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 September 30, 1997

                                       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 O-26676

                     MULTIMEDIA CONCEPTS INTERNATIONAL, INC.
             (Exact name of registrant as specified in its charter)

Delaware                                13-3835325
(State or other jurisdiction of         (I.R.S. Employer Identification No.)
Incorporation or organization)

                              448 West 16th Street
                            New York, New York 10011
                            ------------------- -----
               (Address of principal executive offices) (Zip Code)

                                 (212) 675-6666
              (Registrant's telephone number, including area code)

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

Title of each class                   Name of each exchange on which registered
                                      NONE

     Securities  registered  pursuant to Section 12(g) of the Act: Common Stock,
$.001 par value (Title of Class)

                         Common Stock Purchase Warrants
                                (Title of Class)

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

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

     The Registrant's revenues for its fiscal year ended September 30, 1997 were
$2,054,792.

     The  aggregate  market  value of the voting  stock on  September  30,  1998
(consisting  of Common Stock,  par value $.01 per share) held by  non-affiliates
was approximately $833,000 based upon the closing price ($0.50), for such Common
Stock on September  24, 1997 (the last day prior to September  30, 1997 in which
the stock  traded),  as reported  by a market  maker.  On such date,  there were
3,005,000 shares of Registrant's Common Stock outstanding.




<PAGE>
                                     PART I

ITEM 1.           DESCRIPTION OF BUSINESS

General

         Multimedia Concepts  International,  Inc. (the "Company") is a Delaware
corporation  which  was  organized  in  June  1994  under  the  name  U.S.  Food
Corporation. The Company changed its name to American Eagle Holdings Corporation
in  April  1995 and then to its  present  name in June  1995.  The  Company  was
initially  formed as a holding  company for the purpose of forming an integrated
clothing  design,  manufacturing  and distribution  operation.  In June 1994 the
Company acquired 55% of the outstanding shares of common stock of American Eagle
Industries  Corp.  ("American  Eagle"),  which acquired 100% of the  outstanding
shares of Match II, Inc.  ("Match II"). In June 1995 the Company acquired 34% of
the outstanding shares of common stock of Multi Media Publishing, Inc. ("MMP").

         In January 1997 the Company, through vote of its stockholders, voted to
cease funding the operations of the subsidiaries,  American Eagle, Match II, and
MMP. At such time the Company formed a new subsidiary  named U.S.  Apparel Corp.
("USAC")  to  commence  operations  as a designer  and  manufacturer  of similar
product lines of its prior subsidiaries.  Unless the context otherwise requires,
all references to the "Company" prior to January 1997 include American Eagle and
its wholly owned  subsidiary,  Match II. All  references to the "Company"  after
January 1997 include only its wholly owned subsidiary, USAC.

Recent Developments

     On January 20, 1998, U.S. Stores Corp. ("U.S. Stores"), a company which was
incorporated  on November 10, 1997  acquired  1,465,000  shares of the Company's
Common Stock. After this transaction, U.S. Stores held an aggregate of 1,868,000
shares  of the  Company's  Common  Stock  or 62.2%  of the  outstanding  shares,
effectively making the Company a subsidiary of U.S. Stores.

     On January 2, 1998, the Company was issued 3,571,429 shares of common stock
of United  Textiles  and Toys Corp.  ("UTTC"),  a company of which Ilan Arbel is
President, Chief Executive Officer, and a Director, at a price of $.28 per share
($.01 above the closing  price on December 31,  1997) as payment for  $1,000,000
loaned by the Company to UTTC. As a result of the transaction,  the Company owns
78.5% of the outstanding shares of common stock of UTTC, effectively making UTTC
a subsidiary of the Company.  Because UTTC owns 61% of the outstanding shares of
common  stock of Play Co. Toys &  Entertainment  Corp.  ("Play  Co."),  thus the
Company and its management obtained beneficial voting control of Play Co.

     In April 1997,  Alan  Berkun,  a Director  of the Company  since June 1995,
tendered his  resignation  as a member of the Board of Directors.  To date,  his
vacancy has not been filled.


                                        2


<PAGE>
         In February 1997, the Company formed a wholly-owned subsidiary, USAC, a
New York  corporation,  to design and manufacture a line of private label cotton
"T-shirts"  and "polo" type tops  predominantly  for men.  The  business of U.S.
Apparel  Corp.,  is similar to the  business  previously  engaged in by American
Eagle and Match II. The Company as 55%  stockholder  and sole  financing  arm of
American Eagle terminated its relationship  with American Eagle due to continued
losses.  To this end, USAC has received its own vendor  number from K-Mart,  its
principal customer.

         On  December  23,  1996,  the  Company  held a special  meeting  of its
stockholders  and authorized the Company to (i) sell or dispose of its shares of
common  stock of  American  Eagle  Industries  Corp.  or effect the  dissolution
thereof  and (ii)  authorize  the  Company  to sell or  dispose of its shares of
common  stock of Multi Media  Publishing,  Inc. At the meeting the  stockholders
approved the two proposals by a vote of 1,659,150 and  1,659,450,  respectively,
voting for the  proposals,  3,400 and 1,200,  respectively  voting  against  the
proposals and 4,500 and 6,400, respectively,  abstaining. See Item 4 "Submission
of Matters to a Vote of Security Holders."

         In December 1996, in accordance with the vote of its stockholders,  the
Company terminated its financing and business relationships with American Eagle,
Match II, and MMP.

Acquisitions

American Eagle Industries Corp.

         American Eagle was formed in June 1994 by Ilan Arbel,  Europe  American
Capital Corp. ("EACC"), Carolyn Seymour Jones, Dorothy Zimmerman, Neil Benaderat
and Anita Friedman, at which time 200,000 shares of its common stock were issued
at $.01 per share.  EACC  purchased  110,000  shares or 55%  percent of American
Eagle's  common  stock.  EACC  contributed  these  shares to the  capital of the
Company in June 1994.  Yair  Arbel,  a director of the  Company,  is an officer,
director and the sole stockholder of EACC.  American Eagle ceased  operations in
January 1997.

Match II, Inc.

         Match  II was  formed  by  Transatlantic  Commerce  Corp.  ("TACC")  in
February 1993 at which time TACC  purchased 100 shares of Match II common stock,
which constituted 100% of its outstanding  shares. In June 1994,  American Eagle
acquired the shares owned by TACC, as a contribution  to capital.  Yair Arbel, a
director  of the  Company  is the sole  stockholder  of TACC.  Ilan  Arbel is an
officer and director of TACC. Match II ceased operations in January 1997.

Multi Media Publishing, Inc.

         MMP was formed in July 1994 by its founders TACC,  Bert Spilker,  M.D.,
Howard I.  Wertheim,  D.M.D.,  and  Lampert &  Lampert,  former  counsel  to the
Company,  with TACC  owning  34% of the  outstanding  shares and each of Messrs.
Spilker and  Werthheim  and  affiliates  of Lampert & Lampert  owning 22% of the
outstanding shares. TACC donated the shares of

                                        3


<PAGE>
MMP owned by it as a  contribution  to the  capital to the Company in June 1995.
MMP has ceased  operations.  The  Company  invested  $285,000 in MMP of which at
September  30, 1996 the total amount owed was  $120,000.  The Company has ceased
the financing of this company's activities.

United Textiles & Toys Corp.

In January 1998, UTTC issued 3,571,429 shares of its common stock to the Company
in full repayment of certain loans (aggregating  $1,000,000)  previously made by
the Company to UTTC.  This conversion of debt to equity was performed at a price
of $.28 per share,  $.01 above the closing  price on  December  31,  1997.  As a
result of the  transaction,  the Company  acquired 78.5%  ownership of UTTC. See
"Recent Developments."

     United Textiles & Toys Corp.  (formerly Mister Jay Fashions  International,
Inc.) is a  Delaware  corporation  which was  organized  in March 1991 and which
commenced  operations in October 1991. The Company designs,  manufacturers,  and
markets  a  variety  of lower  priced  women's  dresses,  gowns,  and  separates
(blouses,  camisoles,  jackets,  skirts,  and pants) for special  occasions  and
formal events.

         The  Company  markets  its  products  under  its  Mister  Jay  Fashions
International,  Lady  Helene,  Mister Jay  Separates,  and Junior for Mister Jay
labels.  The Company sells its products in the United States  primarily  through
specialty retail clothing stores and, to a lesser extent, to department  stores.
Most of the Company's  products are  purchased by women for  weddings,  parties,
dances, and other events requiring formal attire.

Play Co. Toys & Entertainment Corp.

     Play Co. was founded in 1974, at which time it operated one store under the
name Play Co. Toys in  Escondido,  California.  Play Co. now  operates  nineteen
stores throughout  Southern  California in Los Angeles,  Orange, San Bernardino,
San Diego, Riverside,  and Ventura Counties; and one in Tempe, Arizona. Prior to
its corporate  restructuring  in 1996 and its acquisition of Toys  International
("Toys") in January 1997, Play Co., which was a retailer of children's and adult
toys,  games, and hobby products,  operated stores which averaged  approximately
10,000 square feet in size and were located in highly  trafficked strip shopping
centers.  These stores ("Play Co.  Originals")  sell traditional and promotional
toys.

         In the beginning of 1996,  Play Co.  redefined its corporate  goals and
philosophy,  changing  its  focus  from  the  sale  of  solely  promotional  and
traditional  toys to the sale of educational,  new electronic  interactive,  and
specialty  and  collectible  toys and items.  In light of its new focus,  during
1997,  Play Co.  redesigned  four of its Play Co.  Originals,  opened a flagship
store in Santa  Clarita  and a store in  Clairemont,  and  acquired  three  Toys
stores.  In  conformance  with  its new  goals,  Play  Co.'s  new  stores  ("the
Contemporaries") are smaller (3,500 to 5,200 square feet in size) and operate in
"exclusive" highly trafficked malls rather than in strip shopping centers.  Play
Co.'s Toys stores and  Contemporaries  are  expected to produce  improved  gross
profits  since,  in addition to carrying  their  historical  inventory  of lower
margin promotional toys, they shall sell educational and electronic  interactive
games and toys, specialty products, and collector's toys,

                                        5


<PAGE>
which generally carry higher gross margins.

     Play  Co.   proposes  to  redesign   several   Play  Co.   Originals   into
Contemporaries  and open an additional five locations by the end of fiscal 1999.
Play Co.  expects to have  twenty-five  locations by the end of fiscal 1999.  In
order to  continue  to adjust to  consumer  preferences,  Play Co.  shall take a
proactive  approach by  continuously  reviewing  each  individual  store's sales
history  and  prospects  on an  individual  basis to decide  on the  appropriate
product mix.

U.S. Apparel Corp.

Business Strategy

         The  Company's  strategy  vis a vis  USAC is to  focus  on the  design,
manufacture and sale of both private-label and brand name knit tops for men. The
Company is of the belief that sales through  department stores offer it the best
market  for  its  USAC  lines.  The  Company  further  believes  that  off-shore
manufacturing  of  its  garments  in  Honduras  currently  offers  it  the  most
cost-effective   means  of  manufacturing  its  garments.   Notwithstanding  the
foregoing,  the Company may in the future manufacture its garments  domestically
or in other jurisdictions abroad if it becomes cost-effective.

Design, Manufacturing, and Shipping

          USAC currently  designs and  manufactures a line of private label knit
cotton tops  predominantly  for men,  consisting  of T-shirts  and polo  shirts.
USAC's  garments  consist of original  designs and  modifications  and copies of
existing designs.  In designing USAC's garments,  USAC first creates the pattern
of the new  garment  and  sews  samples  of the new  garments,  which  are  then
delivered to the Company's  sales  personnel for  introduction  to the Company's
existing  customers and the trade. The Company is continually  seeking to design
and market new products.

     USAC  purchases  approximately  50% of its  fabric,  or piece  goods,  from
suppliers located in South America and approximately 50% of its piece goods from
suppliers in the United States.  The piece goods purchased in both South America
and the United  States are  shipped to  Honduras,  where they are dyed,  cut and
assembled  by  subcontractors  and then  shipped  to and  warehoused  in Florida
pending delivery to USAC's customers. The goods are then shipped to customers by
air or truck common  carriers,  depending upon customers'  needs with respect to
cost and time considerations,  although all goods purchased by K-Mart are picked
up by K-Mart's carriers at USAC's public warehouse in Florida.

Supplies and Inventory

     USAC  purchases its fabrics from both the United States and South  America.
Most of USAC's non-fabric  sub-materials  (zippers,  buttons, and trimmings) are
purchased from New York City-based  manufacturers and suppliers.  USAC generally
pays for fabrics and non-fabric  sub-materials upon receipt.  As is customary in
the industry,  USAC does not have long-term formal  arrangements with any of its
suppliers and purchases its supplies based upon specific

                                        7


<PAGE>
design and order requirements. USAC has not experienced difficulty in satisfying
their fabric and non-fabric  requirements  and considers their sources of supply
adequate.  USAC's  inventory of garments  varies  depending  upon its backlog of
purchase orders and its financial position.

Quality Control

         USAC  conducts  limited  quality  control in  Honduras  to ensure  that
finished  goods meet USAC's  standards.  The  quality  control  person  inspects
samples  of  garments  on a  random  basis  to  ensure  compliance  with  USAC's
specifications.

Marketing and Sales

         Most of USAC's private label garments are sold through major department
stores in the United  States such as K-Mart and J.C.  Penny  Department  Stores.
Sales  to  K-Mart  accounted  for  approximately  95% and  85% of the  Company's
revenues for the years ended  September  30, 1996 and 1997,  respectively.  USAC
bills its clients on a net 30-day  basis.  There is a lag time  between the time
the raw materials are purchased, the final products are produced and shipped and
receipt of payment is received. Late or non-payment could cause material adverse
effects on the  Company's  cash flow and  operations,  especially  since a large
portion of the USAC's sales are to one customer.

         USAC does not sell on consignment  and do not accept return of products
other  than  imperfect  goods or goods  shipped  in error.  Imperfect  goods are
generally replaced with new, conforming goods.

         USAC  believes  that a key  feature of its  business  is its ability to
design,  manufacture  and sell low cost garments  which are similar in style and
appearance to more expensive garments.

Work in Progress; Backlog

         A  significant  portion of USAC's sales are  generated  from short term
purchase  orders from  customers  who place orders on an as-needed  basis.  USAC
typically  manufactures  its products  upon receipt of orders from its customers
and  delivers  goods  within four weeks of receipt of an order.  USAC  generally
manufactures  approximately  10% more  goods than is  ordered  by  customers  in
anticipation of reorders from customers.  Information  relative to open purchase
orders at any date may be materially affected by, among other things, the timing
of recording of orders and shipments.  Accordingly, the Company does not believe
that the amount of its unfilled  orders at any time is meaningful.  As September
30, 1997, USAC had approximately $102,000 worth of unfilled purchase orders with
respect to orders received from K-Mart.

Financing

         The Company  bills its client's on a net 30-day  basis.  There is a lag
time between the time the raw materials are  purchased,  the final  products are
produced  and  shipped  and  receipt  of  payment is  received.  Although  it is
customary in the garment  industry to finance  receivables  through  "factoring"
(i.e.,  financing secured by accounts  receivable of the borrower's  customers),
the  Company  does not  normally  factor any of its  receivables.  Although  the
Company has no present  intention  to do so, it may rely on factoring to finance
future


                                        9


<PAGE>
operations.

Competition

         There is  intense  competition  in the  apparel  industry  in which the
Company participates.  USAC designs, manufactures and markets a line of T-shirts
and polo shirts to large department stores. The Company competes with many other
manufacturers  in this  market,  many of  which  are  larger  and  have  greater
resources than the Company.

         The  Company's   business  is  highly   competitive,   with  relatively
insignificant  barriers to entry and with numerous firms  competing for the same
customers.  The  Company  is in direct  competition  with  local,  regional  and
national clothing  manufacturers,  many of which have greater resources and more
extensive distribution and marketing capabilities than the Company.
 In addition,  many large  retailers  have  recently  commenced  sales of "store
brand"  garments  which  compete  with  those  sold by the  Company.  Management
believes that the Company's market share is insignificant in its product lines.

         Many of the national clothing  manufacturers have extensive advertising
campaigns which develop and reinforce brand  recognition.  In addition,  many of
such  manufacturers  have agreements with department  Stores and national retail
clothing  chains to jointly  advertise  and  market  their  products.  Since the
Company does little  advertising and has no agreement with any department  store
or national retail chain to advertise any of its products,  the Company competes
with companies which have brand names which are well known to the public. It can
be expected that a retail  shopper will buy a garment from a "brand name" entity
before that of an unknown entity, if all other factors are equal.

Employees

         As of  September  30,  1996,  the  Company had three  officers  and two
full-time  employees.  None of the employees of the Company are represented by a
union, and the Company considers employee relations to be good.

ITEM 2.               PROPERTIES

         The Company  sub-leases  6,000 square feet of  industrial  space at 448
West 16th  Street,  New  York,  New York,  where it  leases  its  administrative
offices,  factory  and  warehouse.  The  sub-lease  is  for a term  of 4  years,
terminating on December 31, 1998, at a rate of approximately $36,000 per annum.

ITEM 3.           LEGAL PROCEEDINGS

         The Company is not a party to any material  litigation and is not aware
of any threatened  litigation  that would have a material  adverse effect on its
business. No director,  officer or affiliate of the Company, or any associate of
any of them, is a party to or has a material interest in any proceeding  adverse
to the Company.

                                       10


<PAGE>
ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         On  December  23,  1996,  the  Company  held a special  meeting  of its
stockholders,  at which time it presented to its  stockholders  proposals to (i)
authorize  the  Company  to sell or  dispose  of its  shares of common  stock of
American  Eagle  Industries  Corp.  or effect the  dissolution  thereof and (ii)
authorize  the Company to sell or dispose of its shares of common stock of Multi
Media Publishing,  Inc., unless contrary  instructions are given. At the meeting
the  stockholders  approved  the  two  proposals  by  votes  of:  1,659,150  and
1,659,450, respectively, voting for the proposals; 3,400 and 1,200, respectively
voting against the  proposals;  and 4,500 and 6,400,  respectively,  abstaining.
Therefore, both proposals were adopted by the Company.

ITEM 5.           MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
                  MATTERS

         The Company's  Common Stock and Warrants have been quoted on the Nasdaq
OTC  Bulletin  Board since April 8, 1997.  From  November  10, 1995 (date of the
Company's  initial public  offering)  until March 21, 1997 the Company's  Common
Stock and  Warrants  were  quoted  on the  Nasdaq  SmallCap  Stock  Market.  The
following  table  sets  forth  representative  high and low  closing  prices  as
reported by a market maker, during the periods stated below.  Quotations reflect
prices between dealers, do not include resale mark-ups, mark-downs or other fees
or commissions.
<TABLE>
<CAPTION>

                                         Common Stock                                       Public Warrants
Calendar Period                             Low               High                      Low               High
---------------                             ---               ----                      ---               ----
<S>                                         <C>               <C>                       <C>               <C>                   
11/09/95 - 12/31/95                         6 1/2             9 1/16                    1 7/8             3 3/8
01/01/96 - 03/31/96                         8                 9 1/4                     1 7/8             2 5/8
04/01/96 - 06/30/96                         8 3/4             9 5/8                     2 3/8             3 3/8
07/01/96-  09/30/96                         5                 9                         1 1/4             4 1/8
10/01/96- 12/31/96                          1 15/16           4 1/2                       11/32           1 3/8
01/01/97- 03/31/97                             5/8            3 1/8                        1/16             17/32
04/01/97 - 06/30/97 (1)                        1/4              7/8
07/01/97-  09/30/97                            1/4            1
10/01/97- 12/31/97                             1/8              1/2
----------------
</TABLE>

     (1) There was no market for the  Warrants  form  April 8, 1997 until  their
expiration on November 8, 1997. No Warrants were exercised prior to expiration.

         As of January 5, 1998 there were 42 holders of record of the  Company's
Common Stock,  although the Company  believes that there are  approximately  440
beneficial  owners of shares of Common Stock.  As of January 5, 1998, the number
of shares of Common Stock outstanding of the Company was 3,005,000.



                                       12


<PAGE>
                                                      PART II


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

     Results of  Operations-  Year Ended  September  30,  1997 versus Year Ended
September 30, 1996:

         Consolidated  net sales  decreased  form  $5,727,320 to  $2,054,792,  a
decrease of $3,672,528 or 64% when  comparing the year ended  September 30, 1997
to September  30, 1996.  This decrease was due to the cessation of operations in
December 1996 of American Eagle and its subsidiary  Match II. Sales for the year
ended  September 30, 1997 were solely USAC, a new subsidiary of the Company that
began  operations  in January  1997.  For the year  ended  September  30,  1996,
American  Eagle  reported  $5,691,381 in sales and Match II reported  $35,939 in
sales, for a total consolidated aggregate of $5,727,320.

         Consolidated cost of sales decreased from $6,400,272 or 111.7% of sales
to  $1,647,563  or 80.2% of sales for the year ended  September  30, 1997.  This
decrease of 742.6% was due to the start up of operations  of U.S.  Apparel Corp.
in January  1997 and the  cessation  of  operations  of  American  Eagle and its
subsidiary Match II in December 1996.

         Consolidated  overhead  costs for the year  ended  September  30,  1997
decreased from $1,273,908 or 22.2% of sales to $621,724 or 30.3% of sales.  This
decrease of $652,184 or 51.2% was due to the cessation of operations of American
Eagle and its subsidiary Match II, and the start up of operations in the current
year of USAC.

For the year ended  September  30,  1997,  the  Company  reflected a net loss of
$32,334  or$.01 per share.  For the year ended  September 30, 1996,  the Company
reported a net loss of  $5,090,855  (as amended) or $1.89 per share.  Management
attributes  the decreased  loss to the cessation of operations of American Eagle
and its subsidiary Match II, and the start up of operations of the Company's new
subsidiary, USAC.

Liquidity and Capital Resources:

At September 30, 1997, the Company reflected cash of $13,189, working capital of
$1,784,565 and  shareholders'  equity of $7,422,340.  At September 30, 1996, the
Company had cash of $491,262,  working  capital of $3,299,735 and  shareholders'
equity of $7,454,674.

         The  change  between  1996  and  1997  was due to  several  factors  as
described below:

         (a)      The  Company  ceased  operations  of  American  Eagle  and its
                  subsidiary,  Match II. The operating losses during the current
                  year for these two operations approximated $298,000.

         (b)      The start up of  operations  of USAC resulted in net operating
                  profit of approximately $283,000.

                                       14


<PAGE>
ITEM 7.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - Annexed
hereto

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

         On May 14,  1997,  the  Registrant  and  Lazar,  Levine &  Company  LLP
mutually  agreed  that  Lazar,  Levine &  Company  LLP  would no  longer  be the
Registrant's  auditors.  The resignation of Lazar,  Levine & Company LLP was not
due to any discrepancies or disagreements  between the Company and Lazar, Levine
& Company LLP on any matter of accounting  principles  or  practices,  financial
statement   disclosure,   or  auditing   scope  or  procedure.   There  were  no
disagreements  during the two fiscal years ended  September 30, 1996 and through
the date of  resignation,  May 14,  1997.  The  Registrant's  board of directors
approved the acceptance of the accountant's resignation.

         The  former   accountants'   reports  on  the  Registrant's   financial
statements  for the two years ended  September  30, 1996 and 1995  contained  an
explanatory  paragraph  addressing the Company's  ability to continue as a going
concern.



                                       16


<PAGE>
                                    PART III


ITEM 9.           DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Officers and Directors

         The directors of the Company are elected  annually by the  shareholders
and the officers are appointed annually by the Board of Directors.  Vacancies on
the Board of Directors may be filled by the remaining  directors.  Each director
and officer will hold office until the next annual meeting of  shareholders,  or
until his  successor  is elected  and  qualified.  The  executive  officers  and
directors of the Company are as follows:
<TABLE>
<CAPTION>

         Name                               Age                       Position

<S>                                         <C>                       <C>                      
         Ilan Arbel                         43                        President and Director

         Rivka Arbel                        44                        Vice President and Director

         Shiekhar Boodram                   34                        Secretary and Director

         Yair Arbel                         48                        Director

</TABLE>

     The directors of the Company are elected  annually by its  stockholders and
the officers of the Company are  appointed  annually by its Board of  Directors.
Vacancies on the Board of Directors  may be filled by the  remaining  directors.
Each current director and officer will hold office until the next annual meeting
of stockholders, or until his successor is elected and qualified.

     Ilan Arbel was the President,  Secretary and a Director of the Company from
inception until June 12, 1995 upon the election of Sheikhar  Boodram.  Mr. Arbel
was re-elected as President of the Company in May 1996. In August 1995 Mr. Arbel
was re-elected as a Director of the Company. Mr. Arbel was the President,  Chief
Executive  Officer and a Director  American Toys, Inc. from inception until July
1996.  From May 1993 to April 1997,  Mr. Arbel was a Director of Play Co. Toys &
Entertainment  Corp.,  of which  from June 1994 until his  resignation  in April
1997,  he was the  Chairman  of the  Board.  Since  1991,  Mr.  Arbel  has  been
President,  Chief Executive Officer, and a Director of UTTC, formally Mister Jay
Fashions International,  Inc. Mr. Arbel is a graduate of the University Bar Ilan
in Israel, with B.A. degrees in Economics, Business and Finance.

     Rivka Arbel has been a Director of the Company  since June 12, 1995 and was
elected as Vice  President of the Company in May 1996. In October 1996 Ms. Arbel
resigned  as an  officer  of the  Company.  Ms.  Arbel  was  re-elected  as Vice
President  in May 1997.  From 1992 to present,  Ms. Arbel has been a director of
UTTC.  From 1986 to  present,  Ms.  Arbel has been  President  and a Director of
Amigal, Ltd., a producer of men's and women's wear in Israel. Ms.

                                       18


<PAGE>
Arbel is the wife of Yair Arbel.

     Sheikhar  Boodram was the  President and Secretary of the Company from June
12, 1995 to May 1996, at which time he was elected as the Secretary. Mr. Boodram
was the sole Officer and Director of American Eagle  Industries  Corp. and Match
II, Inc. until December 1996. Mr. Boodram was a Director of American Toys,  Inc.
from May 1993 to July 1996. From September 1992 to present, Mr. Boodram has been
employed  as  Vice-President  and a  Director  of  UTTC.  From  October  1991 to
September  1992,  Mr.  Boodram was employed as a designer  with UTTC.  From 1979
until  October  1991,  Mr.  Boodram was the  production  manager for Lady Helene
Sophisticates,  Ltd., a manufacturer of ladies garments which ceased  operations
in 1991.

     Yair Arbel has been a director  of the  Company  since June 12,  1995.  Mr.
Arbel is currently  employed by Israeli Aircraft  Industries,  where he has been
employed since 1980. Yair Arbel is the husband of Rivka Arbel and the brother of
Ilan Arbel,  the  President,  former  Secretary,  and a current  Director of the
Company. Mr. Arbel is an officer, director, and sole shareholder of EACC.

     The Company has agreed to indemnify its officers and directors with respect
to  certain  liabilities   including  liabilities  which  may  arise  under  the
Securities Act of 1933. Insofar as indemnification for liabilities arising under
the  Securities  Act may be permitted  to  directors,  officers and  controlling
persons of the Company  pursuant to any charter,  provision,  by-law,  contract,
arrangement,  statute or  otherwise,  the Company has been  advised  that in the
opinion of the  Securities  and Exchange  Commission,  such  indemnification  is
against  public  policy as expressed in the  Securities  Act and is,  therefore,
unenforceable.  In the  event  that a claim  for  indemnification  against  such
liabilities  (other than the payment by the Company of expenses incurred or paid
by a director,  officer,  or controlling person of the Company in the successful
defense of any such action,  suit or  proceeding)  is asserted by such director,
officer or controlling  person of the Company in connection  with the Securities
being  registered,  the Company  will,  unless in the opinion of its counsel the
matter  has  been  settled  by  controlling  precedent,  submit  to a  court  of
appropriate  jurisdiction  the question  whether such  indemnification  by it is
against  public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

Significant Employees

     Albert  Benaderet  through  Westside  Apparel,  a company  in which he is a
partner,  has been a consultant to the Company and it's subsidiaries since 1992.
From  1992 to 1994,  Mr.  Benaderet  was a  consultant  to  Match  II  regarding
manufacturing  and sales.  From 1994 to 1996, Mr.  Benaderet was a consultant to
American Eagle regarding overseas  production and  manufacturing.  Since January
1997,   Mr.   Benaderet  has  been  a  consultant  to  USAC   regarding   sales,
manufacturing,  and close outs. Westside Apparel,  Inc. receives a weekly fee of
$2,000 and has the right to 5% of all earnings before interest and taxes.

Compliance with Section 16(a) of the Exchange Act

         Section  16(a) of the  Securities  Exchange  Act of 1934,  as  amended,
requires the Company's officers, directors and persons who beneficially own more
than ten percent of a

                                       20


<PAGE>
registered  class  of  the  Company's  equity  securities  to  file  reports  of
securities  ownership  and changes in such  ownership  with the  Securities  and
Exchange  Commission ("SEC").  Officers,  directors and greater than ten percent
beneficial  owners also are required by rules  promulgated by the SEC to furnish
the Company with copies of all Section 16(a) forms they file.  Based solely upon
requests for information of the Company's  officers,  directors and greater than
10%  shareholders,  during  fiscal 1997,  the Company has been informed that all
officers,  directors or greater than 10% shareholders have stated that they have
filed such  reports as is  required  pursuant to Section  16(a)  during the 1997
fiscal year. The Company has no basis to believe that any required filing by any
of the above indicated individuals has not been made.

ITEM 10.          EXECUTIVE COMPENSATION

Summary of Cash and Certain Other Compensation

         The following  provides  certain  information  concerning  all Plan and
Non-Plan (as defined in Item 402 (a)(ii) of Regulation S-B) compensation awarded
to,  earned by, paid by the Company  during the years ended  September 30, 1997,
1996, and 1995 to each of the named executive officers of the Company.

                           Summary Compensation Table

                               Annual Compensation
<TABLE>
<CAPTION>

(a)                           (b)           (c)              (d)               (e)
Name and Principal                                                             Other Annual
   Position                    Year         Salary($)        Bonus($)          Compensation($) (1)
-----------------------        ----         ---------        --------          ---------------
<S>                            <C>             <C>               <C>                    <C>       
Ilan Arbel                     1997            -                 -                      -
  President                    1996            -                 -                      -
                               1995            -                 -                      -
</TABLE>


(1)      Mr. Arbel does not receive any cash  compensation  as an officer of the
         Company.  Mr.  Arbel  entered  into an  employment  agreement  with the
         Company  in  May  1996.  See  "  Certain   Relationships   and  Related
         Transactions".

Employment Agreements

         On April 4, 1996,  the board of  directors  authorized  the  Company to
enter into a  compensation  agreement  with Ilan Arbel.  Pursuant  thereto,  the
Company  granted  to Ilan  Arbel  an  option  to  purchase  1,900,000  warrants,
identical to the Warrants  sold by the Company in its initial  public  offering.
The  option  was  exercisable  at $.04 per  Warrant.  The  Warrants  and  shares
underlying  the  Warrants  were  registered  for resale  pursuant  to a Form S-8
registration  statement.  Mr. Arbel  exercised  this option in full and sold the
Warrants in April 1996. In addition,  the board  authorized the Company to issue
an additional  option to Mr. Arbel to purchase 200,000 shares of Common Stock at
$3.70 per share.  On April 19,  1996,  the board of directors of the Company and
Mr.  Arbel  amended the  compensation  agreement  and  terminated  the option to
purchase 200,000 shares of Common Stock and in lieu thereof, issued

                                       22


<PAGE>
     an option to  purchase an  additional  1,000,000  Warrants.  The option was
exercisable  at $.04 per  Warrant.  The  Warrants  were  registered  for  resale
pursuant to an  amendment  to the Form S-8  registration  statement.  Mr.  Arbel
exercised this option in full and sold the Warrants commencing in May 1996.

     As of May 15, 1996, the Company  entered into an employment  agreement with
Ilan Arbel, for a period of five years.  Pursuant thereto,  Mr. Arbel became the
President and Chief Executive  Officer of the Company.  At such time the Company
and Mr.  Arbel  agreed to increase  the option price to purchase the Warrants to
$1.90 per  Warrant,  whereby Mr.  Arbel owed the Company  $7,250,000,  which was
payable either in cash, or other securities.  The term securities was defined as
any debt or equity security or convertible security,  the underlying security of
which, is traded on either a national securities exchange or on the Nasdaq Stock
Market. The price for which the securities could be exchanged to reduce the debt
was 50% of the average bid price of the securities or the underlying  securities
of a convertible security, for a period of ninety days ending five days prior to
the exchange.  The employment  agreement  provides that no other compensation or
remuneration be paid to Mr. Arbel during its term. Mr. Arbel, through affiliates
has transferred to the Company an aggregate of 803,070 shares of Play Co. Series
E Preferred  Stock,  each of which is convertible at any time into six shares of
Play Co.'s common stock as payment of the debt.

     In May 1996, the Company, in anticipation of the execution of an employment
agreement  with Rivka Arbel,  granted Mrs.  Arbel an option to purchase from the
Company up to 600,000  Warrants,  which  Warrants  were to be  identical  to the
Warrants issued in the Company's  initial public offering.  Initially Mrs. Arbel
was to pay $.04 per  Warrant  and resell  the  Warrants  pursuant  to a Form S-8
registration  statement,  however,  the Company and Mrs.  Arbel agreed that such
price was too low and decided to increase the price to $2.50 per Warrant,  which
was to be paid either in cash,  or other  securities,  as such term is described
above.  In June 1996,  Mrs. Arbel entered into an employment  agreement with the
Company,  for a period of five  years,  pursuant  thereto  Mrs.  Arbel  became a
Vice-President of the Company.  The employment  agreement provided that no other
compensation  or  remuneration  be paid to Mrs. Arbel during its term. In August
1996 this  agreement was  terminated  and the 600,000  Warrants  returned to the
Company's treasury unexercised.

1995 Senior Management Incentive Plan

     In June  1995,  the  Board  of  Directors  adopted  the  Senior  Management
Incentive  Plan (the  "Management  Plan"),  which  was  adopted  by  stockholder
consent.  The Management  Plan provides for the issuance of up to 150,000 shares
of the Company's  Common Stock in connection  with the issuance of stock options
and other stock purchase rights to executive officers and other key employees.

     The  Management  Plan was  adopted to provide the Board of  Directors  with
sufficient  flexibility regarding the forms of incentive  compensation which the
Company will have at its disposal in rewarding  executive officers and directors
who are also  employees of the  Company,  or a  subsidiary  or the Company,  who
render significant services to the Company or one of its subsidiaries. To enable
the Company to attract and retain qualified personnel without

                                       24


<PAGE>
unnecessarily  depleting the  Company's  cash  reserves,  the Board of Directors
intends to offer key personnel equity ownership in the Company through the grant
of  stock  options  and  other  rights  pursuant  to the  Management  Plan.  The
Management  Plan is  designed  to augment the  Company's  existing  compensation
programs and is intended to enable the Company to offer  executive  officers and
directors  who are also  employees  of the  Company a personal  interest  in the
Company's  growth and success through awards of either shares of Common Stock or
rights to acquire shares of Common Stock.

         The Management  Plan is intended to help the Company attract and retain
key  executive  management  personnel  whose  performance  is expected to have a
substantial  impact on the Company's  long-term  profit and growth  potential by
encouraging and assisting those persons to acquire equity in the Company.  It is
contemplated  that only those  executive  management  employees  (generally  the
Chairman of the Board,  Vice-Chairman,  Chief Executive Officer, Chief Operating
Officer,  President and Vice Presidents of the Company) who perform  services of
special  importance  to the Company  will be eligible to  participate  under the
Management  Plan.  The Company does not presently have any intention to hire any
additional  management  employees  and has not engaged in any  solicitations  or
negotiations with respect to the hiring of any management  employees.  As of the
date of this  Prospectus,  the  Company's  sole  officers are Ilan Arbel,  Rivka
Arbel, and Sheikhar Boodram, and its directors also includes Yair Arbel. A total
of  150,000  shares of Common  Stock will be  reserved  for  issuance  under the
Management  Plan. It is anticipated  that awards made under the Management  Plan
will be subject to three-year vesting periods,  although the vesting periods are
subject to the discretion of the Board of Directors.


                                       26


<PAGE>
ITEM 11.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT

         The following table sets forth certain  information at January 31, 1998
based upon information  obtained by the persons named below, with respect to the
beneficial ownership of common shares by (i) each person known by the Company to
be the  owner  of 5% or  more of the  outstanding  common  shares;  (ii) by each
director; (iii) and by all officers and directors as a group.
<TABLE>
<CAPTION>

                                                                                                        Percent of
                                                                Number of                               Common Stock
Name                                                            Shares                                  Owned (1)

<S>                                                             <C>                                      <C>  
U.S. Stores Corp. (2)(3)                                        1,868,000                                62.2%
c/o Multimedia Concepts International, Inc.
448 West 16th Street
New York, New York

Ilan Arbel (2)(3)                                                --                                       --
c/o Multimedia Concepts International, Inc.
448 West 16th Street
New York, New York

Yair Arbel (2)(3)                                                --                                       --
c/o Multimedia Concepts International, Inc.
448 West 16th Street
New York, New York

 Rivka Arbel (2)(3)                                              --                                       --
c/o Multimedia Concepts International, Inc.
448 West 16th Street
New York, New York

Sheikhar Boodram                                                 --                                       --
c/o Multimedia Concepts International, Inc.
448 West 16th Street
New York, New York

 Officers and Directors                                          --                                       --
(4 as a Group) (2)-(3)

</TABLE>

(1)      Does not give effect to 150,000  shares of Common  Stock  reserved  for
         issuance under the Company's 1995 Senior Management  Incentive Plan, of
         which an option to purchase  75,000  shares at $8.75 per share has been
         granted.
(2)      Dated as of January 2, 1998,  U.S. Stores Corp.  acquired  control of a
         majority of the outstanding shares of the Company, of which (i) 403,000
         shares  were  acquired  through  purchases  in the public  market  (ii)
         1,339,000 shares were acquired from European  Ventures Corp., a company
         in which Ilan Arbel is an officer and  director,  in a private sale and
         (iii)  100,000  shares were  acquired  from  another  shareholder  in a
         private transaction.
(3)      Yair Arbel and Ilan Arbel are  brothers  and Rivka Arbel is the wire of
         Yair Arbel.  Though it can be expected  that the shares of Common Stock
         of record and  beneficially  owned by members of the Arbel family would
         be voted as a group on matters presented to the Company's stockholders;
         however there is no voting agreement or arrangements which require such
         unified voting.



<PAGE>
ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     On April 4, 1996,  the board of directors  authorized  the Company to enter
into a compensation  agreement with Ilan Arbel.  Pursuant  thereto,  the Company
granted to Ilan Arbel an option to purchase 1,900,000 warrants, identical to the
Warrants sold by the Company in its initial public  offering.  The Warrants were
registered  for resale  pursuant to an  amendment  to the Form S-8  registration
statement.  Mr.  Arbel  exercised  this  option  in full and  sold the  Warrants
commencing in May 1996. See "Executive Compensation - Employment Agreements"

     As of May 15, 1996, the Company  entered into an employment  agreement with
Ilan Arbel, for a period of five years.  Pursuant thereto,  Mr. Arbel became the
President  and  Chief   Executive   Officer  of  the  Company.   See  "Executive
Compensation - Employment Agreements"

     In May 1996, the Company, in anticipation of the execution of an employment
agreement  with Rivka Arbel,  granted Mrs.  Arbel an option to purchase from the
Company up to 600,000  Warrants,  which  Warrants  were to be  identical  to the
Warrants  issued in the Company's  initial public  offering.  In June 1996, Mrs.
Arbel entered into an  employment  agreement  with the Company,  for a period of
five years,  pursuant thereto Mrs. Arbel became a Vice-President of the Company.
In August 1996 this agreement was terminated and the 600,000  Warrants  returned
to the Company's treasury unexercised.  See "Executive  Compensation  Employment
Agreements"

     From  October 1995 to September  1997,  the Company  loaned an aggregate of
$1,276,235 to UTTC.  $1,000,000  was converted  into equity in the Company.  See
"Recent Developments" and  "Business-Acquisition  of UTTC." On December 1, 1997,
the  Company  received  3,571,429  shares of UTTC's  common  stock  from UTTC as
payment for $1,000,000 owed to the company by UTTC.

     In June 1996,  the Company  loaned  $331,136 to Ilan Arbel,  the  Company's
President,  which was payable upon demand not accruing any  interest.  This loan
has been repaid.

     As of June 30,  1996,  the  Company  had loaned  approximately  $420,000 to
Hollywood  Productions,  Inc.  The loan accrued no interest and was payable upon
demand. The loan has been repaid.

     On October 21, 1996, the board of directors adopted resolutions authorizing
the Company  subject to  stockholder  approval,  to terminate  its ownership and
relationships   with  American   Eagle  and  MMP  as   non-profitable   business
investments.  These  resolutions  were adopted by the Company's  shareholders in
December 1996.


                                       29
<PAGE>
ITEM 13.          EXHIBITS AND REPORTS ON FORM 8-K

(a) The following  financial  statements of the Company are included as Part II,
Item 8:

<TABLE>
<CAPTION>

<S>                                                                                                                <C>
         Independent Auditors' Report for the Year ended September 30, 1997                                        F-2

         Independent Auditors' Report for the Year ended September 30, 1996                                        F-3

         Consolidated Balance Sheets as of September 30, 1997 and 1996                                             F-4

         Consolidated Statements of Operations for the Years ended
             September 30, 1997 and 1996                                                                           F-5

         Consolidated Statements of Changes in Stockholders' Equity for the
             Years ended September 30, 1997 and 1996                                                               F-6

         Consolidated Statement of Cash Flows for the Years ended
             September 30, 1997 and 1996                                                                           F-7

         Notes to Consolidated Financial Statements                                                                F-8

</TABLE>

(b) During the last quarter, the Company has not filed any reports on Form 8-K.

(c) The  following  exhibits  designated  by an asterisk (*) are filed with Form
10-KSB.  The exhibits not designated by an asterisk have  previously  been filed
with the Commission in connection with the Company's  Registration  Statement on
Form SB-2 and pursuant to 17 C.F.R.  230.411 and are  incorporated  by reference
herein.
<TABLE>
<CAPTION>

<S>                                 <C>                                           
  3.1                      -        Certificate of Incorporation of the Company
  3.2                      -        Amendment to Certificate of Incorporation of the Company, filed in May
                                    1995
  3.3                      -        Second Amendment to Certificate of Incorporation of the Company, filed
                                    in June 1995
  3.5                      -        By-Laws of the Company
  3.9*                     -        Certificate of Incorporation of U.S. Apparel  Corp.
  4.1                      -        Specimen Common Stock Certificate.
 10.1                      -        The Company Senior Management Incentive Plan.
 10.2                      -        Sublease at 448 West 16th Street, New York, New York
 10.4                      -        Dytex Agreement
</TABLE>

                                       30


<PAGE>
                                   SIGNATURES

         In accordance  with Section 13 or 15(d) of the Exchange Act of 1934, as
amended  the  Registrant  has  caused  this  report to be signed on its  behalf,
thereunto duly authorized as of the 10th day of February, 1998.


                                         MULTIMEDIA CONCEPTS INTERNATIONAL, INC.


                                                              By: /s/ Ilan Arbel
                                                           Ilan Arbel, President

         In accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  Registrant and in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>


<S>                                                           <C>                                         <C>
/s/ Ilan Arbel                                                President and Director                      2/10/98
Ilan Arbel                                                                                                Date

/s/ Sheikhar Boodram                                          Secretary and Director                      2/10/98
Sheikhar Boodram                                                                                          Date

/s/ Rivka Arbel                                               Director                                    2/10/98
Rivka Arbel                                                                                               Date

/s/ Yair Arbel                                                Director                                    2/10/98
Yair Arbel                                                                                                Date

</TABLE>

                                       F-0


<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA





                                    INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

                                                                                                 Page(s)

Financial Statements:

<S>                                                                                                <C>
         Independent Auditors' Report for the Year ended September 30, 1997                      F-2

         Independent Auditors' Report for the Year ended September 30, 1996                      F-3

         Consolidated Balance Sheets as of September 30, 1997 and 1996                           F-4

         Consolidated Statements of Operations for the Years ended
             September 30, 1997 and 1996                                                         F-5

         Consolidated Statements of Changes in Stockholders' Equity for the
             Years ended September 30, 1997 and 1996                                             F-6

         Consolidated Statement of Cash Flows for the Years ended
             September 30, 1997 and 1996                                                         F-7

         Notes to Consolidated Financial Statements                                              F-8
</TABLE>


                                       F-1


<PAGE>
                          INDEPENDENT AUDITORS' REPORT



To The Shareholders
Multimedia Concepts International, Inc.
New York, New York

We  have  examined  the  consolidated  balance  sheets  of  Multimedia  Concepts
International,  Inc. and  subsidiaries  as of September 30, 1997 and the related
statements of operations, changes in stockholders' equity and cash flows for the
year then  ended.  These  financial  statements  are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based upon our audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial position of Multimedia Concepts
International,  Inc. and  Subsidiaries as of September 30, 1997, and the results
of its operations,  changes in stockholders'  equity and cash flows for the year
then ended in conformity with generally accepted accounting principles.

The financial  statements for the year ended  September 30, 1996 were audited by
other accountants whose report dated January 24, 1997,  expressed an unqualified
opinion on those statements.






JEROME ROSENBERG, CPA, P.C.

Syosset, New York
December 18, 1997


                                       F-3


<PAGE>
To The Shareholders
Multimedia Concepts International, Inc.
New York, New York



We  have  audited  the  consolidated   balance  sheet  of  Multimedia   Concepts
International,  Inc. and  subsidiaries  as of September 30, 1996 and the related
consolidated  statements of operations,  cash flows and changes in shareholders'
equity  for  the  year  then  ended.   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 audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial position of Multimedia Concepts
International,  Inc. and  subsidiaries as of September 30, 1996, and the results
of its operations and its cash flows for the year then ended, in conformity with
generally accepted accounting principles.

The accompanying  consolidated  financial statements for 1996 have been prepared
assuming  the  Company  will  continue  as a  going  concern.  As  shown  in the
consolidated financial statements, the Company experienced significant operating
losses since  inception and realized a negative  gross profit for the year ended
September 30, 1996. In addition,  as of September 30, 1996,  the Company  ceased
operations  in  its  operating   subsidiaries   and   terminated  its  financing
arrangements with such subsidiaries.  These factors and others raise substantial
doubt  about  the  Company's  ability  to  continue  as  a  going  concern.  The
consolidated financial statements do not include any adjustments relating to the
recoverability  and  classification  of  recorded  assets,  or the  amounts  and
classification  of liabilities  that might be necessary in the event the Company
cannot continue in existence.



LAZAR, LEVINE & COMPANY LLP



New York, New York
January 24, 1997


                                       F-5


<PAGE>
            MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS
<TABLE>
<CAPTION>
                                                                                     September 30,   September 30,
                                                                                     1997            1996
CURRENT ASSETS:
<S>                              <C>                                                 <C>             <C>         
 Cash and cash equivalents (Note 2c )                                                $     13,189    $    491,262
 Accounts receivable (Notes 2c and 10                                                     723,112       1,191,510
Advances to supplier .............................................................         60,000            --
 Inventories (Note 2f ) ..........................................................         66,662          38,090
 Loans and advances-affiliate (Note 3a ) .........................................         89,815         450,815
 Loan receivable-officer (Note 4 ) ...............................................      1,314,596       1,470,141
                                                                                      ------------    ------------
         Total current assets ....................................................      2,267,374       3,641,818
                                                                                      ------------    ------------

FIXED ASSETS:
 Furniture and fixtures ..........................................................         11,547          11,547
 Machinery and equipment .........................................................         17,814          17,814
                                                                                     ------------    ------------
                                                                                           29,361          29,361
                                                                                     ------------    ------------
 Less: accumulated depreciation ..................................................         29,361          10,912
                                                                                     ------------    ------------
                                                                                             --            18,449
                                                                                     ------------    ------------
OTHER ASSETS:
 Security deposits ...............................................................             50            --
 Investment in convertible preferred stock (Notes 2m and 5) ......................      4,221,490       3,696,490
 Advances to equity investee (Note 3b) ...........................................        140,000         120,000
 Due from affiliate (Note 3c) ....................................................      1,276,235         320,000
                                                                                     ------------    ------------
                                                                                        5,637,775       4,136,490
                                                                                     ------------    ------------
         Total assets ............................................................   $  7,905,149    $  7,796,757
                                                                                     ============    ============

                                              LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
 Accounts payable ................................................................   $    429,283    $    286,066
 Accrued expenses and other liabilities ..........................................         29,844          37,029
 Payroll taxes withheld and payable (Note 4 ) ....................................         23,682          18,988
                                                                                     ------------    ------------
         Total current liabilities ...............................................        482,809         342,083
                                                                                     ------------    ------------

MINORITY INTEREST IN SUBSIDIARY (Note 6) .........................................           --              --
                                                                                     ------------    ------------

COMMITMENTS AND CONTINGENCIES (Notes 9,10&11) ....................................           --              --
                                                                                     ------------    ------------

STOCKHOLDERS' EQUITY: (Notes 7 and 8)
 Common stock, $001. par value; 10,000,000 shares
    authorized, 3,005,000 shares issued and outstanding
    at September 30, 1997 and 1996 respectively ..................................          3,005           3,005
 Additional paid-in capital ......................................................     13,102,005      13,102,005
 Retained earnings (deficit) .....................................................     (5,682,670)     (5,650,336)
                                                                                     ------------    ------------
                                                                                        7,422,340       7,454,674
                                                                                     ------------    ------------
         Total liabilities and stockholders' equity ..............................   $  7,905,149    $  7,796,757
                                                                                     ============    ============
</TABLE>

    The accompanying notes are an integral part of these financial statements


                                                      F-6


<PAGE>
            MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS



                               For the Year Ended
                           September 30, September 30,
<TABLE>
<CAPTION>


                                                   1997          1996
                                                  ------------   ---------



<S>                                               <C>            <C>        
NET SALES (Note 9) ............................   $ 2,054,792    $ 5,727,320
                                                  -----------    -----------

COSTS AND EXPENSES:
 Cost of sales ................................     1,647,563      6,400,272
 Operating expenses ...........................       621,724      1,273,908
                                                  -----------    -----------
                                                    2,269,287      7,674,180
                                                  -----------    -----------

(LOSS) FROM OPERATIONS ........................      (214,495)    (1,946,860)
                                                  -----------    -----------


OTHER INCOME(EXPENSE):
 Interest expense .............................          --          (11,070)
 Interest and other income ....................       182,161         88,302
 Loss on investment (Notes 2m and 5) ..........          --       (3,221,227)
                                                  -----------    -----------
                                                      182,161     (3,143,995)
                                                  -----------    -----------

 Minority interests (Note 6 ) .................          --             --
                                                  -----------    -----------

(LOSS) BEFORE PROVISION (CREDIT)
   FOR INCOME TAXES ...........................       (32,334)    (5,090,855)

  Provision (credit) for income taxes (Note 2j)          --             --
                                                  -----------    -----------

NET (LOSS) ....................................   $   (32,334)   $(5,090,855)
                                                  ===========    ===========

NET (LOSS) PER COMMON SHARE (Note 2k) .........   $      (.01)   $     (1.89)
                                                  ===========    ===========

WEIGHTED AVERAGE NUMBER OF COMMON
   SHARES OUTSTANDING (Note 2k) ...............     3,005,000      2,694,973
                                                  ===========    ===========
</TABLE>



    The accompanying notes are an integral part of these financial statements


                                       F-7


<PAGE>
            MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>


                                                                                  Additional    Retained
                                                               Common Stock       Paid-in       Earnings
                                                       Shares       Amount        Capital       (Deficit)      Total

<S>                 <C>                                 <C>         <C>           <C>           <C>            <C>        
Balances at October 1, 1995 .......................     2,085,000   $     2,085   $ 1,909,315   $  (559,481)   $ 1,351,919

Shares sold in initial public offering (Note 7) ...       920,000           920     3,942,690          --        3,943,610

Exercise of common stock purchase warrants (Note 5)          --            --       7,250,000          --        7,250,000

Net loss for the year ended September 30, 1996 ....          --            --            --      (5,090,855)    (5,090,855)
                                                      -----------   -----------   -----------   -----------    -----------

Balances at September 30, 1996 ....................     3,005,000   $     3,005   $13,102,005   $(5,650,336)   $ 7,454,674

Net loss for the year ended September 30, 1997 ....          --            --            --         (32,334)       (32,334)
                                                      -----------   -----------   -----------   -----------    -----------

Balances at September 30, 1997 ....................     3,005,000   $     3,005   $13,102,005   $(5,680,670)     $7,422,340
                                                      ===========   ===========   ===========   ===========    ===========
</TABLE>


    The accompanying notes are an integral part of these financial statements




                                                      F-8


<PAGE>



            MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                               For The Years Ended
                                                                                        September 30,          September 30,
                                                                                            1997                   1996
                                                                                        --------------         --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                                     <C>                    <C>         
 Net (loss)                                                                             $( 32,334)             $(5,090,855)
 Adjustments to reconcile net (loss) to net cash (used for)
   provided by operating activities:
                  Loss on investment                                                             -                3,221,227
                  Depreciation of fixed assets                                              18,449                    5,872
                  Amortization of excess of costs over net assets acquired                       -                   26,667

 Changes in assets and liabilities:
                  (Increase) decrease in accounts receivable                               468,398                 (587,795)
                  (Increase) in advances to supplier                                      (60,000)                         -
                  (Increase) decrease in inventories                                      (28,572)                 1,747,099
                  Decrease in prepaid expenses and other current assets                          -                    29,500
                  (Increase) in security deposits                                             (50)                    34,684

                  (Decrease) increase in accounts payable                                  143,217                 (216,232)
                  (Decrease) in accrued expenses and other liabilities                     (7,185)                  (27,759)
                  (Decrease) increase in payroll taxes withheld and payable                  4,694                    18,988
                                                                                          --------                   -------
                  Net cash (used for) provided by operating activities                     506,617                 (838,604)
                                                                                          --------                 ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
 Loans to officers                                                                        (369,455)                (880,636)
 Advances to equity investee                                                               (20,000)                (120,000)
 Advances to affiliates                                                                   (595,235)                (770,815)
                                                                                          ---------                 --------

                  Net cash (used for) investing activities                                (984,690)              (1,771,451)
                                                                                         ----------             ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Loans received from (repaid to) affiliate                                                        -                (989,500)
 Net proceeds from sale of common stock and warrants                                              -                4,088,610
                                                                                          ---------               ----------
                  Net cash provided by financing activities                                       -                3,099,110
                                                                                          ---------               ----------
NET INCREASE (DECREASE) IN CASH AND
    CASH EQUIVALENTS                                                                      (478,073)                  489,055
Cash and cash equivalents, at beginning of year                                             491,262                    2,207
                                                                                          ---------                   ------

Cash and cash equivalents, at end of year                                                 $  13,189                 $491,262
                                                                                          =========                 ========

SUPPLEMENTAL INFORMATION:
 Taxes paid                                                                               $    -                    $      -
 Interest paid                                                                                    -                   11,070
</TABLE>

    The accompanying notes are an integral part of these financial statements


                                       F-9


<PAGE>
            MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1-           DESCRIPTION OF COMPANY:

         Multimedia Concepts  International,  Inc. (the "Company") is a Delaware
corporation  which  was  organized  in  June  1994  under  the  name  U.S.  Food
Corporation. The Company changed its name to American Eagle Holdings Corporation
in  April  1995 and then to its  present  name in June  1995.  The  Company  was
initially  formed as a holding  company for the purpose of forming an integrated
clothing design,  manufacturing  and distribution  operation.  In June 1994, the
Company acquired 55% of the outstanding shares of common stock of American Eagle
Industries  Corp.  ("American  Eagle"),  which acquired 100% of the  outstanding
shares of Match II, Inc.  ("Match  II") The  Company  also  acquired  34% of the
issued and  outstanding  capital stock of Multi Media  Publishing  Corp. in June
1995.

         In  December  1996,   the  Company  held  a  special   meeting  of  its
shareholders  who  authorized  the  Company  to sell or dispose of its shares in
American Eagle (and its' subsidiary Match II) or effect the dissolution thereof.
These  subsidiaries  had ceased  operations as of September 30, 1996. In January
1997, in accordance with the vote of its  shareholders,  the Company  terminated
its financing and business relationships with these subsidiaries.

         In December  1996,  the  shareholders  also  authorized  the Company to
dispose  of its  34%  interest  in an  unconsolidated  subsidiary,  Multi  Media
Publishing  Corp. (see Note 4b) which had no revenues or operations.  In January
1997, in accordance with the vote of its  shareholders,  the Company  terminated
all business  relationships  with this entity, but it intends to seek the return
of certain funds it had advanced.

         In January 1997, the Company formed a new wholly-owned subsidiary, U.S.
Apparel Corp. ("USAC"), which is engaged in the design and manufacture of a line
of T-shirts and other tops,  predominately  for men.  USAC began  operations  in
January 1997.  USAC is the sole source of operating  revenue for the Company for
the year ended September 30, 1997.


NOTE 2-           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

          (a)     Principles of Consolidation:

          The  consolidated   financial   statements  include  the  accounts  of
Multimedia Concepts International, Inc., and its subsidiaries, USAC and American
Eagle and its  subsidiary  Match II.  (see Note 1).  All  material  intercompany
balances and transactions have been eliminated in consolidation.

          (b)     Use of Estimates:

          In  preparing  financial   statements  in  accordance  with  generally
accepted   accounting   principles,   management  males  certain  estimates  and
assumptions,  where  applicable,  that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities


                                      F-11


<PAGE>
             MULTIMEDIA CONCEPTS INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

at the date of the financial statements, as well as reported amounts of revenues
and expenses during the reporting period. While actual results could differ from
those  estimates,  management does not expect such  variances,  if any to have a
material effect on the financial statements.

          (c)     Concentration of Credit Risk:

     Financial instruments that potentially subject the Company to concentration
of credit risk consist principally of cash and accounts receivable.

     The Company  maintains at times,  deposits in federally  insured  financial
institutions  in excess of  federally  insured  limits.  Management  attempts to
monitor the soundness of the financial  institutions  and believes the Company's
risk is negligible.

     Accounts  receivable  potentially  exposes the Company to  concentration of
credit risk, as defined by Statement of Financial  Accounting Standards No. 105,
"Disclosure of Information  about Financial  Instruments with  Off-Balance-Sheet
Risk and Financial Instruments with Concentration of Credit Risk."

          (d)     Fair Value of Financial Instruments:

     The carrying amount of the Company's financial instruments, primarily cash,
accounts receivable and accounts payable approximate their fair value.

          (e)     Cash and Cash Equivalents:

     For purposes of the  statements  of cash flows,  the Company  considers all
highly liquid investments purchased with a remaining maturity of three months or
less to be cash equivalents.

         (f)      Inventories:

     Inventories  are  stated at the lower of  cost,(FIFO)  method,  or  market.
Finished goods are valued at average production which includes  material,  labor
and manufacturing expenses.

          Inventories consisted of the following:
<TABLE>
<CAPTION>
                                                                                  September 30,
                                                                          1997                      1996
<S>                                                                   <C>                        <C>     
                           Raw materials                              $    -                     $ 30,000
                           Finished goods                                66,662                     8,090
                                                                      ---------                 ---------
                                                                       $ 66,662                  $ 38,090
                                                                       ========                  ========
</TABLE>

          (g)     Fixed Assets and Depreciation:

          Property  and  equipment  are  recorded  at  cost.   Depreciation  and
amortization  are computed  using the  straight-line  method over the  estimated
useful lives of the asset which generally range from three to seven years.



                                      F-12


<PAGE>
             MULTIMEDIA CONCEPTS INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


         (h)      Excess of Costs over Net Assets Acquired:

     In June 1994, American Eagle acquired Match II (see Note 1). The total cost
of the acquisition,  $50,000, exceeded the fair value of the net assets acquired
by $30,000.  This excess was assigned to goodwill to be amortized  over 15 years
on a straight line basis. As of September 30, 1995, accumulated amortization had
amounted to $3,333.  Prior to the  acquisition,  Match II had not  conducted any
significant  operations.  Accordingly,  the Company did write off the  remaining
unamortized  balance of goodwill to operations  during the year ended  September
30, 1996.

                  (i)      Revenue Recognition:

     The  Company  and its  subsidiaries  recognize  revenue  upon  shipment  of
finished  goods to customers.  All sales are based  pursuant to firm  contracts,
with title to merchandise  passing at shipping.  Sales returns and discounts are
reflected in net sales and historically have not been significant.

                  (j)     Income Taxes:

     The Company  accounts  for income  taxes in  accordance  with  Statement of
Financial  Accounting  Standards No. 109,  "Accounting  for Income Taxes," which
requires  the use of the  "liability  method" of  accounting  for income  taxes.
Accordingly,   deferred  tax  assets  and  liabilities,   when  recognized,  are
determined  based on the  difference  between the financial  statements  and tax
bases of assets and liabilities,  using enacted tax rates in effect for the year
in which the differences are expected to reverse.

     The Company has available at September 30, 1997 and 1996,  unused operating
loss  carryforwards  of  approximately  $2,560,000 and $2,400,000  respectively,
which may be applied  against future  taxable  income  expiring in various years
beginning after 2008. Since there is no assurance that the Company will generate
future taxable  income to utilize the deferred tax asset  resulting from its net
operating  loss  carryforwards  and other timing  differences,  a 100% valuation
allowance has been provided as of September 30, 1997 and 1996 respectively.

(k)       Earnings (Loss) Per Share:

         The Company has a simple capital  structure and had 3,005,000 shares of
its common  stock  issued and  outstanding  throughout  the fiscal  year  ending
September 30, 1997.  Basic earnings (loss) per share is computed by dividing the
income (loss) available to common stockholders by the weighted-average number of
common shares outstanding during the period.  Statement of Financial  Accounting
Standards No. 128, " Earnings Per Share" which becomes effective for the Company
on  December  16,  1997  is not  expected  to have an  impact  on the  Company's
financial statements in the future.

                                      F-13


<PAGE>
                 A CONCEPTS INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


          (l)     Accounting Changes:

         As permitted by Statement of Financial  Standards No. 123,  "Accounting
for Stock-Based  Compensation,  which encourages companies to record expense for
stock  options and other  stock-based  employee  compensation  awards based upon
their fair value at the date of grant,  the Company  will  continue to apply its
current  accounting  policy under Accounting  Principles Board Opinion No.25 and
will Include the necessary disclosures in its 1998 financial statements.

                  There are no other  pending or recently  issued  authoritative
accounting  pronouncements that are expected to have a significant impact on the
Company's financial statements in the future.

          (m)     Investment in Preferred Stock:

         The Company has  reflected  its'  investment in  convertible  preferred
stock in accordance  with Statement of Financial  Standards No.  115-"Accounting
for Certain Investments in Debt and Equity  Securities".  This standard requires
that certain debt and equity  securities be adjusted to fair value at the end of
each accounting  period.  Unrealized  gains or losses for securities  treated as
available  for sale  securities  are to be  charged  or  credited  to a separate
component  of  shareholders'  equity.  As of  September  30,  1996,  the Company
determined  that the decline in the value of its  investment in preferred  stock
(see Note 6) was other than temporary, and accordingly wrote down the cost basis
of this security to fair value.  This  writedown of $3,221,227 was recorded as a
realized loss on available for sale securities in the accompanying  consolidated
statements of operations for the year ended September 30, 1996.

NOTE 3-           RELATED PARTY TRANSACTIONS:

          (a)     Loans and Advances-Affiliate:

         During the year ended  September 30, 1996, the Company had advanced the
total $450,815 to Hollywood  Productions,  Inc. an entity in which a relative of
the  Chief-Executive  Officer of the Company is an officer and  director.  These
advances were  non-interest  bearing.  As of September 30, 1997, all but $89,815
had been repaid,  and the Company  anticipates  full collection of the remaining
balance during the year ended September 30, 1998.

(b)       Advances to Equity Investee:

The  Company  owns 34% of the  issued  and  outstanding  stock  of  Multi  Media
Publishing Corp.("MMP"), a development stage company with operating activity. In
December  1996,  the  Company  terminated  its  relationship  with  MMP  and has
requested  that all funds  advanced be returned.  As of September 30, 1997,  the
amount  advanced  was  $140,000.  To date,  no portion of the  advance  has been
repaid. See Note 1.



                                      F-15


<PAGE>
             MULTIMEDIA CONCEPTS INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


          (c)     Due From Affiliate:

         As of September  30,  1997,  United  Textiles and Toys Corp.  (formerly
Mister Jay Fashions International,  Inc.) an entity in which the chief operating
officer  of the  Company  is  President,  was  indebted  to the  Company  in the
aggregate  amount  of  $1,276,235.  The  amount  due from this  affiliate  as of
September  30, 1996 was  $320,000.  The loans bear interest at an annual rate of
8%. The Company does anticipate full payment during the year ended September 30,
1998.

NOTE 4-           LOANS RECEIVABLE-OFFICER:

         As of September 30, 1997,  the chief  executive  officer of the Company
was indebted to the Company in the aggregate amount of $1,314,596, which loan is
repayable  on demand and bears  interest at an annual rate of 8%. The amount due
from this officer at September 30, 1996 was $1,470,141. The In October 1997, the
officer  repaid  $1,000,000  of  the  outstanding   balance.  The  Company  does
anticipate  that the  remaining  balance  will be repaid  during the fiscal year
ended September 30, 1998.


NOTE 5-           INVESTMENT IN PREFERRED STOCK:

         In  connection  with  an  employment  agreement  entered  into  with an
executive  officer in May 1996, the Company granted an option to such officer to
acquire 2,900,000 common stock purchase warrants at a price of $2.50 per warrant
(market value),  payable either in cash or other securities.  Since the warrants
were issued at market value, no compensation was reflected.  As of May 1996, the
officer had purchased  these  warrants with payment  being made  throughout  the
transfer of 803,070 shares of convertible  preferred  stock in another  publicly
traded company,  Play Co. Toys & Entertainment Corp. The Company had valued this
preferred  stock at  $6,917,717,  the deemed fair value at the time of transfer,
based upon such factors as dilution, lack of marketability, etc. This investment
has been reflected as a non-current asset based upon the intent of management.

         (See Note 2 concerning  writedown of available  for sale  securities to
fair market value at September 30, 1996).

NOTE 6-           MINORITY INTEREST IN SUBSIDIARY:

         The Company owns 55% of American  Eagle.  As of December 31, 1996,  the
Company  terminated its financing and business  relationship with American Eagle
and its subsidiary, Match II. As of September 30, 1996, losses applicable to the
minority  shareholders  exceeded  their  interest in American  Eagle,  which was
reduced to zero, and as such,  excess losses were charged against the operations
of the Company. (See Note 1 re: cessation of operations).




                                      F-16


<PAGE>
            MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 7-           COMMON STOCK:

         As of October 1, 1994, the Company had 1,800,000 shares of common stock
outstanding.

         In September 1995, the Company issued 285,000 shares of common stock at
$5.00  per  share and  570,000  redeemable  common  stock  warrants  at $.15 per
warrant,  in  exchange  for a  reduction  of  $1,510,500  in a loan  owed  to an
affiliate. (see Note 3c).

         In January 1996,  the Company,  through its  underwriter,  successfully
completed  an  initial  public  offering  of  920,000  shares  of  common  stock
(including  the  underwriter's  over  allotment)  at a price of $5.00 per share,
together with two warrants for each share,  at a price of $.15 per warrant.  The
net  proceeds  to the  Company  from the sale of the common  stock and  warrants
offered  after  deducting  underwriting  discounts  and  commissions  and  other
expenses of the offering were approximately $3,944,000.

         In May  1996,  the  chief  executive  officer  exercised  an  option to
purchase  2,900,000  common  stock  purchase  warrants  at a price of $2.50  per
warrant. See also Note 6.

NOTE 8-           STOCK OPTION PLAN:

         In June 1995, the board of directors adopted the 1995 Senior Management
Incentive Plan (the "Management Plan"),  which was approved by the shareholders.
The  Management  Plan  provides for the issuance of up to 150,000  shares of the
Company's  common stock in  connection  with the  issuance of stock  options and
other stock  purchase  rights to  executive  officers  and other key  employees.
Options granted under the Management Plan may be either  incentive stock options
("ISO's")  or options  which do not  qualify as ISOs  ("non-ISOs").  ISOs may be
granted at an option price of not less than 100% of the fair market value of the
common stock on the date of grant,  except that an ISO granted to any person who
owns capital stock representing more than 10% of the total combined voting power
of all classes of common  stock of the  Company,  must be granted at an exercise
price of at least 110% of the fair market  value of the common stock on the date
of the grant.  The  exercise  price of the  non-ISOs may be less than 85% of the
fair market value of the common stock on the date of the grant.  As of September
30, 1997,  the Company had granted  options to purchase  75,000 shares of common
stock at an exercise price of $8.75 per share.

NOTE 9-           ECONOMIC DEPENDENCY:

         For  the  year  ended  September  30,  1997,  approximately  77% of the
Company's sales was to one individual  customer.  Accounts  receivable from this
customer at September  30, 1997 was $559,884.  For the year ended  September 30,
1996, 100% of the Company's sales was to one individual  customer,  and accounts
receivable from this customer was $1,191,510.




                                      F-17


<PAGE>
            MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 10-          LEGAL PROCEEDINGS:

         The Company is not a party to any material  litigation and is not aware
of any threatened  litigation  that would have a material  adverse effect on its
business. No director,  officer or affiliate of the Company, or any associate of
any of them, is a party to or has a material interest in any proceeding  adverse
to the Company.

NOTE 11-          COMMITMENTS AND CONTINGENCIES:

          Leases:

         The  Company  and  its  subsidiaries  sub-lease  6,000  square  feet of
industrial  space at 448 West 16th  Street,  New York,  NY,  where it leases its
administrative  offices,  factory and warehouse.  The sub-lease is for a term of
four years,  terminating  on December 31, 1998,  at a rate of $36,000 per annum.
For the year ended  September  30, 1996,  rental  expense  aggregated  $172,646.
Rental expense for this period  encompassed the operations of American Eagle and
Match II, (See Note 1 re: cessation of operations).

NOTE 12-          BUSINESS OPERATIONS:

         The Company's  sales through its  subsidiary,  USAC are generated  from
short-term  purchase orders from customers who place orders an as-needed  basis.
The Company  typically  manufactures  its  products  upon receipt of orders from
customers and delivers  finished goods within four weeks of receipt of an order.
The Company  generally  manufactures 10% more goods than is ordered by customers
in anticipation of reorders from customers. As of September 30, 1997, the amount
of unfilled orders approximated $102,000.
NOTE 13-          BUSINESS SEGMENT INFORMATION:

         The Company's  operations for the year ended September 30, 1997 consist
solely of the operations of its  subsidiary,  USAC. For the year ended September
30, 1996, the Company's operations  encompassed the operations of American Eagle
and its subsidiary Match II.
<TABLE>
<CAPTION>

                                                                           September 30,
                                                                    1997                    1996
           NET SALES:
<S>                                                                 <C>                        <C>    
     T-shirts and Tops                                              $2,054,792                 $91,381
     Ladies Sportswear                                                  -                       35,939
                                                                    ----------                 -------
                                                                    $2,054,792              $5,727,320
                                                                    ============            ==========

           OPERATING INCOME (LOSS):
     T-shirts and Tops                                                $283,006              $(1,797,605)
           Ladies Sportswear                                           (497,501)               (149,255)
                                                                       ---------               ---------
                                                                      $(214,595)            $(1,946,860)
                                                                      ==========            ============
</TABLE>


                                      F-18


<PAGE>
            MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>


           TOTAL ASSETS:
<S>                                                                 <C>                     <C>       
     T-shirts and Tops                                              $7,905,149              $7,786,167
     Ladies Sportswear                                                  -                       10,590
                                                                   -----------              ----------
                                                                    $7,905,149              $7,796,757
                                                                    ==========              ==========

           DEPRECIATION AND AMORTIZATION:
     T-shirts and Tops                                                $18,448               $ 5,872
     Ladies Sportswear                                                  -                       -
                                                                    ---------                 -----
                                                                    $  18,448               $ 5,872
                                                                    =========               =======

           CAPITAL EXPENDITURES:
     T-shirts and Tops                                                $    -                  $   -
     Ladies Sportswear                                                     -                      -
                                                                       ---------               ----

                                                                        $    -                $   -
                                                                       =========               =====
</TABLE>


NOTE 14-          SUBSEQUENT EVENTS:

         On January 2, 1998, the Company was issued  3,571,429  shares of common
stock of  United  Textiles  and Toys  Corp.  ("UTTC"),  a  company  of which the
Company's  President is also President,  Chief Executive Officer and a Director.
The receipt of these common  shares at a price of $.28 per share ($.01 above the
closing price on December 31, 1997) represented payment for $1,000,000 loaned by
the Company to UTTC. (see Note 3c).

         As a  result  of  this  transaction,  the  Company  owns  78.5%  of the
outstanding shares of common stock of UTTC, effectively making UTTC a subsidiary
of the Company.  Because UTTC owns 61% of the outstanding shares of common stock
of Play Co. Toys &  Entertainment  Corp.  ("Play Co"),  thus the Company and its
management obtained beneficial voting control of Play Co.

     On January 20, 1998, U.S. Stores Corp. ("U.S.  Stores") acquired  1,465,000
shares of the Company's  common stock.  U.S. Stores was incorporated on November
10, 1997. The Company's President is also President and Director of U.S. Stores.
After this transaction, U.S. Stores held an aggregate of 1,868,000 shares of the
Company's common stock or 62.2% of the outstanding  shares,  effectively  making
the Company a subsidiary of U.S. Stores.


                                      F-19