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>

PART I

ITEM 1.  Business.

General

    On May 3, 2000 (the "Petition Date" or the "Filing Date"), Dynacore Holdings
Corporation,  then known as Datapoint Corporation (hereinafter "Dynacore" or the
"Company")  filed a petition for relief under Chapter 11 of the Bankruptcy  Code
with the United  States  Bankruptcy  Court (the  "Court")  for the  District  of
Delaware.   On  October  12,   2000,   Dynacore   filed  its  Amended   Plan  of
Reorganization,  which was  subsequently  approved  by the Court on  December 5,
2000.

    Prior to the  Petition  Date,  Dynacore,  including  its  subsidiaries,  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  used for  integrated  computer,
telecommunication and video conferencing network systems.  Through its 80% owned
subsidiary, Corebyte Inc. ("Corebyte"), the Company was also actively engaged in
the   development  and  marketing  of  internet   products   having   e-commerce
applications.

    Dynacore was reincorporated in Delaware in 1976 as the successor corporation
to a Texas  corporation  originally  incorporated  in 1968 as Computer  Terminal
Corporation.  The  Company's  name was changed  from  Datapoint  Corporation  to
Dynacore  Holdings  Corporation in June 2000, in accordance with an order of the
Court.  Pursuant to a Stock Purchase  Agreement dated April 19, 2000 (the "Stock
Purchase   Agreement"),   the  Company  sold  certain  of  its  European   based
subsidiaries  (the "European  Operations") to Datapoint Newco 1 Limited ("DNL").
In addition,  the Company sold all of its interests in the name  "Datapoint" and
was also required to change its name. (See below for a more complete description
of the sale of the European Operations).  Dynacore's principal executive offices
are located at 8410 Datapoint  Drive, San Antonio,  Texas 78229-8500  (telephone
number (210) 593-7000).

    As  of  the  Petition  Date,  the  Company's  business  consisted  of  three
operations.  One operation consisted of a computer telephony integration system,
which  offered  integrated  telecommunication  products and services to meet the
requirements  of  large  call  centers,   customer  service   organizations  and
telemarketing  firms. A second, the systems integration and proprietary hardware
and software  operation,  sold and marketed  Dynacore's  networking  products to
end-users.  The  European  Operations  of the  Company  which  were  sold to DNL
comprised  substantially all of the first and second operations  described above
and  accounted  for more than 98% of the total  assets  and more than 98% of the
revenue of the Company for the past three  fiscal  years.  The  Company's  third
operation  consisted of its subsidiary Corebyte which is engaged in the creation
of internet networking software products.

    Over the past many years,  the  Company's  business  suffered a  significant
decline in total revenue,  recurring losses and a reduction of its domestic work
force.  This was primarily due to a mass entry of  competitors in the networking
marketplace  compounded by a marketplace  demand for "Open Systems" and standard
interfaces, both of which adversely impacted the traditional networking and data
processing components of Dynacore's business.  The marketplace was forced into a
uniformity of design that led to highly competitive  pricing.  At the same time,
the increasing  availability of low cost, "off the shelf" software  applications
written  in a  number  of  industry  accepted  programming  languages  adversely
affected Dynacore.
<PAGE>

    In 1981,  Dynacore  issued  $100  million  8 7/8%  Convertible  Subordinated
Debentures,  due 2006  (the  "Debentures").  Among  other  features,  the  Trust
Indenture governing the Debentures  contained an annual sinking fund obligation.
The  sinking  fund  obligation  provided  that  prior  to June 1 of  each  year,
commencing in 1991,  Dynacore was required to deposit an amount of not less than
$5 million with the Indenture  Trustee in connection  with the redemption of the
Debentures.  The Company was also permitted to deliver  outstanding  Debentures,
other than any previously called for redemption, in partial or full satisfaction
of this annual  sinking fund  obligation,  and in fact,  from time to time,  the
Company purchased Debentures for redemption, such that at the Petition Date, the
outstanding  principal  face  amount  of the  Debentures  had  been  reduced  to
approximately $55 million.

    The recurring  operational  losses and reduced cash flow adversely  affected
the Company's  ability to properly fund its business  operations as it continued
to make the interest and sinking fund  obligations  to holders of the Debentures
under the Trust  Indenture.  To fund these  obligations,  Dynacore was forced to
sell  virtually all of its fixed assets during the  preceding  years,  including
real  property  in San  Antonio,  Texas  in  October,  1998  and in  Gouda,  The
Netherlands,  approximately one year later. In addition,  in October,  1999, the
Company discontinued its domestic video conferencing operations (MINX) as it was
not able to continue making the financial investment required, both in marketing
and  product  development  to  sustain  profitability  for this  portion  of the
business.  In spite of these  actions,  as of the Petition Date, the Company had
defaulted on one  semi-annual  interest  payment,  totaling  approximately  $2.5
million, and was about to default on the sinking fund payment due June 1, 2000.

    In late 1998,  Dynacore  hired Dain Rauscher  Wessels  ("Dain  Rauscher") to
explore  strategic  alternatives.  Although Dain  Rauscher  reviewed a series of
alternatives for Dynacore, the one that appeared most viable was the sale of its
European Operations to a strategic buyer.

    Dain  Rauscher  was then  retained to supervise a process to locate and sell
the European  Operations  to the highest  bidder.  Although  numerous  potential
purchasers were contacted and a private confidential  memorandum was distributed
to over thirty (30) prospective purchasers, Dynacore initially received two bids
for the European  Operations.  Dain Rauscher and  Dynacore's  Board of Directors
agreed that the bid made by Reboot  Systems,  Inc.  ("Reboot")  represented  the
better offer.
<PAGE>

    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.

    In addition,  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.

    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.
<PAGE>

    On  December 5, 2000,  the Court  approved  an order  confirming  Dynacore's
Amended  Plan  of  Reorganization  (the  "Plan").  On  December  18,  2000  (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 and the
status of the related  patent  litigations  is set forth below under the heading
"Multi-Speed Networking Patents".

    As of  December  31,  2000,  the Company  had cash and cash  equivalents  of
approximately  $7.6 million including $0.3 million of restricted cash, which was
restricted for the payment of contested bankruptcy claims.

    Since the  confirmation of the Plan, the Company has been actively  pursuing
an acquisition of assets,  property or business that may be beneficial to it and
its stockholders.  In considering whether to complete any such acquisition,  the
Board of  Directors  shall make the final  determination,  and the  approval  of
stockholders will not be sought unless required by applicable law, the Company's
Restated Certificate of Incorporation,  Bylaws or contract. The Company can give
no assurance that any such endeavor will be successful or profitable.
<PAGE>

    The  Company  does not  intend to  restrict  its  search  to any  particular
business  or  industry,  and the areas in which it will  seek out  acquisitions,
reorganizations  or mergers may include,  but will not be limited to, the fields
of high technology,  manufacturing,  natural  resources,  service,  research and
development, communications,  transportation,  insurance, brokerage, finance and
all medically related fields,  among others. The Company recognizes that because
of its lack of significant resources,  the number of suitable potential business
ventures  which may be  available to it will be  extremely  limited,  and may be
restricted  to entities  who desire to avoid what these  entities may deem to be
the adverse factors related to an initial public offering. The most prevalent of
these factors include substantial time requirements, legal and accounting costs,
the inability to obtain an underwriter who is willing to publicly offer and sell
shares, the lack of or the inability to obtain the required financial statements
for such an undertaking,  limitations on the amount of dilution public investors
will suffer to the benefit of the stockholders of any such entities,  along with
other conditions or requirements imposed by various federal and state securities
laws, rules and regulations.

    Management  intends  to  consider  a number of  factors  prior to making any
decision as to whether to participate in any specific business endeavor, none of
which may be  determinative  or provide  any  assurance  of  success.  These may
include,  but will not be limited to an analysis of the quality of the  entity's
management  personnel;  the  anticipated  acceptability  of any new  products or
marketing concepts;  the merit of technological  changes;  its present financial
condition,  projected  growth potential and available  technical,  financial and
managerial  resources;  its working  capital,  history of operations  and future
prospects;  the nature of its present and expected competition;  the quality and
experience  of its  management  services  and the depth of its  management;  its
potential  for  further  research,  development  or  exploration;  risk  factors
specifically  related to its  business  operations;  its  potential  for growth,
expansion and profit;  the  perceived  public  recognition  or acceptance of its
products,  services,  trademarks  and name  identification;  and numerous  other
factors which are difficult,  if not  impossible,  to properly  analyze  without
referring to any objective criteria.

    Regardless,  the  results  of  operations  of any  specific  entity  may not
necessarily be indicative of what may occur in the future, by reason of changing
market  strategies,  plant or product  expansion,  changes in product  emphasis,
future management  personnel and changes in innumerable other factors.  Further,
in  the  case  of a new  business  venture  or one  that  is in a  research  and
development mode, the risks will be substantial,  and there will be no objective
criteria to examine the  effectiveness or the abilities of its management or its
business  objectives.  Also,  a firm market for its products or services may yet
need to be established,  and with no past track record, the profitability of any
such entity will be unproven and cannot be predicted with any certainty.

    Management will attempt to meet personally with management and key personnel
of the entity sponsoring any business opportunity afforded to the Company, visit
and inspect material facilities,  obtain independent analysis or verification of
information  provided and  gathered,  check  references  of  management  and key
personnel and conduct other reasonably  prudent measures  calculated to ensure a
reasonably thorough review of any particular business opportunity.

    The Company is unable to predict the time as to when and if it may  actually
participate in any specific  business  endeavor.  The Company  anticipates  that
proposed  business  ventures  will  be made  available  to it  through  personal
contacts  of  directors,   executive   officers  and   principal   stockholders,
professional advisors, broker dealers in securities,  venture capital personnel,
members  of the  financial  community  and others  who may  present  unsolicited
proposals.  In certain cases,  the Company may agree to pay a finder's fee or to
otherwise  compensate  the persons who submit a potential  business  endeavor in
which the Company eventually participates.
<PAGE>

    While the Company and its management have had very  preliminary  discussions
with several  businesses and initiated due diligence in this regard, to date the
Company has not entered into any proposals,  arrangements or understandings with
the  owners  of  any  business  or  company  regarding  the  possibility  of  an
acquisition by or merger transaction with the Company.

    Since the sale of its European Operations as described above,  substantially
all of the principal  assets of the Company are currently the cash proceeds from
the sale of the  European  Operations  which  are being  held in a money  market
mutual fund pending future  redeployment in an operating  business other than an
investment  company.  Pursuant to the Investment Company Act of 1940, as amended
(the "40  Act"),  a  company  that  owns  investment  securities  having a value
exceeding  40% of the  value  of  its  total  assets  (exclusive  of  government
securities  and cash  items) is subject to  registration  and  regulation  as an
investment  company unless it qualifies for a statutory or regulatory  exclusion
or exemption from investment company status.  Furthermore,  a company that is or
holds itself out as being engaged primarily, or proposes to engage primarily, in
the business of investing,  reinvesting,  or trading in securities is subject to
registration and regulation as an investment company.

    Since the sale of its European Operations, the Company has been relying on a
temporary  one-year  exclusion from  investment  company status under the 40 Act
(which ends June 30, 2001),  since as indicated above the Company's  intent,  as
soon as  reasonably  possible,  is to engage in a  business  other  than that of
investing,  reinvesting,  owning, holding or trading in securities.  The Company
believes that following the temporary one-year  exclusion,  based on its current
asset mix, and its current  activities  it will not be treated as an  investment
company.  However, if the Company is unsuccessful in completing its initiatives,
the Company  believes  there is a future risk of becoming  subject to regulation
and registration as an investment company.  The Company does not believe that it
is feasible for the Company to register as an investment  company because the 40
Act rules  are  inconsistent  with the  Company's  strategy  of  acquiring,  and
actively  managing an  operating  business.  In  addition,  if the Company  were
required to register as an investment  company,  then it would incur substantial
additional  expense  as a result  of the 40  Act's  record  keeping,  reporting,
voting,  proxy disclosure and other requirements.  After the end of the one-year
grace  period  if the  Company  does not  qualify  for any  other  exclusion  or
exemption  afforded by the 40 Act,  it may be required  either to register as an
investment company or take significant business actions that are contrary to its
business  objectives  in  order  to  avoid  being  required  to  register  as an
investment  company.  For  example,  the Company  might be  compelled to acquire
additional assets that it might not otherwise have acquired,  be forced to forgo
opportunities to acquire  interests in companies or other assets or be forced to
sell or refrain from selling such interests or assets. In addition,  the Company
might  need to  sell  certain  assets  which  are  considered  to be  investment
securities.

    In order to be certain of its status under the 40 Act, the Company may apply
to the  Securities  and  Exchange  Commission  for an order  finding  that it is
primarily engaged in a business other than investing in securities.  The Company
can give no assurance that such an order, if applied for, will be granted.

    Dynacore  believes that it had  approximately  $137 million of net operating
loss ("NOL")  carryovers  (after all reductions in such NOLs required by Section
108 of the  Internal  Revenue  Code  of  1986,  as  amended  (the  "Code"))  and
approximately  $35 million of capital loss carryovers  prior to the consummation
of its Plan.  Section 382 of the Code limits the full annual  utilization of NOL
carryovers of a "loss  corporation"  that has undergone an Ownership  Change (as
defined  below).  Dynacore  believes  that  had it not  qualified  for  the  382
Bankruptcy  Exception  described  below  its  use of its NOL  and  capital  loss
carryovers  would have been  subject to Section 382  limitations  following  its
reorganization under the Plan.

    Generally, a "loss corporation" undergoes an ownership change (an "Ownership
Change") as defined by Section 382 of the Code if  immediately  after any "owner
shift  involving  a  5-percent  shareholder"  (in  general,  any  change  in the
respective ownership of stock of a corporation affecting the percentage of stock
of such corporation owned by any person who is a "5-percent  shareholder" before
or after such change) or any "equity  structure  shift" (in general,  except for
certain  reorganizations,  any tax-free  reorganization under Section 368 of the
Code  and,   to  the  extent   provided   in   Treasury   regulations,   taxable
reorganization-type  transactions,  public offerings and similar  transactions):
(A) the  percentage  of the stock of the loss  corporation  owned by one or more
5-percent  shareholders has increased by more than 50 percentage points over (B)
the  lowest  percentage  of stock of the loss  corporation  (or any  predecessor
corporation)  owned by such shareholders at any time during the "testing period"
(in general,  the 3-year period ending on the day of any owner shift involving a
5-percent shareholder or equity structure shift).
<PAGE>

    A  "loss  corporation",  for  purposes  of  Section  382 of the  Code,  is a
corporation,  like Dynacore,  that either is entitled to use an NOL carryover or
has an NOL for the taxable year in which an Ownership  Change occurs and, except
as provided in  Treasury  regulations,  any  corporation  with a net  unrealized
built-in loss. A "5-percent  shareholder"  means any person holding 5 percent or
more (by  value)  of the  stock of a loss  corporation  at any time  during  the
testing  period.  In general,  in  determining  whether an Ownership  Change has
occurred,  all stock owned by  shareholders  of a loss  corporation  who are not
5-percent  shareholders  is  treated  as  stock  owned  by  a  single  5-percent
shareholder  (referred  to as the "public  group"),  regardless  of whether such
stock comprises an aggregate of 5 percent of the loss corporation's stock.

    Notwithstanding  the foregoing,  the normal Code Section 382 rules generally
do not apply to any Ownership Change if (i) the loss corporation is (immediately
before  such  Ownership  Change)  under  the  jurisdiction  of  the  court  in a
bankruptcy  under Title 11 of the United  States Code or similar case ("Title 11
Case"),  and  (ii)  the  shareholders  and  creditors  of the  loss  corporation
(determined  immediately before such Ownership Change) own (after such Ownership
Change and as a result of being  shareholders  or creditors  immediately  before
such change)  stock of such  corporation  possessing  at least 50 percent of the
total voting power of the stock of such loss  corporation  and has a value equal
to at least 50 percent of the total value of the stock of such loss  corporation
(the "382  Bankruptcy  Exception").  Dynacore  believes  that the  circumstances
surrounding  its  reorganization  in accordance  with the terms of the Plan were
such that it qualified for the 382 Bankruptcy Exception. In addition, subject to
certain "built-in-loss" rules that should have no appreciable effect on Dynacore
and, under certain circumstances,  certain possible limitations set forth in the
consolidated return  regulations,  Dynacore does not expect to be subject to any
limitations on the use of its NOL carryovers  under any other  provisions of the
Code other than Section 382.  Moreover,  the Section 382  continuity of business
enterprise  requirement  normally  applicable  to loss  corporations  that  have
experienced  an  Ownership  Change  should  not  apply to  Dynacore  since  loss
corporations that qualify and elect to rely on the 382 Bankruptcy  Exception are
exempted from such requirement.

    However, due to its reliance on the 382 Bankruptcy  Exception,  Dynacore was
required to reduce its NOL  carryovers by the amount of interest paid or accrued
during the preceding three year period on its Debentures that was converted into
the equity of the reorganized  corporation pursuant to the Plan. Taking both the
reduction  for such  disallowed  interest and all other  reductions  in its NOLs
required by Section 108 of the Code (relating to  cancellation  of  indebtedness
income),  Dynacore  believes that its NOL  carryovers  were  approximately  $137
million following the consummation of the Plan.

    In addition, if a loss corporation has taken advantage of the 382 Bankruptcy
Exception  to  one  Ownership  Change  and  subsequently  experiences  a  second
Ownership  Change within 2 years following the first Ownership  Change,  it must
reduce its NOL  carryovers to zero for all tax periods  ending after the date of
the second Ownership Change. The testing period for the second Ownership Change,
however, begins on the first day following the earlier Ownership Change to which
the 382 Bankruptcy  Exception  applied (rather than beginning on any prior date,
as would otherwise be the case under the three-year rule),  meaning,  in effect,
that the percentage  ownership of Dynacore by 5-percent  shareholders would have
to  increase  within  two years by more than 50  percentage  points  over  their
ownership as determined on the date of the Ownership  Change in Dynacore subject
to the 382  Bankruptcy  Exception.  For  periods  following  such  latter  date,
Dynacore  will again be subject to the general  Section 382 rules  applicable to
changes of more than 50 percent in stock ownership by its 5-percent shareholders
within a rolling 3-year period as described above.

    As part of the Plan the Company  restated its  Certificate of  Incorporation
and in order to  maintain  its NOL and  capital  loss  carryovers  the  Restated
Certificate  of   Incorporation   includes   certain   provisions  which  impose
restrictions  designed  to  prevent  Ownership  Changes  from  occurring.  These
provisions,  as well as  structuring  considerations,  may  interfere  with  the
Company's  ability  to acquire a business  since use of the  Company's  stock as
consideration  in any  acquisition  transaction  may be limited  if the  Company
desires to retain its NOL and capital loss carryovers.

Risk Factors

    In any  business  venture,  there  are  substantial  risks  specific  to the
particular enterprise which cannot be ascertained until a potential acquisition,
reorganization or merger candidate has been identified;  however,  at a minimum,
the  Company's  present  and  proposed   business   operations  will  be  highly
speculative  and  subject  to the same  types of  risks  inherent  in any new or
unproven venture, and will include those types of risk factors outlined below.

    No Source of Revenue. The Company can provide no assurance that any acquired
business will produce any material  revenues for the Company or its stockholders
or that any such business will operate on a profitable basis.
<PAGE>

    Absence of  Substantive  Disclosure  Relating to  Prospective  Acquisitions.
Because the Company has not yet identified any assets, property or business that
it may  potentially  acquire,  potential  investors  in the  Company  will  have
virtually no substantive  information  upon which to base a decision  whether or
not to  invest  in  the  Company.  Potential  investors  would  have  access  to
significantly more information if the Company had already identified a potential
acquisition or if the acquisition  target had made an offering of its securities
directly to the public. The Company can provide no assurance that any investment
in the Company will not ultimately prove to be less favorable than such a direct
investment.

    Unspecified Industry and Acquired Business;  Unascertainable Risks. To date,
the Company has not identified  any particular  industry or business in which to
concentrate  its  acquisition  efforts.   Accordingly,   prospective   investors
currently  have no basis  to  evaluate  the  comparative  risks  and  merits  of
investing  in the  industry or business in which the Company may invest.  To the
extent that the Company may acquire a business in a highly risky  industry,  the
Company will become subject to those risks. Similarly, if the Company acquires a
financially  unstable  business  or a  business  that is in the early  stages of
development, the Company will become subject to the numerous risks to which such
businesses  are  subject.  Although  management  intends to  consider  the risks
inherent in any industry and business in which it may become involved, there can
be no assurance that it will correctly assess such risks.

    Uncertain  Structure of  Acquisition.  While  management has had preliminary
contact and discussions with several businesses, there are, presently, no formal
plans,  proposals or  arrangements to acquire any specific  assets,  property or
business.  Accordingly, it is unclear whether such an acquisition would take the
form of an exchange of capital stock, a merger or an asset acquisition. However,
because the Company has limited  cash  resources  as of the date of this Report,
management  expects that any such acquisition would take the form of cash and an
exchange of capital stock.

Patents and Trademarks

    Dynacore owns certain patents,  copyrights,  trademarks and trade secrets in
network technologies, which it considers valuable proprietary assets.

Multi-speed Networking Patents

    Dynacore is the owner of United States  Patent Nos.  5,008,879 and 5,077,732
related to network  technology.  The Company  believes  these patents cover most
products  introduced  by  various  suppliers  to  the  networking  industry  and
dominates  certain  types  of  dual-speed   technology  on  networking  recently
introduced  by various  industry  leaders.  Dynacore has asserted one or both of
these patents in the United States  District  Court for the Eastern  District of
New York against a number of parties:

     (1)  Datapoint  Corporation*  v.  Standard  Micro-Systems,  Inc.  and Intel
     ---------------------------------------------------------------------------
Corporation, No.C.V.-96-1685;
-----------

     (2) Datapoint  Corporation* v. Cisco Systems,  Plaintree Systems Corp.,
         Accton Technologies Corp.,  Cabletron Systems,  Inc., Bay
         Networks,  Inc., Crosscom Corp. and Assante Technologies, Inc.
         --------------------------------------------------------------
         No. CV 96 4534;


     (3) Datapoint  Corporation*  v. Dayna  Communications,  Inc.,  Sun
         Microsystems,  Inc.,  Adaptec,  Inc.  International  Business
         Machines Corp.,  Lantronix,  SVEC America Computer Corporation, and
         -------------------------------------------------------------------
         Nbase Communications, No. CV 96 6334; and
         --------------------


     (4) Datapoint  Corporation* v. Standard  Microsystems Corp.and Intel Corp.,
         -----------------------------------------------------------------------
         No. CV-96-03819.


* The Company expects to make a motion with the Court to reflect the name change
to Dynacore Holdings Corporation.

    These actions were  consolidated  for  discovery,  and for purposes of claim
construction.  On January 20,  1998, a hearing  commenced  in the United  States
District   Court  that   concluded  on  January  23,  1998  during  which  claim
construction was submitted to a Special Master.  The Special Master's report was
issued in April of 1998 adverse to  Dynacore.  The Company had filed two sets of
objections to certain  portions of this report.  The objections  were overruled.
These  objections will now have to be resolved at the Appellate Court level. The
briefing is completed. Both patents have been submitted to the Patent Office for
re-examination. A favorable action has been rendered on each patent and official
notification of the favorable  action is expected  shortly.  The appeal has been
stayed  pending  the  receipt of  official  notification  of the  re-examination
proceedings.

    The above actions represent the trust property which the Company transferred
and  assigned to the Patent  Litigation  Trust  pursuant  to the certain  Patent
Litigation Trust Agreement,  by and among the Company and the Patent  Litigation
Trust  trustees.  As  previously  mentioned,  the Company  has  retained a 56.5%
interest in the Patent Litigation Trust.
<PAGE>
Employees

At December  31,  2000,  the Company had  nineteen  employees.  Included in this
number are seven  employees of Corebyte,  Inc. and three  employees of Dynacore,
whose  full-time  employment  was terminated in January 2001. Of such ten former
employees,  three still  provide  services on an as needed basis to the Company.
The Company  considers its relations with its employees to be satisfactory.  The
aggregate  annual  salaries  for the  nine  remaining  full  time  employees  is
approximately $850 thousand.

Environmental Matters

    Compliance with current federal,  state, and local  regulations  relating to
the  protection of the  environment  has not had, and is not expected to have, a
material effect upon the capital expenditures, earnings, or competitive position
of the Company.

ITEM 2.  Properties.

    Dynacore's principal executive office is located in San Antonio,  Texas. The
Company  believes that its  facilities are generally  well  maintained,  in good
operating   condition  and  are  adequately  equipped  for  their  present  use.
Information  regarding the principal  properties,  excluding  leases assigned or
subleased, as of December 31, 2000, is as follows:


                                 Approximate
                                    Facility
      Location        Use        Sq. Footage    Owned or Leased Land Area
      --------        ---        -----------    -------------------------

San Antonio, Texas    Office          17,630    Leased; expires March 31, 2001
New York, New York    Office            4,250   Leased; expires October 16, 2009
San Antonio, Texas    Warehouse         4,900   Leased; expires January 31, 2004
Paris, France         Office            1,450   Leased; expires June 16, 2008
                                                with early cancellation options
                                                on June 16, 2002 and
                                                June 16, 2005

    The aggregate annual rental for these leases, excluding sub-lease agreements
is approximately $250 thousand.

    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 Operations 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.

ITEM 3.  Legal Proceedings.

    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.


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

Not applicable.
<PAGE>

PART II

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

Beginning August 24, 1998, the Company's common stock was quoted on the National
Association of Securities  Dealers'  Over-the  Counter  Bulletin Board under the
symbol "DTPT". The symbol changed to DTPTQ upon the filing for bankruptcy relief
and the symbol once again changed as the result of the Company's  name change to
DYHGQ. On the Effective Date and through the present, the symbol is DYHC and the
stock is tradeable  over-the-counter through the National Daily Quotation System
"pink sheets" published by the National Quotation Bureau, Inc. It is anticipated
that the common stock will be quoted on the National  Association  of Securities
Dealers  Over-the Counter Bulletin Board. It is also anticipated that the shares
of  beneficial   interests  in  the  Patent  Litigation  Trust  will  be  traded
over-the-counter  through the National  Daily  Quotation  System  "pink  sheets"
published by the National Quotation Bureau, Inc. As of March 30, 2001 there were
approximately  2,790  holders of record  and  10,000,000  outstanding  shares of
Common Stock.  The prices below  represent the high and low prices for composite
transactions for stock traded during the applicable  periods. As a result of the
new common stock which was issued on the  Effective  Date,  all prices have been
adjusted  to reflect its  issuance  at the rate of .225177  shares of New Common
Stock  for  each  share of Old  Common  Stock.  The  Company  has not paid  cash
dividends to date on its common  stock and has no present  intention to pay cash
dividends  on its common stock in the near  future.  As of March 30,  2001,  the
closing price of the stock was $.28.

The stock  prices for the  periods  listed  below are all for the  common  stock
outstanding prior to the issuance of the new common stock on the Effective Date.
The New common stock did not trade  during the period  December 19, 2000 through
December 31, 2000.

                                              High              Low
            March 30, 2000                     6.52             1.24
            June 30, 2000                      3.05              .55
            September 30, 2000                 1.80              .62
            December 18, 2000                  .84               .26

                                               High              Low
          March 30, 1999                       7.63              2.49
          June 30, 1999                        9.16              2.91
          September 30, 1999                   3.74              2.36
          December 31, 1999                    2.63               .97


ITEM 6.  Selected Financial Data.

The operations of Dynacore for the period of December 19, 2000 through  December
31,  2000  (referred  to as the  "Successor  Company"),  and all  prior  periods
presented  (referred  to as the  "Predecessor  Company")  in  this  report  were
significantly  affected by the Sale of the Company's European Operations on June
30, 2000 and the cessation of virtually all of the production  operations of the
Company.  As a result,  the  financial  results of the  Company  for each of the
periods  addressed by this report prior to December  18,  2000,  (the  Effective
Date),  do not reflect the  earnings  capacity of the  Company.  In addition the
financial  data for the period ended  December 31, 2000 reflects the adoption of
Fresh  Start  Accounting  and  includes  the period  from  December  19, 2000 to
December 31, 2000.

The Fresh Start basis of  accounting  is in  accordance  with the  Statement  of
Position (SOP) 90-7,  "Financial  Reporting by Entities in Reorganization  Under
the  Bankruptcy  Code,"  issued in November  1990 by the  Institute of Certified
Public  Accountants and includes activity from December 19, 2000 to December 31,
2000. Under this accounting treatment,  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  financial data as
of December 31, 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.  As such,  the  financial  data is  considered  that of a Successor
Company and is not comparable to prior periods.

<PAGE>

Selected Financial Data
Five-Year Comparison
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>

                                                 Successor                                Predecessor
                                                 ----------  ---------------------------------------------------------------------

                                                12/19/00 -   01/01/00 -  08/01/99 -
                                                12/31/2000   12/18/2000  12/31/1999     1999        1998       1997        1996

Operating Results for the Fiscal Year
<S>                                                     <C>      <C>        <C>         <C>        <C>         <C>         <C>
Total Revenue                                           $ -      $62,956    $51,860     $138,285   $151,445    $142,121    $179,541
Operating income (loss)                                (195)      (3,004)    (1,772)      (2,886)     5,074       2,033       1,017
Income (loss) before extraordinary credits
  and effect of change in accounting principle         (311)      50,820     (4,513)      (9,256)    (1,224)      1,173      19,015
Net income (loss)                                      (311)      81,079     (4,513)      (7,549)      (669)      2,383      19,342
Basic earnings (loss) per common share:
  Income (loss) before extraordinary credits         ($0.03)      $12.10     ($1.13)      ($2.45)    ($0.49)      $0.05       $5.65
  Gain on the exchange and retirement of preferred stock  -            -          -         0.09          -        1.05           -
  Extraordinary credits                                   -        10.94          -         0.40       0.14        0.33        0.11
    Net income (loss) per share                      ($0.03)      $23.04     ($1.13)      ($1.96)    ($0.35)      $1.43       $5.76
Diluted earnings (loss) per common share:
  Income (loss) before extraordinary credits         ($0.03)      $10.25     ($1.13)      ($2.45)    ($0.49)      $0.05       $4.91
  Gain on the exchange and retirement of preferred stock  -            -          -         0.09          -        1.07           -
  Extraordinary credits                                   -         5.91          -         0.40       0.14        0.31        0.09
  Net income (loss) per share                        ($0.03)      $16.16     ($1.13)      ($1.96)    ($0.35)      $1.43       $5.00

Financial Position at End of Fiscal Year
Current assets                                       $8,289       $9,318    $36,093      $40,930    $50,807     $45,340     $69,995
Fixed assets, net                                       102          108      5,872        5,928      9,468      11,764      14,625
Total assets                                         12,694       13,740     44,054       49,333     66,816      62,388      93,818
Current liabilities                                   1,913        2,801     60,444       60,463     64,491      53,679      76,965
Long-term debt                                            -            -     50,000       50,000     55,000      60,875      63,945
Stockholders' equity (deficit)                        7,189        7,500    (76,556)     (72,128)   (64,437)    (64,084)    (55,202)

Other Information
Average common shares outstanding                10,000,000    4,145,770  4,131,074    4,104,029  4,045,963   3,627,550   3,029,954
Number of common stockholders of record               2,641        2,732      2,810        2,860      2,966       3,070       3,142
Preferred shares outstanding                              -            -    661,967      661,967    721,976     721,976   1,868,071
Dividends paid or accumulated on preferred stock          -            -        165          684        722       1,009       1,885
Number of employees                                      19           19        617          639        652         641         705

No cash dividends on common stock have been declared during the five-year period.
Net income for 1996 includes a gain of $32.2 million resulting from a divestiture.
Net income for the period ending 12/18/00 includes a gain of $52.5 million resulting from a divestiture.
Net income for the period ending 12/18/00 includes an extraordinary debt extinguishment gain of $26.5 million and Fresh start
     adjustments of $3.8 million.
See notes to Consolidated Financial Statements and Management Discussion and Analysis of Financial Condition
     and Results of Operations.
</TABLE>
<PAGE>
     ITEM 7.  Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations.

The operations of Dynacore for the period of December 19, 2000 through  December
31,  2000  (referred  to as the  "Successor  Company"),  and all  prior  periods
presented  (referred  to as the  "Predecessor  Company")  in  this  report  were
significantly  affected by the sale of the Company's European Operations on June
30, 2000 and the cessation of virtually all of the production  operations of the
Company.  As a result,  the  financial  results of the  Company  for each of the
periods  addressed by this report prior to December  18,  2000,  (the  Effective
Date) , do not reflect the  earnings  capacity of the  Company.  In addition the
financial  data for the period ended  December 31, 2000 reflects the adoption of
Fresh  Start  Accounting  and  includes  the period  from  December  19, 2000 to
December 31, 2000.

The Fresh Start basis of  accounting  is in  accordance  with the  Statement  of
Position (SOP) 90-7,  "Financial  Reporting by Entities in Reorganization  Under
the  Bankruptcy  Code,"  issued in November  1990 by the  Institute of Certified
Public  Accountants and includes activity from December 19, 2000 to December 31,
2000. Under this accounting treatment,  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  financial data as
of December 31, 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.  As such,  the  financial  data is  considered  that of a Successor
Company and is not comparable to prior periods.

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 "Court"),  the Company sold (the "Sale") its European
Operations to Datapoint Newco 1 Limited  ("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
(the  "Petition  Date" or the "Filing  Date") 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.
<PAGE>

As a result of the Sale,  the  Company  recorded a gain of  approximately  $52.5
million during the period ended  December 18, 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.

On December 5, 2000, the Court approved an order confirming  Dynacore's  Amended
Plan of Reorganization (the "Plan"). On December 18, 2000 (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 reflect 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.

As of  December  31,  2000,  the  Company  had  cash  and  cash  equivalents  of
approximately  $7.6 million  including $.3 million of restricted cash, which was
restricted for the payment of contested  bankruptcy claims.  Since the Effective
Date,  the  Company's  management  team has  undertaken  efforts to identify and
evaluate  successor  business  opportunities.  The  Company  believes  its  cash
resources are  sufficient to satisfy its normal  operating  obligations  for the
foreseeable future.

As of December 31, 2000,  the Company had  available  federal tax net  operating
losses  aggregating  approximately  $137  million,  expiring in various  amounts
beginning in 2001.  In the event that the  Company's  ability to utilize its net
operating losses to reduce its federal tax liability with respect to current and
future income becomes subject to limitation, the Company may be required to pay,
sooner than it otherwise  might have to, any amounts  owing with respect to such
federal tax liability, which would reduce the amount of cash otherwise available
to the Company (see note 6 to Consolidated Financial Statements).
<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.

Restructuring Costs
(In thousands)

The Company incurred  restructuring costs as follows in connection with employee
termination programs implemented in these periods:

                            (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.

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
Restructuring accrual as of December 18, 2000                       $ 32
Additions                                                             22
Payments                                                              (3)
Restructuring accrual as of December 31, 2000                       $ 51
                                                                     ===
<PAGE>
Results of Operations

The following is a summary of the  Company's  sources of revenue for each of the
periods listed below:

(In thousands)                                       Predecessor
                              -------------------------------------------------
                              01/01/00 -     08/01/99 -
                              12/18/00       12/31/99        1999         1998
                              --------       --------        ----         ----
Sales:
   U.S.                           $103           $385      $3,057       $3,182
   Foreign                      37,716         27,547      75,630       85,742
                                ------         ------      ------       ------
                                37,819         27,932      78,687       88,924
Service and other:
   U.S.                            355            429       1,074        1,123
   Foreign                      24,782         23,499      58,524       61,398
                                ------         ------      ------       ------
                                25,137         23,928      59,598       62,521
                                ------         ------      ------       ------

Total revenue                  $62,956        $51,860    $138,285     $151,445
                               =======        =======    ========     ========

December 19, 2000 - December 31, 2000

The Company did not record any revenue for this  period.  Operating  expenses of
$195  thousand  included  approximately  $50  thousand  of  expenses  related to
severance  obligations  and other expenses  related to employees whose full time
employment has been terminated. In addition, included in this period's operating
expenses are certain  non-recurring  items and therefore,  the operating results
indicated  are not  necessarily  indicative  of  future  results.  Non-operating
expense  includes a foreign  currency  transaction  adjustment  of $139 thousand
related to the German  pension  plan,  offset by  approximately  $19 thousand of
interest income earned during the period. The Company recorded  depreciation and
amortization   expenses  of  approximately  $13  thousand  during  this  period,
reflecting  the  revaluation  of the assets due to the  adoption  of Fresh Start
Reporting.

January 1, 2000 - December 18, 2000

Substantially all of the  approximately  $63.0 million of revenue related to the
European subsidiaries, which were sold on June 30, 2000. The gross profit margin
for this period ended  December 18, 2000 was 23.1%,  compared with the 24.8% for
the five month period  ended  December  31,  1999.  Operating  expenses for this
period were approximately $17.6 million, which primarily included those expenses
incurred by the company's  European  subsidiaries until the time of sale on June
30, 2000.

As a result of the Sale,  the  Company  recorded a gain of  approximately  $52.5
million  during the period.  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.

Non operating  expenses included interest expense of approximately $2.0 million,
offset  by  interest  income  of $1.5  million  and  $317  thousand  related  to
transaction  gains as result  of the  strengthening  U.S.  Dollar,  on  average,
against foreign currencies.

Also included as  extraordinary  items are $26.5 million  related to the gain on
the extinguishment of debt pursuant to the confirmation of the Company's amended
plan of reorganization  and $3.8 million related to the adjustments  required by
the adoption of Fresh Start Accounting.

August 1, 1999 - December 31, 1999

On June 27,  2000,  the Company  elected to change its fiscal year to a calendar
year basis.  Therefore,  the five months represented by this transitional period
are not comparable to the 12 month fiscal year ended July 31, 1999 or the 11 1/2
month period ended  December 18, 2000.  Of the $51.9  million  revenue  recorded
during  this five  month  period,  approximately  $51.2  million  related to the
European  Operations  which were sold on June 30, 2000.  The gross profit margin
for this five month  period was 24.8%,  as  compared to the 25.7% for the twelve
month period ended July 31, 1999.  Operating  expenses for the five months ended
December 31, 2000 were  approximately $ 14 million,  compared with approximately
$37.7  million for the twelve month  period  ended July 31, 1999.  Non-operating
expenses consisted primarily of interest expense of $2.4 million.
<PAGE>

Fiscal Year 1999 Compared to Fiscal Year 1998

During  1999,  the Company had total  revenue of $138.3  million,  a decrease of
$13.2 million from the previous  year.  The decrease was primarily the result of
weak 1999 sales in the Company's  Spanish and Italian  subsidiaries  and a large
volume of personal computer sales to the Swedish  government in fiscal year 1998
which did not repeat in fiscal year 1999.  This  revenue  decrease  reflects the
impact of approximately $1.2 million,  resulting from a stronger U.S. dollar, on
average, during fiscal 1999, as compared to the same period of 1998.

Gross profit  margins  during 1999 were 25.7%  compared with 27.0% for 1998. The
decrease was evidenced in the service  business as margins  decreased from 35.3%
in 1998 to 29.6% in 1999.  This  decrease was primarily the result of an erosion
of the  maintenance  base in Western Europe as customers  upgrade their hardware
with non-Datapoint equipment.

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 Operations on June 30, 2000.

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 $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.

Operating   expenses   (research  and  development   plus  selling,   general  &
administrative)  for 1999 were $37.7  million,  an increase of $1.9 million from
the $35.8  million  recorded in 1998.  Principally  this is due to the increased
year over year expense  associated  with the  amortization  of the  unrecognized
actuarial  losses with regard to the Company's  United Kingdom pension plan. The
Company recorded  restructuring  charges of $813 thousand during 1999,  compared
with $96 thousand recorded in the prior year. Research and development  expenses
decreased from $2.5 million in 1998 to $2.0 million in 1999.
<PAGE>

Fiscal Year 1998 Compared to Fiscal Year 1997

During 1998,  the Company had total  revenue of $151.4  million,  an increase of
$9.3 million from the previous  year.  The increase in revenue was primarily due
to the  receipt of several  new  contracts  awarded  to the  Company's  Spanish,
Italian and British  subsidiaries  and continued  strong  hardware  sales in the
Swedish  subsidiary.  This revenue increase reflects the offset of approximately
$8.7 million,  resulting from a stronger U.S. dollar, on average,  during fiscal
1998, as compared to the same period of 1997.

Gross profit  margins  during 1998 were 27.0%  compared with 29.5% for 1997. The
decrease  was  primarily  the  result of a large  volume of sales by a  Northern
European  subsidiary of lower margin product and competitive  pricing  pressures
worldwide  partially  offset by higher  service  margins due to  continued  cost
cutting actions.

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.

In previous  fiscal  years,  included in  non-operating  income and expense were
transaction gains or losses resulting from the strengthening or weakening of the
U.S. dollar against foreign  currencies.  These exchange gains or losses related
to short  term  intercompany  notes and  international  subsidiary  U.S.  dollar
denominated  cash were offset by  translation  adjustment to  accumulated  other
comprehensive  income included in  Stockholders'  Deficit and therefore,  had no
impact on the Company's financial position.

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  1998,
transaction  gains of $57  thousand  relating to these  loans are  included as a
foreign currency adjustment to Stockholders' Deficit, which in prior years would
have been included in non-operating income and expense, as described above.

During fiscal year 1997, a transaction  gain of  approximately  $6.2 million was
included in  non-operating  income but was offset by  translation  adjustment to
accumulated other comprehensive income included in Stockholders' Deficit.

Operating   expenses   (research  and  development   plus  selling,   general  &
administrative) for 1998 were $35.8 million, a decrease of $1.7 million from the
$37.5 million  recorded in 1997.  Approximately  $1.5 million of the decrease is
related to the effect of the  strengthening  U.S.  dollar when compared with the
same  period a year ago.  The  Company  recorded  restructuring  charges  of $96
thousand  during 1998,  compared  with $2.4 million  recorded in the prior year.
Research and  development  expenses  increased from $2.1 million in 1997 to $2.5
million in 1998.
<PAGE>

YEAR 2000 COMPLIANCE

The Year 2000 Issue was the result of computer  programs being written using two
digits  rather than four to define the  applicable  year.  Any of the  Company's
computer programs or hardware that had date-sensitive software or embedded chips
may have  recognized  a date  using "00" as the year 1900  rather  than the year
2000.  This could have resulted in a system failure or  miscalculations  causing
disruptions of operations,  including, among other things, a temporary inability
to process transactions, generate invoices, or engage in similar normal business
activities.  Based on the Company's  assessments,  the Company  modified  and/or
replaced  significant  portions of hardware and  software so that those  systems
would properly utilize dates beyond December 31, 1999.

The Company  also  assessed  and modified  and/or  replaced its non  Information
Technology  ("IT") operating  systems to insure  compliance with Year 2000 which
included  those  primarily  related to the office  and  facilities'  environment
(telephone systems, security systems, etc.).

As a result of its efforts, Dynacore was prepared for the transition to the Year
2000 and did not  experience  any  significant  malfunctions  or  errors  in its
operating or business systems when the date changed from 1999 to 2000.  Dynacore
is not currently aware of any year 2000 problems that have  materially  affected
its customers or  suppliers.  Based on  operations  since  January 1, 2000,  the
Company does not  anticipate  any material  disruption  in its  operations  as a
result of any  continuing  Year 2000 issues.  However it is possible that latent
problems may arise in the future.  The Company  believes  that any such problems
are likely to be minor and correctable.  Dynacore's aggregate costs for its Year
2000 actions were approximately $1.2 million.

NEW EUROPEAN CURRENCY

In January  1999,  certain  European  countries  introduced a new currency  unit
called the "euro".  In conjunction  with the  preparation for the year 2000, the
Company also modified  and/or adapted  systems  designed to properly  handle the
euro. The costs  required to be able to accommodate  the euro were combined with
costs of becoming year 2000  compliant,  and therefore not easily  identifiable.
However,  they are not  considered to be so significant so as to have a material
effect on the Company's business.

Market Risk Sensitive Instruments

Management  had  determined  that  all  of  the  Predecessor  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. As such, the  Predecessor
Company's  operating  results were affected by  fluctuations in the value of the
U.S. dollar as compared to currencies in European countries,  as a result of the
sales of its products and services in these foreign  markets.  To illustrate,  a
hypothetical, uniform 10% strengthening of the dollar relative to the currencies
in which the Predecessor Company's sales were denominated would have resulted in
a decrease to gross  profit of  approximately  $3.0  million for the year ending
July 31,  1999.  This  calculation  assumes that each  exchange  rate would have
changed in the same direction  relative to the U.S.  dollar.  In addition to the
direct effects of changes in exchange rates, which are a changed dollar value of
the resulting  sales,  changes in exchange rates also affect the volume of sales
or the foreign currency sales price as competitors' products become more or less
attractive.  The Predecessor  Company's  sensitivity  analysis of the effects in
foreign  currency  exchange rates did not factor in a potential  change in sales
levels or local currency prices.
<PAGE>

In addition,  the Predecessor Company had cash and intercompany  receivables and
payables,  which  were  denominated  in  various  functional  currencies  of the
subsidiaries  and  parent.  At July  31,  1999,  the  result  of a  uniform  10%
strengthening  of the dollar  relative to the  currencies in which the Company's
intercompany  balances were  denominated  would have resulted in $4.1 million of
foreign  currency   transaction  gains  that  would  have  been  reported  as  a
translation adjustment to stockholders' deficit.

The Successor  Company's market risk is primarily limited to a pension liability
and other post  employment  liabilities  which remain with the Company's  German
subsidiary.  As such, the Successor  Company's future operating results could be
affected  by  fluctuations  in the value of the U.S.  dollar as  compared to the
German currency.  For example, a 10% strengthening of the dollar relative to the
German  currency would result in a decrease of this liability and an increase to
operating performance of an approximate $300 thousand transaction gain.

The  Company's  long  term  debt  consisted   entirely  of  8  7/8%  convertible
subordinated  debentures.  As of July 31,  1999  the  carrying  amount  of these
debentures was $54,960,  with a fair value of $22,259,  after  consideration  of
repurchases through July 31, 1999.

     Cautionary  Statement  Regarding  Risks and  Uncertainties  That May Affect
Future Results

This Annual Report on Form 10-K contains  forward-looking  statements  about the
business,  financial condition and prospects of the Company.  The actual results
of  the  Company   could  differ   materially   from  those   indicated  by  the
forward-looking  statements because of various risks and uncertainties including
without  limitation  changes in product  demand,  the  availability of products,
changes in competition,  economic conditions,  new product development,  various
inventory  risks due to changes in market  conditions,  changes in tax and other
governmental  rules and regulations  applicable to the Company,  and other risks
indicated in the Company's filings with the Securities and Exchange  Commission.
These risks and  uncertainties are beyond the ability of the Company to control,
and in many cases, the Company cannot predict the risks and  uncertainties  that
could cause its actual results to differ  materially from those indicated by the
forward-looking  statements.  When used in this Annual Report on Form 10-K,  the
words "believes," "estimates," "plans," "expects," and "anticipates" and similar
expressions  as they relate to the  Company or its  management  are  intended to
identify forward- looking statements.

<PAGE>


ITEM 8.  Financial Statements and Supplementary Data.


              INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

<TABLE>

                                                                                                           Page
<S>                                                                                                       <C>

Report of Marks Paneth & Shron LLP
     Independent Auditors                                                                                    18

Report of Ernst & Young LLP
     Independent Auditors                                                                                    19

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

</TABLE>




<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>             <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

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

Assets

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>

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.

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.
<PAGE>

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.

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.
<PAGE>

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               --


PREDECESSOR COMPANY
<TABLE>
<CAPTION>
                               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 debentures1,644  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>
<PAGE>

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.
<PAGE>

     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. 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.
<PAGE>

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.

     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
<S>                                                     <C>              <C>                  <C>            <C>

Assets

Current assets:
    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.
<PAGE>

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.

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>
<PAGE>

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
--------------------------------------------------------------   --------------------------------------------------
<S>                                                 <C>          <C>          <C>                <C>           <C>

Income (loss) before income taxes and extraordinary
   credit:
    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
===================================================================================================================

     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
-------------------------------------------------------------------------------------------------------------------
<S>                                               <C>            <C>          <C>               <C>            <C>

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)
============================================================================
<PAGE>

     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.

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

Successor
                                                              Accumulated
                                                         Cost Depreciation Net
December 31, 2000
    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
==============================================================================
<PAGE>

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

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
<PAGE>

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)

                                  Pension           Foreign Currency
                                  Liability           Translation
                                  Adjustment           Adjustment         Total
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             $--                   $--         $--)
                                         ===                   ===         ====

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.
<PAGE>

<TABLE>
<CAPTION>

                                                            Employee Stock Option Plans
----------------------------------------------------------------------------------------
                                                   Price Range        Number of Shares
                                                                      ------------------
                                                     of Shares        Under      Available
                                                  Under Option       Option     for Option
------------------------------------------------------------------------------------------
<S>                                               <C>                <C>        <C>

Predecessor Company
-------------------
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>


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.
<PAGE>

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.




                                    Director Stock Option Plans
                               Price Range            Number of Shares
                               of Shares             Under      Available
                               Under Option          Option    for Option
------------------------------------------------------------------------
Predecessor Company
-------------------
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              --
                                        ====      =======              ==


     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:
<PAGE>

(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>

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
<PAGE>

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.

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
                                                 =========================================================
<PAGE>

                                               01/01/00 -       08/01/99 -
Assets:                                        12/18/00          12/31/99           1999              1998
----------------------------------------------------------------------------------------------------------
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>

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>
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>
<PAGE>

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.

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>
<PAGE>


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

                                                           2000                  1999
----------------------------------------------------------------------------------------
<S>                                                        <C>                <C>
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)
                                                              ========================
</TABLE>

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.
<PAGE>

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.

     ITEM 9. Changes in and  Disagreements  with  Accountants  on Accounting and
Financial Disclosure.

As filed on Form 8-K dated  December 11,  2000,  and filed as an exhibit to this
report,  on  December  7, 2000,  Ernst & Young LLP  resigned  as auditors of the
Company.

The reports of Ernst & Young LLP on the Company's  financial  statements for the
fiscal  years  ended July 31, 1999 and August 1, 1998 did not contain an adverse
or disclaimer of opinion and were not qualified or modified as to audit scope or
accounting principles. The report of Ernst & Young LLP for the fiscal year ended
July 31,  1999 was  modified  as to  uncertainty  regarding  the  ability of the
Company to continue as a going concern.

In connection with the audits of the Company's financial  statements for each of
the fiscal years ended July 31, 1999 and August 1, 1998,  and in the  subsequent
interim  periods,  there  were no  disagreements  with  Ernst & Young LLP on any
matters of accounting  principles or practices,  financial statement disclosure,
or auditing scope or procedures,  which if not resolved to the  satisfaction  of
Ernst & Young LLP would have caused  Ernst & Young LLP to make  reference to the
matter in their report.  The Company had requested  Ernst & Young to furnish and
Ernst & Young  furnished a letter  addressed to the  Commission  stating that it
agrees with the above.

Subsequent to the  resignation  of Ernst & Young LLP as the Company's  auditors,
the Company retained Marks, Paneth & Shron LLP as its auditors.


PART III

ITEM 10  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    The names,  ages,  positions  and  offices  with the  Company of the current
directors and executive officers of the Company are set forth below.
<TABLE>
<CAPTION>

                    Age as of                                                               Director/Officer
    Name          Dec. 31, 2000 Position                                                           Since
    ----          ------------- --------                                                           -----
<S>                      <C>                                                                       <C>
A. B. Edelman            61     Director-Chairman of the Board and Chief Executive Officer         1985
P. P. Krumb              58     Vice President, Chief Financial Officer, and Director              1994
G. N. Agranoff           54     Chief Operating Officer, Acting President, Vice Chairman
                                of the Board and Director                                          1994
N. W. Walsh              31     Director                                                           2000
N. S. Subin              36     Director                                                           2000
R. B. Smith              58     Director                                                           2000
J. J. Angel              64     Director                                                           2000
</TABLE>
<PAGE>

    The  principal  occupations  and business  experience of each of the current
directors and executive officers of the Company are described below.

     ASHER  B.  EDELMAN,   age  61,  joined   Dynacore's   (formerly   Datapoint
Corporation) Board of Directors as its Chairman in March 1985, and has served in
that capacity to the present date, and as Chief Executive Officer since February
1993.  Mr.  Edelman has served as General  Partner of Asco  Partners,  a general
partner of Edelman  Securities  Company L.P.  since June 1984.  Mr. Edelman is a
director, Chairman of the Board and Chairman of the Executive Committee of Canal
Capital Corporation,  and is a General Partner and Manager of various investment
partnerships  and funds.  Mr. Edelman is also a member of the Board of Directors
of Chemi-Trol  Chemical Co. The principal business address of Mr. Edelman is Ch.
Pecholettaz 9, 1066 EPALINGES, Switzerland.

    PHILLIP P. KRUMB,  age 58, is currently Vice  President and Chief  Financial
Officer and Director of Dynacore. Mr. Krumb joined the Company in September 1994
and was Vice President and Chief  Financial  Officer from September 1994 to June
1997. From June 1997 until March 31, 1999, Mr. Krumb served as Special Assistant
to the Chairman.  From April 1, 1999 to December  17,2000,  Mr. Krumb was acting
Chief Financial Officer. On December 18, 2000, he reassumed his position as Vice
President  and Chief  Financial  Officer.  Prior to joining  the  Company he was
employed by IOMEGA  Corporation for 7 years as Senior Vice President Finance and
Chief Financial  Officer.  The principal  business  address of Mr. Krumb is 8410
Datapoint Drive, San Antonio, Texas 78229-8500.

     GERALD N. AGRANOFF,  age 54, is currently Chief Operating  Officer,  Acting
President,  Vice Chairman of the Board of and Director of Dynacore. Mr. Agranoff
is a General Partner of Asco Partners, the General Partner of Edelman Securities
Company L.P. (formerly  Arbitrage  Securities  Company) and a General Partner of
Plaza Securities  Company.  He has been affiliated with these companies for more
than five years.  Mr. Agranoff is a director of Bull Run  Corporation,  Atlantic
Gulf Communities,  and Canal Capital Corporation. Mr. Agranoff has also been the
General Counsel to Edelman  Securities Company L.P. and Plaza Securities Company
for more than five years. The principal business address of Mr. Agranoff is 8410
Datapoint Drive, San Antonio, Texas 78229-8500.

     NICHOLAS W. WALSH, age 31, is currently serving as Vice President-Portfolio
Manager  with J. & W.  Seligman & Co. Inc.,  New York.,  NY. He has held various
financial positions with the firm since 1993. Prior to joining Seligman in 1993,
he held the position of Portfolio  Assistant  with Alliance  Capital  Management
L.P., New York,  NY. Mr. Walsh holds degrees from Tufts  University and New York
University and is a Chartered Financial Analyst.  The principal business address
of Mr. Walsh is 3 Sheridan Square, Suite #11E, New York, New York 10014.

    NEIL S. SUBIN,  age 36, is  currently  Managing  Director  and  President of
Trendex Capital  Management which he formed in 1991.  Trendex is a private hedge
fund  focusing  primarily  on  financially  distressed  companies.  Mr. Subin is
currently a member of the Board of Directors  of  Teletrac,  a provider of fleet
management  services using two-way  wireless  messaging and also a member of the
Board of Directors of Nucentrix Broadband Networks,  Inc, a provider of wireless
broadband network and multichannel subscription television services,  located in
Plano,  Texas. He holds a degree from Brooklyn College.  The principal  business
address of Mr. Subin is 8 Palm Court, Sewalls Point, Florida 34996.

     ROGER B. SMITH, age 58, is currently serving as Managing Director with Bear
Stearns & Co., Inc. He has held various  positions with Bear Stearns since 1979.
He holds a degree  from the  University  of  Tennessee  at  Chattanooga  and has
various security and commodities licenses. The principal business address of Mr.
Smith is 3424 Peachtree  Road,  Suite 1700,  Atlanta,  Georgia 30326.

     JOSHUA J.ANGEL, age 64, is Founder and Senior Managing Shareholder of Angel
&  Frankel,  P.C.,  a New York law firm.  He holds a law  degree  from  Columbia
University  School of Law (1959) and a BS degree  from New York  University,  NY
(1956).  He has served on  Directorships  of the Public  Companies  of Allegheny
International (now Sunbeam Oster Corporation) 1987-1990; Lancer Industries, Inc.
1993-1996;   Gulf  Resources  Pacific  Limited  1994-1996;  and  Vision  America
Incorporated  June 2000- December 2000.  The principal  business  address of Mr.
Angel is 460 Park Avenue, New York, New York, 10022.

There are no family  relationships  between any of the executive officers of the
Company.
<PAGE>

Audit, Compensation and Executive Committees

     The  Company  has  Audit  and  Compensation  Committees  of  the  Board  of
Directors.  The current members of the Audit Committee are Messrs. Walsh, Subin,
Angel and Smith. The current members of the  Compensation  Committee are Messrs.
Walsh, Subin, and Smith. The Company does not have a Nominating nor an Executive
Committee.

The  Audit  Committee  annually   recommends  to  the  Board  of  Directors  the
independent  auditors for the Company and its  subsidiaries.  They meet with the
independent  auditors concerning the audit;  evaluate non-audit services and the
financial  statements and accounting  developments  that may affect the Company;
meet with  management  concerning  matters  similar to those  discussed with the
outside auditors; and make reports and recommendations to the Board of Directors
and the Company's  management and  independent  auditors from time to time as it
deems  appropriate.  The Committee did not meet during the period  December 19 -
31, 2000.

The  Compensation  Committee  makes  salary  recommendations   regarding  senior
management to the Board of Directors  and  administers  the Company's  Bonus and
Stock  Option Plan as described  below.  The  Committee  did not meet during the
period December 19, 2000 - December 31, 2000.

Meetings of the Board of Directors and Committees

The Board of Directors  met once during the period  December 19, 2000 - December
31, 2000. Each director was in attendance.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

Dynacore  believes  that,  during the fiscal year ended  December 31, 2000,  its
officers and directors complied with all filing requirements under Section 16(a)
of the Securities Exchange Act of 1934.

<PAGE>

ITEM 11  EXECUTIVE COMPENSATION

COMPENSATION OF DIRECTORS

Directors who are employees of Dynacore  receive no additional  compensation for
serving on the Board of Directors or its committees. Each director who is not an
employee of Dynacore  receives  an annual fee of $15,000,  payable in  quarterly
installments.  Non-employee  directors  receive no additional fee for serving on
any of the committees of the Board of Directors.


EXECUTIVE COMPENSATION

COMPENSATION COMMITTEE REPORT

Dynacore's  executive   compensation  program  is  based  on  three  fundamental
principles.

Dynacore must offer compensation opportunities sufficient to attract, retain and
reward  talented  executives  who are  sufficiently  capable of  addressing  the
challenges of a worldwide business in a difficult industry.

Compensation  should  include a  substantial  component  of  pay-for-performance
sufficiently  related  to the  financial  results  of  the  Company  and/or  the
executive's  performance  to  financially  motivate the  executive's  efforts to
increase  stockholder value. This may cause individual  compensation  amounts to
change significantly from year to year.

Compensation  should  provide a direct link between the  long-term  interests of
executives  and  stockholders.  Through the use of stock-based  incentives,  the
Compensation  Committee  focuses the  attention  of  executives  on managing the
Company from the perspective of an owner with an equity stake.

For executive  officers,  compensation now consists  primarily of base salary, a
short-term  performance  incentive  opportunity  in the form of a variable  cash
bonus based on either the financial  performance of the Company or of their area
of  responsibility,  and a  long-term  incentive  opportunity  provided by stock
options.  The committee also obtains ratification by the non-employee members of
the Board on most aspects of compensation and long-term incentives for executive
officers.

The  remainder of this Report  reviews the annual and  long-term  components  of
Dynacore's executive  compensation program, along with the decisions made by the
committee  regarding  the  current  compensation  for both the CEO and the other
named executive officers.

Total Annual Compensation

Annual cash compensation  consists of two components;  a fixed base salary and a
variable annual bonus  opportunity.  As an executive's  level of  responsibility
increases,  a larger  portion of total  annual pay is based on bonus and less on
salary.  All of the named  executives  received  a  downward  salary  adjustment
pursuant to their current  employment  agreements,  effective December 18, 2000.
The Committee sets the base salary of executive officers based upon a subjective
analysis of competitive salaries of equally qualified  executives,  occasionally
confirmed by reference to general  salary  surveys;  prior  compensation  of the
individual  or  of  previous   holders  of  the  position  is  also  considered.
Contractual   minimum  base  salaries  are   customarily   negotiated  with  the
executives.

The short-term  performance incentive bonus opportunity is established either as
a percentage,  unique for each individual,  of a numerical corporate performance
indicia, or as a target percentage of pay which is the amount that can be earned
based upon assigned  objectives being met.  Performance is measured as a percent
of attainment against these objectives.  When performance exceeds objectives, an
executive's  incentive pay can exceed the target rate,  and when it falls below,
individual incentive pay is reduced accordingly.

Messrs. Edelman's,  Agranoff's, and Krumb's bonuses are based on a contractually
specified  percentage  by which  "EBITDA"  exceeds 12 1/2% of Net Equity for the
applicable  period.  "EBITDA" shall mean, with respect to the applicable period,
earnings before interest,  taxes, depreciation and amortization as determined by
the Company's  accountants  in accordance  with  generally  accepted  accounting
principles;  provided however,  "EBITDA" shall not include amounts received from
the Company's  Patent  Litigation Trust that must be distributed to shareholders
pursuant to Section 7.05 of the Amended Plan of Reorganization of Dynacore dated
October  12,  2000.  Net  Equity  shall  mean net  assets  less net  liabilities
determined as of the last day of the applicable period.

<PAGE>

Long Term Incentives

The committee believes that stock options appropriately link executive interests
to the  enhancement  of  stockholder  value and utilizes  them as its  long-term
incentive  program;  no additional  long-term  incentive  programs are utilized.
Stock  options  generally  are  granted at fair  market  value as of the date of
grant,  become  exercisable  over three years, and have a term of ten years. The
stock options  provide value to the recipients  only when the price of Dynacore
stock increases above the option grant price.

As specified in their employment  agreements,  Messrs.  Edelman,  Agranoff,  and
Krumb received  stock options of 300,000,  175,000 and 75,000,  respectively  In
determining  the size of the option  grants for Messrs.  Edelman,  Agranoff' and
Krumb, the committee assessed the following factors: their potential by position
and ability (i) to  contribute to the creation of long-term  stockholder  value;
and (ii) to contribute to the successful execution of Dynacore's  strategy;  and
(iii) their relative levels of responsibility.

This report has been provided by the Compensation Committee.

Nicholas W. Walsh
Neil S. Subin
Roger B. Smith

Supplemental Executive Retirement Plan

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.  During the periods of August 1, 1999 - December 31,
1999,  January 1, 2000 - December  18,  2000,  December  19, 2000 - December 31,
2000,  and fiscal years ended July 31, 1999 and August 1, 1998,  the Company did
not make a  contribution  to the plan.  Under  the  terms of the plan,  benefits
accrued  to the  various  executive  officers  upon  satisfaction  of the plan's
vesting criteria which was based upon length of employment with the Company.
<PAGE>


Summary Compensation Table

The  following  table  sets  forth  certain   information   regarding  all  cash
compensation  paid or accrued for services  rendered by the Company's  five most
highly compensated executive officers for the last three fiscal years.
<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------------------
                                                                             Annual              Long-Term
                                                  Compensation
                                                  ------------------------------------------
Name and                                                                         Other         Compensation            All
                                                                                            --------------------
Principal                                                                       Annual         Stock Options          Other
Position                           Year (10)         Salary       Bonus      Compensation     Granted (#)(5)      Compensation
----------------------------------------------------------------------------------------------------------------------------------
<S>                           <C>                   <C>            <C>       <C>                  <C>              <C>
Asher B. Edelman   (1)        01/01/00-12/31/00     $300,534                 $ 70,648 (2)         300,000          $300,000(9)
Chairman of the Board and                                                                                            709,500(11)
Chief Executive Officer       08/01/99-07/29/00     300,534         -          82,863 (2)            -
                              08/02/98-07/31/99     300,534         -          101,628 (2)        225,000               -
                              08/03/97-08/01/98     300,534                    110,987 (2)

Gerald N. Agranoff (4)        01/01/00-12/31/00     $198,915        -         $7,200 (4)          175,000          $700,000(9)
Chief Operating Officer,      08/01/99-07/29/00      200,000        -           7,200 (4)            -                4,500(11)
Acting President              08/02/98-07/31/99      200,000         -          7,200 (4)         180,000               -
                              08/03/97-08/01/98     200,000                     7,200 (4)

Roger Edmonds (6)             01/01/00-12/31/00     $83,491    $68,521 (3)         -                 -                  -
Vice President,  Technical    08/01/99-07/29/00     153,066      68,521 (3)        -                 -                  -
   Services                   08/02/98-07/31/99     159,025      40,892 (3)        -              37,500                -
                              08/03/97-08/01/98     138,020      41,406 (3)

 .
Phillip P. Krumb (8)          01/01/00-12/31/00   $257,890(7)                                     75,000           $200,000(9)
Vice President and Chief      08/01/99-07/29/00     213,659(7)                                                       36,000(11)
Financial Officer

John R. Perkins (6) (8)       01/01/00-12/31/00     $67,308
Vice President                08/01/99-07/29/00     115,385




Table Footnotes
(1)   Asher B. Edelman was named Chief Executive Officer in February 1993.
(2)   Represents payments incident to foreign assignment.
(3)   Represents a performance bonus.
(4)   Represents auto allowance
(5)  Excludes  options  granted as a member of the Company's Board of Directors.
     Options  granted in fiscal  year 2000 were issued  pursuant  to  employment
     agreements and are subject to the approval of the initial stock option plan
     by the Company's stockholders.
(6)   Messrs.  Edmonds and Perkins were transferred to DNL June 30, 2000 as a result of the sale of the European subsidiaries.
(7)   Included is $105,417 of deferred compensation for the period of April 1999 until February 2000.
(8)   For prior years, Messrs.  Krumb and Perkins were not one of the five most highly compensated executive officers.
(9)      Represents cash portion of the officer settlement agreement.
(10) On June 30, 2000 the Company changed its fiscal year to a calendar year end
     basis.  The  compensation  information  furnished  in this table covers the
     period of 8/1/99 - 7/29/00 as if the fiscal year had not  changed,  as well
     as for the period of 1/1/00 - 12/31/00. Accordingly, there is an overlap of
     compensation information for the period of 1/1/00 - 7/31/00.
(11)     Represents the stock portion of the officer settlement agreement at a value of $.75/share issued.
</TABLE>
<PAGE>

Stock Option Grants in Last Fiscal Year (1)

The following  table sets forth certain  information  regarding all stock option
grants made to the named  executive  officers for the period ended  December 31,
2000.
<TABLE>
<CAPTION>

                      ------------------------------------------------------------
                         Options Granted for the period ended December 31, 2000
                      -------------------------------------------------------------
                                         % of Total
                                                                                   -------------------------------
                                          Options                                    Potential Gain at Assumed
                         Number of       Granted to      Exercise                   Annual Rates of Stock Price
                          Options       Employees in      Price       Expiration    Appreciation for Option Term
                                                                                   -------------------------------
----------------------
        Name            Granted (1)     Fiscal Year     Per Share        Date            5%             10%
------------------------------------------------------------------------------------------------------------------
<S>                            <C>             <C>        <C>         <C>                <C>             <C>

Asher B. Edelman               300,000         54.54%     $0.75       12/18/2010         $141,501        $358,592
Gerald N. Agranoff             175,000         31.82%     $0.75       12/18/2010          $82,542        $209,179
Phillip P. Krumb                75,000         13.64%     $0.75       12/18/2010          $35,375         $89,648
Roger Edmonds                        0          0.00%       0              -                   $0              $0
John Perkins                         0          0.00%       0              -                   $0              $0
------------------------------------------------------------------------------------------------------------------
</TABLE>

    (1)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.  No Stock
     Appreciation Rights (SARs) have ever been granted by Dynacore.


Aggregated Option Exercises for the period ended December 31, 2000 Option Values

The  following  table sets forth  certain  information  regarding  stock options
exercised  by the  Company's  named  executive  officers  for the  period  ended
December 31, 2000.
<TABLE>
<CAPTION>


--------------------------------------------------                               -----------------------------
                        Number of                                                    Value of Unexercised
                                                  -------------------------------
                          Shares                      Number of Unexercised          In-the-Money Options
                       Acquired on      Value      Options at December 31, 2000      at December 31, 2000
                                                  ------------------------------------------------------------
        Name             Exercise      Realized     Exercisable   Unexercisable  Exercisable   Unexercisable
--------------------------------------------------------------------------------------------------------------
<S>                        <C>           <C>                   <C>      <C>               <C>             <C>

Asher B. Edelman            0             0                     0        300,000           $0              $0
Gerald N. Agranoff          0             0                     0        175,000           $0              $0
Phillip P. Krumb            0             0                     0         75,000           $0              $0
Roger Edmonds               0             0                     0              0           $0              $0
John Perkins                0             0                     0              0           $0              $0
--------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

Performance Table

Set forth below is a table comparing the five-year  cumulative total return
for  Dynacore  common  stock with the Dow Jones  65-Composite  Average,  a broad
equity market index, and the Dow Jones computer systems index.

                         DYNACORE HOLDINGS CORPORATION
                              STOCK PRICE ANALYSIS

              Dynacore            Dow Jones Computer      Dow Jones 65-Computer
             Common Stock         systems index           Composite average

            Actual    Base        Actual     Base         Actual      Base
             YE        YE           YE        YE           YE          YE

 (Successor)
 2000        0.00     0.00       564.76      122.65       3,317.61    210.29

(Predecessor)
 1999        1.53    40.80       760.05      417.84       3,214.38    196.58
 1998        3.02    80.53       499.89      274.82       2,870.83    175.57
 1997       15.27   407.20       281.41      154.71       2,607.40    159.46
 1996        4.99   133.07       210.53      115.74       2,025.80    123.89
 1995        1.50    40.00       460.48      253.15       1,577.65     96.49

The graph assumes $100 invested on January 1, 1996, in Dynacore common stock and
each of the Dow Jones indexes,  and that all dividends were  reinvested.  During
the five-year period Dynacore did not pay any dividends on its common stock.

EMPLOYMENT AGREEMENTS

Effective  December  18,  2000,  Dynacore  entered  into  a  written  employment
agreement concerning the employment of Mr. Edelman as Chief Executive Officer of
the Company and Chairman of the Board of Directors of the Company. The agreement
is for a period of eighteen  (18)  months.  The  agreement  provides  for a base
salary of $207,500,  certain executive benefits and an annual bonus opportunity.
For each fiscal year or portion  thereof,  the Company will pay Mr.  Edelman,  a
bonus in an amount  equal to five (5%)  percent  of the  amount by which  EBITDA
exceeds  twelve and  one-half  percent (12 1/2%) of Net Equity.  "EBITDA"  shall
mean, with respect to the applicable  period,  earnings before interest,  taxes,
depreciation  and  amortization  as determined by the Company's  accountants  in
accordance with generally  accepted  accounting  principles;  provided  however,
"EBITDA" shall not include amounts received from the Company's Patent Litigation
Trust that must be distributed to  shareholders  pursuant to Section 7.05 of the
Amended Plan of  Reorganization  of Dynacore  dated October 12, 2000. Net Equity
shall mean net assets less net liabilities  determined as of the last day of the
applicable  period.  In  addition,  pursuant to the  employment  agreement,  Mr.
Edelman was granted 300,000 stock options at an exercise price of $.75,  vesting
in equal  installments on the date coinciding with 6, 12, and 18 months from the
effective date of the  agreement.  The agreement also provides that in the event
Mr.  Edelman's  employment is terminated  without cause or with Good Reason,  he
shall receive his base salary and bonus for the  remaining  duration of the Term
and for an additional  period of six months from the end of the Term ("Severance
Period")  as well as  continuation  of certain  benefits  during  the  severance
period.  The agreement  also provides  that during the  employment  term, in the
event of Mr. Edelman's death or disability,  his estate or legal  representative
shall be entitled  to receive  the base  salary  through the end of the month in
which the  death,  or  disability  occurs,  a pro rata  portion of the bonus and
certain executive benefits.

Effective  December  18,  2000,  Dynacore  entered  into  a  written  employment
agreement  concerning the employment of Mr. Agranoff as Chief Operating Officer,
Acting  President,  and Vice  Chairman of the Board of Directors of the Company.
The  agreement is for a period of eighteen (18) months.  The agreement  provides
for a base salary of $157,500,  certain  executive  benefits and an annual bonus
opportunity.  For each fiscal year or portion thereof,  the Company will pay Mr.
Agranoff, a bonus in an amount equal to four (4%) percent of the amount by which
EBITDA  exceeds  twelve and one-half  percent (12 1/2%) of Net Equity.  "EBITDA"
shall mean, with respect to the applicable  period,  earnings  before  interest,
taxes,  depreciation and amortization as determined by the Company's accountants
in accordance with generally accepted accounting  principles;  provided however,
"EBITDA" shall not include amounts received from the Company's Patent Litigation
Trust that must be distributed to  shareholders  pursuant to Section 7.05 of the
Amended Plan of  Reorganization  of Dynacore  dated October 12, 2000. Net Equity
shall mean net assets less net liabilities  determined as of the last day of the
applicable  period.  In  addition,  pursuant to the  employment  agreement,  Mr.
Agranoff was granted 175,000 stock options at an exercise price of $.75, vesting
in equal  installments on the date coinciding with 6, 12, and 18 months from the
effective date of the  agreement.  The agreement also provides that in the event
Mr.  Agranoff's  employment is terminated  without cause or with Good Reason, he
shall receive his base salary and bonus for the  remaining  duration of the Term
and for an additional  period of six months from the end of the Term ("Severance
Period")  as well as  continuation  of certain  benefits  during  the  severance
period.  The agreement  also provides  that during the  employment  term, in the
event of Mr. Agranoff's death or disability,  his estate or legal representative
shall be entitled  to receive  the base  salary  through the end of the month in
which the  death,  or  disability  occurs,  a pro rata  portion of the bonus and
certain executive benefits.
<PAGE>

Effective  December  18,  2000,  Dynacore  entered  into  a  written  employment
agreement  concerning  the  employment  of Mr.  Krumb as Vice  President,  Chief
Financial  Officer,  and member of the Board of Directors  of the  Company.  The
agreement is for a period of eighteen (18) months.  The agreement provides for a
base  salary  of  $82,500,  certain  executive  benefits  and  an  annual  bonus
opportunity.  For each fiscal year or portion thereof,  the Company will pay Mr.
Krumb,  a bonus in an amount  equal to one (1%)  percent  of the amount by which
EBITDA  exceeds  twelve and one-half  percent (12 1/2%) of Net Equity.  "EBITDA"
shall mean, with respect to the applicable  period,  earnings  before  interest,
taxes,  depreciation and amortization as determined by the Company's accountants
in accordance with generally accepted accounting  principles;  provided however,
"EBITDA" shall not include amounts received from the Company's Patent Litigation
Trust that must be distributed to  shareholders  pursuant to Section 7.05 of the
Amended Plan of  Reorganization  of Dynacore  dated October 12, 2000. Net Equity
shall mean net assets less net liabilities  determined as of the last day of the
applicable period. In addition,  pursuant to the employment agreement, Mr. Krumb
was granted 75,000 stock options at an exercise price of $.75,  vesting in equal
installments on the date coinciding with 6, 12, and 18 months from the effective
date of the agreement. The agreement also provides that in the event Mr. Krumb's
employment is terminated without cause or with Good Reason, he shall receive his
base  salary  and  bonus  for the  remaining  duration  of the  Term  and for an
additional period of six months from the end of the Term ("Severance Period") as
well as  continuation  of certain  benefits  during the  severance  period.  The
agreement  also  provides that during the  employment  term, in the event of Mr.
Krumb's  death  or  disability,  his  estate  or legal  representative  shall be
entitled to receive  the base  salary  through the end of the month in which the
death,  or  disability  occurs,  a pro rata  portion  of the bonus  and  certain
executive benefits.


ITEM 12  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

(a) Security  Ownership of Certain  Beneficial Owners. The following persons are
known to the Company to be  beneficial  owners of more than five percent (5%) of
the Company's securities as defined under Exchange Act Rule 13(d)(3).

                                      Common Stock               Percent
Name and Address                  Beneficially Owned             of Class
----------------                  ------------------             --------
Asher B. Edelman (1)             (See Table under Security
c/o Dynacore Holdings Corporation   Ownership of Management)(1)
717 Fifth Avenue
New York, NY 10222

    (1) Mr.  Edelman is part of a "group" as that term is used in  Exchange  Act
Section  13(d)(3).  See subsection (b) below for detailed  description as to the
amount and nature of beneficial ownership by the members of the group.

(b)  Security Ownership of Management

The following  table sets forth  certain  information  regarding the  beneficial
ownership  of the  Common  Stock  by each  director,  by  each of the  executive
officers  named in the table,  and by the directors and executive  officers as a
group as of March 15, 2001.

                                    Common Stock
                                    Beneficially              Percent
 Name of Officer/Director           Owned (1)                 of Class(10)
-------------------------           -----------------         ------------
 Gerald N. Agranoff (O&D)           6,618(4) (8)                  *
 Asher B. Edelman (O&D)             1,759,534(3)(4)            17.6%
 Phillip P. Krumb (O&D)             54,454(9)                     *
 Nicholas W. Walsh (D)              182,847(2)(5)                 *
 Neil S. Subin (D)                  107,723(2)(6)                 *
 Roger B. Smith (D)                 127,716(2)(7)                 *
 Joshua J. Angel (D)                50,000(2)                     *

 Executive Officers and Directors
    Dynacore as a group (7 persons)    2,288,892               22.8%
   Indicates less than 1% ownership as a percent of the outstanding class (10)
<PAGE>

(1)  Information  relating  to  beneficial  ownership  is based  upon  ownership
     information   furnished  by  each  person  using   "beneficial   ownership"
     definitions set forth in Section 13 of the Securities Exchange Act of 1934,
     as amended (the "Exchange  Act").  Under those rules, a person is deemed to
     be a "beneficial  owner" of a security if that person has or shares "voting
     power",  which  includes  the power to vote or to direct the voting of such
     security,  or "investment power", which includes the power to dispose or to
     direct the disposition of such security.  The person is also deemed to be a
     beneficial  owner of any  security  of  which  that  person  has a right to
     acquire  beneficial  ownership  (such as by exercise of options)  within 60
     days.  Under  such  rules,  more  than one  person  may be  deemed  to be a
     beneficial owner of the same securities, and a person may be deemed to be a
     beneficial  owner of  securities  as to which  he or she may  disclaim  any
     beneficial   interest.   Except  as  otherwise  indicated  in  other  table
     footnotes,  the indicated  directors and executive  officers possessed sole
     voting and investment  power with respect to all shares of Common Stock and
     Preferred Stock attributed.

     (2) The tabulation  includes  shares of Common Stock which may be deemed to
be  beneficially  owned by such  persons  by reason of stock  options  currently
exercisable  or which may become  exercisable  within sixty (60) days after that
date.  The number of shares  deemed to be  beneficially  owned by reason of such
options is: Mr. Walsh,  50,000; Mr. Subin,  50,000;  Mr. Smith,  50,000; and Mr.
Angel, 50,000; all directors as a group, 200,000.

     (3) Mr. Edelman's listed beneficial ownership of 1,759,534 shares of Common
Stock is explained in detail in this paragraph, and is based upon his beneficial
ownership  reported on Schedule  13D. Mr.  Edelman owns  946,000  Common  shares
directly. Mr. Edelman reports beneficial ownership jointly, as a group, with the
following  named  persons or  entities.  Those whose  shares have been  included
within Mr. Edelman's listed total are reported as beneficially owned pursuant to
Rule 13d-3 by Mr. Edelman.  As the controlling  general partner of each of Plaza
Securities  Company,  A.B. Edelman Limited Partnership and Citas Partners (which
is the sole general  partner of Felicitas  Partners,  L.P.),  Mr. Edelman may be
deemed  to  own  beneficially  the  99,381,   211,527  and  1,416  shares  held,
respectively,  by each of such  entities  for  purposes  of Rule 13d-3 under the
Exchange  Act,  and these  shares are  included  in the listed  ownership.  Also
included are the 81,348 shares owned by Canal Capital Corporation ("Canal"),  in
which  company Mr.  Edelman and various  persons and  entities  with which he is
affiliated own interests.  By virtue of investment management agreements between
A. B.  Edelman  Management  Company Inc.  and Canal,  A. B.  Edelman  Management
Company Inc. has the  authority to  purchase,  sell and trade in  securities  on
behalf of Canal. A. B. Edelman  Management  Company Inc. therefore may be deemed
to be the beneficial  owner of the 81,348 shares owned by Canal.  Mr. Edelman is
the sole stockholder of A. B. Edelman  Management  Company Inc. and these shares
are included.  A. B. Edelman Management  Company,  Inc. is also the sole general
partner of Edelman Value  Partners,  L.P. which currently owns 130,031 shares of
Common Stock which are  included.  Also  included are the 43,459 shares owned by
Mr. Edelman's  spouse Maria Regina M. Edelman,  1,125 shares held by Mr. Edelman
in a Keough account,  4,728 shares  beneficially owned by Mr. Edelman's children
in accounts for which he is the  custodian,  and 231,194 shares owned by Edelman
Value Fund,  Ltd., for which Mr. Edelman serves as the sole investment  manager.
Also included are the 9,325 shares owned by Edelman  Family  Partners,  L.P. for
which Mr. Edelman serves as a general partner. As a Trustee of the Canal Capital
Corporation  Retirement  Plan ("Canal  Plan")  which owns 27,287  shares and the
Dynacore  Plan  described  above which owns 71,253  shares,  Mr. Edelman may be
deemed to own  beneficially,  and share  voting  and  investment  power over the
shares  owned by each such Plan,  which are  excluded.  Also  excluded  from the
listed ownership are 13,172 shares beneficially owned by Mr. Edelman's daughters
in accounts for which their mother,  Penelope C. Edelman, is the custodian,  the
411  shares  owned  directly  by  Penelope  C.  Edelman  and the  36,755  shares
beneficially  owned by Mr.  Edelman's son in accounts for which Irving Garfinkel
is the custodian.  Mr. Edelman disclaims  beneficial ownership of these excluded
shares.  Although disclaimed and excluded for purposes of Rule 13d-3, certain of
the disclaimed and excluded shares are  nevertheless  reported by Mr. Edelman as
beneficially  owned on his Form 4's  pursuant  to the  rules  promulgated  under
Section 16 of the Exchange Act.
<PAGE>

     (4) Mr. Agranoff is a general partner of Plaza  Securities  Company,  which
owns 99,381 shares of Common Stock. He disclaims  beneficial  ownership of these
shares which are  excluded in the party's  listing in the  beneficial  ownership
table  above due to the sole voting and  dispositive  powers  attributed  to Mr.
Edelman in his Schedule 13D. Mr. Agranoff is also a director of Canal which owns
81,348 shares. Mr. Agranoff disclaims  beneficial  ownership of these shares and
they are excluded from his beneficial  ownership  listing due to the sole voting
and dispositive powers attributed to Mr. Edelman.

     (5) Mr. Walsh owns 132,847 Common shares directly in addition to the 50,000
shares represented by exercisable options.

     (6) Mr. Subin owns 57,723 Common shares  directly in addition to the 50,000
shares represented by exercisable options.

     (7) Mr. Smith owns 77,716 Common shares  directly in addition to the 50,000
shares represented by exercisable options.

(8)      Mr. Agranoff owns 6,618 Common shares directly.

(9)      Mr. Krumb owns 54,454 Common shares directly.

(10) The  percentage  of the  outstanding  class  calculations  are  based  upon
     10,000,000 Common shares, outstanding as of March 15, 2001.


ITEM 13  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.
<PAGE>

     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.

PART IV

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

    (a)1 Financial Statements

         The consolidated  financial statements listed in the accompanying index
to the financial statements are filed as part of this report.

    (a)2 Financial Statement Schedules

         Schedule II - Valuation and Qualifying Accounts and Reserves

         All other schedules are omitted since they are either not applicable or
         the required information is shown in the Company's financial statements
         or notes thereto.  Individual  financial  statements of the Company are
         omitted  because the Company is primarily an operating  company and all
         subsidiaries  included in the Consolidated  Financial  Statements being
         filed,  in the aggregate,  do not have minority  equity interest and/or
         indebtedness  to any person other than the Company or its  consolidated
         subsidiaries   in  amounts  which  together  exceed  5%  of  the  total
         consolidated  assets as shown by the most recent year-end  Consolidated
         Balance Sheet.

    (a)3 Exhibits

         The exhibits listed on the accompanying  index to exhibits are filed as
part of this report.

(b)      Reports on Form 8-K: In a report  filed on Form 8-K dated  December 11,
         2000, the Company  reported that the Bankruptcy  Court for the District
         of Delaware had confirmed its Amended Plan of  Reorganization  and that
         Ernst & Young LLP had resigned as auditors.

         In a report on Form 8-K dated December 22, 2000,  the Company  reported
         that the Amended  Plan of  Reorganization  was  declared  effective  on
         December 18, 2000.

         Subsequent  to year end, in a report filed on Form 8-K dated January 4,
         2001, the Company  reported its new NASDAQ symbols for the Common Stock
         and the Units of Beneficial  Interest in the Dynacore Patent Litigation
         Trust.

         See Exhibit Index included herein on page 57.
<PAGE>


                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
                                                                                                               Sequentially
Exhibit                                                                                                          Numbered
Number            Description of Exhibits                                                                            Pages

<S>               <C>
(3)(a)            Certificate  of  Incorporation  of  Datapoint  Corporation,  as  amended  (filed as Exhibit
                  (3)(a) to the  Company's  Annual  Report on Form 10K for the year ended July 31, 1993,  and
                  incorporated herein by reference).

(3)(b)            Bylaws of  Datapoint  Corporation,  as amended  (filed as Exhibit  (3)(b) to the  Company's
                  Annual Report on Form 10-K for the year ended August 1, 1992,  and  incorporated  herein by
                  reference).

(4)(a)            Debenture  holder Notice of  Adjustment  to  Conversion  Rate,
                  dated July 11, 1985, under Indenture dated as of June 1, 1981,
                  between   Datapoint   Corporation  and  Continental   Illinois
                  National  Bank and  Trust  Company  of  Chicago,  as  Trustee,
                  providing for 8-7/8% Convertible  Subordinated  Debentures Due
                  2006 (filed as Exhibit  (4)(a) to the Company's  Annual Report
                  on Form  10-K  for the  year  ended  July  27,  1985  and said
                  Indenture  filed as  Exhibit 4 to the  Company's  Registration
                  Statement on Form S-16 (No. 2-72395), each incorporated herein
                  by reference).

(4)(b)            Certificate  of  Designation,  Preferences,  Rights  and  Limitations  of  Series  of $1.00
                  Preferred  Stock (filed as Exhibit (4)(e) to the Company's  Registration  Statement on Form
                  S-4 dated April 30, 1992 and incorporated herein by reference).

(10)(a)           1983 Employee Stock Option Plan (filed as Exhibit (4)(a)(4) to
                  the  Company's   Registration  Statement  on  Form  S-8  dated
                  November 9, 1983 and incorporated herein by reference).

(10)(b)           1985 Director  Stock Option Plan (filed as Exhibit  (10)(i) to
                  the  Company's  Annual  Report on Form 10-K for the year ended
                  August 1, 1987 and incorporated herein by reference).

(10)(c)           1986 Employee  Stock Option Plan (filed as Exhibit  (10)(h) to
                  the  Company's  Annual  Report on Form 10-K for the year ended
                  August 1, 1987 and incorporated herein by reference).

(10)(d)           1991  Director  Stock Option Plan (filed as Exhibit  (10)(b)(2)  to  Amendment  No. 1 dated
                  February 6, 1992 to the  Company's  Registration  Statement on Form S-4  (Registration  No.
                  33-44097) and incorporated herein by reference).

(10)(e)           1992 Employee Stock Option Plan (filed as Exhibit (4)(a)(4) to
                  the Company's Registration Statement on Form S-8 dated January
                  19, 1993 and incorporated herein by reference).

(10)(f)           Agreement for Transfer of Assets and  Liabilities  in Exchange
                  for Stock,  dated as of June 28, 1985, between the Company and
                  Intelogic  Trace,  Inc.  (filed  as  Exhibit  (10)(a)  to  the
                  Company's  Current  Report on Form 8-K dated July 28, 1985 and
                  incorporated herein by reference).

(10)(g)           Master  Maintenance  Agreement,  dated  as of  June  28,  1985,  between  the  Company  and
                  Intelogic  Trace,  Inc. (filed as Exhibit  (10)(b) to the Company's  Current Report on Form
                  8-K dated July 28, 1985 and incorporated herein by reference).

(10)(h)           Maintenance  Agreement  regarding open systems  products  between the Company and Intelogic
                  Trace,  Inc.,  (filed as Exhibit  (10)(g) to the  Company's  Annual Report on Form 10-K for
                  the year ended August 1, 1992, and incorporated herein by reference).
</TABLE>
<PAGE>

                               INDEX TO EXHIBITS
<TABLE>
<CAPTION>

                                                                                                               Sequentially
Exhibit                                                                                                        Numbered
Number            Description of Exhibits                                                                      Pages


<S>               <C>
(10)(i)           Agreement  between the Company  and  Arbitrage  Securities  Company,  as amended  (filed as
                  Exhibit  (10)(f) to the  Company's  Annual  Report on Form 10-K for the year ended July 29,
                  1989 and incorporated herein by reference).

(10)(j)           Indemnity  Agreements  with  Officers  and  Directors  (filed  as  Exhibit  (10)(f)  to the
                  Company's  Annual  Report on Form 10-K for the year ended  August 1, 1987 and  incorporated
                  herein by reference).

(10)(k)           First Amendment to  Indemnification  Agreement with certain Officers and Directors.  (filed
                  as Exhibit  (10)(h)  to the  Company's  Annual  Report on Form 10-K for the year ended July
                  28, 1990 and incorporated herein by reference).

(10)(l)           Second  Amendment to  Employment  Agreement  with A. B. Edelman  (said  amendment  filed as
                  Exhibit  (10)(h)(3)  to the  Company's  Registration  Statement on Form S-4 dated April 30,
                  1992),  amending  Employment  Agreement  dated  January  9, 1991 (said  agreement  filed as
                  Exhibit  (10)(j) to the  Company's  Annual  Report on Form 10-K for the year ended July 28,
                  1990),  as amended by  Amendment  No. 1 dated  December  1, 1990 (said  amendment  filed as
                  Exhibit  (10)(i) to the  Company's  Annual  Report on Form 10-K for the year ended July 27,
                  1991), each of which are incorporated herein by reference.

(10)(m)           Employment  Agreement  with D. Berger  (filed as Exhibit  (10)(m) to the  Company's  Annual
                  report  on Form  10-K  for the  Year  ended  July  31,  1993  and  incorporated  herein  by
                  reference).

(10)(n)           Employment  Agreement  with J. Berger  (filed as Exhibit  (10)(l) to the  company's  Annual
                  Report  on Form  10-K  for the  year  ended  August  1,  1992 and  incorporated  herein  by
                  reference).

(10)(o)           Employment  Agreement with K. L. Thrower (filed as Exhibit (10)(o) to the company's  Annual
                  Report  on Form  10-K  for the  year  ended  August  1,  1992 and  incorporated  herein  by
                  reference).

(10)(p)           First  Amendment to the Grantor  Trust  Agreement  dated June 18,  1991.  (filed as exhibit
                  (10)(n) to the  Company's  Annual  Report on Form 10-K for the year ended July 27, 1991 and
                  incorporated herein by reference).

(10)(q)           Manufacturing   facilities  Agreement  of  Lease  between  the
                  Company  and Willis  and Cox  Associates  dated June 21,  1991
                  (filed as Exhibit  (10)(q) to the  Company's  Annual Report on
                  Form 10-K for the year ended  August 1, 1992 and  incorporated
                  herein by reference).

(10)(r)           Employment  Agreement  with D. Bencsik  (filed as exhibit  (10)(r) to the Company's  Annual
                  Report  on the Form  10-K for the year  ended  July 30,  1994 and  incorporated  herein  by
                  reference).

(10)(s)           Employment  Agreement with G. Agranoff and Amendment No. 1 to Employment  Agreement  (filed
                  as Exhibit  (10) (s) to Amendment  No. 2 to the  Company's  Registration  Statement on Form
                  S-4 filed on September 27, 1996 and incorporated herein by reference).

(10)(t)           Employment  Agreement  with B. Thomas  (filed as Exhibit (10) (t) to Amendment No. 2 to the
                  Company's   Registration   Statement  on  Form  S-4  filed  on   September   27,  1996  and
                  incorporated herein by reference).
</TABLE>
<PAGE>

                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
                                                                                                               Sequentially
Exhibit                                                                                                        Numbered
Number            Description of Exhibits                                                                      Pages

<S>               <C>

(10)(u)           Employment  Agreement  with P. Krumb (filed as Exhibit  (10) (u) to Amendment  No. 2 to the
                  Company's   Registration   Statement  on  Form  S-4  filed  on   September   27,  1996  and
                  incorporated herein by reference).

(10)(v)           Settlement  Agreement  with  NTI  (filed  as  Exhibit  (10) (v) to  Amendment  No. 2 to the
                  Company's   Registration   Statement  on  Form  S-4  filed  on   September   27,  1996  and
                  incorporated herein by reference).

(10)(w)           Umbrella  Acquisition  Agreement between Kalamazoo and Datapoint (filed as Exhibit 2 to the
                  Company's  Current  Report  on Form 8-K  dated  June 25,  1996 and  incorporated  herein by
                  reference).

(10)(x)           Form of Agreement  for sale of assets of Datapoint  Group  Vendor and  Kalamazoo  (filed as
                  Exhibit  3  to  the  Company's  Current  Report  on  Form  8-K  dated  June  25,  1996  and
                  incorporated herein by reference).

(10)(y)           Agreement  for sale of DARTS  Software  (filed as Exhibit 4 to
                  the Company's  Current  Report on Form 8-K dated June 25, 1996
                  and incorporated herein by reference).

(10)(z)           1996  Director  Stock  Option Plan (filed as Annex D to Amendment  No. 3 dated  October 31,
                  1996 to the Company's  Registration  Statement on Form S-4  (Registration No. 333-9627) and
                  incorporated herein by reference).

(10)(aa)          1996  Employee  Stock  Option Plan (filed as Annex E to Amendment  No. 3 dated  October 31,
                  1996 to the Company's  Registration  Statement on Form S-4  (Registration No. 333-9627) and
                  incorporated herein by reference).

(10)(bb)          Employment Agreement with R. Conn.

(10)(cc)          Employment Agreement with R. Edmonds.

(10)(dd)          Employment Agreement with J. Perkins.

(10)(ee)          Amendment  No. 2 to Employment Agreement with G. Agranoff.

(10)(ff)          Amendment No. 1 to Summary of Modified Employment Agreement - with P. Krumb.

(10)(gg)          1997  Employee  Stock  Option  Plan  (filed as Annex A to the  Company's  Definitive  Proxy
                  Statement  on  Schedule  14(a)  dated  December  23,  1997,  and  incorporated   herein  by
                  reference).

(10)(hh)          Announcement of the Letter of Intent to Sell the Company's  European  Operations  (filed as
                  Exhibit 99 to the  Company's  Current  Report Form 8-K dated May 19, 1999 and  incorporated
                  by reference).

(10)(ii)          Announcement  of the  Acquisition  of  Corebyte(TM)  (filed as
                  Exhibit  99 to the  Company's  Current  Report  Form 8-K dated
                  August 3, 1999 and incorporated by reference).

(10)(jj)          Stock Purchase  Agreement  between Reboot  Systems,  Inc. and Datapoint  Corporation  dated
                  July 31, 1999 and as amended on November 1, 1999.

(10)(kk)          Asset Purchase  Agreement  between Datapoint  Corporation,  SF
                  Digital,  LLC and John  Engstrom,  and John Engstrom  d/b/a SF
                  Digital and Corebyte(TM) dated July 27, 1999.

(10) (ll)         Employment agreement  with A. B. Edelman.

(10)(mm)          Employment agreement with G. N. Agranoff.

(10)(nn)          Employment agreement with  P. P. Krumb.

(10)(oo)          Announcement  of  confirmation  of Amended Plan of  Reorganization  and  resignation of the
                  Company's auditors,  Ernst & Young LLP (filed as Exhibits 99.1 and 99.3,  respectively,  to
                  the  Company's  Current  Report  Form 8-K  dated  December  11,  2000 and  incorporated  by
                  reference).

(10)(pp)          Announcement  of Effective  Date of Amended Plan of  Reorganization  (filed as Exhibit 99.1
                  to the  Company's  Current  Report Form 8-K dated  December  22, 2000 and  incorporated  by
                  reference).

(10)(qq)          Announcement  of the  Company's new NASDAQ  symbols  (filed as
                  Exhibit 99.1 to the  Company's  Current  Report Form 8-K dated
                  January 4, 2001, and incorporated by reference).


(27)              Article 5, Financial Data Schedule.
</TABLE>
<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 16, 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 16, 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 16, 2001
---------------------
     Phillip P. Krumb



<PAGE>


                                   Schedule II

                 DYNACORE HOLDINGS CORPORATION AND SUBSIDIARIES
                 Valuation and Qualifying Accounts and Reserves
                                 (In thousands)


<TABLE>
<CAPTION>

                                                                      (a)             (b)
                                   Balance        Charged        Charged
                                        at             to        (to) from        Other            Balance
                                  Beginning       Costs  and        Other        Additions         at End
    Classification                   of Year      Expenses        Accounts      (Deductions)       of Year

Allowance for doubtful accounts:

(Successor Company)
<S>                                     <C>             <C>          <C>              <C>               <C>
Period ended December 31, 2000          $--             $--          $--              $--               $--

(Predecessor Company)
Period ended December 18, 2000        $773            $(65)          $--           $(708)               $--

Period ended December 31, 1999        $880            $(31)          $--            $(76)             $773

Year ended July 31, 1999            $1,305           $(299)        $(69)            $(57)             $880

Year ended August 1, 1998           $1,654             $33         $179            $(561)           $1,305
</TABLE>


(a)  Transfers to and from other balance sheet reserve accounts.
(b)  Accounts written-off net of recoveries, other expense accounts and
     translation adjustments.

<PAGE>



                                                                EXHIBIT 10 (ll)

                         EXECUTIVE EMPLOYMENT AGREEMENT

                  EMPLOYMENT AGREEMENT ("Agreement") dated as of ______ __, 2000
between Dynacore Holdings  Corporation,  a Delaware  corporation (the "Company")
and Asher B. Edelman (the "Executive").

                  WHEREAS,   the  parties  wish  to   establish   the  terms  of
Executive's future employment with the Company.

                  Accordingly, the parties agree as follows:

                  1.       Employment, Duties and Acceptance.
                           ---------------------------------

     1.1  Employment  by the Company.  The Company  shall  employ the  Executive
effective as of  Effective  Date of the  Company's  Plan of  Reorganization,  as
defined  therein (the "Effective  Date") to render services to the Company.  The
Executive will serve in the capacity of Chief  Executive  Officer of the Company
and  Chairman  of  the  Board  of  Directors  of  the  Company  (the  "Board  of
Directors").  The  Executive  shall report to the Board of Directors and perform
duties as may be  assigned  to him from time to time by the Board of  Directors;
provided, however, that the Executive and the Company agree and acknowledge that
the Executive  shall be permitted to engage in any other activity or business as
a director,  stockholder,  partner, owner, employee, consultant, agent or in any
other  capacity so long as such  activity or business does not conflict with the
business of the  Company;  and  provided  further,  that the  Executive  and the
Company agree and  acknowledge  that the Executive is a resident of  Switzerland
and will spend substantial periods of time outside of the United States.

     1.2 Acceptance of Employment by the Executive.  The Executive  accepts such
employment and shall render the services described above.

                  2.       Duration of Employment.
                           ----------------------

     This Agreement and the employment  relationship  hereunder will continue in
effect for eighteen  (18) months from the Effective  Date (the  "Term"),  unless
terminated sooner in accordance with Section 4 hereof.

                  3.       Compensation by the Company.
                           ---------------------------

     3.1 Base Salary. As compensation for all services rendered pursuant to this
Agreement,  the Company  will pay to the  Executive an annual base salary of Two
Hundred Seven Thousand Five Hundred Dollars  ($207,500),  subject only to upward
adjustment  by the  Compensation  Committee  of the  Board of  Directors  of the
Company and payable in  accordance  with the  payroll  practices  of the Company
("Base Salary").

     3.2.  Bonuses.  For each  Fiscal Year (as  hereinafter  defined) or portion
thereof  during the Term and to the extent EBITDA (as  hereinafter  defined) for
the  applicable  period  exceeds  twelve and  one-half  percent (12 1/2%) of Net
Equity (as hereinafter  defined) for the applicable period, the Company will pay
to the  Executive,  in addition to Base  Salary set forth  above,  a bonus in an
amount equal to five percent (5%) of the amount by which EBITDA  exceeds  twelve
and one-half  percent (12 1/2%) of Net Equity (the "Bonus").  The Bonus shall be
payable no later than 90 days  following  the end of the  applicable  period for
which it is paid.

     "EBITDA" shall mean, with respect to the applicable period, earnings before
interest,  taxes,  depreciation  and amortization as determined by the Company's
accountants  in  accordance  with  generally  accepted  accounting   principles;
provided,  however, EBITDA shall not include amounts received from the Company's
Patent  Litigation  Trust that must be distributed to  shareholders  pursuant to
Section  7.05  of the  Amended  Plan  of  Reorganization  of  Dynacore  Holdings
Corporation dated October ___, 2000.

     "Net Equity"  shall mean net assets less net  liabilities  determined as of
the last day of the applicable period.

     3.3  Participation  in  Employee  Benefit  Plans.  The  Executive  shall be
eligible to participate  in all retirement  plans and other benefit plans of the
Company and the Executive and his dependents shall be eligible to participate in
the health benefit plans of the Company (specifically including, but not limited
to,  mental  health  benefits  and  benefits  under the  Company's  Supplemental
Executive  Medical Plan). In addition to any company-wide  life insurance plans,
the Company  shall pay the premiums for a life  insurance  policy on the life of
the  Executive for the benefit of  Executive's  designated  beneficiaries  which
provides a death benefit equal to one hundred percent (100%) of Base Salary (the
"Additional Life Insurance Policy").
<PAGE>

     3.4 Stock Options.  On the Effective  Date, the Executive  shall be granted
incentive  stocks  options to the extent such options may be  designated as such
under  applicable  law and to the extent that all or a portion of the options do
not so qualify  non-qualified  stock  options for the purchase of three  hundred
thousand  (300,000) shares of Common Stock, at an exercise price of seventy-five
cents ($0.75) per share (the "Exercise Price").  The options shall vest in equal
installments on the date coinciding with six (6) months,  twelve (12) months and
eighteen (18) months from the Effective Date. Vested options may be exercised by
the Executive at any time prior to the 10th  anniversary  of the Effective  Date
(the "Option  Term").  Options may be exercised  (i) in cash,  by check by, bank
draft or by money order payment to the Company,  (ii) by delivering Common Stock
of the Company  already  owned by the  Executive  and having a total Fair Market
Value on the date of such delivery  equal to the Exercise  Price,  (iii) through
the written election of the Executive to have shares of Common Stock withheld by
the Company from the shares  otherwise  to be received  upon the exercise of the
option,  with such withheld  shares having an aggregate Fair Market Value on the
date of  exercise  equal to the  Exercise  Price,  (iv) by wire  transfer  to an
account designated by the Company or (v) by any combination of the above methods
of payment.


"Fair  Market  Value" shall mean,  on any day,  with respect to shares of Common
Stock  of the  Company  which  are (a)  listed  on a  United  States  securities
exchange, the last sales price of such shares of Common Stock on such day on the
largest United States securities  exchange on which such Common Stock shall have
traded, or if such day is not a day on which a United States securities exchange
is open for trading,  on the immediately  preceding day on which such securities
exchange was open, (b) not listed on a United States securities exchange but are
included  in The NASDAQ  Stock  Market  System  (including  the NASDAQ  National
Market),  the last sales price of such shares of Common Stock on such day, or if
such day is not a trading day, on the immediately  preceding  trading day or (c)
neither listed on a United States securities exchange nor included in The NASDAQ
Stock Market  System,  the fair market value of such Common Stock as  determined
from  time to  time  by the  Board  of  Directors  in  good  faith  in its  sole
discretion.

     3.5 Office Space. The Company shall provide the Executive with office space
at 717 Fifth Avenue, 15th Floor, New York, New York, substantially comparable to
the office space  provided to the Executive  immediately  prior to the Effective
Date.

     3.6 Secretarial  Reimbursement.  The Company shall provide the services of,
or at the election of the Executive,  reimburse the Executive for the payment of
salary and benefits with respect to the equivalent of, one full time experienced
executive secretary, as selected by the Executive.

     3.7 Expense Reimbursement. During the Term, the Executive shall be entitled
to  receive  prompt  reimbursement  of  all  reasonable  out-of-pocket  expenses
properly  incurred by him in  connection  with his duties under this  Agreement,
including  reasonable  expenses  of  entertainment  and travel;  provided,  that
reimbursement of any expense in excess of Ten Thousand Dollars ($10,000) must be
approved in advance by the Compensation Committee.

     3.8  Vacation.  The  Executive  shall be  entitled  to twenty  (20) days of
vacation per year.
<PAGE>

     4. Termination.

     4.1 Termination  Upon Death. If the Executive dies during the Term, (i) the
Executive's legal  representatives  shall be entitled to receive the Executive's
Base  Salary  through  the end of the month in which the death of the  Executive
occurs, (ii) the Executive's legal  representatives shall be entitled to receive
a pro rata  portion of the bonus  pursuant to Section 3.2 hereof for the year of
the  Executive's  death,  based on the period  beginning on the first day of the
Fiscal  Year in which the death of the  Executive  occurs and ending on the last
day of the  month  in  which  the  death  of the  Executive  occurs,  (iii)  the
Executive's dependents shall receive reimbursement from the Company for the cost
of  continuation   health  coverage  under  the   Consolidated   Omnibus  Budget
Reconciliation  Act of 1985, as amended ("COBRA") for the entire period of COBRA
coverage   determined   under   applicable  law,  (iv)  the  Executive's   legal
representatives  shall receive all benefits and  entitlements  under any benefit
plan of or other  arrangement with the Company,  including,  but not limited to,
benefits  under  the  Executive's  Additional  Life  Insurance  Policy,  (v) all
unvested options shall vest and become  immediately  exercisable and all options
shall remain  exercisable by the  Executive's  legal  representatives  until the
expiration of the Option Term,  (vi) payment for all accrued but unused vacation
and (vii) the Executive's  beneficiaries,  heirs or legal  representatives shall
receive  reimbursement  for all of the Executive's  business expenses accrued to
the date of death.

     4.2  Termination  Upon  Disability.  If during  the Term,  the  Executive's
employment is terminated as a result of a "Disability"  (as defined below),  (i)
the Executive (or his legal representatives, if applicable) shall be entitled to
receive the  Executive's  Base Salary  through the end of the month in which the
Executive is terminated,  (ii) the Executive (or his legal  representatives,  if
applicable)  shall be  entitled  to  receive  a pro rata  portion  of the  bonus
pursuant  to Section  3.2 hereof  for the year of the  Executive's  termination,
based on the period  beginning  on the first day of the Fiscal Year in which the
termination of the Executive's  employment  occurs and ending on the last day of
the month in which the termination of the Executive's  employment occurs,  (iii)
the Executive and the Executive's  dependents shall receive  reimbursement  from
the Company for the cost of  continuation  health  coverage  under COBRA for the
entire  period of COBRA  coverage  determined  under  applicable  law,  (iv) the
Executive  (or his legal  representatives,  if  applicable)  shall  receive  all
benefits and  entitlements  under any benefit plan of or other  arrangement with
the  Company,  (v) all  unvested  options  shall  vest  and  become  immediately
exercisable  and all options shall remain  exercisable  by the Executive (or his
legal  representatives,  if applicable) until the expiration of the Option Term,
(vi) payment for all accrued but unused  vacation,  (vii) the  Executive (or his
legal representatives, if applicable) shall receive reimbursement for all of the
Executive's  business  expenses accrued to the date of termination and (viii) at
the election of the Executive (or his legal representative,  if applicable), the
Company shall  transfer to the Executive the Additional  Life Insurance  Policy.
Nothing in this Section 4.2 shall be deemed to in any way affect the Executive's
right to participate in or receive  benefits from any disability plan maintained
by the Company and for which the Executive is otherwise eligible.

     For the purposes of this Agreement, "Disability" shall mean a determination
by the Board of Directors in accordance with applicable law that, as a result of
a physical or mental  illness,  the Executive is unable to perform the essential
functions of his job with or without reasonable  accommodation,  for one hundred
eighty  (180)  consecutive  days or two  hundred  seventy  (270) days during any
eighteen (18) month period.

     4.3  Termination  without  Cause  or  with  Good  Reason.  The  Executive's
employment  hereunder  may be  terminated  by the  Company  without  "Cause" (as
defined  below) upon ninety (90) days prior written  notice to the Executive and
the Executive may terminate  employment with "Good Reason" (as defined below) at
any time without notice.  Upon a termination  without Cause or with Good Reason,
the Executive shall receive (i) Base Salary and bonus for the remaining duration
of the Term and for an  additional  period of six (6) months from the end of the
Term (collectively,  the "Severance Period") as if the Executive was employed by
the Company during the Severance Period,  (ii) health insurance coverage for the
Executive and his  dependents and all other  benefits and  perquisites  that the
Executive was receiving  immediately  prior to the date of  termination  for the
duration  of the  Severance  Period,  (iii)  immediate  vesting of all  unvested
options and all options  shall remain  exercisable  until the  expiration of the
Option Term,  (iv) all benefits  and  entitlements  under any benefit plan of or
other arrangement with the Company including, without limitation, the payment of
premiums on the Additional  Life Insurance  Policy during the Severance  Period,
(v) payment for all accrued but unused  vacation and (vi) at the election of the
Executive  (or his legal  representative,  if  applicable),  the  Company  shall
transfer to the Executive at the end of the Severance Period the Additional Life
Insurance Policy.  The decision by the Company not to renew the Agreement at the
end of the Term on terms and  conditions  at least as favorable  as  immediately
prior  to the end of the Term  shall be  deemed  a  termination  by the  Company
without Cause.

     For the purposes of this Agreement,  "Cause" shall mean (i) the Executive's
gross  negligence,  recklessness or malfeasance in the performance of his duties
which results in material  financial  injury to the Company,  (ii) the Executive
committing any act or acts of fraud, theft or embezzlement, which, if convicted,
would  constitute  a felony and which  results or intends to result  directly or
indirectly in gain or personal enrichment of the Executive at the expense of the
Company or (iii) the Executive willfully engaging in any conduct relating to the
business of the Company that could  reasonably  be expected to have a materially
detrimental  effect on the  business  or  financial  condition  of the  Company;
provided that the Company must give the Executive  written  notice of its intent
to terminate the Executive  with Cause and the Executive  shall have thirty (30)
days from the date of the notice to cure the deficiency.
<PAGE>

     For purposes of this Agreement, "Good Reason" shall mean (i) the assignment
to the Executive of duties and responsibilities not commensurate with his status
as Chief Executive Officer of the Company and Chairman of the Board of Directors
or the diminution of the Executive's duties,  change in the Executive's title or
status or removal from or failure to re-elect  the  Executive as a member of the
Board (except in conjunction with a termination for Cause),  (ii) the failure of
the Company to provide  compensation and benefits to the Executive at the levels
required by this Agreement, or (iii) the failure of the Company to adhere in any
substantial  manner  to  any of  its  covenants  contained  in  this  Agreement.
Termination of the Executive's employment by the Executive following a Change of
Control (a sale of more than fifty  percent  (50%) of the shares of Common Stock
or sale of all or  substantially  all of the  assets  of the  Company),  will be
deemed a Good Reason termination.

     4.4  Termination  with  Cause or  without  Good  Reason.  The  Company  may
terminate the Executive's  employment with Cause (subject to the cure period set
forth above) and the Executive may terminate  employment  without Good Reason at
any time without notice.  Upon a termination by the Company with Cause or by the
Executive  without  Good  Reason,  the  Executive  shall  receive (i) a pro rata
portion of (A) Base Salary and (B) the bonus  pursuant to Section 3.2 hereof for
the year of the Executive's termination, based on the period of employment prior
to the date of termination,  (ii) all previously earned and accrued entitlements
under  any  benefit  plan  of or  other  arrangement  with  the  Company,  (iii)
reimbursement for all business expenses accrued to the date of termination, (iv)
all vested options shall remain  exercisable  until the expiration of the Option
Term,  (v) payment for all accrued but unused  vacation and (vi) at the election
of the Executive (or his legal representative, if applicable), the Company shall
transfer to the Executive the Additional Life Insurance Policy.


                  Registration Rights.
                  -------------------

     5.1 Piggyback  Registration  Rights. If, at any time after the date hereof,
the Company shall file a  registration  statement  under the  Securities  Act of
1933, as amended (the "Act") with the  Securities and Exchange  Commission  (the
"SEC")  covering  shares of capital stock of the Company  while any  Registrable
Securities  (as  defined in the last  sentence of this  paragraph  5.1) shall be
outstanding,  the Company shall give the Executive 30 days' prior written notice
of the filing of such registration  statement. If requested by the Executive, in
writing, within 10 days after the date of any such notice, the Company shall, at
the Company's sole expense (other than the fees and disbursements of counsel for
the Executive and any underwriting  discounts or commissions  payable in respect
of the Registrable  Securities sold by Executive),  include in such registration
statement all or any portion of the Registrable  Securities of Executive and any
of his affiliates,  all to the extent required to permit the public offering and
sale of the  Registrable  Securities  through the facilities of all  appropriate
securities  exchanges  and  the  over-the-counter   market,  and  will  use  its
reasonable best efforts through its officers, directors, auditors and counsel to
cause  such   registration   statement  to  become   effective  as  promptly  as
practicable.  Notwithstanding the foregoing,  if the managing underwriter of any
such offering shall advise the Company that, in its opinion, the registration of
all or a portion of the Registrable  Securities  requested to be included in the
registration  would  materially   adversely  affect  the  distribution  of  such
securities by the Company,  then the Company shall be required to include in the
registration only that number of Registrable Securities which the Company or the
managing underwriter believe will not jeopardize the success of the offering and
the  number  of  shares  of  Common  Stock  otherwise  to  be  included  in  the
registration  statement  shall be reduced as  follows:  (i) there shall be first
excluded  shares of Common Stock  proposed to be included by other  shareholders
not  possessing  contractual  rights to  include  the same and (ii) any  further
reduction shall be first in accordance with the contractual priorities among all
other  shareholders  (having such contractual  rights)  requesting  inclusion of
their Common Stock in such registration,  including the Executive,  and shall be
second  reduced pro rata among all other  shareholders  in the proportion of the
number of  shares  of  Common  Stock  submitted  for  registration  by each such
shareholder.  As used herein,  "Registrable Securities" shall mean the shares of
Common Stock owned by the Executive or any  affiliates of the  Executive,  which
have not been previously sold pursuant to a registration statement and which are
otherwise,  at the time a request for  registration is made, not able to be sold
pursuant to Rule 144 promulgated under the Act.

     5.2 Demand  Registration  Rights.  Upon  receipt of a written  request from
Executive,  the Company shall,  as promptly as  practicable,  prepare and file a
registration  statement  under the Act with the SEC  sufficient  to  permit  the
public offering and sale of the Registrable Securities through the facilities of
all appropriate  securities exchanges and the over-the-counter  market, and will
use its reasonable  best efforts through its officers,  directors,  auditors and
counsel to cause such registration  statement to become effective as promptly as
practicable.
<PAGE>

     5.3 Blue Sky  Limitations.  In the event of a registration  pursuant to the
provisions of this Section 5, the Company shall use its reasonable  best efforts
to cause the Registrable  Securities so registered to be registered or qualified
for sale  under the  securities  or blue sky laws of such  jurisdictions  as the
Executive may reasonably request; provided,  however, that the Company shall not
by reason of this  Section  5.3 be  required  to qualify to do  business,  or to
subject itself to taxation,  or to file a general  consent to service of process
in any jurisdiction.

     5.4  Duration.  The  Company  shall  keep  effective  any  registration  or
qualification  contemplated by this Section 5 at all times  thereafter and shall
from time to time amend or supplement  each applicable  registration  statement,
preliminary   prospectus,   final   prospectus,   application,   document,   and
communication  for such  period  of time as  shall be  required  to  permit  the
Executive to complete the offer and sale of the Registrable  Securities  covered
thereby  or until  the  date on which  all  Registrable  Securities  can be sold
pursuant to Rule 144 under the Act.

     5.5 Survival.  Notwithstanding anything herein to the contrary the terms of
this Section 5 shall survive the termination of the Executive's  employment with
the  Company  and  shall  survive  for so long  as  Executive  owns  Registrable
Securities.

                  6.       Other Provisions.
                           ----------------

     6.1. Notices.  Any notice or other  communication  required or which may be
given  hereunder  shall  be  in  writing  and  shall  be  delivered  personally,
telegraphed,  telexed,  sent by  facsimile  transmission  or sent by  certified,
registered or express mail,  postage prepaid,  and shall be deemed given when so
delivered personally,  telegraphed,  telexed, or sent by facsimile  transmission
or, if mailed, four (4) days after the date of mailing, as follows:

                           (a)      If the Company, to:

                                    Dynacore Holdings Corporation
                                    717 Fifth Avenue, 15th Floor
                                    New York, New York 10022

                                    Attention:  Board of Directors
                                    Telephone:  (212) 371-7711
                                    Fax:  (212) 223-0006

                                    With a copy to:

                                    Pryor Cashman Sherman & Flynn LLP
                                    410 Park Avenue
                                    New York, New York  10022

                                    Attention:       Selig D. Sacks, Esq.
                                    Telephone:       (212) 326-0879
                                    Fax:             (212) 326-0806

                           (b)      If to the Executive, to his home address set
                                    forth in the records of the Company.

     6.2 Entire Agreement.  This Agreement contains the entire agreement between
the parties with respect to the subject  matter hereof and  supersedes all prior
agreements, written or oral, with respect thereto.
<PAGE>

     6.3  Waiver  and  Amendments.  This  Agreement  may be  amended,  modified,
superseded,  canceled,  renewed or extended, and the terms and conditions hereof
may be waived,  only by a written  instrument  signed by the  parties or, in the
case of a waiver, by the party waiving  compliance.  No delay on the part of any
party in exercising any right,  power or privilege  hereunder shall operate as a
waiver  thereof,  nor  shall  any  waiver  on the  part of any  right,  power or
privilege  hereunder,  nor any single or partial exercise of any right, power or
privilege  hereunder,  preclude  any other or  further  exercise  thereof or the
exercise of any other right, power or privilege hereunder.

     6.4  Governing  Law.  This  Agreement  shall be governed  and  construed in
accordance  with the laws of the State of New York applicable to agreements made
and to be performed  entirely within such state,  without regard to conflicts of
laws principles.

     6.5 Dispute  Resolution.  The Company and Executive  agree to arbitrate any
controversy  or claim  arising out of this  Agreement or  otherwise  relating to
Executive's employment by the Company during the Term or Executive's termination
of such employment  prior to or as of the end of the Term. Any such  controversy
or claim shall be resolved in binding  arbitration in a proceeding  administered
by and under the National Rules for the Resolution of Employment Disputes of the
American Arbitration Association, in the American Arbitration Association office
located in New York City. Except as otherwise provided under Section 6.9 hereof,
the arbitrator  shall not have authority to modify or change any of the terms of
this  Agreement.  Both  parties and the  arbitrator  will treat the  arbitration
process and the activities which occur in the proceedings as  confidential.  The
decision of the arbitrator shall be rendered in writing,  shall be final and may
be entered as a judgment in any federal or state court in New York County.

     6.6  Assignability.   This  Agreement,   and  the  Executive's  rights  and
obligations  hereunder,  may not be assigned by the  Executive.  The Company may
assign this  Agreement  and its rights,  together with its  obligations,  to any
other entity which will substantially carry on the business of the Company.

     6.7  Counterparts.  This  Agreement  may be  executed  in two  (2) or  more
counterparts,  each of which shall be deemed an original  but all of which shall
constitute one and the same instrument,  and it shall not be necessary in making
proof  of  this  Agreement  to  produce  or  account  for  more  than  one  such
counterpart.

     6.8  Headings.  The  headings  in this  Agreement  are for  convenience  of
reference  only and shall not limit or  otherwise  affect  the  meaning of terms
contained herein.

     6.9 Severability.  If any term, provision,  covenant or restriction of this
Agreement,  or any part thereof, is held by a court of competent jurisdiction of
any  foreign,   federal,   state,  county  or  local  government  or  any  other
governmental, regulatory or administrative agency, arbitrator or authority to be
invalid,  void,  unenforceable  or against  public  policy for any  reason,  the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall  remain  in full  force and  effect  and  shall in no way be  affected  or
impaired or invalidated.



                           [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

<PAGE>



                  IN  WITNESS  WHEREOF,  the  parties  hereto,  intending  to be
legally bound hereby,  have executed this Agreement as of the day and year first
above mentioned.



                                                     EXECUTIVE




                                       ------------------------------------
                                       Asher B. Edelman


                                       DYNACORE HOLDINGS CORP.




                                       By:
                                          ---------------------------------
                                            Name:
                                            Title:


<PAGE>



                                                                 EXHIBIT 10(mm)

                         EXECUTIVE EMPLOYMENT AGREEMENT

                  EMPLOYMENT AGREEMENT ("Agreement") dated as of ______ __, 2000
between Dynacore Holdings  Corporation,  a Delaware  corporation (the "Company")
and Gerald N. Agranoff (the "Executive").

                  WHEREAS,   the  parties  wish  to   establish   the  terms  of
Executive's future employment with the Company.

                  Accordingly, the parties agree as follows:

                  1.       Employment, Duties and Acceptance.
                           ---------------------------------

     1.1  Employment  by the Company.  The Company  shall  employ the  Executive
effective as of  Effective  Date of the  Company's  Plan of  Reorganization,  as
defined  therein (the "Effective  Date") to render services to the Company.  The
Executive  will serve in the  capacity  of Chief  Operating  Officer  and Acting
President  of the Company and Vice  Chairman  of the Board of  Directors  of the
Company  (the "Board of  Directors").  The  Executive  shall report to the Chief
Executive  Officer of the Company and  Chairman  of the Board of  Directors  and
perform  duties  as may be  assigned  to him  from  time to  time  by the  Chief
Executive  Officer  of the  Company  and  Chairman  of the  Board of  Directors;
provided, however, that the Executive and the Company agree and acknowledge that
the Executive  shall be permitted to engage in any other activity or business as
a director,  stockholder,  partner, owner, employee, consultant, agent or in any
other  capacity so long as such  activity or business does not conflict with the
business of the Company.

     1.2 Acceptance of Employment by the Executive.  The Executive  accepts such
employment and shall render the services described above.

                  2.       Duration of Employment.
                           ----------------------

     This Agreement and the employment  relationship  hereunder will continue in
effect for eighteen  (18) months from the Effective  Date (the  "Term"),  unless
terminated sooner in accordance with Section 4 hereof.

                  3.       Compensation by the Company.
                           ---------------------------

     3.1 Base Salary. As compensation for all services rendered pursuant to this
Agreement,  the Company  will pay to the  Executive an annual base salary of One
Hundred Fifty-Seven  Thousand Five Hundred Dollars  ($157,500),  subject only to
upward adjustment by the Compensation Committee of the Board of Directors of the
Company and payable in  accordance  with the  payroll  practices  of the Company
("Base Salary").

     3.2.  Bonuses.  For each  Fiscal Year (as  hereinafter  defined) or portion
thereof  during the Term and to the extent EBITDA (as  hereinafter  defined) for
the  applicable  period  exceeds  twelve and  one-half  percent (12 1/2%) of Net
Equity (as hereinafter  defined) for the applicable period, the Company will pay
to the  Executive,  in addition to Base  Salary set forth  above,  a bonus in an
amount equal to four percent (4%) of the amount by which EBITDA  exceeds  twelve
and one-half  percent (12 1/2%) of Net Equity (the "Bonus").  The Bonus shall be
payable no later than 90 days  following  the end of the  applicable  period for
which it is paid.

     "EBITDA" shall mean, with respect to the applicable period, earnings before
interest,  taxes,  depreciation  and amortization as determined by the Company's
accountants  in  accordance  with  generally  accepted  accounting   principles;
provided,  however, EBITDA shall not include amounts received from the Company's
Patent  Litigation  Trust that must be distributed to  shareholders  pursuant to
Section  7.05  of the  Amended  Plan  of  Reorganization  of  Dynacore  Holdings
Corporation dated October ___, 2000.

     "Net Equity"  shall mean net assets less net  liabilities  determined as of
the last day of the applicable period.

     3.3  Participation  in  Employee  Benefit  Plans.  The  Executive  shall be
eligible to participate  in all retirement  plans and other benefit plans of the
Company and the Executive and his dependents shall be eligible to participate in
the health benefit plans of the Company (specifically including, but not limited
to,  mental  health  benefits  and  benefits  under the  Company's  Supplemental
Executive  Medical Plan). In addition to any company-wide  life insurance plans,
the Company  shall pay the premiums for a life  insurance  policy on the life of
the  Executive for the benefit of  Executive's  designated  beneficiaries  which
provides a death benefit equal to one hundred percent (100%) of Base Salary (the
"Additional Life Insurance Policy").
<PAGE>

     3.4 Stock Options.  On the Effective  Date, the Executive  shall be granted
incentive  stocks  options to the extent such options may be  designated as such
under  applicable  law and to the extent that all or a portion of the options do
not so qualify  non-qualified  stock  options  for the  purchase  of one hundred
seventy-five  thousand (175,000) shares of Common Stock, at an exercise price of
seventy-five cents ($0.75) per share (the "Exercise  Price").  The options shall
vest in equal  installments on the date  coinciding with six (6) months,  twelve
(12) months and eighteen (18) months from the Effective Date. Vested options may
be exercised by the Executive at any time prior to the 10th  anniversary  of the
Effective  Date (the "Option  Term").  Options may be exercised  (i) in cash, by
check  by,  bank  draft  or by  money  order  payment  to the  Company,  (ii) by
delivering Common Stock of the Company already owned by the Executive and having
a total Fair Market  Value on the date of such  delivery  equal to the  Exercise
Price,  (iii)  through the written  election of the  Executive to have shares of
Common Stock  withheld by the Company  from the shares  otherwise to be received
upon the exercise of the option,  with such withheld  shares having an aggregate
Fair Market Value on the date of exercise equal to the Exercise  Price,  (iv) by
wire transfer to an account  designated by the Company or (v) by any combination
of the above methods of payment.

     "Fair  Market  Value"  shall mean,  on any day,  with  respect to shares of
Common Stock of the Company which are (a) listed on a United  States  securities
exchange, the last sales price of such shares of Common Stock on such day on the
largest United States securities  exchange on which such Common Stock shall have
traded, or if such day is not a day on which a United States securities exchange
is open for trading,  on the immediately  preceding day on which such securities
exchange was open, (b) not listed on a United States securities exchange but are
included  in The NASDAQ  Stock  Market  System  (including  the NASDAQ  National
Market),  the last sales price of such shares of Common Stock on such day, or if
such day is not a trading day, on the immediately  preceding  trading day or (c)
neither listed on a United States securities exchange nor included in The NASDAQ
Stock Market  System,  the fair market value of such Common Stock as  determined
from  time to  time  by the  Board  of  Directors  in  good  faith  in its  sole
discretion.

     3.5 Office Space. The Company shall provide the Executive with office space
at 717 Fifth Avenue, 15th Floor, New York, New York, substantially comparable to
the office space  provided to the Executive  immediately  prior to the Effective
Date.

     3.6 Secretarial  Reimbursement.  The Company shall provide the services of,
or at the election of the Executive,  reimburse the Executive for the payment of
salary and benefits with respect to the equivalent of, one full time experienced
executive secretary, as selected by the Executive.

     3.7 Expense Reimbursement. During the Term, the Executive shall be entitled
to  receive  prompt  reimbursement  of  all  reasonable  out-of-pocket  expenses
properly  incurred by him in  connection  with his duties under this  Agreement,
including  reasonable  expenses  of  entertainment  and travel;  provided,  that
reimbursement of any expense in excess of Ten Thousand Dollars ($10,000) must be
approved in advance by the Compensation Committee.

     3.8  Vacation.  The  Executive  shall be  entitled  to twenty  (20) days of
vacation per year.
<PAGE>

                  4.       Termination.
                           -----------

     4.1 Termination  Upon Death. If the Executive dies during the Term, (i) the
Executive's legal  representatives  shall be entitled to receive the Executive's
Base  Salary  through  the end of the month in which the death of the  Executive
occurs, (ii) the Executive's legal  representatives shall be entitled to receive
a pro rata  portion of the bonus  pursuant to Section 3.2 hereof for the year of
the  Executive's  death,  based on the period  beginning on the first day of the
Fiscal  Year in which the death of the  Executive  occurs and ending on the last
day of the  month  in  which  the  death  of the  Executive  occurs,  (iii)  the
Executive's dependents shall receive reimbursement from the Company for the cost
of  continuation   health  coverage  under  the   Consolidated   Omnibus  Budget
Reconciliation  Act of 1985, as amended ("COBRA") for the entire period of COBRA
coverage   determined   under   applicable  law,  (iv)  the  Executive's   legal
representatives  shall receive all benefits and  entitlements  under any benefit
plan of or other  arrangement with the Company,  including,  but not limited to,
benefits  under  the  Executive's  Additional  Life  Insurance  Policy,  (v) all
unvested options shall vest and become  immediately  exercisable and all options
shall  remain  exercisable  by the  Executive's  beneficiaries,  heirs  or legal
representatives  until the  expiration of the Option Term,  (vi) payment for all
accrued but unused  vacation and (vii) the Executive's  beneficiaries,  heirs or
legal  representatives  shall receive  reimbursement  for all of the Executive's
business expenses accrued to the date of death.

     4.2  Termination  Upon  Disability.  If during  the Term,  the  Executive's
employment is terminated as a result of a "Disability"  (as defined below),  (i)
the Executive (or his legal representatives, if applicable) shall be entitled to
receive the  Executive's  Base Salary  through the end of the month in which the
Executive is terminated,  (ii) the Executive (or his legal  representatives,  if
applicable)  shall be  entitled  to  receive  a pro rata  portion  of the  bonus
pursuant  to Section  3.2 hereof  for the year of the  Executive's  termination,
based on the period  beginning  on the first day of the Fiscal Year in which the
termination of the Executive's  employment  occurs and ending on the last day of
the month in which the termination of the Executive's  employment occurs,  (iii)
the Executive and the Executive's  dependents shall receive  reimbursement  from
the Company for the cost of  continuation  health  coverage  under COBRA for the
entire  period of COBRA  coverage  determined  under  applicable  law,  (iv) the
Executive  (or his legal  representatives,  if  applicable)  shall  receive  all
benefits and  entitlements  under any benefit plan of or other  arrangement with
the  Company,  (v) all  unvested  options  shall  vest  and  become  immediately
exercisable  and all options shall remain  exercisable  by the Executive (or his
legal  representatives,  if applicable) until the expiration of the Option Term,
(vi) payment for all accrued but unused  vacation,  (vii) the  Executive (or his
legal representatives, if applicable) shall receive reimbursement for all of the
Executive's  business  expenses accrued to the date of termination and (viii) at
the election of the Executive (or his legal representative,  if applicable), the
Company shall  transfer to the Executive the Additional  Life Insurance  Policy.
Nothing in this Section 4.2 shall be deemed to in any way affect the Executive's
right to participate in or receive  benefits from any disability plan maintained
by the Company and for which the Executive is otherwise eligible.

     For the purposes of this Agreement, "Disability" shall mean a determination
by the Board of Directors in accordance with applicable law that, as a result of
a physical or mental  illness,  the Executive is unable to perform the essential
functions of his job with or without reasonable  accommodation,  for one hundred
eighty  (180)  consecutive  days or two  hundred  seventy  (270) days during any
eighteen (18) month period.

     4.3  Termination  without  Cause  or  with  Good  Reason.  The  Executive's
employment  hereunder  may be  terminated  by the  Company  without  "Cause" (as
defined  below) upon ninety (90) days prior written  notice to the Executive and
the Executive may terminate  employment with "Good Reason" (as defined below) at
any time without notice.  Upon a termination  without Cause or with Good Reason,
the Executive shall receive (i) Base Salary and bonus for the remaining duration
of the Term and for an  additional  period of six (6) months from the end of the
Term (collectively,  the "Severance Period") as if the Executive was employed by
the Company during the Severance Period,  (ii) health insurance coverage for the
Executive and his  dependents and all other  benefits and  perquisites  that the
Executive was receiving  immediately  prior to the date of  termination  for the
duration  of the  Severance  Period,  (iii)  immediate  vesting of all  unvested
options and all options  shall remain  exercisable  until the  expiration of the
Option Term,  (iv) all benefits  and  entitlements  under any benefit plan of or
other arrangement with the Company including, without limitation, the payment of
premiums on the Additional  Life Insurance  Policy during the Severance  Period,
(v) payment for all accrued but unused  vacation and (vi) at the election of the
Executive  (or his legal  representative,  if  applicable),  the  Company  shall
transfer to the Executive at the end of the Severance Period the Additional Life
Insurance Policy.  The decision by the Company not to renew the Agreement at the
end of the Term on terms and  conditions  at least as favorable  as  immediately
prior  to the end of the Term  shall be  deemed  a  termination  by the  Company
without Cause.

     For the purposes of this Agreement,  "Cause" shall mean (i) the Executive's
gross  negligence,  recklessness or malfeasance in the performance of his duties
which results in material  financial  injury to the Company,  (ii) the Executive
committing any act or acts of fraud, theft or embezzlement, which, if convicted,
would  constitute  a felony and which  results or intends to result  directly or
indirectly in gain or personal enrichment of the Executive at the expense of the
Company or (iii) the Executive willfully engaging in any conduct relating to the
business of the Company that could  reasonably  be expected to have a materially
detrimental  effect on the  business  or  financial  condition  of the  Company;
provided that the Company must give the Executive  written  notice of its intent
to terminate the Executive  with Cause and the Executive  shall have thirty (30)
days from the date of the notice to cure the deficiency.
<PAGE>

     For purposes of this Agreement, "Good Reason" shall mean (i) the assignment
to the Executive of duties and responsibilities not commensurate with his status
as Chief Operating Officer and Acting President of the Company and Vice Chairman
of the Board of Directors or the diminution of the Executive's duties, change in
the  Executive's  title or status or removal  from or failure  to  re-elect  the
Executive as a member of the Board (except in conjunction with a termination for
Cause), (ii) the failure of the Company to provide  compensation and benefits to
the Executive at the levels required by this Agreement,  or (iii) the failure of
the  Company  to  adhere  in any  substantial  manner  to  any of its  covenants
contained in this Agreement.  Termination of the  Executive's  employment by the
Executive following a Change of Control (a sale of more than fifty percent (50%)
of the shares of Common Stock or sale of all or substantially  all of the assets
of the Company), will be deemed a Good Reason termination.

     4.4  Termination  with  Cause or  without  Good  Reason.  The  Company  may
terminate the Executive's  employment with Cause (subject to the cure period set
forth above) and the Executive may terminate  employment  without Good Reason at
any time without notice.  Upon a termination by the Company with Cause or by the
Executive  without  Good  Reason,  the  Executive  shall  receive (i) a pro rata
portion of (A) Base Salary and (B) the bonus  pursuant to Section 3.2 hereof for
the year of the Executive's termination, based on the period of employment prior
to the date of termination,  (ii) all previously earned and accrued entitlements
under  any  benefit  plan  of or  other  arrangement  with  the  Company,  (iii)
reimbursement for all business expenses accrued to the date of termination, (iv)
all vested options shall remain  exercisable  until the expiration of the Option
Term,  (v) payment for all accrued but unused  vacation and (vi) at the election
of the Executive (or his legal representative, if applicable), the Company shall
transfer to the Executive the Additional Life Insurance Policy.


         Registration Rights.
         -------------------

     5.1 Piggyback  Registration  Rights. If, at any time after the date hereof,
the Company shall file a  registration  statement  under the  Securities  Act of
1933, as amended (the "Act") with the  Securities and Exchange  Commission  (the
"SEC")  covering  shares of capital stock of the Company  while any  Registrable
Securities  (as  defined in the last  sentence of this  paragraph  5.1) shall be
outstanding,  the Company shall give the Executive 30 days' prior written notice
of the filing of such registration  statement. If requested by the Executive, in
writing, within 10 days after the date of any such notice, the Company shall, at
the Company's sole expense (other than the fees and disbursements of counsel for
the Executive and any underwriting  discounts or commissions  payable in respect
of the Registrable  Securities sold by Executive),  include in such registration
statement all or any portion of the Registrable  Securities of Executive and any
of his affiliates,  all to the extent required to permit the public offering and
sale of the  Registrable  Securities  through the facilities of all  appropriate
securities  exchanges  and  the  over-the-counter   market,  and  will  use  its
reasonable best efforts through its officers, directors, auditors and counsel to
cause  such   registration   statement  to  become   effective  as  promptly  as
practicable.  Notwithstanding the foregoing,  if the managing underwriter of any
such offering shall advise the Company that, in its opinion, the registration of
all or a portion of the Registrable  Securities  requested to be included in the
registration  would  materially   adversely  affect  the  distribution  of  such
securities by the Company,  then the Company shall be required to include in the
registration only that number of Registrable Securities which the Company or the
managing underwriter believe will not jeopardize the success of the offering and
the  number  of  shares  of  Common  Stock  otherwise  to  be  included  in  the
registration  statement shall be reduced as follows:  (iii) there shall be first
excluded  shares of Common Stock  proposed to be included by other  shareholders
not  possessing  contractual  rights to  include  the same and (iv) any  further
reduction shall be first in accordance with the contractual priorities among all
other  shareholders  (having such contractual  rights)  requesting  inclusion of
their Common Stock in such registration,  including the Executive,  and shall be
second  reduced pro rata among all other  shareholders  in the proportion of the
number of  shares  of  Common  Stock  submitted  for  registration  by each such
shareholder.  As used herein,  "Registrable Securities" shall mean the shares of
Common Stock owned by the Executive or any  affiliates of the  Executive,  which
have not been previously sold pursuant to a registration statement and which are
otherwise,  at the time a request for  registration is made, not able to be sold
pursuant to Rule 144 promulgated under the Act.

     5.2 Demand  Registration  Rights.  Upon  receipt of a written  request from
Executive,  the Company shall,  as promptly as  practicable,  prepare and file a
registration  statement  under the Act with the SEC  sufficient  to  permit  the
public offering and sale of the Registrable Securities through the facilities of
all appropriate  securities exchanges and the over-the-counter  market, and will
use its reasonable  best efforts through its officers,  directors,  auditors and
counsel to cause such registration  statement to become effective as promptly as
practicable.
<PAGE>

     5.3 Blue Sky  Limitations.  In the event of a registration  pursuant to the
provisions of this Section 5, the Company shall use its reasonable  best efforts
to cause the Registrable  Securities so registered to be registered or qualified
for sale  under the  securities  or blue sky laws of such  jurisdictions  as the
Executive may reasonably request; provided,  however, that the Company shall not
by reason of this  Section  5.3 be  required  to qualify to do  business,  or to
subject itself to taxation,  or to file a general  consent to service of process
in any jurisdiction.

     5.4  Duration.  The  Company  shall  keep  effective  any  registration  or
qualification  contemplated by this Section 5 at all times  thereafter and shall
from time to time amend or supplement  each applicable  registration  statement,
preliminary   prospectus,   final   prospectus,   application,   document,   and
communication  for such  period  of time as  shall be  required  to  permit  the
Executive to complete the offer and sale of the Registrable  Securities  covered
thereby  or until  the  date on which  all  Registrable  Securities  can be sold
pursuant to Rule 144 under the Act.

     5.5 Survival.  Notwithstanding anything herein to the contrary the terms of
this Section 5 shall survive the termination of the Executive's  employment with
the  Company  and  shall  survive  for so long  as  Executive  owns  Registrable
Securities.

                  6.       Other Provisions.
                           ----------------

     6.1. Notices.  Any notice or other  communication  required or which may be
given  hereunder  shall  be  in  writing  and  shall  be  delivered  personally,
telegraphed,  telexed,  sent by  facsimile  transmission  or sent by  certified,
registered or express mail,  postage prepaid,  and shall be deemed given when so
delivered personally,  telegraphed,  telexed, or sent by facsimile  transmission
or, if mailed, four (4) days after the date of mailing, as follows:

                           (a)      If the Company, to:

                                    Dynacore Holdings Corporation
                                    717 Fifth Avenue, 15th Floor
                                    New York, New York 10022

                                    Attention:  Asher B. Edelman
                                    Telephone:  (212) 371-7711
                                    Fax:  (212) 223-0006

                                    With a copy to:

                                    Pryor Cashman Sherman & Flynn LLP
                                    410 Park Avenue
                                    New York, New York  10022

                                    Attention:       Selig D. Sacks, Esq.
                                    Telephone:       (212) 326-0879
                                    Fax:             (212) 326-0806

                           (b)      If to the Executive, to his home address set
                                    forth in the records of the Company.

     6.2 Entire Agreement.  This Agreement contains the entire agreement between
the parties with respect to the subject  matter hereof and  supersedes all prior
agreements, written or oral, with respect thereto.
<PAGE>

     6.3  Waiver  and  Amendments.  This  Agreement  may be  amended,  modified,
superseded,  canceled,  renewed or extended, and the terms and conditions hereof
may be waived,  only by a written  instrument  signed by the  parties or, in the
case of a waiver, by the party waiving  compliance.  No delay on the part of any
party in exercising any right,  power or privilege  hereunder shall operate as a
waiver  thereof,  nor  shall  any  waiver  on the  part of any  right,  power or
privilege  hereunder,  nor any single or partial exercise of any right, power or
privilege  hereunder,  preclude  any other or  further  exercise  thereof or the
exercise of any other right, power or privilege hereunder.

     6.4  Governing  Law.  This  Agreement  shall be governed  and  construed in
accordance  with the laws of the State of New York applicable to agreements made
and to be performed  entirely within such state,  without regard to conflicts of
laws principles.

     6.5 Dispute  Resolution.  The Company and Executive  agree to arbitrate any
controversy  or claim  arising out of this  Agreement or  otherwise  relating to
Executive's employment by the Company during the Term or Executive's termination
of such employment  prior to or as of the end of the Term. Any such  controversy
or claim shall be resolved in binding  arbitration in a proceeding  administered
by and under the National Rules for the Resolution of Employment Disputes of the
American Arbitration Association, in the American Arbitration Association office
located in New York City. Except as otherwise provided under Section 6.9 hereof,
the arbitrator  shall not have authority to modify or change any of the terms of
this  Agreement.  Both  parties and the  arbitrator  will treat the  arbitration
process and the activities which occur in the proceedings as  confidential.  The
decision of the arbitrator shall be rendered in writing,  shall be final and may
be entered as a judgment in any federal or state court in New York County.

     6.6  Assignability.   This  Agreement,   and  the  Executive's  rights  and
obligations  hereunder,  may not be assigned by the  Executive.  The Company may
assign this  Agreement  and its rights,  together with its  obligations,  to any
other entity which will substantially carry on the business of the Company.

     6.7  Counterparts.  This  Agreement  may be  executed  in two  (2) or  more
counterparts,  each of which shall be deemed an original  but all of which shall
constitute one and the same instrument,  and it shall not be necessary in making
proof  of  this  Agreement  to  produce  or  account  for  more  than  one  such
counterpart.

     6.8  Headings.  The  headings  in this  Agreement  are for  convenience  of
reference  only and shall not limit or  otherwise  affect  the  meaning of terms
contained herein.

     6.9 Severability.  If any term, provision,  covenant or restriction of this
Agreement,  or any part thereof, is held by a court of competent jurisdiction of
any  foreign,   federal,   state,  county  or  local  government  or  any  other
governmental, regulatory or administrative agency, arbitrator or authority to be
invalid,  void,  unenforceable  or against  public  policy for any  reason,  the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall  remain  in full  force and  effect  and  shall in no way be  affected  or
impaired or invalidated.



                           [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]



<PAGE>



                  IN  WITNESS  WHEREOF,  the  parties  hereto,  intending  to be
legally bound hereby,  have executed this Agreement as of the day and year first
above mentioned.



                                          EXECUTIVE




                                          ------------------------------------
                                          Gerald N. Agranoff


                                          DYNACORE HOLDINGS CORP.




                                          By:
                                             --------------------------------
                                               Name:
                                               Title:



<PAGE>



                                                                EXHIBIT 10 (nn)

EXECUTIVE EMPLOYMENT AGREEMENT

                  EMPLOYMENT AGREEMENT ("Agreement") dated as of ______ __, 2000
between Dynacore Holdings  Corporation,  a Delaware  corporation (the "Company")
and Phillip P. Krumb (the "Executive").

                  WHEREAS,   the  parties  wish  to   establish   the  terms  of
Executive's future employment with the Company.

                  Accordingly, the parties agree as follows:

                  1.       Employment, Duties and Acceptance.
                           ---------------------------------

     1.1  Employment  by the Company.  The Company  shall  employ the  Executive
effective as of  Effective  Date of the  Company's  Plan of  Reorganization,  as
defined  therein (the "Effective  Date") to render services to the Company.  The
Executive  will serve in the  capacity  of Vice  President  and Chief  Financial
Officer of the  Company  and a member of the Board of  Directors  of the Company
(the "Board of  Directors").  The Executive  shall report to the Chief Executive
Officer of the Company and Chairman of the Board of Directors and perform duties
as may be  assigned to him from time to time by the Chief  Executive  Officer of
the Company and Chairman of the Board of Directors;  provided, however, that the
Executive and the Company  agree and  acknowledge  that the  Executive  shall be
permitted  to  engage  in  any  other   activity  or  business  as  a  director,
stockholder,  partner,  owner,  employee,  consultant,  agent  or in  any  other
capacity  so long as such  activity  or  business  does  not  conflict  with the
business of the Company.

     1.2 Acceptance of Employment by the Executive.  The Executive  accepts such
employment and shall render the services described above.

                  2.       Duration of Employment.
                           ----------------------

     This Agreement and the employment  relationship  hereunder will continue in
effect for eighteen  (18) months from the Effective  Date (the  "Term"),  unless
terminated sooner in accordance with Section 4 hereof.

                  3.       Compensation by the Company.
                           ---------------------------

     3.1 Base Salary. As compensation for all services rendered pursuant to this
Agreement,  the  Company  will pay to the  Executive  an annual  base  salary of
Eighty-Two  Thousand,  Five Hundred  Dollars  ($82,500),  subject only to upward
adjustment  by the  Compensation  Committee  of the  Board of  Directors  of the
Company and payable in  accordance  with the  payroll  practices  of the Company
("Base Salary").

     3.2.  Bonuses.  For each  Fiscal Year (as  hereinafter  defined) or portion
thereof  during the Term and to the extent EBITDA (as  hereinafter  defined) for
the  applicable  period  exceeds  twelve and  one-half  percent (12 1/2%) of Net
Equity (as hereinafter  defined) for the applicable period, the Company will pay
to the  Executive,  in addition to Base  Salary set forth  above,  a bonus in an
amount equal to one percent (1%) of the amount by which  EBITDA  exceeds  twelve
and one-half  percent (12 1/2%) of Net Equity (the "Bonus").  The Bonus shall be
payable no later than 90 days  following  the end of the  applicable  period for
which it is paid.

     "EBITDA" shall mean, with respect to the applicable period, earnings before
interest,  taxes,  depreciation  and amortization as determined by the Company's
accountants  in  accordance  with  generally  accepted  accounting   principles;
provided,  however, EBITDA shall not include amounts received from the Company's
Patent  Litigation  Trust that must be distributed to  shareholders  pursuant to
Section  7.05  of the  Amended  Plan  of  Reorganization  of  Dynacore  Holdings
Corporation dated October ___, 2000.

     Net Equity shall mean net assets less net liabilities  determined as of the
last day of the applicable period.

     3.3  Participation  in  Employee  Benefit  Plans.  The  Executive  shall be
eligible to participate  in all retirement  plans and other benefit plans of the
Company and the Executive and his dependents shall be eligible to participate in
the health benefit plans of the Company (specifically including, but not limited
to,  mental  health  benefits  and  benefits  under the  Company's  Supplemental
Executive  Medical Plan). In addition to any company-wide  life insurance plans,
the Company  shall pay the premiums for a life  insurance  policy on the life of
the  Executive for the benefit of  Executive's  designated  beneficiaries  which
provides a death benefit equal to one hundred percent (100%) of Base Salary (the
"Additional Life Insurance Policy").
<PAGE>

     3.4 Stock Options.  On the Effective  Date, the Executive  shall be granted
incentive  stocks  options to the extent such options may be  designated as such
under  applicable  law and to the extent that all or a portion of the options do
not so qualify  non-qualified  stock  options for the  purchase of  seventy-five
thousand  (75,000)  shares of Common Stock, at an exercise price of seventy-five
cents ($0.75) per share (the "Exercise Price").  The options shall vest in equal
installments on the date coinciding with six (6) months,  twelve (12) months and
eighteen (18) months from the Effective Date. Vested options may be exercised by
the Executive at any time prior to the 10th  anniversary  of the Effective  Date
(the "Option  Term").  Options may be exercised  (i) in cash,  by check by, bank
draft or by money order payment to the Company,  (ii) by delivering Common Stock
of the Company  already  owned by the  Executive  and having a total Fair Market
Value on the date of such delivery  equal to the Exercise  Price,  (iii) through
the written election of the Executive to have shares of Common Stock withheld by
the Company from the shares  otherwise  to be received  upon the exercise of the
option,  with such withheld  shares having an aggregate Fair Market Value on the
date of  exercise  equal to the  Exercise  Price,  (iv) by wire  transfer  to an
account designated by the Company or (v) by any combination of the above methods
of payment.

     "Fair  Market  Value"  shall mean,  on any day,  with  respect to shares of
Common Stock of the Company which are (a) listed on a United  States  securities
exchange, the last sales price of such shares of Common Stock on such day on the
largest United States securities  exchange on which such Common Stock shall have
traded, or if such day is not a day on which a United States securities exchange
is open for trading,  on the immediately  preceding day on which such securities
exchange was open, (b) not listed on a United States securities exchange but are
included  in The NASDAQ  Stock  Market  System  (including  the NASDAQ  National
Market),  the last sales price of such shares of Common Stock on such day, or if
such day is not a trading day, on the immediately  preceding  trading day or (c)
neither listed on a United States securities exchange nor included in The NASDAQ
Stock Market  System,  the fair market value of such Common Stock as  determined
from  time to  time  by the  Board  of  Directors  in  good  faith  in its  sole
discretion.

     3.5 Expense Reimbursement. During the Term, the Executive shall be entitled
to  receive  prompt  reimbursement  of  all  reasonable  out-of-pocket  expenses
properly  incurred by him in  connection  with his duties under this  Agreement,
including  reasonable  expenses  of  entertainment  and travel;  provided,  that
reimbursement of any expense in excess of Ten Thousand Dollars ($10,000) must be
approved in advance by the Compensation Committee.

     3.6  Vacation.  The  Executive  shall be  entitled  to twenty  (20) days of
vacation per year.
<PAGE>

     4. Termination.

     4.1 Termination  Upon Death. If the Executive dies during the Term, (i) the
Executive's legal  representatives  shall be entitled to receive the Executive's
Base  Salary  through  the end of the month in which the death of the  Executive
occurs, (ii) the Executive's legal  representatives shall be entitled to receive
a pro rata  portion of the bonus  pursuant to Section 3.2 hereof for the year of
the  Executive's  death,  based on the period  beginning on the first day of the
Fiscal  Year in which the death of the  Executive  occurs and ending on the last
day of the  month  in  which  the  death  of the  Executive  occurs,  (iii)  the
Executive's dependents shall receive reimbursement from the Company for the cost
of  continuation   health  coverage  under  the   Consolidated   Omnibus  Budget
Reconciliation  Act of 1985, as amended ("COBRA") for the entire period of COBRA
coverage   determined   under   applicable  law,  (iv)  the  Executive's   legal
representatives  shall receive all benefits and  entitlements  under any benefit
plan of or other  arrangement with the Company,  including,  but not limited to,
benefits  under  the  Executive's  Additional  Life  Insurance  Policy,  (v) all
unvested options shall vest and become  immediately  exercisable and all options
shall  remain  exercisable  by the  Executive's  beneficiaries,  heirs  or legal
representatives  until the  expiration of the Option Term,  (vi) payment for all
accrued but unused  vacation and (vii) the Executive's  beneficiaries,  heirs or
legal  representatives  shall receive  reimbursement  for all of the Executive's
business expenses accrued to the date of death.

     4.2  Termination  Upon  Disability.  If during  the Term,  the  Executive's
employment is terminated as a result of a "Disability"  (as defined below),  (i)
the Executive (or his legal representatives, if applicable) shall be entitled to
receive the  Executive's  Base Salary  through the end of the month in which the
Executive is terminated,  (ii) the Executive (or his legal  representatives,  if
applicable)  shall be  entitled  to  receive  a pro rata  portion  of the  bonus
pursuant  to Section  3.2 hereof  for the year of the  Executive's  termination,
based on the period  beginning  on the first day of the Fiscal Year in which the
termination of the Executive's  employment  occurs and ending on the last day of
the month in which the termination of the Executive's  employment occurs,  (iii)
the Executive and the Executive's  dependents shall receive  reimbursement  from
the Company for the cost of  continuation  health  coverage  under COBRA for the
entire  period of COBRA  coverage  determined  under  applicable  law,  (iv) the
Executive  (or his legal  representatives,  if  applicable)  shall  receive  all
benefits and  entitlements  under any benefit plan of or other  arrangement with
the  Company,  (v) all  unvested  options  shall  vest  and  become  immediately
exercisable  and all options shall remain  exercisable  by the Executive (or his
legal  representatives,  if applicable) until the expiration of the Option Term,
(vi) payment for all accrued but unused  vacation,  (vii) the  Executive (or his
legal representatives, if applicable) shall receive reimbursement for all of the
Executive's  business  expenses accrued to the date of termination and (viii) at
the election of the Executive (or his legal representative,  if applicable), the
Company shall  transfer to the Executive the Additional  Life Insurance  Policy.
Nothing in this Section 4.2 shall be deemed to in any way affect the Executive's
right to participate in or receive  benefits from any disability plan maintained
by the Company and for which the Executive is otherwise eligible.

     For the purposes of this Agreement, "Disability" shall mean a determination
by the Board of Directors in accordance with applicable law that, as a result of
a physical or mental  illness,  the Executive is unable to perform the essential
functions of his job with or without reasonable  accommodation,  for one hundred
eighty  (180)  consecutive  days or two  hundred  seventy  (270) days during any
eighteen (18) month period.

     4.3  Termination  without  Cause  or  with  Good  Reason.  The  Executive's
employment  hereunder  may be  terminated  by the  Company  without  "Cause" (as
defined  below) upon ninety (90) days prior written  notice to the Executive and
the Executive may terminate  employment with "Good Reason" (as defined below) at
any time without notice.  Upon a termination  without Cause or with Good Reason,
the Executive shall receive (i) Base Salary and bonus for the remaining duration
of the Term and for an  additional  period of six (6) months from the end of the
Term (collectively,  the "Severance Period") as if the Executive was employed by
the Company during the Severance Period,  (ii) health insurance coverage for the
Executive and his  dependents and all other  benefits and  perquisites  that the
Executive was receiving  immediately  prior to the date of  termination  for the
duration  of the  Severance  Period,  (iii)  immediate  vesting of all  unvested
options and all options  shall remain  exercisable  until the  expiration of the
Option Term,  (iv) all benefits  and  entitlements  under any benefit plan of or
other arrangement with the Company including, without limitation, the payment of
premiums on the Additional  Life Insurance  Policy during the Severance  Period,
(v) payment for all accrued but unused  vacation and (vi) at the election of the
Executive  (or his legal  representative,  if  applicable),  the  Company  shall
transfer to the Executive at the end of the Severance Period the Additional Life
Insurance Policy.  The decision by the Company not to renew the Agreement at the
end of the Term on terms and  conditions  at least as favorable  as  immediately
prior  to the end of the Term  shall be  deemed  a  termination  by the  Company
without Cause.

     For the purposes of this Agreement,  "Cause" shall mean (i) the Executive's
gross  negligence,  recklessness or malfeasance in the performance of his duties
which results in material  financial  injury to the Company,  (ii) the Executive
committing any act or acts of fraud, theft or embezzlement, which, if convicted,
would  constitute  a felony and which  results or intends to result  directly or
indirectly in gain or personal enrichment of the Executive at the expense of the
Company or (iii) the Executive willfully engaging in any conduct relating to the
business of the Company that could  reasonably  be expected to have a materially
detrimental  effect on the  business  or  financial  condition  of the  Company;
provided that the Company must give the Executive  written  notice of its intent
to terminate the Executive  with Cause and the Executive  shall have thirty (30)
days from the date of the notice to cure the deficiency.
<PAGE>

     For purposes of this Agreement, "Good Reason" shall mean (i) the assignment
to the Executive of duties and responsibilities not commensurate with his status
as Vice President and Chief Financial Officer of the Company and a member of the
Board of Directors or the diminution of the  Executive's  duties,  change in the
Executive's title or status or removal from or failure to re-elect the Executive
as a member of the Board (except in conjunction  with a termination  for Cause),
(ii) the  failure of the  Company to provide  compensation  and  benefits to the
Executive at the levels required by this Agreement,  or (iii) the failure of the
Company to adhere in any substantial manner to any of its covenants contained in
this  Agreement.  Termination  of the  Executive's  employment  by the Executive
following  a Change of Control (a sale of more than fifty  percent  (50%) of the
shares of Common Stock or sale of all or substantially  all of the assets of the
Company), will be deemed a Good Reason termination.

     4.4  Termination  with  Cause or  without  Good  Reason.  The  Company  may
terminate the Executive's  employment with Cause (subject to the cure period set
forth above) and the Executive may terminate  employment  without Good Reason at
any time without notice.  Upon a termination by the Company with Cause or by the
Executive  without  Good  Reason,  the  Executive  shall  receive (i) a pro rata
portion of (A) Base Salary and (B) the bonus  pursuant to Section 3.2 hereof for
the year of the Executive's termination, based on the period of employment prior
to the date of termination,  (ii) all previously earned and accrued entitlements
under  any  benefit  plan  of or  other  arrangement  with  the  Company,  (iii)
reimbursement for all business expenses accrued to the date of termination, (iv)
all vested options shall remain  exercisable  until the expiration of the Option
Term,  (v) payment for all accrued but unused  vacation and (vi) at the election
of the Executive (or his legal representative, if applicable), the Company shall
transfer to the Executive the Additional Life Insurance Policy.




                  Registration Rights.
                  -------------------

     5.1 Piggyback  Registration  Rights. If, at any time after the date hereof,
the Company shall file a  registration  statement  under the  Securities  Act of
1933, as amended (the "Act") with the  Securities and Exchange  Commission  (the
"SEC")  covering  shares of capital stock of the Company  while any  Registrable
Securities  (as  defined in the last  sentence of this  paragraph  5.1) shall be
outstanding,  the Company shall give the Executive 30 days' prior written notice
of the filing of such registration  statement. If requested by the Executive, in
writing, within 10 days after the date of any such notice, the Company shall, at
the Company's sole expense (other than the fees and disbursements of counsel for
the Executive and any underwriting  discounts or commissions  payable in respect
of the Registrable  Securities sold by Executive),  include in such registration
statement all or any portion of the Registrable  Securities of Executive and any
of his affiliates,  all to the extent required to permit the public offering and
sale of the  Registrable  Securities  through the facilities of all  appropriate
securities  exchanges  and  the  over-the-counter   market,  and  will  use  its
reasonable best efforts through its officers, directors, auditors and counsel to
cause  such   registration   statement  to  become   effective  as  promptly  as
practicable.  Notwithstanding the foregoing,  if the managing underwriter of any
such offering shall advise the Company that, in its opinion, the registration of
all or a portion of the Registrable  Securities  requested to be included in the
registration  would  materially   adversely  affect  the  distribution  of  such
securities by the Company,  then the Company shall be required to include in the
registration only that number of Registrable Securities which the Company or the
managing underwriter believe will not jeopardize the success of the offering and
the  number  of  shares  of  Common  Stock  otherwise  to  be  included  in  the
registration  statement  shall be reduced as  follows:  (v) there shall be first
excluded  shares of Common Stock  proposed to be included by other  shareholders
not  possessing  contractual  rights to  include  the same and (vi) any  further
reduction shall be first in accordance with the contractual priorities among all
other  shareholders  (having such contractual  rights)  requesting  inclusion of
their Common Stock in such registration,  including the Executive,  and shall be
second  reduced pro rata among all other  shareholders  in the proportion of the
number of  shares  of  Common  Stock  submitted  for  registration  by each such
shareholder.  As used herein,  "Registrable Securities" shall mean the shares of
Common Stock owned by the Executive or any  affiliates of the  Executive,  which
have not been previously sold pursuant to a registration statement and which are
otherwise,  at the time a request for  registration is made, not able to be sold
pursuant to Rule 144 promulgated under the Act.

     5.2 Demand  Registration  Rights.  Upon  receipt of a written  request from
Executive,  the Company shall,  as promptly as  practicable,  prepare and file a
registration  statement  under the Act with the SEC  sufficient  to  permit  the
public offering and sale of the Registrable Securities through the facilities of
all appropriate  securities exchanges and the over-the-counter  market, and will
use its reasonable  best efforts through its officers,  directors,  auditors and
counsel to cause such registration  statement to become effective as promptly as
practicable.
<PAGE>

     5.3 Blue Sky  Limitations.  In the event of a registration  pursuant to the
provisions of this Section 5, the Company shall use its reasonable  best efforts
to cause the Registrable  Securities so registered to be registered or qualified
for sale  under the  securities  or blue sky laws of such  jurisdictions  as the
Executive may reasonably request; provided,  however, that the Company shall not
by reason of this  Section  5.3 be  required  to qualify to do  business,  or to
subject itself to taxation,  or to file a general  consent to service of process
in any jurisdiction.

     5.4  Duration.  The  Company  shall  keep  effective  any  registration  or
qualification  contemplated by this Section 5 at all times  thereafter and shall
from time to time amend or supplement  each applicable  registration  statement,
preliminary   prospectus,   final   prospectus,   application,   document,   and
communication  for such  period  of time as  shall be  required  to  permit  the
Executive to complete the offer and sale of the Registrable  Securities  covered
thereby  or until  the  date on which  all  Registrable  Securities  can be sold
pursuant to Rule 144 under the Act.

     5.5 Survival.  Notwithstanding anything herein to the contrary the terms of
this Section 5 shall survive the termination of the Executive's  employment with
the  Company  and  shall  survive  for so long  as  Executive  owns  Registrable
Securities.


     6. Other Provisions.

     6.1. Notices.  Any notice or other  communication  required or which may be
given  hereunder  shall  be  in  writing  and  shall  be  delivered  personally,
telegraphed,  telexed,  sent by  facsimile  transmission  or sent by  certified,
registered or express mail,  postage prepaid,  and shall be deemed given when so
delivered personally,  telegraphed,  telexed, or sent by facsimile  transmission
or, if mailed, four (4) days after the date of mailing, as follows:

                           (a)      If the Company, to:

                                    Dynacore Holdings Corporation
                                    717 Fifth Avenue, 15th Floor
                                    New York, New York 10022

                                    Attention:  Asher B. Edelman
                                    Telephone:  (212) 371-7711
                                    Fax:  (212) 223-0006

                                    With a copy to:

                                    Pryor Cashman Sherman & Flynn LLP
                                    410 Park Avenue
                                    New York, New York  10022

                                    Attention:       Selig D. Sacks, Esq.
                                    Telephone:       (212) 326-0879
                                    Fax:             (212) 326-0806

                           (b)      If to the Executive, to his home address set
                                    forth in the records of the Company.

     6.2 Entire Agreement.  This Agreement contains the entire agreement between
the parties with respect to the subject  matter hereof and  supersedes all prior
agreements, written or oral, with respect thereto.
<PAGE>

     6.3  Waiver  and  Amendments.  This  Agreement  may be  amended,  modified,
superseded,  canceled,  renewed or extended, and the terms and conditions hereof
may be waived,  only by a written  instrument  signed by the  parties or, in the
case of a waiver, by the party waiving  compliance.  No delay on the part of any
party in exercising any right,  power or privilege  hereunder shall operate as a
waiver  thereof,  nor  shall  any  waiver  on the  part of any  right,  power or
privilege  hereunder,  nor any single or partial exercise of any right, power or
privilege  hereunder,  preclude  any other or  further  exercise  thereof or the
exercise of any other right, power or privilege hereunder.

     6.4  Governing  Law.  This  Agreement  shall be governed  and  construed in
accordance  with the laws of the State of New York applicable to agreements made
and to be performed  entirely within such state,  without regard to conflicts of
laws principles.

     6.5 Dispute  Resolution.  The Company and Executive  agree to arbitrate any
controversy  or claim  arising out of this  Agreement or  otherwise  relating to
Executive's employment by the Company during the Term or Executive's termination
of such employment  prior to or as of the end of the Term. Any such  controversy
or claim shall be resolved in binding  arbitration in a proceeding  administered
by and under the National Rules for the Resolution of Employment Disputes of the
American Arbitration Association, in the American Arbitration Association office
located in New York City. Except as otherwise provided under Section 6.9 hereof,
the arbitrator  shall not have authority to modify or change any of the terms of
this  Agreement.  Both  parties and the  arbitrator  will treat the  arbitration
process and the activities which occur in the proceedings as  confidential.  The
decision of the arbitrator shall be rendered in writing,  shall be final and may
be entered as a judgment in any federal or state court in New York County.

     6.6  Assignability.   This  Agreement,   and  the  Executive's  rights  and
obligations  hereunder,  may not be assigned by the  Executive.  The Company may
assign this  Agreement  and its rights,  together with its  obligations,  to any
other entity which will substantially carry on the business of the Company.

     6.7  Counterparts.  This  Agreement  may be  executed  in two  (2) or  more
counterparts,  each of which shall be deemed an original  but all of which shall
constitute one and the same instrument,  and it shall not be necessary in making
proof  of  this  Agreement  to  produce  or  account  for  more  than  one  such
counterpart.

     6.8  Headings.  The  headings  in this  Agreement  are for  convenience  of
reference only and shall not limit or otherwise  affect the meaning of
terms contained herein.

     6.9 Severability.  If any term, provision,  covenant or restriction of this
Agreement,  or any part thereof, is held by a court of competent jurisdiction of
any  foreign,   federal,   state,  county  or  local  government  or  any  other
governmental, regulatory or administrative agency, arbitrator or authority to be
invalid,  void,  unenforceable  or against  public  policy for any  reason,  the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall  remain  in full  force and  effect  and  shall in no way be  affected  or
impaired or invalidated.

     IN WITNESS  WHEREOF,  the parties  hereto,  intending  to be legally  bound
hereby,  have  executed  this  Agreement  as of the day  and  year  first  above
mentioned.

                                          EXECUTIVE




                                          ------------------------------------
                                          Phillip P. Krumb





                                          DYNACORE HOLDINGS CORP.




                                          By:
                                             ----------------------------------
                                               Name:
                                               Title: