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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

(Mark One)

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

For the fiscal year ended February 28, 1999
                                       OR

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

For the transition period from ______________ to _____________

                         Commission file number: 0-25758


                       MULTI-MEDIA TUTORIAL SERVICES, INC.
                      ------------------------------------
            (Name of small business issuer specified in its charter)


           Delaware                                               73-1293914
---------------------------------                            -------------------
(State or other jurisdiction                                  (I.R.S. Employer
of incorporation or organization)                            Identification No.)


                   205 Kings Highway Brooklyn, New York 11223
                   ------------------------------------------
          (Address of principal executive offices, including zip code)


                                  718-234-0404
                                  ------------
                (Issuer'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
   -------------------                                  -------------------
          None                                                  None


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

                                      Units
                     Common Stock, $0.01 par value per share
                               Redeemable Warrants
                               -------------------
                                (Title of Class)

Check whether the issuer: (i) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (ii) has been
subject to such filing requirements for the past 90 days. Yes  X   No
                                                             ----    ----

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]

<PAGE>

The issuer's revenues for the fiscal year ended February 28, 1999 were
$5,369,597.

The number of shares outstanding of the issuer's Common Stock as of January 28,
2000 was 8,313,343 shares. The aggregate market value of the Common Stock
(5,452,025 shares) held by non-affiliates, based on the average of the bid and
asked prices ($0.40) of the Common Stock as of January 25, 2000 was $2,180,810.

Transactional Small Business Disclosure Format (Check one):   Yes        No  X
                                                                 ----      ----

         This Annual Report on Form 10-KSB (the "Report") may be deemed to
contain forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"). Forward-looking statements in
this Report or hereafter included in other publicly available documents filed
with the Securities and Exchange Commission (the "Commission"), reports to the
Company's stockholders and other publicly available statements issued or
released by the Company involve known and unknown risks, uncertainties and other
factors which could cause the Company's actual results, performance (financial
or operating) or achievements to differ from the future results, performance
(financial or operating) or achievements expressed or implied by such
forward-looking statements. Such future results are based upon management's best
estimates based upon current conditions and the most recent results of
operations. These risks include, but are not limited to, the risks set forth
herein, each of which could adversely affect the Company's business and the
accuracy of the forward-looking statements contained herein.

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         As of May 24, 1999, the Company effected a one-for-ten reverse stock
split of its issued and outstanding Common Stock, and increased the Company's
authorized Common Stock to 20,000,000 shares. Except as set forth herein, the
discussion set forth in this Annual Report on Form 10KSB does not reflect the
effect of the one-for-ten reverse split.

                                     PART I

ITEM 1.    BUSINESS

GENERAL

         The Company produces, acquires and telemarkets a variety of products to
consumers using direct marketing through television, radio and print
advertising. The Company's principal product to date has been proprietary
tutorial education programs on videotape for use by adults and children in
homes, workplaces, schools, libraries and other locales. This principal product
line, which is marketed under the brand Math Made Easy(TM), consists of a series
of over 100 videotapes and supplemental materials on mathematics. The Math Made
Easy(TM) line uses colorful computer graphics and real life vignettes and is the
most complete line of mathematics videotapes available.

         The Company specializes in telemarketing generated by its own
television and radio advertisements, which it places on a "direct response"
basis at the lowest available rates. The Company uses different 800 numbers for
each channel on which it advertises, which permits the Company to track the
effectiveness of its advertising. Payment is made by credit card or direct debit
to a checking account. The product is then shipped by a fulfillment house to the
customer.

         The Company's products are sold principally by an internal sales staff
of approximately 50 trained telemarketers, and have been purchased by over
200,000 customers over the last five years. The Company's telemarketing staff is
experienced in converting an individual who is inquiring about an advertised
product into a customer who will purchase the product. This expertise, of
converting a "call to inquire" into a sale, was developed as a result of
specialized training of telemarketers to sell the Math Made Easy(TM) product
line. See "Sales, Marketing & Distribution."

         The Company's objective is to expand the scope of its telemarketing
business in a variety of ways. Subject to the availability of additional
financing, the Company intends to expand product offerings for sale to
individual consumers by developing, licensing or acquiring new complementary
educational products. In addition, subject to the availability of additional
financing, the Company anticipates expanding the marketing of its products
through such efforts as co-branding and joint-marketing.

         The Company also offers customized telemarketing services to companies
and institutions who wish to outsource their telemarketing needs. These
companies and institutions can retain the Company on a project by project basis
to take advantage of the Company's telemarketing expertise and infrastructure
instead of having to develop or support telemarketing in their own operations.
The fees for these services are based on either a per minute charge or a
combination of hourly and commission rate. See "Customized Telemarketing
Services."

         In 1999, the Company determined to expand its business operations to
include an educational website on the internet and enter into the e-commerce
industry. The Company currently offers its educational products and services on
the internet on the Company's website, known as TheTutorialChannel.com. The
Company anticipates initiating a special website featuring its "Math Made Easy"
product by February, 2000. Further, the Company has entered into a software
development agreement with Gaspra, Inc. to develop a software engine designed to
convert the Company's videotape programs into CD ROM, DVD and internet formats.
The Company has entered into certain agreements and letters of intent with
respect to the commercialization of this new business segment, but has not
generated any revenues from this business to date. Further, the Company
anticipates that it will need financing of between $1,000,000 and $3,000,000 to
develop this business, and there can be no assurances that the Company will
receive such financing.

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         The Company was incorporated under the laws of the State of Oklahoma in
January 1987 under the name Intechnica Learning Systems, Inc., and was
reincorporated in Delaware in July 1989 when its name was changed to Intechnica
International, Inc. The name of the Company was changed to Multi-Media Tutorial
Services, Inc. in November 1994 shortly after its acquisition of Video Tutorial
Services, Inc. ("VTS"), which is a New York corporation organized in 1985. In
April, 1995, the Company completed its initial public offering ("IPO") of Units
of Common Stock and Warrants, generating net proceeds of $5.8 million.

THE PRODUCTS

         The Company's products consist of an extensive line of "Math Made
Easy(TM)" and "Reading Made Easy(TM)" videotapes and ancillary material for
direct sale to consumers via direct marketing through national and local TV and
radio advertising. See "Sales Marketing & Distribution"

CURRENT PRODUCTS

         MATH MADE EASY(TM). The Company offers over 100 mathematics videotapes
in the Math Made Easy(TM) series. The series, which was developed and produced
by the Company, is geared to students ranging from pre-school to college and
adult education. Topics covered by the series include number concepts, basic
arithmetic, fractions, decimals, percents, word problems, fundamentals of
pre-algebra, algebra, logic, geometry, statistics and probability, pre-calculus
and calculus, trigonometry and advanced calculus. This product line is marketed
by the Company through television and radio advertising with specific "800MATH
telephone numbers directed to its telemarketing staff and is also sold directly
to schools. The average math consumer order consists of a set of five
educational videotapes at a price of $200. Sets of five video tapes are sold to
schools at a price of $250, and $9.95 per each additional workbook Reading Made
Easy(TM). The Company has also entered into non-exclusive agreements with
various companies to distribute tapes of reading and literacy educational
products as part of its Reading Made Easy(TM) series. The products include
reading readiness, letter identification, grammar, and reading comprehension
which cover topics from preschool through junior high school. The various titles
include videotapes, audiotapes and workbooks and flash cards. The Company
purchases these products at discounted rates from the respective manufacturers
or distributors and distributed through the Company's direct marketing
division.. The average reading consumer order consists of five videotapes at a
price of $159.

PRODUCT DEVELOPMENT

         The Company produces many of its own math videotape products and
supplemental workbooks by commissioning a curriculum from the Company's
educational coordinators. The Company employs Dr. Meryle Kohn, chairperson of
the mathematics and science departments at New York Institute of Technology, as
its curriculum coordinator and headwriter. The Company's educational writers are
independent contractors retained on a project-by-project basis. Total cost of a
videotape production is approximately $10,000 to $15,000.

         Many of the Company's videotapes include colorful computer graphics and
real life vignettes, certain of which are scripted by professional writers. The
curriculum writers seek to augment comprehension of the materials by numerous
examples, which are solved on a step by step basis. The curriculum invites
interaction by requesting the viewer to pause and to solve designated problems
before restarting the videotape to view the step by step solution.

PRODUCT ACQUISITION

         In addition to developing its own math product, the Company purchases
or licenses product from third parties, such as the Reading Made Easy(TM) line.


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ANTICIPATED FUTURE PRODUCTS AND SERVICES

         The launch of new product lines and customized telemarketing services
is subject to the availability of capital to be generated by additional funding.
The potential revenues, costs and margins that may be generated by the increased
product offerings and telemarketing services may cause different margins as
compared to the historical margins as a result of different pricing and costs of
the acquired product and services.

CUSTOMIZED TELEMARKETING SERVICES

         The Company has also begun to expand its telemarketing services by
offering customized telemarketing services to companies and institutions who
wish to outsource their telemarketing needs. These companies and institutions
can retain the Company on a project by project basis to take advantage of the
Company's telemarketing expertise and infrastructure instead of having to
develop or support telemarketing in their own operations. For example, the
Company has been retained to handle telephone inquiries from potential customers
of Windmere Corp. who respond to the infomercial or 60 second advertisement for
Windmere's "Littermaid(TM)" product. The Company's telemarketing has ranged from
data base cleaning to sales and marketing and customer service. Among its
clients have been Fortune 500 companies and internet related and
telecommunications companies. The fees for these services are based on either a
per minute charge or a combination of hourly and commission rate. The Company's
telemarketing staff is trained and experienced in converting an individual who
is inquiring about an advertised product to a customer who will purchase the
product. This expertise, of converting a "call to inquire" into a sale, was
developed as a result of specialized training of telemarketers to sell the Math
Made Easy(TM) product.

TheTutorialChannel.com

         In 1999, the Company determined to expand its business operations to
include an educational website on the internet and enter into the e-commerce
industry. The Company currently offers its educational products and services on
the internet on the Company's website, known as TheTutorialChannel.com. The
Company anticipates initiating a special website featuring its "Math Made Easy"
product by February, 2000. Further, the Company has entered into a software
development agreement with Gaspra, Inc. to develop a software engine designed to
convert the Company's videotape programs into CD ROM, DVD and internet formats.
The Company has entered into certain agreements and letters of intent with
respect to the commercialization of this new business segment, but has not
generated any revenues from this business to date. Further, the Company
anticipates that it will need financing of between $1,000,000 and $3,000,000 to
develop this business, and there can be no assurances that the Company will
receive such financing.

THE MARKET

         SUPPLEMENTAL EDUCATION AT HOME. The Company believes that parents are
increasingly concerned about the quality of their children's education and are
seeking to supplement the existing curricula. In particular, they are seeking to
use televisions and videotape players now found in most homes for educational
purposes. In addition, the Company believes that adults going back to school to
prepare for career moves or promotions are an ever growing potential market for
its educational videotapes. The Company has found that its primary customers are
parents with children in the educational system. The Company's efforts to date
have resulted in a database of more than 445,000 names, of which 260,000 ordered
product, and approximately 185,000 names of potential customers.

         SCHOOLS. As part of the drive to improve education, the Company
believes that school districts may increasingly allocate available funds to the
acquisition of educational tools. The Company believes that the possible
expansion of this market and the increased availability of funds may present an
important opportunity for its products.

         In the fiscal year ended February 28, 1999, consumer videotape sales
and school videotape sales constituted approximately 90%, and 10% of total
sales, respectively. For the fiscal year ended February 29, 1998, consumer
videotape sales and school videotape sales constituted approximately 92% and 8%
of total sales, respectively.

         CUSTOMIZED TELEMARKETING SERVICES. In 1996, the WEFA Group conducted a
study for the Direct Marketing Association the total sales generated by
telephone marketing was estimated to be $244 billion. The Company believes that
many companies across the nation are interested in outsourcing their customer
service, sales staff and help desk hotlines. Outsourcing of these specialized

                                       5
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tasks to non-employees has become common in today's business world. The Company
has offered its telemarketing services to clients, for services including data
base cleaning to sales and marketing and customer services. In the fiscal year
ended February 28, 1999, customized telemarketing sales constituted
approximately 25% of total sales. For the fiscal year ended February 29, 1998,
customized telemarketing sales constituted approximately 8% of total sales.

SALES, MARKETING AND DISTRIBUTION DIRECT MARKETING

         The Company markets its videotapes and related materials to consumers
primarily by inbound telemarketing efforts, which are supported by advertising
on radio and television on a national and regional level. Each commercial is
assigned a distinct 800 telephone number to call. The Company tests the
efficiency of each commercial on a daily and weekly basis by sourcing each
incoming call by the phone number that was dialed. The results of tracking
consumer response directly affect the placement of future advertising. The
Company's telemarketing staff, which responds to incoming calls, seeks to
convert into sales all leads, which are generated by the Company's advertising.
The telemarketer attempts to record all pertinent information regarding the
customer who responded to the advertisement, thereby adding the potential
customer to the Company's database even if they do not purchase at that time. If
the customer agrees to purchase the product, the telemarketer will record either
credit card or checking account information, which is then transferred to the
billing department which processes the payment and sends the information to the
fulfillment center for shipping. The Company has documented repeat sales for
additional items for existing customers. The Company believes that many repeat
sales may be a direct response to the commercial that the customer had initially
seen.

         In an effort to maximize efficient use of the telemarketers, the
Company has installed a new predictive dialing system. This system eases the
telemarketing efforts by having the computer dial return calls to prospective
customers for the telemarketers. The Company believes this system facilitates
the Company's efforts to enter into the telemarketing servicing arena. In
addition, it allows the Company to contact prospective customers who have not
yet purchased products from its math and reading videotapes, as well as previous
customers on a timely basis, in a more efficient manner. The Company also
utilizes the "predictive dialing" system in its off-season to generate new
contacts from its existing customer base.

         Credit cards are the preferred method of payment, both for the Company
and for its customers. These cards are either billed in full or in partial
monthly payments. The Company also offers consumers who do not wish to use
their credit card another means of payment; an automatic check debit, in which
the customer is shipped the merchandise after he offers the Company his bank
name and checking account number.

ADVERTISING

         The Company purchases media time on a "direct response" basis. This
allows the Company to have the lowest cost per lead possible, as the direct
response rate is significantly lower than regular advertising rate. Although
this minimizes the advertising costs, reservations for advertising time at
direct response rates are subject to last minute cancellation by the radio and
television stations and are difficult to purchase efficiently. See "Risk
Factors."

         The Company has entered into a joint venture marketing agreement with
the Bobley-Harmann Co., whereby "Math Made Easy" brochures are inserted into
national mailings of credit card and department store bills.

         The Company has also entered into a joint venture agreement with a
technology company, in order to market the Company's educational products on the
internet in connection with the Company's website. The Company currently offers
its educational products and services on the internet on the Company's website,
known as TheTutorialChannel.com. The Company anticipates initiating a special
website featuring its "Math Made Easy" product by February, 2000. Further, the
Company has entered into a software development agreement with Gaspra, Inc. to
develop a software engine designed to convert the Company's videotape programs
into CD ROM, DVD and internet formats. The Company's business plan to develop
this marketing program will require significant additional financing from
external sources. There can be no assurances that the Company will be able to
obtain such a financing in order to exploit and develop this business plan.

                                       6
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CUSTOMIZED TELEMARKETING SERVICES

         The Company solicits business for its customized telemarketing services
division by advertising in trade magazines as well as through its own internal
efforts. To date, the Company has entered into agreements with .LitterMaid, a
subsidiary of Windmere Corp., pursuant to which the Company provides inbound and
outbound telemarketing services. The Company offers its clients the advantage of
a highly trained sales force as well as the capability to produce accurate
telephone and sales reports. In addition, the Company can offer its expertise in
creating and placing advertisements, for which it receives a commission on all
media placed. The Company is actively seeking to service additional accounts in
this area. The Company's telemarketing services have ranged from database
cleaning to sales and marketing and customer service. The Company's clients have
included Fortune 500 companies, and internet related and telecommunications
companies.

TECHNOLOGY RESOURCES

         The Company has created a customized network to augment the efficiency
of its telemarketing operations. This enables the Company to handle over 1,000
simultaneous inbound calls. The Company's PABX (Private Automatic Branch
Exchange telephone switch) uses an open ended ISDN (Integrated Services Digital
Network) architecture which allows the Company to link multiple systems together
in an automated fashion, thus gathering numerical data and other information
from every inbound toll-free call. All inbound and outbound calls are tracked
and tagged for later examination and database development. The Company utilizes
an SMDR (Station Message Detail Recorder) specialized call accounting and
tracking software package to record vital call statistics. The Company uses CTI
(Computer Telephony Integration) to combine voice and data and then delivers
this information into the Company's data management systems. These are then
integrated into centrally managed Local Area Networks (LANs) and Wide Area
Networks (WANs). By using Interactive Voice Response Units (IVRUs) technology,
the Company is able to automate the response to inbound calls. IVRU technology
also enables the Company to provide to telemarketing customers advanced detailed
reports and data management upon request. The Company's modular open system
architecture allows ongoing modifications and updates, thus increasing
efficiency without downtime due to system shutdown for such updating. The
Company's use of (OCDD/RT) On-Line Call Detail Real-Time reporting software
provides the Company with detailed incoming call information. This assists the
call center managers by enabling them to efficiently schedule proper staffing
levels and accommodate fluctuations in call volumes. OCDD/RT also helps analyze
in real-time the efficiency and reliability of the call connections to the
Company's internal system, and helps the Company predict call volume using
historical models.

         The Company utilizes an ACD (Automatic Call Distributor) to help
identify each customer's call and automatically route those calls to specific
telemarketers. The Company's predicative dialer utilizes specific algorithms to
assist in analyzing each telemarketer's performance and the network's
efficiency. The predictive dialer's UNIX processor provides centralized list
management, data consolidation, reporting and interfaces with the LAN as well.

         The Company's location is protected by a fire extinguishing system and
it's primary systems have an uninterruptable power supply. In addition, the
Company has a short-term battery back-up in the event of power outage, reduced
voltage or power surge. Furthermore, instantaneous rerouting of all call traffic
takes place in the event of telecommunication failure, natural disaster or other
emergencies, thus insuring calls are usually answered properly even under
duress.

PERSONNEL AND TRAINING

         The Company believes that the quality of its employees is a key factor
in its effort to develop a profitable telemarketing business. The Company
tailors its recruiting and training techniques towards the industries and
products it services. All telemarketers receive a detailed review of each
product they will be selling. In addition, the Company trains its telemarketers
in the art of converting an inquiry into a sale. A telemarketer is in training
for approximately 5 days, prior to receiving customer calls on a full-time, solo
basis. Furthermore, the Company continually monitors telemarketers'
conversations to assure quality and customer satisfaction. Compensation is based
on a combination of salary and commission. See "Risk Factors."

                                       7
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RETURNS, GUARANTY AND WARRANTY POLICIES

         The Company offers its customers a 30 day money back guarantee during
which period they may return the merchandise for an exchange or full credit. The
Company believes that a money back guaranty policy is essential to the success
of its telemarketing efforts. In addition, management of the Company has
implemented policies and procedures intended to minimize the number of returned
products. These policies and procedures include the confirmation of each order
by a supervisor, increasing the appeal of the Company's products by designing
more attractive packaging, and enclosing with its shipments full color
catalogues and parent guides. In addition, the customer service department,
which must be contacted before merchandise is returned, has been trained to
specifically reduce returns. See "Risk Factors."

COMPETITION

         The Company's educational videotape offerings compete with a variety of
programs, including Hooked on Phonics, Reading Genius, Davidson, Megasystems,
the Learning Co., and MegaMath. In the school market, the Company competes with
Video Aided Instruction, Video Tutor and Educational Video Resources. Almost all
of these competitors have greater financial resources, greater public and
industry recognition and broader marketing capabilities than the Company. The
market is characterized by numerous small companies, with whose products the
Company may be unfamiliar, and which may be competitive with the Company's
products. The Company's products also compete with other methods of education
such as private tutors and televised programs. The Company believes that its
products are competitive because it offers a more complete range of subjects,
the products are designed to be more engaging, and the Company has generally
developed more effective use of the telemarketing process.

         The telemarketing industry is intensely competitive and the Company's
principal competition in its primary markets comes from large and small
telemarketing companies including Apac Teleservices, Inc., Sykes Enterprises,
Incorporated, ICT Group, Inc., Precision Response Corporation, Teletech
Teleservices, West Telemarketing, Iti Marketing Services, Inc., Matrixx
Marketing, Inc., West Teleservices Corporation and Dial America. Because of the
size of this market, the Company believes that no one entity dominates this
business. Nevertheless, the Company's competitors in this area have greater
financial resources, greater public and industry recognition, advanced
technological expertise and equipment and broader marketing capabilities than
the Company. In addition, most businesses that are significant consumers of
telemarketing services utilize more than one telemarketing firm at one time and
reallocate work among various firms from time to time. A significant amount of
such work is contracted on an individual project basis, thus increasing the
competition in the industry. Furthermore, the Company believes there is a trend
among businesses with telemarketing operations toward outsourcing the management
of those operations to others and this trend may attract new and substantially
larger competitors. The Company believes that it may be able to offer
competitive services based upon its expertise developed by marketing its own
products. For example, because the Company produces and places its own media it
is more experienced in linking the telemarketers' approaches to the clients'
specific advertising.

PROPRIETARY RIGHTS

         The Company has received certificates of registration with the United
States Trademark Office for the following trademarks: MATH MADE EASY, PASSPORT
TO MATH SUCCESS, LEARNING TRENDS, AND REAL LIFE MATH. The Company has filed
applications with the United States Trademark Office for the registration of
READING MADE EASY.

EMPLOYEES

         As of January 28, 2000, the Company had 38 employees, of whom 2 were
executive officers, 30 were engaged in sales, and 6 were in marketing, support
and administrative staff. The Company has made significant reductions in
personnel in order to reduce overhead expenses. The Company retains outside
consultants to augment its computer, telephone and telemarketing expertise. The
Company also relies on several outside consultants for expertise in hardware,
software and curriculum development. The Company believes that its relationship
with its employees is generally satisfactory.

                                       8
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RISK FACTORS

         The Company's business involves a high degree of risk. Shareholders and
investors should carefully consider the following risk factors and the other
information included in this Report. Financial Condition of the Company; History
of Losses; Going Concern Qualification in Certified Public Accountant's Report;
Company Highly Leveraged

         The Company has experienced significant losses from operations since
inception. It experienced losses of $753,136 and $5,027,117 for the fiscal years
ended February 28, 1999 and 1998. As of February 28, 1999, the Company had a
working capital deficit of $4,640,974 and an accumulated deficit of $14,089,581.
The Company's working capital requirements have been met primarily from loans
and private sales of securities provided by management and other investors and
with the net proceeds of the IPO but there can be no assurance the Company will
be able to obtain such funds in the future. As of February 28, 1999, the Company
has investor loans and advances aggregating $1,725,000, of which a certain
amount may be converted into equity, subject to ongoing negotiations. All of
this amount is in default and currently due and payable; there can be no
assurance the Company will be able to convert the debt to equity, or generate
the funds from operations or further financings to repay these obligations.
Currently, the Company's sales volume is not sufficient to repay this
indebtedness or to absorb the fixed overhead arising from the infrastructure
necessary to support the telemarketing effort which causes current operating
losses. In addition, the Company's operating expenses are anticipated to
increase significantly in the future if the Company is able to implement its
expanded marketing strategy. Although the Company is seeking additional funds to
allow it to repay its current debt, expand its customized telemarketing
operations and develop its e-commerce business plan, there can be no assurance
that the Company will not continue to experience such losses or will ever
generate revenues at levels sufficient to support profitable operations. The
Company has received a report from its current and former independent public
accountants, that includes an explanatory paragraph describing the uncertainty
as to the ability of the Company's operations to continue as a going concern.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Consolidated Financial Statements."

NEED FOR ADDITIONAL FINANCING

         The Company has limited resources and has not been able to finance its
activities with the proceeds from operations and there can be no assurance it
will be able to do so in the future. The Company is seeking additional financing
in order to meet its debt repayment obligations and to maintain and potentially
expand its current operations. Even if the Company is able to obtain funding,
there can be no assurance that a sufficient level of sales will be attained to
fund such operations or that unbudgeted costs will not be incurred. Future
events, including the problems, delays expenses and difficulties frequently
encountered by similarly situated companies, as well as changes in economic,
regulatory or competitive conditions, may lead to cost increases that could make
the net proceeds of any new funding and cash flow from operations insufficient
to fund the Company's capital requirements. There can be no assurances that the
Company will be able to obtain such additional funding from management or other
investors on terms acceptable to the Company, if at all. Additional financings
may result in dilution for then current stockholders. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

FUTURE ISSUANCES OF STOCK; DILUTION TO CURRENT STOCKHOLDERS

         The Company currently has outstanding options, warrants and other
rights to acquire an aggregate of approximately 6,000,000 shares of Common Stock
at exercise or conversion prices ranging from $0.0625 to $56.00 per share, as
adjusted for the one-for-ten reverse split. The Company currently has
outstanding 8,313,343 shares of Common Stock and as of January 25, 2000, the
price of the Company's current stock as quoted on the NASDAQ Electronic Bulletin
Board was approximately $0.40 per share. The Company is engaged in negotiations
to obtain additional funding in order to maintain the Company's operations and
meet current debt repayment commitments. At the present time, the Company's
management believes that these equity offerings, if completed, may result in the
issuance of shares of Common Stock in an amount in excess of the Company's
currently outstanding Common Stock, and will substantially dilute the holdings
of the Company's current stockholders. Furthermore, such issuances could result
in a change of control of the Company. See "Need for Additional Financing."

                                       9
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UNCERTAINTY OF MARKET ACCEPTANCE

         Consumer acceptance of the Company's products is difficult to predict.
The success of the Company's marketing strategy is dependent on direct responses
to its advertising campaigns. The Company's marketing techniques are therefore
based on an "impulse buy" which is susceptible to any softening in the
consumer's overall confidence caused by economic turndowns, which affect the
consumer. Furthermore, the pool of potential customers for its products
advertised through media may be decreased as a result of market saturation. As a
consequence, there can be no assurance that the Company's present level of sales
will be sustainable in the future. See "Business--Sales, Marketing and
Distribution."

         Market acceptance of the Company's products is further dependent on the
existence and development of other means to market similar products, such as
interactive television, which enable the consumer to participate directly in
courses offered on television, and home shopping clubs, which enable the
consumer to directly order and pay for products shown on television. The Company
has currently no plans to employ interactive television as a strategy to sell
its products. Failure of the Company's products to achieve or sustain market
acceptance would have a material adverse effect on the Company's operating
results and financial condition. High Level of Returned Merchandise; Accounts
Receivable Collection & Adequacy of Reserves

         The Company experiences a high level of returns, which generally range
from 20% to 25% for its various products. The Company believes that an important
reason for the high level of returns is that a substantial number of purchasers
return their tutorial videotapes after being unable to motivate their children
to view the tapes or having illegally copied them. There are currently no
cost-effective ways to prevent the illegal copying of the Company's videotapes.
In addition, the Company does not currently have the funds to prosecute
infringers. There can be no assurance that the Company will be able to
successfully prosecute infringements even if the Company is adequately funded.

SEASONALITY AND AVAILABILITY OF MEDIA TIME

         The Company's math and reading videotape business is highly seasonal.
Demand for its products tends to peak during the first and fourth fiscal
quarters when school is in session. Demand is especially slow during the school
vacation periods. This seasonality greatly affects the Company's advertising
campaigns, which must be timed to coincide with the annual periods when demand
is traditionally high. In addition, the Company does not reserve advertising
time in advance in order to purchase air time at the lowest possible rates;
rather, it purchases direct response time, which is characterized as remnant
time and is difficult to purchase efficiently. In addition, its reservations are
subject to last minute cancellation by the radio and television stations. As a
result of the Company's dependence on the availability of media time, operating
results can be negatively impacted by difficulty in purchasing media time such
as occurs during elections and holidays. For example, the Company incurred
difficulty in purchasing media time prior to and immediately following the
November 1996 elections and thereby experienced lower results for the fiscal
year ended February 28, 1997. Any significant decrease in sales during the
season when business activity is high could have a material adverse impact upon
the Company's operations. Although the Company is trying to reduce its
dependence on curriculum based products, it will in all likelihood continue to
experience significant seasonality in sales of its educational products.

CUSTOMER SATISFACTION

         The Company's revenues are mainly generated through telemarketing to
customers on a national basis. Although the Company attempts to satisfy
customers' needs, there may at times be dissatisfied customers. These customers
may contact local or national consumer advocate groups as well as television, or
radio station reporters to voice their dissatisfaction with the Company. This
negative publicity may have an adverse effect on future sales.

LIMITED PRODUCT LINE

         In the fiscal year ended February 28, 1999, most of sales were from the
Math Made Easy(TM) product line. Although the Company is continually seeking to
introduce additional product lines there can be no assurance that these new
product lines will generate significant sales. In the event that the popularity

                                       10
<PAGE>

of the Math Made Easy(TM) product line decreases or faces increased competition,
the Company's sales would be adversely affected and if not replaced by
substantially increased sales from other products, the Company could be forced
to cease operations.

CREDIT CARD FRAUD

         Credit card fraud perpetrated by disreputable telemarketing operations
have increased the reluctance of the consumers to make use of their credit cards
by telephone. This may adversely affect the Company's ability to secure credit
card orders

TURNOVER RATE

         Recruiting, training and retaining qualified telemarketers is essential
for the Company. There is a high turnover rate among telemarketers as a result
of the frustration of the telemarketing process, the high pressure atmosphere,
and the reliance on commissions as a major component of salaries. The training
of telemarketers is a lengthy process, which involves learning a complex product
line and special sales techniques. In addition, it is essential that the Company
utilize the optimal number of telemarkerters for its level of advertisements and
the number of clients it is servicing. Too many advertisements may overwhelm the
telemarketers while too few advertisements may lead to a drop in the
commissions, which will cause the telemarketers to leave the Company.
Furthermore, the ability of the Company to convert leads into sales is largely
dependent on the expertise of its telemarketers. There can be no assurance that
the Company will be able to continue to recruit and retain a qualified team of
telemarketers.

NEW PRODUCTS; TECHNOLOGICAL OBSOLESCENCE

         The Company's prospects depend in significant part on its ability to
develop and/or license new products that achieve market acceptance. Most of the
new electronic tutorial products being introduced into the market are based on
computer technology, usually with interactive capabilities. There can be no
assurance that the Company's ability to market its educational products in
videotape, CD ROM or DVD versions will not be materially adversely affected by
the increase in the number and sophistication of computer based educational
products. Furthermore, there can be no assurance that the introduction of such
computer based technologies will not render obsolete the products currently
marketed by the Company. No assurance can be given that the Company can adapt to
such new media technologies. In addition, when the Company may license new
non-educational products there is no guarantee of market acceptance of these new
products. See "Business--Product Acquisition and Development."

INTELLECTUAL PROPERTY RIGHTS

         The Company realizes that a substantial number of its videotapes are
copied illegally. There are currently no cost-effective ways to prevent the
illegal copying of the Company's videotapes. In addition, the Company does not
currently have the funds to prosecute infringers. There can be no assurance that
the Company will be able to successfully prosecute infringements even if the
Company is adequately funded. The Company's videotapes do not contain a blocking
device to deter unauthorized copying, because newer technologies constantly
develop to override such devices and the cost to implement the locking devices
would negatively impact gross margins. There can be no assurance that future
illegal copying of the Company's products will not continue, worsen, exceed the
Company's reserves therefore or have a material adverse effect on operations.

COMPETITION

         The Company's educational videotape offerings compete with a variety of
programs, including Hooked on Phonics, Reading Genius, Davidson, Megasystems,
the Video Professor and MegaMath. In the school market, the Company competes
with Video Aided Instruction, The Learning Co., and Educational Video Resources.
Almost all of these competitors have greater financial resources, greater public
and industry recognition and broader marketing capabilities than the Company.
The market is characterized by numerous small companies, with whose products the
Company may be unfamiliar, and which may be competitive with the Company's
products. The Company's products also compete with other methods of education
such as private tutors and televised programs.

                                       11
<PAGE>

         The telemarketing industry is intensely competitive and the Company's
principal competition in its primary markets comes from large and small
telemarketing companies including Apac Teleservices, Inc., Sykes Enterprises,
Incorporated, ICT Group, Inc., Precision Response Corporation, Teletech
Teleservices, West Telemarketing, Iti Marketing Services, Inc., Matrixx
Marketing, Inc., West Teleservices Corporation and Dial America. Because of the
size of this market, the Company believes that no one entity dominates this
business. Nevertheless, the Company's competitors in this area have greater
financial resources, greater public and industry recognition, advanced
technological expertise and equipment and broader marketing capabilities than
the Company. In addition, most businesses that are significant consumers of
telemarketing services utilize more than one telemarketing firm at one time and
reallocate work among various firms from time to time. A significant amount of
such work is contracted on an individual project basis, thus increasing the
competition in the industry. Furthermore, the Company believes there is a trend
among businesses with telemarketing operations toward outsourcing the management
of those operations to others and this trend may attract new and substantially
larger competitors. Competition in both the education products and telemarketing
markets may result in loss of sales by the Company or a reduction of the prices
which the Company can charge for its products or services. See "Business
-Competition."

DEPENDENCE ON MANAGEMENT

         The Company's business is significantly dependent upon the personal
efforts and continued availability of Barry Reichman, its Chief Executive
Officer. The loss or unavailability to the Company of Mr. Reichman could have a
materially adverse effect upon the Company's business operations and prospects.
To the extent that the services of Mr. Reichman are unavailable to the Company
for any reason, the Company would be required to procure other personnel to
manage and operate the Company. There can be no assurance that the Company would
be able to locate or employ such personnel on acceptable terms, if at all.

GOVERNMENT REGULATION

         In response to the concerns of consumer advocacy groups and as a result
of the practices of a number of unscrupulous telemarketing companies, the
Federal Trade Commission and the Federal Communications Commission have
promulgated rules regulating the telemarketing industry. The Federal Telephone
Consumer Protection Act of 1991 (the "TCPA"), enforced by the Federal
Communications Commission, imposes restrictions on unsolicited telephone calls
to residential telephone subscribers. The rules applicable to the Company
include, among other things, an obligation to advise customers of their rights,
to initiate telephone solicitations to residential telephone customers before
8:00AM or after 9:00PM local time at the customer's location, obligation to ship
merchandise in a timely fashion and an obligation to notify a customer of delays
in shipments and to offer a refund in the event of a delay. In addition, many
states are enacting their own laws regulating the telemarketing industry which
are, to the extent applicable to the Company, similar to the Federal rules in
most respects. Furthermore, there exist both state and federal laws governing
false advertising and deceptive trade practices. Due to the subjective nature of
interpreting and enforcing such laws, there can be no assurance that the Company
will be in compliance with such laws at all times. Although such regulations are
expected to have a minimal impact on the Company's ability to operate its
business in its present form, the nature of which is considered inbound
telemarketing, such regulations generally tend to add significant recordkeeping
requirements and, consequently, expenses.

DELISTING FROM NASDAQ SMALL CAP MARKET; MAINTENANCE CRITERIA FOR NASDAQ
SECURITIES; PENNY STOCK RULES

         On April 17, 1997, the National Association of Securities Dealers, Inc.
Automated Quotation System Stock Market ("NASDAQ") delisted the Company's Common
Stock and Warrants from trading on the NASDAQ Small-Cap Market because the
minimum bid price of the Company's Common Stock had been below the requirement
of $1.00 per share. In order to regain a listing for the Company's securities on
the NASDAQ Small-Cap Market, the Company's Common Stock must have a minimum bid
price of $4.00 per share and at least three market makers for the trading
securities.. In addition, the Company must either have $4,000,000 in net
tangible assets, a market capitalization of at least $50,000,000, or net income
of at least $750,000 in its most recently completed fiscal year or in two of the
three last completed fiscal years, and the Company must have at least 1,000,000
publicly traded shares not held by affiliates of the Company ("public float"),
with a market value of at least $5,000,000, and at least 300 stockholders of
record. There can be no assurances that the Company will be able to meet the
requirements for relisting on the NASDAQ Small Cap Market.

                                       12
<PAGE>

         If the Company's securities are again listed on the NASDAQ Small-Cap
Market, in order to maintain such listing the Company must continue to be
registered under Section 12(g) of the Securities Exchange Act of 1934 (the
"Exchange Act"). In addition, NASDAQ has proposed increasing the requirements
for maintaining a NASDAQ Small-Cap listing to require either: (1) net tangible
assets of at least $2,000,000, (2) a market capitalization of $35,000,000 or (3)
net income in at least two of the last three years of $500,000, and at least 300
holders of record, a minimum bid price of $1.00 per share, at least two market
makers and a public float of at least 500,000 shares with a market value of at
least $1,000,000. There can be no assurance that the Company would be able to
meet the requirements for maintaining a listing on the NASDAQ Small-Cap Market.

         Failure to regain or to maintain NASDAQ Small-Cap Market listing will
probably depress the market value of the Common Stock and purchasers likely
would find it more difficult to dispose of, or to obtain accurate quotations as
to the market value of, the Common Stock.

         In addition, if the Company cannot obtain a NASDAQ Small-Cap Market
listing for its securities, and no other exclusion from the definition of a
"penny stock" under the Exchange Act is available, then the Company's stock will
continue to be subject to additional federal and state regulatory requirements.
Rule 15g-9 under the Exchange Act, among other things requires that
broker/dealers satisfy sales practice requirements, including making
individualized written suitability determinations and receiving any purchaser's
written consent prior to any transaction. The Company's securities could also be
deemed penny stocks under the Securities Enforcement and Penny Stock Reform Act
of 1990, which requires additional disclosure in connection with trades in the
Company's securities, including the delivery of a disclosure schedule explaining
the nature and risks of the penny stock market. Such requirements can severely
limit the liquidity of the Company's securities and the ability of purchasers to
sell their securities in the secondary market.

         The Company's securities have been designated for potential removal
from the electronic bulletin board for failure to be current in its filings
under the Exchange Act. The Company must be current in its filings under the
Exchange Act on or before February 1, 2000. The Company anticipates that the
filing of this Report, together with certain other delinquent reports under the
Exchange Act, will allow the Company's securities to continue to be quoted on
the bulletin board. In the event that the Company's securities are removed from
trading on the bulletin board, and designated for trading on the "pink sheets,"
an even less efficient market than the electronic bulletin board, there would
result in an even more illiquid market for the Company's securities.

LIMITED PUBLIC TRADING MARKET FOR THE COMPANY'S SECURITIES, VOLATILITY

         There is only a limited public trading market for the Company's
securities and no assurances can be given that a liquid market will develop or,
if developed, that it will continue to be maintained. There can be no assurance
that a more active trading market will develop or, if developed, that it will be
maintained. In addition, there can be no assurance that the Company will obtain
relisting of its securities on NASDAQ. See "Maintenance Criteria for NASDAQ
Securities; Delisting from NASDAQ Small Cap Market; Penny Stock Rules."

LIMITATION OF USE OF NET OPERATING LOSS CARRYFORWARDS

         As of February 28, 1999 and 1998, the Company had federal net operating
loss carryforwards of approximately $8,667,000 and $7,920,000, respectively,
portions of which expire yearly through 2014 (subject to certain limitations).
This balance gives effect to annual limitations on the utilization of the loss
carryforwards caused by "ownership changes" as defined in Section 382 of the
Internal Revenue Code. If there is any additional ownership change, there can be
no assurance as to the specific amount of net operating loss carryforwards
available in any post-change year since the calculation is based upon a
fact-dependent formula. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."

                                       13
<PAGE>

NO DIVIDENDS

         The Company has never paid any dividends on its Common Stock. The
payment of future dividends will be dependent upon earnings, financial
requirements of the Company and other factors deemed relevant by the Company's
Board of Directors. For the foreseeable future it is anticipated that any
earnings which may be generated from operations of the Company will be used to
finance the growth of the Company and that cash dividends will not be paid to
holders of Common Stock.

ISSUANCE OF PREFERRED STOCK; POTENTIAL ANTI-TAKEOVER EFFECT

         Certain provisions of Delaware law and the Company's certificate of
incorporation and by-laws could make more difficult a merger, tender offer or
proxy contest involving the Company, even if such events could be beneficial to
the interests of the stockholders. The Board of Directors has the authority to
issue up to 1,000,000 shares of Preferred Stock in one or more series and to fix
the number of shares constituting any such series, the voting powers,
designation, preferences and relative participation, optional or other special
rights and qualifications, limitations or restrictions thereof, including the
dividend rights and dividend rate, terms of redemption (including sinking fund
provisions), redemption price or prices, conversion rights and liquidation
preferences of the shares constituting any series, without any further vote or
action by the stockholders. The issuance of preferred stock by the Board of
Directors could adversely affect the rights of the holders of Common Stock. For
example, such issuance could result in a class of securities outstanding that
would have preferences with respect to voting rights and dividends and in
liquidation over the Common Stock, and could (upon conversion or otherwise)
enjoy all of the rights appurtenant to Common Stock. The authority possessed by
the Board of Directors to issue preferred stock could potentially be used to
discourage attempts by others to obtain control of the Company through a merger,
tender offer, proxy contest or otherwise by making such attempts more difficult
to achieve or more costly. Such provisions could limit the price that certain
investors might be willing to pay in the future for shares of the Company's
Common Stock or preferred stock.

ITEM 2.  PROPERTIES

         The Company leases an approximately 4,700 square foot facility at 205
Kings Highway, Brooklyn, New York, which houses its telemarketing and other
staff. This lease, which currently calls for monthly rentals of $7,500, subject
to annual increases, is scheduled to expire in June, 2001, with an option to
extend through June, 2003. The Company also leases a 20,000 square foot
warehouse located at 201 Kings Highway in Brooklyn, New York, which calls for a
monthly rent of $1,300.

ITEM 3.  LEGAL PROCEEDINGS

         The Company has judgments entered against it by certain of its vendors
in the aggregate amount of approximately $100,000. The Company has reached
agreements or is in the course of negotiating agreements with these vendors to
make scheduled payments on these obligations. Further, certain creditors of the
Company have commenced various lawsuits asserting claims in the aggregate amount
of approximately $235,000. In addition, the Company has been sued by a vendor
for approximately $100,000, and the Company has asserted a counterclaim against
the vendor seeking damages in the sum of $500,000.

         There can be no assurances as to the outcome of any of the pending
litigation.

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

         On June 13, 1997, the company's stockholders approved resolutions to
adopt a one-for-ten reverse split and an increase in the authorized shares of
Common Stock to 20,000,000. The Company effected these resolutions on May 24,
1999.

                                       14
<PAGE>

                                     PART II

ITEM 5.  MARKET PRICE OF REGISTRANT'S COMMON EQUITY AND EQUITY AND RELATED
         STOCKHOLDER MATTERS

         The Company's Common Stock, Warrants and Units were traded on The
NASDAQ Small Cap Market under the symbols MMTS, MMTSW and MMTSU respectively,
from the Company's initial public offering on April 13, 1995 until they were
delisted on April 17, 1997. The Company's Units no longer are listed for
trading. The last available trade date for the Units was May 24, 1999. Since
April 17, 1997, the Company's Common Stock and Warrants have been listed on the
NASDAQ Electronic Bulletin Board.

         The following table sets forth the high and low sales price for the
Company's Common Stock, Warrants and Units in each quarter of the fiscal years
ended February 28, 1999 and 1997, and the initial three quarters of the fiscal
year ending February 28, 2000. Further, the following table reflects the high
and low sales price for such securities during the period from March 3-April 17,
1997, during which period the securities were listed for trading in the NASDAQ
Small Cap Market, and for subsequent periods, during which such securities were
traded on the bulletin board, and further reflects the period preceding and
following May 24, 1999, the date on which the Company effected a one-for-ten
reverse split of the issued and outstanding Common Stock. These quotations have
been reported by the National Association of Securities Dealers, Inc. and
represent quotations by dealers without adjustments for retail mark-ups,
mark-downs or commissions and may not represent actual transactions.

<TABLE>

COMMON STOCK
------------
<CAPTION>

                                                     Bid Prices                              Asked Prices
                                                     ----------                              ------------
                                                High             Low                      High             Low
                                                ----             ---                      ----             ---

Year Ended February 28, 1998

 <S>                                          <C>                   <C>                 <C>               <C>
 March 3-April 17                             0.5625                0.125               0.59375           0.25
 April 18-May 30                              0.1875                0.125               0.3125            0.25
 2nd Quarter                                  0.125                 0.0625              0.25              0.125
 3rd Quarter                                  0.15625               0.0625              0.21875           0.09375
 4th Quarter                                  0.0625                0.03125             0.9375            0.05

Year Ended February 28, 1999

 1st Quarter                                  0.04                   0.3125             0.05              0.05
 2nd Quarter                                  0.0325                 0.03125            0.05              0.045
 3rd Quarter                                  0.0325                 0.0325             0.045             0.04
 4th Quarter                                  0.05                   0.03               0.07              0.04

Year Ending February 28, 2000

 March 1-May 24                               0.11                   0.05               0.15              0.06
 May 25-May 28                                0.60                   0.60               0.96875           0.75
 2nd Quarter                                  0.60                   0.09375            0.75              0.125
 3rd Quarter                                  0.46875                0.10               0.53125           0.12

</TABLE>

                                       15
<PAGE>
<TABLE>

WARRANTS
--------
<CAPTION>

                                                      Bid Prices                              Asked Prices
                                                      ----------                              ------------
                                                High             Low                      High             Low
                                                ----             ---                      ----             ---

Year Ended February 28, 1998

 <S>                                          <C>                   <C>                 <C>               <C>
 March 3-April 17                             0.09375               0.03125             0.15625           0.10
 April 18-May 30                              0.03125               0.0.3125            0.10              0.06
 2nd Quarter                                  0.03125               0.03125             0.10              0.06
 3rd Quarter                                  0.03125               0.01                0.10              0.055
 4th Quarter                                  0.01                  0.01                0.055             0.055

Year Ended February 28, 1999

 1st Quarter                                  0.01                  0.005               0.055             0.055
 2nd Quarter                                  0.005                 0.005               0.055             0.055
 3rd Quarter                                  0.005                 0.005               0.055             0.055
 4th Quarter                                  0.005                 0.005               0.055             0.055

Year Ending February 28, 2000

 March 1-May 24                               0.01                  0.005               0.55              0.01
 May 25-May 28                                0.01                  0.01                0.10              0.10
 2nd Quarter                                  0.05                  0.01                0.10              0.10
 3rd Quarter                                  0.05                  0.01                0.10              0.08


UNITS
-----

                                                      Bid Prices                              Asked Prices
                                                      ----------                              ------------
                                                High             Low                      High             Low
                                                ----             ---                      ----             ---

Year Ended February 28, 1998

 March 3-April 17                             0625                  0.1875              0.875             0.375
 April 18-May 30                              0.25                  0.0125              0.50              0.25
 2nd Quarter                                  0.15625               0.0625              0.40625           0.25
 3rd Quarter                                  0.125                 0.0625              0.25              01875
 4th Quarter                                  0.07                  0.05                0.25              0.07

Year Ended February 28, 1999

 1st Quarter                                  0.05                  0.04                0.07              0.07
 2nd Quarter                                  0.04                  0.04                0.07              0.07
 3rd Quarter                                  0.04                  0.02                0.07              0.07
 4th Quarter                                  0.06                  0.02                0.15              0.07

Year Ending February 28, 2000

 March 1-May 24                               0.10                  0.06                0.25              0.12
</TABLE>

                                       16
<PAGE>

         The closing bid and asked sales prices of the Common Stock, as traded
in the over-the-counter market, on January 25, 2000, were approximately $0.375
and $0.4375, respectively. The closing bid and asked sales prices of the
Warrants, as traded in the over-the-counter market, on January 25, 2000, were
approximately $0.02 and $0.10, respectively. These prices are based upon
quotations between dealers, without adjustments for retail mark-ups, mark-downs
or commissions, and therefore may not represent actual transactions.

         The Company has not paid a cash dividend on its Common Stock since its
inception and, by reason of its present financial status and its contemplated
financial requirements, does not anticipate paying and cash dividends in the
foreseeable future. It is anticipated that earnings, if any, which may be
generated from operations will be used to finance the operations of the Company.

SALES OF UNREGISTERED SECURITIES

         As of May 24, 1999, the Company effected a reverse split of its issued
and outstanding Common Stock on a one-for-ten basis. Except as set forth below,
the following discussion does not give effect to the reverse split.

         In April 1996, the Company received gross proceeds of $500,000 from the
issuance of convertible notes. The notes bear interest at 10% per annum and an
accelerated rate of 17% per annum beginning April 17, 1997. The noteholders have
the right to convert the principal and accrued interest into common shares of
the Company at a price of (i) $1.2656 per share or (ii) 75% of the closing bid
for the five trading days immediately preceding the conversion. In the event of
default, as defined, the Company will not have the right to compel conversion.
The Company placed 909,090 shares of common stock into escrow for the benefit of
the noteholders. During the nine months ended November 30, 1996, $250,000 was
converted into 341,897 shares. As a result of the conversion, 454,545 shares
remained in escrow.

         The Company arranged a six month short term loan that yielded the
Company in the months of September 1996 and October 1996 approximately
$1,000,000 which was used to retire existing debt and fund working capital. In
connection with this funding, the lenders were granted 2,200,000 million
warrants exercisable at $1.50. Interest accrues at a rate of 8.0%. Warrants to
acquire an additional 1,100,000 shares at $1.50 per share were issued on the
180th day of the loan. The Company has repaid $200,000 of these loans, and an
additional $50,000 of these loans was converted into 800,000 shares of Common
Stock. The Company also entered into an agreement to issue 2,475,000 shares of
Common Stock in exchange for the 3,300,000 warrants in July, 1997.

         During the quarter ended November 30, 1996, the Company issued $750,000
of convertible preferred stock. During the fiscal year ended February 28, 1997,
holders of $100,000 of the preferred stock converted their shares into
approximately 184,666 shares of Common Stock. The holders of the remaining
$650,000 of preferred stock received warrants to purchase 650,000 shares of
Common Stock because they did not convert their preferred shares within six
months following the issuance of such preferred shares. During the fiscal year
ended February 28, 1998, the remaining preferred stockholders converted their
shares into an aggregate of 10,400,000 shares of Common Stock. In addition, the
holders of approximately 585,206 warrants exchanged their warrants for 292,603
shares of Common Stock.

         In May and June 1997, the Company secured approximately $350,000 of
loans ("1997 Loans"), which were used for working capital and for debt
repayment. Lenders in these six-month loans received a promissory note bearing
interest at 10%. Upon an event of default in the repayment of the loans, the
lenders received the right to convert their loans into shares of Common Stock at
a conversion price of $0.125 per share. The Company reached an agreement to
extend the repayment time for $300,000 of these loans, and further agreed to
reduce the default conversion price to $0.0625 per share. As of January 28,
2000, the noteholders had converted $225,000 of the loans into 3,400,000 shares
of Common Stock. The shares issued or issuable upon the conversion of these
notes are not and will not be adjusted downward in connection with the May 24,
1999 reverse split. Further, in connection with the initial issuance of the
notes relating to these loans, and as extended, the Company issued an aggregate
of 2,455,560 shares of Common Stock to the noteholders.

         In addition, the Company issued 3,200,000 shares of Common Stock in
August, 1997 in cancellation of an unsecured obligation in the amount of
$200,000.

                                       17
<PAGE>

         The Company issued 230,769 shares (on a post-split basis) of Common
Stock to an employee in cancellation of $30,000 of accrued and unpaid salary.

         The Company also has received approximately $120,000 of loans from
Barry and Anne Reichman, who are directors and executive officers of the
Company. In December, 1999, the Company issued 230,769 shares of Common Stock to
Anne Reichman (on a post-split basis) in cancellation of $30,000 of these
obligations.

         In August, 1997, the Company issued 1,600,000 shares of Common Stock in
cancellation of $100,000 of obligations to a vendor, and issued 6,700,000 shares
of Common Stock in cancellation of a $201,000 obligation to another vendor.

         In addition to the various issuances of securities referenced above in
this Report, the Company has issued options to purchase approximately 4,280,306
shares of Common Stock at exercise prices ranging from $0.10 to $0.90 (on a
post-split basis) to various employees and consultants of the Company during the
fiscal year ended February 28,1999 and the fiscal year ending February 28, 2000.

         In June 1996, the Company issued to Slim Goodbody Corp., AJS
Consultants Ltd. Profit Sharing Trust and Atlaz International, Ltd. 80,000
shares of Common Stock and a warrant to purchase 70,000 shares of Common Stock
exercisable at $1.50 per share, in exchange for cancellation of $70,700 of the
Company's obligations to them.

         During the year ended February 28, 1997, the Company issued an
aggregate of 89,900 shares of Common Stock and warrants to acquire 50,000 shares
of Common Stock to CRG Group, G. Simon, H. Gress, R. Katzoff, J. Leibowitz, E.
Miles, A. Moses, J. Plutovski, for $82,000 of value in services.

         In May 1996, the Company issued 20,000 shares of Common Stock for
$20,000 to Bayit Care Corp.

         In August 1996, the Company issued warrants to purchase 355,000 shares
of Common Stock at prices ranging from $1.00 to $1.10 to I. Bader, M. Berger, O.
Folger, W. Haase, J. Lucas, A. Reichman, B. Reichman and Target Capital Corp.
for compensation for services.

         In May, June and July 1996 S. Berger and A. Reichman advanced $54,000
to the Company. In consideration for these loans, the Company issued warrants to
acquire 108,000 shares of Common Stock exercisable at $1.50 per share.

         These transactions were exempt from registration pursuant to Section
4(2) of the Securities Act of 1933.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

         THIS REPORT, INCLUDING THE DISCLOSURES BELOW, CONTAINS CERTAIN
FORWARD-LOOKING STATEMENTS THAT INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES.
WHEN USED HEREIN, THE TERMS "ANTICIPATES," "EXPECTS," "ESTIMATES," "BELIEVES"
AND SIMILAR EXPRESSIONS, AS THEY RELATE TO THE COMPANY OR ITS MANAGEMENT, ARE
INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. THE COMPANY'S ACTUAL
RESULTS, PERFORMANCE OR ACHIEVEMENTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED
OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR
CONTRIBUTE TO SUCH MATERIAL DIFFERENCES INCLUDE THE FACTORS DISCLOSED IN THE
"RISK FACTORS" SECTION OF THIS ANNUAL REPORT ON FORM 10-KSB, WHICH READERS OF
THIS REPORT SHOULD CONSIDER CAREFULLY.

RESULTS OF OPERATIONS

         RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED FEBRUARY 28, 1999 AND
1998. Net sales for the fiscal year ended February 28, 1999 (the "1999 Period")
were $5,369,597 compared to $3,383,836 in the fiscal year ended February 28,
1998 (the "1998 Period").

         Gross profit was $4,773,423 in the 1999 Period compared to $2,679,302
in the 1998 Period.

                                       18
<PAGE>

         Selling and marketing expenses were $2,379,814 for the 1999 Period
compared to $2,011,731 for the 1998 Period. General and administrative expenses
were $3,005,161 in the 1999 Period compared to $5,350,209 in the 1998 Period.
Interest expense was $141,335 in the 1999 Period compared to $344,479 in the
1998 Period.

         Net loss from operations was $753,136 in the 1999 Period compared to
net loss from operations of $5,027,117 in the 1998 Period

         LIQUIDITY AND CAPITAL RESOURCES. The Company's cash and restricted cash
decreased to $80,000 at February 28, 1999 from $136,001 at February 28, 1999.

         Net cash used in operations in the 1999 Period was $108,352 compared to
$895,223 in the 1998 Period.

         Net cash used in investing activities in the 1999 Period was $25,857
compared to net cash provided by investing activities of $193,088 in the 1998
Period.

         Net cash used in financing activities in the 1999 Period was $30,067,
compared to net cash provided from financing activities of $472,064 in the 1998
Period.

         As of May 24, 1999, the Company effected a reverse split of its issued
and outstanding Common Stock on a one-for-ten basis. Except as set forth below,
the following discussion does not give effect to the reverse split.

         In April 1996, the Company received gross proceeds of $500,000 from the
issuance of convertible notes. The notes bear interest at 10% per annum and an
accelerated rate of 17% per annum beginning April 17, 1997. The noteholders have
the right to convert the principal and accrued interest into common shares of
the Company at a price of (i) $1.2656 per share or (ii) 75% of the closing bid
for the five trading days immediately preceding the conversion. In the event of
default, as defined, the Company will not have the right to compel conversion.
The Company placed 909,090 shares of common stock into escrow for the benefit of
the noteholders. During the nine months ended November 30, 1996, $250,000 was
converted into 341,897 shares. As a result of the conversion, 454,545 shares
remained in escrow.

         The Company arranged a six month short term loan that yielded the
Company in the months of September 1996 and October 1996 approximately
$1,000,000 which was used to retire existing debt and fund working capital. In
connection with this funding, the lenders were granted 2,200,000 million
warrants exercisable at $1.50. Interest accrues at a rate of 8.0%. Warrants to
acquire an additional 1,100,000 shares at $1.50 per share were issued on the
180th day of the loan. The Company has repaid $200,000 of these loans, and an
additional $50,000 of these loans was converted into 800,000 shares of Common
Stock. The Company also entered into an agreement to issue 2,475,000 shares of
Common Stock in exchange for the 3,300,000 warrants in July, 1997.

         During the quarter ended November 30, 1996, the Company issued $750,000
of convertible preferred stock. During the fiscal year ended February 28, 1997,
holders of $100,000 of the preferred stock converted their shares into
approximately 184,666 shares of Common Stock. The holders of the remaining
$650,000 of preferred stock received warrants to purchase 650,000 shares of
Common Stock because they did not convert their preferred shares within six
months following the issuance of such preferred shares. During the fiscal year
ended February 28, 1998, the remaining preferred stockholders converted their
shares into an aggregate of 10,400,000 shares of Common Stock. In addition, the
holders of approximately 585,206 warrants exchanged their warrants for 292,603
shares of Common Stock.

         The Company's educational telemarketing business is highly seasonal.
Demand for its products tends to peak during the first and fourth fiscal
quarters when school is in session. Demand is especially slow during the school
vacation periods. This seasonality greatly affects the Company's advertising
campaigns, which must be timed to coincide with the annual periods when demand
is traditionally high. The Company does not reserve advertising time in advance
and purchases air time at the lowest possible rates. Consequently, its
reservations are subject to last minute cancellation by the radio and television
stations. In addition, as a result of the Company's dependence on the
availability of media time, operating results can be negatively impacted by
difficulty in purchasing cost effective media time. Although the Company has
entered into certain ventures, which may reduce the impact of seasonality on the
Company's business, it will in all likelihood continue to experience a certain
amount of seasonality in its operations.

                                       19
<PAGE>

         In May and June 1997, the Company secured approximately $350,000 of
loans ("1997 Loans"), which were used for working capital and for debt
repayment. Lenders in these six-month loans received a promissory note bearing
interest at 10%. Upon an event of default in the repayment of the loans, the
lenders received the right to convert their loans into shares of Common Stock at
a conversion price of $0.125 per share. The Company reached an agreement to
extend the repayment time for $300,000 of these loans, and further agreed to
reduce the default conversion price to $0.0625 per share. As of January 28,
2000, the noteholders had converted $225,000 of the loans into 3,400,000 shares
of Common Stock. The shares issued or issuable upon the conversion of these
notes are not and will not be adjusted downward in connection with the May 24,
1999 reverse split. Further, in connection with the initial issuance of the
notes relating to these loans, and as extended, the Company issued an aggregate
of 2,455,560 shares of Common Stock to the noteholders.

         The Company has received advances aggregating $375,000, which bear
interest at the rate of 10% per year, and are in default.

         In addition, the Company issued 3,200,000 shares of Common Stock in
August, 1997 in cancellation of an unsecured obligation in the amount of
$200,000.

         The Company issued 230,769 shares (on a post-split basis) of Common
Stock to an employee in cancellation of $30,000 of accrued and unpaid salary.

         The Company also has received approximately $120,000 of loans from
Barry and Anne Reichman, who are directors and executive officers of the
Company. In December, 1999, the Company issued 230,769 shares of Common Stock to
Anne Reichman (on a post-split basis) in cancellation of $30,000 of these
obligations.

         In August, 1997, the Company issued 1,600,000 shares of Common Stock in
cancellation of $100,000 of obligations to a vendor, and issued 6,700,000 shares
of Common Stock in cancellation of a $201,000 obligation to another vendor.

         The Company has judgments entered against it by certain of its vendors
in the aggregate amount of approximately $100,000. The Company has reached
agreements or is in the course of negotiating agreements with these vendors to
make scheduled payments on these obligations. Further, certain creditors of the
Company have commenced various lawsuits asserting claims in the aggregate amount
of approximately $235,000. In addition, the Company has been sued by a vendor
for approximately $100,000, and the Company has asserted a counterclaim against
the vendor seeking damages in the sum of $500,000. The Company also has reached
agreements with certain of its vendors relating to obligations in the aggregate
amount of approximately $895,000. Of these settled amounts, approximately
$830,000 is payable over a period between three to five years, and the other
$65,000 is payable over a period between 6 to 18 months.

         The Company continues to meet its working capital requirements through
debt and equity funding from outside sources and internally generated funds. In
addition, the Company may have increased capital requirements as it seeks to
expand its product lines and customized telemarketing services. In order to meet
its current and future cash requirements, the Company is in discussions to
negotiate additional debt and equity financing. There can be no assurance that
any financing will be successful nor that the Company will be able to fund
internally its working capital requirements or meet its debt repayment
obligations. In the event that the Company is unable to secure additional
financing, it may be obligated to significantly reduce its operations and seek
to sell assets, which would have a material adverse affect on the Company's
prospects and financial results.

         The Company has received a report from its independent public
accountants, that includes an explanatory paragraph describing the uncertainty
as to the ability of the Company's operations to continue as a going concern.

          The Company's operations have not been materially affected by the
impact of inflation.

                                       20
<PAGE>

YEAR 2000

         The Company has developed plans to address issues related to the impact
on its computer systems of the year 2000. Financial and operational systems have
been assessed and plans have been developed to address systems modification
requirements. The financial impact of making the required systems changes is not
expected to be material to the Company's consolidated financial position,
liquidity and results of operations. In the first week of January, 2000, the
Company experienced a year 2000 problem relating to the operations of its voice
mail system. The problem has been resolved with minimal expense, and the problem
did not have a material adverse effect on the operations of the Company during
the weeklong period and the Company does not anticipate that there will be a
material adverse effect on the Company relating to the matter for the
foreseeable future.

ITEM 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The financial statements are included herein commencing on page F-1

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

         a. On December 14, 1999, the Company terminated its relationship with
Holtz Rubenstein & Co., LLP ("Holtz Rubenstein"), as principal independent
accountants for the Company.

         In connection with the audits for the two (2) most recent fiscal years
ended February 28, 1999 and 1998 and the subsequent interim periods through
December 14 1999, there were no disagreements between Holtz Rubenstein and the
Company, on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedures, which disagreements, if
not resolved to the satisfaction of Holtz Rubenstein would have caused Holtz
Rubenstein to make reference in connection with its report for the related
periods with respect to the subject matter of the disagreement.

         Except for a qualification with respect to the ability of the Company
to continue as a going concern stated in the opinion of Holtz Rubenstein, dated
as of April 25, 1997, the audit reports of Holtz Rubenstein on the consolidated
financial statements of the Company, as of and for the fiscal years ended
February 28, 1997 and 1996, did not contain any adverse opinion, or disclaimer
of opinion, nor were they qualified or modified as to uncertainty, audit scope,
or accounting principles.

         b. As of November 14, 1999, the Company engaged Singer Lewak Greenbaum
& Goldstein ("SLGG"), as the Company's principal independent accountants. Prior
to engaging SLGG, neither the Company nor someone on its behalf consulted SLGG
regarding either: (i) the application of accounting principles to a specified
transaction, either completed or proposed, or the type of audit opinion that
might be rendered on the Company's financial statements, or (ii) any matter that
was either the subject of a disagreement or a reportable event.

                                       21
<PAGE>

                                    PART III

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Officers and Directors

     The officers and directors of the Company, as of January 28, 2000, are as
follows:

 NAME                              AGE                           POSITION
 ----                              ---                           --------

 Barry Reichman                    48                     President and Director

 Anne Reichman                     45                     Secretary and Director

 Irving Bader (1)                  59                     Director

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

(1)      Member of the Audit Committee.

         Barry Reichman has been President and a Director of the Company since
August 1994. From 1985 until 1994, he was Secretary and a Director of VTS. Mr.
Reichman holds a B.A. in Economics from Yeshiva University and an M.B.A. from
Baruch College. He is the husband of Anne Reichman, a Director of the Company.

         Anne Reichman has been a Director of the Company since October 1994.
Ms. Reichman was elected Secretary of the Company in March 1995. From 1985 until
1994 she developed and oversaw the computer and order fulfillment system for VTS
and supervised internal accounting. Ms. Reichman was also an assistant producer
in a number of VTS mathematics videotape productions and authored several math
workbooks. Ms. Reichman holds a B.A. in Mathematics from Yeshiva University. Ms.
Reichman is the wife of Barry Reichman, President and a Director of the Company.

         Irving Bader was elected a Director of the Company in March 1995. Mr.
Bader has been Director of Adaptive Physical Education with the New York City
Board of Education since 1973. He has also been an Adjunct Professor of Physical
Education at Brooklyn College since 1980. In addition, he has been the area
coordinator of the New York Special Olympics since 1985. Mr. Bader holds a B.A.
in English from Yeshiva College and M.S.E. from Yeshiva Graduate School of
Education.

AUDIT COMMITTEE

         The Board has designated an Audit Committee consisting of Messrs.
Bader. There were no meetings held for this committee during the most recent
fiscal year.

ITEM 10. EXECUTIVE COMPENSATION

         The following table sets forth information with respect to compensation
paid by the Company for services to the Company during the three fiscal years
ended February 28, 1999, to the Company's Chief Executive Officer and other
officers of the Company who received annual compensation in excess of $100,000.

                                       22
<PAGE>

                           SUMMARY COMPENSATION TABLE

         SUMMARY COMPENSATION TABLE. The following table sets forth certain
information concerning compensation of certain of the Company's executive
officers (the "Named Executives"), including the Company's Chief Executive
Officer and all executive officers whose total annual salary and bonus exceeded
$100,000, for the years ended February 28, 1999 and 1998:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                  ANNUAL  COMPENSATION                        LONG TERM COMPENSATION

   Awards                                            Payouts
-------------------------------------------------------------------------------------------------------------------

                                                                         Securities
                                                            Restricted   Underlying
Name and                                   Other annual     Stock        Options/SARs    LTIP          All other
principal                                  Compensation     Awards (s    (1)             Payouts       Compensation
position        Year    Salary   Bonus          ($)             ($)           (#)             ($)           ($)
--------------- ------- -------- --------- ---------------- ------------ --------------- ------------- ------------

<S>             <C>     <C>        <C>         <C>              <C>         <C>               <C>            <C>
Morris Berger   1999    $76,000    -0-         $3,850           -0-         134,986           -              -
(2)

                1998    $130,000   -0-         $6,600           -0-           -0-             -              -

Barry
Reichman(3)     1999    $100,000   -0-           -0-            -0-         104,967           -              -


                1998    $100,000   -0-           -0-            -0-           -0-             -              -
</TABLE>

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

(1)      These numbers are adjusted to reflect the one-for-ten reverse split
         effected on May 24, 1999.

(2)      Mr. Berger served as Chief Executive Officer during the fiscal year
         ended February 28, 1998 and during the fiscal year ended February 28,
         1999 until July 31, 1999. His salary and compensation for a car
         allowance reflect compensation generated from March 1, 1999 until July
         31, 1999.

(3)      Mr. Reichman has served as Chief Executive Officer since July 31, 1999.

                                       23
<PAGE>

         OPTIONS/SAR GRANTS TABLE DURING LAST FISCAL YEAR. The following table
sets forth certain information concerning grants of stock options to certain of
the Named Executives, for the fiscal years ended February 28, 1999 and 1998:
<TABLE>
<CAPTION>

                                                                                Potential Realizable
                                                                                Value at Assumed
                                                                                Annual Rate of
                                                                                Stock Price Appreciation
                           Individuals Grants                                   For Option Term (1)
--------------------------------------------------------------------------------------------------------

(a)                       (b)          (c)             (d)             (e)          (f)           (g)
                          Number of    % of
                          Securities   Total
                          Under lying  Options/
                          Options/     SARs            Exercise
                          SARs         Granted to      Or Base
                          Granted      Employees       Price           Expiration
Name                      (#)          In Fiscal Year  ($/Share) (1)   Date (1)     5%($)         10%($)
--------------------------------------------------------------------------------------------------------

<S>                        <C>          <C>             <C>             <C>        <C>            <C>
Morris Berger              134,986 (2)  42.86%          $0.30           5/27/08    $25,647        $62,093

Barry Reichman             104,967 (2)  33.33%          $0.30           5/27/08    $19,944        $41,987
</TABLE>

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

         (1) This chart assumes a market price of $0.40 for the Common Stock,
the average of the bid and asked prices for the Company's Common Stock in the
over-the-counter market, as of January 25, 2000, as the assumed market price for
the Common Stock with respect to determining the "potential realizable value" of
the shares of Common Stock underlying the options described in the chart, as
reduced by any lesser exercise price for such options. Each of the options
reflected in the chart was granted at exercise prices, which the Company
believes to have been determined based on the fair market value of the Common
Stock as of the date of grant. Further, the chart assumes the annual compounding
of such assumed market price over the relevant periods, without giving effect to
commissions or other costs or expenses relating to potential sales of such
securities. The Company's Common Stock has a very limited trading history. These
values are not intended to forecast the possible future appreciation, if any,
price or value of the Common Stock. See "Item 5-Market Price of Common Equity
and Related Stockholder Matters" and "Executive Compensation-Stock Option Plan."

         (2) The Company granted these options on May 27, 1998. All of the
options have vested and are currently exercisable, and reflect an adjustment for
the one-for-ten reverse split.

                                       24
<PAGE>

EMPLOYMENT AGREEMENTS

         The Company has entered into employment agreements with Barry Reichman,
Anne Reichman and Harold Reichman pursuant to which they are paid annual base
salaries of $100,000, $50,000 and $75,000, respectively. In addition, Anne
Reichman and Harold Reichman are entitled to receive option to purchase up to
500,000 and 200,000 shares of Common Stock, respectively, at an exercise price
equal to 50% of the market price of the Common Stock on the last day of the
calendar year immediately preceding the year of vesting of the options. The
options vest in 20% increments, on each January 5 of the term of the agreements,
commencing January 5, 2000. The agreements terminate on December 31, 2004.

STOCK OPTION PLAN

         The Company's 1995 Stock Option Plan (the "Stock Option Plan") provides
for the granting of options to purchase not more than an aggregate of 350,000
shares of Common Stock, subject to adjustment under certain circumstances. Such
options may be Incentive Stock Options ("ISO") within the meaning of the
Internal Revenue Code of 1986, as amended, or Non-Qualified Options ("NQO").

         The Stock Option Plan is administered by the Board of Directors or by a
stock option committee (the " Committee") which may be appointed by the Board of
Directors. To date the Board has not appointed a Committee. The Committee has
full power and authority to interpret the provisions, and supervise the
administration, of the Stock Option Plan. The Committee determines, subject to
the provisions of the Stock Option Plan, to whom options are granted, the number
of shares of Common Stock subject to each option, whether an option shall be an
ISO or a NQO and the period during which each option may be exercised. In
addition, the Committee determines the exercise price of each option, subject to
the limitations provided in the Stock Option Plan, including that (i) for a NQO
the exercise price per share may not be less than 85% of the fair market value
per share of Common Stock on the date of grant and (ii) for an ISO the exercise
price per share may not be less than the fair market value per share of Common
Stock on the date of grant (110% of such fair market value if the grantee owns
stock possessing more than 10% of the combined voting power of all classes of
the Company's stock). In determining persons to whom options will be granted and
the number of shares of Common Stock to be covered by each option, the Committee
considers various factors including each eligible person's position and
responsibilities, service and accomplishments, anticipated length of future
service and other relevant factors. Options may be granted under the Stock
Option Plan to all officers, directors and employees of the Company and, in
addition, NQO may be granted to other parties who perform services for the
Company. No options may be granted under the Stock Option Plan, after March 31,
2004. The Stock Option Plan may be amended from time to time by the Board of
Directors of the Company. The Board of Directors may not, however, without
stockholder approval, amend the Stock Option Plan to increase the number of
shares of Common Stock which may be issued under the Stock Option Plan (except
upon changes in capitalization as specified in the Stock Option Plan), decrease
the minimum exercise price provided in the plan or change the class of persons
eligible to participate in the plan.

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

         Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater than ten-percent shareholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file.

         Based solely on review of the copies of such forms furnished to the
Company, or written representations that no Forms 5 were required, the Company
believes that during the period from February 28, 1997 through February 28,
1999,no reports required under Section 16 (a) of the Exchange Act were made by
any of the Company's executive officers, directors or 10% beneficial owners, if
any, and that all such reports remain delinquent. The Company intends determine
which reports, if any, are required to be filed by such persons, and to be in
compliance with the filing requirements of Section 16(a).

                                       25
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth, as of January 28, 2000, as adjusted for
the one-for-ten reverse split, information regarding the beneficial ownership of
the Common Stock based upon the most recent information available to the Company
for (i) each person known by the Company to own beneficially more than five
percent of the Common Stock, (ii) each of the Company's named executive officers
and directors and (iii) all officers and directors of the Company as a group.
Unless otherwise indicated, each stockholder's address is c/o the Company, 205
Kings Highway, Brooklyn, New York, 11223.

<TABLE>
<CAPTION>

Name and Address
of Beneficial Owner                         Number of Shares              Percent of Total #
-------------------                         ----------------              ------------------

<S>                                         <C>                                   <C>
Barry Reichman (1)                          1,980,736                             19.68

Anne Reichman (1)                           1,980,736                             19.68

Irving Bader (2)                            25,000                                     *

Custer Company, Inc. (3)                    1,685,556                             20.28

Steel Partners II LP (4)                    1,691,000                             16.14

M.J. Segal & Co., Inc. (5)                  853,993                               10.27

Jacob Wizman (6)                            800,000                               9.62

Rita Folger (7)                             704,521                               8.47

George Lichtenstein (8)                     665,958                               7.95

Jeshayahu Boymelgreen (9)                   422,222                               5.02

All officers and directors as a group       2,005,736
(3 persons)
</TABLE>

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

(FOOTNOTES ON FOLLOWING PAGE)

                                       26
<PAGE>

(FOOTNOTES FROM PRIOR PAGE)

         # Pursuant to the rules of the Commission, shares of Common Stock which
an individual or group has a right to acquire within 60 days pursuant to the
exercise of options or warrants are deemed to be outstanding for the purpose of
computing the percentage ownership of such individual or group, but are not
deemed to be outstanding for the purpose of computing the percentage ownership
of any other person shown in the table.

         * Less than 1%.

(1)      Mr. and Mrs. Reichman are husband and wife, and are officers and
         directors of the Company. Includes options to purchase up to 1,224,967
         shares granted to Mr. Reichman, options to purchase up to 525,000
         shares granted to Mrs. Reichman, and 230,769 shares owned by Mrs.
         Reichman.

(2)      Mr. Bader is a director of the Company. Includes options to purchase up
         to 25, 000 shares.

(3)      The address for Custer Company, Inc. is 10911 Petal Street, Dallas
         Texas 75238.

(4)      The address for Steel Partners II LP is 180 East 52nd Street, 21st
         Floor, New York, New York 10022. Includes $1,000,000 principal amount
         of promissory notes convertible into 1,600,000 shares of Common Stock.

(5)      The address for M.J. Segal & Company, Inc. is 3603 Dunn Street, #301,
         Los Angeles, California 90034. Includes 800,000 shares of Common Stock
         owned by M.J. Segal & Company, Inc., a corporation of which the
         beneficial owners are M.J. Segal and Michael Moore. In addition, Mr.
         Segal owns 8,347 shares of Common Stock, in which Mr. Moore owns no
         beneficial interest.

(6)      The address for Mr. Wizman is 211 South Beverly Drive, Suite 108,
         Beverly Hills, California 9021.

(7)      The address for Ms. Folger is 521 Fifth Avenue, New York, New York
         10175.

(8)      The address for Mr. Lichtenstein is 4706 16th Avenue, Brooklyn, New
         York 11204. Includes options to purchase up to 665,958 shares.

(9)      The address for Mr. Boymelgreen is 1286 President Street, Brooklyn, New
         York 11213.

                                       27
<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         As of May 24, 1999, the Company effected a reverse split of its issued
and outstanding Common Stock on a one-for-ten basis. Except as set forth below,
the following discussion does not give effect to the reverse split.

         In April 1996, the Company received gross proceeds of $500,000 from the
issuance of convertible notes. The notes bear interest at 10% per annum and an
accelerated rate of 17% per annum beginning April 17, 1997. The noteholders have
the right to convert the principal and accrued interest into common shares of
the Company at a price of (i) $1.2656 per share or (ii) 75% of the closing bid
for the five trading days immediately preceding the conversion. In the event of
default, as defined, the Company will not have the right to compel conversion.
The Company placed 909,090 shares of common stock into escrow for the benefit of
the noteholders. During the nine months ended November 30, 1996, $250,000 was
converted into 341,897 shares. As a result of the conversion, 454,545 shares
remained in escrow.

         The Company arranged a six month short term loan that yielded the
Company in the months of September 1996 and October 1996 approximately
$1,000,000 which was used to retire existing debt and fund working capital. In
connection with this funding, the lenders were granted 2,200,000 million
warrants exercisable at $1.50. Interest accrues at a rate of 8.0%. Warrants to
acquire an additional 1,100,000 shares at $1.50 per share were issued on the
180th day of the loan. The Company has repaid $200,000 of these loans, and an
additional $50,000 of these loans was converted into 800,000 shares of Common
Stock. The Company also entered into an agreement to issue 2,475,000 shares of
Common Stock in exchange for the 3,300,000 warrants in July, 1997.

         During the quarter ended November 30, 1996, the Company issued $750,000
of convertible preferred stock. During the fiscal year ended February 28, 1997,
holders of $100,000 of the preferred stock converted their shares into
approximately 184,666 shares of Common Stock. The holders of the remaining
$650,000 of preferred stock received warrants to purchase 650,000 shares of
Common Stock because they did not convert their preferred shares within six
months following the issuance of such preferred shares. During the fiscal year
ended February 28, 1998, the remaining preferred stockholders converted their
shares into an aggregate of 10,400,000 shares of Common Stock. In addition, the
holders of approximately 585,206 warrants exchanged their warrants for 292,603
shares of Common Stock.

         In May and June 1997, the Company secured approximately $350,000 of
loans ("1997 Loans"), which were used for working capital and for debt
repayment. Lenders in these six-month loans received a promissory note bearing
interest at 10%. Upon an event of default in the repayment of the loans, the
lenders received the right to convert their loans into shares of Common Stock at
a conversion price of $0.125 per share. The Company reached an agreement to
extend the repayment time for $300,000 of these loans, and further agreed to
reduce the default conversion price to $0.0625 per share. As of January 28,
2000, the noteholders had converted $225,000 of the loans into 3,400,000 shares
of Common Stock. The shares issued or issuable upon the conversion of these
notes are not and will not be adjusted downward in connection with the May 24,
1999 reverse split. Further, in connection with the initial issuance of the
notes relating to these loans, and as extended, the Company issued an aggregate
of 2,455,560 shares of Common Stock to the noteholders.

         The Company has received advances aggregating $375,000, which bear
interest at the rate of 10% per year, and are in default.

         In The Company also has received approximately $120,000 of loans from
Barry and Anne Reichman, who are directors and executive officers of the
Company. In December, 1999, the Company issued 230,769 shares of Common Stock to
Anne Reichman (on a post-split basis) in cancellation of $30,000 of these
obligations.

         In June 1996, the Company as part of its agreement with certain
shareholders converted approximately $42,900 of principal and interest due to
Rita Folger into 43,171 shares of the Company's Common Stock and into 43,171 of
the company's Redeemable Warrants.

                                       28
<PAGE>

ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

         (a)      1. and 2. Financial Statements and Schedules.

         The financial statements are listed in the Index to Financial
         Statements on page F-1 and are filed as part of this annual report.

         3. Exhibits.

         The Index to Exhibits following the Signature Page indicates the
         exhibits which are being filed herewith and the exhibits which are
         incorporated herein by reference.


                                    EXHIBITS

Except where otherwise indicated, the following exhibits are incorporated by
reference to the correspondingly numbered exhibit in the Company's Registration
Statement on Form SB-2 (No. 33-88494) declared effective April 13, 1995:

3.1      Certificate of Incorporation, as amended
3.2      By-Laws
4.1      Form of Warrant Agreement entered into between Registrant and
           American Stock Transfer & Trust Company
4.2      Specimens of Registrant's Stock, Redeemable Warrant and Unit
           Certificate
10.1     Form of 1995 Stock Option Plan
10.2     Agreement between VTS and The Ernest Lawrence Group
10.3     Employment Agreement between Registrant and Morris Berger
10.4     Employment Agreement between Registrant and Barry Reichman
10.5     Form of Note Conversion Agreement dated November 15, 1995 (1)
10.6     Form of Amendment No. 1 to Note Conversion Agreement dated November 30,
           1995 (1)
10.7     Form of Modification Agreement dated May 30, 1996 (1)
10.8     Form of Convertible Debt Offering (2)
10.9     Form of 1996 Short Term Loan (2)
10.1     Certificate of Designation of Series A Preferred Stock (2)
10.11    Form of 1997 Short Term Loan (2)
16.1     Letter  re change in certifying accountant (3)
27.1     Financial Data Schedule (3)
--------------------------------------------------------------------------------

(1)      Incorporated by reference from the Company's 10KSB for the fiscal year
         ended February 29, 1996.

(2)      Incorporated by reference from the Company's 10KSB for the fiscal year
         ended February 29, 1997.

(3)      Filed herewith

                                       29
<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.

                                          MULTI MEDIA TUTORIAL SERVICES, INC.


Dated: January 28, 2000                   By: /S/ Barry Reichman
                                              ----------------------------------
                                              Barry Reichman, CEO and Director


         Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below as of January 28, 2000 by the following
persons on behalf of Registrant and in the capacities indicated.


                                          /S/ Barry Reichman
                                          --------------------------------------
                                          Barry Reichman, CEO and Director


                                          /S/ Anne Reichman
                                          --------------------------------------
                                          Anne Reichman, Secretary and Director



<PAGE>

                                             MULTI-MEDIA TUTORIAL SERVICES, INC.
                                                                  AND SUBSIDIARY
                                     INDEX TO CONSOLIDATED FINANCIALS STATEMENTS
                                                               FEBRUARY 28, 1999
================================================================================


                                                             Page

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS           F-2

FINANCIAL STATEMENTS

     Consolidated Balance Sheet                              F-3 - F-4

     Consolidated Statements of Operations                   F-5

     Consolidated Statements of Stockholders' Equity         F-6

     Consolidated Statements of Cash Flows                   F-7 - F-8

     Notes to Consolidated Financial Statements              F-9 - F-21

                                      F-1
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Stockholder
Multi-Media Tutorial Services, Inc. and subsidiary


We have audited the accompanying consolidated balance sheet of Multi-Media
Tutorial Services, Inc. and subsidiary as of February 28, 1999, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the two years in the period ended February 28, 1999. 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Multi-Media
Tutorial Services, Inc. and subsidiary as of February 28, 1999, and the
consolidated results of their operations and their consolidated cash flows for
each of the two years in the period ended February 28, 1999 in conformity with
generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company incurred a net loss of $753,136 during the
year ended February 28, 1999, and it had negative cash flows from operations of
$170,502. In addition, the Company is currently in default on all loans and
capitalized leases. These factors, among others, as discussed in Note 2 to the
financial statements, raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.



/s/ SINGER LEWAK GREENBAUM & GOLDSTEIN LLP

Los Angeles, California
December 10, 1999

                                      F-2
<PAGE>

                                             MULTI-MEDIA TUTORIAL SERVICES, INC.
                                                                  AND SUBSIDIARY
                                                      CONSOLIDATED BALANCE SHEET
                                                               FEBRUARY 28, 1999
================================================================================


                                     ASSETS

CURRENT ASSETS
     Accounts receivable                                     $       217,583
     Inventories                                                      88,741
     Prepaid income taxes                                              2,349
     Prepaid expenses                                                 34,677
                                                             ----------------

         Total current assets                                        343,350

FURNITURE AND EQUIPMENT, net                                         334,843
INTANGIBLE ASSETS, net                                               251,406
RESTRICTED CASH                                                       80,000
OTHER ASSETS                                                          24,583
                                                             ----------------

                  TOTAL ASSETS                               $     1,034,182
                                                             ================

   The accompanying notes are an integral part of these financial statements.

                                      F-3
<PAGE>

                                             MULTI-MEDIA TUTORIAL SERVICES, INC.
                                                                  AND SUBSIDIARY
                                                      CONSOLIDATED BALANCE SHEET
                                                               FEBRUARY 28, 1999
================================================================================



                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
     Book overdraft                                            $       118,277
     Short-term debt                                                 1,725,000
     Due to related party                                               62,150
     Accounts payable                                                2,280,569
     Capital lease obligations                                         128,855
     Accrued payroll and other expenses                                271,893
     Accrued interest                                                  319,580
     Deferred revenue                                                   78,000
                                                               ----------------

         Total current liabilities                                   4,984,324
                                                               ----------------
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
     Preferred stock, Series A, $0.01 par value
         1,000,000 shares authorized
         no shares issued and outstanding                                    -
     Preferred stock, Series B, $0.01 par value
         50 shares authorized
         no shares issued and outstanding                                    -
     Common stock, $0.01 par value
         20,000,000 shares authorized
         2,743,646 shares issued and outstanding                        27,437
     Additional paid-in capital                                     10,112,002
     Accumulated deficit                                           (14,089,581)
                                                               ----------------

         Total stockholders' equity                                 (3,950,142)
                                                               ----------------

             TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY        $     1,034,182
                                                               ================

   The accompanying notes are an integral part of these financial statements.

                                      F-4
<PAGE>

                                             MULTI-MEDIA TUTORIAL SERVICES, INC.
                                                                  AND SUBSIDIARY
                                           CONSOLIDATED STATEMENTS OF OPERATIONS
                                                FOR THE YEARS ENDED FEBRUARY 28,
================================================================================


                                                1999               1998
                                          ---------------    ---------------

NET SALES                                 $    5,369,597     $    3,383,836

COST OF SALES                                    596,423            704,534
                                          ---------------    ---------------

GROSS PROFIT                                   4,773,174          2,679,302
                                          ---------------    ---------------

OPERATING EXPENSES
     Selling and marketing                     2,379,814           2,011,731
     General and administrative                3,005,161           5,350,209
                                          ---------------    ---------------

         Total operating expenses              5,384,975           7,361,940
                                          ---------------    ---------------

LOSS FROM OPERATIONS                            (611,801)         (4,682,638)

OTHER INCOME (EXPENSE)
     Interest expense                           (141,335)           (344,479)
                                          ---------------    ----------------

NET LOSS                                  $     (753,136)    $    (5,027,117)
                                          ===============    ================

BASIC LOSS PER SHARE                      $        (0.27)    $         (3.91)
                                          ===============    ================

DILUTED LOSS PER SHARE                    $        (0.27)    $         (3.91)
                                          ===============    ================

WEIGHTED-AVERAGE SHARES OUTSTANDING            2,743,646           1,284,257
                                          ===============    ================

   The accompanying notes are an integral part of these financial statements.

                                      F-5
<PAGE>
<TABLE>

                                                                                                 MULTI-MEDIA TUTORIAL SERVICES, INC.
                                                                                                                      AND SUBSIDIARY
                                                                                     CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                                                                                    FOR THE YEARS ENDED FEBRUARY 28,
====================================================================================================================================

<CAPTION>


                                          Preferred Stock, Series A   Preferred Stock, Series B         Common Stock
                                          -------------------------   -------------------------   ------------------------
                                            Shares         Amount       Shares         Amount       Shares        Amount
                                          ----------     ----------   ----------     ----------   ----------    ----------

<S>                                             <C>      <C>          <C>            <C>            <C>         <C>
BALANCE, FEBRUARY 28, 1997                       13      $       1            -      $       -      621,330     $   6,213
ISSUANCE OF COMMON STOCK FOR
  Conversion of February 20, 1997
     note                                                                                           320,000         3,200
  Conversion of 1997 note                                                                            80,000           800
  Conversion of accrued consulting
     fees to common stock                                                                           160,000         1,600
  Interest charge on bridge note                                                                    245,556         2,456
  Exchange of warrants                                                                              276,760         2,768
RECAPITALIZATION OF SERIES A
  PREFERRED STOCK                               (13)            (1)          13              1
RECAPITALIZATION OF SERIES B
  PREFERRED STOCK                                                           (13)            (1)   1,040,000        10,400
ISSUANCE OF WARRANTS AS INTEREST
NET LOSS
                                          ----------     ----------   ----------     ----------   ----------    ----------

BALANCE, FEBRUARY 28, 1998                        -              -            -              -    2,743,646        27,437
STOCK OPTIONS ISSUED FOR SERVICES
NET LOSS
                                          ----------     ----------   ----------     ----------   ----------    ----------

     BALANCE, FEBRUARY 28, 1999                   -      $       -            -      $       -    2,743,646     $  27,437
                                          ==========     ==========   ==========     ==========   ==========    ==========
</TABLE>

continued below -
<PAGE>
<TABLE>

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - continued
<CAPTION>


                                             Additional
                                              Paid-In     Accumulated
                                              Capital        Deficit         Total
                                           ------------   -------------   ------------

<S>                                        <C>            <C>             <C>
BALANCE, FEBRUARY 28, 1997                 $ 9,432,980    $ (8,309,328)   $ 1,129,866
ISSUANCE OF COMMON STOCK FOR
  Conversion of February 20, 1997
     note                                      196,800                        200,000
  Conversion of 1997 note                       49,200                         50,000
  Conversion of accrued consulting
     fees to common stock                       98,400                        100,000
  Interest charge on bridge note               149,789                        152,245
  Exchange of warrants                         167,232                        170,000
RECAPITALIZATION OF SERIES A
  PREFERRED STOCK
RECAPITALIZATION OF SERIES B
  PREFERRED STOCK                              (10,399)                             -
ISSUANCE OF WARRANTS AS INTEREST                22,000                         22,000
NET LOSS                                                    (5,027,117)    (5,027,117)
                                           ------------   -------------   ------------

BALANCE, FEBRUARY 28, 1998                  10,106,002     (13,336,445)    (3,203,006)
STOCK OPTIONS ISSUED FOR SERVICES                6,000                          6,000
NET LOSS                                                      (753,136)      (753,136)
                                           ------------   -------------   ------------

     BALANCE, FEBRUARY 28, 1999            $10,112,002    $(14,089,581)   $(3,950,142)
                                           ============   =============   ============
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      F-6
<PAGE>
<TABLE>

                                                                 MULTI-MEDIA TUTORIAL SERVICES, INC.
                                                                                      AND SUBSIDIARY
                                                               CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                    FOR THE YEARS ENDED FEBRUARY 28,
====================================================================================================

<CAPTION>
                                                                       1999               1998
                                                                ----------------    ----------------
<S>                                                             <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                                      $      (753,136)    $    (5,027,117)
  Adjustments to reconcile net loss to net cash
      used in operating activities
           Options issued for services                                    6,000                   -
           Depreciation and amortization                                252,706             327,206
           Interest charges on bridge notes                                   -             174,245
           Warrant repricing expenses                                         -             170,000
  (Increase) decrease in
      Restricted cash                                                    10,000             169,021
      Accounts receivable                                                65,597           1,387,684
      Inventories                                                        21,097             178,407
      Prepaid income taxes                                                 (300)             (2,049)
      Prepaid expenses                                                   31,976             689,558
      Other assets                                                       (2,500)               (663)
  Increase (decrease) in
      Due to stockholders                                                62,150
      Accounts payable                                                   77,799             489,271
      Accrued payroll and other expenses                                (31,741)            303,634
      Accrued interest                                                  140,000             179,580
      Deferred revenue                                                   12,000              66,000
                                                                ----------------    ----------------

           Net cash used in operating activities                       (108,352)           (895,223)
                                                                ----------------    ----------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of furniture and equipment                                   (20,857)                  -
  Increase in intangibles                                                (5,000)            (13,162)
  Collection of note receivable                                               -             206,250
                                                                ----------------    ----------------

          Net cash provided by (used in) investing
             activities                                                 (25,857)            193,088
                                                                ----------------    ----------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Repayment of capital lease obligations                                (55,069)            (27,936)
  Payments on short-term debt                                                 -            (200,000)
  Proceeds from issuance of short-term debt                              25,000             700,000
                                                                ----------------    ----------------

          Net cash provided by financing activities                     (30,069)            472,064
                                                                ----------------    ----------------

              Net decrease in cash and cash equivalents                (164,278)           (230,071)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                             46,001             276,072
                                                                ----------------    ----------------

CASH AND CASH EQUIVALENTS (BOOK OVERDRAFT), END OF YEAR         $      (118,277)    $        46,001
                                                                ================    ================
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      F-7
<PAGE>

                                             MULTI-MEDIA TUTORIAL SERVICES, INC.
                                                                  AND SUBSIDIARY
                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                FOR THE YEARS ENDED FEBRUARY 28,
================================================================================


                                                        1999            1998
                                                    ------------    ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

     INTEREST PAID                                  $     1,334     $    12,654
                                                    ============    ============

     INCOME TAXES PAID                              $     1,060     $         -
                                                    ============    ============


SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
During the year ended February 28, 1999, the Company issued options to purchase
stock for consulting services valued at $6,000.

During the year ended February 28, 1998, the Company converted $250,000 of
short-term debt into 400,000 shares of common stock.

During the year ended February 28, 1998, the Company converted $100,000 of
accrued consulting fees into 160,000 shares of common stock.

During the year ended February 28, 1998, the Company issued 245,556 shares of
common stock for interest on bridge notes valued at $152,245.

During the year ended February 28, 1998, the Company issued warrants to purchase
110,000 share of common stock as interest in the amount of $22,000.

During the year ended February 28, 1998, the Company exchanged warrants for
276,760 shares of common stock and incurred a repricing charge of $170,000.

During the year ended February 28, 1998, the Company entered into a
recapitalization agreement, whereby it converted all outstanding shares of
preferred stock for 1,040,000 shares of common stock.

   The accompanying notes are an integral part of these financial statements.

                                      F-8
<PAGE>

                                             MULTI-MEDIA TUTORIAL SERVICES, INC.
                                                                  AND SUBSIDIARY
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                               FEBRUARY 28, 1999
================================================================================

NOTE 1 - DESCRIPTION OF BUSINESS

         Multi-Media Tutorial Services, Inc. and subsidiary (collectively, the
         "Company"), a Delaware corporation, is engaged in the production and
         sales of educational videocassettes through its wholly-owned
         subsidiary, Video Tutorial Services, Inc. The Company also provides
         telemarketing and webified telemarketing to third party customers
         through its Multi-Media Telemarketing Services division.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Basis of Presentation
         ---------------------
         The accompanying consolidated financial statements have been prepared
         in conformity with generally accepted accounting principles, which
         contemplate continuation of the Company as a going concern. The Company
         incurred a net loss of $753,136 and $5,027,117 during the years ended
         February 28, 1999 and 1998, respectively. In addition, the Company had
         an accumulated deficit of $14,089,581 and a working capital deficit of
         $4,640,974 as of February 28, 1999. Further, the Company is currently
         in default on all loans and capitalized leases. Management recognizes
         that the Company must generate additional resources and the eventual
         achievement of sustained profitable operations. Management's plan
         include obtaining additional capital through debt/equity financing and
         the extension of existing debt. Management is also addressing improved
         collection of customer accounts and the implementation of additional
         products. The consolidated financial statements do not include any
         adjustments that might be necessary if the Company is unable to
         continue as a going concern.

         Principles of Consolidation
         ---------------------------
         The consolidated financial statements include the accounts of
         Multi-Media Tutorial Services, Inc. and its wholly-owned subsidiary,
         Video Tutorial Services, Inc. All significant intercompany transactions
         and balances have been eliminated in consolidation.

         Estimates
         ---------
         In preparing financial statements in conformity with generally accepted
         accounting principles, management makes estimates and assumptions that
         affect the reported amounts of assets and liabilities and disclosures
         of contingent assets and liabilities at the date of the financial
         statements, as well as the reported amounts of revenues and expenses
         during the reporting period. Actual results could differ from those
         estimates.

         Cash and Cash Equivalents
         -------------------------
         For purposes of the statements of cash flows, the Company considers all
         highly liquid investments purchased with original maturity of three
         months or less to be cash equivalents.

                                      F-9
<PAGE>

                                             MULTI-MEDIA TUTORIAL SERVICES, INC.
                                                                  AND SUBSIDIARY
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                               FEBRUARY 28, 1999
================================================================================

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         Advertising
         -----------
         The Company uses direct-response media advertising, consisting
         primarily of television and radio commercials. The Company expenses
         advertising costs as incurred. Advertising expense was $1,832,536 and
         $3,301,344 during the years ended February 28, 1999 and 1998,
         respectively.

         Inventories
         -----------
         The cost of inventories is determined by the first-in, first-out method
         and is stated at the lower of cost or market. Inventories are composed
         primarily of videocassettes and textbooks. Inventory carrying values
         are composed entirely of product costs.

         Furniture and Equipment
         -----------------------
         Furniture and equipment are recorded at cost. Depreciation and
         amortization are provided using the straight-line and accelerated
         methods over estimated useful lives as follows:

                  Furniture and fixtures                  5 to 7 years
                  Office equipment                        5 to 7 years
                  Computer equipment and software         3 to 5 years
                  Leasehold Improvements                  1 to 4 years

         Maintenance and minor replacements are charged to expense as incurred.
         Leasehold improvements are amortized over the lease period or the
         useful life of the asset, whichever is shorter.

         Master Production Costs
         -----------------------
         Costs incurred in producing a master video program are capitalized and
         expensed over the estimated life of the program, which is seven years.

         Patents and Copyrights
         ----------------------
         Patents and copyrights, stated at cost less accumulated amortization,
         are amortized using the straight-line method over their estimated
         useful lives of three years.

         Deferred Revenue
         ----------------
         Deferred revenue consists of cash received or billings on products that
         have not been shipped.

         Revenue Recognition
         -------------------
         Sales revenue is recognized when products are shipped to customers. The
         Company provides a reserve for anticipated returns for customers and
         doubtful collections based upon historical return levels.

                                      F-10
<PAGE>

                                             MULTI-MEDIA TUTORIAL SERVICES, INC.
                                                                  AND SUBSIDIARY
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                               FEBRUARY 28, 1999
================================================================================

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         Stock Split
         -----------
         On May 24, 1999, the Company effected a one-for-10 reverse stock split
         of its common stock. All share and per share data have been
         retroactively restated to reflect this stock split.

         Impairment of Long-Lived Assets
         -------------------------------
         The Company reviews its long-lived assets for impairment whenever
         events or changes in circumstances indicate that the carrying amount of
         an asset may not be recoverable. Recoverability of assets to be held
         and used is measured by a comparison of the carrying amount of the
         assets to future net cash flows expected to be generated by the assets.
         If the assets are considered to be impaired, the impairment to be
         recognized is measured by the amount by which the carrying amount
         exceeds the fair value of the assets. To date, no impairment has
         occurred.

         Income Taxes
         ------------
         The Company utilizes Statement of Financial Accounting Standards
         ("SFAS") No. 109, "Accounting for Income Taxes," which requires the
         recognition of deferred tax assets and liabilities for the expected
         future tax consequences of events that have been included in the
         financial statements or tax returns. Under this method, deferred income
         taxes are recognized for the tax consequences in future years of
         differences between the tax bases of assets and liabilities and their
         financial reporting amounts at each period end based on enacted tax
         laws and statutory tax rates applicable to the periods in which the
         differences are expected to affect taxable income. Valuation allowances
         are established, when necessary, to reduce deferred tax assets to the
         amount expected to be realized. The provision for income taxes
         represents the tax payable for the period and the change during the
         period in deferred tax assets and liabilities.

         Fair Value of Financial Instruments
         -----------------------------------
         The Company measures its financial assets and liabilities in accordance
         with generally accepted accounting principles. For certain of the
         Company's financial instruments, including cash and cash equivalents,
         accounts receivable, accounts payable, accrued payroll and accrued
         expenses, the carrying amounts approximate fair value due to their
         short maturities. The amount shown for short-term debt also
         approximates fair value because the current interest rates offered to
         the Company for short-term debt of similar maturities are substantially
         the same.

         Concentrations of Credit Risk
         -----------------------------
         The financial instrument which potentially subjects the Company to
         concentrations of credit risk is cash. The Company places its cash with
         high quality financial institutions, and at times it may exceed the
         Federal Deposit Insurance Corporation $100,000 insurance limit. As of
         February 28, 1999, there were no uninsured portions.

                                      F-11
<PAGE>

                                             MULTI-MEDIA TUTORIAL SERVICES, INC.
                                                                  AND SUBSIDIARY
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                               FEBRUARY 28, 1999
================================================================================

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         Net Loss per Share
         ------------------
         For the year ended February 28, 1998, the Company adopted SFAS No. 128,
         "Earnings per Share." Basic loss per share is computed by dividing loss
         available to common stockholders by the weighted-average number of
         common shares outstanding. Diluted loss per share is computed similar
         to basic loss per share except that the denominator is increased to
         include the number of additional common shares that would have been
         outstanding if the potential common shares had been issued and if the
         additional common shares were dilutive. For the years ended February
         28, 1999 and 1998, the Company incurred net losses; therefore, basic
         and diluted loss per share are the same.

         Reclassifications
         -----------------
         Certain reclassifications have been made to the February 28, 1998
         financial statements to conform with the February 28, 1999
         presentation.

         Comprehensive Income
         --------------------
         For the year ended February 28, 1999, the Company adopted SFAS No. 130,
         "Reporting Comprehensive Income." This statement establishes standards
         for reporting comprehensive income and its components in a financial
         statement. Comprehensive income as defined includes all changes in
         equity (net assets) during a period from non-owner sources. Examples of
         items to be included in comprehensive income, which are excluded from
         net income, include foreign currency translation adjustments and
         unrealized gains and losses on available-for-sale securities.
         Comprehensive income is not presented in the Company's financials
         statements since the Company did not have any of the items of
         comprehensive income in any period presented.

         Recently Issued Accounting Pronouncements
         -----------------------------------------
         In February 1998, the Financial Accounting Standards Board ("FASB")
         issued SFAS No. 132, "Employers' Disclosures about Pensions and Other
         Post-Retirement Benefits." The Company does not expect adoption of SFAS
         No. 132 to have a material impact, if any, on its financial position or
         results of operations.

         SFAS No. 133, "Accounting for Derivative Instruments and Hedging
         Activities," is effective for financial statements with fiscal years
         beginning after June 15, 1999. SFAS No. 133 establishes accounting and
         reporting standards for derivative instruments, including certain
         derivative instruments embedded in other contracts, and for hedging
         activities. This statement is not applicable to the Company.

         SFAS No. 134, "Accounting for Mortgage-Backed Securities Retained after
         the Securitization of Mortgage Loans Held for Sale by a Mortgage
         Banking Enterprise," is effective for financial statements with the
         first fiscal quarter beginning after December 15, 1998. This statement
         is not applicable to the Company.

                                      F-12
<PAGE>

                                             MULTI-MEDIA TUTORIAL SERVICES, INC.
                                                                  AND SUBSIDIARY
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                               FEBRUARY 28, 1999
================================================================================

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         Recently Issued Accounting Pronouncements
         -----------------------------------------
         SFAS No. 135,  "Rescission of FASB Statement No. 75 and Technical
         Corrections,"  is effective for financial  statements  with fiscal
         years beginning February 1999.  This statement is not applicable to the
         Company.

         In June 1999, the FASB issued SFAS No. 136, "Transfer of Assets to a
         Not-for-Profit Organization or Charitable Trust that Raises or Holds
         Contributions for Others." This statement is not applicable to the
         Company.

         In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
         Instruments and Hedging Activities." The Company does not expect
         adoption of SFAS No. 137 to have a material impact, if any, on its
         financial position or results of operations.


NOTE 3 - FURNITURE AND EQUIPMENT

         Furniture and equipment at February 28, 1999 consisted of the
         following:

             Furniture and fixtures                            $        54,466
             Office equipment                                          668,571
             Computer equipment and software                           145,952
             Leasehold improvements                                    113,960
                                                               ----------------

                                                                       982,949
             Less accumulated depreciation
                and amortization                                       648,106
                                                               ----------------

                      TOTAL                                    $       334,843
                                                               ================

         Depreciation and amortization expense was $176,004 and $180,501 for the
         years ended February 28, 1999 and 1998, respectively.

                                      F-13
<PAGE>

                                             MULTI-MEDIA TUTORIAL SERVICES, INC.
                                                                  AND SUBSIDIARY
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                               FEBRUARY 28, 1999
================================================================================

NOTE 4 - INTANGIBLE ASSETS

  Intangible assets at February 28, 1999 consisted of the following:

           Master video production costs                        $     1,109,225
           Patents and copyrights                                        22,088
                                                                ----------------

                                                                      1,131,313
           Less accumulated depreciation and amortization               879,907
                                                                ----------------

                    TOTAL                                       $       251,406
                                                                ================


NOTE 5 - SHORT-TERM DEBT

         At February 28, 1999, the Company maintained short-term, convertible
         promissory notes in the amount of $250,000. The notes bear interest at
         10% per annum and an accelerated rate of 17% per annum beginning April
         17, 1997, expired on December 31, 1997, and are convertible into common
         stock at a price of (i) $12.66 per share or (ii) 75% of the closing bid
         for the five trading days prior to the conversion. Related to this
         debt, the Company maintains 454,545 shares of its common stock in
         escrow.

         At February 28, 1999, the Company maintained short-term, unsecured
         promissory notes in the amount of $750,000. The notes bear interest at
         8% per annum and were issued during September and October 1996 with a
         six-month original maturity. The maturity dates were subsequently
         extended and are currently in default. Amounts retired during the years
         were as follows:

             Balance, February 28, 1997                         $     1,000,000
             Paid-in for cash                                          (200,000)
             Converted for common stock, February 28, 1998              (50,000)
                                                                ----------------

                 BALANCE, FEBRUARY 28, 1998 AND 1999            $       750,000
                                                                ================

         Related to these notes, the Company issued warrants to purchase
         110,000 shares of common stock and recorded interest of $22,000.

         During the year ended February 28, 1998, the Company converted
         unsecured, non-interest-bearing advances in the amount of $200,000 into
         320,000 shares of common stock. The conversion was performed at a rate
         that approximated the fair market value of the Company's common stock.

                                      F-14
<PAGE>

                                             MULTI-MEDIA TUTORIAL SERVICES, INC.
                                                                  AND SUBSIDIARY
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                               FEBRUARY 28, 1999
================================================================================

NOTE 5 - SHORT-TERM DEBT (CONTINUED)

         During the year ended February 28, 1998, the Company raised $350,000
         through the placement of short-term, unsecured promissory notes. The
         notes bear interest at 10% per annum and have six-month original
         maturity dates. $300,000 was extended an additional three months. All
         of the notes were outstanding and in default at the year ended February
         28, 1999. The notes are convertible to common stock upon default at
         $1.25 per share for notes with principal outstanding of $50,000 and
         $0.625 per share for notes with principal of $300,000. Related to the
         extension of the due dates on these notes, the Company issued 245,556
         shares of common stock to the debt holders and recognized interest
         charges of $174,245 during the year ended February 28, 1998.

         The Company raised $375,000 through short-term, unsecured bridge
         financing. The notes bear interest at 10% per annum, have a six-month
         original maturity date, and were in default at the year ended February
         28, 1999. All of these bridge financings were outstanding as of
         February 28, 1999.

NOTE 6 - RELATED PARTY TRANSACTIONS

         At February 28, 1998, the Company maintained advances from stockholders
         in the amount of $62,150. The advances are unsecured,
         non-interest-bearing, and are payable on demand.


NOTE 7 - COMMITMENTS AND CONTINGENCIES

         Leases
         ------
         The Company has entered into an operating lease for facilities and
         equipment. The Company also leases certain office and computer
         equipment under non-cancelable, capital lease arrangements. Future
         minimum payments under capital and operating leases with initial or
         remaining terms of one year or more at February 28, 1999 are as
         follows:

              Year Ending                                Operating     Capital
                February                                   Leases       Leases
              ------------                            ------------  ------------
                 2000                                 $    97,000   $   116,128
                 2001                                      97,000        28,218
                 2002                                     103,000             -
                 2003                                     108,000             -
                 2004                                      27,000             -
                                                      ------------  ------------

                                                      $   432,000       144,346
                                                      ============
                 Less amount representing interest                       15,491
                                                                    ------------
                   TOTAL                                            $   128,855
                                                                    ============

                                      F-15
<PAGE>

                                             MULTI-MEDIA TUTORIAL SERVICES, INC.
                                                                  AND SUBSIDIARY
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                               FEBRUARY 28, 1999
================================================================================

NOTE 7 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

         Lease (Continued)
         -----------------
         Assets capitalized under capital lease agreements at February 28, 1999
         were valued at $274,770.

         The Company was in default in its capital lease agreements at February
         28, 1999 and as such has classified the entire amount representing
         principal as current.

         Rent expense was $133,683 and $93,253 for the years ended February 28,
         1999 and 1998, respectively.

         Employment Agreements
         ---------------------
         The Company has entered into employment agreements with four employees,
         which provide for aggregate salaries of $298,000 and $400,000 during
         the years ending February 28, 1999 and 1998.

         Litigation
         ----------
         The Company has had certain judgements against it from various vendors.
         The judgements aggregate approximately $100,000 and are recorded in
         accounts payable at February 28, 1999. Other creditors have commenced
         various lawsuits asserting claims against unpaid accounts payable. All
         of the amounts are included in accounts payable and management believes
         no additional charges will be incurred.

         The Company is involved in various legal proceedings and claims which
         arise in the ordinary course of its business. Management does not
         believe that the outcome of these matters will have a material adverse
         effect on the Company's consolidated position or results of operations.


NOTE 8 - INCOME TAXES

         Significant components of the Company's deferred tax assets and
         liabilities for income taxes consisted of the following:

                  Deferred tax assets
                      Operating losses                          $     3,467,000
                  Valuation allowance                                 3,467,000
                                                                ----------------

                           NET DEFERRED TAX ASSET               $             -
                                                                ================

         Deferred tax assets consisted of net operating loss carryforwards. The
         federal operating loss carryforwards at February 28, 1999 were
         approximately $8,667,000.


NOTE 9 - STOCKHOLDERS' EQUITY

         Capitalization
         --------------
         Each share of preferred and common stock has one vote per share in all
         matters. The preferred shares have priority over the Company's common
         stock in respect to dividend rights and liquidation preferences.

                                      F-16
<PAGE>

                                             MULTI-MEDIA TUTORIAL SERVICES, INC.
                                                                  AND SUBSIDIARY
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                               FEBRUARY 28, 1999
================================================================================

NOTE 9 - STOCKHOLDERS' EQUITY (CONTINUED)

         Series A Preferred Stock
         ------------------------
         The Company's Series A preferred stock is convertible into common stock
         at a price equal to the lesser of $1 per share or 70% of the market
         value of the common stock at the time of conversion, but in no event
         less than $5 per share. In addition, the holders of the preferred stock
         were entitled to receive a warrant to purchase one share of common
         stock for $15 for each dollar invested. If the stock was not converted
         within six months during the year ended February 28, 1998, the Company
         issued 65,000 warrants to preferred stock shareholders.

         Series B Preferred Stock
         ------------------------
         In August 1997, the Company authorized the issuance of 50 shares of its
         $0.01 par value Series B preferred stock. The stock is in all ways
         identical to its Series A preferred, except it is convertible to common
         stock at the lesser of (a) $5 per share, (b) the price per share of the
         Company's common stock in its next offering, or (c) in the event the
         Company has less than $2,000,000 in net liquid assets at September 30,
         1997 at $0.62 per share.

         During the year ended February 28, 1998, pursuant to a
         re-capitalization agreement, all outstanding shares of Series A
         preferred stock were exchanged on a 1-for-1 basis for the newly created
         Series B preferred stock. The Series B preferred stock was then
         immediately converted to 1,040,000 shares of the Company's common
         stock.

         Stock Purchase Warrants
         -----------------------
         On July 8, 1997, the Company negotiated a warrant re-capitalization
         agreement, whereby certain warrant holders agreed to exchange their
         warrants for shares of the Company's common stock. Pursuant to this
         agreement, holders of warrants to purchase 330,000 shares at the lesser
         of $10 per share or 75% of the market price of the underlying stock
         exchanged their warrants for 0.75 shares per warrant for a total of
         247,500 shares of common stock. In addition, holders of 58,520 warrants
         exercisable at $1.50 per share were exchanged at a rate of $0.50 per
         share for a total of 29,260 shares of common stock. Related to the
         warrant re-capitalization, the Company charged $170,000 to operations
         for exchange rates beneficial to the warrant holders.

         Stock purchase warrants outstanding at February 28, 1999 consisted of
         the following:

               Exercise Price       Outstanding         Exercisable
              ----------------    ----------------    ----------------

              $         15.00             242,462             242,462
              $         56.00             390,625             390,625
              $ 10.00 - 15.00              45,750              45,750
                                  ----------------    ----------------

             TOTAL                        678,837             678,837
                                  ================    ================

                                      F-17
<PAGE>

                                             MULTI-MEDIA TUTORIAL SERVICES, INC.
                                                                  AND SUBSIDIARY
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                               FEBRUARY 28, 1999
================================================================================

NOTE 9 - STOCKHOLDERS' EQUITY (CONTINUED)

         Common Stock
         ------------
         During the year ended February 28, 1998, the Company issued 400,000
         shares of common stock in exchange for outstanding debt and accrued
         interest of $250,000 at $0.62 per share. The value of the securities
         issued approximated the amount of the liability exchanged.

         During the year ended February 28, 1998, the Company converted certain
         vendor obligations valued at $100,000 into 160,000 shares of common
         stock at $0.62 per share, which approximated the value of the services
         rendered.

         In November 1997, the Company issued 245,556 shares of common stock as
         consideration for accrued interest and outstanding bridge financings
         and recognized finance charges of $174,245.

         Stock Option Plan
         -----------------
         The Company has adopted a stock option plan (the "Plan") for 350,000
         shares of the Company's common stock. The Plan is administered by the
         Board of Directors or by a Stock Option Committee to be appointed by
         the Board of Directors. The Stock Option Committee determines, subject
         to the provisions of the Plan, to whom options are granted, the number
         of shares of common stock subject to each option, ether an option shall
         be an incentive stock option (an "ISO") or a non-qualified option (a
         "NQO"), and the period during which each option may be exercised. In
         addition, the Stock Option Committee determines the exercise price of
         each option, subject to the limitations provided in the Stock Option
         Plan, including that (i) for a NQO the exercise price per share may not
         be less than 85% of the fair market value per share of common stock on
         the date of grant and (ii) for an ISO the exercise price per share may
         not be less than the fair market value per share of common stock on the
         date of grant (11% of such fair market value if the grantee owns stock
         possessing more than 10% of the combined voting power of all classes of
         the Company's stock).

         In determining persons to whom options will be granted and the number
         of shares of common stock to be covered by each option, the Stock
         Option Committee considers various factors including each eligible
         person's position and responsibilities, service, and accomplishments,
         present and future value to the Company, anticipated length of future
         service, and other relevant factors. Options may be granted under the
         Plan to all officers, directors, and employees of the Company. No
         options may be granted under the Plan after March 31, 2004. To date,
         the Board of Directors has not appointed a Stock Option Committee.

                                      F-18
<PAGE>

                                             MULTI-MEDIA TUTORIAL SERVICES, INC.
                                                                  AND SUBSIDIARY
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                               FEBRUARY 28, 1999
================================================================================

NOTE 9 - STOCKHOLDERS' EQUITY (CONTINUED)

         Stock Option Plan (Continued)
         -----------------------------
         The Company has adopted only the disclosure provisions of SFAS No. 123,
         "Accounting for Stock-Based Compensation." It applies Accounting
         Principles Bulletin ("APB") Opinion No. 25, "Accounting for Stock
         Issued to Employees," and related interpretations in accounting for its
         plans and does not recognize compensation expense for its stock-based
         compensation plans other than for restricted stock and options/warrants
         issued to outside third parties. If the Company had elected to
         recognize compensation expense based upon the fair value at the grant
         date for awards under its plan consistent with the methodology
         prescribed by SFAS No. 123, the Company's net loss and loss per share
         would be increased to the pro forma amounts indicated below for the
         years ended February 28, 1999 and 1998:
                                                  1999                1998
                                            ----------------    ----------------
           Net loss
              As reported                   $      (753,136)    $    (5,027,117)
              Pro forma                     $      (814,075)    $    (5,027,117)
           Basic loss per common share
              As reported                   $         (0.27)    $         (3.91)
              Pro forma                     $         (0.30)    $         (3.91)

         These pro forma amounts may not be representative of future disclosures
         because they do not take into effect pro forma compensation expense
         related to grants made before 1995. The fair value of these options was
         estimated at the date of grant using the Black-Scholes option-pricing
         model with the following weighted-average assumptions for the year
         ended February 28, 1999. (No options were granted during the year ended
         February 28, 1998): dividend yield of 0%, expected volatility of 100%,
         risk-free interest rate of 5.3%, and expected life of five years.

         The Black-Scholes option valuation model was developed for use in
         estimating the fair value of traded options which have no vesting
         restrictions and are fully transferable. In addition, option valuation
         models require the input of highly subjective assumptions including the
         expected stock price volatility. Because the Company's employee stock
         options have characteristics significantly different from those of
         traded options, and because changes in the subjective input assumptions
         can materially affect the fair value estimate, in management's opinion,
         the existing models do not necessarily provide a reliable single
         measure of the fair value of its employee stock options.

                                      F-19
<PAGE>

                                             MULTI-MEDIA TUTORIAL SERVICES, INC.
                                                                  AND SUBSIDIARY
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                               FEBRUARY 28, 1999
================================================================================

NOTE 9 - STOCKHOLDERS' EQUITY (CONTINUED)

         Stock Option Plan (Continued)
         -----------------------------
         The following summarizes the stock option transactions:
                                                                     Weighted-
                                                                      Average
                                                    Stock Options     Exercise
                                                     Outstanding        Price
                                                    -------------  -------------
           Balance, February 28, 1997 and 1998            15,000   $      10.00
               Granted                                   264,953   $       0.32
                                                    -------------

                 BALANCE, FEBRUARY 29, 1999              279,953   $       0.82
                                                    =============

                 EXERCISABLE, FEBRUARY 29, 1999          279,953   $       0.82
                                                    =============

         The weighted-average remaining contractual life of the options
         outstanding is 9.9 years at February 28, 1999.

         During the year ended February 28, 1999, the Company issued 568,820
         stock options to various vendors for consulting services rendered
         valued at $6,000 for an exercise price of $0.32, which has been
         recorded as a consulting expense. As of February 28, 1999, all options
         were exercisable and outstanding.


NOTE 10 - MAJOR SUPPLIERS

         The Company purchases its products primarily from one video duplication
         manufacturer. During the years ended February 28, 1999 and 1998, total
         product purchases from this supplier amounted to 44% and 22%,
         respectively.


NOTE 11 - YEAR 2000 ISSUE

         The Company has completed a comprehensive review of its computer
         systems to identify the systems that could be affected by ongoing Year
         2000 problems. Upgrades to systems judged critical to business
         operations have been successfully installed. To date, no significant
         costs have been incurred in the Company's systems related to the Year
         2000.

                                      F-20
<PAGE>

                                             MULTI-MEDIA TUTORIAL SERVICES, INC.
                                                                  AND SUBSIDIARY
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                               FEBRUARY 28, 1999
================================================================================

NOTE 11 - YEAR 2000 ISSUE (CONTINUED)

         Based on the review of the computer systems, management believes all
         action necessary to prevent significant additional problems has been
         taken. While the Company has taken steps to communicate with outside
         suppliers, it cannot guarantee that they have all taken the necessary
         steps to prevent any service interruption that may affect the Company.


NOTE 12 - SUBSEQUENT EVENTS

         On May 15, 1999, the Company entered into a settlement agreements with
         various vendors for unpaid accounts payable for approximately $895,000.
         This amount was included in accounts payable at February 28, 1999.

         In December 1999, the Company converted debt in the amount of $110,000
         to 1,261,538 shares of common stock. $60,000 of the converted debt
         represented related parties who received 461,538 shares of common
         stock. Related to the conversion, the Company recognized financing
         charges of approximately $69,000.

         In December 1999, the Company entered into three employment agreements,
         which provide for aggregate salaries of $225,000 per year for the years
         ending February 2000 through 2005.

         In January 2000, the Company converted $225,000 of short-term, 10%,
         unsecured promissory notes to 3,400,000 shares of its common stock.

         Subsequent to February 28, 1999, the Company granted 2,383,000 options
         to various employees with exercise prices ranging from $0.10 to $0.30.
         In addition, the Company granted 917,958 options to various consultants
         for services with exercise prices ranging from $0.10 to $0.33.

                                      F-21