<PAGE>




                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   ----------
                                    FORM 10-K

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


For the fiscal year ended:                          Commission file number:
    September 30, 1998                                      0-26614

                                   -----------


                        SOCRATES TECHNOLOGIES CORPORATION
                              (formerly MVSI, INC.)

             (Exact name of Registrant as specified in its Charter)

         Delaware                                         54-1707718
(State or other jurisdiction of                         (I.R.S. Employer
incorporation or organization)                         Identification No.)

           9301 Peppercorn Place, Largo, MD         20774
       (Address of principal executive offices)   (Zip code)

                                 (301) 925-2200
                (Company's telephone number, including area code)

                                   -----------

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

  Title of Each Class                              Name of Each Exchange
                                                   On Which Registered

    Not Applicable                                     Not Applicable


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


                                 Title of Class
                          Common Stock, $.01 Par Value
                                   -----------

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

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

     The total market value of the voting stock was $22,993,158, of which
$17,822,574 was held by non-affiliates of the registrant, based upon the closing
price of the common stock on December 22, 1998, as quoted by the Nasdaq National
Market System.

     The number of outstanding shares of the registrant's common stock on
December 22, 1998 was 14,739,204.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Proxy Statement of the registrant to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A of the Securities
Exchange Act of 1934 on or prior to January 29, 1999, are incorporated herein by
reference into Part III of this report.


<PAGE>


                        SOCRATES TECHNOLOGIES CORPORATION


                                      INDEX



<TABLE>
<CAPTION>


                                   Part I 
                                                                                                                       Page

<S>                      <C>                                                                                           <C>
   Item 1.               Business.                                                                                       3
   Item 2.               Properties.                                                                                    13
   Item 3.               Legal Proceedings.                                                                             14
   Item 4.               Submission of Matters to a Vote of Security Holders.                                           14

</TABLE>


<TABLE>
<CAPTION>

                                     Part II

<S>                      <C>                                                                                           <C>
   Item 5.               Market for Registrant's Common Equity and Related Stockholder Matters.                         14
   Item 6.               Selected Financial Data.
   Item 7.               Management's Discussion and Analysis of Financial Condition and Results of Operations.
                                                                                                                        15
   Item 7A.              Quantitative and Qualitative Disclosures About Market Risk                                     15
   Item 8.               Financial Statements.                                                                          22
   Item 9.               Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.          48

</TABLE>


<TABLE>
<CAPTION>

                                    Part III

<S>                      <C>                                                                                           <C>
   Item 10.              Directors and Executive Officers of the Registrant.                                            48
   Item 11.              Executive Compensation.                                                                        48
   Item 12.              Security Ownership of Certain Beneficial Owners and Management.                                48
   Item 13.              Certain Relationships and Related Transactions.                                                48
   Item 14.              Exhibits, Financial Statement Schedules, and Reports on Form 8-K.                              48

</TABLE>

<PAGE>


Item 1.  Business.

Overview

     Socrates Technologies Corporation ("Socrates" or the "Company") is a 
broad-based information technology solutions company whose business is 
focused on two primary business lines: (1) Information Technology Solutions 
-specifically, the provision of information technology products, services and 
solutions to commercial and government customers, including assembly, 
integration and marketing of proprietary and generic computer system products 
and services; computer systems integration, telecommunications integration, 
Internet connectivity, and wide and local area networking; and providing 
training on the use of computer software programs to individuals, 
corporations and the government; and (2) Customized Software Development and 
Maintenance Services for commercial and government customers, including 
development of customized turnkey business and management information 
systems; development and sale of proprietary warehouse and inventory control 
systems; implementation of third-party enterprise resource (ERP) programs 
(especially SAP implementation), and Year 2000 remediation and audit 
services. The Company's current strategy is to provide a one-stop source for 
information technology and custom software development for large and medium 
sized commercial customers and federal , state and local governments.

     In March 1998, the Company discontinued its machine vision welding and 
scanner business conducted by its wholly-owned subsidiary, MVS Modular Vision 
Systems, a Canadian corporation, ("MVS") to focus on what management believes 
to be the segments of its business that offer greater potential for growth in 
shareholder value. Since March 1998, the Company has attempted to sell the 
remaining assets of MVS. While the Company has had discussions with several 
prospective buyers since March 1998, the Company has not reached an agreement 
for the purchase of MVS assets as of the date of this report. While 
management is confident of its ability to sell the assets in the near future 
based upon ongoing discussions with potential buyers, no assurances can be 
given that these efforts will result in definitive agreements being reached 
or that the Company will obtain consideration in any such sale sufficient to 
recoup any portion of its investment.

     Socrates Technologies Corporation ("Socrates" or the "Company"), a Delaware
corporation, was incorporated in the State of Delaware on November 6, 1998. Upon
the merger of Socrates with MVSI, Inc., a Delaware Corporation incorporated on
April 12, 1994, on December 12, 1998, the name of MVSI, Inc., the surviving
corporation, was changed to Socrates Technologies Corporation. Unless the
context otherwise requires, the "Company" or "Socrates" refers to Socrates
Technologies Corporation, its predecessor and its subsidiaries. Since December
1, 1998, the Company has maintained its executive offices and principal
facilities at 9301 Peppercorn Place, Largo, Maryland 20774. Its telephone number
is (301) 925-2200.

     The Company's Common Stock, $.01 par value, ("Common Stock") was quoted on
the Nasdaq SmallCap Market from August 14, 1995 until May 1, 1997. Since May 2,
1997, the Common Stock has been quoted on the Nasdaq National Market System
under the trading symbols "SOCT" or previously, from May 2, 1997 until December
12, 1998, under the trading symbol "MVSI."

     Financial information relating to the Company's industry segments for
continuing operations for the years ended September 30, 1998 and 1997, is as
follows:

<TABLE>
<CAPTION>

                                                                             1998
                                             ----------------------------------------------------------------------
                                             Computer
                                             System Sales,
                                             Integration          Software          General
                                             and Training        Development        Corporate           Total
---------------------------------------------------------------------------------------------------------------------

<S>                                    <C>                 <C>                 <C>                <C>         
      Sales to unaffiliated
           customers                   $  57,221,898       $   4,786,070       $         -        $ 62,007,968

</TABLE>

<PAGE>


<TABLE>
<CAPTION>

<S>                                    <C>                 <C>                 <C>                <C>         
      Operating profit (loss)               (163,242)            297,785           (906,736)          (772,193)
      Net income (loss)                     (569,012)            265,246          1,691,672          1,387,906
      Identifiable Assets                 21,704,084           3,995,072          2,012,433          7,711,589

</TABLE>


<TABLE>
<CAPTION>

                                                                           1997
                                     ----------------------------------------------------------------------------
                                          Computer
                                         System Sales,
                                         Integration           Software             General
                                         And Training         Development          Corporate           Total
-----------------------------------------------------------------------------------------------------------------
<S>                                      <C>                 <C>               <C>                  <C>         
      Sales to unaffiliated
           customers                     $  33,755,491       $   579,207       $            -       $ 34,334,698
      Operating profit (loss)                1,493,644           (91,302)          (1,067,585)           334,757
      Net income (loss)                      1,115,359           (95,953)            (202,701)           816,705
      Identifiable Assets                   12,316,043         2,991,400            3,142,449         18,449,892

</TABLE>


     The Company provides financial information for segment reporting purposes
for two lines of business representing its continuing operations in fiscal year
1998 and 1997. Continuing operations are represented by the Company's Computer
Systems Sales, Integration and Training business and its Software Development
business. For the year ended September 30, 1996, the Company's continuing
operations were in a single segment.

     The Company's continuing operations do not generate a significant amount of
export of foreign sales. However, prior to its discontinuance, the Company
machine-vision subsidiary had a significant amount of sales to customers outside
North America, principally located in South Korea.

Computer Systems Sales, Integration and Training

     The Company conducts its Information Technology Solution business through
Socrates Technologies, Inc. ("Socrates Technologies"), a wholly-owned subsidiary
organized under the laws of the State of Maryland, and conducts its Custom
Software Development and Maintenance business through Technet Computer Services,
Inc. ("Technet"), a wholly-owned subsidiary organized under the laws of the
Commonwealth of Virginia.

     Since September 1997, Socrates Technologies has occupied a 35,000 square
foot office, manufacturing and warehouse space in Largo, Maryland, a suburb of
Washington, D.C. This center serves as Socrates' and Socrates Technologies'
principal executive offices, and Socrates Technologies' primary manufacturing
and engineering center, corporate technology training center and primary
warehouse facility. Socrates Technologies has sales offices in Exton,
Pennsylvania, Gaithersburg, Maryland, Vienna and Virginia Beach, Virginia, and
Long Island City, New York. Socrates Technologies also has a computer sales and
service center in Newport News, Virginia, which sells exclusively to Newport
News Shipbuilding, Inc. and its employees.

     On November 6, 1997, Socrates Technologies entered into an agreement 
with the Washington Sports & Entertainment, Inc. ("WSE") whereby Socrates, 
Inc. would provide computer hardware, software and training services to WSE; 
the Washington Wizards National Basketball Association Professional 
Basketball Team and Washington Capitals National Hockey League Professional 
Hockey Team, which WSE owns; and two major sports and entertainment complexes 
in the greater Washington, D.C. metropolitan area in which WSE has an 
ownership interest: the new MCI Center in Washington, D.C. and US Airways 
Arena in Largo, Maryland. The agreement has a three-year term and also 
entitles Socrates Technologies to advertise at the MCI Center and US Airways 
Arena and in television and cable shows and in print publications sponsored 
or produced by WSE or its affiliates.

     In September 1997, Socrates Technologies initiated an effort to establish
as a separate business line the training of corporate and government employees
and information technology professionals in the

<PAGE>


greater Washington, D.C. metropolitan area in the use of popular computer
programs and network systems. Socrates Technologies conducted its first training
classes in December 1997. Socrates Technologies intends to continue its efforts
in Fiscal Year 1999 to expand the scope and market of its training business,
which expansion could include establishing training centers in other
metropolitan areas along the East Coast of the United States and expanding the
program of study to qualify individuals to become certified software or network
systems engineers or obtain other software or network systems certifications.

     To take advantage of the rapid growth of the Internet and intranets and to
provide its customers with complete Internet connectivity, Socrates Technologies
has created a special in-house networking group. The Company anticipates
significant growth in Socrates Technologies' networking group business and
computer training business in fiscal year 1999. The Company makes no assurances
that Socrates Technologies will be able to successfully penetrate this market or
to attain the anticipated significant growth.

     Socrates Technologies also is a contract manufacturer and wholesale
distributor of proprietary and generic memory products for computers, plotters,
laser printers, process controllers and other computer related industry devices;
an assembler and seller of custom computer workstations and servers. Such
products are marketed in North America to computer resellers and dealers and
Internet Service Providers (ISP's).

     The Company intends to continue its financial and other support of
Socrates' Technologies expansion of business lines and supporting resources as a
central part of the Company's strategic goal to establish one-stop information
technology capabilities for large corporate and government customers in fiscal
year 1999.

     A majority of the Company's hardware and software sales are made pursuant
to customer purchase orders. Training courses are offered for a per-course fee.
For the years ended September 30, 1998 and 1997, sales to one customer of this
segment accounted for 30% and 21%, respectively, of the Company's total sales.

Software Development

     Technet provides customized software development, including turnkey system
development and product development, Year 2000 compliance services, and
maintenance services to corporate and government customers.

     Technet has software development centers in New Jersey and at its principal
executive offices in Vienna, Virginia. Technet also utilizes the software
development center of an affiliated company in Madras, India.

     Technet's core competency and expertise lies in systems design and
development of relational databases, network applications, imaging and
multimedia applications. Technet's custom software development work centers on
developing and maintaining sales, logistics, finance, research and other major
application areas of information management systems.

     Technet has also designed, developed and implemented turnkey systems for
market research and analysis, consumer relations, help desk, customer service
and support, and multimedia expert systems for market research and
presentations. Technet's product development has been focused on pre-packaged,
easily customized software solutions for warehouse and supply chain management,
order processing, document management, human resource management and medical
office management. Among its principal products in this area is "Winnie," a
fully integrated real-time software solution to distribution and supply chain
management. Winnie provides customers with a management tool which provides
information for use in key business decisions relating to inventory management,
order fulfillment, delivery performance, and responsiveness, forecasting, and
sales force automation.

<PAGE>


     Technet provides Year 2000 conversion solutions, which remedies the 
inability of many computer programs and systems to properly recognize the new 
millenium as the Year 2000 and the possible malfunctions resulting from that 
recognition error.

     Technet's principal customers include several major international cosmetics
and fragrance companies, a major U.S. insurance company, an international
computer systems manufacturer and a domestic long-distance telephone carrier.
Substantially all of Technet's consulting sales are generated pursuant to time
and materials contracts whereby Technet invoices the customer using agreed upon
hourly rates multiplied by the hours of service rendered or under turnkey
contracts which stipulate a fixed price for the system or solution developed.

MVS Modular Vision Systems, Inc. ("MVS")

     In March 1998, the Company discontinued its machine vision welding and 
scanner business conducted from its wholly-owned subsidiary, MVS Modular 
Vision Systems, a Canadian corporation, ("MVS") to allow the Company to focus 
on what management believes to be the segments of its business which offer 
greater potential for growth in shareholder value. MVS designs, develops, 
manufactures and markets state-of-the-art, proprietary vision-based robotic 
and sensor products and systems for productivity improvement and quality 
control applications in the manufacturing workplace. MVS is based in a single 
facility of approximately 14,000 square feet in Montreal, Quebec, Canada. As 
of December 1998, the Company continues to market for sale the MVS business. 
While management is confident of its ability to sell the MVS assets in the 
near future based upon ongoing discussions with potential buyers, no 
assurances can be given that these efforts will result in definitive 
agreements being reached or that the Company will obtain consideration in any 
such sale sufficient to recoup any portion of its investment.

     The primary component of MVS' products and systems is its three-dimensional
camera and laser vision inspection technology. This technology utilizes
specialized cameras, lasers, optics and custom-designed high-speed processing
hardware and software for inspection, measurement and motion control in
industrial or manufacturing applications. MVS currently markets and sells one
principal computer chip inspection scanner product and system: the MVS
LaserVision QFP Lead Scanner (the "QFP Scanner"), and also markets and sells one
principal sensor product and system: the MVS LaserVision Welding Sensor ("MVS
Welding System"), which is used for weld inspection or ensuring that the welding
device properly tracks the weld joint or seam.

Marketing and Sales

     The Company's Computer Systems Sales, Integration and Training business
relies heavily on an in-house direct sales force to sell their products. In
addition, from time to time the Company uses print, radio and television
advertising campaigns, principally focused on the Middle Atlantic region of the
United States. Socrates intends to continue to expand its market presence
through the use of various forms of print and electronic advertising in Fiscal
Year 1999 to complement its direct sales force.

     Technet relies heavily on the sales efforts of its key personnel to market
and sell its services, which efforts have been supported by the addition of a 
professional sales staff in fiscal year 1998.

Sources of Supply and Backlog

     All materials and components used by the Company's Computer Systems Sales,
Integration and Training business are available from numerous sources of supply.
The Company does not foresee any shortage of these materials.

     As of September 30, 1998, the Company's backlog was approximately $2
million. The Company's Computer Systems Sales, Integration and Training business
has historically operated with limited backlog as products are typically shipped
shortly after orders are received. The Company does not believe that its backlog
at any specific time is necessarily indicative of its future business.

<PAGE>


Customer Service and Support

     The Company warranties certain products and systems for 12 months and
provides technical personnel on-site, if required, during the warranty period.
The Company, however, endeavors to complete warranty service repairs at its own
facilities in order to minimize costs. To date, warranty costs, which are
accrued by the Company at the time of sale, have not been material.

Patent, Trademark, Copyright and Proprietary Rights

     None of the Company's continuing operations have filed any patents or
possess any technologies or other intellectual property that they believe
require or qualify for patent protection. The Company's discontinued machine
vision business holds a number of patents or has patents pending in the United
States, Canada and others internationally, some of which the Company expects to
sell with other assets of this business in the near future. MVS has not 
maintained certain patents for its inspection scanner because of the 
discontinuation of that product or the lack of market demand in a particular 
nation.

     Except as may be required by the filing of patent, trademark and copyright
applications, the Company will attempt to keep all other proprietary information
secret and to take such actions as may be necessary to insure the results of its
development activities are not disclosed and are protected under the common law
concerning trade secrets. Such steps will include the execution of nondisclosure
agreements by key Company personnel and may also include the imposition of
restrictive agreements on purchasers of the Company's products and systems.
There is no assurance that the execution of such agreements will be effective to
protect the Company, that the Company will be able to enforce the provisions of
such nondisclosure agreements or that technology and other information acquired
by the Company pursuant to its development activities will be deemed to
constitute trade secrets by any court of competent jurisdiction.

Competition

     The Company believes that there are other companies, some of which are
substantially larger and have substantially greater assets and resources than
the Company, engaged in the development of technology and products that may be
highly competitive with those of the Company, within each industry the Company
competes in. Almost all of the companies with which the Company intends to
compete are substantially larger and have substantially greater resources than
the Company. It is also likely that other competitors will emerge in the future.
Since the Company will compete with companies that have greater market
recognition and broader capabilities than the Company, there can be no assurance
that the Company or its operating subsidiaries will be able to successfully
compete in the marketplace or will be able to achieve success in any of the
business endeavors described herein.

Employees

     At the year ended September 30, 1998, the Company employed approximately
130 persons, all of whom were full-time employees. Of these full-time employees,
approximately 20 were engaged in management, administration and finance, 60 in
operations and 50 in marketing, training and sales.

     The Company believes that its future success will depend in large part upon
its continued ability to recruit and retain highly qualified technical
personnel. Competition for highly qualified technical personnel is significant,
particularly in the geographic area in which the Company's operations are
located. The Company has never experienced a work stoppage and none of its
employees is represented by a labor organization. Management of the Company
considers its relationship with its employees to be good.

<PAGE>


Forward-Looking and Cautionary Statements

     The Company and its representatives may from time to time make written or
oral forward-looking statements, including statements contained in the Company's
filings with the Securities and Exchange Commission and in its reports to
stockholders. In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, as amended, the Company is hereby
identifying important factors, among others, that could cause actual results to
differ materially from those contained in any forward-looking statement made by
or on behalf of the Company; any such statement is qualified by reference to the
following cautionary statements.

     The Company's operating results could be affected by a number of factors.
They include the availability and cost of components, an unexpected inability to
manage expenses relative to sales growth, and an inability to anticipate
downward price pressures by customers using our products and services. Also,
there is the potential problem of competing with companies having significantly
greater financial, technical, and market resources than the Company.

     A significant percentage of the Company's sales to major customers
historically has occurred in the last month of a quarter. Changes in purchasing
patterns by one or more of the Company's major customers, and the inability of
the Company to anticipate in advance the mix of customer orders and its ability
to ship the necessary quantities of product near the end of a fiscal quarter,
could result in material fluctuations in quarterly operating results.

     The Company participates in competitive industries marked by changing
technology, which could result in volatility of the Company's common stock
price. Additionally, any shortfall in revenue or earnings from the levels
expected by securities analysts could have an immediate and significant effect
on the trading price of the Company's common stock in any given period.
Moreover, it is possible the Company may not learn of such shortfalls until late
in the fiscal quarter, which could result in an even more immediate and adverse
effect on the trading price of the Company's stock.

Item 2. Description of Properties.

     In December 1998, the Company completed the move of its principal executive
offices from Vienna, Virginia to the Socrates Technologies headquarters in
Largo, Maryland.

     Socrates leases approximately 35,000 square feet of space for its computer
integration, distribution and training facilities located in Largo, Maryland.
Base rent for the space is approximately $11,600 per month. The lease agreement,
which expires in 2002, includes rent escalations and requires Socrates to pay
certain operating expenses. In addition, Socrates also leases approximately
16,000 square feet in the aggregate of space for its facilities in Gaithersburg,
Maryland; Exton, Pennsylvania; Vienna, Virginia and its locations in Virginia
Beach and Newport News, Virginia under leases that expire through 2003. Base
rent for these facilities is approximately $22,500 per month in the aggregate
and requires the Company to pay certain operating expenses.

     Socrates also leases approximately 15,000 square feet of space for its
computer integration, service and distribution facilities located in Long Island
City, New York. Base rent for the space is approximately $11,600 per month. The
five-year lease agreement includes annual rent escalations and requires the
Company to pay certain operating expenses.

     Technet leases approximately 5,000 square feet of space under two lease
agreements, for its software development business, located in Vienna, Virginia.
Base rent for the aggregate space is approximately $8,400 per month. The lease
agreements, which expire in 1999, include rent escalations and require Technet
to pay certain operating expenses. Technet also leases approximately 3,500
square feet of space in Edison, New Jersey, with a base rent of $6,125, which
lease expires in August 1999.

<PAGE>


     MVS leases approximately 14,000 square feet for its MVS Canadian
development and manufacturing facilities located in Montreal, Quebec, Canada,
under a lease that extends through May 1999. The Company operates at
approximately 50 percent of capacity. Base rental for the premises is
approximately $5,500 per month. The lease requires the Company to pay certain
property taxes and certain operating expenses.

     The Company believes that its current and anticipated facilities are
suitable and adequate for its operations.

Item 3.  Legal Proceedings.

     In the ordinary course of conducting business, the Company is subject, from
time to time, to certain legal proceedings concerning the Company's business.
Management does not believe that any current legal proceedings will have a
material impact on the Company's business or its financial statements.

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

     None.


Item 5. Market for Common Equity and Related Stockholder Matters.

     The Common Stock and Class A Warrants were listed on the Nasdaq SmallCap
Market System from August 15, 1995 until May 1, 1997, under the symbols "MVSI "
and "MVSIW", respectively. From May 2, 1997 through December 11, 1998, the
Company's Common Stock traded on the Nasdaq National Market System under the
symbol "MVSI" and ceased-to-be traded on the Nasdaq SmallCap Market. Effective
December 14, 1998, the Company's Common Stock has traded on the Nasdaq National
Market Exchange under the symbol "SOCT." The Class A Warrants were traded on the
Nasdaq National Market System under the symbol "MVSIW" until 4:00 p.m., local
New York City time, on December 15, 1997, the redemption date of the Class A
Warrants. The Class B Warrants, which were not publicly traded, were also
redeemed, effective December 15, 1997. There are approximately 3,000
shareholders of the Company's Common Stock, as last reported. The following
table sets forth the range of high and low trading prices for the Common Stock,
as reported by The Nasdaq Stock Market, for the fiscal periods indicated through
September 30, 1998.

<TABLE>
<CAPTION>

                                                                         High                 Low
                                                                       --------             --------

<S>                                                                     <C>                   <C>  
   Fiscal Year 1996
          First fiscal quarter                                           $8.38                 $3.88
          Second fiscal quarter                                          $7.38                 $4.00
          Third fiscal quarter                                           $9.75                 $6.88
          Fourth fiscal quarter                                         $15.63                 $8.00



   Fiscal Year 1997
          First fiscal quarter                                          $10.88                 $2.75
          Second fiscal quarter                                          $6.06                 $2.75
          Third fiscal quarter                                           $6.13                 $2.66
          Fourth fiscal quarter                                          $7.69                 $4.06



   Fiscal Year 1998
          First fiscal quarter                                           $9.06                $5.00
          Second fiscal quarter                                          $8.25                $4.25
          Third fiscal quarter                                           $8.13                $6.00
          Fourth fiscal quarter                                          $7.75                $1.50

</TABLE>

<PAGE>

     Holders of the Company's Common Stock are entitled to dividends when, as
and if declared by the Board of Directors out of funds legally available
therefor. The Company does not anticipate the declaration or payment of any
dividends in the foreseeable future. The Company intends to retain earnings, if
any, to finance the development and expansion of its business. Future dividend
policy will be subject to the discretion of the Board of Directors and will be
contingent upon future earnings, if any, the Company's financial condition,
capital requirements, general business conditions and other factors. Therefore,
there can be no assurance that any dividends of any kind will ever be paid by
the Company.


<PAGE>


Item 6. Selected Financial Data


<TABLE>
<CAPTION>

                                                              Year ended September 30,
                                                   1998          1997           1996          1995
-------------------------------------------------------------------------------------------------------
                                                      (in thousands, except per share data)

<S>                                             <C>            <C>            <C>                <C>
Sales                                           $ 62,008       $ 34,335       $ 11,421       $  --

Gross Profit                                       8,710          4,362          1,045          --

Earnings from continuing operations                1,388            817            458        (3,504)

Income (Loss) from discontinued operations        (5,982)          (707)           555        (1,977)

Net Income (loss)                                 (4,594)           110          1,013        (5,481)

Earnings (Loss) per share-Basic                     (.31)           .01            .09         (1.10)
Earnings (Loss) per share-Diluted                   (.31)           .01            .08         (1.10)

Total Assets                                      29,512         25,491         20,160        12,959

Stockholders' Equity                              17,377         18,065         15,106        10,605

</TABLE>


Note: Operating data for the fiscal year ended September 30, 1995 relates to the
Company's machine vision operations discontinued in 1998.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.

     The following discussion and analysis of the Company's historical results
of operations and of its liquidity and capital resources should be read in
conjunction with the Company's consolidated financial statements and
accompanying notes.

        Moreover, this Management's Discussion and Analysis of Financial
Condition and Results of Operations contains forward-looking statements
concerning the Company's business and operations. Such statements involve risks
and uncertainties that could cause actual results to differ due to a variety of
risk factors set forth herein and from time to time in the Company's filings
with the Securities and Exchange Commission and other public announcements.

Overview

     Fiscal year 1998 was a year of evolution and change for the Company. Since
the Company's initial public offering in 1995, the Company has grown
significantly through the acquisition of four separate technology companies
involved in computer system sales, integration, training and software
development. To date, each of these organizations has been operated
independently of one another.

     To focus greater attention on its information technology businesses, the
Company elected to discontinue its machine vision business in March 1998. This
business was the core business of the Company at its inception and management
believed it possessed superior technology in the machine vision industry.
However, uncertainty caused by instability in overseas financial markets
(principally Asia), and geographically segregated management in Canada resulted
in management concluding that the greatest potential for growth in shareholder
value would rest with the Company's information technology businesses. As of
December 1998, the Company continues to market for sale the assets of MVS.
While management is confident of its ability to sell the MVS assets in the near
future based upon ongoing discussions with potential buyers, no assurances can
be given that these efforts will result in definitive agreements being reached
or that the Company will obtain consideration in any such sale sufficient to
recoup any portion of its investment.

<PAGE>


     The past year marked the first full year of operations conducted from the
Company's 35,000 square foot Socrates Technology Center, a full service
information technology facility from which the Company conducts training
services, integrates and manufactures computer systems and houses its executive
offices. Fiscal 1998 was the first full year of operations of its Software
Development business operated from its Technet Computer Services subsidiary. The
Company's continuing operations, while showing significant growth, generated an
operating loss due to significantly higher amortization associated with goodwill
arising from acquisitions, downward pressure on margins from hardware sales, and
losses from certain operating divisions with the computer hardware distribution
businesses. These losses led management to reorganize all hardware distribution
businesses late in the year under the Socrates name and management. While no
assurances can be given as to the success of the reorganization, management
believes that by better coordinating sales and marketing efforts and leveraging
a single centralized administrative support organization, operating profits will
improve.

     All results of operations have been restated to reflect the discontinuance
of the Company's machine vision segment in March 1998. As a result, current year
to prior year comparisons of results from continuing operations exclude this
segment except when noted.

Results of Operations

     Year ended September 30, 1998 Compared to Year ended September 30, 1997

     The Company reported an increase in sales of $27,673,270 or 81% to
$62,007,968 for the year ended September 30, 1998 as compared to the same period
in fiscal 1997. The increase in sales is attributable to the continued growth in
sales generated by the Company's Computer System Sales, Integration and Training
business which rose by $23,466,407 or 70% to $57,221,898 and a full year's sales
from its Software Development business which rose by $4,206,863 or 726% to
$4,786,070 due to the inclusion of a full year's sales for this business as it
was acquired in the fourth quarter of the prior fiscal year.

     The gross margins of the Company increased slightly to 14% from 13%, for
the year ended September 30, 1998, principally as a result of generally higher
margins experienced by the software development business, offset by the
relatively lower gross profit margins in the Company's Computer Sales,
Integration and Training business.

     For the year ended September 30, 1998, selling expenses increased by
$2,110,329 or 245% to $2,972,701, primarily as a result of additional sales
staff hired and from including a full year's selling and marketing expenses for
its Software Development Business, which was acquired in the fourth quarter of
fiscal 1997. Administrative expenses increased $2,894,381 or 109% to $5,545,305
for the fiscal year 1998, as a result of increased salary expenses associated
with the acquisition late in the prior fiscal year as well as an increase from
investments in administrative infrastructure necessary to support growth in
operations.

     Depreciation and amortization expenses for the year ended September 30,
1998, increased by $449,869 to $963,895 as a direct result of an increase in
depreciable assets from the Company's businesses and from the resulting goodwill
amortization recorded subsequent to the acquisitions. For acquisitions completed
to date, future annual goodwill amortization will be approximately $610,000.

     Investment income, which includes realized gains or losses on marketable
securities and interest income, net of interest expense and financing charges,
increased by $1,106,208 or 142% to $1,884,726 for the year ended September 30,
1998. The increase was attributable to a gain recognized from the sale of shares
of e-Net, Inc. in June 1998 which resulted in a gain of approximately $1,594,000
and interest income from the Company's short-term U.S. Treasury interest bearing
investments, offset by realized losses from the liquidation of short-term U.S
Treasury securities. Both periods reflect interest on line of credit borrowings,
and shareholder loans.

<PAGE>


     Management regularly reviews for recoverability deferred tax assets and
adjusts, if necessary, a valuation allowance against such assets. In determining
the amount of the valuation allowance recorded at September 30, 1998, management
considered historical taxable income generated by continuing operations,
adjusted for non-recurring gains and losses and known charges which are not
deductible such as goodwill amortization, and for the anticipated impact of
management's operating plans. The recovery of the deferred tax asset at
September 30, 1998 is dependent upon the Company generating taxable income in
the future sufficient to realize the associated tax benefits. In the event
taxable income is not generated at sufficient levels, write downs of the
deferred tax asset may be necessary.

     The Company has net operating loss carry forwards available to offset U.S.
taxable income of approximately $8,000,000 at September 30, 1998, expiring in
2018. While the future use of these net operating loss carryforwards has not
been significantly affected by the Company's past acquisitions, in the event a
change in control occurs in the future, use of all or a portion of the U.S.
carryforwards could be affected. In addition, the Company has net operating loss
and research expenditure carryforwards available to offset future taxable income
generated in Canada. However, with the discontinuance of the Company's business
in Canada in the past year, use of such Canadian tax benefits is dependent upon
the Company conducting certain lines of business in Canada in the future which
management believes is doubtful at the present time.

     Earnings from continuing operations for the year ended September 30, 1998
were $1,387,906 or $0.09 per share (basic and diluted EPS), as compared to
earnings from continuing operations of $816,705 or $0.08 per share (basic EPS)
and $0.06 per share (diluted EPS) for the year ended September 30, 1997.

     In March 1998, the Company discontinued its machine vision business and as
result has reported results of operations and losses associated with the
discontinuance separately from continuing operations. For the year ended
September 30, 1998, this discontinued business incurred an operating loss of
$1,250,052 compared to an operating loss of $707,159 in the prior year. In
addition, upon making the decision to discontinue the machine vision business,
the Company incurred a loss of $4,731,636 associated with write-downs of
inventories, capitalized software costs, and deferred tax assets to net
realizable value.

     Year ended September 30, 1997 Compared to Year ended September 30, 1996

     The Company reported an increase in sales of $22,913,403 or 201% to
$34,334,698 for the year ended September 30, 1997 as compared to the same period
in fiscal 1996. The increase in sales is attributable to the Company's current
year acquisitions of Expert, Inc. (Computer Sales, Integration and Training) and
Technet (Software Development), as well as the inclusion of a full year of sales
for Socrates, which was acquired in the fourth quarter of fiscal 1996. Despite
the increase in sales, the Company was impacted in the fourth quarter of Fiscal
Year 1997 by the lack of MVS machine vision scanner sales and the temporary
reduction in sales and increase in expenses due to Socrates' move to its new
35,000 square foot facility in Largo, Maryland.

     The gross margins of the Company increased to 13% from 9%, for the year
ended September 30, 1997, principally as a result of generally higher margins
experienced by the software development business acquired in the fourth quarter
of 1997, offset by the relatively lower gross profit margins in the Company's
Computer Sales, Integration and Training business.

     For the year ended September 30, 1997, selling expenses increased by
$669,975 (348%) to $862,372, primarily as a result of additional sales staff
hired at MVS and the Company's current year acquisitions of Expert (Computer
Sales, Integration and Training) and Technet (Software Development), as well as
the inclusion of a full year of selling expenses for Socrates, which was
acquired in the fourth quarter of fiscal 1996. Administrative expenses increased
$1,220,564 (85%) to $2,650,924 for the fiscal year 1997, as a result of
increased salary expenses associated with the Company's year acquisitions, as
well as an increase in the Company's overall level of operations.

<PAGE>


     Depreciation and amortization expenses for the year ended September 30,
1997, increased by $396,518 to $514,026 as a direct result of an increase in
depreciable assets from the Company's acquisitions of Expert and Socrates and
the resulting goodwill amortization recorded subsequent to the acquisitions. For
acquisitions completed to date, future annual goodwill amortization will be
approximately $610,000.

     Interest income, net of interest expense and financing charges, 
increased by $2,125 from $776,393 to $778,518 for the year ended September 
30, 1997. Both periods reflect interest on line of credit borrowings, and 
shareholder loans.

     The Company has net operating loss and research expenditure carryforwards
available to offset future taxable income generated in Canada totaling
approximately $8,000,000 at September 30, 1997, expiring in 2010 and investment
tax credits of $1,350,000 available as a direct offset to taxes payable in the
future. In addition, the Company has net operating loss carry forwards available
to offset U.S. taxable income of approximately $600,000 at September 30, 1997,
expiring in 2011. Future use of these net operating loss carryforwards was not
affected by the Company's acquisitions during fiscal years 1996 and 1997.
However, in the event a change in control occurs in the future, use of all or a
portion of the U.S. carryforwards could be affected. The Company does not
believe that the December 1997 warrant redemption will materially affect the
ability to use U.S. carryforwards in the future.

     As of September 30, 1997, the Company has recorded net deferred tax assets
totaling approximately $1,655,000 consisting of $889,000 relating to tax
benefits derived from the Company's operations based in Canada and $766,000
relating to tax benefit derived from the Company's operation in the United
States. Recoverability of this asset is dependent upon the Company generated
future taxable income in both Canada and the United States. Critical to
recovering the Canadian portion of the deferred tax benefits is the successful
implementation of a plan aimed at returning the Canadian operations to
profitability. Key elements of this plan center on reducing indirect staff
levels, successfully outsourcing certain manufacturing operations, and redirect
sales and marketing efforts toward more profitable product lines. In the event
this plan is unsuccessful in generating future taxable income, a write down of
this asset may be necessary. The Company will review the valuation allowance
quarterly to determine the future realizability of these deferred tax assets.

     The Company's fourth quarter 1997 operations reflect certain adjustments to
revise prior estimates associated with cost of sales of the Company's computer
integration and distribution businesses of approximately $200,000, and to revise
the provision for income taxes estimated for each interim period, the result
being an increase in income tax expense by approximately $300,000. In addition,
the Company recorded changes of approximately $300,000 to adjust inventories of
its machine vision business to net realizable value. The effect of these items
was to reduce net income for the fourth quarter by $800,000 or $.07 per share.

     Earnings from continuing operations for the year ended September 30, 1997
were $816,705 or $0.08 per share, as compared to earnings of $457,670 or $0.04
per share (basic EPS) and $0.03 per share (diluted EPS) for the year ended
September 30, 1996.

     Year ended September 30, 1996 Compared to Year ended September 30, 1995

     As a result of the Company's discontinuance of its machine vision business,
there are no continuing operations for fiscal year 1995 for which to make valid
comparisons to fiscal year 1996. Thus, no year-to-year comparisons are provided.

<PAGE>


Capital Resources, Liquidity and Backlog

     As of September 30, 1998, the Company had working capital of $9,458,207
compared to $7,657,175 as of September 30, 1997. As of September 30, 1998, the
Company has cash, cash equivalents and investments of $1,801,428. While the
Company generated $24,547,712 of proceeds from a conversion of its warrants
during the year, $16,981,581 of such proceeds were used to repurchase shares of
the company's common stock in the open pursuant to a publicized stock redemption
program. The Company also experienced a significant increase in accounts
receivable in fiscal 1998. Management believes a portion of the increase relates
to temporary delays in the processing of one customer's invoices which was
rectified in November 1998 when the Company collected approximately $5,000,000
on these accounts receivable. The increase in accounts receivable, coupled with
the repurchase of shares of e-Net, Inc. common stock in the fourth quarter as
described below, caused the Company to liquidate certain investment securities
in the fourth quarter of fiscal 1998.

     The Company maintains a wholesale financing agreement with a finance
company for inventory financing for one of its subsidiaries. The agreement
provides the Company with the ability to pay for certain scheduled inventory
purchases on terms similar to those that would be provided by third party
vendors. Amounts due to the finance company under the agreement at September 30,
1998 and 1997, amounted to $5,403,768 and $208,082, respectively. The agreement
is subject to annual renewal and is collateralized by all present and future
accounts receivable and inventory of the Company's subsidiary. In addition, the
Company must comply with certain financial and reporting covenants. As of
September 30, 1998, the Company was in compliance with all of these covenants.

     On October 21, 1998, the Company entered into an accounts receivable credit
facility with the same financing company to provide funding for the short-term
financing needs of the Company. The maximum amount available under this
agreement is $6,000,000. The Company has pledged all of its inventory,
receivables, equipment, fixtures and all its intangible assets to secure the
facility. Interest is payable monthly at the prime rate as published by the
Chase Manhattan Bank. The facility contains certain covenants, the most
restrictive of which requires the Company to maintain a tangible net worth
including subordinated debt of $1,000,000; a ratio of debt minus subordinated
debt not to exceed 5 to 1; and to provide the financing company with weekly
borrowing base certificates in order to access the unused portion of the credit
facility. The Company has renegotiated its existing wholesale financing
agreement in connection with the establishment of this credit facility. The
maximum amount available under the combined agreements is $10,000,000.

     Management believes that the working capital and liquidity position of 
the Company, together with funds available under the Company's new line of 
credit, are adequate to meet the Company's working capital requirements based 
upon its current level of operations. However, significant internal growth or 
additional acquisitions could create a need for additional working capital. 
The Company's ability to raise additional funds through secondary offerings 
of equity or debt securities will be subject to conditions in capital 
markets, as well as restrictions under its existing credit facilities.

     By notice of redemption, dated November 14, 1997, the Company called all of
its outstanding Class A Warrants and Class B Warrants for redemption for cash,
on December 15, 1997 (the "Redemption Date'), at a redemption price of $.05 per
Class A Warrant and $.05 per Class B Warrant (the "Redemption Price"). After
December 15, 1997, on the Redemption Date, the only right of any holders of a
Class A Warrant or Class B Warrant who did not timely exercise, or, in the case
of the Class A Warrant holder, timely trade the warrant, was to receive the
Redemption Price for each warrant properly tendered to American Stock Transfer &
Trust Company, the Warrant Agent for the warrants. Pursuant to the redemption,
the Company generated proceeds to the Company of $24,547,712. Of these proceeds,
$16,981,581 were used during the fiscal year ended September 30, 1998 for the
purchase of Company stock in the open market.

     The Company entered fiscal 1998 with an investment of 250,000 shares of
common stock of e-Net, Inc. ("e-Net"), a publicly held Germantown, Maryland
based manufacturer of data-telephony equipment, valued at approximately
$1,600,000. During the third fiscal quarter of 1998, the Company sold 130,000
shares for proceeds of $2,368,000, or $18.22 per share, resulting in a realized
gain of $1,594,000. In addition, the Company purchased an additional 160,000
shares of e-Net common stock for prices ranging from $13.13 to $14.88 per share.
During the fourth quarter of fiscal 

<PAGE>


1998, the Company purchased 170,000 shares of e-Net stock at prices ranging 
from $17.06 to $18.63 per share, or aggregate consideration of $3,077,500. 
Later in the fourth quarter, the value of e-Net shares decreased 
significantly, falling to $3.43 per share at September 30, 1998, causing the 
Company to suffer unrealized losses of approximately $5,800,000 in the fourth 
quarter of fiscal 1998. At the present time, the Company continues to hold 
450,000 shares of e-Net stock. Because e-Net common stock is highly volatile, 
the Company can make no assurances that the unrealized losses suffered can be 
recovered.

     The Company has no significant long-term debt outstanding as of September
30, 1998.

     As of September 30, 1998, the Company had borrowed, under two separate loan
agreements, monies from a principal stockholder/officer (Edward Ratkovich) to
enable the Company to meet its on-going cash flow requirements. These loans bear
interest at 9% and 8%, respectively, and are due on demand. Total loans and
accrued interest outstanding at September 30, 1998, total $1,380,056. Subsequent
to September 30, 1998, the Company has repaid $250,000 of the total outstanding
loans.

     At September 30, 1998, the Company's backlog was approximately $2 million.
The Company does not believe that its backlog at any specific time is
necessarily indicative of its future business.

Impact of Inflation and Foreign Currency Exchange Rates

     The Company does not believe that inflation has had a material adverse
effect on sales or income during the past several years. Increases in supplies
or other operating costs may adversely affect the Company's operations; however,
the Company believes it may increase prices of its products and systems to
offset increases in costs of goods sold or other operating costs.

     A portion of the Company's operations through its Canadian subsidiary is
transacted in Canadian dollars. The Company, however, reports its financial
position, results of operations and cash flows in U.S. dollars. As a result, the
Company believes that its exposure to foreign currency fluctuations or
deterioration is limited.

Seasonality

     Based on its experience to date, the Company believes that its future
operating results may be subject to quarterly variations based on a variety of
factors, including seasonal changes in the weather, especially in its Canadian
operations. Such effects may not be apparent in the Company's operating results
during a period of expansion. However, the Company can make no assurances that
its business can be significantly expanded under any circumstances.

Year 2000

     Certain of the financial information systems used at the Company's
subsidiaries are currently not Year 2000 compliant. The Company is in the
process of addressing these issues as part of a Company-wide management
information system implementation which is expected to be substantially complete
in early 1999. Management believes the Company's operations do not pose complex
systems needs and its financial information system requirements can be satisfied
with "off-the-shelf" software which will not require significant customization.
The costs related to the system implementation have not been significant.


Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

     Not Applicable.


<PAGE>

<TABLE>
<CAPTION>

Socrates Technologies Corporation and Subsidiaries

Contents

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

<S>                                                                        <C>
Item 8:  Financial Statements


Report of Independent Certified Public Accountants                         23


Consolidated Financial Statements

        Consolidated Balance Sheets                                        24

        Consolidated Statements of Operations                              25

        Consolidated Statements of Stockholders' Equity                    26

        Consolidated Statements of Cash Flows                              27

        Notes to Consolidated Financial Statements                        28-47

</TABLE>


<PAGE>







Report of Independent Certified Public Accountants


Board of Directors
Socrates Technologies Corporation and Subsidiaries


We have audited the accompanying consolidated balance sheets of Socrates
Technologies Corporation (a Delaware Corporation) and Subsidiaries as of
September 30, 1998 and 1997, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended September 30, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Socrates
Technologies Corporation and Subsidiaries as of September 30, 1998 and 1997, and
the results of their operations and their cash flows for each of the three years
in period ended September 30, 1998, in conformity with generally accepted
accounting principles.




Vienna, Virginia
December 15, 1998


<PAGE>



Socrates Technologies Corporation and Subsidiaries

Consolidated Balance Sheets

<TABLE>
<CAPTION>

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

Years ended September 30,                                                                     1998               1997
-------------------------------------------------------------------------------------------------------------------------------

<S>                                                                                    <C>                <C>
Assets

Current Assets
      Cash and cash equivalents                                                         $    831,921       $  1,704,724
      Investments                                                                            969,507          2,833,931
      Accounts receivable, net of allowance for doubtful accounts                         14,533,443          6,399,507
      Inventory                                                                            3,625,823          3,619,030
      Tax credits and income tax receivable                                                  613,191            306,283
      Prepaid expenses                                                                     1,019,604            219,382
                                                                                       -------------      -------------
Total Current Assets                                                                      21,593,489         15,082,857

Property and Equipment, net                                                                1,375,477            984,290

Capitalized Software Costs, net                                                              101,250          1,723,138

Goodwill, net                                                                              5,027,719          5,641,582

Deferred Tax Asset, net of valuation allowance                                             1,200,000          1,655,471

Other Assets                                                                                 214,327            403,495
                                                                                       -------------      -------------
                                                                                        $ 29,512,262       $ 25,490,833
                                                                                       -------------      -------------
                                                                                       -------------      -------------

Liabilities and Stockholders' Equity

Current Liabilities
        Vendor financing arrangement                                                    $  5,417,256       $  1,397,943
        Accounts payable and accrued liabilities                                           5,337,970          5,290,531
Shareholder loans and interest                                                             1,380,056            737,208
                                                                                       -------------      -------------
Total Current Liabilities                                                                 12,135,282          7,425,682

Stockholders' Equity
               Common stock, $.01 par value, 50,000,000 shares authorized,
               17,740,620 and 11,590,000 shares issued and 14,739,204 and
               11,410,510 shares outstanding at September 30, 1998,
               and 1997, respectively                                                        177,406            115,900
        Stock subscription receivable                                                       (150,000)          (150,000)
        Additional paid-in capital                                                        49,342,292         24,599,441
        Treasury stock, at cost, 3,001,416 and 179,500 shares, respectively              (17,554,241)          (572,660)
        Accumulated deficit                                                               (9,959,838)        (5,366,056)
        Unrealized loss on investments available for sale                                 (4,406,200)          (205,182)
Cumulative translation adjustment                                                            (72,439)          (356,292)
                                                                                       -------------      -------------
Total Stockholders' Equity                                                                17,376,980         18,065,151
                                                                                       -------------      -------------
                                                                                       $  29,512,262      $  25,490,833
                                                                                       -------------      -------------
                                                                                       -------------      -------------

</TABLE>


The accompanying notes are an integral part of these statements.

<PAGE>


Socrates Technologies Corporation and Subsidiaries

Consolidated Statements of Operations



<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------

Years ended September 30,                                     1998                1997             1996
---------------------------------------------------------------------------------------------------------------
                                                                       (as restated, see Note J)

<S>                                                       <C>                <C>                <C>         
Sales                                                     $ 62,007,968       $ 34,334,698       $ 11,421,295

Cost of Sales                                               53,298,270         29,972,618         10,376,183
                                                          ------------       ------------       ------------

Gross Profit                                                 8,709,698          4,362,080          1,045,112

Expenses
    Selling                                                  2,972,701            862,372            192,397
    Administrative                                           5,545,305          2,650,924          1,430,360
    Depreciation and amortization                              963,885            514,026            117,508
                                                          ------------       ------------       ------------


                                                             9,481,891          4,027,322          1,740,265

Income (Loss) from Operations                                 (772,193)           334,758           (695,153)

Interest and Investment Income                               2,150,537          1,029,336            893,899
Interest and Financing Charges                                (265,811)          (250,818)          (117,506)
                                                          ------------       ------------       ------------



Earnings Before Income Taxes                                 1,112,533          1,113,276             81,240

Income Tax (Benefit) Provision
     Current                                                    30,600             82,649               --
     Deferred                                                 (305,973)           213,922           (376,430)
                                                          ------------       ------------       ------------
Earnings from Continuing Operations                       $  1,387,906       $    816,705       $    457,670
                                                          ------------       ------------       ------------
                                                          ------------       ------------       ------------


Discontinued Operations
        Loss from operations, net of income
             tax benefits of $0, $486,350
             and $410,000, respectively                     (1,250,052)          (707,159)           555,094

        Loss from disposal, including of income
             tax expense of $1,233,000 in 1998              (4,731,636)              --

                                                            (5,981,688)          (707,159)           555,094


                                                          ------------       ------------       ------------
Net Earnings (Loss)                                         (4,593,782)           109,546          1,012,764
                                                          ------------       ------------       ------------
                                                          ------------       ------------       ------------


Earnings (Loss) per Share
             Continuing operations--basic                 $       0.09       $      0.08       $      0.04
             Discontinued operations--basic                      (0.40)            (0.07)             0.05
             Net earnings (loss)--basic                          (0.31)             0.01              0.09
             Continuing operations--diluted                       0.09              0.06              0.03
             Discontinued operations--diluted                    (0.40)            (0.05)             0.05
             Net earnings (loss)--diluted                        (0.31)             0.01              0.08
                                                          ------------       -----------       -----------
</TABLE>

<PAGE>


Socrates Technologies Corporation and Subsidiaries

Consolidated Statements of Stockholders' Equity


<TABLE>
<CAPTION>

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

Years ended September 30,                      1998                                   1997                               1996
---------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>                                     <C>                              <C>



</TABLE>



The accompanying notes are an integral part of these statements.

<PAGE>



Socrates Technologies Corporation and Subsidiaries

Consolidated Statements of Cash Flows


<TABLE>
<CAPTION>

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

Years ended September 30,                                                             1998              1997                1996
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>             <C>                 <C>           
Increase (Decrease) in Cash and Cash Equivalents
Cash Flows from Operating Activities
      Net earnings (loss) from operations                                       $ (4,593,782)   $      109,546      $    1,012,764
                                                                                ------------    --------------      --------------


      Adjustments to reconcile net income (loss) to net cash from operating
      activities:
           Deferred income taxes                                                     371,315           (272,429)          (786,430)
           Depreciation and amortization                                             929,697            777,263            197,814
           Realized (Gain) on sale of investments                                 (1,594,157)              --                 --   
           (Gain) loss on foreign exchange                                              --                 --              (50,359)
           Equity in earnings of joint venture                                       239,970            (49,847)              --
           Loss on disposal of long term assets                                    1,486,401               --                 --
           Changes in operating assets and liabilities, net of effects of
                 acquisitions:
                 (Increase) in accounts receivable                                (8,541,868)          (487,807)        (1,112,781)
                 (Increase) in inventory                                            (176,307)           (95,703)        (1,526,431)
                 Decrease (increase) in tax credits
                      and income taxes receivable                                   (336,665)           369,004            (95,952)
                 Decrease (increase) in prepaid expenses                            (719,427)            84,355           (115,414)
                 (Increase) in other assets                                          (90,559)           (17,528)           (16,964)
                 (Decrease) in advance deposits                                      (75,609)           131,666           (150,854)
                 (Decrease) in accounts payable and
                      accrued liabilities                                            474,008         (1,106,514)          (894,482)
                                                                                ------------    --------------      --------------

Net Cash (Used in) Operating Activities                                          (12,592,795)          (557,994)        (3,539,087)
                                                                                ------------    --------------      --------------
                                                                                ------------    --------------      --------------


Cash Flows from Investing Activities
      Investment purchases                                                        (5,542,707)          (989,626)
      Proceeds from, sales and borrowings on margin
           against investments                                                     4,800,270          4,536,897          2,120,102
      Property, plant and equipment purchases                                       (854,552)          (605,976)          (223,857)
      Capitalized software costs                                                        --             (548,987)          (892,687)
      Loan to acquired company and other                                                --                 --             (300,000)
      Investment in joint venture                                                       --             (216,396)              --
                                                                                ------------     --------------     --------------


Net Cash Provided by (used in) Investing Activities                               (1,596,989)         2,030,518            763,345
                                                                                ------------     --------------     --------------


Cash Flows from Financing Activities
      Net increase in vendor financing/line of credit                              4,372,955            317,053            609,374
      Proceeds from shareholder loans                                              1,400,967             78,996               --
      Payment of shareholder loans                                                  (758,119)              --             (497,269)
      Payment of debt                                                                   --                 --              (19,275)
      Proceeds from issuance of common stock                                            --              522,900            600,000
      Proceeds from exercise of warrants                                          24,547,712             60,000                180
      Purchase of treasury stock                                                 (16,981,581)          (572,660)              --
                                                                                ------------     --------------     --------------

Net Cash Provided by Financing Activities                                         12,581,934            406,289            693,010
                                                                                ------------     --------------     --------------
                                                                                ------------     --------------     --------------
Effect of Exchange Rate Changes on Cash                                              735,047           (487,977)            54,039
                                                                                ------------     --------------     --------------



Net Increase (Decrease) in Cash                                                     (872,803)         1,390,834         (2,029,146)

Cash (Cash Overdraft) at Beginning of Year                                         1,704,724            313,890          2,343,036
                                                                                ------------     --------------     --------------


Cash at End of Year                                                            $     831,921      $   1,704,724      $    313,890
                                                                                ------------    --------------      --------------
                                                                                ------------     --------------     --------------


Supplemental Disclosures:
      Income Taxes Paid                                                        $     131,527      $      85,434      $        --
      Interest Paid                                                            $     223,353      $     261,754      $     80,220

                                                                                ------------     --------------     --------------
</TABLE>


The accompanying notes are an integral part of these statements.

<PAGE>

MVSI, Inc. and Subsidiaries


Consolidated Statements of Stockholders' Equity (Deficit)


Years ended September 30, 1998, 1997 and 1996

<TABLE>
<CAPTION>

                                                                                  Stock        Additional                     
                                                        Common Stock          Subscription      Paid-In         Accumulated   
                                                    Shares         Amount      Receivable       Capital          (Deficit)    
                                                 ----------   -------------  --------------  ------------    --------------   
<S>                                            <C>         <C>           <C>              <C>            <C>           
Balance, October 1, 1995 ...................     10,140,000   $    101,400   $   (150,000)   $ 17,085,475    $ (6,488,366)
Acquisition--JMR Distributors, Inc. ........        100,000          1,000           --           508,161            --   
Acquisition--Socrates, Inc. ................        350,000          3,500           --         2,385,250            --   
Net Earnings ...............................           --             --             --              --         1,012,764
Warrant Purchase ...........................           --             --             --               180            --   
Private Placement Transactions .............        150,000          1,500           --           598,500            --   
Change in Cumulative Translation Adjustment            --             --             --              --              --   
Unrealized Gain (Loss) from Investments ....           --             --             --              --              --   
                                                 ----------   -------------  --------------  ------------    --------------   
Balance, September 30, 1996 ................     10,740,000        107,400       (150,000)     20,577,566      (5,475,602)
Acquisition--Expert, Inc. ..................        300,000          3,000           --         1,064,475            --   
Acquisition--Technet Computer Services, Inc.        400,000          4,000           --         2,376,000            --   
Net Earnings ...............................           --             --             --              --           109,546
Warrant Conversion .........................         15,000            150           --            59,850            --   
Issuance of Common Stock ...................        135,000          1,350           --           521,550            --   
Purchase of Treasury Stock .................           --             --             --              --              --   
Change in Cumulative Translation Adjustment            --             --             --              --              --   
Unrealized Gain (Loss) from Investments ....           --             --             --              --              --   
                                                 ----------   -------------  --------------  ------------    --------------   
Balance, September 30, 1997 ................     11,590,000   $    115,900   $   (150,000)   $ 24,599,441    $ (5,366,056)
Net Loss ...................................           --             --             --              --        (4,593,782)
Warrant Redemption & Exercise ..............      6,086,928         60,869           --        24,447,586            --   
Issuance of Common Stock ...................         63,692            637           --           313,363            --   
Purchase of Treasury Stock .................           --             --             --              --              --   
Issuances of Treasury Stock ................           --             --             --          (146,008)           --   
Tax Benefit From Option Exercises ..........           --             --             --           127,910            --   
Change in Cumulative Translation Adjustment            --             --             --              --              --   
Unrealized Gain (Loss) from Investments ....           --             --             --              --              --   
                                                 ----------   -------------  --------------  ------------    --------------   
Balance, September 30, 1998 ................     17,740,620   $    177,406   $   (150,000)   $ 49,342,292    $ (9,958,838)
                                                 ----------   -------------  --------------  ------------    --------------   
                                                 ----------   -------------  --------------  ------------    --------------   

</TABLE>

<TABLE>
<CAPTION>

                                                                                Unrealized       Cummulative 
                                                        Treasury Stock        Gain (Loss) on     Translation 
                                                     Shares        Amount       Investments       Adjustment        Total      
                                                  ------------ -------------  ---------------  --------------  --------------
<S>                                              <C>           <C>             <C>             <C>               <C>
Balance, October 1, 1995 ...................           --      $       --      $     --       $    56,301    $ 10,604,810
Acquisition--JMR Distributors, Inc. ........           --              --            --              --           509,161
Acquisition--Socrates, Inc. ................           --              --            --              --         2,388,750
Net Earnings ...............................           --              --            --              --         1,012,764
Warrant Purchase ...........................           --              --            --              --               180
Private Placement Transactions .............           --              --            --              --           600,000
Change in Cumulative Translation Adjustment            --              --            --            50,359          50,359
Unrealized Gain (Loss) from Investments ....           --              --         (59,786)           --           (59,786)
                                                 ----------   -------------  --------------  ------------    --------------   
Balance, September 30, 1996 ................           --              --         (59,786)   $    106,660      15,106,238
Acquisition--Expert, Inc. ..................           --              --            --              --         1,067,475
Acquisition--Technet Computer Services, Inc.           --              --            --              --         2,380,000
Net Earnings ...............................           --              --            --              --           109,546
Warrant Conversion .........................           --              --            --              --            60,000
Issuance of Common Stock ...................           --              --            --              --           522,900
Purchase of Treasury Stock .................       (179,500)       (572,660)         --              --          (572,660)
Change in Cumulative Translation Adjustment            --              --            --          (462,952)       (462,952)
Unrealized Gain (Loss) from Investments ....           --              --        (145,396)           --          (145,396)
                                                 ----------   -------------  --------------  ------------    --------------   
Balance, September 30, 1997 ................       (179,500)   $   (572,660)   $ (205,182)   $   (356,292)   $ 18,065,151
Net Loss ...................................           --              --            --              --        (4,593,782)
Warrant Redemption & Exercise ..............       (683,674)     (4,333,437)         --              --        20,175,018
Issuance of Common Stock ...................           --              --            --              --           314,000
Purchase of Treasury Stock .................     (2,258,792)    (13,045,072)         --              --       (13,045,072)
Issuances of Treasury Stock ................        120,550         396,928          --              --           250,920
Tax Benefit From Option Exercises ..........           --              --            --              --           127,910
Change in Cumulative Translation Adjustment            --              --            --           283,853         283,853
Unrealized Gain (Loss) from Investments ....           --              --      (4,201,018)           --        (4,201,018)
                                                 ----------   -------------  --------------  ------------    --------------   
Balance, September 30, 1998 ................     (3,001,416)   $(17,554,241)  $(4,406,200)   $    (72,439)   $ 17,376,980
                                                 ----------   -------------  --------------  ------------    --------------   
                                                 ----------   -------------  --------------  ------------    --------------   

</TABLE>



<PAGE>






Socrates Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements

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

September 30, 1998, 1997 and 1996
------------------------------------------------------------------------------


NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


     Basis of Presentation and Nature of Operations

     The accompanying consolidated financial statements include the accounts of
     Socrates Technologies Corporation (a Delaware corporation), and its
     wholly-owned subsidiaries (collectively referred to as the "Company").
     Significant intercompany accounts and transactions have been eliminated in
     consolidation.

     Socrates Technologies Corporation ("Socrates" or the "Company") is a
     broad-based information technology solutions company whose business is
     focused on the assembly, integration and marketing of built to order or
     proprietary computer systems, and training on the use of computer software
     programs to individuals, corporations and the government. In addition, the
     Company also provides customized software development, including turnkey
     system development and product development, and maintenance services to
     corporate and government customers. In March 1998, the Company discontinued
     its machine vision welding and scanner business conducted by its wholly
     owned subsidiary, MVS Modular Vision Systems, a Canadian corporation. to
     focus on what management believes to be the segments of its business which
     offer greater potential for growth in shareholder value.

     Socrates, a Delaware corporation, was incorporated in the State of Delaware
     on November 6, 1998. Upon the merger of Socrates with MVSI, Inc., a 
     Delaware Corporation incorporated on April 12, 1994, on November 30, 1998, 
     the name of MVSI, Inc., the surviving corporation, was changed to Socrates 
     Technologies Corporation. Unless the context otherwise requires, the 
     "Company" or "Socrates" refers to Socrates Technologies Corporation, its 
     predecessor and its subsidiaries. The Company maintains its executive 
     offices and principal facilities in Maryland with other sales and 
     marketing offices in the Middle Atlantic and Northeastern United States.

     Revenue Recognition

     Product sales are recognized upon shipment. Typical terms of sale do not
     provide the customer with the right of return except for defective
     products, which are covered either by the Company's warranty or by the
     warranty of the original equipment manufacturer in instances where the
     Company acts as a distributor. Revenue from services is generally
     recognized as the services are rendered using contractual billing rates.
     Revenue billed in advance of customer acceptance is deferred until such
     time as acceptance occurs. Amounts received from customers prior to
     shipment are recorded as deposit liabilities.

     Cash and Cash Equivalents

     Cash and cash equivalents include cash and money market accounts.



<PAGE>




Socrates Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements--Continued

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

September 30, 1998, 1997 and 1996
------------------------------------------------------------------------------


NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued


     Investments

     Investments consist of a short-term U.S. treasury mutual fund, and the
     Company's investment in common stock of e-Net, Inc. ("e-Net"), a
     publicly-held Germantown, Maryland based manufacturer of data-telephony
     equipment, which is accounted for using the cost method. The market value
     of the short-term U.S. treasury mutual fund and the Company's investment in
     the common stock of e-Net, Inc. at September 30, 1998, was $304,000 and
     $1,547,000, respectively. In accordance with Statement of Financial
     Accounting Standards No. 115, the Company has classified these investments
     as available for sale, and recorded the investments at market value, net of
     margin loans, at September 30, 1998 and 1997 and unrealized gains and
     losses are reported as an element of stockholders' equity. The unrealized
     loss from investments available for sale for the years ended September 30,
     1998 and 1997 was $4,406,200 and $205,182. The unrealized loss as of
     September 30, 1998 relates principally to a significant decrease in the
     value of e-Net, Inc. shares late in fiscal 1998. During the year ended
     September 30, 1998, the Company sold 130,000 shares of e-Net, Inc. stock
     for gross proceeds of $2,368,000, generating a realized gain of $1,594,000.
     The Company's policy is to determine the cost associated with shares sold
     on a first-in, first-out basis (FIFO).

     The Company continues to hold 450,000 shares of e-Net stock. Like other
     technology stocks, the value of e-Net common stock is highly volatile.
     Therefore, the Company can make no assurances that the unrealized losses
     suffered can be recovered.

     Accounts Receivable

     Accounts receivable is stated at the unpaid balances, less allowance on
     collectible accounts. Management periodically reviews its outstanding
     accounts receivable to assess collectibility of balances based on past
     experience and evaluation of current adverse situations which may affect
     collectibility of receivables. As of September 30, 1998 and 1997,
     management has established an allowance for doubtful accounts of
     approximately $204,000 and $71,000, respectively.

     Inventory Valuation

     Inventory is valued at the lower of cost and market. Cost is determined on
     a first-in, first-out (FIFO) basis. Management evaluates obsolete and
     slow-moving inventory at each reporting date and either excludes such
     inventory from the valuation or provides for a necessary reserve to record
     inventory at lower of cost or market.

     Property and Equipment

     Property and equipment are carried at cost, net of an allowance for
     accumulated depreciation and amortization. Depreciation is computed on
     equipment and furniture, principally using the double-declining balance
     method over estimated lives ranging from five to seven years. Demonstration
     and research equipment is depreciated on a straight-line basis over a
     four-year period. Leasehold improvements are amortized on a straight-line
     basis over the shorter of the lease term or estimated useful lives of the
     related assets.


<PAGE>




Socrates Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements--Continued

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

September 30, 1998, 1997 and 1996
-------------------------------------------------------------------------------


NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued


     Capitalized Software Costs

     The Company acquired certain computer software in connection with the
     Technet acquisition which is being amortized over a two year period, the
     expected remaining economic life of the related products. In prior years,
     certain software development costs not reimbursed by the Canadian
     government incurred by the Company's discontinued machine vision business
     were capitalized. In connection with the discontinuance of the machine
     vision business in fiscal 1998, all such capitalized costs were written
     off. Amortization expense associated with discontinued operations for the
     years ended September 30, 1997 and 1996, was $209,213 and $-0-,
     respectively. Amortization expense related to computer software acquired in
     the Technet acquisition was $135,000 and $33,750 for the years ended
     September 30, 1998 and 1997, respectively.

     Goodwill

     Goodwill represents the excess of cost over the fair value of net assets
     acquired in business combinations accounted for as purchases. Goodwill is
     being amortized on the straight-line method over ten years. Amortization
     expense charged to operations for the fiscal years 1998, 1997 and 1996 was
     $614,304, $382,511 and $107,889, respectively. Management regularly reviews
     the carrying value of goodwill against anticipated cash flows of each
     business in order to evaluate recoverability. It is reasonably possible
     that estimates of anticipated future gross profits of the acquired
     businesses will be reduced significantly in the near term. As a result, the
     carrying amount of goodwill may be reduced materially in the near term.

     Income Taxes

     Deferred taxes are recognized, subject to a valuation allowance, for
     temporary differences in the timing of recognition of certain income and
     expenses for financial statement and income tax purposes using the
     liability method.

     Earnings Per Share

     The Financial Accounting Standards Board recently issued Statement of
     Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share,"
     effective for periods ending after December 15, 1997. This Statement
     establishes standards for computing and presenting earnings per share
     (EPS). It requires dual presentation of basic and diluted EPS on the face
     of the income statement for all entities with complex capital structures
     and requires a reconciliation of the numerator and denominator of the basic
     EPS computation to the numerator and denominator of the diluted EPS
     computation. Basic EPS excludes dilution and is computed by dividing income
     available to common stockholders by the weighted-average number of common
     shares outstanding for the period. Diluted EPS reflects the potential
     dilution that could occur if securities or other contracts to issue common
     stock were exercised or converted into common stock or resulted in the
     issuance of common stock that then shared in the earnings of the entity.


<PAGE>





Socrates Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements--Continued

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

September 30, 1998, 1997 and 1996
-------------------------------------------------------------------------------


NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued


      The computations of basic and fully diluted earnings (loss) per share are
as follows:

<TABLE>
<CAPTION>

                                                 1998               1997              1996
---------------------------------------------------------------------------------------------
<S>                                           <C>              <C>              <C>         

Numerator
     Earnings from continuing operations       $ 1,387,906      $   816,705      $   457,670
                                              -----------      -------------     ------------


Denominator
     Denominator for basic earnings per
           share--weighted average shares       14,883,572       10,799,832       10,249,307
                                              -----------      -------------     ------------


Effect of diluted securities
     employee stock options and warrants           259,598        2,010,383        3,031,429
                                              -----------      -------------     ------------


Denominator for diluted earnings per
     share--adjusted weighted average
     shares and assumed conversions             15,143,170       12,810,215       13,280,736
                                              -----------      -------------     ------------


Basic earnings per share from
     continuing operations                    $      0.09      $      0.08      $       0.04
                                              -----------      -------------     ------------


Diluted earnings per share from

     continuing operations                    $      0.09      $     0.06       $       0.03
                                              -----------      ----------       ------------

</TABLE>



For additional information regarding stock options, see Note G. Certain options
outstanding in each period were not included in the computation of diluted
earnings per share because the options' exercise price was greater than the
average market price of the underlying common stock for the year and, therefore,
the effect would be antidilutive.

Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate the
value:

The carrying amount approximates fair value for cash and cash equivalents,
accounts receivable, notes receivable, accounts payable, line of credit and
other accrued liabilities.

Investment securities classified as current assets are based on quoted market
price.



<PAGE>





Socrates Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements--Continued

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

September 30, 1998, 1997 and 1996
-------------------------------------------------------------------------------


NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued


     Translation of Foreign Currency and Concentration of Credit Risk

     A portion of the Company's operations are transacted in Canadian dollars.
     The balance sheet of Canadian operations is translated into U.S. dollars at
     the year-end rate of exchange, and all statement of operations items are
     translated at the weighted-average exchange rates for the year. The
     resulting translation adjustments are made directly to a separate component
     of stockholders' equity.

     As of September 30, 1998, approximately 54% of accounts receivable or $7.9
     million was due from a single customer. Otherwise, the Company's customers
     are not generally concentrated with any one customer or in any specific
     geographic region. As a matter of policy, the Company requires its larger
     customers to furnish letters of credit (and in some instances, advance
     deposits) to minimize credit risk to the Company after shipment of the
     products. For other customers, the Company reviews a customer's credit
     history before extending credit.

     Stock Options

     As permitted by generally accepted accounting standards, the Company
     accounts for the value of stock options granted to employees in accordance
     with Accounting Principles Board Opinion 25 (APB 25), whereby if stock
     options exercise prices are set at fair market value or above at the date
     of grant, no compensation expense is recognized at that date. While the
     Company continues to apply the provisions Opinion 25, pro forma disclosures
     of net income, and earnings per share, as if the fair value based method of
     accounting defined in SFAS 123 have been presented in these footnotes.

     Using Estimates in Preparing Financial Statements

     In preparing financial statements in conformity with generally accepted
     accounting principles, management is required to make estimates and
     assumptions that affect the reported amounts of assets and liabilities and
     the disclosure of contingent assets and liabilities at the date of the
     financial statements and revenue and expenses during the reporting period.
     Actual results could differ from those estimates.

     Reclassifications

     Certain prior year amounts have been reclassified to conform to the current
     year presentation.


<PAGE>





Socrates Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements--Continued

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

September 30, 1998, 1997 and 1996
------------------------------------------------------------------------------


NOTE B--INVENTORY


      Inventory consists of the following at September 30:

<TABLE>
<CAPTION>

                                   1998               1997
-------------------------------------------------------------------------------

<S>                           <C>                <C>         
Raw materials                 $   1,396,106      $  1,464,965
Work in progress                    213,561           407,476
Finished goods                    2,016,156         1,746,589
                              -------------      ------------

                              $   3,625,823      $  3,619,030
                              -------------      ------------

</TABLE>

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

NOTE C--PROPERTY AND EQUIPMENT

Property, plant and equipment consist of the following at September 30:

<TABLE>
<CAPTION>


                                                    1998                 1997
-------------------------------------------------------------------------------

<S>                                             <C>                 <C>        
Autos and trucks                                $   142,405         $   124,384
Furniture and office equipment                    1,374,418             863,058
Manufacturing equipment                              11,463              11,027
Research and development equipment                  272,373             319,272
Purchased software                                  386,148             152,640
Leasehold improvements                               72,190              81,595
                                                -----------         -----------


                                                  2,258,997           1,551,976
Less accumulated depreciation                      (883,520)           (567,686)
                                                -----------         -----------


                                                $ 1,375,477         $   984,290
                                                -----------         -----------

</TABLE>



<PAGE>





Socrates Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements--Continued

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

September 30, 1998, 1997 and 1996
-------------------------------------------------------------------------------


NOTE D--VENDOR FINANCING ARRANGEMENT


     The Company maintains a wholesale financing agreement with a finance
     company for inventory financing for one of its subsidiaries. The agreement
     provides the Company with the ability to pay for certain scheduled
     inventory purchases on terms similar to those that would be provided by
     third party vendors. The amounts due to the finance company under the
     agreement at September 30, 1998 and 1997, amounted to $5,403,768 and
     $208,082, respectively. The agreement is subject to annual renewal and is
     collateralized by all present and future accounts receivable and inventory
     of the Company's subsidiary. In addition, the Company must comply with
     certain financial and reporting covenants. As of September 30, 1998, the
     Company was in compliance with all of these covenants.

     On October 21, 1998, the Company entered into an accounts receivable credit
     facility with the same financing company to provide funding for the
     short-term financing needs of the Company. The maximum amount available
     under this agreement is $6,000,000. The Company has pledged all of its
     inventory, receivables, equipment, fixtures and all its intangible assets
     to secure the facility. Interest is payable monthly at the prime rate as
     published by the Chase Manhattan Bank. The facility contains certain
     covenants, the most restrictive of which requires the Company to maintain a
     tangible net worth including subordinated debt of $1,000,000; a ratio of
     debt minus subordinated debt not to exceed 5 to 1; and to provide the
     financing company with weekly borrowing base certificates in order to
     access the unused portion of the credit facility. The Company has
     renegotiated its existing wholesale financing agreement in connection with
     the establishment of this credit facility. The maximum amount available
     under the combined agreements is $10,000,000.


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


NOTE E--ACCOUNTS PAYABLE AND ACCRUED LIABILITIES


      Accounts payable and accrued liabilities consist of the following at
September 30:

<TABLE>
<CAPTION>


                                                         1998            1997
-------------------------------------------------------------------------------

<S>                                                  <C>              <C>       
Vendor trade payables                                $3,859,853       $3,054,734
Salaries and commissions payable                        913,524        1,189,211
Other accrued liabilities                               564,593        1,046,586
                                                     ----------       ----------


                                                     $5,337,970       $5,290,531
                                                     ----------       ----------

</TABLE>



<PAGE>





Socrates Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements--Continued

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

September 30, 1998, 1997 and 1996
-------------------------------------------------------------------------------


NOTE F--INCOME TAXES


      The income tax (benefit) provision consists of the following at September
30:
<TABLE>
<CAPTION>

                                                                                1996           1997              1998
---------------------------------------------------------------------------------------------------------------------------------

<S>                                                                      <C>               <C>            <C>            
Federal
     Current                                                              $      --       $       --       $          --
     Deferred                                                                 67,202          342,091         (2,347,617)
                                                                          -----------       ----------     -------------- 


                                                                              67,202          342,091         (2,347,617)

State
     Current                                                                      --           82,648             30,600
     Deferred                                                                  9,883           50,307           (345,238)

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

                                                                               9,883          132,955           (314,638

Increase (decrease) in valuation
     Allowance                                                              (453,515)        (178,476)         2,386,882
                                                                         -----------       ----------     -------------- 


Net Provision                                                            $  (376,430)      $  296,570     $     (275,373)
                                                                         -----------       ----------     -------------- 

</TABLE>


A reconciliation of the income tax provision at the federal statutory rate
to the income tax provision at the effective rate is as follows as of September
30:

<TABLE>
<CAPTION>


                                                1996            1997           1998
----------------------------------------------------------------------------------------

<S>                                          <C>            <C>            <C>        
Tax (benefit) at U.S. Federal statutory
     rates                                   $    27,622    $   378,514    $   377,946

Increase (decrease) resulting from
     State income taxes                             --           90,061         55,580
     Goodwill amortization                       110,582        164,916        292,229
     Change in valuation allowance against
           deferral tax asset                   (453,515)      (178,476)     2,386,882
     Tax benefit associated with write off
           of loans to foreign subsidiary           --             --       (3,523,948)
     Other permanent differences                 (61,119)      (158,445)       135,938
                                            ------------    -----------   ------------ 


Income tax provision                        $   (376,430)   $   296,570   $   (275,373)
                                            ------------    -----------   ------------ 

</TABLE>





<PAGE>





Socrates Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements--Continued

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

September 30, 1998, 1997 and 1996
-------------------------------------------------------------------------------


NOTE F--INCOME TAXES--Continued


     The tax effect of temporary differences between the financial statement
     amounts and tax bases of assets and liabilities that give rise to a
     deferred tax asset are as follows at September 30:


<TABLE>
<CAPTION>

                                                    1997              1998
------------------------------------------------------------------------------


<S>                                              <C>            <C>        
Net operating losses                             $   220,031    $ 3,201,183
Accrued compensation                                 658,905        347,685
Accounts receivable and inventory reserves            26,416         63,259
Other                                               (139,234)       (25,245)
Valuation allowance                                     --       (2,386,882)
                                                 -----------    -----------


Net deferred tax asset - continuing operations   $   766,118    $ 1,200,000
                                                 -----------    -----------

</TABLE>


     The above table does not reflect the tax effect of unrealized losses on
     available for sale securities classified in stockholders' equity as of
     September 30, 1998, amounting to approximately $1,700,000. This tax effect
     has been fully reserved by establishing an additional $1,700,000 valuation
     allowance at September 30, 1998. In addition, the table excludes tax
     benefits available in Canada as discussed below.

     Management regularly reviews for recoverability deferred tax assets and
     adjusts, if necessary, a valuation allowance against such assets. In
     determining the amount of the valuation allowance recorded at September 30,
     1998, management considered historical taxable income generated by
     continuing operations, adjusted for non-recurring gains and losses and
     known charges which are not deductible such as goodwill amortization, and
     for the anticipated impact of management's operating plans. The recovery of
     the deferred tax asset at September 30, 1998 is dependent upon the Company
     generating taxable income in the future sufficient to realize the
     associated tax benefits. In the event taxable income is not generated at
     sufficient levels, write downs of the deferred tax asset may be necessary.

     The Company has net operating loss carry forwards available to offset U.S.
     taxable income of approximately $8,000,000 at September 30, 1998, expiring
     in 2018. While the future use of these net operating loss carryforwards has
     not been a significantly affected by the Company's past acquisitions, in
     the event a change in control occurs in the future, use of all or a portion
     of the U.S. carryforwards could be affected. In addition, the Company has
     net operating loss and research expenditure carryforwards available to
     offset future taxable income generated in Canada. However, with the
     discontinuance of the Company's business in Canada in the past year, use of
     such Canadian tax benefits is dependent upon the Company conducting certain
     lines of business in Canada in the future which management believes is
     doubtful at the present time.


<PAGE>





Socrates Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements--Continued

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

September 30, 1998, 1997 and 1996
-------------------------------------------------------------------------------


NOTE G--STOCKHOLDERS' EQUITY


     Warrants

     In December 1997, the Company completed a redemption of the above warrants
     wherein certain Class A warrant holders exercised their warrants into
     5,086,928 shares of common stock and the Class B warrant holder exercised
     its warrant into 1,000,000 shares of common stock, resulting in net
     proceeds to the Company of approximately $24.5 million. In connection with
     the redemption, the Company purchased and exercised, prior to the deadline,
     683,654 warrants for approximately $4.3 million in cash, resulting in net
     proceeds to the Company of approximately $20.2 million.

     Stock Option Plan

     In April 1997, the Company adopted and the stockholders ratified the 1997
     Stock Option Plan (the "Stock Option Plan"), under which options to
     purchase shares of the Company's common stock have been granted at exercise
     prices equal to the market price of the stock at the date of grants, with
     the exception of certain stock options granted to a greater than 10%
     stockholder with a required exercise price of 110% of fair market value of
     the stock at the date of grant.

     The plan authorizes the Company to grant options to eligible persons to
     purchase up to 1,000,000 shares of common stock. Options vest over a
     two-year period from the date of grant. The maximum term of the options is
     ten years from the grant date.

     The Company applies Accounting Principles Board Opinion No. 25 and related
     interpretations in accounting for its stock option plan. Accordingly, no
     compensation expense has been recognized related to the granting of such
     options. Had the Company recognized compensation expense based upon the
     fair value of the options at the grant dates consistent with SFAS 123, the
     Company's earnings and earnings per share would have changed to the pro
     forma amounts indicated below:


<TABLE>
<CAPTION>

                                                                   1998            1997
-----------------------------------------------------------------------------------------

<S>                                                          <C>             <C>         
Earnings from continuing operations:
           As reported                                       $   1,387,906   $    816,705
           Pro Forma                                         $     604,342   $    580,278
Earnings Per Share, from continuing operations:
           As reported                                       $        0.09   $       0.06
           Pro Forma                                         $        0.04   $       0.05

</TABLE>


     The fair value of each option grant was estimated on the date of the grant
     using the Black-Scholes options-pricing model with the following weighted
     average assumptions used for grants in 1998 and 1997, respectively:
     expected volatility 84% and 74%, risk free interest rate 5.36% and 5.89%,
     and expected life of options of 2.6 years.


<PAGE>





Socrates Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements--Continued

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

September 30, 1998, 1997 and 1996
------------------------------------------------------------------------------


NOTE G--STOCKHOLDERS' EQUITY--Continued


<TABLE>
<CAPTION>


<S>                                                             <C>    
Following is a summary of stock option transactions:

      Outstanding, October 1, 1996                              $    --

           Granted during the year (at prices
           ranging from $2.94 to $7.00 per share)                924,000
           Forfeited during the year                                  --
           Exercised during the year                                  --

           Outstanding, September 30, 1997                      924,000
                                                              ---------


            Granted during the year (at prices ranging from
                $1.75 to $6.06 per share)                       100,000

            Forfeited during the year                          (180,000)
            Exercised during the year                           (85,600)
            Outstanding, September 30, 1998                     758,400
                                                              ---------


 Eligible, end of year for exercise
         currently (at prices ranging from
         $2.94 to $7.00 per share)                              336,650
                                                              ---------


Weighted average stock option price                           $    4.17
                                                              ---------


Weighted average fair value of options
granted during fiscal:  1997                                  $    3.16
                        1998                                  $    1.34


</TABLE>


     Stock Purchase Plan

     In April 1997, the Company adopted and the stockholders ratified the 1997
     Employee Stock Purchase Plan (the "Employee Purchase Plan"), which
     authorizes eligible employees of the Company to purchase up to 250,000
     shares of the Company's common stock for 85% of the fair market value of
     the common stock on each purchase date. As of September 30, 1998, no shares
     of common stock had been purchased by employees under this plan.


<PAGE>




Socrates Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements--Continued

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

September 30, 1998, 1997 and 1996
-------------------------------------------------------------------------------


NOTE H--COMMITMENTS AND CONTINGENT LIABILITIES


     Leases

     The minimum rental payments payable under a long-term lease for premises,
     exclusive of certain operating costs determined annually, and for the lease
     of equipment at September 30, 1998, are approximately as follows:

<TABLE>
<CAPTION>


 Year ending September 30,
-------------------------------------------------------------------------------
<S>                         <C>    
     1999                   $       834,634
     2000                           612,180
     2001                           509,693
     2002                           457,727
     2003                           162,326
                           ----------------



                           $      2,576,560
                           ----------------

</TABLE>


     Rent expense was $663,000, $490,000 and $252,000 for the years ended
     September 30, 1998, 1997, and 1996, respectively.

     Employment Agreements

     The Company has entered into separate employment agreements with five of
     its officers, which are subject to certain termination rights by both the
     Company and the officers. In addition to salary commitments by the Company,
     these officers are eligible to receive all employee benefits which may from
     time to time be awarded or be made available. Certain of these agreements
     also provide for bonuses to be computed and paid based upon the performance
     of the operations under their management or based upon amounts determined
     at the discretion of the Board of Directors.

     Legal Matters

     In the ordinary course of conducting business, the Company is subject, from
     time to time, to certain legal proceedings concerning the Company's
     business. Management does not believe that any current legal proceedings
     will have a material impact on the Company's business or its financial
     statements.

     Transactions with Stockholders and Affiliates

     The Company has loans payable to two officer/stockholders outstanding as of
     September 30, 1998. Loans to one such officer/stockholder have been loaned
     under two separate loan agreements bearing interest at 9% and 8%,
     respectively, and are due on demand and carry a balance, including accrued
     interest at September 30, 1998 of $1,380,056. In 1998, the Company also
     advanced funds to another officer/stockholder. The outstanding loan amount,
     which is payable on demand and bears interest at 6.5%, was $150,000 at
     September 30, 1998.

     The Company subcontracted certain software development services to an
     affiliated development company in India, which is partially owned by the
     former owner and current President and CEO of the subsidiary of $262,000
     and $87,125 during the years ended September 30, 1998 and 1997,
     respectively.


<PAGE>




Socrates Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements--Continued

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

September 30, 1998, 1997 and 1996
-------------------------------------------------------------------------------


NOTE I--SEGMENT INFORMATION


     The Company provides financial information for segment reporting purposes
     for two lines of business representing its continuing operations in fiscal
     1998 and 1997. Continuing operations are represented by the Company's
     Computer Systems Sales, Integration and Training business and it's Software
     Development business. For the year ended September 30, 1996, the Company
     continuing operations were in a single segment.

     For the years ended September 30, 1998 and 1997, the Company had one
     customer that accounted for approximately 30% and 21% of its total revenue.
     For the year ended September 30, 1996, the Company had one customer that
     accounted for approximately 10 percent of its total revenue. In addition,
     approximately, 15% and 19% of the Company's sales in fiscal years 1997 and
     1996, respectively, were to customers outside North America. The Company
     had no material export sales in fiscal 1998. In addition, while a portion
     the Company's sales in the past have been from customers in Asia, the
     Company's continuing operations are conducted in the United States.

     Financial information relating to the Company's industry segments for
     continuing operations for the years ended September 30, 1998 and 1997, is
     as follows:


<TABLE>
<CAPTION>

                                                                       1998
                                     --------------------------------------------------------------------------------
                                     Computer
                                     System Sales,
                                     Integration             Software            General
                                     and Training          Development          Corporate                    Total
---------------------------------------------------------------------------------------------------------------------

<S>                                <C>                 <C>                 <C>                  <C>              
      Sales to unaffiliated
           customers               $  57,221,898       $   4,786,070       $           -        $      62,007,968
      Operating profit (loss)           (163,242)            297,785             (906,736)               (772,193)
      Net income (loss)                 (569,012)            265,246            1,691,672               1,387,906
      Identifiable Assets             21,704,084           3,994,147            2,012,433              27,711,589

</TABLE>





<TABLE>
<CAPTION>


                                                                           1997
                                --------------------------------------------------------------------------------------
                                Computer
                                System Sales,
                                  Integration                   Software            General
                                And Training                 Development           Corporate                Total
---------------------------------------------------------------------------------------------------------------------

<S>                               <C>                   <C>                  <C>                    <C>            
      Sales to unaffiliated
           customers              $    33,755,491       $      579,207       $              -       $    34,334,698
      Operating profit (loss)           1,493,644              (91,302)            (1,067,585)              334,757
      Net income (loss)                 1,115,359              (95,953)              (202,701)              816,705
      Identifiable Assets              12,316,043            2,991,400              3,142,449            18,449,892

</TABLE>





<PAGE>


Socrates Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements--Continued

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

September 30, 1998, 1997 and 1996
-------------------------------------------------------------------------------


NOTE J--DISCONTINUED OPERATIONS


     In March 1998, the Company discontinued its machine vision welding and
     scanner business conducted from its wholly owned subsidiary, MVS Modular
     Vision Systems, a Canadian corporation, to allow the Company to focus on
     what management believes to be the segments of its business which offer
     greater potential for growth in shareholder value. MVS designs, develops,
     manufactures and markets state-of-the-art, proprietary vision-based robotic
     and sensor products and systems for productivity improvement and quality
     control applications in the manufacturing workplace. As of December 1998,
     the Company continues to market for sale the MVS assets. While management
     is confident of its ability to sell this business in the near future based
     upon ongoing discussions with potential buyers, no assurances can be given
     that these efforts will result in definitive agreements being reached or
     that the Company will obtain consideration in any such sale sufficient to
     recoup any portion of its investment.

     In connection with the decision to discontinue the machine vision business,
     the Company recorded a loss on the discontinuance of approximately
     $3,400,000, including tax expense associated with writing off deferred tax
     assets of $1,233,000, reflecting write-downs of inventories, capitalized
     software costs, and other assets to estimated net realizable value.

     In addition, in March 1998, the Company accrued $365,000 as an estimate of
     operating losses to be incurred after the decision was made to dispose of
     the machine vision business up to the date of disposal. In the third and
     fourth quarters of fiscal 1998, the Company added approximately $250,000 to
     this provision for operating losses. As of September 30, 1998, all loss
     accruals have been utilized. Management does not anticipate incurring any
     additional losses after September 30, 1998.

     As a result of the discontinuance, the accompanying financial statements
     have been restated to reflect these operations as discontinued. The
     condensed balance sheet as of September 30, 1998, and the statement of
     operations of the machine vision business for the last three fiscal years
     is as follows:


<TABLE>
<CAPTION>

                                                                    September 30
Condensed Balance Sheet                                                   1998
-------------------------------------------------------------------------------
<S>                                                                   <C>       
Cash                                                                  $   65,519
Accounts receivable, net                                                 390,445
Inventories, net                                                         793,836
Other assets                                                             296,498
Property and equipment, net                                              254,375
                                                                      ----------


Total assets                                                           1,800,673

Accounts payable and accrued
     liabilities                                                         413,243
                                                                      ----------


Net assets                                                            $1,387,430
                                                                      ----------

</TABLE>




<PAGE>



Socrates Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements--Continued

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

September 30, 1998, 1997 and 1996
-------------------------------------------------------------------------------


NOTE J--DISCONTINUED OPERATIONS - Continued

<TABLE>
<CAPTION>

      Condensed income statements:

                                          1998         1997            1996
-------------------------------------------------------------------------------

<S>                                 <C>            <C>            <C>        
Sales                               $ 1,708,000    $ 5,551,000    $ 4,566,000
Costs and expenses                    2,946,000      6,744,000      4,421,000
Income (loss) before income taxes    (1,238,000)    (1,193,000)       145,000
Income tax provision                    (12,000)       486,000        410,000
                                    -----------    -----------    -----------


Net income (loss)                  $ (1,250,052)   $  (707,000)   $   555,000

</TABLE>


NOTE K--ACCOUNTING STANDARDS

     Reporting Comprehensive Income

     The Financial Accounting Standards Board recently issued Statement of
     Financial Accounting Standards No. 130 (SFAS 130), "Reporting Comprehensive
     Income," effective for fiscal years beginning after December 15, 1997. This
     Statement establishes standards for reporting and display of comprehensive
     income and its components (revenues, expenses, gains, and losses) in a full
     set of general-purpose financial statements. This Statement requires that
     all items that are required to be recognized under accounting standards as
     components of comprehensive income be reported in a financial statement
     that is displayed with the same prominence as other financial statements.
     SFAS 130 does not require a specific format for that financial statement
     but requires that an enterprise display an amount representing total
     comprehensive income for the period in that financial statement. The
     Statement requires that an enterprise classify items of other comprehensive
     income by their nature in a financial statement and display the accumulated
     balance of other comprehensive income separately from retained earnings and
     additional paid-in capital in the equity section of a statement of
     financial position. Reclassification of financial statements for earlier
     periods provided for comparative purposes is required. The Company will
     comply with the disclosure requirements of SFAS 130 in fiscal year 1999.

     Disclosures about Segments of an Enterprise and Related Information

     The Financial Accounting Standards Board issued Statement of Financial
     Accounting Standards No. 131 (SFAS 131), "Disclosures about Segments of an
     Enterprise and Related Information," effective for periods beginning after
     December 15, 1997. This Statement establishes standards for the way that
     public business enterprises report information about operating segments in
     annual financial statements and requires that those enterprises report
     selected information about operating segments in interim financial reports
     issued to shareholders. This Statement requires that a public business
     enterprise report financial and descriptive information about its
     reportable operating segments. Operating segments are components of an
     enterprise about which separate financial information is available that is
     evaluated regularly by the chief operating decision-maker in deciding how
     to allocate resources and in assessing performance. It also establishes
     standards for related disclosures about products and services, geographic
     areas, and major customers. The Company will comply with the disclosure
     requirements of SFAS 131 in fiscal year 1999.

Socrates Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements--Continued

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

September 30, 1998, 1997 and 1996
-------------------------------------------------------------------------------


NOTE L--ACQUISITIONS


     The Company acquired all the outstanding stock of Expert, Inc. (Expert),
     effective April 1, 1997. The Company exchanged 300,000 restricted shares of
     common stock valued at $1,070,000 for all outstanding shares of Expert. The
     acquisition of Expert was accounted for as a purchase. The cost exceeded
     the fair value of net assets and liabilities resulting in goodwill of
     approximately $995,000. Goodwill will be amortized using an estimated life
     of ten years. The results of operations of Expert are included in the
     accompanying financial statements since the date of acquisition.

     The Company acquired Technet Computer Services, Inc. (Technet), effective
     July 1, 1997. The Company exchanged 400,000 restricted shares of common
     stock valued at $2,380,000 for all the outstanding shares of Technet. The
     acquisition of Technet was accounted for as a purchase. The cost exceeded
     the fair value of net tangible assets and liabilities acquired resulting in
     $270,000 and $2,300,000 being allocated to computer software and goodwill,
     respectively. The value allocated to computer software and goodwill will be
     amortized using estimated lives of two and ten years. The results of
     operations of Technet are included in the accompanying financial statements
     since the date of acquisition.


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


NOTE M--QUARTERLY INFORMATION (UNAUDITED)

      Quarterly information for the last two fiscal years is as follows (all
amounts in thousands):

<TABLE>
<CAPTION>


   Year Ended               December 31,   March 31,  June 30, September 30,
September 30, 1998             1997         1998        1998      1998        Total
------------------------------------------------------------------------------------

<S>                         <C>         <C>         <C>         <C>         <C>     
Sales                       $ 12,714    $ 14,823    $ 16,330    $ 18,141    $ 62,008

Earnings (loss) from
     operations                 (113)       (684)        247        (222)       (772)

Earnings (loss) from
     continuing
     operations                  (61)       (360)      2,002        (193)      1,388

Loss from
     discontinued
     operations including
     loss on disposal           (502)     (5,228)       (114)       (138)     (5,982)
                            --------    --------    --------    --------    -------- 


Net loss (earnings)         $   (563)   $ (5,588)   $  1,888    $   (331)   $ (4,594)
                            --------    --------    --------    --------    -------- 

</TABLE>

<PAGE>


Socrates Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements--Continued

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

September 30, 1998, 1997 and 1996
------------------------------------------------------------------------------


NOTE M--QUARTERLY INFORMATION (UNAUDITED)-Continued


<TABLE>
<CAPTION>

    Year Ended            December 31,    March 31,     June 30,   September 30,
 September 30, 1997          1996           1997          1997         1997          Total
-------------------------------------------------------------------------------------------

<S>                       <C>           <C>           <C>           <C>            <C>     
Sales                     $  6,759      $  8,162      $  9,972      $  9,442       $ 34,355


Earnings (loss) from
     operations                344           377           206          (592)           355

Earnings (loss) from
     continuing
     operations                431           504           588          (706)           817

Loss from
     discontinued
     operations                169           104           229        (1,209)          (707)
                          --------      --------      --------      --------       --------

Net loss (earnings)       $    600      $    608      $    817      $ (1,915)      $    110
                          --------      --------      --------      --------       --------

</TABLE>



<PAGE>





Item 8. Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure.

        None.

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
        with 16(a) of the Exchange Act.

     Item 9 is hereby incorporated by reference to the registrant's Proxy
Statement to be filed with the Commission on or prior to January 29, 1999.

Item 10.  Executive Compensation.

     Item 10 is hereby incorporated by reference to the registrant's Proxy
Statement to be filed with the Commission on or prior to January 29, 1999.

Item 11.  Security Ownership of Certain Beneficial Owners and Management.

     Item 11 is hereby incorporated by reference to the registrant's Proxy
Statement to be filed with the Commission on or prior to January 29, 1999.

Item 12.  Certain Relationships and Related Transactions.

     Item 12 is hereby incorporated by reference to the registrant's Proxy
Statement to be filed with the Commission on or prior to January 29, 1999.

Item 13.  Exhibits, List and Reports on Form 8-K.

     A. Exhibits.

3.0  Certificate of Incorporation, filed April 12, 1994. (Incorporated by
     reference to Exhibit 3.0 to Registration Statement on Form SB-2 (File No.
     33-89194), filed with the Commission on February 9, 1995)

3.1  By-laws, as amended. (Incorporated by reference to Exhibit 3.1 to
     Registration Statement on Form SB-2 (File No. 33-89194), filed with the
     Commission on February 9, 1995)

4.0  Specimen Copy of Common Stock Certificate. (Incorporated by reference to
     Exhibit 4.0 to Registration Statement on Form SB-2 (File No. 33-89194),
     filed with the Commission on February 9, 1995)


<PAGE>


21.0 List of Subsidiaries, filed herewith.

23.0 Consent of Independent Auditors, Grant Thornton LLP, dated December 15,
     1998, filed herewith.




<PAGE>



B.  Reports on Form 8-K.

     The Company filed no reports on Form 8-K with the Commission during the
quarter ended September 30, 1998.


<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.

                                     SOCRATES TECHNOLOGIES CORPORATION

December 28, 1998

                                      By:             EDWARD RATKOVICH
                                         -------------------------------------
                                                         Edward Ratkovich
                                                      Chairman of the Board

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report is signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.


<TABLE>
<CAPTION>

Signature                                   Title                                 Date
---------                                   -----                                 ------

<S>                                         <C>                                   <C>
ABBAS FATHI                                 Director, Chief Executive Officer,    December 28, 1998
-------------------------
Abbas Fathi                                 and President
                                            [Principal Executive Officer]

MARK J. MCKNIGHT                            Chief Financial Officer, Controller,  December 28, 1998
-------------------------
Mark J. McKnight                            Assistant Secretary
                                            [Principal Financial Officer]

EDWARD RATKOVICH                            Chairman of the Board                 December 28, 1998
-------------------------
Edward Ratkovich

GEORGE COWAN                                Director, Executive Vice              December 28, 1998
-------------------------
George Cowan                                President

EDWARD P. ROBERTS                           Director                              December 28, 1998
-------------------------
Edward P. Roberts

CLIVE G. WHITTENBURY, PH.D.                 Director                              December 28, 1998
-------------------------
Clive G. Whittenbury, Ph.D.

PAUL W. RICHTER                             Director, General Counsel,            December 28, 1998
-------------------------
 Paul W. Richter                            Secretary

</TABLE>