================================================================================

                     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 year ended:              Commission file number:
           December 31, 1999                         0-26614
                                   -----------

                        SOCRATES TECHNOLOGIES CORPORATION
             ------------------------------------------------------
             (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.)

        8500 Leesburg Pike, Vienna, Va                         22183
    ----------------------------------------                 ----------
    (Address of principal executive offices)                 (Zip code)


                                 (703) 288-6500
                -------------------------------------------------
                (Company's telephone number, including area code)

                                   -----------

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

                                              NAME OF EACH EXCHANGE
                    TITLE OF EACH CLASS        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 $95,261,810, of which
$71,714,280 was held by non-affiliates of the registrant, based upon the closing
price of the common stock on March 17, 2000, as quoted by the Nasdaq National
Market System.

     The number of outstanding shares of the registrant's common stock on March
17, 2000 was 23,093,772.

                                                                          Page 1

<PAGE>

                       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 March 30, 2000, are incorporated herein by
reference into Part III of this report.

================================================================================


                        SOCRATES TECHNOLOGIES CORPORATION


                                Table of Contents


<TABLE>
<S>           <C>                                                                    <C>
PART I                                                                               PAGE
Item 1.       Business                                                               3-8
Item 2.       Properties                                                             8-9
Item 3.       Legal Proceedings                                                      9-10
Item 4.       Submission of Matters to a Vote of Security Holders                    10

PART II
Item 5.       Market for Registrant's Common Equity
                  and Related Stockholder Matters                                    10-11
Item 6.       Selected Financial Data                                                11
Item 7.       Management's Discussion and Analysis of Financial Condition
                  and Results of Operations                                          12-20
Item 7A.      Quantitative and Qualitative Disclosures About Market Risk             20
Item 8.       Financial Statements                                                   21
Item 9.       Changes in and Disagreements with Accountants
                  on Accounting and Financial Disclosure                             45
PART III
Item 10.      Directors and Executive Officers of the Registrant                     45
Item 11.      Executive Compensation                                                 45
Item 12.      Security Ownership of Certain Beneficial Owners and Management         45
Item 13.      Certain Relationships and Related Transactions                         45
Item 14.      Exhibits, Financial Statement Schedules and Reports on Form 8-K        45
</TABLE>





                                                                          Page 2

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ITEM 1.  BUSINESS.

Overview

         Socrates Technologies Corporation ("Socrates" or "the Company"), was
incorporated in the State of Delaware on April 14, 1994 under the name "MVSI,
Inc.". Upon the merger of Socrates Technologies Corporation, a new-formed
subsidiary of the Company, MVSI, Inc., on December 12, 1998, the name of the
Company was changed from "MVSI, Inc." to "Socrates Technologies Corporation.
Unless the context otherwise requires, the "Company" or "Socrates" refers to
Socrates Technologies Corporation, its predecessor and its subsidiaries. Since
February 1, 2000, the Company has maintained its principal executive offices at
8500 Leesburg Pike, Vienna, Virginia 22183. Its telephone number is (703)
288-6500.

         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."

         Effective January 1, 1999, the Company has changed it fiscal year end
from September 30 to December 31. References to fiscal years herein are to the
fiscal years of the Company ended September 30 of the respective years.
References to the transition period are the three month period ended December
31, 1998.

         The Company, using stock and cash, acquired all the outstanding stock
of Networkland, Inc., a regional network integrator and hardware reseller,
effective August 16, 1999. The results of operation of Networkland, Inc. are
included in the accompanying financial statements since the date of acquisition.
(See Liquidity and Capital Resources, below and Note L, Notes to Consolidated
Financial Statements.)

         Effective March 1, 2000, the Company, through Socrates Solutions
Corporation ("SSC"), acquired using stock and cash, substantially all of the
assets and certain liabilities of Object Application Systems, Inc.("OAS"), a New
York based software development and sales and implementation company, which will
be operated as a division of SSC. OAS develops and implements a family of ERP
software systems for small and mid size enterprises. The Company plans to
convert these systems to web based applications during the year 2000. The
OA/System ERP software "vertical" application products include OA/Manufacturing,
OA/Distribution, and OA/Converting. OA/System products are capable of supporting
virtually every aspect of manufacturing, importing, converting, and
distribution. The applications include customer sales order processing,
purchasing, inventory management, shipping, invoicing, production scheduling,
production planning, general ledger, accounts receivable, financing of
receivables, accounts payable, letter of credit processing, financial reporting
and multi-currency. Additional OA/System products include OA/EDI for Electronic
Data Interchange (EDI) transactions and OA/Data Collection for radio frequency
(RF) warehouse management. (See Liquidity and Capital Resources, below and Note
M, Notes to Consolidated Financial Statements.)

         Socrates offers a suite of services that allows customers to leverage
existing Internet, network, hardware and software technology in a cost effective
and consistent manner. These services include:

Connectivity and Communication
Application Service Providing (ASP)
E-commerce and Web-site Development
Customized Software Solutions
Hardware and Network Integration
Software Training

                                                                          Page 3

<PAGE>

Strategic Focus

         Socrates Technologies Corporation is an information technology ("IT")
solutions company whose business is focused on 1) Application Service Providing
("ASP") (delivery of web-based applications) to small and medium sized
enterprises ("SME"); 2) e-commerce solutions and web design; 3) customized
software solutions 4) network integration and services and 5) reselling of
computer hardware and peripherals. Socrates' plan is to develop its ASP services
to SME's through acquisitions and strategic alliances. Socrates strives to
provide SME's with a complete IT service offering allowing the SME to outsource
its IT requirements and have a clearer understanding and control of its total IT
cost without having the typical cost associated with ownership and management of
IT infrastructure. Socrates believes it can enter into long-term contracts (24
to 36 months) with its customers, delivering and billing services on a per user
monthly basis.

         Socrates plans to deliver these services through three wholly owned
subsidiaries; Socrates Solutions, Corp. ("SSC"), Technet Computer Services, Inc.
("Technet") and Networkland, Inc. ("Networkland").


Connectivity and Communication

         Socrates, as a member of Qwest Communications, Inc., ("Qwest")(NYSE: Q)
business partnership program (QBPP) and Qwest application service provider
(QASP) program, can offer to its customers a wide range of connectivity and
communication solutions. Socrates' main future focus of delivering applications
to SME's cannot be achieved until adequate high-speed internet access is present
at the customer site. The partnerships with Qwest should allow Socrates to offer
high-speed access including digital service lines (DSL), T-1, T-3, OC12 and OC48
connectivity through Qwest's nationwide and international network. In addition
to high-speed access, Socrates can also offer the customer virtual private
networks (VPN), video broadcasting, video on demand, voice services over
internet protocol, Microsoft Exchange services (e-mail), Microsoft Windows 2000
and Microsoft Office 2000 web based offerings.


Application Service Providing (ASP)

         Socrates believes that the ASP market will fuel the Company's future
growth and is developing ASP offerings that are specifically geared toward the
SME market. Socrates believes that acquisition, development or alliance with
providers of mission critical applications will provide an offering that will
differentiate the Company from others within the ASP market. These mission
critical applications include enterprise resource planning ("ERP"), enterprise
asset management ("EAM"), customer relationship management ("CRM"), sales force
automation ("SFA"), accounting and financial reporting, human resource
administration ("HRA"), supply-chain management ("SCM"), and educational and
training applications geared toward the SME market.

         Socrates believes that SME's not only want reduced costs of licensing
applications but also reduced costs associated with implementation and
maintenance. Often the larger applications have been designed for larger
enterprises and as such are difficult and expensive to implement costing 5 to 10
times the licensing fee. Socrates acquisition and development strategy is to
deliver applications that have been successfully delivered to existing SME's
through a local area network ("LAN") and begin to deliver them, as "internet
ready" offerings, across the internet and wide area networks ("WAN"). Socrates
believes its advantage will be the reduced cost of licensing as a result of
ownership of the application and a reduced cost of implementation to the
customer due to the applications SME focus. Socrates has developed a SCM
solution that is scheduled to be internet ready by the end of the second quarter
of 2000. Effective March 1, 2000, through the acquisition of OAS, Socrates
acquired the rights to an ERP application which is also scheduled to be internet
ready by the end of the second quarter of 2000.

         Socrates also offers other applications through strategic alliances to
complement its own offerings or in areas where cost and competition make it

                                                                          Page 4

<PAGE>

prohibitive for internal development or acquisition. In March of 2000, Socrates
completed a strategic alliance with SalesLogix, Inc. (NASDAQ:SLGX) whereby
Socrates can resell SalesLogix CRM and SFA solutions over the Internet. This
alliance helps Socrates to offer a complete suite of services to its customers.

         The ASP business of Socrates is a new business line and initiative.
There can be no assurance that Socrates will be able to establish or maintain
the ASP business as a profitable operation. The Compact believes that the ASP
business development is essential to growing the Company's existing operations
and to its overall future financial performance. The Company privately placed
shares of its Common Stock in February 2000 and a 4% Convertible Debenture in
March 2000 in order to raise approximately $4.8 million in capital to fund the
ASP business as well as existing business lines. The Company may need to raise
additional working capital in fiscal year 2000 to fund the ASP business
development. SSC is the principal business vehicle for the ASP business
development.


E-Commerce and Web-site Development

         Socrates also plans to offer e-commerce and web-site development
services to the SME market as many SME's do not have an existing Internet
presence or e-commerce offering. Socrates believes that by offering bundled
services such as connectivity with web-site development and e-commerce, SME's
can obtain a web presence without significant upfront costs. Socrates will offer
up to eight modular web-site offerings to choose from and will provide basic
e-commerce solutions (credit card authorizations, cataloging, etc.). These
services will be bundled as part of the long-term contract and will provide
SME's with an instant web presence.


Software Development

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

         Technet has software development centers in New Jersey and at its
principal offices in Vienna, Virginia. Technet also utilizes the software
development center of an unaffiliated 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.

         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.


Customized Software Solutions

         Socrates has the capability to develop specialized software solutions
within an enterprise. These solutions include ERP applications, back-end web
integration solutions, and customized integration between existing applications
or legacy systems. This offering allows customers to manage the migration from
existing systems to new web based applications.

                                                                          Page 5

<PAGE>

Hardware and Network Integration

         Socrates offers its customers a complete set of hardware solutions
including personal computers, laptop computers, servers, and peripheral
equipment. In addition, Socrates offers network installation and integration
services to those customers that do not have existing networks. Finally,
Socrates can also offer on-site consulting services to the SME to handle any IT
services.


Software Training

         In September 1997, Socrates initiated an effort to establish a separate
business line for the training of corporate, government employees, and
information technology professionals in the greater Washington, D.C.
metropolitan area in the use of popular computer programs and network systems.
Socrates conducted its first training classes in December 1997. Socrates intends
to continue its efforts in fiscal year 2000 to expand the scope and market of
its training business. There can be no assurance that the training business will
generate sufficient revenues to be sustained throughout fiscal year 2000.

         The Company's continuing operations do not generate a significant
amount of foreign sales exports.


Restructured Operations

         Two Company subsidiaries, Expert, Inc. and Socrates Technologies, Inc.
("STI"), ceased operations in April 1999 and November 1999, respectively. The
assets of Expert, Inc. were transferred to STI in May 1999. The assets and
personnel of STI were transferred to Networkland Inc. in October 1999. The
discontinuance of Expert, Inc. and STI operations was a result of the adverse
impact of decreasing profit margins in the commercial computer reseller industry
on both companies' financial condition and results of operations in 1998 and
1999 and the Company's transition away from hardware reselling to more service
oriented business lines.


MARKETING AND SALES

         The Company relies on an in-house direct sales force to sell its
products. In addition, the Company occasionally 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 2000 to complement its direct sales force.

         The Company targets customers who have the following characteristics:

         -     Companies that are presently using a pre-Windows computer
               system/network and want to upgrade to a Windows-based operating
               environment;

         -     Companies that do not have the in-house IT staff required to
               manage a networked PC environment or an ERP program in a
               cost-effective manner;

         -     Companies which in the past either could not afford an ERP
               program nor did they have the manpower to manage an ERP program;

         -     Companies that want to contain their IT expenditures by switching
               over to a fixed term contract;

         -     Companies which recognize that in order for them to gain a
               competitive advantage in their marketplace they have to expand
               their IT capabilities (analysis and decision-making tools), but
               do not have the in-house staff to analyze and/or manage the
               project;

         -     Companies in the process of deciding on the installation of an
               ERP program which do not have the necessary in-house IT
               capabilities to conduct a suitable evaluation of alternative
               solutions.

         -     Companies that wish to concentrate on their core business and
               realize that IT management is not a core competence;

         -     Companies which require quality IT professionals to manage
               specific IT operations, but the hours required per week/month for
               this operation do not justify hiring such a person full-time; or

         -     Companies which are unable to hire or retain appropriate IT staff
               to manage an existing network.

                                                                          Page 6

<PAGE>

COMPETITION

         The market for IT services is very competitive because of the large
number of competitors and the rapidly changing Business and Technology
environment. Primary competitors include participants from a wide variety of
market segments, including "Big Five" accounting firms, systems consulting and
implementation firms, service groups of computer equipment companies, facilities
management companies, general management consulting firms and programming
companies. The companies which Socrates believes to be its direct competitors,
in that they have announced or are already delivering ASP service, include
USInternetworking, FutureLink, Corio, Telecomputing USA and Interliant (to be
acquired by Sage Networks). Many competitors of the Company have substantially
greater technical, financial and marketing resources than the Company.

         Additionally, the market for Internet-related services is extremely
competitive. Socrates anticipates that competition will continue to intensify as
the use of the Internet grows. In the market for Internet-enabled application
software and network solutions, Socrates competes on the basis of performance,
price, software functionality and overall network design.

         Socrates also competes with national, regional, and local commercial
systems integrators. A certain number of these companies bundle their services
with software and hardware providers and perform an IT management outsourcing
role for the customer, including Arthur Anderson and Electronic Data Systems
("EDS"). Arthur Anderson provides an ASP service featuring JD Edwards ERP
financial software and Electronic Data Systems ("EDS") has teamed with SAP
America to bring SAP's ERP applications to small and mid-size businesses.

         Socrates indirect competition may also include ISP companies, whose
primary business involves hosting web pages, such as USWeb, Exodus
Communications and Verio Inc.

         In the wider realm of general IT outsourcing, Socrates considers its
possible competitors to be local IT services companies in cities the Company
operates in and larger IT companies such as IBM Global Services, EDS, Cap
Gemini, McKinsey & Co., Booz, Allen & Hamilton, Whittman-Hart, Inc. and the "Big
5" consulting firms.


SOURCES OF SUPPLY AND BACKLOG

         All materials and components used by the Company are available from
numerous sources of supply. The Company does not foresee any shortage of these
materials.

         As of December 31, 1999, the Company's backlog was approximately
$800,000. The Company 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.


PATENT, TRADEMARK, COPYRIGHT AND PROPRIETARY RIGHTS

         The Company has a federally registered trademark for "Socrates
Technologies". Otherwise, 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.

         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 ensure 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 in protecting the Company, or that the Company will be able to enforce
the provisions of such 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.

                                                                          Page 7

<PAGE>

EMPLOYEES

         At December 31, 1999 and March 17, 2000, the Company employed
approximately 59 and 72 persons, respectively, all of whom were full-time
employees.

         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.


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.

         Socrates completed the move of its principal executive offices from
Largo, Maryland to Vienna, Virginia in February 2000. The Company leases
approximately 5,100 square feet of space for its facilities located in Vienna,
Virginia. Base rent for the space is approximately $10,000 per month. The lease
agreement, which expires in 2003, includes rent escalations and requires the
Company to pay certain operating expenses.

         Technet leases approximately 6,400 square feet of space for its
software development business, located in Vienna, Virginia. Base rent for the
space is approximately $14,000 per month. The lease agreement, which expires in
2004, includes rent escalations and requires 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 $8,000, which lease expires in 2004.

                                                                          Page 8

<PAGE>

         Networkland leases approximately 2,900 square feet of space under its
agreement for its facilities located in Arlington, Virginia. Base rent for the
space is approximately $3,900. The lease agreement, which expires in 2002,
includes rent escalations and requires Networkland to pay certain operating
expenses.

         Socrates also leases approximately 35,000 square feet of space for its
facilities located in Largo, Maryland. Base rent for the space is approximately
$12,000 per month. The lease agreement, which expires in 2002, includes rent
escalations and requires the Company to pay certain operating expenses. The
Company utilizes approximately 10,000 square feet of this facility for training
facilities, and is actively seeking to sublease the balance of the space.

         The Company's lease for facilities located in Long Island City, New
York, of approximately 15,000 square feet of space has been sublet. Both the
lease and sublease will expire in 2003. The base rent for these facilities is
approximately $12,000 and under the sublease agreement the company receives a
rent payment of approximately $9,800, resulting in loss of approximately $2,200
per month. This loss has been accounted for and accrued as a liability in the
Company's financial statements.

         The Socrates lease for facilities located in Exton, Pennsylvania, of
approximately 3,000 square feet of space was sublet in July 1999. Both the lease
and sublease will expire in 2001. The base rent for these facilities is
approximately $3,900 and is offset by the same amount in the sublease agreement.

         The Company also leases space for facilities of approximately 3,800
square feet located in Virginia Beach, Virginia. This space is now under a
sublease agreement. The sublease will expire in March 2000. The lease expires in
August, 2002. The Company is currently negotiating with the sublessee to extend
the sublease. The base rent for these facilities was approximately $3,800 and
was offset by about the same amount in the sublease agreement. The Socrates
leases for the facilities located in Gaithersburg, Maryland and in Montreal,
Quebec, Canada both expired in 1999 and were not renewed.

         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. A summary of significant legal matters follows.

         The Company is pursuing a $5.6 million claim against a national
broker-dealer in an arbitration case before the National Association of
Securities Dealers, Inc. The Company alleges that the defendant broker-dealer
mismanaged and engaged in authorized actions with respect to the Company assets
and accounts. The matter has not been set for a hearing as of the date of March
27, 2000. The Company believes that its claims have merit and intends to
aggressively pursue its claims in the arbitration. There can be no assurance
that the Company will prevail on any of its claims or that the Company will
recover any damages sought in this action.

         Socrates Technologies, Inc. ("STI") filed a lawsuit in January 2000 in
the Superior Court of the District of Columbia against National Public Radio and
AAA Networks alleging breach of contract by National Public Radio and tortious
interference in contract against AAA Networks. On March 2000, the Superior Court
denied without a hearing the motion of National Public Radio to dismiss the
case. The Company is seeking $300,000 in compensatory damages and unspecified
amounts in punitive damages. The Company believes that STI's claims have merit
and STI intends to aggressively pursue its claims in the case. A trial date has
not been set for this case as of March 27, 2000.

         In January 2000, Hirata Corporation and Hirata Corporation USA amended
their complaint in a civil action in the U.S. District Court for the Southern
District of Indiana (Hirata Corporation and Hirata Corporation USA v. Daniel
Porush, Jordan Belfort, et al., Case ) to add as defendants to the case the
following corporations

                                                                          Page 9

<PAGE>

and person: the Company; its former Chairman, Chief Executive Officer and
President, Edward Ratkovich; and two other corporations that are not affiliated
with the Company or Mr. Ratkovich. With respect to the Company and Mr.
Ratkovich, the amended complaint alleges that Mr. Ratkovich, as an officer of
the Company, conspired with the two defendants who were officers of the
underwriter to manipulate the public market for the Company's common stock and
that said manipulation harmed the plaintiffs in an unspecified amount of
damages. The Company believes that the amended complaint is frivolous, without
basis in law or in fact on its face, was not timely filed and was prompted by
the plaintiffs lack of success to date against the original defendants. The law
firm of Jones Day Reavis & Pogue in Washington, D.C. has been retained to
represent the Company and Mr. Ratkovich in this case. The Company intends to
aggressively pursue the dismissal of the case and to defend itself against all
allegations in the amended complaint.

         Washington Sports & Entertainment, Inc. filed a lawsuit in the Superior
Court of the District of Columbia in March 2000 against STI for alleged breach
of contract to supply computer hardware and to license a box suite at the MCI
Center in Washington, D.C. The Company has denied the claims of the plaintiff. A
trial date has not been set as of March 2000 in this case. The Company is
currently negotiating a settlement to the lawsuit and the Company believes that
this lawsuit will be settled before the trial date and that such settlement
shall not have an adverse material affect on the Company's financial condition
or results of operations.

         As previously reported, the Company was sued by Technospin, Inc. for
alleged breach of a corporate guarantee under a manufacturing agreement between
Technospin, Inc. and MVS. The Company has counter claimed against Technospin,
Inc. for breach of contract under the manufacturing agreement. The matter has
not been set for trial as of March 27, 2000. The Company has provided for a
reserve against any liability in this case in its 1999 financial statements. The
Company intends to aggressively pursue its claims against Technospin, Inc. and
to aggressively defend itself against Technospin, Inc.'s claims. The Company
cannot at this time predict with any certainty the results or impact of this
case on the Company and its financial condition or results of operations.

         The Company is subject to certain other legal proceedings and claims
that have arisen in the ordinary course of business and have not been fully
adjudicated. The results of these legal proceedings cannot be predicted with
certainty; however, in the opinion of management, the Company does not have a
potential liability related to any legal proceedings and claims that would have
a material adverse effect on its financial condition or results of operations.
Most of these legal proceedings concern accounts payable allegedly owed by the
Company's discontinued operations, especially Expert and STI.


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 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 3,400 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 December 31, 1999 as well as the three-month
transition period ended December 31, 1998.

                                                                         Page 10

<PAGE>

                                                    High        Low
                                                    ----        ---

Fiscal year ended September 30, 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 ended September 30, 1998
   First fiscal quarter                           $  9.06     $ 5.00
   Second fiscal quarter                          $  8.25     $ 4.25
   Third fiscal quarter                           $  7.13     $ 6.00
   Fourth fiscal quarter                          $  7.75     $ 1.50

Transition period ended December 31, 1998         $  4.00     $ 1.00

Calendar year 1999
   First fiscal quarter                           $  4.25     $ 1.63
   Second fiscal quarter                          $  2.96     $ 1.00
   Third fiscal quarter                           $  1.13     $ 0.50
   Fourth fiscal quarter                          $  2.19     $ 0.50


         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.


ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                          Three months ended        -----------------Years ended--------------------
                                             December 31,                                  September 30,
                                    ------------------------------   December 31,   --------------------------------
                                        1999             1998           1999            1998            1997
                                    ------------------------------  --------------  --------------------------------
                                     (Unaudited)            (Thousands of dollars, except per share data)
<S>                                       <C>            <C>             <C>             <C>            <C>
Sales                                     $ 5,484        $ 12,650     |  $ 23,239   |    $ 62,008       $ 34,335
Gross profit                                  735           1,358     |     3,424   |       8,710          4,362
Earnings (loss) from                                                  |             |
     continuing operations                 (2,137)         (3,893)    |   (11,997)  |       1,388            817
                                                                      |             |
Earnings (loss) from                                                  |             |
     discontinued operations                    -          (1,132)    |         -   |      (5,982)          (707)
                                                                      |             |
Net earnings (loss)                        (2,137)         (5,025)    |   (11,997)  |      (4,594)           110
                                                                      |             |
Earnings (loss) per                                                   |             |
     share, basic                           (0.14)          (0.34)    |     (0.77)  |       (0.31)          0.01
                                                                      |             |
Earnings (loss) per                                                   |             |
     share, fully diluted                   (0.14)          (0.34)    |     (0.77)  |       (0.31)          0.01
                                                                      |             |
Total assets                               11,622          22,905     |    11,622   |      29,099         23,620
Stockholders' equity                        7,454          13,182     |     7,454   |      17,377         18,065
</TABLE>

                                                                         Page 11

<PAGE>

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

         Effective January 1, 1999, the Company changed it fiscal year end from
September 30 to December 31. References to fiscal years herein are to the fiscal
years of the Company ended December 31, 1999 and September 30, 1998 and 1997,
respectively. References to the transition period are the three-month period
ended December 31, 1998.

         Fiscal year 1998 and the transition period ended December 31, 1998
began a period of evolution, change and restructuring for the Company that
continued throughout 1999. Since the Company's initial public offering in 1995,
it had grown significantly through the acquisition of four separate technology
companies involved in computer system sales, integration, training and software
development. During 1999, the Company decided to shut down two of the companies
and consolidated the remaining operations of Socrates Technologies, Inc. into
the newly acquired Networkland subsidiary.

         As previously disclosed, in March 1998, the Company elected to
discontinue its machine vision business and focus greater attention on its
information technology businesses. On August 11, 1999, the Company sold the
assets of the welding division of MVS to Meta Technology Ltd. for approximately
$157,000 plus a contingent amount based on certain performance criteria. A loss
of approximately $5,000 was realized as a result of the 1999 sale.

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


RESULTS OF OPERATIONS

         The following table sets forth the results of operations for the
periods presented expressed in thousands of dollars and as a percentage of
revenues.

                                                                         Page 12

<PAGE>

<TABLE>
<CAPTION>
                                                                  Three months ended
                                                                     December 31,
                                                 -----------------------------------------------------
                                                     1999            %            1998           %
                                                 ------------   ------------  ------------  ----------
                                                 (unaudited)
<S>                                                   <C>              <C>       <C>             <C>
Sales                                                 $ 5,484          100.0     $ 12,650        100.0

Cost of Sales                                           4,749           86.6       11,292         89.3
                                                      -------          -----     --------        -----

Gross Profit                                              735           13.4        1,358         10.7

Expenses
   Selling, general and administrative                  1,035           18.9        3,063         24.2
   Depreciation and amortization                          312            5.7          271          2.1
   Restructuring Charges                                1,551           28.3        1,290         10.2
                                                      -------          -----     --------        -----
                                                        2,898           52.8        4,624         36.5
                                                      -------          -----     --------        -----

Income (loss) from Operations                          (2,163)         (39.4)      (3,266)       (25.8)

Gain (loss) on sale of investment                           -              -         (184)        (1.5)
Interest and financing income (expense)                    15             .3         (443)        (3.5)
Other income (expense)                                     11             .2            -            -
                                                      -------          -----     --------        -----

Earnings Before Income Taxes                           (2,137)         (39.0)      (3,893)       (30.8)

Income Tax (Benefit) Provision
   Current                                                  -              -            -            -
   Deferred                                                 -              -            -            -
                                                      -------          -----     --------        -----

Earnings (loss) from Continuing Operations             (2,137)         (39.0)      (3,893)       (30.8)
                                                      -------          -----     --------        -----

Discontinued Operations
   Loss from operations, net of income
      tax benefits of $486 in 1997                          -              -       (1,132)        (8.9)

   Loss from disposal, including income tax
      expense of $1,233 in 1998                             -              -            -            -
                                                      -------          -----     --------        -----
                                                            -              -       (1,132)        (8.9)
                                                      -------          -----     --------        -----

Net Earnings (Loss)                                   $(2,137)         (39.0)    $ (5,025)       (39.7)
                                                      =======          =====     ========        =====


<CAPTION>
                                                                                            Fiscal years ended
                                                    December 31,                              September 30,
                                              ------------------------     --------------------------------------------------
                                                   1999          %             1998           %           1997          %
                                              ------------  ----------     ------------  ----------   ------------  ---------
<S>                                             <C>            <C>           <C>            <C>        <C>           <C>
Sales                                           $ 23,239       100.0         $ 62,008       100.0      $ 34,335      100.0

Cost of Sales                                     19,815        85.3           53,299        86.0        29,973       87.3
                                                --------       -----         --------       -----      --------      -----

Gross Profit                                       3,424        14.7            8,709        14.0         4,362       12.7

Expenses
   Selling, general and administrative             7,467        32.1            8,518        13.7         3,513       10.2
   Depreciation and amortization                     959         4.1              964         1.6           514        1.5
   Restructuring Charges                           3,627        15.6                -           -                        -
                                                --------       -----         --------       -----      --------      -----
                                                  12,053        51.9            9,482        15.3         4,027       11.7
                                                --------       -----         --------       -----      --------      -----

Income (loss) from Operations                     (8,629)      (37.1)            (773)       (1.2)          335        1.0

Gain (loss) on sale of investment                 (3,953)      (17.0)           1,594         2.6             -          -
Interest and financing income (expense)             (127)        (.5)             292          .5           778        2.3
Other income (expense)                               712         3.1                -           -             -          -
                                                --------       -----         --------       -----      --------      -----

Earnings Before Income Taxes                     (11,997)      (51.6)           1,113         1.8         1,113        3.2

Income Tax (Benefit) Provision
   Current                                             -           -               31         0.0            82        0.2
   Deferred                                            -           -             (306)       (0.5)          214        0.6
                                                --------       -----         --------       -----      --------      -----

Earnings (loss) from Continuing Operations       (11,997)      (51.6)           1,388         2.2           817        2.4
                                                --------       -----         --------       -----      --------      -----

Discontinued Operations
   Loss from operations, net of income
      tax benefits of $486 in 1998                     -           -           (1,250)       (2.0)         (707)      (2.1)

   Loss from disposal, including income tax
      expense of $1,233 in 1998                        -           -           (4,732)       (7.6)            -          -
                                                --------       -----         --------       -----      --------      -----
                                                       -           -           (5,982)       (9.6)         (707)      (2.1)
                                                --------       -----         --------       -----      --------      -----

Net Earnings (Loss)                             $(11,997)      (51.6)        $ (4,594)       (7.4)     $    110        0.3
                                                ========       =====         ========       =====      ========      =====
</TABLE>


Three-month period ended December 31, 1999 compared to the transition period
ended December 31, 1998.

         During the quarter ended December 31, 1999, the Company continued and
concluded the reorganization and restructuring previously disclosed, and
concentrated on refocusing its business in the higher margin software and
application service provider markets, while consolidating its hardware reseller
and networking business into Networkland.

         The Company reported a decrease in sales of approximately $7.2 million
to $5.5 million for the quarter ended December 31, 1999 compared to the same
period last year, related to the consolidation and restructuring of its hardware
reseller business and the decrease in revenues due to the shutdown of its
component supply and build to order business. For the current quarter,
Networkland reported revenue of approximately $3.6 million compared to Socrates
Technologies Incorporated revenue of approximately $10.9 million for the same
period last year, while Technet reported revenue of approximately $1.8 million
for the current quarter compared to approximately $1.7 million for the same
period last year.

         Cost of sales decreased approximately $6.5 million reflecting the
decrease in sales.

         Gross Profit for the period decreased from $1.4 million to $735,000,
reflecting the decrease in sales from period to period. Gross profit did,
however, increase as a percentage of sales to 13.4% from 10.7%. This improvement
is due to the concentration on higher margin opportunities in software
development and networking services.

                                                                         Page 13

<PAGE>



         Selling, general and administrative expenses decreased $2.0 million, or
64%, compared to the same period in 1998, reflecting the restructuring and
downsizing of operations, as well as the Company's continuing efforts in
reducing administrative costs. Included in the current period is a reserve
against accounts receivable of $300,000.

         Management's decision to write down the value associated with goodwill
acquired in the 1997 acquisition of Socrates Technologies, Inc. ("STI") was due
to the fact that the Company is no longer targeting Socrates' customers, the
"build to order" operations wherein the Company assembled custom computers and
peripherals have been ceased, and substantially all of the Socrates employee
base is no longer with the Company. In addition, goodwill was written down to
zero because the training operations within Socrates that continue were
commenced after the acquisition and management believes any value associated
with the Socrates name can not be estimated.

         Depreciation and amortization decreased by approximately $23,000.

         Restructing charges for the fourth quarter of 1999 amounted to
approximately $1.6 million versus $1.3 million for the same period last year. In
the current period, the charge was for a one-time write down of goodwill related
to Socrates Technologies, Inc., whose reseller operations have been consolidated
with those of Networkland.

         Investment income and expense for the current period amounted to
$15,000 compared to $25,000 for the comparable period last year. The current
quarter was effected by lack of available funds to invest. In the same quarter
last year, the Company recorded losses of approximately $184,000 from the sale
of shares of e-Net, Inc. In addition, during the quarter ended December 31,
1998, the Company recorded a loss of $298,000 associated with an early
withdrawal penalty charged the Company by a financial institution upon
withdrawal of funds from an investment account.

         The Company did not record any tax benefit associated with losses
incurred in 1999 due to the fact that the Company's ability to generate taxable
income sufficient to absorb such losses is uncertain. However, the Company has
not adjusted the previously recorded net deferred tax asset of $1.2 million
based on its estimate of future taxable income expected to be generated from its
continuing operations. A key aspect of this analysis was that the Company's
operations, exclusive of restructuring charges, have generated taxable income
since the third quarter of 1999.

         While the above analysis is prepared for consistency with prior
reports, the Company does not believe that the presentation is indicative of its
current operations. The Company bases this belief upon the acquisition of
Networkland, as well as the restructuring concluded in the fourth quarter of
1999. For the quarter ended December 31, 1999, the two operating subsidiaries of
the Company, Technet and Networkland were profitable from operations on a
combined basis. The table below segregates the operations of Technet and
Networkland for the fourth quarter of 1999.

<TABLE>
<CAPTION>
         Quarter ended December 31, 1999
                                               Networkland     Technet     All Other(1)      Total
                                               -----------   -----------   ------------   -----------
<S>                                              <C>           <C>           <C>            <C>
         Sales                                   $ 3,597       $ 1,825       $    62        $ 5,484

         Gross profit on sales                       615           192           (70)           737

         Expenses                                    456           218         2,225          2,899

                                                 -------       -------       -------        -------
         Earnings (loss) from operations         $   159       $   (26)      $(2,296)       $(2,163)
                                                 =======       =======       =======        =======
</TABLE>

----------
(1) Includes goodwill write down of $1.6 million and $300,000 reserve against
    accounts receivable of restructured operations.

                                                                         Page 14

<PAGE>

Year ended December 31, 1999 compared to the year ended September 30, 1998.

         The Company reported a decrease in sales of $38.8 million or 62% to
$23.2 million during 1999, compared to the fiscal year ended September 30, 1998.
This decrease is directly related to the consolidation and restructuring of its
hardware reseller business and the decrease in revenues due to the shutdown of
its component supply and build to order businesses.

         STI and Networkland combined for revenues of $15.0 million in the 1999
calendar year, versus STI revenues of $38.8 million for the fiscal year ended
September 30, 1998, resulting in a decrease of 61%. For the same periods Technet
reported revenues of $7.4 million and $4.8 million, respectively, which results
in an increase of 54.2%.

         Cost of sales decreased to $19.8 million from $53.3 million related to
the decrease in sales.

         Gross profit decreased $5.3 million to $3.4 million, related to the
decrease is sales. Gross profit percentage increased slightly from 15% from 14%.

         Selling, general and administrative expenses decreased from $8.5
million to $7.5 million, or 11.6%. This decrease reflects the restructuring and
downsizing of operations, as well the Company's continuing efforts in reducing
administrative costs. The benefits from these actions were not apparent until
late in 1999.

         Restructuring charges were incurred in 1999 that amounted to $3.6
million. The restructuring charges include a write down of goodwill amounting to
$1.8 million, as well as write downs of inventory, receivables and fixed assets,
the recording of certain personnel costs, including severance, associated with
restructuring the operations, and the establishment of reserves for anticipated
losses on subleases.

         Investment income and expense decreased $5.5 million to $(3.9) million
from $1.6 million. In 1999, the Company sold its entire holdings of e-Net stock
having a cost basis of $5.3 million and received net proceeds of $1.3 million.
Relating to this sale, the Company recorded the loss of $3.9 million.

         Also included is income of $691,000 associated with a former officer
and current shareholder agreeing to forego salary which had been accrued but not
paid from 1996 to 1998 to resolve certain matters between the Company and the
individual. The income associated with the reversal of this accrual has been
treated as a change in estimate and is classified in other income to reflect its
non-recurring nature and to not distort results of operations.

         The Company did not record any tax benefit associated with losses
incurred in 1999 due to the fact that the Company's ability to generate taxable
income sufficient to absorb such losses is uncertain. However, the Company has
not adjusted the previously recorded net deferred tax asset of $1.2 million
based its estimate of future taxable income expected to be generated from its
continuing operations. A key aspect of this analysis was that the Company's
operations, exclusive of restructuring charges, have generated taxable income
since completing the restructuring of its operations in the third quarter of
1999.

     Earnings (loss) from continuing operations for the year ended December 31,
1999 were $(12) million or $(.77) per share (basic and diluted EPS), as
compared to earnings (loss) continuing operations for the year ended September
30, 1998 $1.4 million or $0.09 per share (basic and diluted EPS).

Transition period ended December 31, 1998 compared to comparable period in 1997


         During the quarter ended December 31, 1998, the Company continued the
reorganization of its businesses aimed at concentrating on higher margin
product, service and training sales. The effort is concentrated on reconfiguring
the operating model of its computer hardware and software sales and training
business segment to streamline support infrastructure and realigning sales force
accountability and focus. Associated with this effort was a significant
downsizing of the Company operations in New York, acquired in 1997 with the
acquisition of

                                                                         Page 15

<PAGE>

Expert, Inc. and the folding of the JMR Distributors business into Socrates
Technologies. JMR was involved in the reselling and distribution of computer
memory and associated products. This reorganization had a significant impact on
operating results during the transition period ended December 31, 1998 due to
downward adjustments to the carrying value of goodwill, inventory and fixed
assets associated with reorganized operations.

         At the same time, the Company continues to be vigorously pursuing
growth of its Software Development business via its Technet Computer Services
subsidiary.

         The Company reported a decrease in sales of $63,314 to $12,650,211 for
the transition quarter ended December 31, 1998 compared to the comparable
quarter ended December 31, 1997. The decrease was due in part to lower sales
generated by the Company's computer hardware and software sales and training
segment consistent with the reorganization of this business to focus on higher
margin product sales, particularly in its New York operations and with the
planned exit of the low margin memory distribution business. Offsetting this
decrease was an increase in sales generated by the Company's software
development business by $838,000 or 94% to $1,730,000 for the quarter ended
December 31, 1998.

         The gross margins as a percentage of sales decreased to 11% from 13%.
Contributing to this decrease was an adjustment during the quarter ended
December 31, 1998 of approximately $480,000 to reduce inventories to net
realizable value. Without this adjustment, gross margins increased to 15%.

         For the quarter ended December 31,1998, selling expenses increased by
$634,906 or 143% to $1,078,166 due to additional personnel costs associated with
the expansion of the sales force related to the Company's software development
business. Administrative expenses increased $822,276 or 71% to $1,983,581 as a
result of additional reserves for accounts receivable of approximately $400,000
and the increase in expenses associated with growth in the Company's
infrastructure necessary to support future growth.

         Depreciation and amortization expenses for the quarter ended December
31, 1998 increased by $50,205 to $270,866 due to an increase in depreciable
assets.

         During the quarter ended December 31, 1998, the Company recorded
charges totaling $1,290,373 associated with the restructuring of its computer
hardware and software sales and training segment. The charges consisted of non-
cash write downs of goodwill and inventory associated with certain restructured
operations of $940,000 and the write down of certain fixed assets which have no
continuing value to the Company by $35,000. In addition, the Company recorded a
write down of the value of inventories associated with its New York and memory
distribution operations of $325,000 as a result of reorganizing this business.

         Investment income and expense, which includes realized gains and losses
on marketable securities, decreased in the quarter ended December 31, 1998
compared to the comparable 1997 quarter by $69,108 to $25,469 as a result of
lower investment balances and losses of approximately $184,000 from the sale of
shares of e-Net, Inc. In addition, during the quarter ended December 31, 1998,
the Company recorded a loss of $298,000 associated with an early withdrawal
penalty charged the Company by a financial institution upon withdrawal of funds
from an investment account. The Company is disputing the penalty and currently
seeking recovery of the funds. However, the recovery, if any, will be recorded
when realized.

         In March 1998, the Company discontinued its machine vision business and
as a result has reported results of operations and losses associated with the
discontinuance separately from continuing operations. Since the decision to exit
this business was made, the Company has been marketing for sale this business.
The Company currently is considering offers from two third parties, one for a
portion of the business and one for the entire business. Using the lower of
these two offers as an indication of the floor value of the net assets of this
business, the Company recorded a write down of the net assets held for sale
during the quarter ended December 31, 1998 of approximately $1,080,000. In
addition, the Company has provided a reserve of approximately $30,000 for
estimated operating losses to be incurred

                                                                         Page 16

<PAGE>

from January 1, 1999 to the expected date of sale, which is expected to occur in
the second quarter of 1999.

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 hardware and software sales 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 hardware and
software sales 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.

         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 carry forwards 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.
carry-forwards could be affected. In addition, the Company has net operating
loss and research expenditure carry forwards 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 17

<PAGE>

         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.

Liquidity and capital resources

         As of December 31, 1999, the Company had working capital of $1.0
million and cash, cash equivalents and investments of $942,000. The Company
generated cash from operations during the year ended December 31, 1999 of
approximately $2.5 million principally as result of reductions to other current
assets due to the restructuring and increases to current liabilities. This cash
was principally used to reduce the lines of credit referred to below.

         The Company had entered 1999 with two financing agreements with a
financing company, a floor inventory line and coupled with a revolving line of
credit, that provided inventory and accounts receivable financing. The maximum
amount available under the combined lines was $10 million. Both lines were
terminated by the lender in 1999 due to a decrease in purchasing and inventory
levels below contractual floor levels. All amounts due to the financing company
have been repaid at December 31, 1999.

         In 1999, the Company sold its entire holdings of e-Net stock having a
cost basis of $5.3 million and received net proceeds of $1.3 million. Relating
to this sale, the Company recorded a realized loss of $(3.9) million.

         During 1999, the Company paid $750,000 to the former owner of its
Technet subsidiary and accrued $250,000 in satisfaction of an earn-out provision
associated with the acquisition of the Technet in 1997. This payment and accrual
were charged to goodwill.

         The Company acquired all the outstanding stock of Networkland, Inc.
effective August 16, 1999. The Company paid $700,000 in cash and 2,000,000
shares of common stock valued at $1.3 million at closing. The merger agreement
also specified that an additional $450,000 in cash would be paid over a three
year period following the merger. The acquisition of Networkland, Inc. was
accounted for as a purchase. The cost exceeded the fair value of net assets
resulting in goodwill of $2.0 million. Goodwill will be amortized using an
estimated life of ten years. The results of operation of Networkland, Inc. are
included in the accompanying financial statements since the date of acquisition.

         During the fourth quarter of 1999, the Company entered into two short
term accounts receivable financing agreements with a finance company, which
provided for advances against accounts receivable in the amounts of $85,000 and
$100,000, respectively. Of these amounts, at December 31, 1999 the Company owed
approximately $129,000, which was repaid in January of 2000.

         In February 2000, the Company entered in to a new agreement with a
financing company to provide up to $1 million of financing by factoring specific
accounts receivable. To date the Company has financed approximately $47,000
under this agreement.

         During December 1999, the Company converted loans payables to
stockholders to equity. Loans to such stockholders had been loaned under three
separate loan agreements bearing interest at 9 percent, 8 percent, and 16
percent respectively. The total amount of loan payable converted to equity
included principle amount of approximately $1.3 million and interest of
approximately $290,000.

         In January 2000, the Company entered into certain agreements with
individual accredited investors for a private placement of shares of the
Company's common stock, which resulted in an increase in equity, cash and
tangible assets of approximately $865,000.

                                                                         Page 18
<PAGE>

         Effective March 1, 2000, the Company acquired substantially all of the
assets and certain liabilities of Object Applications Systems, Inc. for total
consideration of approximately $4.7 million, payable in cash, note payable and
common stock of the Company. The Company will record the transaction as an asset
purchase, allocating the total purchase price to the various assets purchased,
with any excess of purchase price over fair market vale of assets purchased to
goodwill. The principal asset purchased in the agreement is software,
independently valued approximately $3.7 million.

         OAS develops and implements a family of ERP software systems for small
and mid size enterprises. The Company plans to convert these systems to web
based applications during the year 2000. The OA/System ERP software "vertical"
application products include OA/Manufacturing, OA/Distribution, and
OA/Converting. OA/System products are capable of supporting virtually every
aspect of manufacturing, importing, converting, and distribution. The
applications include customer sales order processing, purchasing, inventory
management, shipping, invoicing, production scheduling, production planning,
general ledger, accounts receivable, financing of receivables, accounts payable,
letter of credit processing, financial reporting and multi-currency. Additional
OA/System products include OA/EDI for Electronic Data Interchange (EDI)
transactions and OA/Data Collection for radio frequency (RF) warehouse
management. (See Note M, Notes to Consolidated Financial Statements.)

         In August 1999, the Company received notification from The Nasdaq Stock
Market, Inc. that the company was not in compliance with the criteria for
continued listing on the Nasdaq National Market System ("NMS"). This listing
deficiency was the Company's stock market price falling below $1.00. In November
1999, Nasdaq informed the Company that it was not incompliance with an
additional criterion, that of maintaining at least $4 million in tangible net
assets. In the first quarter of 2000, the Company was notified by NASDAQ that it
had met the requirements for continued listing on NMS, provided that it Make a
public filing, on or before March 15, 2000, evidencing, with pro forma
statements that it had tangible net assets of at least $5 million, taking into
account transactions between January 31 and March 15, 2000. The notice further
provided that the Company must hold an annual meeting of shareholders in April
2000 and that it maintain compliance with all other aspects of the listing
criteria. With the equity transactions described above and the acquisition of
substantially all of the assets of Object Application Systems, Inc. (described
below and more fully in Note M, Notes to Financial Statements), the Company
filed Form 8K on March 15, which showed that the Company had, on March 15, 2000,
well in excess of $5 million in tangible net assets. The Company has scheduled a
shareholders' meeting for April 21, 2000 and believes that it has, with the
conduct of the April 21, 2000 shareholders' meeting, met all criteria for
continued listing on NMS.

         On March 20, 2000, the Company sold a series of debentures, convertible
under certain circumstances into shares common stock of the Company, for an
aggregate price of $4.5 million. The debentures bear interest at the rate of 4%,
which, at the option of the holder, may be paid in shares of common stock. The
shares of stock underlying the debentures will be included in a registration
statement to be filed by the Company with the SEC by May 15, 2000. The Company
receives $3.5 million at the closing, with another $1 million to be received
after the registration of the underlying shares becomes effective. The
debentures generally are convertible either after 120 days or after the
registration becomes effective, whichever event occurs first. There are certain
penalties included in the agreements for failure to register the underlying
stock. The debentures are convertible into common stock at the lower of $3.38 or
the lowest closing price of the Company's common stock during the 30 trading
days immediately preceding conversion. Each debenture has attached to it a
warrant granting the holder the right to purchase .5 shares at $6.77 per share
and .1 shares at $12.00 per share. The Company expects to record related
expenses of approximately $470,000, for commissions and legal expenses related
to the sale of the debentures. The foregoing is qualified in its entirety by
reference to the Debenture, Warrant and Securities Purchase Agreements, all of
which are exhibits to this report.

         Management believes that the working capital and liquidity position of
the Company, together with funds available under the Company's debentures
outlined above, 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.

         The Company has no significant long-term debt outstanding as of
December 31, 1999.

                                                                         Page 19

<PAGE>

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.

         With the discontinuance of the Company's Canadian operation in March
1998, 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. 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

         The Company has experienced no significant problems related to the Year
2000 with its internal systems nor with any equipment or systems sold to its
customers.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         Not Applicable.

                                                                         Page 20

<PAGE>


SOCRATES TECHNOLOGIES CORPORATION AND SUBSIDIARIES

Contents


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

ITEM 8:  FINANCIAL STATEMENTS


REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                            22


CONSOLIDATED FINANCIAL STATEMENTS

     Consolidated balance sheets                                              23

     Consolidated statements of operations                                    24

     Consolidated statements of stockholders' equity (deficit) and other
          comprehensive income and losses                                     25

     Consolidated statements of cash flows                                    26

     Notes to Consolidated Financial Statements                            27-44



                                                                         Page 21

<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 December 31, 1999 and 1998, and the related consolidated statements of
operations, stockholders' equity (deficit) and other comprehensive income and
losses and cash flows for the year ended December 31, 1999, the three-month
period ended December 31, 1998 and the years ended September 30, 1998 and 1997.
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 December 31, 1999 and 1998 and
the results of operations and their cash flows for the year ended December 31,
1999, the three-month period ended December 31, 1998 and the years ended
September 30, 1998 and 1997, in conformity with generally accepted accounting
principles.



                                                    GRANT THORNTON LLP


Vienna, Virginia
March 3, 2000,
(except for
Note M, for which the
date is March 27, 2000)

                                                                         Page 22

<PAGE>

<TABLE>
Socrates Technologies Corporation and Subsidiaries
Consolidated balance sheets
(thousands of dollars, except share data)
-----------------------------------------------------------------------------------------------------
<CAPTION>
                                                                                 December 31,
                                                                          ---------------------------
                                                                             1999           1998
                                                                             ----           ----
<S>                                                                          <C>            <C>
Assets
Current assets
     Cash and cash equivalents                                               $    942       $  2,423
     Investments                                                                    -          1,479
     Accounts receivable, net of allowance
         for doubtful accounts                                                  3,769         10,437
     Inventory                                                                     54          1,073
     Advances and other receivables                                               211            217
     Prepaid expenses                                                             194            779
     Net assets of discontinued operations held for sale                            -            162
                                                                          ------------   ------------

Total current assets                                                            5,170         16,570

Property and equipment, net                                                       636          1,019
Capitalized software costs, net                                                     -             68
Goodwill, net                                                                   4,542          3,944
Deferred tax asset, net of valuation allowance                                  1,200          1,200
Other assets                                                                       72            104
                                                                          ------------   ------------

Total assets                                                                 $ 11,620       $ 22,905
                                                                          ============   ============

Liabilities and stockholders' equity
Current liabilities
     Line of credit and financing arrangement                                $      -       $  4,491
     Notes payable                                                                134              0
     Accounts payable and accrued liabilities                                   4,036          4,077
     Shareholder loans and interest                                                 -          1,155
                                                                          ------------   ------------
Total current liabilities                                                       4,170          9,723

Stockholders' equity
     Common stock, $.01 par value,
         50,000,000 shares authorized, 21,264,644 and 17,740,620 shares
         issued; 18,263,228 and 14,739,204 shares outstanding at
         December 31, 1999 and 1998, respectively                                 212            177
     Stock subscription receivable                                               (150)          (150)
     Additional paid-in capital                                                51,924         49,342
     Treasury stock, at cost, 3,001,416 shares                                (17,554)       (17,554)
     Accumulated deficit                                                      (26,982)       (14,985)
     Accumulated other comprehensive income and (losses)                            -         (3,649)
                                                                          ------------   ------------
Total stockholders' equity                                                      7,450         13,182
                                                                          ------------   ------------

Total liabilities and stockholders' equity                                   $ 11,620       $ 22,905
                                                                          ============   ============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                                                         Page 23

<PAGE>

<TABLE>
Socrates Technologies Corporation and Subsidiaries
Consolidated Statements of Operations
(thousands of dollars, except per share amounts)
------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                                 Three Months
                                                    Year Ended      Ended            Fiscal years ended
                                                   December 31,  December 31,          September 30,
                                                  ----------------------------  ----------------------------
                                                     1999            1998           1998           1997
                                                     ----            ----           ----           ----
<S>                                                   <C>             <C>            <C>            <C>
Products                                              $15,828         $10,920        $57,222        $33,756
Services                                                7,411           1,730          4,786            579
                                                  ------------   -------------  -------------  -------------
Total Sales                                            23,239          12,650         62,008         34,335

Products                                               14,632          10,251         50,696         29,522
Services                                                5,183           1,041          2,603            451
                                                  ------------   -------------  -------------  -------------
Total Cost of Sales                                    19,815          11,292         53,299         29,973

Gross Profit                                            3,424           1,358          8,709          4,362

Expenses
   Selling, general and administrative                  7,467           3,063          8,518          3,513
   Depreciation and amortization                          959             271            964            514
   Restructuring Charges                                3,627           1,290              -              -
                                                  ------------   -------------  -------------  -------------
                                                       12,053           4,624          9,482          4,027
                                                  ------------   -------------  -------------  -------------

Income (Loss) from Operations                          (8,629)         (3,266)          (773)           335

Gain (Loss) on Sale of Investment                      (3,953)           (184)         1,594              -
Interest and financing income (expense)                  (128)           (443)           292            778
Other income                                              712               -              -              -
                                                  ------------   -------------  -------------  -------------

Earnings (loss) Before Income Taxes                   (11,997)         (3,893)         1,113          1,113

Income Tax (Benefit) Provision
   Current                                                  -               -             31             82
   Deferred                                                 -               -           (306)           214
                                                  ------------   -------------  -------------  -------------

Earnings (loss) from Continuing Operations            (11,997)         (3,893)         1,388            817
                                                  ------------   -------------  -------------  -------------

Discontinued Operations
   Loss from operations, net of income
      tax benefits of $486 in 1997                          -          (1,132)        (1,250)          (707)

   Loss from disposal, including income tax
      expense of $1,233 in 1998                             -               -         (4,732)             -
                                                  ------------   -------------  -------------  -------------
                                                            -          (1,132)        (5,982)          (707)
                                                  ------------   -------------  -------------  -------------

Net Earnings (Loss)                                   (11,997)         (5,025)        (4,594)          $110
                                                  ============   =============  =============  =============

Earnings (Loss) Per Share
   Continuing operations--basic                         (0.77)          (0.26)          0.09           0.08
   Discontinued operations--basic                           -           (0.08)         (0.40)         (0.07)
   Net earnings (loss)--basic                           (0.77)          (0.34)         (0.31)          0.01
   Continuing operations--diluted                       (0.77)          (0.26)          0.09           0.06
   Discontinued operations--diluted                         -           (0.08)         (0.40)         (0.05)
   Net earnings (loss)--diluted                         (0.77)          (0.34)         (0.31)          0.01
</TABLE>

        The accompanying notes are an integral part of these statements.

                                                                         Page 24

<PAGE>

Socrates Technologies Corporation and Subsidiaries

Consolidated Statements of Stockholders' Equity (Deficit) and Other
Comprehensive Income and Losses
(In thousands)
-------------------------------------------------------------------------------

Year Ended December 31, 1999, Three Month Transition Period Ended December 31,
1998 and the Years ended September 30, 1998, 1997

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


                                                        Common Stock             Stock         Additional
                                                    --------------------      Subscription       Paid-In       Accumulated
                                                    Shares        Amount       Receivable        Capital        (Deficit)
                                                    ------        ------       ----------      ----------      -----------
<S>                                                 <C>           <C>           <C>             <C>             <C>
Balance, October 1, 1996                            10,740        $ 107         $ (150)         $ 20,578        $ (5,476)
Acquisition--Expert, Inc.                              300            3              -             1,064               -
Acquisition--Technet Computer Services, Inc.           400            4              -             2,376               -
Net Earnings                                             -            -              -                 -             110
Warrant Conversion                                      15            -              -                60               -
Issuance of Common Stock                               135            1              -               522               -
Purchase of Treasury Stock                               -            -              -                 -               -
Change in Cumulative Translation Adjustment              -            -              -                 -               -
Unrealized Gain (Loss) from Investments                  -            -              -                 -               -


Total Comprehensive Loss
-------------------------------------------------------------------------------------------------------------------------


Balance, September 30, 1997                         11,590          115           (150)           24,600          (5,366)

Net Loss                                                 -            -              -                 -          (4,594)
Warrant Redemption & Exercise                        6,087           61              -            24,448               -
Issuance of Common Stock                                64            1              -               313               -
Purchase of Treasury Stock                               -            -              -                 -               -
Issuance's of Treasury Stock                             -            -              -              (146)              -
Tax Benefit From Option Exercises                        -            -              -               128               -
Change in Cumulative Translation Adjustment              -            -              -                 -               -
Unrealized Gain (Loss) from Investments                  -            -              -                 -               -


Total Comprehensive Loss
-------------------------------------------------------------------------------------------------------------------------


Balance, September 30, 1998                         17,741          177           (150)           49,343          (9,960)

Net Loss                                                 -            -              -                 -          (5,025)
Change in Cumulative Translation Adjustment              -            -              -                 -               -
Unrealized Gain (Loss) from Investments                  -            -              -                 -               -


Total Comprehensive Loss
-------------------------------------------------------------------------------------------------------------------------


Balance, December 31, 1998                          17,741          177           (150)           49,343         (14,985)

Acquisition--Networkland                             2,000           20              -             1,255               -
Conversion of shareholders' loans                    1,524           15              -             1,532               -
Net Loss                                                 -            -              -                 -         (11,997)
Change in Cumulative Translation Adjustment              -            -              -              (206)              -
Unrealized Gain (Loss) from Investments                  -            -              -                 -               -


Total Comprehensive Loss
-------------------------------------------------------------------------------------------------------------------------


Balance December 31, 1999                           21,265        $ 212         $ (150)         $ 51,924        $(26,982)
                                                    ======        =====         ======          ========        ========

</TABLE>


<TABLE>
<CAPTION>
                                                                                     Accumulated
                                                                                        Other
                                                          Treasury Stock            Comprehensive
                                                      Shares         Amount         Income(Losses)       Total
                                                      ------         ------         --------------      -----
<S>                                                   <C>          <C>                 <C>            <C>
Balance, October 1, 1996                                   -       $       -           $      47      $ 15,106
Acquisition--Expert, Inc.                                  -               -                   -         1,067
Acquisition--Technet Computer Services, Inc.               -               -                   -         2,380
Net Earnings                                               -               -                   -           110
Warrant Conversion                                         -              60                   -            60
Issuance of Common Stock                                   -               -                   -           523
Purchase of Treasury Stock                              (180)           (573)                  -          (573)
Change in Cumulative Translation Adjustment                -               -                (463)         (463)
Unrealized Gain (Loss) from Investments                    -               -                (145)         (145)
                                                                                                      --------

Total Comprehensive Loss                                                                                  (499)
--------------------------------------------------------------------------------------------------------------

Balance, September 30, 1997                             (180)           (573)               (561)       18,065

Net Loss                                                   -               -                   -        (4,594)
Warrant Redemption & Exercise                           (684)         (4,333)                  -        20,176
Issuance of Common Stock                                   -               -                   -           314
Purchase of Treasury Stock                            (2,259)        (13,045)                  -       (13,045)
Issuance's of Treasury Stock                             121             397                   -           251
Tax Benefit From Option Exercises                          -               -                   -           128
Change in Cumulative Translation Adjustment                -               -                 284           284
Unrealized Gain (Loss) from Investments                    -               -              (4,201)       (4,201)
                                                                                                      --------

Total Comprehensive Loss                                                                                (8,511)
--------------------------------------------------------------------------------------------------------------

Balance, September 30, 1998                           (3,002)       (17,554)           $  (4,478)       17,378

Net Loss                                                   -               -                   -        (5,025)
Change in Cumulative Translation Adjustment                -               -                 (63)          (63)
Unrealized Gain (Loss) from Investments                    -               -                 893           893
                                                                                                      --------

Total Comprehensive Loss                                                                                (4,195)
--------------------------------------------------------------------------------------------------------------

Balance, December 31, 1998                            (3,002)        (17,554)             (3,648)       13,183

Acquisition--Networkland                                   -               -                   -         1,275
Conversion of shareholders' loans                          -               -                   -         1,547
Net Loss                                                   -               -                   -       (11,997)
Change in Cumulative Translation Adjustment                -               -                 135           (71)
Unrealized Gain (Loss) from Investments                    -               -               3,513         3,513
                                                                                                      --------

Total Comprehensive Loss                                                                                (8,554)
--------------------------------------------------------------------------------------------------------------

Balance December 31, 1999                             (3,002)      $ (17,554)          $       -      $  7,450
                                                      ======       =========           =========      ========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                                                         Page 25
<PAGE>

<TABLE>
Socrates Technologies Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Thousands of dollars)
--------------------------------------------------------------------------------------------
<CAPTION>
                                                                                 Three Month
                                                                 Year Ended      Period Ended         Years Ended September 30,
                                                                December 31,     December 31,      -------------------------------
                                                                    1999             1998              1998               1997
                                                                -------------    --------------    -------------   ---------------
<S>                                                                <C>                <C>              <C>                <C>
Increase (Decrease) in Cash and Cash Equivalents
Cash Flows from Operating Activities
   Net earnings (loss) from operations                             $ (11,997)         $ (5,025)        $ (4,594)          $   110
   Adjustments to reconcile net income (loss) to net
     cash from operating activities:
       Deferred income taxes                                               -                 -              371              (272)
       Depreciation and amortization                                     959               272              964               777
       Restructuring charges                                           2,803             1,290                -                 -
       Realized (gain) loss on investments                             3,953               439           (1,594)                -
       Equity in Earnings of Joint Venture                                 -                 -              240               (50)
       Non-cash (gains) losses from discontinued operations                -             1,031            2,030              (466)
       Loss on disposal of long term assets                                5                 -                -                 -

       Changes in operating assets and liabilities,
         net of effects of acquisitions and dispositions:
         Decrease (increase) in accounts receivable                    7,137             4,366           (8,542)             (488)
         Decrease (increase) in inventory                                754             1,434             (176)              (96)
         Decrease (increase) in tax credits and income taxes
           receivable                                                     61               (19)            (337)              369
         Decrease (increase) in prepaid expenses                          98               178             (719)               84
         Decrease (increase) in other assets                              32               148             (127)              (18)
         Decrease (increase) in advance deposits                           -                 -              (76)              132
         (Decrease) increase in accounts payable and accrued
           liabilities                                                (1,299)           (1,265)             474            (1,135)
                                                                  ------------------------------------------------------------------
Net Cash (Used in) Provided by Operating Activities                    2,506             2,848          (12,086)           (1,053)

Cash Flows from Investing Activities
   Cash received from purchase of subsidiary                             421                 -                -                 -
   Cash received from sale of discontinued operations                    157                 -                -                 -
   Cash received from sale of investments                              1,348                 -                -                 -
   Cash payment for purchase of subsidiary                              (700)                -                -                 -
   Cash payment for earnout of acquired subsidiary                      (750)                -                -                 -
   Investment purchases                                                    -              (567)          (5,543)             (990)
   Borrowings (payments) on margin against investments                  (309)              512            4,800             4,537
   Property, Plant and equipment purchases                               (24)              (15)            (854)             (606)
   Capitalized Software Costs                                              -                 -                -              (549)
   Investment in Joint Venture                                             -                 -                -              (216)
                                                                  ------------------------------------------------------------------
Net Cash (Used in) Provided by Investing Activities                      143               (70)          (1,597)            2,176

Cash Flows from Financing Activities
   Net (decrease) increase in line of credit                          (4,491)             (926)           4,243               318
   Proceeds from issuance of notes payable                               197                 -                -                 -
   Payment of notes payable                                              (65)                -                -                 -
   Proceeds from shareholder loans                                       300                 -            1,401                79
   Payment of shareholder loans                                            -              (226)            (758)                -
   Proceeds from issuance of common stock                                  -                 -              314               522
   Purchase of treasury stock                                              -                 -          (17,378)             (573)
   Proceeds from exercise of warrants                                      -                 -           24,509                60
   Issuance of treasury stock                                              -                 -              251                 -
                                                                  ------------------------------------------------------------------
Net Cash (Used in) Provided by Financing Activities                   (4,059)           (1,152)          12,582               406
                                                                  ------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash                                  (71)               31              192              (168)
                                                                  ------------------------------------------------------------------

Net Increase (Decrease) in Cash                                       (1,481)            1,657             (909)            1,361
Cash at Beginning of Year                                              2,423               766            1,675               314
                                                                  ------------------------------------------------------------------

Cash at End of Year                                                $     942          $  2,423         $    766           $ 1,675

Supplemental Disclosure of Cash Flow Information
   Income Taxes Paid                                               $      10          $      -         $    132           $    85
   Interest Paid                                                   $     105          $     21         $    223           $   262
                                                                  ==================================================================
</TABLE>

        The accompanying notes are an integral part of these statements.

                                                                         Page 26

<PAGE>


     SOCRATES TECHNOLOGIES CORPORATION AND SUBSIDIARIES
     Notes to Consolidated Financial Statements--Continued
     DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997

     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 an
     information technology solutions company whose business is focused on
     systems engineering and integration, software engineering and customized
     software development, including turnkey system development and product
     development, and maintenance services and customized information technology
     to corporate and government customers.

     Socrates 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 Virginia.

     Effective January 1, 1999, the Company has changed it fiscal year end from
     September 30 to December 31. References to fiscal years herein are to the
     fiscal years of the Company ended December 31, 1999 and September 30, 1998
     and 1997, respectively. References to the transition period are the
     three-month period ended December 31, 1998.

     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. For fixed price contracts, the Company follows
     the percentage of completion method for revenue recognition. Amounts
     received from customers prior to shipment are recorded as deposit
     liabilities.


                                                                         Page 27
<PAGE>
     SOCRATES TECHNOLOGIES CORPORATION AND SUBSIDIARIES
     Notes to Consolidated Financial Statements--Continued
     DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997
     CASH AND CASH EQUIVALENTS

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

     Cash and cash equivalents include cash and money market accounts.

     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 December 31, 1999, and 1998 management
     has established an allowance for doubtful accounts of approximately $1.4
     million and $409,000, respectively.

     The following table depicts the activity in the allowance for doubtful
     accounts:
<TABLE>
<CAPTION>
                                            Balance Beginning                           Balance End
                                                of Period       Additions   Deletions    of Period
<S>                                               <C>              <C>        <C>          <C>
     Fiscal year ended September 30, 1997         140                         (69)            71
     Fiscal year ended September 30, 1998          71              133                       204
     Three months ended December 31, 1998         204              272        (67)           409
     Year ended December 31, 1999                 409              991                     1,400
</TABLE>

     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 straight-line method over
     estimated lives ranging from five to seven years. Leasehold improvements
     are amortized on a straight-line basis over the shorter of the lease term
     or estimated useful lives of the related assets.

     CAPITALIZED SOFTWARE COSTS

     The Company had acquired certain computer software in connection with the
     Technet acquisition which was being amortized over a two year period, the
     expected remaining economic life of the related products. Amortization
     expense related to computer software acquired in the Technet acquisition
     was $68,000, $34,000, and $135,000 for year ending December 31, 1999, the
     three month period ended December 31, 1998, and the year ended September
     30, 1998. At December 31, 1999 the capitalized software costs are fully
     depreciated.

     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.

     During 1999, the Company paid $750,000 to the former owner of its Technet
     subsidiary and accrued $250,000 in satisfaction of an earn-out provision
     associated with the acquisition of the Technet in 1997. This payment and
     accrual were charged to goodwill.

     Amortization expense charged to operations in the during the fiscal year
     ended December 31, 1999 was $569,000 and for the three month period ended
     December 31, 1998 was $153,000 and for the fiscal years September 30, 1998
     and 1997 was $614,000 and $382,000, respectively. Management regularly
     reviews the carrying value of goodwill against anticipated cash flows of
     each business in order to evaluate recoverability. As a result of the
     reviews of the recoverability of the recorded goodwill at December 31,
     1999, approximately $1.8 million of goodwill was written off to
     restructuring

                                                                         Page 28
<PAGE>

     charges, of which $1.6 million was written off in the fourth quarter. It is
     possible that estimates of anticipated future gross profits of 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.


                                                                         Page 29

<PAGE>


     SOCRATES TECHNOLOGIES CORPORATION AND SUBSIDIARIES
     Notes to Consolidated Financial Statements--Continued
     DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997

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

     EARNINGS PER SHARE

     The Financial Accounting Standards Board 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
     statement of operations 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.

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

<TABLE>
<CAPTION>
                                                 Year ended          3 months ended          Year ended          Year ended
(Thousands, except per share amounts)          December 31, 1999    December 31, 1998    September 30, 1998  September 30, 1997
--------------------------------------------------------------------------------------------------------------------------------

<S>                                                 <C>                    <C>                  <C>                <C>
Numerator
    Earnings (loss) from continuing operations      $(11,997)              $ (3,893)            $ 1,388            $     817
                                                -----------------------------------------------------------------------------

Denominator
    Denominator for basic earnings (loss) per
    share-weighted average shares                     15,547                 11,448              14,884               10,800
                                                -----------------------------------------------------------------------------

Effect of diluted securities
    employee stock options and warrants                 0.00                   0.00                 260                2,010
                                                -----------------------------------------------------------------------------

Denominator for diluted earnings (loss) per
    share-adjusted weighted average
    shares and assumed conversions                    15,547                 11,448              15,144               12,810
                                                -----------------------------------------------------------------------------

Basic earnings (loss) per share from
    continuing operations                           $  (0.77)              $  (0.34)            $  0.09            $    0.08
                                                -----------------------------------------------------------------------------

Diluted earnings (loss) per share from
    continuing operations                           $  (0.77)              $  (0.34)            $  0.09            $    0.06
                                                -----------------------------------------------------------------------------
</TABLE>


     For additional information regarding stock options, see Note H. 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.

                                                                         Page 30

<PAGE>

     SOCRATES TECHNOLOGIES CORPORATION AND SUBSIDIARIES
     Notes to Consolidated Financial Statements--Continued
     DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997

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


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

     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.


     NOTE B--RESTRUCTURING OF OPERATIONS

     During the year ended December 31, 1999, the Company continued and
     concluded the reorganization and restructuring of its businesses aimed at
     concentrating on higher margin product and service sales. The effort is
     concentrated on reconfiguring the operating model of its Computer System
     Sales, Integration and Training business segment to streamline support
     infrastructure and realigning sales force accountability and focus.
     Associated with this effort was a significant downsizing of the Company
     operations in New York, acquired in 1997 with the acquisition of Expert,
     Inc. and the folding of the JMR Distributors and Socrates Technologies
     Computer System Sales, Integration and Training Segment business. With the
     acquisition of Networkland, Inc., the Company transfered certain staff and
     resources from the Company's Largo facility to Networkland, Inc. facility
     in Rossyln, Virginia. The Company intends to sublease the Largo facility
     except the classrooms utilized for the Company's IT training programs. This
     reorganization had a significant impact on operating results during the
     year ended December 31, 1999 due to downward adjustments to the carrying
     value of goodwill, inventory and fixed assets associated with reorganized
     operations.

     During the year ended December 31, 1999, the Company recorded charges
     totaling $3.6 million associated with the restructuring of its Computer
     System Sales, Integration and Training Segment. The charges consisted of
     non- cash write downs of goodwill associated with certain restructured
     operations of $1.8 million. Additional charges consisted of write-downs of
     inventory, receivables and fixes assets, the recording of certain personnel
     costs associated with restructuring the operations, and the establishment
     of reserves for anticipated losses on subleases. At December 31, 1999, the
     Company has remaining accrued liabilities of associated with the
     restructuring approximately $568,000, all of which are expected to be
     utilized in 2000.

                                                                         Page 31
<PAGE>


     SOCRATES TECHNOLOGIES CORPORATION AND SUBSIDIARIES
     Notes to Consolidated Financial Statements--Continued
     DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997

     Management's decision to write down the value associated with goodwill
     acquired in the 1997 acquisition of Socrates Technologies, Inc. ("STI") was
     due to the fact that the Company is no longer targeting Socrates customers,
     the "build to order" operations where in the Company assembled custom
     computers and peripherals have been ceased, and substantially all of the
     Socrates employee base is no longer with the Company. In addition, goodwill
     was written down to zero because the training operations within Socrates
     that continue were commenced after the acquisition and management believes
     any value associated with the Socrates name can not be estimated.


     NOTE C---INVENTORY

         Inventory consists of the following:

                                                       (thousands of dollars)
                                                            December 31,
                                                       -----------------------
                                                       1999             1998
                                                       ----             ----
           Raw materials                               $  -            $  314
           Finaished goods                               54               759
                                                       ----            ------

                                                       $ 54            $1,073
                                                       ====            ======



     NOTE D--PROPERTY AND EQUIPMENT

     Property, plant and equipment consist of the following:


                                                       (thousands of dollars)
                                                            December 31,
                                                       -----------------------
                                                       1999             1998
                                                       ----             ----
           Autos and trucks                           $   127         $   127
           Furniture and office equipment                 879             996
           Purchased software                             307             310
           Leasehold improvements                         160             160
                                                      -------         -------
                                                        1,473           1,593
           Less: Accumulated depreciation                (837)           (574)
                                                      -------         -------

                                                      $   636         $ 1,019
                                                      =======         =======


     NOTE E--VENDOR FINANCING ARRANGEMENT

     The Company maintained a wholesale financing agreement and an accounts
     receivable credit facility with a finance company for the financing for one
     of its subsidiaries. The agreement provided 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 and to borrow against
     accounts receivable.

                                                                         Page 32
<PAGE>

     SOCRATES TECHNOLOGIES CORPORATION AND SUBSIDIARIES
     Notes to Consolidated Financial Statements--Continued
     DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997


     The agreement was collateralized by all present and future accounts
     receivable and inventory of Company's subsidiary. In addition, the Company
     must comply with certain financial and reporting covenants. At September
     30, 1999 the Company was not in compliance with certain covenants,
     including the Tangible Net Worth and Subordinated Debt covenants, contained
     in the wholesale and business finance agreements. The Company paid off all
     its obligations under the financing arrangement in October 1999 and the
     agreement was terminated. Amounts due to finance company under the
     agreement at December 31, 1999 and 1998 was $0 and $4.5 million,
     respectively.

     During the fourth quarter of 1999, the Company entered into two short term
     accounts receivable financing agreements with a finance company, which
     provided for advances against accounts receivable in the amounts of $85,000
     and $100,000, respectively. Of these amounts, at December 31, 1999 the
     Company owed approximately $129,000, which was repaid in January of 2000.

     NOTE F--ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

     Accounts payable and accrued liabilities consist of the following:

                                                       (thousands of dollars)
                                                            December 31,
                                                      -----------------------
                                                       1999             1998
                                                       ----             ----
           Vendor trade payables                      $ 2,392        $ 3,220
           Salaries and commissions payable               306            757
           Other accrued liabilities                    1,338            100
                                                      -------        -------

                                                      $ 4,036        $ 4,077
                                                      =======        =======

                                                                         Page 33

<PAGE>


     NOTE G--INCOME TAXES

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

                                                                                                 Fiscal years ended
                                                               Year Ended                          September 30,
                                                              December 31,         3 months   --------------------------
                                                                 1999           ended 12/31/98     1998          1998
                                                                 ----           --------------     ----          ----
<S>                                                             <C>                <C>           <C>            <C>
     Federal
     Current                                                          -                 -              -             -
     Deferred                                                   $(3,291)           $ (945)       $(2,348)       $  342
                                                                -------            ------        -------        ------

     Total Federal                                               (3,291)             (945)        (2,348)          342
                                                                -------            ------        -------        ------

     State
     Current                                                          -                 -             31            83
     Deferred                                                      (484)             (139)          (345)           50
                                                                -------            ------        -------        ------

     Total State                                                   (484)             (139)          (314)          133
                                                                -------            ------        -------        ------

     Increase (Decrease in valuation allowance)                   3,775             1,084          2,387          (178)
                                                                -------            ------        -------        ------

     Net provision                                              $     -            $    -        $  (275)       $  297
                                                                =======            ======        =======        ======
</TABLE>



     Reconciliation of the income tax provision at the federal
     statutory rate to the income tax at the effective rate:

<TABLE>
<CAPTION>
                                                                                                 Fiscal years ended
                                                               Year Ended                          September 30,
                                                              December 31,        3 months    --------------------------
                                                                 1999          ended 12/31/98      1998          1997
                                                                 ----          --------------      ----          ----
<S>                                                             <C>               <C>            <C>             <C>

     Tax (benefit) at U.S. Federal statutory rates              $(4,079)          $(1,323)       $   378        $   378

     Increase (decrease) resulting from:

     State tax (benefit)                                           (600)             (195)            56             90
     Goodwill amortization                                          916               436            292            165
     Change in valuation allowance against deferred tax asset     3,776             1,084          2,387           (178)
     Other permanent differences                                    (13)               18            136           (158)
     Tax benefit associated with loan forgivenes
        to foreign subsidiary                                         -               (20)        (3,524)             -
                                                                -------           -------        -------        -------

     Income tax provision (benefit)                             $     -           $     -        $  (275)       $   297
                                                                =======           =======        =======        =======
</TABLE>


     Tax effect of temporary differences between financial statement amounts and
     tax bases and liabilities which give rise to a deferred tax asset are as
     follows:

<TABLE>
<CAPTION>
                                                                                                 Fiscal years ended
                                                               Year Ended                          September 30,
                                                              December 31,       3 months     --------------------------
                                                                  1999        ended 12/31/98       1998          1997
                                                                  ----        --------------       ----          ----
<S>                                                             <C>              <C>             <C>            <C>

Net Operating Losses                                            $ 6,000           $ 4,158        $ 3,201        $  220
Accrued Compensation                                                119               270            348           659
A/R and Inventory Reserves                                          622               225             63            26
Depreciation and Other                                               92                18            (25)         (139)
Excess of Capital losses over capital gains                       1,613                 -              -             -
Valuation Allowances                                             (7,246)           (3,471)        (2,387)            -
                                                                -------           -------        -------        ------

Net deferred Tax Asset                                          $ 1,200           $ 1,200        $ 1,200        $  766
                                                                =======           =======        =======        ======
</TABLE>

     Following is a table depicting the activity the Company's valuation
     allowance against deferred income tax assets:
<TABLE>
<CAPTION>
                                            Balance Beginning                           Balance End
                                                of Period       Additions   Deletions    of Period
<S>                                             <C>              <C>        <C>          <C>
     Fiscal year ended September 30, 1997       3,471            3,775           -         7,246
     Fiscal year ended September 30, 1998       2,387            1,084           -         3,471
     Three months ended December 31, 1998           -            2,387           -         2,387
     Year ended December 31, 1999                 178                -        (178)            -
</TABLE>

     The above table does not reflect the tax effect of unrealized losses on
     available for sale securities classified in stockholders' equity as of
     December 31, 1998, amounting to approximately $1.7 million. This tax effect
     has been fully reserved by establishing an additional $1.7 million
     valuation allowance at December 31, 1998. In addition, the table excludes
     tax benefits available in Canada as discussed below.

                                                                         Page 34
<PAGE>


     SOCRATES TECHNOLOGIES CORPORATION AND SUBSIDIARIES
     Notes to Consolidated Financial Statements--Continued
     DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997


     NOTE G--INCOME TAXES--Continued

     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 each balance
     sheet date, 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 December 31, 1999 is dependent upon the Company
     generating taxable income in the future sufficient to realize the
     associated tax benefits.

     The Company fully reserved against tax benefits associated with losses
     incurred in 1999 due to the fact that the Company's ability to generate
     taxable income sufficient to absorb such losses is uncertain. However, the
     Company has not adjusted the previously recorded net deferred tax asset of
     $1.2 million based its estimate of future taxable income expected to be
     generated from its continuing operations. A key aspect of this analysis was
     that the Company's operations, exclusive of restructuring charges, have
     generated taxable income since completing the restructuring of its
     operations in the third quarter of 1999. In the event taxable income is not
     generated at sufficient levels, writedowns 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 $15.0 million at December 31, 1999,
     expiring through 2019. 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.


     NOTE H--STOCKHOLDERS' EQUITY

     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 percent
     stockholder with a required exercise price of 110 percent of fair market
     value of the stock at the date of grant.

                                                                         Page 35

<PAGE>

     SOCRATES TECHNOLOGIES CORPORATION AND SUBSIDIARIES
     Notes to Consolidated Financial Statements--Continued
     DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997

     NOTE H--STOCKHOLDERS' EQUITY--CONTINUED


     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.

     In November 1998, the Company adopted Non-Qualified Employee Stock Option
     Plan with similar terms to the 1997 plan.

     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 net earnings and net earnings per share would have changed to the
     pro forma amounts indicated below:


<TABLE>
<CAPTION>

                                                                               THREE MONTHS
                                                                YEAR ENDED         ENDED              YEAR ENDED SEPTEMBER 30,
                                                               DECEMBER 31,     DECEMBER 31,          ------------------------
                                                                  1999             1998                1998             1997
                                                               ------------    -------------           ----             ----

<S>                                                             <C>              <C>                  <C>               <C>
     Earnings (loss) from continuing operations:
        As reported                                             $ (11,997)       $ (3,893)            $ 1,388           $  817
        Pro forma                                               $ (12,602)       $ (4,072)            $   604           $  580
     Earnings (loss) per share, from continuing operations:
        As reported                                             $   (0.77)       $   (.26)            $  0.09           $ 0.06
        Pro forma                                               $   (6.79)       $   (.28)            $  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 during the year ended December 31,
     1999, the three month period ended December 31, 1998 and years ended
     September 30, 1998 and 1997, respectively: expected volatility of 106
     percent, 114 percent, 84 percent and 74 percent, risk free interest rates
     of 5.45 percent, 4.38 percent, 5.36 percent and 5.89 percent; expected
     lives for options granted during the periods were 2.3 years for the year
     ended December 31, 1999, 2.0 years for the three month period ended
     December 31, 1998, and 2.6 years for the years ended September 30, 1998 and
     1997.


                                                                         Page 36

<PAGE>



     SOCRATES TECHNOLOGIES CORPORATION AND SUBSIDIARIES
     Notes to Consolidated Financial Statements--Continued
     DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997

     NOTE H--STOCKHOLDERS' EQUITY--CONTINUED

     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 shre)                         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
                                                               -----------
     Granted during the period (at prices ranging from
             $1.50 to $1.75 per share)                             155,000
     Forfeited during the period                                   (24,250)
     Exercised during the period                                         -
     Outstanding, December 31, 1998                                889,150
                                                               -----------
     Granted during the year (at prices ranging from
             $.50 to $1.38 per share)                            1,280,000
     Forfeited during the year                                    (277,150)
     Exercised during the year                                           -
     Outstanding, December 31, 1999                              1,942,000
                                                               -----------
     Exercisable at end of year
         (at prices ranging from
         $1.38 to $6.56 per share)                                 832,750
                                                               -----------
     Weighted average stock option price                       $      1.91
                                                               -----------
     Weighted average fair value of options
     granted during fiscal:     1997                           $      3.16
                                1998                                  1.34
                 three months ended Dec. 31, 1998                      .97
                                1999                                   .53
                                                               ===========


     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 percent of the fair market
     value of the common stock on each purchase date. As of December 31, 1998,
     no shares of common stock had been purchased by employees under this plan.


     NOTE I--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 December 31, 1999, are approximately as follows:

                                                                         Page 37

<PAGE>

     SOCRATES TECHNOLOGIES CORPORATION AND SUBSIDIARIE
     Notes to Consolidated Financial Statements--Continued
     DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997

     NOTE I--COMMITMENTS AND CONTINGENT LIABILITIES--CONTINUED

            (thousands of dollars)
                 Years ending
                  December 31,
                  ------------
                      2000          $   850
                      2001              812
                      2002              744
                      2003              335
                                    -------

                                    $ 2,741
                                    =======



     Rent expense was $652,000, $240,000, $663,000, and $490,000 for year ended
     December 31, 1999, for the three month period ended December 31, 1998, and
     the years ended September 30, 1998, and 1997, respectively.

     EMPLOYMENT AGREEMENTS

     The Company has entered into separate employment agreements with certain 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. A summary of significant legal matters follows.

     The Company is pursuing a $5.6 million claim against a national
     broker-dealer in an arbitration case before the National Association of
     Securities Dealers, Inc. The Company alleges that the defendant
     broker-dealer mismanaged and engaged in authorized actions with respect to
     the Company assets and accounts. The matter has not been set for a hearing.
     The Company believes that its claims have merit and intends to aggressively
     pursue its claims in the arbitration. There can be no assurance that the
     Company will prevail on any of its claims or that the Company will recover
     any damages sought in this suit.

     The Company filed a lawsuit in January 2000 in the Superior Court of the
     District of Columbia against National Public Radio and AAA Networks
     alleging breach of contract by National Public Radio and tortuous
     interference in contract against AAA Networks. On March 2000, the Superior
     Court denied without a hearing the motion of National Public Radio to
     dismiss the case. The Company is seeking $300,000 in compensatory damages
     and unspecified amount in punitive damages. The Company believes that its
     claims have merit and STI intends aggressively pursue its claims in the
     case. A trial date has not been set for this case.

                                                                         Page 38


<PAGE>

     In January 2000, Hirata Corporation and Hirata Corporation USA amended
     their complaint in an civil action in the U.S. District Court for the
     Southern District of Indiana (Hirata Corporation and Hirata Corporation USA
     v. Daniel Porush, Jordan Belfort, et al., Case ) to add as defendants to
     the case the following corporations and person: the Company; its former
     Chairman, Chief Executive Officer and President, Edward Ratkovich; and two
     other corporations that are not affiliated with the Company or Mr.
     Ratkovich. With respect to the Company and Mr. Ratkovich, the amended
     complaint alleges that Mr. Ratkovich, as an officer of the Company,
     conspired with the two defendants who were officers of the underwriter to
     manipulate the public market for the Company's common stock and that said
     manipulation harmed the plaintiffs in an unspecified amount of damages. The
     Company believes that the amended complaint is frivolous, without basis in
     law or in fact on its face, was not timely filed and was prompted by the
     plaintiffs lack of success to date against the original defendants. The law
     firm of Jones Day Reavis & Pogue in Washington, D.C. has been retained to
     represent the Company and Mr. Ratkovich in this case. The Company intends
     to aggressively pursue the dismissal of the case and to defend itself
     against all allegations in the amended complaint.

     Washington Sports & Entertainment, Inc. filed a lawsuit in the Superior
     Court of the District of Columbia in March 2000 against the Company for
     alleged breach of contract to supply computer hardware and to license a box
     suite at the MCI Center in Washington, D.C. The Company has denied the
     claims of the plaintiff. A trial date has not been set in this case. The
     Company is currently negotiating a settlement to the lawsuit and the
     Company believes that this lawsuit will be settled before the trial date
     and that such settlement shall not have an adverse material affect on the
     Company's financial condition or results of operations.

     As previously reported, the Company was sued by Technospin, Inc. for
     alleged breach of a corporate guarantee under a manufacturing agreement
     between Technospin, Inc. and MVS. The Company has counter claimed against
     Technospin, Inc. for breach of contract under the manufacturing agreement.
     The matter has not been set for trial. The Company has provided for a
     reserve against any liability in this case in its 1999 financial
     statements. The Company intends to aggressively pursue its claims against
     Technospin, Inc. and to aggressively defend itself against Technospin,
     Inc.'s claims. The Company cannot at this time predict with any certainty
     the results or impact of this case on the Company and its financial
     condition or results of operations.

     The Company is subject to certain other legal proceedings and claims that
     have arisen in the ordinary course of business and have not been fully
     adjudicated. The results of these legal proceedings cannot be predicted
     with certainty; however, in the opinion of management, the Company does not
     have a potential liability related to any legal proceedings and claims that
     would have a material adverse effect on its financial condition or results
     of operations. Most of these legal proceedings concern accounts payable
     allegedly owed by the Company's discontinued operations, especially Expert
     and Socrates Technologies, Inc.


     TRANSACTIONS WITH STOCKHOLDERS AND AFFILIATES

     During December 1999, the Company converted loans payables to stockholders
     to equity. Loans to such stockholders had been loaned under three separate
     loan agreements bearing interest at 9 percent, 8 percent, and 16 percent
     respectively. The total amount of loan payable converted to equity included
     principle amount of approximately $1.3 million and interest of
     approximately $290,000.

         During 1999, accrued salary of approximately $691,000 due to the former
     Chairman of the Board of Directors was forgiven in order to resolve certain
     matters between the Company and the individual. The forgiveness of salary
     was recorded as other income in the Company's results of operations.

                                                                         Page 39
<PAGE>
     SOCRATES TECHNOLOGIES CORPORATION AND SUBSIDIARIES
     Notes to Consolidated Financial Statements--Continued
     DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997

     NOTE I--COMMITMENTS AND CONTINGENT LIABILITIES--CONTINUED

     During October 1999, the President of one of the subsidiaries resigned.
     Subsequent to the resignation, the President formed another software
     company which performed consulting services to the subsidiary of
     approximately $62,000.

     The Company also subcontracted certain software development services to an
     affiliated software development company in India, which is owned by the
     former President and CEO of the subsidiary of $315,000, $70,000, $262,000
     and $87,000 during the year ended December 31, 1999 and the three months
     period ended December 31, 1998 and the years ended September 30, 1998 and
     1997, respectively.

     During the current year the Company performed consulting services for a
     company owned by the former Chairman and CEO of the Company. Total revenue
     generated for consulting was approximately $39,000 for year ended December
     31, 1999.

     NOTE J--SEGMENT INFORMATION

     The Company adopted SFAS No. 131, Disclosures about Segments of an
     Enterprise and Related Information, in the fiscal year ended September 30,
     1998. SFAS No. 131 supersedes SFAS No. 14, Financial Reporting for Segments
     of a Business Enterprise and establishes standards for reporting
     information about operating segments. Operating segments are defined as
     components of an enterprise about which separate financial information is
     available that is evaluated regularly by the chief operating decision
     maker, or group, in deciding how to allocate resources and in assessing
     performance.

     Segment income is the measure of profit and loss that our CODM uses to
     assess performance and make decisions. Segment income represents the sales
     less the cost of sales and direct expenses incurred within the operating
     segments. Corporate level operating expenses are not allocated to operating
     segments. Business units do not sell to each other, and accordingly, there
     are no intersegment sales. At December 31, 1999, the Company's continuing
     operations are represented by two identifiable segments: Computer Systems
     Sales, Integration and Training and Software Development.

     For the year ended December 31, 1999, the Company did not have a single
     customer that accounted for more than 10 percent of the total consolidate
     revenue. For the three month period ended December 31, 1998 and the years
     ended September 30, 1998 and 1997, the Company had one customer that
     accounted for approximately 24 percent, 30 percent and 21 percent of its
     total revenue, respectively. In addition, approximately, 15 percent of the
     Company's sales in fiscal years 1997, were to customers outside North
     America. The Company had no material export sales in fiscal years 1999 and
     1998 or during the three month period ended December 31, 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 three months ended December 31, 1999,
     transition period representing the three month period ended 1998 and the
     fiscal year ended December 31, 1999 and fiscal years ended September 30,
     1998 and 1997 is as follows:
<TABLE>
<CAPTION>
(Thousands of dollars)                    THREE MONTHS ENDED DECEMBER 31, 1999
(unaudited)                      -------------------------------------------------------
                                 COMPUTER
                                 SYSTEM SALES,
                                 INTEGRATION      SOFTWARE      GENERAL
                                 AND TRAINING    DEVELOPMENT    CORPORATE         TOTAL
     -----------------------------------------------------------------------------------

<S>                                <C>           <C>            <C>             <C>
        Sales to unaffiliated
           Customers               $  3,659      $  1,825       $     -         $  5,484
        Operating profit (loss)      (1,790)          (26)         (347)          (2,163)
        Net income (loss)            (1,630)          (29)         (478)          (2,137)
        Total assets                  4,097         5,168         2,355           11,620
     -----------------------------------------------------------------------------------
</TABLE>

                                                                         Page 40
<PAGE>

     SOCRATES TECHNOLOGIES CORPORATION AND SUBSIDIARIES
     Notes to Consolidated Financial Statements--Continued
     DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997

     NOTE J--SEGMENT INFORMATION--CONTINUED

<TABLE>
<CAPTION>


                                          THREE MONTHS ENDED DECEMBER 31, 1998
                                 -------------------------------------------------------
                                 COMPUTER
                                 SYSTEM SALES,
                                 INTEGRATION      SOFTWARE      GENERAL
                                 AND TRAINING    DEVELOPMENT    CORPORATE         TOTAL
     -----------------------------------------------------------------------------------

<S>                                <C>           <C>            <C>             <C>
     Sales to unaffiliated
       customers                  $  10,920      $  1,730     $      -         $  12,650
     Operating profit (loss)         (3,083)           76         (259)           (3,266)
     Net income (loss)               (3,349)           22         (566)           (3,893)
     Total Assets                    16,343         4,180        2,382            22,905
</TABLE>

<TABLE>
<CAPTION>

                                                 YEAR ENDED DECEMBER 31, 1999
                                 -------------------------------------------------------
                                 COMPUTER
                                 SYSTEM SALES,
                                 INTEGRATION      SOFTWARE      GENERAL
                                 AND TRAINING    DEVELOPMENT    CORPORATE         TOTAL
     -----------------------------------------------------------------------------------

<S>                                <C>           <C>            <C>             <C>
     Sales to unaffiliated
         customers                $  15,828      $  7,411     $       -        $  23,239
     Operating profit (loss)         (7,333)          355        (1,651)          (8,629)
     Net income (loss)               (7,487)          358        (4,769)         (11,997)
     Total Assets                     4,097         5,168         2,355           11,620


</TABLE>

<TABLE>
<CAPTION>

                                                 YEAR ENDED SEPTEMBER 30, 1998
                                 -------------------------------------------------------
                                 COMPUTER
                                 SYSTEM SALES,
                                 INTEGRATION      SOFTWARE      GENERAL
                                 AND TRAINING    DEVELOPMENT    CORPORATE         TOTAL
     -----------------------------------------------------------------------------------

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

     Sales to unaffiliated
       customers                  $  57,223      $  4,786      $      -        $  62,008
     Operating profit (loss)           (163)          298          (908)            (773)
     Net income (loss)                 (569)          265         1,692)           1,388
     Total Assets                    21,704         3,995         2,013           27,712
</TABLE>

<TABLE>
<CAPTION>
                                                 YEAR ENDED SEPTEMBER 30, 1997
                                 -------------------------------------------------------
                                 COMPUTER
                                 SYSTEM SALES,
                                 INTEGRATION      SOFTWARE      GENERAL
                                 AND TRAINING    DEVELOPMENT    CORPORATE         TOTAL
     -----------------------------------------------------------------------------------

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

     Sales to unaffiliated
        customers                 $  33,755       $   579         $       -  $  34,335
     Operating profit (loss)          1,494           (91)           (1,068)       335
     Net income (loss)                1,115           (96)             (202)       817
     Total Assets                    12,316         2,991             3,142     18,449

</TABLE>

                                                                         Page 41
<PAGE>
     SOCRATES TECHNOLOGIES CORPORATION AND SUBSIDIARIES
     Notes to Consolidated Financial Statements--Continued
     DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997

     NOTE K--DISCONTINUED OPERATIONS

     During the year ended December 31, 1999, the Company completed the sale of
     the assets of 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 enhancing
     shareholder value.

     NOTE L--QUARTERLY INFORMATION (UNAUDITED)

     Quarterly information for the last three fiscal years is as follows (all
     amounts in thousands):
<TABLE>
<CAPTION>
     YEAR ENDED
     December 31, 1999        MARCH 31         JUNE 30            SEPTEMBER 30    DECEMBER 31      TOTAL
     --------------------------------------------------------------------------------------------------------
<S>                          <C>               <C>                 <C>             <C>            <C>
     Sales                   $  7,851          $  5,950            $  3,954        $  5,484       $  23,239

     Income (loss) from
        operations             (1,288)           (3,047)             (2,131)         (2,163)         (8,629)
                             --------------------------------------------------------------------------------
     Net earnings (loss)     $ (1,368)         $ (3,081)           $ (5,411)       $ (2,137)      $ (11,997)
                             --------------------------------------------------------------------------------
</TABLE>
<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

     Income (loss) from
        operations               (113)             (684)                247            (223)          (773)

     Income (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 earnings (loss)     $   (563)         $ (5,588)           $  1,888        $   (331)     $  (4,594)
                             --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
     YEAR ENDED               DECEMBER 31,       MARCH 31,          JUNE 30,       SEPTEMBER 30,
     SEPTEMBER 30, 1998          1996              1997               1997             1997         TOTAL
     --------------------------------------------------------------------------------------------------------
<S>                          <C>                <C>                 <C>            <C>            <C>
     Sales                   $  6,759           $ 8,162             $ 9,972        $  9,442       $ 34,335

     Income (loss) from
        operations                344               377                 206            (592)           335

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

     Earnings (loss) from
        discontinued
        operations                169               104                 229          (1,209)          (707)
                             --------------------------------------------------------------------------------
     Net earnings (loss)     $    600           $   608             $   817        $ (1,915)      $    110
                             --------------------------------------------------------------------------------
</TABLE>

                                                                         Page 42

<PAGE>

     SOCRATES TECHNOLOGIES CORPORATION AND SUBSIDIARIES
     Notes to Consolidated Financial Statements--Continued
     DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997

     NOTE L--Acquisition of Networkland

     The Company acquired all the outstanding stock of Networkland, Inc.
     effective August 16, 1999. The Company paid $700,000 in cash and 2,000,000
     shares of common stock valued at $1.3 million at closing. The merger
     agreement also specified that an additional $450,000 in cash would be paid
     over a three year period following the merger. The acquisition of
     Networkland, Inc. was accounted for as a purchase. The cost exceeded the
     fair value of net assets resulting in goodwill of $2.0 million. Goodwill
     will be amortized using an estimated life of ten years. The results of
     operations of Networkland, Inc. are included in the accompanying financial
     statements since the date of acquisition.

     Pro forma financial information should be read in conjunction with the
     related historical information, and is not necessarily indicative of the
     results that would have been attained had the transaction actually taken
     place.

     The unaudited proforma results of operations of the combined entities are
     summarized below:

                                                           Years ended
                                                   December 31,    September 30,
     (Thousands of dollars)                           1999             1998
                                                   -----------     -------------
     Revenue
          Socrates                                   $18,745          $62,008
          Networkland, Inc. (unaudited)                8,943            5,058
                                                     -------          -------
     Combined revenue                                $27,688          $67,066
                                                     =======          =======

     Net income (loss)
          Socrates                                 $ (12,298)       $  (4,594)
          Networkland, Inc. (unaudited)                  697                4
                                                     -------          -------
     Combined net income (loss)                    $ (11,601)        $ (4,590)
                                                   =========         ========

     Note M--SUBSEQUENT EVENTS

     In January of 2000, the Company entered into certain agreements with
     individual accredited investors for a private placement of shares of the
     Company's common stock, which resulted in an increase in equity, cash and
     tangible assets of approximately $865,000.

     Effective March 1, 2000, the Company acquired substantially all of the
     assets and certain liabilities of Object Applications Systems, Inc. for
     total consideration of approximately $4.7 million, payable in cash, note
     payable and common stock of the Company. The Company will record the
     transaction as an asset purchase, allocating the total purchase price to
     the various assets purchased, with any excess of purchase price over fair
     market vale of assets purchased to goodwill. The principal asset purchased
     in the agreement is software, independently valued at no less than $3.68
     million. The estimated purchase price allocation, is as follows
     (unaudited):

        Cash and note payable                                $  420
        Capital Stock                                         3,786
        Liabilities assumed                                     487
        Deferred revenue, maintenance contracts                  37
                                                             ------

     Total purchase price                                    $4,730
                                                             ======

     Allocation of purchase price
        Accounts receivable                                  $  272
        Loans and exchanges                                     354
        Fixed assets, net                                         6
        Security deposits                                        16
        Internally developed software                         3,680
        Goodwill                                                402
                                                             ------

     Total allocation of purchase price                      $4,730
                                                             ======

                                                                         Page 43

<PAGE>
     Pro forma financial information should be read in conjunction with the
     related historical information, and is not necessarily indicative of the
     results that would have been attained had the transaction actually taken
     place.

     The proforma balance sheet of Socrates Technologies Corporation at December
     31, 1999 giving effect to the transaction as if it had occurred at December
     31, 1999 is summarized below:
<TABLE>
<CAPTION>
                                                                                               Pro forma
                                                                                               Unaudited
        Assets                                                   31-Dec-99          OAS        31-Dec-99
        ------                                                   ---------          ---        ---------
<S>                                                                <C>             <C>          <C>

        Current Assets                                            $ 5,170            272        $ 5,442
        Property and Equipment, net                                   636              6            642
        Capitalized Software Costs, net                                 -          3,680          3,680
        Goodwill, net                                               4,542            402          4,944
        Deferred Tax Asset, net of valuation
             allowance                                            $ 1,200         $    -        $ 1,200
        Other Assets                                                   72            370            442
                                                                  -------         ------        -------

        Total Assets                                              $11,620         $4,730        $16,350
                                                                  =======         ======        =======

        Liabilities and Stockholders' Equity
        Current Liabilities
             Line of credit and financing arrangement             $   134         $    -        $   134
             Accounts payable and accrued
                 liabilities                                        4,036            944          4,980
             Shareholder loans and interest                             -              -              -
                                                                  -------         ------        -------
        Total Current Liabilities                                   4,170            944          5,114


        Stockholders' Equity                                        7,450          3,786         11,236
                                                                  -------         ------        -------

        Total Liabilities and Stockholders' Equity                $11,620         $4,730        $16,350
                                                                  =======         ======        =======
</TABLE>

     The pro forma results of operations as if the acquisition occurred on
     January 1, 1999 are summarized below:

     Pro forma revenue and income
     (Thousands of dollars)                                    1999
     Revenue                                                  ------
        Socrates                                             $ 23,239
        OAS, Inc. (unaudited)                                   1,695
                                                             --------
     Combined revenue                                        $ 24,934
                                                             ========

     Net loss
        Socrates                                             $(11,997)
        OAS, Inc. (unaudited)                                    (219)
                                                             --------
     Combined net loss                                       $(12,216)
                                                             ========

     On March 20, 2000, the Company sold a series of debentures, convertible
     under certain circumstances into shares common stock of the Company, for an
     aggregate price of $4.5 million. The debentures bear interest at the rate
     of 4%, which, at the option of the holder, may be paid in shares of common
     stock. The shares of stock underlying the debentures will be included in a
     registration statement to be filed by the Company with the SEC by May 15,
     2000. The Company receives $3.5 million at the closing, with another $1
     million to be received after the registration of the underlying shares
     becomes effective. The debentures generally are convertible either after
     120 days or after the registration becomes effective, whichever event
     occurs first. There are certain penalties included in the agreements for
     failure to register the underlying stock. The debentures are convertible
     into common stock at the lower of $3.38 or the lowest closing price of the
     Company's common stock during the 30 trading days immediately preceding
     conversion. Each debenture has attached to it a warrant granting the holder
     the right to purchase .5 shares at $6.77 per share and .1 shares at $12.00
     per share. The Company expects to record related expenses of approximately
     $470,000 for commissions and legal expenses related to the sale of the
     debentures.


                                                                         Page 44


<PAGE>

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

         None.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH 16(A) OF THE EXCHANGE ACT.

     Item 10 is hereby incorporated by reference to the registrant's Proxy
Statement to be filed with the Commission on or prior to June 1,1999.

ITEM 11. EXECUTIVE COMPENSATION.

     Item 11 is hereby incorporated by reference to the registrant's Proxy
Statement to be filed with the Commission on or prior to June 1, 1999.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     Item 12 is hereby incorporated by reference to the registrant's Proxy
Statement to be filed with the Commission on or prior to June 1, 1999.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Item 13 is hereby incorporated by reference to the registrant's Proxy
Statement to be filed with the Commission on or prior to June 1, 1999.

ITEM 14. EXHIBITS, LIST AND REPORTS ON FORM 8-K.

    A.       Exhibits.

    2.1           Asset Purchase Agreement, dated March 10, 2000, between
                  Socrates Solutions Corporation and Object Application Systems,
                  Inc. (1)
    2.2           Acquisition Agreement, dated August 17, 1999, by and among
                  Socrates Technologies Corporation, Networkland, Inc. and
                  Farshad Sajedi (1)
    3.2           By-laws, as amended, dated February 7, 1998
   10.1           Securities Purchase Agreement, dated March 20, 2000, by and
                  among Socrates Technologies Corporation and Certain
                  Purchasers (1)
   10.2           4% Debenture, dated March 20, 2000, due March 2005 (1)
   10.3           Warrant Agreement, dated March 20, 2000 (1)
   10.4           Loan Conversion Agreement, dated December 31, 1999, between E.
                  Paul Roberts and Socrates Technologies Corporation (2)
   10.5           Loan Conversion Agreement, dated December 15, 1999, between
                  Edward Ratkovich and Socrates Technologies Corporation
   10.6           Employment Agreement, dated March 20, 2000, by and between
                  Timothy Keenan and Socrates Technologies Corporation (1)
   10.7           Employment Agreement, dated November 15, 2000, by and between
                  Stephen J. Fogarty and Socrates Technologies Corporation (1)
   10.8           Form of Indemnification Agreement
   10.9           1997 Stock Option Plan of Socrates Technologies Corporation
                  (3)
  10.10           1998 Non-Qualified Stock Option Plan of Socrates Technologies
                  Corporation (4)
  10.11           1999 Non-Employee Directors Stock Option Plan
  10.12           Amendment Number 3 to the Employment Agreement between Paul
                  Richter and Socrates Technologies Corporation (1)
    21            List of Subsidiaries.
    23            Consent of Independent Auditors, Grant Thornton, LLP, dated
                  March 27, 2000.

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

(1)    To be filed by amendment
(2)    Incorporated by reference to Form 8-K, filed with the Commission on
       February 2, 2000

(3)    Incorporated by reference to Exhibit One to the Proxy Statement, filed
       with the Commission on March 11, 1997

(4)    Incorporated by reference to Exhibit 4.1 to the Form S-8 Registration
       Statement (Commission File Number 333-96155), filed with the Commission
       on February 4, 2000

                                                                         Page 45
<PAGE>

A.       Reports on Form 8-K

         The Company filed the following Form 8-K Reports during the fourth
         quarter of fiscal year 1999: Form 8-K, filed with the Commission on
         October 12, 1999 and Form 8-K, filed with the Commission on December
         13, 1999.



                                   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

March 22, 2000

                                               By: Andreas A. Keller
                                                   -----------------------------
                                                   Andreas A. Keller
                                                   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.

SIGNATURE                             TITLE
DATE

Andreas A. Keller                     Chairman of the Board
March 22, 2000
-----------------------------
Andreas A. Keller

Timothy J. Keenan                     President, Director
March 22, 2000
---------------------------
Timothy J. Keenan                     [Principal Executive Officer]

PAUL W. RICHTER                       Director, General Counsel,
March 22, 2000
---------------------------           Secretary
Paul W. Richter

Stephen J. Fogarty                    Chief Financial Officer,
March 22, 2000
---------------------------
Stephen J. Fogarty                    [Principal Financial Officer]

Farshad Sajedi                        Director
March 22, 2000
---------------------------
Farshad Sajedi                        Director

Mariellen Lowry                       Director
March 22, 2000
---------------------------
Mariellen Lowry

Richard W. Prins                      Director
March 22, 2000
---------------------------
Richard W. Prins

                                                                         Page 46