U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                   FORM 10-KSB
                 ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2000

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

                        Commission File Number: 001-13343

                        ADVANTAGE MARKETING SYSTEMS, INC.
                 (Name of small business issuer in its charter)

        OKLAHOMA                                             73-1323256
(State or other jurisdiction of                           (I.R.S. Employer
incorporation or organization)                           Identification No.)




                     2601 Northwest Expressway, Suite 1210W
                       Oklahoma City, Oklahoma 73112-7293
                    (Address of principal executive offices)
                                 (405) 842-0131
                           (Issuer's telephone number)
                            ------------------------

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

       Title of each class             Name of each exchange on which registered
   Common Stock, $0.0001 Par Value                American Stock Exchange
Redeemable Common Stock Purchase Warrants         American Stock Exchange
            1997-A Warrants                       American Stock Exchange

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

                         Common Stock, $0.0001 Par Value
                    Redeemable Common Stock Purchase Warrants
                                 1997-A Warrants
                            ------------------------
Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period  that the  registrant  was  required to file such  reports),  and (2) has
subject to such filing requirements for the past 90 days. Yes X No

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.[X]

The issuer's revenues for the year ended December 31, 2000 were $26,707,936.

The aggregate market value of the issuer's common stock,  $.0001 par value, held
by  non-affiliates  of the issuer as of March 31, 2001, was $10,561,984 based on
the closing sale price on that date as reported by the American Stock  Exchange.
As of March 31, 2001,  4,350,379 shares of the issuer's common stock, $.0001 par
value, were outstanding.


                        ADVANTAGE MARKETING SYSTEMS, INC.
                                   FORM 10-KSB
                   For the Fiscal Year Ended December 31, 2000
                                TABLE OF CONTENTS


Part I
Item 1   Description of Business
Item 2   Description of Property
Item 3   Legal Proceedings
Item 4   Submission of Matters to a Vote of Security Holders

Part II
Item 5   Market for Common Equity and Related Stockholder Matters
Item 6   Management's Discussion and Analysis or Plan of Operation
Item 7   Financial Statements
Item 8   Changes In and Disagreements With Accountants on Accounting
         and Financial Disclosure

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

SIGNATURES

           CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

     Certain  statements  under the captions "Item 1.  Description of Business,"
"Item  6.  Management's  Discussion  and  Analysis  or Plan of  Operation,"  and
elsewhere  in this report  constitute  "forward-looking  statements"  within the
meaning of Section 27A of the  Securities  Act of 1933, as amended,  and Section
21E of the  Securities  Exchange  Act of  1934,  as  amended.  Certain,  but not
necessarily all, of such forward-looking statements can be identified by the use
of  forward-looking  terminology such as "anticipates,"  "believes,"  "expects,"
"may,"  "will," or "should" or other  variations  thereon,  or by discussions of
strategies that involve risks and uncertainties.  Our actual results or industry
results may be materially different from any future results expressed or implied
by such forward-looking  statements.  Factors that could cause actual results to
differ materially include general economic and business conditions;  our ability
to implement  our business and  acquisition  strategies;  changes in the network
marketing   industry   and   changes  in  consumer   preferences;   competition;
availability  of  key  personnel;   increasing  operating  costs;   unsuccessful
advertising and promotional efforts;  changes in brand awareness;  acceptance of
new product  offerings;  changes in, or the failure to comply  with,  government
regulations  (especially  food and drug laws and  regulations);  our  ability to
obtain financing for future acquisitions; and other factors.

     Chambre(R),  Spark of  Life(R),  Young at  Heart(R),  Co-Clenz(R),  Stay 'N
Shape(R),  Sine-eze(R),  and  ToppFast(R),  are our registered  trademarks,  and
Choc-Quilizer(R) is a trademark of Tinos, L.L.C.

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

     We market a product line  consisting of over one hundred  products in three
categories;  weight  management,  dietary supplement and personal care products.
These products are marketed  through a network  marketing  organization in which
independent  distributors  purchase  products for resale to retail  customers as
well as for their own personal  use. The number of our active  distributors  has
increased  from  approximately  33,000 at December 31, 1998,  and  approximately
61,200 at December 31, 1999,  to  approximately  86,600 at December 31, 2000. In
January 2001 we added  another  5,000 active  distributors  with the purchase of
LifeScience  Technologies.  An "active"  distributor is one who purchased $50 of
product or $15 on autoship of our products within the preceding 12 months.

     The distributors in our network are encouraged to recruit interested people
to become new distributors of our products.  New distributors are placed beneath
the recruiting distributor in the "network" and are referred to as being in that
distributor's "downline" organization. Our marketing plan is designed to provide
incentives for  distributors to build,  maintain and motivate an organization of
recruited  distributors in their downline organization to maximize their earning
potential.  Distributors generate income by purchasing our products at wholesale
prices and reselling  them at retail prices.  Distributors  also earn bonuses on
product purchases generated by the distributors in their downline  organization.
See "--Network Marketing."

     On an ongoing  basis we review our product line for  duplication  and sales
movement and make adjustments accordingly.  As of December 31, 2000, our product
line  consisted  of (i)  seven  weight  management  products,  (ii)  27  dietary
supplement  products,  (iii) 66 personal care products  consisting  primarily of
cosmetic and skin care  products and (iv) Dial A Doc. In January  2001, we added
four  new  dietary  supplements  and ten new  personal  care  products  with the
acquisition   of  LifeScience   Technologies   Holdings   Limited   Partnership,
LifeScience  Technologies  Limited,   LifeScience  Technologies  of  Japan,  LST
Fulfillment Limited  Partnership,  and LifeScience  Technologies of Canada, Inc.
(collectively,  "LifeScience  Technologies").  Our products are  manufactured by
various manufacturers  pursuant to formulations developed for us and are sold to
our  independent  distributors  located  in all 50 states  and the  District  of
Columbia.

     We believe that our network marketing system is ideally suited to marketing
weight  management,  dietary supplement and personal care products because sales
of  such  products  are   strengthened  by  ongoing   personal  contact  between
distributors  and their  customers.  Our network  marketing  system appeals to a
broad  cross-section of people,  particularly those looking to supplement family
income or who are seeking part-time work. Distributors are given the opportunity
through  our  sponsored  events and  training  sessions  to  network  with other
distributors, develop selling skills and establish personal goals. We supplement
monetary  incentives  with  other  forms of  recognition  in  order to  motivate
distributors  further and to foster an atmosphere of excitement  throughout  our
distributor network.

Key Operating Strengths

     We believe  the source of our  success is our  support of and  compensation
program for our  distributors.  We provide our  distributors  with  high-quality
products and a highly attractive bonus program along with extensive training and
motivational  events and services.  We believe that we have established a strong
operating platform to support distributors and facilitate future growth. The key
components of this platform include the following:

o    quality  products,   many  of  which  emphasize  herbs  and  other  natural
     ingredients to appeal to consumer  demand for products that contribute to a
     healthy lifestyle;

o    a  compensation  program  that  permits  distributors  to earn  income from
     profits on the resale of products and residual  income from reorder bonuses
     on product purchases within a distributor's downline organization,  as well
     as to participate in various  non-cash  awards,  such as vacations  offered
     through promotional programs;

o    a superior communications program that seeks to effectively and efficiently
     communicate  with  distributors by utilizing new technologies and marketing
     techniques, as well as motivational events and training seminars;

o    a continual  expansion  and  improvement  of our product line and marketing
     plan; and

o    the  employment  of  computer  technology  to provide  timely and  accurate
     product  order  processing,  weekly  bonus  payment  processing,   detailed
     distributor earnings statements, and inventory management.

Growth Strategy

     Our  growth  strategy  is  expansion  of our  product  line and  network of
independent  distributors  to  increase  sales.  An  increase  in the  number of
distributors  generally  results in  increased  sales  volume,  and new products
create  enthusiasm  among  distributors,  serve as a promotional tool in selling
other  products,  and attract new  distributors.  Since 1995, we have introduced
many new  products  to our  product  line in the weight  management  and dietary
supplement categories, primarily through the acquisition of:

o    Miracle Mountain International, Inc. in May 1996;

o    Chambre International, Inc. in January 1997;

o    the  assets  of  Stay  'N  Shape  International,  Inc.,  Solution  Products
     International,  Inc., Nation of Winners, Inc., and Now International,  Inc.
     in April 1997;

o    all  rights,  including  formulations  and  trademarks  for  the  ToppFast,
     ToppStamina and ToppFitt products from ToppMed, Inc. in July 1998; and

o    proprietary  formulations  and  trademarks  for  LifeScience  Technologies.
     Trademarks include Adapt-O-Pet(R),  Aloe Perfect(R), Breckhman's Choice(R),
     Breckhman's  Gold(R),  Equine  Gold(R),  Golden Taiga  Tea(R),  LifeScience
     Technologies(R),   LST(R),   Maximizing  Life's  Potential(R),   Pillar  of
     Health(R),  Pillar of Youth(R), Prima Derma(R), Primal Mist(R), Prime 1(R),
     Prime Club(R), Prime Perfect(R) and Prime Pak(R).

     We will also seek to increase sales through initiatives designed to enhance
sales in our existing markets.  These initiatives  include increasing the number
of our training and motivational events and  teleconferences,  hiring additional
distributor  support personnel and establishing more convenient regional support
centers in targeted geographic markets.

     In addition, we seek to grow through  acquisitions.  The network  marketing
industry, which has relatively low barriers to entry, is fragmented and includes
a number of small  marketing  companies,  many of which are  being  acquired  by
larger companies.  Our strategy is to capitalize on these market characteristics
to achieve  additional  growth,  both in terms of distributors  and product line
enhancement,  through the acquisition of additional network marketing  companies
or the assets of such companies.

     The  principal  objective of our  acquisition  strategy is to acquire other
network marketing  organizations that can be combined with our network marketing
organization,  resulting  in  increased  sales  volume with  minimal  additional
administrative  cost. We will not consummate an acquisition unless, at the time,
we anticipate that such acquisition will contribute to profitability and provide
positive cash flows from  operations.  There is no assurance,  however,  that we
will in the future be able to acquire other network marketing organizations,  or
that such acquisitions will result in increased profitability and cash flows.

     Our growth strategy  requires  expanded  distributor  services and support,
increased   personnel,   expanded   operational   and   financial   systems  and
implementation of additional control  procedures.  There is no assurance that we
will be able to manage expanded operations effectively.  Furthermore, failure to
implement  financial,  information  management,  and  other  systems  and to add
control  procedures  could  have a  material  adverse  effect on our  results of
operations and financial  condition.  Our acquisitions could involve a number of
risks including:

o    the diversion of management's attention to the assimilation of the acquired
     companies or assets;

o    adverse effects on our results of operations,  such as the  amortization of
     acquired intangible assets; and

o    the possibility  that the acquired company or assets will not contribute to
     our business cash flows and profitability as expected.

     Our business plan includes  expansion  and  diversification  of our network
marketing organization and products through the acquisition of companies engaged
in network marketing.

     Although we intend to focus  principally  on the  expansion of sales within
the  United  States,  we are  preparing  for  expansion  into  markets  in other
countries. We have products approved for sale in Canada and Japan and are moving
forward  with  other  countries,  such as the  United  Kingdom,  Australia,  the
Philippines and Taiwan. We believe there are numerous  additional  international
markets in which our network  marketing  organization  and products  could prove
successful.

Industry Overview

     Network Marketing.  We believe that network marketing is one of the fastest
growing channels of distribution for certain types of goods and services.

     Weight  Management  and Dietary  Supplement  Products.  We believe that the
weight  management  and  dietary  supplement  category is  expanding  because of
heightened  public  awareness of reports  about the  positive  effects of weight
management and dietary  supplements on health. Many individuals also use dietary
supplements as a means of  preventative  health care. We believe several factors
account for the steady  growth of the  dietary  supplement  category,  including
increased   public   awareness  of  the  reported  health  benefits  of  dietary
supplements and favorable demographic trends toward older Americans who are more
likely to consume dietary supplements.

     Over the past several years, widely publicized reports and medical research
findings  have  suggested  a  correlation  between  the  consumption  of dietary
supplements  and the reduced  incidence of certain  diseases.  The United States
government and  universities  generally  have increased  sponsorship of research
relating to dietary  supplements.  In  addition,  Congress has  established  the
Office of Alternative Medicine within the National Institute of Health to foster
research  into  alternative  medical  treatments,   which  may  include  natural
remedies.  Congress also recently  established the Office of Dietary Supplements
in the National Institutes of Health to conduct and coordinate research into the
role of dietary supplements in maintaining health and preventing disease.

     In  addition,  we believe that the aging of the United  States  population,
together  with a  corresponding  increased  focus on  preventative  health  care
measures,  will  continue to result in increased  demand for dietary  supplement
products.  We believe  these  trends  have helped fuel the growth of the dietary
supplement category.  To meet the increased demand for dietary  supplements,  we
and others have introduced a number of successful  dietary  supplement  products
the past several years,  including  function  specific products for weight loss,
sports nutrition,  menopause,  energy and mental alertness. In addition, the use
of a number  of  ingredients,  such as  chromium  picolinate,  shark  cartilage,
proanthocyanidins, citrin and colloidal minerals, have created opportunities for
us and others to offer new products.

     Personal Care Products.  We believe that the personal care products  market
is a mature category that has been historically immune to swings in the economy.
Manufacturers  and  distributors  of personal  care  products  must  continually
improve  existing  products,  introduce  new  products and  communicate  product
advantages  to  consumers.  With the aging  population,  there  appears  to be a
growing demand for a wide spectrum of new products in the area of skin care.

Products

     Our  product  line  consists  of  products  in  the  categories  of  weight
management,  dietary supplements and personal care. We currently market over one
hundred  products,  exclusive of variations  in product size,  colors or similar
variations of our basic product line.

     Weight  Management  Category.  During the years ended December 31, 2000 and
1999, 67.6% and 70.9% respectively, of our net sales were derived from the seven
products in the weight  management  category  that we market under the Advantage
Marketing  Systems label. The following  products  represent the majority of our
product sales in the weight management category:

o    AM-300--A specialized blend of herbs, including an ephedra herb concentrate
     and chromium picolinate; and

o    AS-200--A  specialized  blend of herbs and  nutrients in addition to citrin
     and chromium picolinate.

     As a  result  of the  Stay  'N  Shape  asset  purchase,  we  added  several
additional  products to our product line in the weight management  category that
are  marketed   under  the  Advantage   Marketing   Systems   label,   including
Choc-Quilizer.  Choc-Quilizer  is an appetite  suppression  product  made from a
compound which occurs naturally in chocolate. It was originally developed by Dr.
George Kargas to control  chocolate  cravings,  and is believed by Dr. Kargas to
decrease the appetite for other foods as well.

     Dietary Supplement  Category.  During the years ended December 31, 2000 and
1999, 25.3% and 23.4%,  respectively,  of our net sales were derived from the 27
products in the dietary  supplement  category  which  contain  herbs,  vitamins,
minerals  and other  natural  ingredients.  They are sold  under  the  Advantage
Marketing  Systems label. The following  products  represent the majority of our
product sales in the dietary supplement category:

o    Shark Cartilage  Complex--Manufactured from shark fin cartilage and a blend
     of curcumin, boswellia and vanadium;

o    Colloidal  Silver--Contains  essential elements required by plants, animals
     and man that we once  naturally  obtained  from  organic  soils via fruits,
     vegetables, nuts, grains and legumes;

o    Spark of Life--A  liquid  nutritional  drink  containing  a blend of herbs,
     vitamins, minerals, amino acids and essential fatty acids; and

o    Chlorella--Fresh  water  green  algae  containing  amino  acids of protein,
     nucleic acids, fibers, vitamins and minerals.

     As of January 4, 2001 we have added a new line of dietary  supplements with
the purchase of  LifeScience  Technologies.  Many of the products are based on a
proprietary formula of blended herbs, known as adaptogens,  imported from Russia
as developed by the research of Dr. Israel Breckhman.

     Personal  Care  Category.  In January 1997,  we  dramatically  expanded and
improved  our product line by acquiring  Chambre  International  and its line of
skin care, hair care, family care and cosmetic products.  Chambre  International
had been  marketing  its  products  for over 24 years.  During  the years  ended
December 31, 2000 and 1999, 1.3% and 2.7% of our net sales were derived from the
66 personal  care  products  marketed  primarily  under the Chambre label in the
personal care  category.  The following  products  represent the majority of our
product sales in the personal care category:

o    NH2  Lift  System--A   three-part   skin-care  system  combining  enzymatic
     exfoliation  and isometric  action to firm the skin,  build muscle tone and
     lift the face;

o    Skin Care  Collections--Include  cleansing lotion, skin freshener,  oatmeal
     scrub, night treatment, moisturizer and protein or moisture masque;

o    Hair   Care   Systems--Include   keratin   shampoo,   conditioning   rinse,
     reconstructor, hair hold and style and set; and

o    Chambre  Cosmetics--Include  foundations,  mascara,  lipliners,  eyeliners,
     powder and cream blushes, lip colors and eyeshadows.

     Dial A Doc. Effective May 1, 1998, we began offering the Dial A Doc service
to members of our  monthly  autoship  program.  Dial A Doc is a 24-hour  service
which allows  participants  to speak with and ask questions of board  certified,
private  practice  physicians  anytime,  seven days a week.  Members  access the
service  through a  toll-free  telephone  number and a  personal  identification
number.

     Promotional  Materials.  We also derive  revenues  from the sale of various
educational  and  promotional  materials  designed  to aid our  distributors  in
maintaining and building their businesses.  Such materials include various sales
aids,  informational  videotapes  and  cassette  recordings,   and  product  and
marketing brochures.

     Other  Products  and  Services.  Prior to  focusing  on weight  management,
dietary  supplement  and personal  care  products in October  1993,  we marketed
various packages of consumer benefit services provided by third-party providers.
The consumer benefit services consist of:

o    a discount shopping service;

o    a grocery coupon service;

o    a discount travel service;

o    pre-paid legal services; and

o    a variety of other consumer benefits.

The services  under these  consumer  benefit  programs,  except for the pre-paid
legal services,  are provided by Consumer  Benefit  Services,  Inc. The pre-paid
legal services are provided by Pre-Paid Legal Services,  Inc. We actively market
these programs, and maintain the existing memberships.  These program membership
sales represented less than 1% of our net sales during 2000 and 1999.

     New  Product  Identification.  We  expand  our  product  line  through  the
development and acquisition of new products.  New product ideas are derived from
a number  of  sources,  including  trade  publications,  scientific  and  health
journals, our management,  consultants,  distributors and other outside parties.
Potential  product  acquisitions  are identified in a similar  manner.  Prior to
introducing new products,  we investigate  product  formulation as it relates to
regulatory compliance and other issues.

     We do not  maintain  a product  development  staff,  but rely upon  Chemins
Company, Inc. and other manufacturers,  independent researchers, vendor research
departments  and  others  for  such  services.  When a new  product  concept  is
identified  or when an existing  product must be  reformulated,  the new product
concept or reformulation project is generally submitted to Chemins for technical
development and implementation.  We continually review our existing products for
potential  enhancements to improve their effectiveness and marketability.  While
we consider our product  formulations  to be  proprietary  trade  secrets,  such
formulations are not patented.  Accordingly,  there is no assurance that another
company will not replicate one or more of our products.

     Product  Procurement and  Distribution;  Insurance.  Essentially all of our
product  line in the weight  management  and dietary  supplement  categories  is
manufactured  by Chemins  Company,  Inc.  utilizing  our  product  formulations.
Essentially   all  of  our  product  line  in  the  personal  care  category  is
manufactured by GDMI, Inc. and Columbia  Cosmetics,  Inc. Our adaptogen  product
line from our LifeScience  Technologies acquisition is manufactured by Vita Rich
Laboratories.

     In connection  with the Stay 'N Shape asset  purchase,  we succeeded to the
rights  and  obligations  of  Nation  of  Winners  International,  Inc.  under a
marketing  and  distribution  agreement  with  Tinos,  L.L.C.  Pursuant  to this
agreement we acquired the exclusive worldwide right to market  Choc-Quilizer for
the purpose of appetite suppression and weight control through December 6, 2006.
This agreement is subject to termination by Tinos upon 60 days written notice in
the event we did not obtain a sales volume of 300,000 units of 90 count capsules
or caplets of  Choc-Quilizer  during  the  period  from the date of the  license
through  December 5, 1998,  or  reasonable  sales  volumes  during each 12-month
period thereafter. We did not meet the required sales volume through December 5,
1998, and the agreement  could be subject to  cancellation  upon 60 days written
notice,  however,  we have  received  no  indication  from Tinos that it has any
intention of terminating the agreement.

     We have not generally  entered into long-term  supply  agreements  with the
manufacturers  of our product line or the third-party  providers of our consumer
benefit  services.  However,  we  customarily  enter  into  contracts  with  our
manufacturers  and suppliers to establish the terms and conditions of purchases.
Our arrangements  with Chemins  Company,  Inc. may be terminated by either party
upon the completion of any outstanding purchase orders. Therefore,  there can be
no assurance that Chemins will continue to  manufacture  our products or provide
research,  development and formulation  services.  In the event the relationship
with any of our manufacturers  becomes  impaired,  we will be required to obtain
alternative  manufacturing  sources for our products. In such event, there is no
assurance that the manufacturing  processes of our current  manufacturers can be
replicated by another manufacturer.  Although we have not previously experienced
product unavailability or supply interruptions, we believe that we would be able
to obtain alternative  sources for our weight management, dietary supplement and
personal care  products.  A significant  delay or reduction in  availability  of
products,  however,  could  have a  material  adverse  effect  on our  business,
operating results and financial condition.

     We, like other marketers of products that are intended to be ingested, face
an inherent risk of exposure to product  liability  claims in the event that the
use of our products  results in injury.  We maintain  limited product  liability
insurance  with  coverage   limits  of  $100,000  per  occurrence  and  $100,000
aggregate.  Although we do not obtain contractual  indemnification,  our product
manufacturers  carry product liability  insurance which covers our products.  We
have agreed to indemnify Tinos,  L.L.C., the licensor of Choc-Quilizer,  against
any product liability claims arising from the Choc-Quilizer  product marketed by
us.  Also we have agreed to  indemnify  Chemins  Company,  Inc.  against  claims
arising  from claims  made by our  distributors  for  products  manufactured  by
Chemins and  marketed by us.  Product  liability  claims in excess of  insurance
coverage may result in significant  losses which would adversely  affect product
sales,  results  of our  operations,  financial  condition  and the value of our
common stock.

     All of the  items in our  product  line  include  a  customer  satisfaction
guarantee. Within 30 days of purchase, any retail customer or distributor who is
not  satisfied  with our  product  for any  reason  may  return it or any unused
portion to the distributor from whom it was purchased or to us for a full refund
or credit  toward the  purchase  of  another  product.  Distributors  may obtain
replacements  from us for products  returned to them by retail customers if they
return such products on a timely basis. Furthermore,  in most jurisdictions,  we
maintain a buy-back program. Under this program we will repurchase products sold
to a  distributor  (subject  to a 10%  restocking  charge),  provided  that  the
distributor  resigns as a  distributor  and returns  the  product in  marketable
condition  within 12 months of original  purchase,  or longer where  required by
applicable state law or regulations.  We believe this buy-back program addresses
a number of the regulatory  compliance  issues  pertaining to network  marketing
systems.  For the years ended  December 31, 2000 and 1999,  the cost of products
returned to us was 2% and 3% percent of gross sales, respectively.

     Our product line is distributed principally from our facilities in Oklahoma
City or from our Regional Support  Centers.  Products are warehoused in Oklahoma
City and at selected Regional Support Centers.

Network Marketing

     We market our product line through  independent  distributors  in a network
marketing  organization.  At December  31,  2000,  we had  approximately  86,600
"active"   distributors.   We  had  approximately  61,200  and  33,000  "active"
distributors  at December  31,  1999 and 1998,  respectively.  To be  considered
"active" a distributor must have purchased $50 in products or $15 on autoship of
our products within the preceding 12 months.  Our  distributors  are independent
contractors  who  purchase  products  directly  from  us for  resale  to  retail
consumers.  Distributors may elect to work on a full-time or part-time basis. We
believe our network marketing system appeals to a broad cross-section of people,
particularly those seeking to:

o    supplement family income;

o    start a home business; or

o    pursue  employment   opportunities   other  than  conventional,   full-time
     employment.

A majority of our distributors therefore sell our products on a part-time basis.

     We believe that our network marketing system is ideally suited to marketing
our product line because  sales of such  products  are  strengthened  by ongoing
personal contact between retail consumers and distributors, many of whom use our
products themselves.  Sales are made through direct personal sales presentations
as well as  presentations  made to  groups  in a format  known  as  "opportunity
meetings." These sales methods are designed to encourage individuals to purchase
our products by informing  potential  customers and  distributors of our product
line and  results of  personal  use,  and the  potential  financial  benefits of
becoming a distributor.  The objective of the marketing  program is to develop a
broad based network marketing  organization of distributors  within a relatively
short period.  Our  marketing  efforts are  typically  focused on  middle-income
families and individuals.

     Our network marketing program  encourages  individuals to develop their own
downline network marketing organizations.  Each new distributor is either linked
to:

o    the existing  distributor that personally enrolled the new distributor into
     our network marketing organization; or

o    the  existing  distributor  in  the  enrolling  distributor's  downline  as
     specified by the enrolling distributor at the time of enrollment.

Growth of a distributor's  downline  organization is dependent on the recruiting
and enrollment of additional distributors by the distributor or the distributors
within such distributor's downline organization.

     Distributors  are  encouraged  to assume  responsibility  for  training and
motivation  of other  distributors  within their  downline  organization  and to
conduct  opportunity  meetings  as soon as they are  appropriately  trained.  We
strive to maintain a high level of motivation,  morale, enthusiasm and integrity
among the members of our network marketing organization.  We believe this result
is achieved  through a  combination  of  products,  sales  incentives,  personal
recognition of outstanding achievement, and quality promotional materials. Under
our network marketing  program,  distributors  purchase sales aids and brochures
from us and assume the costs of  advertising  and  marketing our product line to
their  customers as well as the direct cost of recruiting new  distributors.  We
believe  that this form of sales  organization  is cost  efficient  because  our
direct sales expenses are primarily limited to the payment of bonuses, which are
only incurred when products are sold.

     We continually  strive to improve our marketing  strategies,  including the
compensation structure within our network marketing organization and the variety
and mix of products in our line,  to attract and  motivate  distributors.  These
efforts are designed to increase  distributors'  monthly  product  sales and the
recruiting of new distributors.

     To aid distributors in easily meeting the monthly personal product purchase
requirement to qualify for bonuses,  we developed the "autoship" in 1994.  Under
the autoship purchasing  arrangement,  distributors establish a standing product
order for an amount in  excess of $15 which is  automatically  charged  to their
credit cards or deducted  from their bank  accounts each month prior to shipment
of  the  ordered  products.  At  December  31,  2000,  1999,  and  1998,  we had
approximately  29,761,  27,600,  and 13,000  distributors  participating  in the
autoship, respectively.

     Growth of our network marketing organization is in part attributable to our
bonus structure which provides for payment of bonuses on product  purchases made
by other  distributors in a distributor's  downline  organization.  Distributors
derive income from several sources:

o    First,  distributors  earn profits by  purchasing  from our product line at
     wholesale  prices  (which are  discounted up to 40% from  suggested  retail
     prices) and selling our product line to customers at retail.

o    Second,   distributors   who  establish  their  own  downline   distributor
     organizations  may  earn  bonuses  of up to 40%  on  product  purchases  by
     distributors within the first four levels of their downline organization.

o    Third,  distributors who have personally enrolled three active distributors
     and have (i) $300 per month of autoship  product  purchases  by  personally
     enrolled  distributors  on their  first  level  and (ii)  $300 per month of
     autoship product purchases on their second level, become directors and have
     the opportunity to build an additional  director downline  organization and
     receive  additional  bonuses of 4% on product  purchases  by such  downline
     organization.

o    Fourth,  distributors who have personally  enrolled six active distributors
     and have (i) $600 per month of autoship  product  purchases  by  personally
     enrolled  distributors  on their  first  level  and (ii)  $600 per month of
     autoship product  purchases on their second level,  become silver directors
     and have the opportunity to build an additional  silver  director  downline
     organization and receive  additional  bonuses of 5% on product purchases by
     such downline organization.

o    Fifth, silver directors who have personally enrolled 12 active distributors
     and have (i) $1,200 per month of autoship  product  purchases by personally
     enrolled  distributors  on their  first  level and (ii) $1,200 per month of
     autoship product purchases on their second level and have a total of $5,000
     wholesale volume monthly in their downline,  become gold directors and have
     the opportunity to receive an additional  bonus of 3% on product  purchases
     by their silver director downline organization. In addition, gold directors
     have the  opportunity  to  receive  generation  bonuses  of up to 3% on the
     product purchases by distributors of silver director downline organizations
     that originate from their silver  director  downline  organization  through
     four generations.

o    Sixth,  gold  directors  who maintain the gold  director  requirements  and
     develop four gold directors, each one from a separate leg of their downline
     organization plus $40,000 wholesale volume in downline organization, become
     platinum directors and have the opportunity to build an additional platinum
     director  downline  organization  and receive  additional  bonuses of 5% on
     product purchases by such downline organization.

     Combining these levels of bonuses,  our total "pay-out" on products subject
to bonuses is approximately 67% of the bonus value of product sales. However, in
the case of a distributor who is not qualified to receive bonuses, we retain the
bonuses  otherwise  payable  on the  first  two  levels  of those  distributors'
downline  organizations.  A distributor who has not purchased $15 on autoship or
at least $50 if not on autoship of our products  during the  preceding  month is
not qualified to receive bonuses.

     Each distributor in our network  marketing  organization has a director,  a
silver director,  a gold director and a platinum  director.  Each director has a
silver director,  a gold director and a platinum director.  Each silver director
has a gold director and a platinum  director.  Each gold director has a platinum
director.  As of  December  31,  2000,  we had 293  silver  directors,  182 gold
directors and 43 platinum directors.

     Under our regional  support center  program,  we designate  distributors to
serve as regional support center directors and provide them special training and
support.   Each  regional  support  center  director   functions  as  a  product
distribution  center  for our  products.  As of  December  31,  2000,  we had 74
regional support center directors.

         We maintain a computerized system for processing distributor orders and
calculating  bonus payments  which enable us to remit such payments  promptly to
distributors. We believe that prompt and accurate remittance of bonuses is vital
to  recruiting  and  maintaining  distributors,  as  well  as  increasing  their
motivation  and  loyalty to us. We make  weekly  bonus  payments  based upon the
previous week's product purchases,  while most network marketing  companies only
make monthly bonus payments. During 2000 and 1999, we paid bonuses to 11,902 and
8,500  distributors,  respectively,  in the aggregate amounts of $11,271,109 and
$9,677,476, respectively.

     We  are  committed  to  providing   the  best   possible   support  to  our
distributors.  Distributors in our network  marketing  organization are provided
training  guides and are given the  opportunity  to  participate in our training
programs.  We sponsor  regularly  scheduled  conference  calls for our  platinum
distributors  which  include  testimonials  from  successful   distributors  and
satisfied customers as well as current product and promotional  information.  We
produce a monthly newsletter which provides  information on us, our products and
our network  marketing  system.  The  newsletter is designed to help recruit new
distributors  by  answering   commonly  asked  questions  and  includes  product
information and business  building  information.  The newsletter also provides a
forum for us to give additional  recognition to our distributors for outstanding
performance.  In  addition,  we  regularly  sponsor  training  sessions  for our
distributors  across the United States. At these training sessions  distributors
are  provided the  opportunity  to learn more about our product line and selling
techniques  so  they  can  build  their  businesses  more  rapidly.  We  produce
comprehensive  and attractive  four color  catalogues and brochures that display
and describe our product line. We maintain a web page which provides information
on us, our products, and our network marketing system at www.amsonline.com.

     Furthermore,  in order to  facilitate  our  continued  growth  and  support
distributor  activities,  we continually upgrade our management  information and
telecommunications  systems.  These systems are designed to provide, among other
things, financial and operating data for management, timely and accurate product
ordering,   bonus  payment   processing,   inventory   management  and  detailed
distributor  records.  Since 1994,  we have  invested  more than  $1,980,000  to
enhance our computer and telecommunications systems.

Regulation

     In the  United  States (as well as in any  foreign  markets in which we may
sell  our  products),  we  are  subject  to  laws,  regulations,  administrative
determinations,  court decisions and similar constraints (as applicable,  at the
federal, state and local levels) (hereinafter "regulations").  These regulations
include and pertain to, among other things:

o    the   formulation,   manufacturing,   packaging,   labeling,   advertising,
     distribution, importation, sale and storage of our products;

o    our product claims and advertising (including direct claims and advertising
     as well as claims and advertising by distributors, for which we may be held
     responsible); and

o    our network marketing organization.

     Products. The formulation, manufacturing, packaging, labeling, advertising,
distribution and sale and storage of our products are subject to regulation by a
number of governmental  agencies. The federal agencies include the Food and Drug
Administration,  the Federal  Trade  Commission,  the  Consumer  Product  Safety
Commission,  the United States  Department of Agriculture and the  Environmental
Protection  Agency. Our activities are also regulated by various agencies of the
states,  localities  and foreign  countries  in which our products are or may be
manufactured,  distributed  and  sold.  The  Food and  Drug  Administration,  in
particular,  regulates  the  formulation,  manufacturing  and labeling of weight
management  products,  dietary  supplements,  cosmetics and skin care  products,
including some of our products. Food and Drug Administration regulations require
us and our suppliers to meet relevant  regulatory good  manufacturing  practices
for the preparation, packaging and storage of these products. Good manufacturing
practices for dietary supplements have yet to be promulgated but are expected to
be proposed. The Dietary Supplement Health and Education Act of 1994 revised the
provisions of the Federal Food, Drug and Cosmetic Act concerning the composition
and labeling of dietary supplements,  which we believe is generally favorable to
the dietary supplement industry. The Dietary Supplement Health and Education Act
created a new statutory class of "dietary  supplements." This new class includes
vitamins,  minerals,  herbs,  amino acids and other dietary substances for human
use to supplement the diet. However, the Dietary Supplement Health and Education
Act grandfathered,  with certain  limitations,  dietary ingredients that were on
the market  before  October 15,  1994.  A dietary  supplement  containing  a new
dietary  ingredient  and placed on the market on or after  October 15, 1994 must
have a  history  of use or other  evidence  establishing  a basis  for  expected
safety.  Manufacturers  of  dietary  supplements  having a  "structure-function"
statement,  must have  substantiation  that the  statement  is truthful  and not
misleading.

     The majority of our sales come from products that are classified as dietary
supplements  under  the  Federal  Food,  Drug and  Cosmetic  Act.  The  labeling
requirements for dietary  supplements  have been set forth in final  regulations
with respect to labels  affixed to  containers  beginning  after March 23, 1999.
These regulations include how to declare nutrient content  information,  and the
proper detail and format required for the "supplemental facts" box. During 1999,
we revised our product labels in compliance with these regulations.  Many states
have  also  recently  become  active in the  regulation  of  dietary  supplement
products.  These states may require  modification  of labeling or formulation of
certain of our products sold in these states.

     In addition, on January 6, 2000, the Food and Drug Administration published
a Final Rule on permissible structure/function statements to be placed on labels
and in  brochures.  Structure/function  statements  are claims of the benefit or
effect of a product or an ingredient on the body's  structure or function.  This
new  regulation  does not  significantly  change  the way that the Food and Drug
Administration interprets  structure/function  statements. Thus, we did not make
any substantial  label  revisions based on this regulation  regarding any of our
structure/function product statements.

     As a marketer of products that are ingested by consumers, we are subject to
the risk that one or more of the  ingredients  in our  products  may  become the
subject of adverse regulatory action. For example, one of the ingredients in our
AM-300 product is ephedra, an herb which contains naturally-occurring ephedrine.
Our manufacturer uses a powdered extract of that herb when manufacturing AM-300.
We market AM-300 principally as an aid in weight  management.  The extract is an
8% extract  which  means  that  every 100  milligrams  of the  powdered  extract
contains   approximately  eight  milligrams  of  naturally  occurring  ephedrine
alkaloids.  Ephedrine  containing  products  have been the  subject  of  adverse
publicity in the United States and other  countries  relating to alleged harmful
effects.

     On April 10,  1996,  the Food and Drug  Administration  issued a  statement
warning  consumers  not to purchase  or ingest  dietary  supplements  containing
ephedrine that are claimed to produce  certain  effects.  These effects  include
euphoria, heightened awareness, increased sexual sensations or increased energy.
The Food and Drug  Administration  cautions that these products pose significant
adverse health risks, including dizziness, headache,  gastrointestinal distress,
irregular  heartbeat,  heart  palpitations,  heart  attack,  strokes,  seizures,
psychosis  and  death.  We  market  AM-300  principally  as  an  aid  in  weight
management.  On April 3, 2000,  the FDA withdrew  most of the  provisions of its
proposed rule regarding dietary  supplements that contain  ephedrine  alkaloids.
The proposed rule, which was published on June 4, 1997, would have significantly
limited  our  ability to sell  AM-300 if it had been made  effective.  The FDA's
withdrawal of the provisions removed most, but not all, of the limitations. This
action was  prompted  largely by a report  issued by the United  States  General
Accounting  Office ("GAO") in which the GAO criticized the scientific  basis for
the  proposed  rule and the FDA's  evaluation  of  approximately  900 reports of
adverse events  supposedly  related to the  consumption  of dietary  supplements
containing  ephedrine  alkaloids.  The FDA made available for public  inspection
most of these adverse event reports on April 3, 2000.

     On October 25, 2000, several trade organizations for the dietary supplement
industry  submitted  a  petition  to the  FDA,  which  concerned  the  remaining
provisions  of the proposed  rule  regarding  dietary  supplements  that contain
ephedrine  alkaloids.  The  petition  requested  the FDA to:  (1)  withdraw  the
remaining  provisions  of the  proposed  rule; and (2)  adopt new  standards for
dietary  supplements that contain ephedrine  alkaloids,  which were set forth in
the petition. The FDA has not publicly responded to this petition.

     The FDA  will,  most  likely,  attempt  to issue a new  proposal  rule with
respect to dietary supplements that contain ephedrine alkaloids.  However, it is
uncertain  what  restrictions  the new proposed  rule will contain or when a new
proposed  rule will be  issued.  In our  opinion,  it is  unlikely  that a final
regulation will be issued by the FDA during 2001.

     The Texas Department of Health  promulgated a new regulation,  which became
effective on January 1, 2001. The regulation requires a warning to appear on the
product label indicating that the sale of ephedra-containing  products to minors
is illegal. Our AM-300 labels comply with this regulation.

     In foreign markets,  prior to commencing  operations and prior to making or
permitting  sales of our  products,  we may be required  to obtain an  approval,
license or  certification  from the  country's  ministry of health or comparable
agency.  Prior to entering a new market in which a formal  approval,  license or
certificate  is  required,  we are  required  to  work  extensively  with  local
authorities to obtain the requisite  approvals.  The approval process  generally
requires  us to present  each  product  and product  ingredient  to  appropriate
regulators  and,  in some  instances,  arrange  for testing of products by local
technicians  for  ingredient  analysis.  Such  approvals may be  conditioned  on
reformulation  of our  products or may be  unavailable  with  respect to certain
products or ingredients.

     Product Claims and  Advertising.  The Federal Trade  Commission and certain
states  regulate  advertising,  product  claims,  and  other  consumer  matters,
including  advertising  of  our  products.  All  advertising,   promotional  and
solicitation  materials used by distributors  require our approval prior to use.
The Federal Trade Commission has instituted  enforcement actions against several
dietary supplement companies for false or deceptive  advertising,  including the
use of testimonials.

     We provide no assurance that:

o    the  Federal  Trade  Commission  will  not  question  our  past  or  future
     advertising or other operations; or

o    a state will not interpret product claims presumptively valid under federal
     law as illegal under that state's regulations.

     Also, our  distributors  and their  customers may file actions on their own
behalf, as a class or otherwise,  and may file complaints with the Federal Trade
Commission or state or local consumer affairs  offices.  These agencies may take
action on their own initiative or on a referral from distributors,  consumers or
others. If taken, these actions may result in:

o    entries of consent decrees;

o    refunds of amounts paid by the complaining distributor or consumer;

o    refunds to an entire class of distributors or customers;

o    other damages; and

o    changes in our method of doing business.

     A complaint based on the practice of one  distributor,  whether or not such
activities were authorized by us, could result in an order affecting some or all
distributors  in a particular  state,  and an order in one state could influence
courts or government agencies in other states. Enforcement proceedings resulting
from  these  complaints  may result in  significant  defense  costs,  settlement
payments or judgments and could have a material  adverse effect on our financial
condition.

     Compliance  Efforts.  We  attempt  to  remain in full  compliance  with all
applicable  laws and  regulations  governing the  manufacture,  labeling,  sale,
distribution,  and  advertising  of our dietary  supplements.  We retain special
legal counsel for advice on both Food and Drug  Administration and Federal Trade
Commission  legal  issues.  In  particular,  we work closely with special  legal
counsel  who  specializes  in  Dietary   Supplement  Health  and  Education  Act
regulations  for label  revisions,  content  of  structure/function  statements,
advertising  copy, and also the position of the Food and Drug  Administration on
ephedra-containing products.

     Network  Marketing  System.  Our  network  marketing  system is  subject to
federal  and  state  laws and  regulations  administered  by the  Federal  Trade
Commission  and  various  state  agencies.  These laws and  regulations  include
securities,   franchise  investment,  business  opportunity  and  criminal  laws
prohibiting   the  use  of  "pyramid"  or  "endless   chain"  types  of  selling
organizations. These regulations are generally directed at ensuring that product
sales are ultimately  made to consumers (as opposed to other  distributors)  and
that  advancement  within  the  network  marketing  system  is based on sales of
products,  rather  than  investment  in the  company or other  non-retail  sales
related criteria.

     The compensation  structure of a network  marketing system is very complex.
Compliance with all of the applicable  regulations and laws is uncertain because
of the  evolving  interpretations  of  existing  laws  and  regulations  and the
enactment of new laws and regulations pertaining in general to network marketing
systems and product  distribution.  We have an ongoing  compliance  program with
assistance from legal counsel experienced in the laws and regulations pertaining
to network sales organizations. We are not aware of any legal actions pending or
threatened by any  governmental  authority  against us regarding the legality of
our network marketing operations.

     We  currently  have  independent  distributors  in all 50  states  and  the
District of Columbia.  We review the  requirements  of various states as well as
seek  legal  advice  regarding  the  structure  and  operation  of  our  selling
organization  to ensure that it  complies  with all of the  applicable  laws and
regulations  pertaining  to network sales  organizations.  On the basis of these
efforts  and  the  experience  of our  management,  we  believe  that  we are in
compliance with all applicable  federal and state  regulatory  requirements.  We
have not obtained any no-action  letters or advance  rulings from any federal or
state security regulator or other governmental agency concerning the legality of
our  operations,  nor are we  relying  on a formal  opinion  of  counsel to this
effect.  Accordingly,  there is the risk that our network marketing system could
be found to be in  noncompliance  with  applicable laws and  regulations,  which
could then:

o    result in enforcement action and imposition of penalties;

o    require modification of our network marketing system;

o    result in negative publicity; or

o    have a negative effect on distributor morale and loyalty.

Any of these  consequences  could have a material adverse effect on our sales as
well as our financial condition.

     We are  subject to the risk of  challenges  to the  legality of our network
marketing  system  by  our  distributors,  both  individually  and  as a  class.
Generally such  challenges  would be based on claims that our network  marketing
system was  operated  as an illegal  "pyramid  scheme" in  violation  of federal
securities  laws,  state  unfair  practice  and  fraud  laws  and the  Racketeer
Influenced and Corrupt Organizations Act.

     Two  important  Federal  Trade  Commission  cases  have  established  legal
precedent for  determining  whether a network  marketing  system  constitutes an
illegal pyramid scheme. The first, IN RE KOSCOT INTERPLANETARY,  INC., 86 F.T.C.
1106 (1975),  set forth a standard for  determining  whether a marketing  system
constituted a pyramid  scheme.  Under the KOSCOT  standard,  a pyramid scheme is
characterized by the participants' payment of money to a company in return for:

o    the right to sell a product; and

o    the right to receive,  in return for recruiting other participants into the
     program,  rewards  that are  unrelated  to sales of the product to ultimate
     users.

Applying the KOSCOT  standard in IN RE AMWAY CORP.,  93 F.T.C.  618 (1979),  the
Federal  Trade  Commission  determined  that a company will not be classified as
operating a pyramid scheme if the company  adopts and enforces  policies that in
fact  encourage  retail  sales to  consumers  and prevent  "inventory  loading."
Inventory  loading  occurs  when  distributors   purchase  large  quantities  of
non-returnable  inventory  to obtain the full amount of  compensation  available
under  the  system.  In AMWAY,  the  Federal  Trade  Commission  found  that the
marketing  system of Amway  Corporation  did not  constitute  a pyramid  scheme,
noting the following Amway policies:

o    participants were required to buy back, from any person they recruited, any
     saleable, unsold inventory upon the recruit's leaving Amway;

o    every  participant was required to sell at wholesale or retail at least 70%
     of the  products  bought in a given  month in order to  receive a bonus for
     that month; and

o    in order to receive a bonus in a month,  each  participant  was required to
     submit proof of retail sales made to 10 different consumers.

     We believe that our network marketing system is not classified as a pyramid
scheme under the standards set forth in KOSCOT, AMWAY, and other applicable law.
In particular, in most jurisdictions,  we maintain an inventory buy-back program
to address the  problem of  inventory  loading.  Pursuant  to this  program,  we
repurchase  products sold to a distributor  (subject to a 10% restocking charge)
provided that:

o    the distributor resigns as a distributor; and

o    returns the product in  marketable  condition  within 12 months of original
     purchase, or longer where required by applicable state law or regulations.

Our  literature  provided to  distributors  describes our buy-back  program.  In
addition,  pursuant  to  agreements  with  our  distributors,  each  distributor
represents  that at least  70% of the  products  he or she buys  will be sold to
non-distributors.   However,  as  is  the  case  with  other  network  marketing
companies,  the  bonuses  paid by us to our  distributors  are based on  product
purchases  including  purchases of products that are personally  consumed by the
downline  distributors.  Basing bonuses on sales of personally consumed products
may be  considered an inventory  loading  purchase.  Furthermore,  distributors'
bonuses are based on the wholesale  prices  received by us on product  purchases
or, in some cases based upon the particular  product  purchased,  on prices less
than the wholesale prices.

     In the event of challenges to the legality of our network  marketing system
by distributors, we would be required to:

o    demonstrate that our network marketing policies are enforced; and

o    that the network marketing system and distributors' compensation thereunder
     serve as safeguards to deter inventory  loading and encourage  retail sales
     to the ultimate consumers.

     In WEBSTER V. OMNITRITION INTERNATIONAL, INC., 79 F.3d 776 (9th Cir. 1996),
the United  States  Court of Appeals held that a class  action  brought  against
Omnitrition  International,  Inc., a multilevel  marketing seller of nutritional
supplements and skin care products,  should be allowed to proceed to trial.  The
plaintiffs,   former  distributors  of  Omnitrition's  products,   alleged  that
Omnitrition's  selling  program  was  an  illegal  pyramid  scheme  and  claimed
violations of Racketeer  Influenced  and Corrupt  Organizations  Act and several
federal and state fraud and securities  laws.  Despite evidence that Omnitrition
complied  with the AMWAY  standards,  the court  ruled that a jury would have to
decide whether Omnitrition's  policies, many of which apparently were similar to
compliance  policies  adopted by us, were adequate to ensure that  Omnitrition's
marketing  efforts resulted in a legitimate  product  marketing and distribution
structure and not an illegal pyramid  scheme.  We believe that our marketing and
sales programs  differ in significant  respects from those of  Omnitrition,  and
that  our  marketing   program  complies  with  applicable  law.  The  two  most
significant differences are:

o    the Omnitrition  marketing plan required distributors to purchase $2,000 in
     merchandise  in order to qualify for bonuses as compared to $15 on autoship
     under our marketing program; and

o    the Omnitrition  inventory  repurchase  policy was limited to products that
     were less than three months old as compared to one year under our inventory
     repurchase policy.

A lesson from the OMNITRITION case is that:

o    a selling  program which  operates to generate  only the minimum  purchases
     necessary to qualify for bonuses is suspect; and

o    a selling program must operate to generate  purchases  independently of the
     payment of  bonuses in order to have a  legitimate  product  marketing  and
     distribution structure.

We believe that our selling program operates to generate  significant  purchases
"for intrinsic value" as demonstrated by our sales figures.  During the month of
December  2000,  32,185  of our  distributors  placed a total of  35,005  orders
averaging $52 in size while only a single $15 on autoship per month is necessary
to qualify  for  bonuses.  In view of the holding of the court of appeals in the
OMNITRITION case, however,  there is no assurance that, if challenged,  we would
prevail  against private  plaintiffs  alleging  violations of  anti-pyramid  and
securities  laws. A final  ruling  against us in such a suit could result in the
imposition  of a  material  liability  against  us.  Moreover,  even  if we were
successful in defending  against such suit,  the costs of such defense,  both in
dollars spent and in management time, could be material and adversely affect our
operating  results.  In addition,  the  negative  publicity of such a suit could
adversely affect our sales and ability to attract and retain distributors.

     Nutrition  for  Life  International,  Inc.,  one of our  competitors  and a
multilevel  seller of personal care and  nutritional  supplements,  announced in
January  1997,  that  it  had  settled  class  action   litigation   brought  by
distributors  alleging  fraud in  connection  with the  operation  of a  pyramid
scheme. Nutrition for Life paid in excess of $3 million to settle claims brought
on behalf of its  distributors,  and related  securities fraud claims brought on
behalf of certain purchasers of its stock.

     We believe that our marketing  program is significantly  different from the
program allegedly  promoted by Nutrition for Life and that our marketing program
is not in  violation  of  anti-pyramid  laws or  regulations.  Two issues in the
Nutrition for Life matter were a $1,000  buy-in urged on new  recruits,  and the
paying of  commissions  on  product  vouchers  prior to the actual  delivery  of
product.  By design, our marketing program offers no incentive to anyone to make
a large personal purchase nor do we use product  vouchers.  Actual average order
size in  December  2000 was $52.  However,  there is no  assurance  that  claims
similar to the claims brought  against  Nutrition for Life and other  multilevel
marketing  organizations will not be brought against us, or that we will prevail
in the event any such claims were made. Furthermore,  even if we were successful
in defending  against any such claims,  the cost of  conducting  such a defense,
both in dollars  spent and in management  time,  could be material and adversely
affect our operating results and financial condition.  In addition, the negative
publicity of such a suit could adversely affect our sales and ability to attract
and retain distributors.

Intellectual Property

     We use several  trademarks and trade names in connection  with our products
and  operations.  As of  December  31,  2000,  we had  seven  federal  trademark
registrations   with  the  United  States  Patent  and  Trademark  Office.   The
LifeScience  Technologies  acquisition in January 4, 2001 included an additional
45 registered trademarks.  We rely on common law trademark rights to protect our
unregistered trademarks.  Common law trademark rights do not provide us with the
same level of protection as afforded by a United States federal  registration of
a trademark.  Also,  common law trademark  rights are limited to the  geographic
area in  which  the  trademark  is  actually  used.  In  addition,  our  product
formulations  are not  protected by patents and are not  patentable.  Therefore,
there can be no assurance that another company will not replicate one or more of
our products.

Competition

     We are subject to significant  competition in recruiting  distributors from
other network marketing  organizations,  including those that market products in
the weight management,  dietary supplement and personal care categories, as well
as other types of products.  There are over 300 companies worldwide that utilize
network marketing  techniques,  many of which are substantially  larger, offer a
greater variety of products,  and have available  considerably greater financial
resources  than us. Our ability to remain  competitive  depends,  in significant
part,  on our  success  in  recruiting  and  retaining  distributors  through an
attractive bonus plan and other  incentives.  We believe that our bonus plan and
incentive  programs provide our distributors with significant  income potential.
However,  there  can be no  assurance  that our  programs  for  recruitment  and
retention of distributors will continue to be successful.

     In addition,  the business of marketing  products in the weight management,
dietary  supplement  and personal care  categories is highly  competitive.  This
market  segment  includes  numerous   manufacturers,   other  network  marketing
companies, catalog companies, distributors,  marketers, retailers and physicians
that actively  compete in the sale of such products.  We also compete with other
providers of such products, especially retail outlets, based upon convenience of
purchase and  immediate  availability  of the purchased  product.  The market is
highly sensitive to the introduction of new products or weight  management plans
(including  various  prescription  drugs) that may rapidly capture a significant
share of the market. As a result, our ability to remain  competitive  depends in
part upon the successful introduction and addition of new products to our line.

     Our network marketing competitors include small,  privately held companies,
as well as larger,  publicly held companies with greater financial resources and
greater product and market  diversification  and  distribution.  Our competitors
include Shaklee Corporation, The A.L. Williams Corporation,  Mary Kay Cosmetics,
Inc., Amway Corporation,  Nutrition for Life International,  Inc., and Herbalife
International, Inc.

Employees

     As of December 31, 2000,  we had 72 full-time  and 21 part-time  employees,
consisting of four executive officers, 33 involved in administrative activities,
15 involved in marketing activities, 20 involved in customer service activities,
and 21 involved in shipping  activities.  Our employees are not represented by a
labor organization. We consider our employee relations to be good.

ITEM 2.  DESCRIPTION OF PROPERTY

     We maintain our executive  office in 10,003  square feet at 2601  Northwest
Expressway,  Suites 1210W and 1120W,  Oklahoma City,  Oklahoma  73112-7293,  our
warehouse and  distribution  center in 10,340 square feet at 4000 North Lindsay,
Oklahoma  City,  Oklahoma,  and our support  center in 1,300  square feet at 214
Quadrum Drive, Oklahoma City, Oklahoma.  These premises are occupied pursuant to
long-term  leases which expire on May 31, 2003,  January 31, 2005,  May 31, 2003
and January 31, 2002, respectively, and which require monthly rental payments of
$7,348, $2,336, $5,600 and $904, respectively.  In April of 2000 we broke ground
on our new warehouse and  distribution  facility.  The 23,346 square foot,  $1.3
million facility is expected to be completed in May of 2001.

ITEM 3.  LEGAL PROCEEDINGS

     We are not a party  to any  pending  litigation.  In  September  1995,  the
Oklahoma  Department of Securities  commenced an investigation of us and the AMS
Distributor  Stock Pool  related to the  availability  of  exemptions  under the
Oklahoma  Business  Opportunity  Act  with  respect  to  our  network  marketing
activities and programs, the offer and sale of unregistered securities by us and
the sale thereof by our officers,  directors and employees without  registration
as  broker-dealers  and the  purchase  and  resale  of our  common  stock by our
officers and directors in the public market. As the investigation progressed, it
narrowed to focus on the activities associated with and related to the pool. The
pool, under which our independent  distributors were permitted to participate on
a voluntary basis, was formed in 1990.  Participants  made  contributions to the
pool and, from such contributions,  the administrator of the pool purchased on a
monthly  basis  our  common  stock  in  the  over-the-counter   market  for  the
participants.  All purchase  transactions  were executed and effected  through a
registered  broker-dealer.  All records of ownership of the common stock held by
the pool were maintained at our offices.  The pool only purchased  shares of our
common  stock  and did not sell  shares on  behalf  of the  participants.  As of
December 31, 1997,  the pool held  approximately  245,000 shares of common stock
for and on behalf of the  participants.  Each participant has sole voting rights
with  respect to those  shares of common  stock held for their  benefit.  In the
event a  participant  desires to sell the common stock held for their benefit by
the pool,  certificates  representing  such shares are delivered to them for the
purpose of effecting such sale.

     The Oklahoma  Department of Securities took the position that the offer and
sale of participation rights in the pool violated the registration provisions of
the Oklahoma Securities Act. During October 1997, we ceased accepting additional
contributions  to the pool and  effecting  purchase  transactions  in our common
stock.  On November 4, 1997, we and our then  executive  officers and directors,
John W. Hail,  Curtis H.  Wilson,  Sr.  and Roger P.  Baresel,  entered  into an
agreement  with the  Administrator  of the Oklahoma  Department of Securities in
settlement of the investigation.  The Oklahoma  Department of Securities settled
without taking any action  against us and our executive  officers and directors.
Pursuant to such  agreement,  John W. Hail reimbursed the Department its cost of
the investigation without entitlement to reimbursement by us or any of our other
officers and directors.  Under the terms of such agreement, we and Messrs. Hail,
Wilson and Baresel agreed to notify the Department of any proposed offer or sale
of  additional  securities  by us or each of Messrs.  Hail,  Wilson and  Baresel
pursuant to any  registration  exemption under the Oklahoma  Securities Act, for
the three year period ended on November 6, 2000.

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

     No matters were  submitted to a vote of security  holders during the fourth
quarter of our fiscal year ended December 31, 2000.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     From November 6, 1997 to June 14, 1999,  our common stock was traded on the
Nasdaq  SmallCap  Market under the symbol  "AMSO." On June 15, 1999,  our common
stock began trading on the American Stock Exchange under the symbol "AMM."

     On March 31,  2001,  the  closing  sale  price of our  common  stock on the
American  Stock  Exchange was $2.80.  We believe there are  approximately  2,870
holders of our common stock.

     The following table sets forth, for the periods prior to June 15, 1999, the
high and low closing bid  quotations of our common stock.  These bid  quotations
reflect inter-dealer prices without adjustment for retail markups,  markdowns or
commissions and may not reflect actual transactions.  For the periods subsequent
to June 15,  1999,  the table sets forth the high and low closing  sale price of
our common stock on the American Stock Exchange.


No cash dividends were declared
as of December 31, 2000                           Common Stock
                                            Closing Sales or Bid Prices
                                            ---------------------------
                                                 High      Low
                                                 ----      ---
2000--Calendar Quarter Ended:
    March 31..............................      $ 7.63   $ 5.63
    June 30...............................        6.13     4.50
    September 30..........................        4.69     3.69
    December 31...........................        2.63     2.25
1999 --Calendar Quarter Ended:
    March 31..............................      $ 3.00   $ 2.19
    June 30...............................        4.00     1.94
    September 30..........................        4.56     3.25
    December 31...........................        5.56     3.13

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following  discussion  should be read in conjunction  with our  consolidated
financial statements and notes thereto under Item 7 below.

General

     Our  business  and  operations   during  the  last  five  years  have  been
significantly  affected by the acquisitions of Miracle  Mountain  International,
Inc. in May 1996 (the "Miracle Mountain  acquisition"),  Chambre  International,
Inc. in January 1997 (the  "Chambre  acquisition"),  the assets of Stay 'N Shape
International,  Inc., Solution Products International,  Inc., Nation of Winners,
Inc.,  and  Now   International,   Inc.  in  April  1997  (the  "Stay  'N  Shape
International  asset  purchase")  and ToppMed  Inc.,  in July 1998 (the "ToppMed
asset  purchase").  As a result of these  acquisitions and asset  purchases,  we
acquired  6,790  distributors  and added 115  products to our product  line.  In
addition we expect the addition of LifeScience  Technologies  in January 2001 to
significantly  impact our sales growth with the  addition of 5,000  distributors
and 14 new products.

     Miracle  Mountain  Acquisition.  Effective May 31, 1996,  Miracle  Mountain
International,  Inc.  became  one  of  our  wholly-owned  subsidiaries.  Miracle
Mountain was a network marketer of various third-party  manufactured nutritional
supplement  products.  In connection with the Miracle Mountain  acquisition,  we
issued 20,000 shares of our common  stock.  As a result of the Miracle  Mountain
acquisition, we added one product to our line and 1,690 additional distributors.

     Chambre  Acquisition.  Effective January 31, 1997,  Chambre  International,
Inc. became one of our wholly-owned  subsidiaries.  Chambre  International was a
network marketer of various third-party  manufactured  cosmetics,  skin care and
hair care products. In connection with the Chambre acquisition, we issued 14,000
shares of our common stock. As a result of the Chambre acquisition,  we added 74
products to our line,  68 in the personal  care  category and six in the dietary
supplement category, and 2,100 additional distributors.

     Stay 'N Shape International Asset Purchase. We purchased all of the assets,
including the network marketing  organizations,  of Stay 'N Shape International,
Inc., Solution Products  International,  Inc., Nation of Winners,  Inc., and Now
International,  Inc. on April 16, 1997. In connection  with this asset purchase,
we paid cash of $1,174,441 and issued  125,984 shares of our common stock.  As a
result of this  asset  purchase,  we added 39  products  to our line,  38 in the
weight management and dietary supplement categories and one in the personal care
category, and 3,000 additional distributors.

     ToppMed Asset Purchase. On July 31, 1998, we acquired all rights, including
formulations and trademarks, for the ToppFast, ToppStamina and ToppFitt products
from ToppMed, Inc. for $192,000.

     LifeScience  Technology  Acquisition.  On January 4, 2001, we purchased the
LifeScience  Technologies  group of  companies  for $1.2 million and a five year
payment  of  $41,667  per  month  or  5%  of  the  gross  sales  of  LifeScience
Technologies products whichever is greater. The seller has the option to take up
to 860,000  shares of common  stock in lieu of cash at an option  price of $3.00
per share.  As a result of this  acquisition we added 14 products and over 5,000
distributors.

     Repurchase  of Our Common  Stock.  In March 1998,  we  announced  and began
repurchasing  up to $1  million of our common  stock in the open  market.  As of
December 31, 1999,  we had  repurchased  201,185  shares of our common stock for
$699,307 or an average of $3.48 per share and as of December  31,  2000,  we had
repurchased  472,795  shares of our common stock for $2,311,364 or an average of
$4.75 per share. This program was discontinued as of January 1, 2001.

     Units  Offering.  On  November  12,  1997,  we  completed  the  offering of
1,495,000 units, each consisting of one share of common stock and one redeemable
common  stock  purchase  warrant.  As a result  of this  offering,  we  received
proceeds  of  $6,050,000.  Each  redeemable  common  stock  purchase  warrant is
exercisable  for the  purchase of one share of our common  stock for $3.40 on or
before  November  6, 2002.  In  connection  with this  offering,  we sold to the
underwriters,  Paulson  Investment  Company,  Inc. and Joseph  Charles & Assoc.,
Inc., warrants  exercisable for the purchase of 130,000 units for $5.40 per unit
on or before November 6, 2002.

     Warrant  Modification  Offering and Rights  Offering.  In January  1997, we
distributed  non-transferable  rights to our common  stock  shareholders.  These
rights  entitled the holders to subscribe for and purchase up to 2,148,191 units
(each unit  consisting of one share of our common stock and one 1997-A  warrant)
for the price of $6.80 per unit.

     Concurrently,  we called and redeemed our  outstanding  class A and class B
common  stock  purchase  warrants  for  $.0008 per  warrant  on March 17,  1997.
However, in connection with the warrant redemption, we offered to the holders of
the class A and class B warrants the right to purchase units,  each comprised of
one share of common stock and one 1997-A warrant,  at an exercise price of $6.00
per unit.

     Each  1997-A  warrant is  exercisable  on or before  November  6, 2002,  to
purchase one share of common stock for $3.40,  subject to  adjustment in certain
events.  We may redeem the 1997-A warrants at any time upon 30 days notice, at a
price of $.0001 per 1997-A warrant.

     We received  proceeds from these two offerings of  $2,154,357.  Accumulated
offering  costs of $323,076  were charged  against the net  proceeds  from these
offerings.  Pursuant to these offerings we issued 337,211 shares of common stock
and the same number of 1997-A warrants.

     Distributor  Stock Purchase  Plan. On February 19, 1999,  our  Registration
Statement,  (number  333-47801)  was declared  effective by the  Securities  and
Exchange Commission.  Under this registration statement, we registered 5,000,000
stock purchase plan participation interests  ("Participation  Interests") in the
Advantage  Marketing  Systems,  Inc. 1998  Distributor  Stock Purchase Plan (the
"Plan"). The Participation  Interests will be offered to the distributors of our
products  and  services  ("Eligible  Persons")  in lots  of  five  Participation
Interests.   An  Eligible   Person  electing  to  participate  in  the  Plan  (a
"Participant")  is entitled through purchase of the  Participation  Interests to
purchase in the open market  through the Plan,  shares of our common stock.  The
Participation  Interests are non-transferable.  Other than an annual service fee
of $5.00 per  Participant  and a transaction  fee of $1.25 per month,  we do not
receive any  proceeds  from the  purchase of the common  stock by the Plan.  The
offering price of each Participation Interest is $1.00, and each Eligible Person
is to be required initially to purchase a minimum of 25 Participation  Interests
upon electing to participate in the Plan.

     American Stock Exchange.  Our common stock and publicly-held  warrants were
approved for listing on the American  Stock Exchange and began trading under the
symbol AMM on June 15, 1999.

     Warrant Registration. On March 22, 2000, our Registration Statement (number
333-31750) was declared  effective by the  Securities  and Exchange  Commission.
Under this  Registration  Statement,  we  registered  2,092,211  shares of stock
underlying our outstanding  1997-A  warrants,  redeemable  common stock purchase
warrants and underwriter warrants. During the first quarter of 2000, the closing
sale price of our common stock for 20 consecutive  trading days exceeded  $6.80,
which  permits us to call the  redeemable  common  stock  purchase  warrants for
redemption.

Results of Operations

     The  following  table sets forth,  as a percentage  of net sales,  selected
results of our operations for the years ended December 31, 2000,  1999 and 1998.
The selected  results of  operations  are derived from our audited  consolidated
financial  statements.  The results of operations for the periods  presented are
not necessarily indicative of our future operations.

<TABLE>
                                                                        For the Years Ended December 31,
                                                                        --------------------------------
<CAPTION>
                                                            2000                      1999                       1998
                                                            ----                      ----                       ----
                                                      Amount     Percent        Amount    Percent         Amount       Percent
                                                      ------     -------        ------    -------         ------       -------
<S>                                                <C>              <C>       <C>            <C>        <C>              <C>
Net sales......................................... $26,707,936      100.0%    $22,427,551    100.0%     $13,287,824      100.0%
                                                    -----------     -----     -----------    -----      -----------      -----
    Cost of sales:
    Commissions and bonuses.......................   10,973,686      41.1       9,691,239     43.2        5,487,418       41.3
    Cost of products..............................    5,687,197      21.3       5,140,375     22.9        3,146,765       23.7
    Cost of shipping..............................    1,268,818       4.8         779,327      3.5          365,046        2.7
                                                   ------------     -----     -----------    -----      -----------      -----
Total cost of sales...............................   17,929,701      67.1      15,610,941     69.6        8,999,229       67.7
                                                   ------------     -----     -----------    -----      -----------      -----
    Gross profit..................................    8,778,235      32.9       6,816,610     30.4        4,288,595       32.3
Marketing, distribution and
    administrative expenses.......................    8,057,808      30.2       5,236,938     23.4        3,548,772       26.7
                                                   ------------     -----     -----------    -----      -----------      -----
    Income from operations........................      720,427       2.7       1,579,672      7.0          739,823        5.6
Other income (expense):
Interest and dividends, net.......................      310,599       1.2         364,270      1.6          309,908        2.3
Other income (expenses)...........................      (81,560)      (.3)          7,866       --           39,280         .3
Settlement of additional  tax liability...........           --        --          --           --         (421,623)      (3.2)
                                                   ------------     -----     -----------    -----        ---------      -----
Total other income (expense)......................      229,038        .9         372,136      1.7          (72,435)       (.6)
                                                   ------------     -----     -----------    -----      -----------      ------
Income before income taxes........................      949,466       3.6       1,951,808      8.7          667,388        5.0
Income Taxes......................................      456,532       1.7         676,025      3.0          253,340        1.9
                                                   ------------     -----     -----------    -----      -----------      -----
Net income........................................ $    492,934       1.8%    $ 1,275,783      5.7%     $   414,048        3.1%
                                                   ============     =====     ===========    =====      ===========      =====
</TABLE>

     During the years 2000, 1999 and 1998, we experienced increases in net sales
compared to each preceding  year. The increases were  principally  the result of
expansion of our network of independent  distributors and increased sales of our
weight management,  dietary supplement and personal care products.  We expect to
continue to expand our network of independent distributors,  which may result in
increased  sales volume.  However,  there is no assurance that  increased  sales
volume  will  be  achieved  through  expansion  of our  network  of  independent
distributors,  or that,  if sales volume  increases,  we will realize  increased
profitability.

Comparison of 2000 and 1999

     Our net sales  during  the year  ended  December  31,  2000,  increased  by
$4,280,385  or 19.1%,  to  $26,707,936  from  $22,427,551  during the year ended
December 31, 1999. The increase was principally attributable to expansion of our
network  of  independent   distributors   and  increased  sales  of  our  weight
management,  dietary supplement and personal care products. During 2000, we made
aggregate net sales of $26,561,859 to 79,500 distributors, compared to aggregate
net sales during 1999 of  $22,218,379  to 63,200  distributors.  At December 31,
2000,  we  had   approximately   86,600   "active"   distributors   compared  to
approximately  61,200 at December 31, 1999. A  distributor  is  considered to be
"active"  if he or she has made a product  purchase of $50 or more from us or is
enrolled  in our  autoship  program  within the  previous  12 months.  Sales per
distributor per month increased from $30 to $59 for 2000, compared to 1999.

     Our  cost of sales  during  2000  increased  by  $2,318,760  or  14.9%,  to
$17,929,701 from $15,610,941 during 1999. This increase was attributable to:

o    an increase of $1,282,447 in distributor commissions and bonuses due to the
     increased level of sales and increased promotions;

o    an increase of $546,822 in the cost of products  sold due to the  increased
     level of sales and the addition of new products and marketing tools; and

o    an increase of $489,491  in shipping  costs due to the  increased  level of
     sales and the effect of our modified pricing structure.

Effective April 1, 1999, we modified our pricing  structure to include  shipping
costs in our  product  prices.  Previously  shipping  costs had been  calculated
separately  on each order and we reported  shipping  costs net of  payments  for
shipping  received  from  customers.  Because our  shipping  costs are no longer
reported net of the separately  collected shipping  reimbursement,  our shipping
cost as a percentage of sales appears to have increased. Total cost of sales, as
a percentage of net sales  decreased to 67.1% during the year ended December 31,
2000,  from  69.6%  during  the  same  period  in  1999  due to an  decrease  in
distributor  commissions  and bonuses as a percentage of net sales to 41.1% from
43.2%,  a decrease in cost of products sold to 21.3% of net sales from 22.9% due
to efficiency in inventory  purchasing and carrying cost, partially offset by an
increase in cost of shipping to 4.8% of net sales from 3.5%, due to UPS and USPS
rate increase.

     Our gross profit increased $1,961,625,  or 28.8%, to $8,778,235 during 2000
from $6,816,610  during 1999. The gross profit  increased as a percentage of net
sales to 32.9% of net sales  from  30.4%,  reflected  in our cost of goods  sold
decrease.

     Marketing,  distribution and administrative  expenses increased $2,821,366,
or 53.9%, to $8,057,810 during the year ended December 31, 2000, from $5,236,938
during the same period in 1999.  This increase was  attributable to expansion of
our  administrative  infra-structure  necessary to support  increased  levels of
sales and increased  promotional  expense designed to increase sales. The number
of  full-time  employees  increased to 70 during the first  quarter of 2000,  76
during the second  quarter of 2000,  declined to 74 during the third  quarter of
2000 and declined to 72 during the fourth quarter of 2000 as compared to 53, 54,
49 and 75,  respectively  during the same  periods of 1999.  The  balance of the
increase in marketing,  distribution and  administrative  expenses resulted from
the higher level of activity  and  corresponding  increases  in variable  costs,
including  professional  services,  telephone,  bank card  service  charges  and
equipment and vehicle repair and  maintenance.  The marketing,  distribution and
administrative  expenses as a percentage of net sales  increased to 30.2% during
2000, from 23.3% during 1999 due to the increased level of sales.

     Our other income  (reduced by other  expense)  decreased by $143,097 to net
other income of $229,039  during 2000,  from a net income of $372,136 during the
same period in 1999.  This decrease was primarily  attributable  to the one-time
contribution  to the OKC  Memorial  Fund  during the  second  quarter in 2000 of
$59,500. Additionally, as the result of a decision of management to transfer the
company's  marketable  security  investments  to Bank  Trust  during  the second
quarter  in  2000  we  realized  an  approximate  $51,000  loss  on the  sale of
marketable  securities.  We believe these were one-time nonrecurring charges and
will have no further adverse impact on our future results of operations.

     Our income before taxes decreased $1,002,342,  or 51.4%, to $949,466 during
2000,  from $1,951,808  during 1999.  Income before taxes as a percentage of net
sales was 4.3% and 8.7% during 2000 and 1999, respectively.  Income taxes during
2000 and 1999 were $456,532 and $676,025 respectively.  Our net income decreased
$782,849,  or 61.4%, to $492,934 during 2000, from $1,275,783  during 1999. This
decrease in net income was attributable to:

o    the  decrease in interest  income net of  interest  expense of $53,671,  or
     14.7%, to $310,599 during 2000 from $364,270 during 1999;

o    the increase in the marketing,  distribution and  administrative  expenses;
     and

o    the increase in other expenses due to the one-time  contribution of $59,500
     to the OKC Memorial Fund and the approximately $51,000 realized loss on the
     sale of marketable securities during the second quarter of 2000.

     Net income as a percentage of net sales decreased to 1.8% during 2000, from
5.7% during 1999.

Comparison of 1999 and 1998

     Our net sales  during  the year  ended  December  31,  1999,  increased  by
$9,139,727,  or 68.8%,  to $22,427,551  from  $13,287,824  during the year ended
December 31, 1998. The increase was principally attributable to expansion of our
network  of  independent   distributors   and  increased  sales  of  our  weight
management,  dietary supplement and personal care products. During 1999, we made
aggregate net sales of $22,218,379 to 63,200 distributors, compared to aggregate
net sales during 1998 of  $13,159,821  to 33,700  distributors.  At December 31,
1999,  we  had   approximately   61,200   "active"   distributors   compared  to
approximately  33,000 at December 31, 1998. A  distributor  is  considered to be
"active"  if he or she has made a product  purchase of $50 or more from us or is
enrolled  in our  autoship  program  within the  previous  12 months.  Sales per
distributor per month decreased from $33 to $30 for 1999, compared to 1998.

     Our cost of sales  during  1999  increased  by  $6,611,712,  or  73.5%,  to
$15,610,941 from $8,999,229 during 1998. This increase was attributable to:

o    an increase of $4,203,821 in distributor commissions and bonuses due to the
     increased level of sales and increased promotions;

o    an increase of $1,993,610 in the cost of products sold due to the increased
     level of sales and the addition of new products and marketing tools; and

o    an increase of $414,281  in shipping  costs due to the  increased  level of
     sales and the effect of our modified pricing structure.

Effective April 1, 1999, we modified our pricing  structure to include  shipping
costs in our  product  prices.  Previously  shipping  costs had been  calculated
separately  on each order and we reported  shipping  costs net of  payments  for
shipping  received  from  customers.  Because our  shipping  costs are no longer
reported net of the separately  collected shipping  reimbursement,  our shipping
cost as a percentage of sales appears to have increased. Total cost of sales, as
a percentage of net sales  increased to 69.6% during the year ended December 31,
1999,  from  67.7%  during  the  same  period  in  1998  due to an  increase  in
distributor  commissions and bonuses as a percentage of net sales to 43.2 % from
41.3%,  a decrease in cost of products sold to 22.9% of net sales from 23.7% and
an increase in cost of shipping to 3.5% of net sales from 2.7%.

     Our gross profit increased $2,528,015,  or 58.9%, to $6,816,610 during 1999
from $4,288,595  during 1998. The gross profit  decreased as a percentage of net
sales to 30.4% of net sales from 32.3%.

     Marketing,  distribution and administrative  expenses increased $1,688,166,
or 47.6%, to $5,236,938 during the year ended December 31, 1999, from $3,548,772
during the same period in 1998.  This increase was  attributable to expansion of
our  administrative  infra-structure  necessary to support  increased  levels of
sales and increased  promotional  expense designed to increase sales. The number
of  full-time  employees  increased to 53 during the first  quarter of 1999,  54
during the second  quarter of 1999,  declined to 49 during the third  quarter of
1999 and rose to 75 during the fourth  quarter of 1999 as compared to 37, 35, 47
and 46,  respectively  during  the same  periods  of 1998.  The  balance  of the
increase in marketing,  distribution and  administrative  expenses resulted from
the higher level of activity  and  corresponding  increases  in variable  costs,
including  postage,  telephone,  bank card  service  charges and  supplies.  The
marketing, distribution and administrative expenses as a percentage of net sales
decreased  to 23.4% during  1999,  from 26.7%  during 1998 due to the  increased
level of sales.

     Our other income  (reduced by other  expense)  increased by $444,571 to net
other income of $372,136  during 1999,  from a net expense of $72,435 during the
same period in 1998.  This increase was primarily  attributable  to the one-time
expense in 1998 of the  settlement  of  additional  tax  liability  of  $421,623
($256,300  net of related tax effect).  During 1998,  in an effort to facilitate
the growth of our distributor  network,  we voluntarily  began contacting all of
the state tax  authorities  to enter into  agreements  with them under  which we
assumed the  responsibility  for collecting and remitting sales and use taxes on
behalf of our independent  distributors.  Certain states had requirements  which
resulted in an  additional  tax  liability as a condition  of entering  into the
agreement. We believe the liability was a one-time non-recurring charge and will
have no further  adverse impact on our future results of operations  because the
ongoing  collection  and  remittance  of sales  and use tax  represents  neither
additional  income nor  additional  expense to us but instead is a pass  through
item with no income statement effect.

     Our income  before taxes  increased  $1,284,420,  or 192.5%,  to $1,951,808
during 1999, from $667,388  during 1998.  Income before taxes as a percentage of
net sales was 8.7% and 5.0% during  1999 and 1998,  respectively.  Income  taxes
during 1999 and 1998 were  $676,025 and $253,340,  respectively.  Our net income
increased  $861,735,  or 208.1%, to $1,275,783 during 1999, from $414,048 during
1998. This increase in net income was attributable to:

o    the increased level of sales;

o    the decrease in the marketing,  distribution and administrative expenses as
     a percentage of net sales; and

o    the increase in other income due to the one-time  expense of the settlement
     of additional  tax  liability of $421,623  ($256,300 net of the related tax
     effect) taken in 1998.

     Net income as a percentage of net sales increased to 5.7% during 1999, from
3.1% during 1998.

     Accounting  Standards - In June 1998,  the Financial  Accounting  Standards
Board issued Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activites. In June 2000, the FASB issued SFAS
No. 138,  Accounting  for Certain  Derivative  Instruments  and Certain  Hedging
Activites  which  amends  certain  provisions  of SFAS 133 to clarify four areas
causing  difficulties in  implementation.  The amendment  included expanding the
normal  purchase  and  sale  exemption  for  supply  contracts,  permitting  the
offsetting  of  certain  intercompany  foreign  currency  derivatives  and  thus
reducing the number of third party derivatives,  permitting hedge accounting for
foreign currency  denominated  assets and liabilities,  and redefining  interest
rate  risk  to  reduce   sources   of   ineffectiveness.   Management   believes
implementation  of SFAS 133,  as  amended  by SFAS 138,  did not have a material
impact on our  consolidated  results of operations,  financial  position or cash
flows.

Seasonality

     No pattern of seasonal  fluctuations exists due to the growth patterns that
we are currently  experiencing.  However, there is no assurance that we will not
become subject to seasonal fluctuations in operations.

Commitments and Contingencies

     Recent  Regulatory  Developments  - A significant  portion of our net sales
continues  to be  dependent  upon our  AM-300  product.  Our net sales of AM-300
represented  63.8% and 66.6% of net sales for the years ended  December 31, 2000
and  1999,  respectively.  One of the  ingredients  in our  AM-300  products  is
ephedra, an herb which contains naturally-occurring  ephedrine. Our manufacturer
uses a powdered extract of that herb when manufacturing AM-300. We market AM-300
principally as an aid in weight  management.  The extract is an 8% extract which
means that every 100 milligrams of the powdered extract  contains  approximately
eight  milligrams  of  naturally   occurring  ephedrine   alkaloids.   Ephedrine
containing  products  have been the subject of adverse  publicity  in the United
States and other countries relating to alleged harmful effects.

     On April 3, 2000,  the FDA withdrew most of the  provisions of its proposed
rule  regarding  dietary  supplements  that  contain  ephedrine  alkaloids.  The
proposed  rule,  which was published on June 4, 1997,  would have  significantly
limited  our  ability to sell  AM-300 if it had been made  effective.  The FDA's
withdrawal of the provisions removed most, but not all, of the limitations. This
action was  prompted  largely by a report  issued by the United  States  General
Accounting  Office ("GAO") in which the GAO criticized the scientific  basis for
the  proposed  rule and the FDA's  evaluation  of  approximately  900 reports of
adverse events  supposedly  related to the  consumption  of dietary  supplements
containing  ephedrine  alkaloids.  The FDA made available for public  inspection
most of the adverse event reports on April 3, 2000.

     On October 25, 2000, several trade organizations for the dietary supplement
industry  submitted  a  petition  to the  FDA,  which  concerned  the  remaining
provisions  of the proposed  rule  regarding  dietary  supplements  that contain
ephedrine  alkaloids.  The  petition  requested  the FDA to:  (1)  withdraw  the
remaining  provisions  of the proposed  rule,  and (2) adopt new  standards  for
dietary  supplements that contain ephedrine  alkaloids,  which were set forth in
the petition. The FDA has not publicly responded to this petition.

     The FDA  will,  most  likely,  attempt  to issue a new  proposed  rule with
respect to dietary supplements that contain ephedrine alkaloids.  However, it is
uncertain  what  restrictions  the new proposed  rule will contain or when a new
proposed  rule will be  issued.  In our  opinion,  it is  unlikely  that a final
regulation  will be issued by the FDA during 2001.  Consequently,  management is
unable at the present time to predict the ultimate  resolution  of these issues,
nor their ultimate impact on our results of operations or financial condition.

     Product  Liability - We, like other marketers of products that are intended
to be ingested,  face the inherent risk of exposure to product  liability claims
in the event that the use of our products results in injury. We maintain product
liability insurance coverage with limits of $100,000 per occurrence and $100,000
aggregate.  We  generally  do not obtain  contractual  indemnification  from our
product  manufacturers.  However, all of our product manufacturers carry product
liability  insurance  which  covers our  products.  We have agreed to  indemnify
Tinos,  L.L.C.,  the licensor of  Choc-Quilizer,  against any product  liability
claims  arising  from the  Choc-Quilizer  product  marketed  by us. We also have
agreed to  indemnify  Chemins  against  claims  arising  from claims made by our
distributors for products manufactured by Chemins and marketed by us. Although a
product  liability  claim has not been  asserted  against us, such claims  could
result in material losses.

     Choc-Quilizer  Agreement  - In the event we fail to  achieve  the  required
contractual  sales volumes  provided for in the marketing  agreement with Tinos,
L.L.C.,  we will need to either  renegotiate the marketing  agreement or give up
our rights to market Choc-Quilizer. We do not believe that loss of the marketing
rights to  Choc-Quilizer  will have a material  adverse effect on our results of
operations, financial condition or liquidity.

Liquidity and Capital Resources

     Our  primary  source of  liquidity  has been cash  provided by sales of our
common stock, marketable securities and operating activities.  In 2000 we signed
a  $980,000  mortgage  loan  with  BancFirst  for  the  construction  of our new
distribution  facility.  The  loan was not  drawn  on in 2000  and  subsequently
transferred  to Bank One.  We  anticipate  executing  definitive  mortgage  loan
agreements  with Bank One in the second quarter of 2001 in the principal  amount
of $980,000  accruing  interest  at an annual  rate of 1/4% over prime rate.  At
March 31, 2000, we had drawn $477,100  against a $500,000  bridge loan with Bank
One while  awaiting  perfection of the Bank One mortgage  loan.  The bridge loan
accrues  interest  at 1/4% over  prime,  and is  expected  to be repaid with the
proceeds of the Bank One mortgage loan.

     At December  31, 2000,  we had working  capital of  $5,218,790  compared to
$4,521,410  at December 31, 1999. We believe our cash and cash  equivalents  and
cash flows from  operations will be sufficient to fund our working capital needs
over the next 12 months.  During the year ended December 31, 2000, net cash used
in operating  activities was $62,480,  net cash used in investing activities was
$885,350,  and  net  cash  used  in  financing  activities  was  $638,377.  This
represented an average monthly  negative cash flow from operating  activities of
$27,600.  We had a net  decrease  in cash  during  this  period  of  $1,586,207,
primarily  as a result of our  purchase  of certain  marketable  securities  for
investment purposes and the repurchase of 271,610 shares of our common stock for
cash.  Our working  capital needs over the next 12 months  consist  primarily of
marketing,  distribution and administrative expenses and the acquisition cost of
LifeScience  Technologies.  The cost of the  acquisition is $1.2 million paid in
January  and  February,  2001 as well as a minimum of $41,667 per month or 5% of
the gross sales LifeScience Technologies products, whichever is greater.

     At December 31,  2000,  we had  marketable  debt and equity  securities  of
$3,502,514 compared to $4,079,628 at December 31, 1999. During the third quarter
of  2000,  management  decided  to  classify  all the  Company's  securities  as
available for sale securities.

     On March 4, 1998, we announced our intent to repurchase up to $1 million of
our common stock in the open market for cash.  As of December  31, 1999,  we had
repurchased  201,185 shares of our common stock for $699,307,  or an average per
share price of $3.48,  and as of December 31, 2000, we had  repurchased  472,795
shares of our  common  stock for  $2,311,364,  or an average of $4.75 per share.
This plan was discontinued January 1, 2001.

     During the first quarter of 1998, we agreed to loan John W. Hail, our Chief
Executive Officer and a major shareholder, up to $250,000.  Subsequently we also
agreed to loan up to an additional  $75,000. In 2000, an additional $200,000 was
approved.  These loans are  secured,  and bear  interest at 8% per annum.  As of
December 31, 2000, the balance due on these loans plus interest was $544,007. On
January 1, 2001 the  outstanding  balance on all the notes  plus  interest  were
combined into one note payable in monthly installments.  The loans and extension
were unanimously approved by our board of directors.

     On March 22,  2000,  our  Registration  Statement  (number  333-31750)  was
declared  effective  by the  Securities  and  Exchange  Commission.  Under  this
Registration  Statement,  we registered 2,092,211 shares of stock underlying our
outstanding  1997-A  warrants,  redeemable  common stock  purchase  warrants and
underwriter  warrants.  During the first quarter of 2000, the closing sale price
of our common  stock for 20  consecutive  trading  days  exceeded  $6.80,  which
permits us to call the redeemable common stock purchase warrants for redemption.
The  1997-A  warrants  and  redeemable   common  stock  purchase   warrants  are
exercisable on or before November 6, 2002, for the purchase of 1,832,211  shares
of our  common  stock  for $3.40 per  share  and the  underwriter  warrants  are
exercisable  on or before  November 12, 2002,  for the purchase of 130,000 units
(consisting  of one share of our common  stock and one  redeemable  common stock
purchase  warrant) for $5.40 per unit. These common stock purchase  warrants are
exercisable for the purchase of 130,000 shares of our common stock for $3.40 per
share.

ITEM 7.  FINANCIAL STATEMENTS

     Our consolidated  financial  statements are set forth below:

                          INDEX TO FINANCIAL STATEMENTS



ADVANTAGE MARKETING SYSTEMS, INC. AND SUBSIDIARIES
AUDITED CONSOLIDATED FINANCIAL STATEMENTS:

Independent Auditors' Report

Consolidated Balance Sheets as of December 31, 2000 and 1999

Consolidated Statements of Income for Years Ended December 31, 2000,
 1999 and 1998

Consolidated Statements of Stockholders' Equity for Years Ended
 December 31, 2000, 1999 and 1998

Consolidated Statements of Cash Flows for Years Ended December 31,
 2000, 1999 and 1998

Notes to Consolidated Financial Statements for Years Ended December
 31, 2000, 1999 and 1998

<PAGE>

INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders of
Advantage Marketing Systems, Inc. and Subsidiaries
Oklahoma City, Oklahoma



We have  audited  the  accompanying  consolidated  balance  sheets of  Advantage
Marketing  Systems,  Inc. and  subsidiaries  (the  "Company") as of December 31,
2000, and 1999, and the related consolidated statements of income, stockholders'
equity,  and cash flows for each of the three years in the period ended December
31, 2000. These consolidated  financial statements are the responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

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

In our opinion,  such consolidated  financial  statements present fairly, in all
material respects, the financial position of the Company as of December 31, 2000
and 1999,  and the results of its  operations and its cash flows for each of the
three years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States of America.



DELOITTE & TOUCHE LLP


Oklahoma City, Oklahoma
April 12, 2001

<TABLE>
                        ADVANTAGE MARKETING SYSTEMS, INC.
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2000 AND 1999
<CAPTION>
                                    ASSETS                                              2000                1999
                                    ------                                             ----                ----
<S>                                                                                <C>                <C>
CURRENT ASSETS:
  Cash and cash equivalents....................................................    $       76,687     $   1,662,894
  Marketable securities, available for sale, at fair value......................        3,502,514         2,788,905
  Receivables - net of allowance of $157,804 and $55,332 respectively...........          371,397           319,519
  Receivable from affiliates....................................................          594,395           313,761
  Prepaid taxes.................................................................          282,361                --
  Inventory.....................................................................        1,007,934           927,591
  Deferred income taxes.........................................................           64,772            60,797
  Other assets..................................................................          305,721           187,496
                                                                                    -------------      ------------
              Total current assets..............................................        6,205,781         6,260,963
MARKETABLE SECURITIES, held to maturity.........................................               --         1,290,723
RECEIVABLES, Net................................................................          515,764           126,624
PROPERTY AND EQUIPMENT, Net.....................................................        2,979,003         2,202,885
GOODWILL, Net...................................................................        1,511,918         1,618,826
COVENANTS NOT TO COMPETE, Net...................................................          363,117           436,845
DEFERRED INCOME TAXES...........................................................           12,291            21,788
OTHER ASSETS....................................................................          102,376           201,729
                                                                                    -------------      ------------
TOTAL...........................................................................   $   11,690,250     $  12,160,383
                                                                                    =============      ============
                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable..............................................................   $      191,620     $     313,492
  Accrued commissions and bonuses...............................................          230,563           319,183
  Accrued other expenses........................................................          217,748           807,246
  Accrued Income Tax............................................................           72,791                --
  Accrued sales tax liability...................................................          140,513           218,789
  Notes payable.................................................................            8,472                --
  Capital lease obligations.....................................................          125,284            80,843
                                                                                    -------------      ------------
              Total current liabilities.........................................          986,991         1,739,553
LONG-TERM LIABILITIES:
  Notes payable.................................................................           14,251                --
  Capital lease obligations.....................................................          265,103           188,847
               Total liabilities................................................        1,266,345         1,928,400
                                                                                    -------------      ------------
COMMITMENTS AND CONTINGENCIES (Note 12)
STOCKHOLDERS' EQUITY:
  Preferred stock - $.0001 par value; authorized 5,000,000 shares; none issued..               --                --
  Common stock - $.0001 par value; authorized 495,000,000 shares;
   issued 4,821,174 and 4,283,988 shares; outstanding 4,348,379 and 4,082,803
   shares, respectively ........................................................              482               428
  Paid-in capital...............................................................       11,642,189        10,232,700
  Notes receivable for exercise of options......................................         (31,088)          (50,999)
  Retained earnings.............................................................        1,077,626           759,692
  Accumulated other comprehensive income, net of tax............................         (20,828)          (10,531)
                                                                                    -------------      ------------
                 Total capital and retained earnings............................       12,668,381        10,931,290
  Less cost of treasury stock (472,795 and 201,185 shares, common, respectively)       (2,244,476)         (699,307)
                                                                                    -------------      ------------
                Total stockholders' equity......................................       10,423,905        10,231,983
                                                                                    -------------      ------------
TOTAL...........................................................................   $   11,690,250     $  12,160,383
                                                                                    =============      ============
</TABLE>

See notes to consolidated financial statements.

<PAGE>

<TABLE>
                        ADVANTAGE MARKETING SYSTEMS, INC.
                                AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME
                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
<CAPTION>
                                                                          2000         1999           1998
                                                                     ------------  ------------   -----------
<S>                                                                  <C>           <C>            <C>
Net sales..........................................................  $ 26,707,936  $ 22,427,551   $13,287,824
Cost of sales......................................................    17,929,701    15,610,941     8,999,229
                                                                      -----------   -----------    ----------
    Gross profit...................................................     8,778,235     6,816,610     4,288,595
Marketing, distribution and administrative expenses................     8,057,808     5,236,938     3,548,772
                                                                      -----------   -----------    ----------
    Income from operations.........................................       720,427     1,579,672       739,823
Other income (expense):
Interest and dividends, net........................................       310,599       364,270       309,908
Other income (expense), net........................................       (81,560)        7,866        39,280
Settlement of additional tax liability (Note 11)...................            --            --      (421,623)
                                                                      -----------   -----------    ----------
    Total other income (expense)...................................       229,039       372,136       (72,435)
                                                                      -----------   -----------    ---------
INCOME BEFORE TAXES................................................       949,466     1,951,808       667,388
INCOME TAX EXPENSE ................................................       456,532       676,025       253,340
                                                                      -----------   -----------    ----------
NET INCOME.........................................................  $    492,934  $  1,275,783   $   414,048
                                                                      ===========   ===========    ==========
Net income per common share........................................  $        .12  $        .31   $       .10
                                                                      ===========   ===========    ==========
Net income per common share - assuming  dilution...................  $        .09  $        .27   $       .09
                                                                      ===========   ===========    ==========
Weighted average common shares outstanding.........................     4,283,461     4,139,706     4,191,760
                                                                      ===========   ===========    ==========
Weighted average common shares outstanding - assuming dilution.....     5,476,277     4,778,576     4,503,411
                                                                      ===========   ===========    ==========
</TABLE>
See notes to consolidated financial statements.

<TABLE>
                                                         ADVANTAGE MARKETING SYSTEMS, INC.
                                                               AND SUBSIDIARIES

                                                   CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                                     YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
<CAPTION>
                                                                                                 Accumulated
                                                                Notes       Retained             Other Com-
                                                               Receivable   Earnings             prehensive                 Total
                                 Shares                          for        (Accumu-    Compre-    Income,                  Stock-
                                  (See    Common    Paid-In   Exercise of    lated      hensive      Net     Treasury      holders'
                                Note 5)    Stock    Capital     Options     Deficit)    Income     of Tax     Stock         Equity
                                -------    -----    -------     -------     --------    ------     ------     -----         ------
<S>                            <C>        <C>    <C>           <C>       <C>          <C>        <C>       <C>          <C>
BALANCE, JANUARY 1, 1998.......4,249,383  $ 425  $210,180,109  $(74,000) $ (930,139) $       --  $     --  $       --   $ 9,176,395
Payments on notes receivable...       --     --            --    10,040          --          --        --          --        10,040
Options exercised by
  tendering mature shares, net.   26,131      3            (3)       --          --          --        --          --            --
Purchases of treasury stock, at
  cost......................... (134,500)    --            --       --           --          --        --    (377,871)     (377,871)
Comprehensive Income:
  Net income...................       --     --            --       --      414,048     414,048        --          --       414,048
                               ---------  -----    ----------   ------    ---------   =========   -------   ---------    ----------
BALANCE, DECEMBER 31, 1998.....4,141,014    428    10,180,106  (63,960)    (516,091)         --        --    (377,871)    9,222,612
Payments on notes receivable...       --     --            --   12,961           --          --        --          --        12,961
Stock option issued............       --     --        52,600       --           --          --        --          --        52,600
Options exercised by
  tendering mature shares, net.    8,474     --            (6)      --           --          --        --          --            (6)
Purchases of treasury stock,
  at cost......................  (66,685)    --            --       --           --          --        --    (321,436)     (321,436)
Comprehensive Income:
  Net income...................       --     --            --       --    1,275,783   1,275,783        --          --     1,275,783
  Unrealized loss on available for
    sale securities, net of tax       --     --            --       --           --     (10,531)  (10,531)         --       (10,531)
Comprehensive income...........       --     --            --       --           --   1,265,252        --          --            --
                               ---------  -----    ----------   ------    ---------   =========   -------   ---------    ----------
BALANCE, DECEMBER 31, 1999.....4,082,803    428    10,232,700  (50,999)     759,692               (10,531)   (699,307)   10,231,983
Payments on notes receivable...       --     --            --   19,911           --          --        --          --        19,911
Options exercised with cash....  373,504     37       843,480       --           --          --        --          --       843,517
Options exercised by
  tendering mature shares, net.   76,239      8            --       --           --          --        --          --             8
1997-A Warrants exercised         28,443      3        96,703       --           --          --        --          --        96,706
Redeemable common stock purchase
  warrants exercised              59,000      6       200,594       --           --          --        --          --       200,600
Purchases of treasury stock, at (271,610)    --            --       --           --          --        --  (1,545,169)   (1,545,169)
Tax benefit from exercise of
  non-qualified options                      --       268,711       --           --          --        --          --       268,711
Purchase and cancellation of warrants --     --            --       --     (174,999)         --        --          --      (174,999)
Comprehensive Income:
  Net income...................       --     --            --       --      492,934     492,934        --          --       492,934
  Unrealized loss on available for
    sale securities, net of tax       --     --            --       --           --     (10,297)  (10,297)         --       (10,297)
Comprehensive income...........       --     --            --       --           --  $  482,637        --          --            --
                               ---------  -----    ----------   ------    ---------   =========   -------   ---------    ----------
BALANCE, DECEMBER 31, 2000.....4,348,379  $ 482   $11,642,188 $(31,088)  $1,077,627              $(20,828) $(2,244,476) $10,423,905
                               =========  =====    ==========  =======    =========               =======   ==========   ==========
</TABLE>

See notes to consolidated financial statements.

<TABLE>
                                                   ADVANTAGE MARKETING SYSTEMS, INC.
                                                            AND SUBSIDIARIES
                                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                              YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
<CAPTION>
                                                                                  2000                1999            1998
                                                                                  ----                ----            ----
<S>                                                                           <C>                  <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                                 $   492,934          $ 1,275,783    $   414,048
   Adjustments to reconcile net income to net
      cash provided by (used in) operating activities:
        Depreciation and amortization                                             799,969              527,054        387,160
        Deferred taxes                                                              5,522              112,631        251,144
        Provision for bad debts                                                   102,472               18,728         10,804
        Non-cash compensation                                                          --               52,600             --
       (Gain) loss on sale of assets                                               (3,120)                  --        (35,329)
        Realized loss on sale of marketable securities                             34,369                   --             --
        Changes in assets and liabilities which provided (used) cash:
           Receivables                                                           (543,490)             (71,934)      (144,485)
           Inventory                                                              (80,343)              82,407       (197,873)
           Prepaid taxes                                                          (13,650)                  --             --
           Other assets                                                           (51,668)            (174,308)       (23,179)
           Accounts payable and accrued expenses                                 (805,475)             547,978        579,964
                                                                              -----------          -----------    -----------
                Net cash (used in) provided by operating activities               (62,480)           2,370,939      1,242,254
                                                                              -----------          -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of property and equipment                                         (1,164,945)          (1,378,830)      (547,592)
   Advances to affiliates                                                        (280,670)             (40,000)      (293,936)
   Proceeds from sale of assets                                                    29,826                   --        125,340
   Repayment of receivable from affiliates                                             36               20,175         54,780
   Purchase of marketable securities, available for sale                       (1,510,538)                  --             --
   Purchase of marketable securities, held to maturity                         (1,301,151)                  --             --
   Sale of marketable securities, available for sale                            1,956,092                   --             --
   Maturity of marketable securities, held to maturity                          1,386,000                   --             --
   Purchase of ToppMed, Inc. assets                                                    --                   --       (192,000)
   Purchase of other assets                                                            --                   --       (142,875)
                                                                              -----------          -----------    -----------
                 Net cash used in investing activities                           (885,350)          (5,473,205)      (996,283)
                                                                              -----------          -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from issuance of common stock                                       1,140,823                   --             --
   Proceeds from notes payable                                                     25,548                   --         62,727
   Purchase of treasury stock                                                  (1,545,169)            (321,436)      (377,871)
   Purchase and cancellation of other warrants                                   (174,999)                  --             --
   Payment of deferred offering costs                                                  --                   --       (180,450)
   Repayments of notes receivable for exercise of stock options                    19,911               12,961         10,040
   Payment of notes payable                                                        (2,826)            (123,787)       (47,684)
   Principal payment on capital lease obligations                                (101,674)             (91,795)      (198,792)
                                                                              -----------          -----------    -----------
                 Net cash used in financing activities                           (638,377)            (524,057)      (732,030)
                                                                              -----------          -----------    -----------

NET DECREASE IN CASH AND CASH  EQUIVALENTS                                     (1,586,207)          (3,626,323)      (486,059)
CASH AND CASH EQUIVALENTS, BEGINNING                                            1,662,894            5,289,217      5,775,276
                                                                              -----------          -----------    -----------
CASH AND CASH EQUIVALENTS, ENDING                                             $    76,687          $ 1,662,894    $ 5,289,217
                                                                              ===========          ===========    ===========
</TABLE>

See notes to consolidated financial statements.

<PAGE>
                        ADVANTAGE MARKETING SYSTEMS, INC.
                                AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Principles of Consolidation - The consolidated financial statements include
     the  accounts of  Advantage  Marketing  Systems,  Inc. and its wholly owned
     subsidiaries,   Miracle   Mountain   International,   Inc.   and   Chambre'
     International,  Inc. (the "Company"). All significant intercompany accounts
     have been eliminated.

     Nature  of  Business  - The  Company  markets a  product  line of  consumer
     oriented products in the weight management, dietary supplement and personal
     care  categories  that are produced by various  manufacturers.  The Company
     sells its product line through a network of full and part-time  independent
     distributors developed by the Company.

     The  Company  also  sells   supplies  and  materials  to  its   independent
     distributors.

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

     Revenue  Recognition  - The Company  recognizes  revenue  upon  shipment of
     products,  training  aids  and  promotional  material  to  the  independent
     distributors.

     Sales  Returns  -  All  of  the  Company's   products  include  a  customer
     satisfaction guarantee.  Company products may be returned within 30 days of
     purchase for a full refund or credit toward the purchase of another Company
     product. The Company also has a buy-back program whereby it will repurchase
     products sold to an independent  distributor  (subject to a restocking fee)
     provided that the distributor terminates his/her distributorship  agreement
     with the  Company  and  returns  the  product  within 12 months of original
     purchase in marketable  condition.  For the years ended  December 31, 2000,
     1999 and 1998, the cost of products  returned to the Company is included in
     net sales and was two, three and two percent of gross sales, respectively.

     Advertising  -  The  Company  expenses   advertising  as  incurred.   Total
     advertising  expense  for 2000,  1999,  and 1998 was $1,585,  $17,818,  and
     $16,459, respectively.

     Cash and Cash  Equivalents - Cash and cash  equivalents  consist of cash in
     banks and all short  term  investments  with  initial  maturities  of three
     months or less.

     Marketable  Securities  - At the  time  of  purchase,  investments  in debt
     securities  that the Company had the positive intent and ability to hold to
     maturity  were  classified  as held to maturity  and  reported at amortized
     cost; all other debt securities are reported at fair value.  Securities not
     classified as held to maturity are  classified as available for sale,  with
     the related unrealized gains and losses excluded from earnings and reported
     net of income tax as a separate  component  of  stockholders'  equity until
     realized.  At December 31, 2000 all of the Company's marketable  securities
     are classified as available for sale. Realized gains and losses on sales of
     securities are based on the specific identification method. Declines in the
     fair value of investment  securities  below their  carrying  value that are
     other than temporary are recognized in earnings.

     Inventory - Inventory  consists of consumer product  inventory and training
     and  promotional  material  such as video tapes,  cassette  tapes and paper
     supplies held for sale to customers and independent distributors. Inventory
     is stated at the lower of cost or market. Cost is determined on a first-in,
     first-out method.

     Intangibles  - Intangible  assets  consist of goodwill and covenants not to
     compete.  Goodwill represents the excess of cost over the fair value of the
     net assets acquired  pursuant to the Miracle Mountain  International,  Inc.
     ("MMI"),

     Chambre'  International,  Inc. ("CII"),  Stay 'N Shape International,  Inc.
     ("SNSI") and  ToppMed,  Inc.  ("TI")  acquisitions.  The Company  amortizes
     goodwill  from  the  acquisition  of MMI  over  seven  years  and  from the
     acquisitions  of CII, SNSI, and TI over 20 years.  Covenants not to compete
     are being  amortized over the life of the  contracts.  At December 31, 2000
     the net  amount  of  goodwill  arising  from  the  MMI,  CII,  SNSI  and TI
     acquisitions was $41,139, $144,208, $1,214,038 and $112,533,  respectively,
     and at December 31, 1999 was $58,162,  $153,174,  $1,288,556  and $118,934,
     respectively.  Goodwill amortization for the years ended December 31, 2000,
     1999 and 1998 was $106,908, $106,908 and $103,175,  respectively.  Covenant
     amortization  for the years ended  December  31, 2000,  1999 and 1998,  was
     $73,729, $74,840 and $71,106, respectively.

     Property and  Equipment - Property and  equipment are stated at cost or, in
     the case of leased  assets under capital  leases,  at the fair value of the
     leased  property  and  equipment,   less   accumulated   depreciation   and
     amortization.   Property   and   equipment   are   depreciated   using  the
     straight-line method over the estimated useful lives of the assets of three
     to 20 years.  Assets under capital  leases and leasehold  improvements  are
     amortized  over  the  lesser  of the  term of the  lease or the life of the
     asset.

     Long-Lived  Assets - Management of the Company assesses  recoverability  of
     its long-lived assets,  including  goodwill,  whenever events or changes in
     circumstances  indicate  that the  carrying  value of the  asset may not be
     recoverable   through   future   cash  flows   generated   by  that  asset.
     Recoverability  is assessed  and  measured on  long-lived  assets  using an
     estimate of the undiscounted  future cash flows  attributable to the asset.
     Impairment  is  measured  based  on  future  cash  flows  discounted  at an
     appropriate rate.

     Fair Value Disclosure - The Company's  financial  instruments  include cash
     and  cash  equivalents,   marketable  securities,  receivables,  short-term
     payables, notes payable and capital lease obligations. The carrying amounts
     of  cash  and  cash  equivalents,   receivables  and  short-term   payables
     approximate  fair  value  due  to  their  short-term   nature.   Marketable
     securities held for sale are carried at fair value. The carrying amounts of
     notes payable and capital lease obligations approximate fair value based on
     borrowing rates currently available to the Company.

     Earnings per Share - Earnings  per common share is computed  based upon net
     income divided by the weighted average number of common shares  outstanding
     during each period. Earnings per common share-assuming dilution is computed
     based upon net  income  divided by the  weighted  average  number of common
     shares  outstanding  during each period adjusted for the effect of dilutive
     potential  common shares  calculated  using the treasury stock method.  The
     following is a reconciliation of the common shares used in the calculations
     of  earnings  per  common  share and  earnings  per  common  share-assuming
     dilution:

<TABLE>
<CAPTION>
                                                      Income        Shares       Per Share
                                                    (Numerator)   (Denominator)    Amount
                                                    -----------   -------------    ------
<S>                                                   <C>           <C>            <C>
For the year ended December 31, 2000:
 Earnings per common share:
      Income available to common stockholders.........$ 492,934                    $.12
                                                                                   ====
      Weighted average common shares outstanding......              4,283,461
   Earnings per common share-assuming dilution:
      Options.........................................       --       706,786
      Warrants........................................       --       486,030
                                                       --------     ---------
      Income available to common stockholders plus assumed
               conversions............................$ 492,934     5,476,277      $.09
                                                       ========     =========      ====
</TABLE>

<TABLE>
<CAPTION>
                                                      Income        Shares       Per Share
                                                    (Numerator)   (Denominator)    Amount
                                                    -----------   -------------    ------
<S>                                                   <C>           <C>            <C>
For the year ended December 31, 1999:
  Earnings per common share:
      Income available to common stockholders.........$1,275,783                   $.31
                                                                                   ====
      Weighted average common shares outstanding......              4,139,706
   Earnings per common share-assuming dilution:
      Options.........................................        --      624,805
      Warrants........................................        --       14,065
                                                       ---------    ---------
      Income available to common stockholders plus assumed
               conversions............................$1,275,783    4,778,576      $.27
                                                       =========    =========      ====

For the year ended December 31, 1998:
  Earnings per common share:
      Income available to common stockholders.........$  414,048                   $.10
                                                                                   ====
      Weighted average common shares outstanding......              4,191,760
   Earnings per common share-assuming dilution:
      Options.........................................        --      311,651
                                                       ---------    ---------
      Income available to common stockholders plus assumed
               conversions............................$  414,048    4,503,411      $.09
                                                       =========    =========      ====
</TABLE>

     Options to  purchase  138,005  shares of common  stock at  exercise  prices
     ranging from $4.75 to $6.13 per share were outstanding at December 31, 2000
     but  were  not  included  in  the   computation   of  earnings  per  common
     share-assuming  dilution  because the options'  exercise  price was greater
     than the average market price of the common shares.

     Options to  purchase  213,875  shares of common  stock at  exercise  prices
     ranging from $3.44 to $4.75 per share were outstanding at December 31, 1999
     but were not  included in the  computation  of earnings  per common share -
     assuming  dilution because the options' exercise price was greater than the
     average  market  price of the common  shares.  Options to purchase  100,000
     shares of common stock at $2.56 per share were  outstanding at December 31,
     1999 but were not  included  in the  computation  of  earnings  per  common
     share-assuming dilution because the options were based on a condition which
     had not yet been met.

     Options to  purchase  130,358  shares of common  stock at  exercise  prices
     ranging  from $2.80 to $3.60 per share and 5,000  shares of common stock at
     $6.00 per  share  were  outstanding  at  December  31,  1998,  but were not
     included in the computation of earnings per common share-assuming  dilution
     because the options'  exercise  price was greater  than the average  market
     price of the common shares.

     Warrants to purchase  130,000  shares of common stock at $5.40 per share at
     December 31, 2000,  1999 and 1998 and  1,962,211  shares of common stock at
     exercise  prices ranging from $3.40 to $5.40 at December 31, 1999 and 1998,
     respectively,  were outstanding but were not included in the computation of
     earnings per common share-assuming  dilution because the warrants' exercise
     price was greater than the average market price of the common shares.

     Accounting  Standards  Yet to be  Adopted  - In June  1998,  the  Financial
     Accounting   Standards  Board  ("FASB")   issued   Statement  of  Financial
     Accounting   Standards   ("SFAS")  No.  133,   Accounting   for  Derivative
     Instruments and Hedging  Activites.  In June 2000, the FASB issued SFAS No.
     138,  Accounting for Certain  Derivative  Instruments  and Certain  Hedging
     Activites which amends certain provisions of SFAS 133 to clarify four areas
     causing  difficulties in  implementation.  The amendment included expanding
     the normal purchase and sale exemption for supply contracts, permitting the
     offsetting of certain  intercompany  foreign currency  derivatives and thus
     reducing the number of third party derivatives, permitting hedge accounting
     for foreign currency  denominated  assets and  liabilities,  and redefining
     interest  rate  risk  to  reduce  sources  of  ineffectiveness.  Management
     believes implementation of SFAS 133, as amended by SFAS 138, did not have a
     material  impact  on the  Company's  consolidated  results  of  operations,
     financial position or cash flows.

     Comprehensive  Income - The Company classifies other  comprehensive  income
     items  by  their  nature  in the  financial  statements  and  displays  the
     accumulated  balance  of  other  comprehensive  income  separately  in  the
     stockholders' equity section of the balance sheet. The Company's only other
     comprehensive  income  item is related to  unrealized  gains on  investment
     securities classified as available for sale.

     Income Taxes - The Company uses an asset and liability  approach to account
     for  income  taxes.  Deferred  income  taxes  are  recognized  for  the tax
     consequences of temporary differences and carryforwards by applying enacted
     tax rates  applicable to future years to differences  between the financial
     statement  amounts and the tax bases of existing assets and liabilities.  A
     valuation allowance is established if, in management's  opinion, it is more
     likely  than not that some  portion of the  deferred  tax asset will not be
     realized.

     Reclassifications - Certain  reclassifications have been made to prior year
     balances to conform with the presentation for the current period.

2.  MARKETABLE SECURITIES

     A summary  of the  amortized  cost,  unrealized  gains and  losses and fair
     values of marketable securities at December 31, 2000 follows:

                                                 December 31, 2000
                                                 -----------------
                                 Amortized       Gross Unrealized       Fair
                                    Cost         Gains     Losses       Value
                                    ----         -----     ------       -----
Available for Sale:
  Other Securities........        $3,536,086   $ 16,230   $ (49,802)  $3,502,514

                                                 December 31, 1999
                                                 -----------------
                                 Amortized       Gross Unrealized       Fair
                                    Cost         Gains     Losses       Value
                                    ----         -----     ------       -----
Available for Sale:
  Other Securities................$1,822,860   $ 43,100   $ (60,075)  $1,805,885
                                  ==========   ========   =========   ==========

Held to Maturity:
  U.S. Government obligations.....$2,273,743   $     --   $ (39,129)  $2,234,614
                                  ==========   ========   =========   ==========

     The fair value of the Company's  marketable debt securities at December 31,
     2000 by maturity date follows:


                                                             Available For Sale
                                                             ------------------
                                                               Fair Value
                                                               ----------
One year or less...........................................    $      200,626
Two years through five years...............................         1,475,141
Five years through ten years...............................           586,125
More than ten years........................................                --
                                                                -------------
Total......................................................    $    2,261,892
                                                                =============

3.  PROPERTY AND EQUIPMENT
    Property and equipment consists of the following at December 31:

                                                 2000          1999
                                                 ----          ----
Office furniture, fixtures and equipment.... $ 3,075,661   $ 2,403,535
Vehicles....................................     807,317       717,862
Leasehold Improvements......................      62,793        57,756
Building....................................     409,853            --
Land........................................     148,308            --
                                              ----------    ----------
                                               4,503,932     3,179,153
Accumulated depreciation and amortization...  (1,524,929)     (976,268)
                                              ----------    ----------
Total property and equipment, net............$ 2,979,003   $ 2,202,885
                                              ==========    ==========

     Depreciation  expense for the years ended December 31, 2000,  1999 and 1998
     was $548,661, $367,357, and $203,972, respectively.

     During  2000  the  Company  entered  into a  contract  for the  design  and
     construction of a 23,346 square foot  distribution and call center facility
     in  Oklahoma  City.  The  base  price  of the  contract  is  approximately,
     $1,315,000. Of this amount, approximately $980,000 will be funded through a
     loan  with a bank.  Property  and  liability  insurance  coverage  is being
     provided  by  the  building  contractor  during  construction.   Management
     believes the facility will be completed by May 2001.

4.   LEASE AGREEMENTS

     The Company  has various  capital  leases for office  equipment.  The lease
     terms  range  from  24 to 60  months.  Additionally,  annual  lease  rental
     payments  for each lease range from $700 to $40,000 per year.  The schedule
     of future  minimum lease  payments  below  reflects all payments  under the
     leases.

     The  property  and  equipment  accounts  include  $676,139 and $453,768 for
     leases  that  have  been   capitalized  at  December  31,  2000  and  1999,
     respectively.  Related  accumulated  amortization  amounted to $276,697 and
     $171,420 at December 31, 2000 and 1999, respectively.

     The  Company  leases  office  and  warehouse  space  under   noncancellable
     operating leases.

     Future  annual   minimum   lease   payments   under   capital   leases  and
     noncancellable operating leases with initial or remaining terms of one year
     or more at December 31, 2000 are as follows:

                                     Capital     Operating
                                      Leases       Leases         Total
                                      ------       ------         -----
Year ending:
2001............................     $ 155,227   $  196,470    $  351,697
2002............................       119,857      192,534       312,391
2003............................       113,098       99,375       212,473
2004............................        41,969       32,607        74,576
2005............................        24,723        2,724        27,447
Total minimum lease payments....     $ 454,874   $  523,710    $  978,584
                                      ========    =========     =========
Less amount representing interest       64,487
                                      --------
Present value of net minimum
 lease payments.................       390,387
Less current portion............       125,284
                                      --------
Long-term capital lease obligations  $ 265,103
                                      ========

     Rental  expense  under  operating  leases for the years ended  December 31,
     2000, 1999 and 1998 was $218,738, $167,831, and $147,166, respectively.

 5.  STOCKHOLDERS' EQUITY

     Common  Stock - On March 4, 1998,  the  Company  announced  it's  intent to
     repurchase  up to $1  million  of the  Company's  common  stock in the open
     market for cash. In connection with such repurchase, the Company filed with
     the Securities and Exchange  Commission pursuant to Section 13(e)(1) of the
     Securities  Exchange  Act of 1934,  as  amended,  an  Issuer  Tender  Offer
     Statement on March 4, 1998.  As of December 31, 2000 and 1999,  the Company
     had  repurchased  472,795 and 201,185 shares of the common stock at a total
     cost of $2,244,476 and $699,307, respectively.

     Common Stock Options and Other Warrants - During 2000, the Company  granted
     428,450  options at exercise  prices  ranging from $2.75 per share to $6.13
     per share.  Options were  granted  primarily  for services  rendered and to
     ensure the future  availability  of those services to the Company.  None of
     the options  granted during 2000 were  exercisable at December 31, 2000 due
     to a one year minimum  vesting period.  During 2000,  107,375 prior options
     were  exercised  with 31,136 mature shares (shares owned by the optionee in
     excess of six months as of the date of exercise).  In addition,  during the
     period 215,059 options were canceled and 14,750 options expired.

     During 1999, the Company granted 291,461 options at exercise prices ranging
     from $2.00 per share to $4.75 per share. Options were granted primarily for
     services  rendered and to ensure the future  availability of those services
     to the  Company.  A total of 122,750  and  100,000 of the  options  granted
     during  1999 were  unexercisable  at  December  31, 1999 due to a six month
     vesting period and a contingency  requirement,  respectively.  During 1999,
     15,358 options were exercised with 6,884 mature shares (shares owned by the
     optionee in excess of six months as of the date of exercise).  In addition,
     during the period 31,400 options were canceled and 18,750 options expired.

     During 1998, the Company granted 809,819 options at exercise prices ranging
     from $1.75 per share to $3.00 per share. Options were granted primarily for
     services  rendered and to ensure the future  availability of those services
     to the Company.  A total of 418,819 of the options granted during 1998 were
     unexercisable  at  December  31,  1998 due to a six month  vesting  period.
     During 1998,  57,306 options were  exercised for 31,025 mature  shares.  In
     addition,  during  this  period  519,944  options  with a weighted  average
     exercise price of $2.32 per share were voluntarily surrendered and canceled
     by the Company in exchange for an equal number of options,  with a weighted
     average  exercise  price of $1.82 and 97,580 other  options  were  canceled
     without  exchange for new  options.  The  exercise  price of the  exchanged
     options was equal to the market value of the Company's stock on the date of
     exchange.  There  was no  expense  recognized  in the  Company's  financial
     statements relating to the exchange.

     See Note 6 for the proforma  effects of SFAS 123 Accounting for Stock-Based
     Compensation ("SFAS 123").

     The  following  table  summarizes  the  Company's  stock  option  and other
     warrants activity for the years ended December 31, 2000, 1999 and 1998:

<TABLE>
<CAPTION>
                                         Weighted                   Weighted                   Weighted
                                         Average                    Average                     Average
                                         Exercise                   Exercise                    Exercise
                                        ----------                 ----------                  ---------
                              2000         Price          1999        Price            1998      Price
                              ----         -----          ----        -----            ----      -----
<S>                          <C>          <C>          <C>           <C>           <C>           <C>
Options and other
   warrants outstanding,
    beginning of year.....   1,769,275    $2.22        1,543,322     $2.09         1,439,583     $2.28

Options and other
    warrants issued
    during the year.......     428,450     4.57          291,461      2.92           809,819      1.93

Options and other
   warrants exercised
   during the year........    (480,879)    2.20          (15,358)     2.28           (57,306)     2.17

Options and other
   warrants cancelled
   during the year........    (215,059)    4.16          (31,400)     2.09          (617,524)     2.35

Options and other
   warrants expired
   during the year........     (14,750)    2.00          (18,750)     2.16           (31,250)     1.60
                            ----------                  ---------                   ---------

Options and other
   warrants  outstanding,
   end of year............   1,487,037     $2.62        1,769,275     $2.22         1,543,322     $2.09
                            ==========                  =========                   =========
</TABLE>


     The weighted  average  grant-date  fair value of options and other warrants
     granted  during 2000,  1999 and 1998 was $2.83,  $1.39 and $1.05 per share,
     respectively.

<TABLE>
<CAPTION>
                                  Options and Other Warrants              Options and Other Warrants
                                         Outstanding                              Exercisable
                                         -----------                              -----------
                                         Weighted-
                                          Average       Weighted-                          Weighted-
                            Number       Remaining       Average          Number            Average
        Range of          Outstanding   Contractual      Exercise       Exercisable         Exercise
     Exercise Prices      at 12/31/00      Life           Price         at 12/31/00          Price
    -----------------    -------------    ------         -------       -------------        ------
     <S>                   <C>           <C>              <C>             <C>                <C>
     $1.75 - $2.75         1,069,220     3.94 years       $1.94           797,284            $1.94
     $3.06 - $4.75           329,391     4.37 years       $4.01            17,893            $3.56
     $5.25 - $6.13            88,426     4.28 years       $5.78                --               --

</TABLE>

     Common Stock Warrants - The following table summarizes the Company's common
     stock  warrants and their  activity for the years ended  December 31, 2000,
     1999 and 1998:

<TABLE>
<CAPTION>
                                                               Warrants
                                                              Issued and     Exercise
                                                              Outstanding     Price        Exercise Period
                                                              -----------     -----        ---------------
<S>                                                            <C>             <C>      <C>
December 31, 2000:
    1997-A Warrants, beginning of the year..................     337,211       $3.40       1/31/97-11/06/02
    1997-A Warrants exercised during the year...............     (28,443)      $3.40       1/31/97-11/06/02
    1997-A Warrants, end of the year........................     308,768
    Redeemable Common Stock Purchase Warrants, beginning
         of the year........................................   1,495,000       $3.40      11/06/97-11/06/02
    Redeemable Common Stock Purchase Warrants, exercised
         during the year....................................     (59,000)      $3.40      11/06/97-11/06/02
    Redeemable Common Stock Purchase Warrants, end of year .   1,436,000
    Underwriters' Warrants .................................     130,000       $5.40      11/12/98-11/12/02
December 31, 1999:
    1997-A Warrants.........................................     337,211       $3.40     1/31/97 - 11/06/02
    Redeemable Common Stock Purchase Warrants...............   1,495,000       $3.40    11/06/97 - 11/06/02
    Underwriters' Warrants .................................     130,000       $5.40    11/12/98 - 11/12/02
December 31, 1998:
    1997-A Warrants.........................................     337,211       $3.40      1/31/97 - 1/31/02
    Redeemable Common Stock Purchase Warrants...............   1,495,000       $3.40    11/06/97 - 11/06/02
    Underwriters' Warrants .................................     130,000       $5.40    11/12/98 - 11/12/02
</TABLE>

     Each warrant  entitles the holder to purchase one share of common stock. As
     of January 8, 1998,  the Company  reduced the exercise  price of the 1997-A
     Warrants from $12.00 to $3.40 and extended the exercise period from January
     31, 1999 to November 6, 2002,  to  correspond  more closely to the terms of
     the Redeemable Common Stock Purchase Warrants.

     As of January 6, 1998, the exercise  price of the  Redeemable  Common Stock
     Purchase Warrants was adjusted from $5.40 to $3.40.

     There was no  expense  recognized  in the  Company's  financial  statements
     relating to either of the warrant  exercise price reductions as the changes
     only  affected  allocations  of  additional  paid-in  capital  because  the
     Redeemable  Common Stock  Purchase  Warrants and the 1997-A  Warrants  were
     issued in conjunction  with an equity offering of the Company.  The reduced
     exercise prices exceeded the market value of the Company's  common stock on
     the date of the reduction.

     The Redeemable  Common Stock Purchase Warrants are subject to redemption by
     the Company at $0.25 per warrant. All of the outstanding  Redeemable Common
     Stock Purchase  Warrants must be redeemed if any are redeemed.  The Company
     may redeem the 1997-A  Warrants for $0.0001 per warrant.  Any redemption of
     unexercised 1997-A Warrants would be for all such outstanding warrants. The
     Underwriters'  Warrants were issued in  connection  with the sale of common
     stock and  Redeemable  Warrants  in  November  1997 and were in addition to
     other fees paid to the underwriters. The Underwriters' Warrants entitle the
     holder to purchase one unit consisting of one share of the Company's common
     stock and one Redeemable Common Stock Purchase Warrant.

6.  STOCK OPTION PLAN

     During 1995, the Company  approved the 1995 Stock Option Plan (the "Plan").
     Under  this  Plan,   options   available  for  grant  can  consist  of  (i)
     nonqualified  stock  options,  (ii)  nonqualified  stock options with stock
     appreciation  rights  attached,  (iii)  incentive  stock options,  and (iv)
     incentive  stock  options  with stock  appreciation  rights  attached.  The
     Company has reserved  1,125,000 shares of the Company's common stock $.0001
     par  value,  for the Plan.  The Plan  limits  participation  to  employees,
     independent  contractors,  and  consultants.   Non-employee  directors  are
     excluded  from Plan  participation.  The  option  price for shares of stock
     subject to this Plan is set by the Stock  Option  Committee of the Board of
     Directors  at a price not less than 85% of the market value of the stock on
     the date of grant. No stock options may be exercised within six months from
     the date of grant,  unless under a Plan exception,  nor more than ten years
     after  the  date of  grant.  The  Plan  provides  for the  grant  of  stock
     appreciation  rights,  which allow the holder to receive in cash,  stock or
     combination thereof, the difference between the exercise price and the fair
     value  of  the  stock  at  date  of  exercise.  The  fair  value  of  stock
     appreciation  rights  is  charged  to  compensation   expense.   The  stock
     appreciation  right is not separable  from the  underlying  stock option or
     incentive  stock  option  originally  granted and can only be  exercised in
     tandem with the stock option. No stock appreciation  rights are attached to
     any options outstanding.  During the years ended December 31, 2000 and 1999
     the Company  issued  428,450 and 160,061  options,  respectively  under the
     Plan.  At  December  31,  2000 and 1999,  the  Company  had  1,487,037  and
     1,769,275,  respectively,  stock options  outstanding of which only 708,707
     and 591,650, respectively, were issued pursuant to the plan.

     The Company applies Accounting  Principles Board Opinion No. 25 and related
     interpretations  in accounting  for its  stock-based  compensation  awards.
     Accordingly,  no  compensation  cost has been  recognized for stock options
     granted  in  the  accompanying   consolidated  financial  statements.   The
     following  proforma data is calculated net of tax as if  compensation  cost
     for the  Company's  stock-based  compensation  awards (see also Note 5) was
     determined  based upon the fair value at the grant date consistent with the
     methodology prescribed under SFAS No. 123.

<TABLE>
<CAPTION>
                                                                     Years Ended December 31,
                                                                     ------------------------
                                                                  2000          1999        1998
                                                                  ----          ----        ----
<S>                                                          <C>            <C>           <C>
Net income as reported.......................................$    492,934   $ 1,275,783   $ 414,048
  Adjustment, net of tax.....................................    (167,293)     (113,466)   (233,329)
                                                               ----------     ---------    --------
Proforma net income..........................................$    325,641   $ 1,162,317   $ 180,719
Net income per common share as reported......................$        .12           .31         .10
  Adjustment, net of tax.....................................        (.04)         (.03)       (.06)
                                                               ----------     ---------     --------
Proforma net income per common share.........................$        .08           .28         .04
Proforma net income per common share-assuming
  dilution...................................................$        .06           .24         .04
Weighted average common shares outstanding...................   4,283,461     4,139,706   4,191,760
Weighted average common shares outstanding-assuming
  dilution...................................................   5,476,277     4,778,576   4,503,411
</TABLE>

     The fair value of each option grant is estimated on the date of grant using
     the Black-Scholes  option pricing model with the following weighted average
     assumptions used for grants in 2000, 1999 and 1998, respectively: risk-free
     interest rates of 6.14, 5.41 and 4.50 percent; no dividend yield or assumed
     forfeitures;  expected  lives of 5.0, 3.7 and 5.4 years;  and volatility of
     66, 60 and 59  percent.  The pro forma  amounts  above are not likely to be
     representative   of  future  years  because  there  is  no  assurance  that
     additional awards will be made each year.

7.   RELATED PARTIES

     During 2000, 1999 and 1998, the Company received $5,931, $6,724 and $6,822,
     respectively,  from  Pre-Paid  Legal  Services,  Inc., a  shareholder,  for
     commissions on sales of memberships  for the services  provided by Pre-Paid
     Legal Services, Inc.

     On October 8, 1998,  John W. Hail, an affiliate,  surrendered  an option to
     purchase  100,000 shares of the Company's  common stock for $2.70 per share
     with an  expiration  date of May 20, 2007 in exchange for an option  having
     the same terms  other than an  exercise  price of $1.75 per share of common
     stock, which was equal to the fair value of the common stock on the date of
     exchange. These options became exercisable on April 8, 1999.

     During the first quarter of 1998,  the Company  agreed to loan John W. Hail
     up to  $250,000.  Subsequently  the  Company  also  agreed to loan up to an
     additional  $75,000.  In 2000, an additional  $200,000 was approved.  These
     loans are secured,  and bear  interest at 8% per annum.  As of December 31,
     2000, the balance due on these loans was $544,007 plus interest. On January
     1st the  outstanding  balance on all the notes were  combined into one note
     payable in monthly  installments.  The loans and extension were unanimously
     approved by the board of directors.

     During 2000,  the Company made advances  totaling  $50,424 to an officer of
     the Company (the  "Officer").  The advances  are  secured,  require  weekly
     principal  payments,  bear interest at 8% per annum,  were due on April 28,
     2004. As of February  2001, the balance of these advances were paid in full
     by the  officer.  In  addition,  the  officer  and his wife  receive  sales
     commissions based upon purchases by them and their downline distributors in
     accordance with the Company's network marketing programs.  During 2000, the
     Company  paid the  officer  and his wife  sales  commissions  of $9,504 and
     $15,205 respectively.

     During 2000 and 1999, the Company paid Curtis H. Wilson,  a former director
     and  greater  than  5%  shareholder,  sales  commissions  of  $129,524  and
     $128,700,  respectively.  These  commissions  are based on purchases by Mr.
     Wilson and his  downline  distributors  in  accordance  with the  Company's
     network marketing program in effect at the time of the sales.

     During 2000 and 1999, the Company paid Pat Dungan, wife of Jimmy L. Dungan,
     a Director of the Company,  sales  commissions  of $114,684  and  $119,626,
     respectively.  These commissions were based on purchases by the Dungans and
     their  downline  distributors  in  accordance  with the  Company's  network
     marketing program in effect at the time of the sales.

8.   INCOME TAXES

     On a regular  basis,  management  evaluates  all available  evidence,  both
     positive  and  negative,  regarding  the  ultimate  realization  of the tax
     benefits of its deferred tax assets.  Management  has concluded  that it is
     more likely than not that a tax benefit will be realized  from its deferred
     tax assets.  The Company has a net  deferred tax asset at December 31, 2000
     and 1999, of $77,063 and $82,585, respectively.

     Income taxes for 2000 and 1999 are  comprised of current  taxes of $444,710
     and $563,394 and deferred  taxes of $11,822 and $112,631,  respectively.  A
     reconciliation  of the statutory  Federal  income tax rate to the effective
     income tax rate for the years ended December 31, 2000, 1999, and 1998 is as
     follows:

                                       2000        1999        1998
                                       ----        ----        ----
Statutory federal income tax rate...    34.0%       34.0%       34.0%
State tax effective rate............     4.0         4.0         4.0
Nondeductible expenses..............     8.9         1.1         2.3
Benefit of graduated tax rates......    (0.6)        0.0         0.0
Prior year assessments finalized....     7.0         0.0         0.0
Other...............................    (5.2)       (4.5)       (2.3)
                                        ----        ----        ----
Effective income tax rate...........    48.1%       34.6%       38.0%
                                        ====        ====        ====

     The change in the total  deferred tax net assets from  December 31, 1999 to
     December  31, 2000 was $5,522.  This  difference  is  allocated  as $11,822
     included in tax expense reduced by $6,300 classified in stockholder equity,
     respectively.

     Deferred  tax  liabilities  and assets at  December  31,  2000 and 1999 are
     comprised of the following:

                                                              December 31,
                                                              ------------
                                                          2000           1999
                                                          ----           ----
Deferred tax liabilities:
  Depreciation and amortization....................... $  (66,926)  $  (48,717)
  Other...............................................    (19,663)      47,404)
                                                        ---------    ---------
             Total deferred tax liabilities...........    (86,589)     (96,121)
                                                        ---------    ---------
Deferred tax assets:
  Net operating loss carryforwards....................     86,136       79,209
  Reserves............................................         --       39,785
  Receivables.........................................     28,868       20,860
  Inventory...........................................     35,904       32,408
  Unrealized losses...................................     12,744        6,444
                                                        ---------    ---------
              Total deferred tax assets...............    163,652      178,706
                                                        ---------    ---------
Net deferred taxes....................................     77,063       82,585
Less current portion of net deferred tax assets.......     64,772       60,797
                                                        ---------    ---------
Noncurrent portion of deferred tax asset (liability).. $   12,291   $   21,788
                                                        =========   ==========

9.  ACQUISITIONS

     On July 31, 1998, the Company acquired all rights,  including  formulations
     and trademarks,  for the ToppFast,  ToppStamina and ToppFitt  products from
     ToppMed,  Inc. of Los Angeles,  California  for a total  purchase  price of
     $192,000 which was paid at closing.

10.  SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

                                                    Year Ended December 31,
                                                    -----------------------
                                                2000         1999         1998
                                                ----         ----         ----
Cash paid during the year for:
  Interest....................................$  33,339   $ 18,381   $  34,663
  Income taxes................................  480,000     12,020          --
Noncash financing and investing activities:
  Property and equipment acquired by capital
   lease......................................   89,894    101,133      99,007
ToppMed, Inc. asset purchase;
  Fair value of covenant not to compete.......$      --   $     --   $ (64,000)
  Purchase price in excess of tangible assets
   acquired and covenant not to compete.......       --         --    (128,000)
                                               --------    -------    --------
  Cash paid to purchase ToppMed, Inc. assets..$      --   $     --   $(192,000)
                                               ========    =======    ========

11. ADDITIONAL TAX LIABILITY

     During  1998,  in an effort to  facilitate  the  growth of its  distributor
     network,  the Company  voluntarily  began contacting all of the state sales
     and use tax  authorities  to enter into  agreements  with them  whereby the
     Company would assume the  responsibility for collecting and remitting sales
     and use taxes on behalf of its independent distributors. Certain states had
     requirements  which resulted in an additional tax liability for the Company
     as a condition of entering into the agreement. The liability has an adverse
     impact  on the  Company's  earnings,  net of the  related  tax  effect,  of
     $256,300 or $.06 per share.  Management believes the liability was one time
     nonrecurring  charge  and  will  have  no  further  adverse  impact  on the
     Company's future results of operations  because the ongoing  collection and
     remittance of sales and use tax represents  neither  additional  income nor
     additional  expense to the Company but instead is a pass  through item with
     no income statement effect.

12.  COMMITMENTS AND CONTINGENCIES

     Recent Regulatory  Developments -A significant portion of the Company's net
     sales  continues to be dependent  upon the Company's  AM-300  product.  The
     Company's net sales of AM-300  represented 63.8% and 66.6% of net sales for
     the  years  ended  December  31,  2000 and 1999,  respectively.  One of the
     ingredients  in the  Company's  AM-300  products is ephedra,  an herb which
     contains  naturally-occurring  ephedrine. The Company's manufacturer used a
     powdered  extract  of that  herb when  manufacturing  AM-300.  The  Company
     markets AM-300 principally as an aid in weight  management.  The extract is
     an 8% extract which means that every 100 milligrams of the powdered extract
     contains  approximately  eight milligrams of naturally  occurring ephedrine
     alkaloids.  Ephedrine  containing products have been the subject of adverse
     publicity  in the United  States and other  countries  relating  to alleged
     harmful effects.

     On April 3, 2000,  the FDA withdrew most of the  provisions of its proposed
     rule regarding dietary  supplements that contain ephedrine  alkaloids.  The
     proposed   rule,   which  was  published  on  June  4,  1997,   would  have
     significantly  limited the Company's  ability to sell AM-300 if it had been
     made effective.  The FDA's  withdrawal of the provisions  removed most, but
     not all, of the  limitations.  This action was prompted largely by a report
     issued by the United States General  Accounting Office ("GAO") in which the
     GAO  criticized  the  scientific  basis for the proposed rule and the FDA's
     evaluation  of  approximately  900  reports  of adverse  events  supposedly
     related to the  consumption  of dietary  supplements  containing  ephedrine
     alkaloids. The FDA made available for public inspection most of the adverse
     event reports on April 3, 2000.

     On October 25, 2000, several trade organizations for the dietary supplement
     industry  submitted  petition  to the FDA  which  concerned  the  remaining
     provisions of the proposed rule regarding dietary  supplements that contain
     ephedrine  alkaloids.  The petition  requested the FDA to: (1) withdraw the
     remaining  provisions of the proposed rule, and (2) adopt new standards for
     dietary supplements that contain ephedrine alkaloids,  which were set forth
     in the petition. The FDA has not publicly responded to this petition.

     The FDA  will,  most  likely,  attempt  to issue a new  proposed  rule with
     respect to dietary supplements that contain ephedrine  alkaloids.  However,
     it is uncertain  what  restrictions  the new proposed  rule will contain or
     when a new proposed rule will be issued.  In the Company's  opinion,  it is
     unlikely  that a final  regulation  will be issued by the FDA during  2001.
     Consequently,  management  is unable at the  present  time to  predict  the
     ultimate  resolution  of these  issues,  nor their  ultimate  impact on the
     Company's results of operations or financial position.

     Product Liability - The Company,  like other marketers of products that are
     intended  to be  ingested,  faces an  inherent  risk of exposure to product
     liability  claims  in the event  that the use of its  products  results  in
     injury. The Company has liability  insurance  coverage.  The limits of this
     coverage are $100,000 per  occurrence and $100,000  aggregate.  The Company
     generally  does  not  obtain  contractual   indemnification   from  parties
     manufacturing  its  products.  However,  all  of the  manufacturers  of the
     Company's  products  carry  product  liability  insurance  which covers the
     Company's products.  The Company has agreed to indemnify Tinos, L.L.C., the
     licensor of  Choc-Quilizer,  against any product  liability  claims arising
     from the Choc-Quilizer product marketed by the Company, and the Company has
     agreed to indemnify  Chemins against claims arising from claims made by the
     Company's distributors for products manufactured by Chemins and marketed by
     the Company.  Although the Company has never had a product liability claim,
     such  claims  against the Company  could  result in material  losses to the
     Company.

13.  SUBSEQUENT EVENTS

     On  January  4, 2001  Advantage  Marketing  Systems  and its  wholly  owned
     subsidiary   LifeScience   Technologies   Holdings   acquired   LifeScience
     Technologies   Holdings  Limited  Partnership,   LifeScience   Technologies
     Limited,   LifeScience  Technologies  of  Japan,  LST  Fulfillment  Limited
     Partnership,  and LifeScience  Technologies of Canada, Inc. The acquisition
     cost to the company was $1.2 million paid at  acquisition  plus $41,667 per
     month or 5% of LifeScience  Technology  product sales whichever is greater.
     The seller,  at his option,  has the right to take up to a total of 860,000
     shares of common stock at a three  dollar  option price in lieu of cash for
     the monthly payment.

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

     There have been no disagreements concerning matters of accounting principle
or financial statement disclosure between us and our independent  accountants of
the type requiring disclosure hereunder.

                                    PART III

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

Our Directors and Executive Officers

     Pursuant to our bylaws, our directors are divided into three classes. Class
I directors  hold office  initially for a term expiring at the annual meeting of
shareholders to be held in 2002.  Class II directors hold office initially for a
term expiring at the annual meeting of  shareholders  to be held in 2000.  Class
III directors hold office initially for a term expiring at the annual meeting of
shareholders  to be held in 2001.  Each  director  will hold office for the term
elected and until his  successor is duly elected and  qualified.  At each annual
shareholders  meeting, the successor to a member of the class of directors whose
term  expires at such  meeting is elected to hold office for a term  expiring at
the annual meeting of shareholders  held in the third year following the year of
his election. Executive officers are elected by our board of directors and serve
at our  discretion.  The  following  table sets forth certain  information  with
respect to our executive officers and directors.


      Name                    Age          Position with Us
      ----                    ---          ----------------

John W. Hail(1)(2)             71   Chairman of the Board, Chief Executive
                                    Officer and Director

Dennis Loney                   46   Chief Operations Officer

Reggie Cook                    46   Chief Financial Officer, Secretary and
                                    Treasurer

R. Terren Dunlap(3)            56   Director and Member of Audit Committee

Harland C. Stonecipher(4)      62   Director and Member of Audit Committee

Jimmy L. Dungan (2)            55   Director

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

(1)  Member of the Stock Option Committee.
(2)  Term as a Director expires in 2001.
(3)  Term as a Director expires in 2003.
(4)  Term as a Director expires in 2002.

     John W. Hail is our founder and has served as our Chief  Executive  Officer
and Chairman of the Board of Directors since our inception in June 1988.  During
1987 and through May 1988, Mr. Hail served as Executive Vice President, Director
and Agency Director of Pre-Paid Legal  Services,  Inc., a public company engaged
in the sale of legal  services  contracts,  and also  served as  Chairman of the
Board of Directors of TVC  Marketing,  Inc.,  the exclusive  marketing  agent of
Pre-Paid Legal  Services,  Inc. Since 1998, Mr. Hail has served as a Director of
Pre-Paid  Legal  Services,  Inc.  In March  1999,  Mr. Hail became a director of
DuraSwitch Industries, Inc., a company that developed and distributes electronic
switches.

     R. Terren Dunlap has served as one of our directors  since June 1995. He is
Chief Executive Officer of DuraSwitch Industries, Inc., a company formed in 1997
that  developed  and  distributes  electronic  switches.  He  served as our Vice
President-International  Development  from June 1995  through  March  1996.  Mr.
Dunlap is a Director, co-founder, and from 1984 until March 1994 served as Chief
Executive  Officer and Chairman of the Board of Go-Video,  Inc., a developer and
distributor of consumer electronics products.

     Harland C.  Stonecipher  has served as one of our  directors  since  August
1995. Mr. Stonecipher has been Chairman of the Board and Chief Executive Officer
of Pre-Paid Legal Services, Inc. since its inception in 1972.

     Jimmy L. Dungan has served as one of our directors  since October 1999. Mr.
Dungan has been  actively  working full time to develop an  Advantage  Marketing
Systems  distributorship with his wife, Pat, since August 1995. The Dungans have
been Platinum  Distributors  since  November 1998 and achieved  Double  Platinum
status in October 1999.

     Dennis  Loney is Chief  Operations  Officer.  Mr.  Loney has served as Vice
President  of AMS since July 1995.  Prior to his  current  position,  Mr.  Loney
served as the Vice President of Administration of TVC Marketing,  Inc. Mr. Loney
brings over 20 years of business and 14 years of Network Marketing experience to
AMS.

     Reggie Cook is Vice  President and Chief  Financial  Officer.  Mr. Cook has
served AMS since  November  2000.  From 1994 to 2000,  Mr.  Cook served as Chief
Financial  Officer of Sequoiah Fuels  Corporation,  a former  subsidiary of Kerr
McGee Corporation.

Section 16(a) Beneficial Ownership Reporting Compliance

     Section 16(a) of the Securities Exchange Act of 1934, as amended,  requires
our  directors  and  officers,  and  persons  who own more than 10  percent of a
registered  class of our equity  securities,  to file reports of  ownership  and
changes in ownership  with the  Securities  and Exchange  Commission.  Officers,
directors  and greater  than 10%  shareholders  are  required to furnish us with
copies of all Section 16(a) forms they file.

     Based solely on our review of the copies of the forms we received  covering
purchase and sale  transactions in our equity securities during 2000, we believe
that each  person  who, at any time  during  2000,  was a  director,  officer or
beneficial  owner of more than 10% of our common stock complied with all Section
16(a) filing requirements during 2000.

ITEM 10.  EXECUTIVE COMPENSATION

     The following  Summary  Compensation  Table sets forth certain  information
relating to compensation  for services  rendered during the years ended December
31,  2000,  1999 and  1998,  paid to or  accrued  for John W.  Hail,  our  Chief
Executive  Officer  and each of our  executive  officers  whose 2000  salary and
bonus, pursuant to a recurring arrangement, exceed $100,000.

<TABLE>
                                                Summary Compensation Table
<CAPTION>
                                                                                                 Long-Term
                                                                                           Compensation Awards
                                                                                           -------------------
                                                                                           Securities     Exercise
                                                             Annual Compensation           Underlying     or Base
Name and Principal Position                    Year    Salary<F1>    Bonus       Other<F2>   Options        Price
---------------------------                    ----    ---------   -------      ---------    -------        -----
<S>                                            <C>     <C>         <C>             <C>          <C>         <C>
John W. Hail................................   2000    $281,640    $    --         $ --              --     $    --
    Chief Executive Officer                    1999    $236,801    $    --         $ --              --     $    --
                                               1998    $ 60,000    $16,565         $ --         100,000<F3> $  1.75

Roger P. Baresel (resigned April 2000)......   2000    $143,208    $    --         $ --              --     $    --
    President and Chief Financial              1999    $146,049    $    --         $ --              --     $    --
    and Accounting Officer                     1998    $ 96,304    $25,000         $ --          10,000<F4> $  2.00
<FN>
<F1> Dollar value of base salary earned during the year.

<F2> We provide  use of an  automobile  to Mr.  Hail,  the value of which is not
     greater than $5,000 annually.

<F3> During 1997,  we granted  100,000 stock options to Mr. Hail pursuant to our
     stock option plan, each exercisable for the purchase of one share of common
     stock at an  exercise  price of $6.00 per share  (the  market  value of the
     common stock on the date of grant). The exercise price on these options was
     reduced to $2.70  pursuant  to regrant  during 1997 (which was equal to the
     fair value of the common stock on the date of regrant).  On October 8, 1998
     the exercise price on these options was reduced to $1.75 per share pursuant
     to regrant  (which  was equal to the fair value of the common  stock on the
     date of regrant).

<F4> During  1994,  we  granted  10,000  stock  options  to  Mr.  Baresel,  each
     exercisable  for the  purchase of one share of common  stock at an exercise
     price of $2.16 per share (the market  value of the common stock on the date
     of grant).  The  exercise  price on these  options was reduced to $2.00 per
     share  pursuant to regrant (which was equal to the fair value of the common
     stock on the date of regrant) in 1998.
</FN>
</TABLE>

Aggregate Option Grants and Exercises in 2000 and Year End Option Values

     Stock Options and Option  Values.  No options were granted to Messrs.  Hail
and Baresel during 2000.

     Aggregate  Stock Option  Exercises in 2000 and Year End Option Values.  The
following table sets forth information  related to the exercise of stock options
during  2000 and the  number and value of  options  held by the named  executive
officers at December 31, 2000.

<TABLE>
                               Stock Option Exercises and Year-End Option Value Table
<CAPTION>
                                                                                                   Value of Unexercised
                                                                     Number of Unexercised            In-the-Money
                                                                         Options as of                Options as of
                                           Shares                      December 31, 2000           December 31, 2000<F1>
                                        Acquired on     Value         ------------------          --------------------
                                          Exercise     Realized     Exercisable  Unexercisable  Exercisable  Unexercisable
                                          --------     --------     -----------  -------------  -----------  -------------
<S>                                        <C>           <C>        <C>           <C>             <C>               <C>
John W. Hail...........................        --        $ --       475,000<F2>      --           $387,250          $ --
    Chief Executive Officer

<FN>
<F1> The closing  sale price of our common  stock as  reported  on the  American
     Stock  Exchange on  December  31, 2000 was $2.38.  The  per-share  value is
     calculated  based on  the  applicable  closing  price per  share, minus the
     exercise price,  multiplied  by the  number of  shares of our  common stock
     underlying the options.

<F2> Includes 225,000 options given by John Hail as a gift to certain members of
     his family in 1995.
</FN>
</TABLE>

Compensation of Directors

     Directors  who are not our  employees  receive $250 for each board  meeting
attended.   Directors  who  are  also  our   employees   receive  no  additional
compensation for serving as directors. We reimburse our directors for travel and
out-of-pocket  expenses in connection  with their  attendance at meetings of our
board  of  directors.  Our  bylaws  provide  for  mandatory  indemnification  of
directors and officers to the fullest extent permitted by Oklahoma law.

Stock Option Plan

     We established the Advantage Marketing Systems, Inc. 1995 Stock Option Plan
in June 1995.  This plan  provides for the issuance of incentive  stock  options
with or without stock appreciation rights and nonincentive stock options with or
without stock  appreciation  rights to our employees and consultants,  including
employees who also serve as a director. The total number of shares of our common
stock  authorized for issuance under this stock option plan is 1,125,000.  As of
March 30, 2001,  options to purchase a total of  1,054,884  shares of our common
stock have been granted under the plan of which 514,068 were outstanding.  These
options  are  exercisable  for $1.75 to $6.13 per share and  expire  March  2002
through May 2007. Also, at March 30, 2001, there were outstanding  stock options
and warrants (in addition to the 1997-A  warrants,  the redeemable  common stock
purchase warrants and the underwriter  warrants) exercisable for the purchase of
790,750 shares of our common stock granted outside of the plan.

     The stock option committee,  which is currently  comprised of Messrs.  Hail
and Cook,  administers and interprets the stock option plan and has authority to
grant  options to all  eligible  employees  and  determine  the types of options
granted and the terms, restrictions and conditions of the options at the time of
grant.

     The option  price of our common  stock is  determined  by the stock  option
committee, provided such price may not be less than 85% of the fair market value
of the shares on the date of grant of the  option.  The fair  market  value of a
share of our common stock is  determined  by the last reported sale price on the
date of grant of the option.  Upon the  exercise of an option,  the option price
must  be  paid  in  full,  in  cash,  tendering  mature  shares or with a  stock
appreciation  right.  Subject to the stock  option  committee's  approval,  upon
exercise of an option with a stock  appreciation  right attached,  a participant
may receive  cash,  shares of our common stock or a  combination  of both, in an
amount or having a fair  market  value  equal to the  excess of the fair  market
value,  on the date of  exercise,  of the  shares for which the option and stock
appreciation right are exercised, over the option exercise price.

     Options  granted under the stock option plan may not be exercised until six
months after the date of the grant,  except in the event of death or  disability
of the participant.  Incentive stock options and any stock  appreciation  rights
are exercisable only by participants  while actively employed as our employee or
a consultant, except in the case of death, retirement or disability. Options may
be exercised at any time within three months after the participant's  retirement
or within one year after the  participant's  disability or death, but not beyond
the  expiration  date of the  option.  No option may be granted  after April 30,
2005. Options are not transferable  except by will or by the laws of descent and
distribution.

Officer and Director Liability

     As permitted by the provisions of the Oklahoma General Corporation Act, our
certificate of incorporation  eliminates in certain  circumstances  the monetary
liability of our  directors for a breach of their  fiduciary  duty as directors.
These  provisions and  applicable  laws do not eliminate the liability of one of
our directors for:

o    a breach of the director's duty of loyalty to us or our shareholders;

o    acts  or  omissions  by a  director  not in good  faith  or  which  involve
     intentional misconduct or a knowing violation of law;

o    liability  arising under the Oklahoma  General  Corporation Act relating to
     the  declaration  of dividends  and purchase or redemption of shares of our
     common stock in violation of the Oklahoma General Corporation Act;

o    any  transaction  from  which the  director  derived an  improper  personal
     benefit;

o    violations of federal securities laws; or

o    limit  our   rights   or  those  of  our   shareholders,   in   appropriate
     circumstances, to seek equitable remedies such as injunctive or other forms
     of non-monetary relief;  however, such remedies may not be effective in all
     cases.

     Our certificate of incorporation  and bylaws provide that we will indemnify
our  directors  and  officers to the fullest  extent  permitted  by the Oklahoma
General Corporation Act. Under such provisions,  any director or officer, who in
his capacity as such,  is made or  threatened to be made, a party to any suit or
proceeding,  may be  indemnified  if our  board  of  directors  determines  such
director or officer acted in good faith and in a manner he  reasonably  believed
to be in or not opposed to our best interests.

     Our  certificate  of  incorporation  and  bylaws and the  Oklahoma  General
Corporation  Act further provide that such  indemnification  is not exclusive of
any  other  rights  to  which  such   individuals  may  be  entitled  under  our
certificate,  our bylaws,  an agreement,  vote of shareholders or  disinterested
directors or otherwise. Insofar as indemnification for liabilities arising under
the  Securities  Act of 1933 may be  permitted  to our  directors  and  officers
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange  Commission such  indemnification  is
against public policy and is, therefore, unenforceable.

     We  maintain  insurance  to protect  our  directors  and  officers  against
liability  asserted  against them in their official  capacities.  Such insurance
protection covers claims and any related defense costs of up to $3 million based
on alleged or actual securities law violations, other than intentional dishonest
or fraudulent acts or omissions,  or any willful violation of any statute,  rule
or law, or claims arising out of any improper profit,  remuneration or advantage
derived  by an insured  director  or officer.

ITEM 11.  SECURITY  OWNERSHIP  OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following  table  presents  certain  information  as to the  beneficial
ownership of our common stock as of March 31, 2001, of:

o    each person who is known to us to be the  beneficial  owner of more than 5%
     of our common stock;

o    each of our directors and executive officers;

o    our executive officers and directors as a group; and

o    their percentage holdings of our outstanding shares of common stock.

For  purposes  of the  following  table,  the  number of shares  and  percent of
ownership of our  outstanding  common  stock that the named person  beneficially
owned at March 31,  2001,  includes  shares of our common stock that such person
has the right to acquire  within 60 days of this date of this form 10-KSB,  upon
exercise of options and warrants.  However, such shares are not included for the
purposes of  computing  the number of shares  beneficially  owned and percent of
outstanding common stock of any other named person.


                                                             Common Stock
                                                             ------------
                                                          Shares     Percent of
                                                       Beneficially   Shares
Name and Address of Beneficial Owner                      Owned     Outstanding
------------------------------------                      -----     -----------

John W. Hail (1)(2)...................................    626,385       14.4%

Curtis H.Wilson (3)...................................    258,282        5.9%

Harland C. Stonecipher (4)............................    180,768        4.2%

R. Terren Dunlap (1)..................................     17,500         .4%

Jimmy L. Dungan (1)(5)................................     11,871         .3%

Executive Officers and Directors as a group
   (four persons).....................................    836,524       19.2%
------------------------

(1)  A  director  or an  executive  officer  with a  business  address  of  2601
     Northwest Expressway, Suite 1210W, Oklahoma City, Oklahoma 73112-7293.

(2)  The number of shares consist of and each percentage presented includes:

     o    250,000  shares of our  common  stock that are  subject  to  currently
          exercisable  stock options,  100 shares of our common stock subject to
          currently  exercisable  1997-A warrants and 1,100 shares of our common
          stock that are  subject to  currently  exercisable  redeemable  common
          stock purchase warrants held by Mr. Hail;

     o    28,759 shares of our common stock and 1,000 shares of our common stock
          that are subject to  currently  exercisable  redeemable  common  stock
          purchase warrants owned by corporations controlled by Mr. Hail; and

     o    2,847  shares of our common stock and 1,000 shares of our common stock
          that are subject to  currently  exercisable  redeemable  common  stock
          purchase  warrants held by Helen Hail,  wife of Mr. Hail, with respect
          to which Mr. Hail disclaims any beneficial interest.

(3)  A  former  director,  with a  business  address  of  10121  NW 7th  Street,
     Plantation,  Florida  33324.  The  number  of  shares  and each  percentage
     presented includes:

     o    250,000  shares of our  common  stock that are  subject  to  currently
          exercisable stock options held by Mr. Wilson; and

     o    3,000 shares of our  outstanding  common stock and 3,000 shares of our
          common  stock that are  subject to  currently  exercisable  redeemable
          common  stock  purchase  warrants  held  by Ruth  Wilson,  wife of Mr.
          Wilson,  with respect to which Mr.  Wilson  disclaims  any  beneficial
          interest.

(4)  Mr.  Stonecipher  is a director  with a  business  address of 321 East Main
     Street,  Ada, Oklahoma 74820, and Chairman of the Board and Chief Executive
     Officer of Pre-Paid  Legal  Services,  Inc. The number of shares consist of
     and  each  percentage  presented  is  based  upon  180,768  shares  of  our
     outstanding  common stock held by Pre-Paid Legal Services,  Inc., which may
     be deemed to be beneficially owned by Mr. Stonecipher.

(5)  The number of shares and each percentage presented includes:

     o    11,556  shares of our  common  stock held by Pat  Dungan,  wife of Mr.
          Dungan;

     o    140 shares of our common stock held by Mr. Dungan; and

     o    175 shares of our common stock subject to currently exercisable 1995-A
          warrants held by Mrs. Dungan.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Set forth below is a description  of  transactions  entered into between us
and certain of our  officers,  directors  and  shareholders  during the last two
years. Certain of these transactions may result in conflicts of interest between
us and such individuals.  Although these persons have fiduciary duties to us and
our  shareholders,  there can be no assurance  that  conflicts of interest  will
always be resolved in our favor or in favor of our shareholders.

     During 2000 and 1999,  we received  $5,931 and $6,724,  respectively,  from
Pre-Paid  Legal  Services,  Inc., a  shareholder,  for  commissions  on sales of
memberships for the services provided by Pre-Paid Legal Services, Inc.

     During the first quarter of 1998, we agreed to loan John W. Hail, the Chief
Executive  Officer and a major  shareholder,  up to $250,000.  Subsequently,  we
agreed to loan up to an additional  $75,000. In 2000, an additional $200,000 was
approved.  These loans are  secured,  and bear  interest at 8% per annum.  As of
December 31, 2000, the balance due on these loans plus interest was $544,007. On
January 1, 2001 the outstanding  balance on all the notes were combined into one
note payable in monthly  installments.  The loans and extension were unanimously
approved by our board of directors.

     During 2000,  we made advances  totaling  $50,424 to Dennis Loney our Chief
Operating Officer. The advances are secured,  require weekly principal payments,
bear  interest at 8% per annum,  and were due on April 28, 2004.  As of February
2001, the balance of these advances were paid in full by Mr. Loney. In addition,
Mr. Loney and his wife receive sales  commissions  based upon  purchases by them
and  their  downline  distributors  in  accordance  with our  network  marketing
programs. During 2000 and 1999, we paid Mr. Loney and his wife sales commissions
of $9,504 and $15,205, respectively.

     During  2000 and 1999,  we paid Curtis H.  Wilson,  a former  director  and
greater  than 5%  shareholder,  sales  commissions  of  $129,524  and  $128,700,
respectively.  These  commissions  are based on purchases by Mr.  Wilson and his
downline distributors in accordance with our network marketing program in effect
at the time of the sales.

     During  2000 and  1999,  we paid Pat  Dungan,  wife of Jimmy L.  Dungan,  a
director,  sales  commissions  of $114,684  and  $119,626,  respectively.  These
commissions   were  based  on  purchases  by  the  Dungans  and  their  downline
distributors in accordance with our network  marketing  program in effect at the
time of the sales.

On December 17, 1996, we adopted policies that:

o    any loans to officers, directors and 5% or more shareholders ("affiliates")
     are  subject  to  approval  by a  majority  of  not  less  than  two of our
     disinterested independent directors; and

o    such loans and other  transactions with affiliates will be on terms no less
     favorable than could be obtained from unaffiliated  parties and approved by
     a majority of not less than two of the disinterested independent directors.

Our board of directors is comprised  of four  members,  two of which,  R. Terren
Dunlap and Harland C. Stonecipher, are independent directors.

                                     PART IV

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits

Exhibit No.       Description
-----------       -----------

3.1  The Registrant's Certificate of Incorporation, incorporated by reference to
     the Registration  Statement on Form SB-2 (Registration No. 333-47801) filed
     with the commission on March 11, 1998.

3.2  The  Registrant's  Bylaws,  incorporated  by reference to the  Registration
     Statement  on  Form  SB-2  (Registration  No.  333-47801)  filed  with  the
     commission on March 11, 1998.

10.1 Warrant Agreement between Registrant and U.S. Stock Transfer Inc., dated as
     of January 20, 1997, as amended and restated January 8, 1998,  incorporated
     by reference to Amendment No. 2 to Form 8-A Registration  Statement,  filed
     with the Commission on January 13, 1998.

10.2 Unit and Warrant Agreement between Registrant and U.S. Stock Transfer Inc.,
     dated as of November  6, 1997,  as amended  and  restated  January 8, 1998,
     incorporated  by  reference  to  Amendment  No. 1 to Form 8-A  Registration
     Statement, filed with the Commission on January 14, 1998.

10.3 The  Promotional  Shares Escrow  Agreement,  dated November 4, 1997, by and
     between Advantage Marketing Systems,  Inc., John W. Hail, Curtis H. Wilson,
     Sr., Ruth Wilson,  Roger P. Baresel,  Judith A. Baresel,  R. Terren Dunlap,
     Pre-Paid  Legal  Services,  Inc.,  TVC,  Inc.,  and Liberty  Bank and Trust
     Company of Oklahoma City, N.A.,  incorporated by reference to Amendment No.
     2 to Registration Statement on Form SB-2 (Registration No. 333-34885) filed
     with the commission on November 3, 1997.

10.4 The  Promotional  Shares Escrow  Agreement,  dated October 31, 1997, by and
     between Advantage  Marketing Systems,  Inc., Robert and Retha H. Nance, and
     Liberty Bank and Trust  Company of Oklahoma  City,  N.A.,  incorporated  by
     reference  to  Amendment  No.  2 to  Registration  Statement  on Form  SB-2
     (Registration No. 333-47801) filed with the commission on November 3, 1997.

10.5 The Promotional  Shares Lock-In  Agreement,  dated November 5, 1997, by and
     between Advantage Marketing Systems,  Inc., Roger P. Baresel, and Judith A.
     Baresel,  incorporated  by  reference to  Amendment  No. 2 to  Registration
     Statement  on  Form  SB-2  (Registration  No.  333-47801)  filed  with  the
     commission on November 3, 1997.

10.6 Legal Services  Agreement  between  Registrant and Pre-Paid Legal Services,
     dated  September  1, 1988,  incorporated  by  reference to Form 10-K Annual
     Report for the year ended  December 31, 1989,  filed with the Commission on
     September 18, 1990.

10.7 Lease Agreement  between  Registrant and  International  Business  Machines
     Corporation,  dated May 22,  1989,  incorporated  by reference to Form 10-K
     Annual  Report  for the  year  ended  December  31,  1989,  filed  with the
     Commission on September 18, 1990.

10.8 Group Contract  between  Registrant and Consumer  Benefit  Services,  Inc.,
     dated April 2, 1989,  incorporated  by reference to Form 10-K Annual Report
     for the  year  ended  December  31,  1989,  filed  with the  Commission  on
     September 18, 1990.

10.9 Distribution  Agreement between Registrant and Topped,  Inc., dated June 1,
     1989,  incorporated  by reference  to Form 10-K Annual  Report for the year
     ended December 31, 1989, filed with the Commission on September 18, 1990.

10.10Lease Agreement  between  Registrant and Kaiser Francis Oil Company,  dated
     June 1, 1993,  incorporated by reference to Form 10-K Annual Report for the
     year ended December 31, 1993, filed with the Commission on April 14, 1994.

10.11Advantage Marketing Systems,  Inc. 1995 Stock Option Plan,  incorporated by
     reference to Form SB-2 Registration  Statement (No.  33-80629),  filed with
     the Commission on November 20, 1996.

10.12Agreement  between  Registrant and Consumer Benefit  Services,  Inc., dated
     October 20,  1995,  incorporated  by  reference  to Form SB-2  Registration
     Statement (No. 33-80629), filed with the Commission on November 20, 1996.

10.13Agreement between  Registrant and Advanced  Products,  Inc., dated November
     28, 1994,  incorporated  by reference to Form SB-2  Registration  Statement
     (No. 33-80629), filed with the Commission on November 20, 1996.

10.14Agreement between  Registrant and J&K  Pharmaceutical  Laboratories,  dated
     April 22, 1996,  incorporated  by reference to Amendment No. 3 to Form SB-2
     Registration Statement (No. 33-80629), filed with the Commission on January
     14, 1997.

10.15Stock Purchase  Agreement having an effective date of May 31, 1996, between
     Registrant,  Miracle Mountain  International,  Inc.,  Richard Seaton,  Gene
     Burson,  Kaye  Jennings,  Daryl Burson and James  Rogers,  incorporated  by
     reference to Form 8-K, filed with the Commission on July 12, 1996.

10.16Stock  Purchase  Agreement  having an  effective  date of January 31, 1997,
     among Registrant, Chambre International,  Inc., Janet Britt, Jerry Hampton,
     Teresa Hampton, James Baria, Florence Baria, Rose Cashin, Pat Eason, Joseph
     Williams,  Livia  Williams,  Don Black,  Nadine  Black,  Lynda Brown,  Gary
     Galindo,  Harold  Griffin,  Linda Griffin,  Iren Van  Vlaenderen,  Dean Van
     Vlaenderen, Rose Hilgedick, Julie Connary, and Royce Britt, incorporated by
     reference  to  Amendment  No. 3 to Form SB-2  Registration  Statement  (No.
     33-80629), filed with the Commission on January 14, 1997.

10.17Asset Purchase  Agreement among  Registrant,  Stay 'N Shape  International,
     Inc., Solution Products  International,  Inc., Nation of Winners, Inc., Now
     International, Inc., Carl S. Rainey and Danny Gibson, dated April 16, 1997,
     incorporated  by reference to Form 8-K, filed with the Commission on May 1,
     1997.

10.18The Advantage  Marketing  Systems,  Inc. 1998  Distributor  Stock  Purchase
     Plan,  incorporated  by  reference  to  Amendment  No.  1  to  Registration
     Statement  on  Form  SB-2  (Registration  No.  333-47801)  filed  with  the
     commission on October 7, 1998.

10.19The form of  Advantage  Marketing  Systems,  Inc.  1998  Distributor  Stock
     Purchase  Plan Stock  Purchase  Agreement,  incorporated  by  reference  to
     Amendment No. 1 to Registration  Statement on Form SB-2  (Registration  No.
     333-47801) filed with the commission on October 7, 1998.

21   Subsidiaries

23   Consent of Independent Public Accountants


     (b)  Reports on Form 8-K.

          None

<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.


                                   REGISTRANT:
                                   ADVANTAGE MARKETING SYSTEMS, INC.

Date: April 16, 2001               By: /S/ JOHN W. HAIL
                                       ----------------
                                        John W. Hail, Chief Executive Officer,
                                        Chairman of the Board and Director

Date: April 16, 2001               By: /S/ DENNIS LONEY
                                       ----------------
                                        Dennis Loney, Chief Operational Officer

Date: April 16, 2001               By: /S/ REGGIE COOK
                                       ---------------
                                        Reggie Cook, Chief Financial Officer
                                        and Secretary Treasurer

     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.


Date: April 16, 2001                 By: /S/ JOHN W. HAIL
                                         ----------------
                                         John W. Hail, Chief Executive Officer,
                                         Chairman of the Board and Director

Date: April 16, 2001                 By: /S/ DENNIS LONEY
                                         ----------------
                                         Dennis Loney, Chief Operational Officer

Date: April 16, 2001                 By: /S/ REGGIE COOK
                                         ---------------
                                         Reggie Cook, Chief Financial Officer
                                         and Secretary Treasurer

Date: April 16, 2001                 By: /S/ JIMMY L. DUNGAN
                                         -------------------
                                         Jimmy L.  Dungan, Director

Date: April 16, 2001                 By: /S/ R. TERREN DUNLAP
                                         --------------------
                                         R. Terren Dunlap, Director

Date: April 16, 2001                 By: /S/ HARLAND C. STONECIPHER
                                         --------------------------
                                         Harland C. Stonecipher, Director

<PAGE>
<TABLE>
<CAPTION>
                               INDEX TO EXHIBITS
Exhibit
No.         Description                                    Method of Filing
---         -----------                                    ----------------
<S>   <C>                                               <C>
3.1   The Registrant's Certificate of Incorporation     Incorporated herein by reference

3.2   The  Registrant's  Bylaws                         Incorporated herein by reference

10.1  Warrant Agreement between Registrant and U.S.     Incorporated herein by reference
      Stock Transfer Inc., dated as of January 20,
      1997, as amended and restated January 8, 1998

10.2  Unit and Warrant Agreement between Registrant     Incorporated herein by reference
      and U.S. Stock Transfer Inc., dated as of
      November 6, 1997, as amended and restated
      January 8, 1998

10.3  The Promotional Shares Escrow Agreement, dated    Incorporated herein by reference
      November 4, 1997, by and between Advantage
      Marketing Systems,  Inc., John W. Hail,
      Curtis H. Wilson, Sr., Ruth Wilson,  Roger P.
      Baresel, Judith A. Baresel, R. Terren Dunlap,
      Pre-Paid  Legal  Services,  Inc.,  TVC,  Inc.,
      and Liberty  Bank and Trust Company of
      Oklahoma City, N.A.

10.4  The Promotional Shares Escrow Agreement, dated    Incorporated herein by reference
      October 31, 1997, by and between Advantage
      Marketing Systems,  Inc., Robert and Retha H.
      Nance, and Liberty Bank and Trust Company of
      Oklahoma City, N.A.

10.5  The Promotional Shares Lock-In Agreement,         Incorporated herein by reference
      dated November 5, 1997, by and between
      Advantage Marketing Systems,  Inc., Roger P.
      Baresel, and Judith A. Baresel

10.6  Legal Services Agreement between Registrant       Incorporated herein by reference
      and Pre-Paid Legal Services, dated September
      1, 1988

10.7  Lease Agreement  between  Registrant and          Incorporated herein by reference
      International Business Machines Corporation,
      dated May 22, 1989

10.8  Group Contract between Registrant and Consumer    Incorporated herein by reference
      Benefit  Services,  Inc., dated April 2, 1989

10.9  Distribution  Agreement between Registrant        Incorporated herein by reference
      and Topped,  Inc., dated June 1, 1989

10.10 Lease Agreement between Registrant and Kaiser     Incorporated herein by reference
      Francis Oil Company,  dated June 1, 1993

10.11 Advantage Marketing Systems, Inc. 1995            Incorporated herein by reference
      Stock Option Plan

10.12 Agreement between Registrant and Consumer         Incorporated herein by reference
      Benefit  Services, Inc., dated October 20,
      1995

10.13 Agreement between  Registrant and Advanced        Incorporated herein by reference
      Products, Inc., dated November 28, 1994

10.14 Agreement between  Registrant and J&K             Incorporated herein by reference
      Pharmaceutical  Laboratories, dated
      April 22, 1996,

10.15 Stock Purchase Agreement having an effective      Incorporated herein by reference
      date of May 31, 1996, between Registrant,
      Miracle Mountain  International,  Inc.,
      Richard Seaton, Gene Burson, Kaye Jennings,
      Daryl Burson and James Rogers

10.16 Stock Purchase Agreement having an effective      Incorporated herein by reference
      date of January 31, 1997, among Registrant,
      Chambre International,  Inc., Janet Britt,
      Jerry Hampton, Teresa Hampton, James Baria,
      Florence Baria, Rose Cashin, Pat Eason,
      Joseph Williams, Livia Williams, Don Black,
      Nadine Black, Lynda Brown, Gary Galindo,
      Harold Griffin, Linda Griffin, Iren Van
      Vlaenderen, Dean Van Vlaenderen, Rose
      Hilgedick, Julie Connary, and Royce Britt

10.17 Asset Purchase  Agreement among  Registrant,      Incorporated herein by reference
      Stay 'N Shape  International, Inc., Solution
      Products International, Inc., Nation of
      Winners, Inc., Now International, Inc.,
      Carl S. Rainey and Danny Gibson, dated
      April 16, 1997

10.18 The Advantage  Marketing  Systems, Inc. 1998      Incorporated herein by reference
      Distributor  Stock  Purchase Plan

10.19 The form of Advantage Marketing Systems, Inc.     Incorporated herein by reference
      1998 Distributor Stock Purchase Plan Stock
      Purchase Agreement

21    Subsidiaries                                      Filed herewith electronically

23    Consent of Independent Public Accountants         Filed herewith electronically
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