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 March 31, 1999

                                       OR

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

             For the transition period from __________ to __________

                         Commission File Number 0-26676

                     MULTIMEDIA CONCEPTS INTERNATIONAL, INC.
             (Exact Name of Registrant as Specified in its Charter)

<TABLE>
<CAPTION>
<S>                                                                             <C>
          Delaware                                                              13-3835325
         (State or Other Jurisdiction of Incorporation or Organization)         (IRS Employer Identification No.)
</TABLE>

               1385 Broadway, Suite 814, New York, New York 10018
                    (Address of Principal Executive Offices)

                                 (212) 391-1111
              (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, $0.01 par value
                                (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 to Item 405 of
Regulation S-B is contained in this form,  and no disclosure  will be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB [ X].

     The  Registrant's  revenues  for its fiscal  year ended March 31, 1999 were
$37,791,421.

     The aggregate market value of the voting stock on July 29, 1999 (consisting
of  Common  Stock,  par  value  $0.01  per  share)  held by  non-affiliates  was
approximately  $242,961.25 based upon the closing price for such Common Stock on
said date  ($0.25),  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

History

     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 formed
initially as a holding company for the purpose of forming an integrated clothing
design,   manufacturing,   and  distribution  operation.  It  is  currently,  in
principle, a holding company for its two operating subsidiaries:  (i) its direct
wholly  owned  subsidiary,  U.S.  Apparel  Corp.  ("USAC") and (ii) its indirect
majority owned  subsidiary,  Play Co. Toys & Entertainment  Corp.  ("Play Co.").
Play Co. is the subsidiary of United Textiles and Toys Corp. ("United Textiles")
which is a  majority  owned  subsidiary  of the  Company.  The  Company  and its
subsidiaries  are  hereinafter  referred to in the  aggregate  as the  "Company"
except as otherwise required for clarity.

Cessation of Business Operations

     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").  American  Eagle
designed and  manufactured a line of private label cotton  "T-shirts" and "polo"
type tops predominantly for men. Match II, a wholly owned subsidiary of American
Eagle,  sold its own  brand  name  ladies  knit tops and  coordinates  under the
trade-name "Match II". In June 1995, the Company acquired 34% of the outstanding
shares  of common  stock of Multi  Media  Publishing,  Inc.  ("MMP").  MMP was a
company which produced CD-ROM versions of medical clinical study books.

     In January 1997, the Company,  through vote of its  stockholders,  voted to
cease funding the operations of American  Eagle,  Match II, and MMP. The Company
terminated its relationship with American Eagle and MMP due to continued losses.
In  February  1997,  the  Company  formed a new  subsidiary,  USAC,  to commence
operations as a designer and  manufacturer  of product lines similar to those of
American Eagle and Match II.

Ownership of the Company

     At fiscal year end March 31, 1999,  2,033,165  (or 67.7%) of the  Company's
shares of common  stock  were owned by U.S.  Stores  Corp.  ("USSC"),  a private
company of which the Company's  president is the president and a director.  USSC
is owned 100% by American Telecom PLC ("ATPLC"),  a British public  corporation,
which is owned approximately 80% by Europe American Capital Foundation ("EACF"),
a Swiss foundation, which is the parent corporation also of Frampton Industries,
Ltd.  ("Frampton")  and ABC Fund,  Ltd.  ("ABC"),  entities  affiliated with the
Company under common control.

     The  Company  owns  3,571,429  (or 78.5%) of the shares of United  Textiles
common stock and 100% of the shares of USAC.  United Textiles owns 45.2% of Play
Co. which in turn owns 93.4% of Toys  International.COM,  Inc. ("Toys") and 100%
of Play Co. Toys Canyon Country, Inc. ("Canyon").

     The following chart depicts the Company's ownership structure:

                       Europe American Capital Foundation


Frampton Industries, Ltd. (100%) American Telecom PLC (80%) ABC Fund, Ltd.(100%)

                                     (100%)

                                U.S. Stores Corp.
                                     (67.7%)

                     Multimedia Concepts International, Inc.
                                 (78.5%) (100%)
                               U.S. Apparel Corp.
                          United Textiles & Toys Corp.
                                     (45.2%)

                       Play Co. Toys & Entertainment Corp.

Ownership of U.S. Apparel Corp. and United Textiles & Toys Corp.

U.S. Apparel Corp.

     In February 1997, the Company  formed a wholly-owned  subsidiary,  USAC - a
New York  corporation  of which the  Company's  president is the president and a
director - to design and  manufacture a line of private label cotton  "t-shirts"
and "polo" type tops  predominantly  for men and boys.  See "-- Business of U.S.
Apparel Corp."

United Textiles & Toys Corp.

     On January 2, 1998, the Company was issued 3,571,429 shares of common stock
of United Textiles, at a price of $0.28 per share ($0.01 above the closing price
on December  31,  1997) in repayment of a $1 million loan made by the Company to
United Textiles.  United Textiles is a company of which the Company's  president
is president and a director. As a result of the transaction,  the Company became
the parent of United  Textiles,  owning 78.5% of the  outstanding  shares of the
common stock of same.
<PAGE>
     United Textiles is a Delaware corporation which was organized in March 1991
and commenced  operations in October 1991. It formerly  designed,  manufactured,
and marketed a variety of lower priced  women's  dresses,  gowns,  and separates
(blouses,  camisoles,  jackets,  skirts,  and pants) for special  occasions  and
formal events. In April 1998,  United Textiles ceased all operating  activities.
It now operates solely as a holding company for Play Co.

Business of U.S. Apparel Corp.

     USAC  designs  and  manufactures  a line of private  label knit cotton tops
(such as T-shirts and polo shirts) for boys and men. USAC's garments  consist of
original designs and modifications  and copies of existing  designs.  Typically,
USAC's customers  provide it with designs they desire to use which USAC forwards
to a subcontractor in Honduras.  The subcontractor  creates the pattern from the
design provided it and sews sample garments which it then delivers to USAC sales
personnel  who then  deliver same to USAC's  customers  for  approval.  Once the
samples are approved,  customers  place their orders with USAC,  typically  four
months in advance. USAC sends the orders to the subcontractor which manufactures
the final  product  and ships  same LDP  (i.e.,  land and duty paid) to a public
warehouse in Florida where USAC's customers retrieve the goods. USAC maintains a
showroom at 1385 Broadway in New York City and is continually  seeking to design
and market new products.

Supplies and Inventory

     USAC  purchases all of its fabrics and non-fabric  sub-materials  (zippers,
buttons,  and trimmings) directly from the subcontractor which sews the garments
and  purchases  only so much as is required to fill orders  placed with it. USAC
has found that this process is the most  cost-effective  means of operating  its
business  and expects to continue its  operations  in this manner in the future,
though it may use other or additional manufacturers. Although management of USAC
is of the  opinion  that the fabrics and  non-fabric  sub-materials  it uses are
readily  available and that there are numerous  manufacturers for such goods who
offer similar  terms and prices,  there can be no assurance  that  management is
correct  in such  belief.  The  unavailability  of  fabrics  or the  absence  of
clothiers,  or the availability of either at unreasonable  cost, could adversely
affect the operations of USAC and, hence, the Company.

     Since  USAC   purchases   only   finished   garments   from  the   overseas
subcontractor,  it  does  not  buy  or  maintain  an  inventory  of  fabrics  or
sub-materials.  While USAC has not experienced difficulty in satisfying finished
garment  requirements and considers its source of supply adequate,  there can be
no  assurance  that such supply will  continue to be  available  or that it will
continue to be available on terms or at prices USAC deems reasonable.

Quality Control

     USAC conducts  limited  quality control in Honduras to ensure that finished
goods meet  USAC's  standards.  A 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 department stores in
the United States such as K-Mart,  Conway,  and Ross.  Sales to K-Mart accounted
for  approximately  92% and 82% of USAC's  revenues for the year ended March 31,
1999 and the six month  transition  period ended March 31,  1998,  respectively.
USAC bills its clients on a net 30-day basis.  Late or  non-payment  could cause
material adverse effects on USAC's cash flow and operations,  especially since a
large portion of USAC's sales are to one customer.

     USAC does not sell on  consignment  and does 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  generally  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. At
March 31, 1999, USAC had no unfilled purchase orders.

Financing

     USAC bills its clients on a net 30-day  basis.  Although it is customary in
the  garment  industry to finance  receivables  through  "factoring"  (financing
secured by the accounts receivable of the borrower's  customers),  USAC does not
factor any of its receivables.  Although USAC has no present intention to do so,
it may rely on factoring to finance future operations.


<PAGE>
Competition

     There  is  intense  competition  in the  apparel  industry.  USAC  designs,
manufactures,  and  markets a line of  T-shirts  and polo  shirts to  department
stores and competes with many other  manufacturers in this market, many of which
are larger and have greater  financial and other resources than USAC.  There are
relatively  insignificant  barriers  to entry in the  business  in which USAC is
engaged and numerous companies compete for the same customers. USAC 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 USAC. In addition,  many large retailers have commenced sales
of "store  brand"  garments  which  compete with those sold by USAC.  Management
believes that USAC'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.  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.  Since USAC
advertises  only  via  its  showroom  presentation,  it has no  agreements  with
department stores or national retail chains to advertise any of its products.

Business of Play Co. Toys & Entertainment Corp.

     Play Co., a Delaware  corporation,  was  founded  in 1974 and  operates  an
aggregate  of  twenty-six  stores  throughout  Southern  California  (in the Los
Angeles,  Orange, San Diego, Riverside,  and San Bernardino Counties) and in (i)
Tempe,  Arizona, (ii) Las Vegas, Nevada, (iii) Dallas, Texas, (iv) Auburn Hills,
Michigan, and (v) Chicago,  Illinois.  Play Co. intends to expand its operations
geographically  and in  accordance  therewith  has  executed  leases to open ten
additional stores by the end of calendar year 2000.

     Approximately  75% of Play Co.'s stores offer  educational,  new electronic
interactive,  and  specialty  and  collectible  toys and  items for sale and are
strategically  located in highly  trafficked,  upscale malls.  The remaining 25%
sell traditional toys and games and are located in strip shopping centers. Given
the  favorable  results  obtained  from a two  year  market  test of the sale of
children's  swimwear in its stores,  Play Co. recently  expanded its product mix
and now offers a limited number of children's  swimwear and accessories for sale
in many of its stores.

     Since 1997,  Play Co. has embraced and  implemented  a new store design and
layout,  remodeled most of its older stores, closed  non-profitable  stores, and
expanded its  geographic  market from  exclusively  Southern  California  to the
mid-western  United States.  Since 1996,  Play Co. has opened eight stores which
are  considered  by  management  to be  high-end  retail  toy  and  educational,
electronic interactive stores. These outlets, and those Play Co. expects to open
in the future,  offer items comparable in quality and choice to those offered by
FAO  Schwarz,  Warner  Brothers,  and Disney  Stores and are expected to attract
clientele similar to those attracted by such stores.

     In April 1999,  Play Co.  debuted the first of three  dedicated  electronic
commerce websites. This site,  www.ToysWhyPayRetail.com,  represents a new trade
name and allows  consumers to purchase,  at near wholesale  prices,  overstocks,
special buys, and overruns on mostly  name-brand  toys purchased by Play Co. out
of  season.  Play Co.  plans to offer  approximately  1000 items for sale on the
website.  The second electronic commerce website,  www.Playco.com,  is currently
being developed to a  state-of-the-art  standard in conjunction with an Internet
consulting  firm.  This second site,  which will offer  collectible and imported
specialty  merchandise such as die-cast cars,  dolls,  plush toys,  trains,  and
collectible  action  figures,  is  expected  to open in the  fall  of  1999.  In
conjunction with the website launch,  Play Co. plans to place computer kiosks in
its retail locations in order to permit customers to place orders on the website
for goods otherwise not sold in such stores.

     Because  Play  Co.'s new and newly  remodeled  stores  focus on the sale of
educational and electronic  interactive games and toys, specialty products,  and
collector's  toys which  generally  carry higher gross margins than  traditional
toys,  such stores have shown and are  expected to continue to show higher gross
profits than Play Co.'s older  stores  (which  focused  primarily on the sale of
traditional toys).

Employees

     As of July 30,  1999,  the Company,  including  USAC,  had three  executive
officers and no employees.

ITEM 2. PROPERTIES

     Until April 1998, the Company, along with United Textiles, subleased 20,000
square feet of industrial space at 448 West 16th Street,  New York, New York, at
an  approximate  rate of $12,500  per  annum.  It is at this  location  that the
Company housed its  administrative  offices,  factory,  and warehouse.  In April
1998, in connection with United Textiles'  cessation of its textile  operations,
the  Company  and  United  Textiles  moved its  administrative  offices  to 1410
Broadway,  Suite 1602,  New York,  New York 10018 and vacated its former office,
factory,  and warehouse space at 448 West 16th Street.  The office space at this
location was leased to USAC (a subsidiary of Multimedia,  the Company's parent),
and  pursuant  to an oral  agreement  with USAC,  neither the Company nor United
Textiles paid  remuneration for their use of the premises.  The President of the
Company is also the president of USSC and United Textiles.


<PAGE>
     On July 1, 1999,  the Company  vacated 1410  Broadway and  relocated,  with
United  Textiles  and USAC (the named  tenant on the lease),  to 1385  Broadway,
Suite 814, New York,  New York 10018.  Pursuant to an oral  agreement with USAC,
neither the Company nor United  Textiles  pays  remuneration  for its use of the
premises.

ITEM 3. LEGAL PROCEEDINGS

     Neither the Company's officers, directors, affiliates, nor owners of record
or beneficially  of more than five percent of any class of the Company's  Common
Stock is a party to any  material  proceeding  adverse  to the  Company or has a
material interest in any such proceeding adverse to the Company or its parent or
subsidiary.

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

         None.


<PAGE>
                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The Company's  securities  were quote on the Nasdaq  SmallCap  Stock Market
until  they were  delisted  in March  1997.  Since  April  1997,  the  Company's
securities have been quoted on the OTC Bulletin Board.  The following table sets
forth  representative  high and low bid quotes as reported  by the OTC  Bulletin
Board whereon the Company's  securities  are quoted,  during the periods  stated
below  (quotes  prior to April 1997 are  reported  by  Nasdaq).  Bid  quotations
reflect prices between dealers, do not include resale mark-ups,  mark-downs,  or
other fees or commissions, and do not necessarily represent actual transactions.
<TABLE>
<CAPTION>

                                                                 Common Stock                               Public Warrants

Calendar Period                                         Low                      High                Low                  High



              1997

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



              1998

01/01/98 - 03/31/98                                      1/8                      7/16

04/01/98 - 06/30/98                                     5/64                      9/16

07/01/98 - 09/30/98                                     0.26                      0.34

10/01/98 - 12/31/98                                    0.125                      0.26



              1999

01/01/99 - 03/31/99                                     0.12                      1.75

04/01/99 - 06/30/99                                     0.16                      0.34

07/01/99 - 07/31/99                                     0.19                      0.28

</TABLE>

     (1) There was no market for the Company's warrants from April 8, 1997 until
their  expiration on November 8, 1997, and no warrants were  exercised  prior to
expiration.

     As of July 30, 1999,  there were  approximately 51 holders of record of the
Company's   Common  Stock,   although  the  Company   believes  that  there  are
approximately  1200 additional  beneficial owners of shares of Common Stock held
in street name.  As of July 30, 1999,  the number of  outstanding  shares of the
Company's Common Stock was 3,005,000.

Recent Sales of Unregistered Securities

     The Company sold no  unregistered  securities  during the fiscal year ended
March 31, 1999.



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

     Statements  contained in this report which are not historical  facts may be
considered forward looking  information with respect to plans,  projections,  or
future  performance  of the  Company as  defined  under the  Private  Securities
Litigation  Reform Act of 1995. These forward looking  statements are subject to
risks and  uncertainties  which could cause actual results to differ  materially
from those projected.

     The following  table  summarizes  certain  selected  financial  data and is
qualified in its entirety by the more detailed  financial  statements  contained
elsewhere in this document:
<TABLE>
<CAPTION>

                                                                 March 31,                  March 31,
                                                                   1999                     1998
                                                                                            Restated
Balance Sheet Data:

<S>                                                                 <C>                            <C>
Working capital                                                     $3,419,711                     $6,085,868

Total assets                                                        23,599,316                     15,750,583

Total current liabilities                                           12,119,228                       4,411,870

Long-term obligations                                                 8,527,116                      7,055,549

Stockholders' equity                                                  1,949,272                      2,303,042



Operating data:



Net sales                                                          $37,791,421                     $15,869,731

Cost of sales                                                        21,801,832                     10,897,966

Total operating expenses                                             14,737,247                      6,251,399

Net income (loss)                                                      (353,770)                    (5,119,298)

Income (loss) per common share                                                  (.12)                       (1.17)

Weighted average shares outstanding                                   3,005,000                     3,005,000
</TABLE>


Results of Operations

     In May 1998,  the Company's  Board of Directors  voted to change the end of
the Company's  fiscal year from September  30th to March 31st. The  accompanying
consolidated  financial  statements  as of March 31, 1998 reflect the results of
operations for the six months ended March z31, 1998. Consequently, the following
management discussion covers the year ended March 31, 1999 only.

     The consolidated  financial  statements contained herein for the year ended
March 31, 1999 and the six months ended March 31, 1998 in this document  reflect
the  operations  of  the  Company's   wholly-owned   subsidiary,   U.S.  Apparel
Corporation ("USAC"), and the Company's 78.5% owned subsidiary,  United Textiles
& Toys  Corp.  ("United  Textiles"),  as well as United  Textiles'  45.2%  owned
subsidiary, Play Co. Toys & Entertainment Corp. ("Play Co.")

For the year ended March 31, 1999:

     Consolidated net sales for the year ended March 31, 1999 were  $37,791,421.
This  represented the  consolidated net sales of the Company which was comprised
of the following components:

U.S. Apparel                                        $3,413,581
Play Co.                                            34,371,230
United Textiles                                          6,610
                                                   $37,791,421



     At the end of March 1999, Play Co. had 25 retail locations,  compared to 19
retail  locations  at the end of March 1998.  During the fiscal year ended March
31, 1999, Play Co. opened six new stores.

     Consolidated  cost of sales were  $21,801,832  for the year ended March 31,
1999. The component breakdown of this item was as follows:

U.S. Apparel                                        $2,211,048
Play Co.                                            19,590,784
                                                   $21,801,832



<PAGE>
     Consolidated  operating  expenses (total operating expenses less litigation
related  expenses and depreciation  and  amortization)  were $13,722,541 for the
year ended March 31, 1999.

     Play Co. incurred $27,659 of litigation  related expenses in the period. In
1998,  Play Co. closed five store  locations.  Play Co.  settled the  litigation
relating to four of the five closed  locations.  Play Co.  remains in litigation
regarding the fifth closed store,  and the expenses  incurred  through March 31,
1999 relate to the fifth store.

     Depreciation and amortization  expense in the year ended March 31, 1999 was
$987,047.  Total interest  expense amounted to $965,051 for the year ended March
31, 1999.

     For the year ended March 31, 1999,  subsequent  to the  adjustment  for the
minority  interest in the net losses of  subsidiaries,  the  Company  reported a
consolidated net loss of $353,770, or $.12 per common share.



Liquidity and Capital Resources

     At March 31, 1999,  consolidated working capital was $3,419,711 as compared
to a working  capital of $6,085,868 at March 31, 1998.  For the year ended March
31, 1999,  consolidated operating activities contributed funds of $293,584. Cash
used for  investing  activities  for the year ended March 31,  1999  amounted to
$2,802,634.

     Consolidated  financing activities generated funds of $1,984,958 during the
year ended March 31, 1999.  The primary  elements in the generation of financing
funds were net  borrowings  under a new financing  agreement by Play Co. and net
proceeds received by Play Co. from notes payable.

     As a result,  consolidated  net cash decreased from $1,635,058 at March 31,
1998 to $1,110,966 at March 31, 1999.

Trends Affecting Liquidity, Capital Resources and Operations

     As a result of its planned  merchandise  mix change to emphasize  specialty
and educational toys, Play Co. enjoyed significant  increases in sales and gross
profits in the year ended March 31, 1999.  While Play Co.  believes that its new
product mix will remain  popular with the consumer  market for the  remainder of
1999,  there can be no assurance that this growth will continue.  The history of
the toy industry  indicates  that there is generally at least one highly popular
toy every year.

     Play Co.'s  sales  efforts are focused  primarily  on a defined  geographic
segment consisting of the Southern  California area and the Southwestern  United
States.  Play Co.'s  future  financial  performance  will depend upon  continued
demand for toys and hobby items and on the general  economic  conditions  within
that geographic market area, its ability to choose locations for new stores, its
ability to purchase  product at favorable prices and on favorable terms, and the
effects of increased competition and changes in customer preferences.

     The toy and hobby retail  industry  faces a number of  potentially  adverse
business  conditions  including  price and gross  margin  pressures  and  market
consolidation.   Play  Co.  competes  with  a  variety  of  mass  merchandisers,
superstores,  and  other  toy  retailers,  including  Toys R Us and  Kay Bee Toy
Stores. Competitors that emphasize specialty and educational toys include Disney
Stores,  Warner Bros.  Stores,  Learning Smith,  Lake Shore,  Zainy Brainy,  and
Noodle  Kidoodle.  Play Co. also competes both through its  electronic  commerce
operations and through its stores against  Internet  oriented toy retailers such
as eToys,  Inc. There can be no assurance that Play Co.'s business strategy will
enable it to compete effectively in the toy industry.

Seasonality

     Play Co.'s operations are highly seasonal with approximately  30-40% of its
sales falling within the third quarter which  encompasses the Christmas  selling
season.  Play Co. intends to open new stores  throughout the year, but generally
before the Christmas selling season,  which will make the third quarter sales an
even greater percentage of the total year's sales.

Impact of Inflation

     The impact on consolidated  results of operations has not been significant.
Play Co. attempts to pass on increased product prices over time.

Year 2000

     The Company does not believe that the Year 2000 computer  issue will have a
significant  impact on its  operations  or financial  position and thus does not
believe that it will be required to significantly  modify its internal  computer
systems.   However,   if  internal  systems  do  not  correctly  recognize  date
information  when the year changes to 2000,  there could be an adverse impact on
the Company's operations.  Furthermore,  other entities' failures to ensure year
2000  capability may have an adverse  effect on the Company via its  subsidiary,
Play Co.


<PAGE>
     In 1998,  Play Co.  developed  a plan to upgrade  its  existing  management
information system and computer hardware and to become year 2000 compliant. Play
Co. has completed the hardware  upgrade and has installed a year 2000  compliant
upgrade  to its  accounting  software.  It  expects  to  finish  the  year  2000
compliance work in the September  quarter of 1999.  Beyond this issue,  Play Co.
has no current  knowledge of any outside third party year 2000 issues that would
result in a material  negative  impact on its  operations.  It has  reviewed its
significant  vendors' and financing arm's recent SEC filings vis-a-vis year 2000
risks and uncertainties  and, on the basis thereof,  is confident that the steps
it has taken to become year 2000 compliant are  sufficient.  In  continuation of
this review, Play Co. shall continue to monitor or otherwise obtain confirmation
from the  aforesaid  entities  - and such other  entities  as  management  deems
appropriate - as to their respective  degrees of preparedness.  To date, nothing
has come to the  attention  of Play Co.  that would lead it to believe  that its
significant  vendors and/or service  providers will not be year 2000 ready.  The
effect,  if any, of year 2000  problems on Play Co.'s  results of  operations if
Play Co. or its customers, vendors, or service providers are not fully compliant
cannot be estimated  with any degree of certainty.  It is  nonetheless  possible
that year 2000  problems  could have a material  adverse  effect in that holiday
1999 purchases may be stunted due to consumer  uncertainty  and that the overall
business environment may be disrupted in Play Co.'s fourth fiscal quarter, which
in turn, would have a material adverse effect on the Company.

<PAGE>
ITEM 7. FINANCIAL STATEMENTS

     See attached Financial Statements.

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

     On May 14,  1997,  the  Company  and Lazar,  Levine & Company  LLP  ("LLC")
mutually  agreed  that LLC  would  no  longer  be the  Company's  auditors.  The
resignation of LLC was not due to any discrepancies or disagreements between the
Company and same on any matter of accounting principles or practices,  financial
statement  disclosure,  or auditing  scope or  procedure,  as there were no such
discrepancies  or  disagreements.  There  were no  disagreements  during the two
fiscal years ended  September 30, 1997 and 1996 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, 1997 and 1996  contained an  explanatory
paragraph addressing the Company's ability to continue as a going concern.

     On July 1, 1997, the Company's board of directors  authorized the Company's
executive  officers to engage Jerome  Rosenberg,  CPA, P.C. as the Company's new
auditing  firm for the year ending  March 31,  1997.  Prior to  engaging  Jerome
Rosenberg,  CPA,  P.C.,  such  accounting  firm was not consulted on any matters
relative to the application of accounting  principles on specified  transactions
or in any  matter  that  was  the  subject  of a  disagreement  with  the  prior
accountants.

     During the past two fiscal years and during the  transition  report for the
period  October 1, 1997 through  March 31, 1998, no  accountant's  report on the
Company's  financial  statements  contained any adverse opinion or disclaimer of
opinion  or  was  modified  as  to  uncertainty,   audit  scope,  or  accounting
principles.



<PAGE>
                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS

Officers and Directors

     The following table sets forth the names, ages, and titles of all directors
and officers of the Company:
<TABLE>
<CAPTION>

Name                            Age                  Position

<S>                             <C>                  <C>
Ilan Arbel                      46                   Chief Executive Officer, President, and Director

Rivka Arbel                     47                   Vice President and Director

Yair Arbel                      51                   Director


</TABLE>

     All  directors   are  elected  at  an  annual   meeting  of  the  Company's
shareholders  and hold  office for a period of one year or until the next annual
meeting  of  stockholders  or  until  their  successors  are  duly  elected  and
qualified.  Vacancies on the board of directors  may be filled by the  remaining
directors.  Officers are appointed  annually by, and serve at the discretion of,
the board of directors.  There are no family relationships  between or among any
officers  or  directors   of  the  Company   except  that  Rivka  Arbel  is  the
sister-in-law of Ilan Arbel and Moses Mika is the father of Mr. Arbel.

     As permitted  under the Delaware  General  Corporation  Law, the  Company's
Certificate of Incorporation  eliminates the personal liability of the directors
to the Company or any of its shareholders for damages caused by breaches of said
directors' fiduciary duties. As a result of such provision,  stockholders may be
unable to  recover  damages  against  directors  for  actions  which  constitute
negligence or gross  negligence or are in violation of their  fiduciary  duties.
This  provision in the Company's  Certificate  of  Incorporation  may reduce the
likelihood of derivative,  and other types of  shareholder,  litigation  against
directors.

     Ilan Arbel was the president, secretary, and a director of the Company from
inception  until June 12, 1995.  He was  reelected a director in August 1995 and
president  in May  1996.  Mr.  Arbel  has been the  president,  chief  executive
officer,  and a  director  of United  Textiles  since  1991.  Mr.  Arbel was the
president,  chief executive officer,  and a director of Atoys from February 1993
until July 1993 at which time he resigned as president  thereof.  In March 1995,
Mr.  Arbel was  reelected  president  of Atoys,  a  position  he held,  with his
directorship,  until July 1996. Since its inception, in February 1997, Mr. Arbel
has been the president and a director of USAC.  From May 1993 to April 1997, Mr.
Arbel  was a  director  of Play  Co.  (from  June  1994  until  his  April  1997
resignation,  he was  chairman).  Since 1989,  he has been the sole  officer and
director of Europe America Capital Corp., a company  involved in investments and
finance in the United  States and Europe.  Since 1993, he has been the president
of European Ventures Corp., a company involved in investments and finance in the
United States and Europe.  Mr. Arbel is a graduate of the University Bar Ilan in
Israel and has 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,  Mrs.
Arbel  resigned as an officer of the Company.  Mrs. Arbel was re-elected as vice
president in May 1997.  From 1992 to present,  Mrs. Arbel has been a director of
United  Textiles.  Since 1986,  Mrs.  Arbel has been president and a director of
Amigal,  Ltd., a producer of men's and women's wear in Israel. Mrs. Arbel is the
wife of Yair Arbel.

     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 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.


<PAGE>
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 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.

     No person ("a Reporting Person") who during the fiscal year ended March 31,
1999 was a director,  officer,  or beneficial  owner of more than ten percent of
the  Company's  Common  Stock or Series E Stock  [which are the only  classes of
equity  securities  of the  Company  registered  under  ss.12 of the  Securities
Exchange  Act of 1934],  failed to file on a timely  basis  reports  required by
ss.16 of the Act during the most  recent  fiscal  year  except as  follows:  all
officers  and  directors  failed to file Forms 5 (and its  parent  corporations)
failed  to file  Forms 4. The  foregoing  is based  solely  upon a review by the
Company of (i) Forms 3 and 4 during the most recent  fiscal year as furnished to
the  Company  under Rule  16a-3(e)  under the Act,  (ii) Forms 5 and  amendments
thereto  furnished to the Company  with respect to its most recent  fiscal year,
and (iii) any  representation  received by the Company from any reporting person
that no Form 5 is required, except as described herein.

ITEM 10. EXECUTIVE COMPENSATION

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 or paid
by the  Company  during  (i) the  fiscal  year ended  March 31,  1999,  (ii) the
transition  period  October 1, 1997 through March 31, 1998, and (iii) the fiscal
year ended  September  30, 1997 to each of the named  executive  officers of the
Company.
<TABLE>
<CAPTION>

                                                   SUMMARY COMPENSATION TABLE

                                         Annual Compensation                              Long-Term Compensation



Name and
Principal Position   Year                                           Awards                         Payouts

                                                                             Securities
                                                  Other       Restricted     Underlying                    All Other
                                                  Annual      Stock          Options/          LTIP        Compensation
                                                  Compen      Award(s)       SARs              Payouts
                         Salary     Bonus         -sation($)    ($)
                           ($)      ($)(1)
<S>                  <C>    <C>         <C>        <C>           <C>            <C>            <C>            <C>
Ilan Arbel (2) ...   1999   --          --         --            --             --             --             --
  President,  CEO,
 And Director
                     1998   --          --         --            --             --             --             --
                     1997   --          --         --            --             --             --             --
</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 "Employment Agreements."

     (2) See "Employment Agreements."

Employment and Consulting 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 Mr.  Arbel an option to  purchase  1,900,000  warrants  at $0.04 per
warrant,  identical  to the warrants  sold by the Company in its initial  public
offering. The option was exercisable at $7.00 per share. 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 of  directors  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 and
Mr.  Arbel  amended the  compensation  agreement  and  terminated  the option to
purchase  200,000 shares of Common Stock and in lieu thereof issued an option to
purchase  1,000,000  warrants  for a purchase  price of $0.04 per  warrant,  the
warrants  bearing  an  exercise  price of $7.00 per  share.  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.


<PAGE>
     In May 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,  payable  either in cash or other  securities,  whereupon Mr.
Arbel  owed  the  difference  between  the  price he paid  for  warrants  he had
purchased  previously  ($0.04) and this new purchase price  ($1.90).  In October
1997,  the Company and Mr. Arbel agreed to increase the option price to purchase
the warrants to $2.50 per warrant,  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. As payment of the debt, Mr. Arbel, through certain
affiliates,  transferred  to the Company an aggregate of 803,070  shares of Play
Co. Series E preferred stock, each share of which is convertible into six shares
of Play Co.  common  stock at the  option  of the  holder,  subject  to  holding
periods.

     In April 1999, USAC entered into a verbal consulting  agreement with Yu Jin
International,  Inc. ("Yu Jin") pursuant to which Yu Jin oversees the day to day
production of garments and operating activities of USAC's subcontractor.  During
the 1st fiscal  quarter of 2000,  USAC remitted  $51,800 to Yu Jin in accordance
with the terms of the aforesaid agreement.From 1992 to October 1998, the Company
and its subsidiaries  were provided  consulting  services from Westside Apparel.
During the fiscal year ended March 31, 1999,  Westside Apparel was paid $110,367
in  consulting  fees,  inclusive  of a profit  percentage,  pursuant to its oral
agreement with USAC.

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 either  the  Company or its  subsidiary(ies)  or who
render significant services to the Company or its subsidiary(ies). To enable the
Company  to  attract  and  retain  qualified  personnel  without   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 president 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.  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.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following  table sets forth certain  information  regarding  beneficial
ownership of the Company's  outstanding Common Stock as of July 31, 1999, by (i)
each beneficial owner of 5% or more of the Company's Common Stock,  (ii) each of
the Company's executive officers,  directors,  and key employees,  and (iii) all
executive officers, directors, and key employees as a group:



<PAGE>
<TABLE>
<CAPTION>
                   Name and Address                                Number of Shares             Percent of Common Stock
                 of Beneficial Owner                             Beneficially Owned1             Beneficially Owned2


U.S. Stores Corp.
1385 Broadway, Suite 814
<S>                 <C>                                               <C>                                      <C>
New York, New York  10018                                             2,033,155                                67.7%

Ilan Arbel (3)
c/o United Textiles & Toys Corp.
1385 Broadway, Suite 814                                              2,033,155                                67.7%
New York, New York  10018

American Telecom, PLC (4)
8-13 Chiswell Street                                                  2,033,155                                67.7%
London EC 1Y 4UP

Europe American Capital Foundation (5)
Box 47
Tortola British Virgin Islands                                        2,033,155                                67.7%

Yair Arbel
c/o United Textiles & Toys Corp.
c/o United Textiles & Toys Corp.                                          --                                     --
1385 Broadway, Suite 814
New York, New York  10018

Rivka Arbel
c/o United Textiles & Toys Corp.
1385 Broadway, Suite 814                                                  --                                     --
New York, New York  10018

Officers and Directors as a Group
(4 persons)                                                               --                                     --
</TABLE>

<PAGE>
(footnotes from previous page)

     (1) Unless otherwise noted, all of the shares shown are held by individuals
or entities  possessing  sole voting and  investment  power with respect to such
shares.  Shares not outstanding but deemed  beneficially  owned by virtue of the
right of an individual or entity to acquire them within 60 days,  whether by the
exercise of options or  warrants,  are deemed  outstanding  in  determining  the
number of shares beneficially owned by such person or entity.

(2)  The "Percent of Common Stock Beneficially  Owned" is calculated by dividing
     the  "Number  of  Shares  Beneficially  Owned"  by the sum of (i) the total
     outstanding  shares of Common Stock of the Company,  and (ii) the number of
     shares of Common  Stock that such person or entity has the right to acquire
     within 60 days, whether by exercise of options or warrants. The "Percent of
     Common Stock Beneficially Owned" does not reflect shares beneficially owned
     by virtue of the  right of any  person,  other  than the  person  named and
     affiliates  of said  person,  to acquire  them  within 60 days,  whether by
     exercise of options or warrants.

     (3) Ilan Arbel is the  president  and a director of each of USSC, a private
company which is the parent of the Company  (owning  67.7% of same),  and United
Textiles,  a publicly traded company which is a subsidiary of the Company (owned
78.5% by same) and, therefore, can control the voting of the shares held by such
entities.

     (4) ATPLC is a British  corporation and the parent of USSC,  owning 100% of
same, and accordingly is a beneficial  owner of the shares of Common Stock owned
by USSC

     (5) EACF is a Swiss foundation and the parent of ATPLC, owning 80% of same,
and  accordingly  is a  beneficial  owner of the shares of Common Stock owned by
ATPLC.

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 and Consulting
Agreements."

     From  October 1995 to September  1997,  the Company  loaned an aggregate of
$1,276,235  to United  Textiles.  On  January 2, 1998,  the  Company  was issued
3,571,429  shares of common  stock of United  Textiles,  a company of which Ilan
Arbel is President,  Chief Executive Officer, and a Director, at a price of $.28
per share as payment for $1 million loaned by the Company to United Textiles. As
a result of the transaction, the Company owns 78.5% of the outstanding shares of
common stock of United Textiles, effectively making United Textiles a subsidiary
of the Company.  Because United Textiles owns 45.2% of the outstanding shares of
common stock of Play Co.,  the Company and its  management  obtained  beneficial
voting control of Play Co. through this transaction

     On January 20, 1998, USSC, a company which was incorporated on November 10,
1997, acquired 1,465,000 shares of the Company's Common Stock of which 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. After this transaction, USSC 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 USSC. Since
then,  USSC has acquired an additional  165,155  shares of the Company's  Common
Stock on the open  market,  rendering  the Company a 67.7% owned  subsidiary  of
same.

     In April 1998,  American  Telecom,  exchanged  all its  outstanding  common
shares and all of the  outstanding  shares of its wholly owned  subsidiary  USSC
with ATPLC, a publicly traded company in Great Britain.  After this transaction,
both American Telecom and USSC became wholly owned subsidiaries of ATPLC.

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>
Report of Independent Certified Public Accountant                               F-1

Consolidated Balance Sheets as of March 31, 1999                                F-2

Consolidated Statements of Operations for the year ended March 31, 1999
and the six months ended March 31, 1998                                         F-4

Consolidated Statement of Changes in Stockholders' Equity for the two
years in the period ended March 31, 1999                                        F-5

Consolidated Statements of Cash Flows for the year ended March 31, 1999
and the six months ended March 31, 1998                                         F-6

Notes to Financial Statements                                                   F-8
</TABLE>


<PAGE>
     (b) During its last fiscal 1999 quarter, the Company filed no Forms 8-K.

     (c) All exhibits,  except those  designated  with an asterisk (*) which are
filed  herewith  have  previously  been  filed  with the  Commission  either  in
connection  with the  Company's  Registration  Statement  on Form  SB-2  or,  as
indicated  by the  reference  herein and  pursuant to 17  C.F.R.ss.230.411,  are
incorporated by reference herein.  Exhibits  previously filed but not as part of
the SB-2  Registration  Statement  are  incorporated  herein by reference to the
appropriate document.
<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
3.8(a)                Second Amendment to Certificate of Incorporation of the Company, filed in June 1996
3.9                   Certificate of Incorporation of U.S. Apparel  Corp.
4.1                   Specimen Common Stock Certificate.
10.1                  The Company Senior Management Incentive Plan.
27.1*                 Financial Data Schedule
</TABLE>
<PAGE>
            MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES



                                TABLE OF CONTENTS

                        March 31, 1999 and March 31, 1998
<TABLE>
<CAPTION>



                                                                                                          Page

<S>                                                                                                         <C>
Report of Independent Certified Public Accountant                                                         F-1

Consolidated Financial Statements:

         Consolidated Balance Sheets as of March 31, 1999 and March 31, 1998                              F-2

         Consolidated Statements of Operations for the year ended March 31, 1999
         and the  six months ended March 31, 1998                                                         F-4

         Consolidated Statement of Changes in Stockholder's Equity for the year
         ended March 31, 1999 and the six months ended March 31, 1998                                     F-5

         Consolidated Statements of Cash Flows for the year ended March 31, 1999
         and the six months ended March 31, 1998                                                          F-6

Notes to Financial Statements                                                                             F-8
</TABLE>










<PAGE>
                REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT


Board of Directors
Multimedia Concepts International, Inc.

     We have audited the accompanying  consolidated balance sheets of Multimedia
Concepts  International,  Inc. as of March 31, 1999 and March 31, 1998,  and the
related statements of operations,  stockholders'  equity, and cash flows for the
year ended March 31, 1999 and the six months ended March 31, 1998.

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

     In our opinion,  the financial statements referred to above present fairly,
in  all  material  aspects,   the  financial  position  of  Multimedia  Concepts
International,  Inc at March 31, 1999 and March 31, 1998,  and the result of its
operations  and its cash  flows for the year  ended  March 31,  1999 and the six
months ended March 31, 1998 in conformity  with  generally  accepted  accounting
principles.


Melville, New York
June 30, 1999







                                       F-1


<PAGE>
            MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                     As of March 31, 1999 and March 31, 1998
<TABLE>
<CAPTION>

                                                  March. 31,     March 31,
                                                     1999          1998


                           ASSETS (Note 10) (Note 3o)


CURRENT ASSETS:
<S>                               <C>           <C>           <C>
  Cash and cash equivalents (Note 3c) .......   $ 1,110,966   $ 1,635,058
  Restricted certificate of deposit (Note 7)        350,000       250,000
  Accounts receivable .......................       692,266       404,288
  Advances to supplier ......................       474,572          --
  Inventories (Note 3d) .....................    11,595,284     7,929,061
  Prepaid expenses and other current assets .     1,315,851       189,516
  Loans and advances - affiliate ............          --          89,815
  Loans and advances - officer ..............          --            --

          Total current assets ..............    15,538,939    10,497,738
                                                -----------   -----------

PROPERTY AND EQUIPMENT - NET (Notes 2f and 9)     5,350,285     2,782,386
                                                -----------   -----------

OTHER ASSETS:
Restricted certificate of deposit (Note 7) ..     2,000,000     2,000,000
Due from affiliates .........................       136,662          --
Advances to equity affiliate (Note 1) .......       140,000       140,000
Deposits and other assets (Note 10) .........       433,430       330,459
                                                -----------   -----------

          Total assets ......................   $23,599,316   $15,750,583
                                                ===========   ===========





</TABLE>











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


                                       F-2


<PAGE>
            MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                     As of March 31, 1999 and March 31, 1998
<TABLE>
<CAPTION>

                                                                                     March. 31       March 31,
                                                                                        1999           1998

                                                                                                     (Note 3o)

                      LIABILITIES AND STOCKHOLDERS' EQUITY


CURRENT LIABILITIES:
<S>                                                                                <C>             <C>
Accounts payable ...............................................................   $  9,653,563    $  3,181,317
Accrued expenses and other current liabilities .................................        689,580         880,553
Current portion of notes payable (Note 12) .....................................      1,125,000         350,000
Due to affiliates ..............................................................        423,888            --
Current portion of capital lease obligation ....................................        227,197            --

     Total current liabilities .................................................     12,119,228       4,411,870
                                                                                                   ------------

LONG-TERM LIABILITIES:
  Borrowings under financing agreement (Note 10) ...............................      7,814,666       5,445,198
  Note payable, net of current portion (Note 12) ...............................           --         1,500,000
  Deferred rent liability ......................................................        126,769         110,351
  Current lease obligations, net of current portion ............................        585,681            --

          Total long-term liabilities ..........................................      8,527,116       7,055,549

          Total liabilities ....................................................     20,646,344      11,467,419
                                                                                                   ------------

MINORITY INTEREST IN SUBSIDIARIES ..............................................      1,003,700       1,980,122
                                                                                                   ------------

STOCKHOLDERS' EQUITY:
Common stock, $.001 par value;  10,000,000 shares  authorized;  3,005,000 shares
   issued and outstanding at March 31, 1999 and
   March 31, 1998 respectively .................................................          3,005           3,005
  Additional paid-in capital ...................................................     13,102,005      13,102,005
  Retained earnings (Deficit) ..................................................    (11,155,738)    (10,801,968)
                                                                                   ------------    ------------

          Total stockholders' equity ...........................................      1,949,272       2,303,042
                                                                                   ------------    ------------

          Total liabilities and stockholders' equity ...........................   $ 23,599,316    $ 15,750,583
                                                                                   ============    ============

</TABLE>


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

                                       F-3


<PAGE>
             MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

                                                                                    Year Ended    Six Months Ended
                                                                                     March 31,        March 31,
                                                                                       1999             1998
                                                                                                     Restated
                                                                                                     (Note 3o)

<S>                                                                                 <C>             <C>
Net sales .......................................................................   $ 37,791,421    $ 15,869,731

Cost of sales ...................................................................     21,801,832      10,897,966
                                                                                    ------------    ------------

Gross profit ....................................................................     15,989,589       4,971,765
                                                                                                    ------------
Operating expenses:
Operating expenses ..............................................................     13,722,541       5,272,210
     Litigation related expenses (Note 13) ......................................         27,659         583,541
     Depreciation and amortization ..............................................        987,047         395,648
                                                                                    ------------    ------------

               Total operating expenses .........................................     14,737,247       6,251,399
                                                                                    ------------    ------------

               Operating  income (loss) .........................................      1,252,342      (1,279,634)
                                                                                                    ------------

               Other income:
                          Interest and other income .............................         90,242          12,500
               Other expenses:
                          Loss on investment ....................................           --      -(4,221,490)
                                                                                       1,342,584      (5,488,624)
Interest expense: (Note 10)
               Interest and finance charges .....................................        796,202          96,256
               Amortization of debt issuance costs ..............................        168,849         288,645
                                                                                    ------------    ------------

               Total interest expense ...........................................        965,051         384,901
                                                                                    ------------    ------------

             Income (loss) before the effect of non-cash dividends on
   convertible preferred stock and minority interest ............................        377,533      (5,873,525)

           Effect of non-cash dividends on convertible preferred stock ..........     (1,707,725)       (273,806)
                                                                                    ------------    ------------

           (Loss) before Minority interests .....................................     (1,330,192)     (6,147,331)

              Minority interest in net (loss) of consolidated subsidiary (Note 6)        976,422       1,028,033
                                                                                    ------------    ------------

           Net (loss) ...........................................................   $   (353,770)   $ (5,119,298)
                                                                                    ============    ============

           (Loss) per basic and diluted common share and share equivalents:
                          Net loss before minority interest .....................   $       (.44)   $      (2.05)
                          Minority interest in net loss .........................            .32             .34
                                                                                    ------------    ------------

           Net (loss) ...........................................................   $       (.12)   $      (1.71)
                                                                                    ============    ============

           Weighted average number of common shares outstanding .................      3,005,000       3,005,000
                                                                                    ============    ============
</TABLE>

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

                                       F-4


<PAGE>
             MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARY

                        STATEMENT OF STOCKHOLDERS' EQUITY
                   For the Years Ended March 31, 1998 restated
                               and March 31, 1999
<TABLE>
<CAPTION>


                                                                              Additional
                                        Common Stock            Paid-In      Accumulated

                                  Shares           Amount       Capital        Deficit

<S>                <C> <C>       <C>          <C>            <C>            <C>
Balance, September 30, 1997      3,005,000    $      3,005   $ 13,102,005   $ (5,682,670)

Net loss for the six months
  Ended March 31, 1998 ....     (5,119,298)

Balance, March 31, 1998 ...      3,005,000           3,005     13,102,005    (10,801,968)

Net loss for the year ended
   March 31, 1999 .........       (353,770)

Balance, March 31, 1999 ...      3,005,000    $      3,005   $ 13,102,005   $(11,155,738)
                              ============    ============   ============   ============


</TABLE>


























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


<PAGE>
            MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENT OF CASH FLOWS

                           Increase (Decrease) in Cash
<TABLE>
<CAPTION>

                                                                                    Year Ended  Six Months Ended
                                                                                      March 31,    March 31,
                                                                                        1999         1998
                                                                                                   Restated
                                                                                                   (Note 3o)

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                                <C>            <C>
Net income (loss) ..............................................................   $  (353,770)   $(5,119,298)
                                                                                                  -----------

Adjustments  to  reconcile  net  loss  to cash  (used)  provided  for  operating
   activities:
   Depreciation and amortization ...............................................       987,047        395,648
   Loss on abandonment of assets ...............................................          --           45,255
   Minority interests in net losses of subsidiaries ............................      (976,422)     1,980,122
Changes in assets and liabilities:
   (Increase) decrease in accounts receivable ..................................      (287,978)       318,824
   (Increase) decrease in advances to supplier .................................      (474,572)        60,000
   (Increase) decrease in Merchandise inventories ..............................    (3,666,223)    (7,862,399)
   (Increase) decrease in prepaid expenses and other current assets ............    (1,126,335)      (189,516)
   (Increase) decrease in deposits and other assets ............................      (102,971)      (330,409)
   Increase in accounts payable ................................................     6,469,363      2,752,033
   Decrease in accrued expenses and liabilities ................................      (190,973)       827,027
   Increase in deferred rent liability .........................................        16,418        110,351
                                                                                   -----------    -----------

          Total adjustments ....................................................       647,354     (1,893,064)
                                                                                   -----------    -----------

          Net cash provided by operating activities ............................       293,584     (7,012,362)
                                                                                                  -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of restricted certificates of deposit .................................      (100,000)    (2,250,000)
Increase in property and equipment .............................................    (2,702,634)    (3,223,288)
Loss on investment .............................................................          --        4,221,490
Loans made and repaid by officer ...............................................          --        1,314,596
                                                                                                  -----------

          Net cash provided by (used for) investing activities .................    (2,802,634)        62,798
                                                                                                  -----------

</TABLE>









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

                                       F-5


<PAGE>
            MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENT OF CASH FLOWS

                           Increase (Decrease) in Cash

<TABLE>
<CAPTION>
                                                           Year Ended   Six Months Ended
                                                            March 31,      March 31,
                                                              1999           1998
                                                                                                                           Restated
                                                                                                                           (Note 3o)


CASH FLOWS FROM FINANCING ACTIVITIES:
<S>                                                        <C>            <C>
  Net borrowings under financing agreement of subsidiary   $ 2,369,468    $ 5,445,198
  Loans and advances-affiliates ........................       377,041      1,276,235
  Proceeds from notes payable ..........................     2,700,000      1,850,000
  Repayment of notes payable ...........................    (3,425,000)          --
  Repayment under capital leases .......................       (36,551)          --

          Net cash provided by financing activities ....     1,984,958      8,571,433
                                                                          -----------

NET INCREASE (DECREASE) IN CASH ........................      (524,092)     1,621,869
Cash, beginning of period ..............................     1,635,058         13,189
                                                                          -----------

Cash, end of period ....................................   $ 1,110,966    $ 1,635,058
                                                                          ===========

Supplemental disclosure of cash flow information:
Interest paid ..........................................   $   965,051    $   384,901
Taxes paid .............................................   $     2,150    $       800

</TABLE>



















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


                                       F-6


<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 Holding 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 the common stock of American
Eagle  Industries  Corp.,  which had acquired 100% of the outstanding  shares of
Match II, Inc.

     In  January  1997,  the  Company  terminated  its  financing  and  business
relationships  with these  subsidiaries.  Both  companies  had ceased  operating
activities in September 1996.

     In January 1997,  the Company also  terminated  all business  relationships
with Multi Media  Publishing  Corp., an  unconsolidated  subsidiary in which the
Company had a 34% interest since June 1995.  This company during this period had
no revenue or operating activities. The Company is seeking the return of certain
funds that it had advanced to Multi Media Publishing Corp.

     In February 1997, the Company  formed a new wholly owned  subsidiary,  U.S.
Apparel Corp. ("U.S.  Apparel"),  which is engaged in the design and manufacture
of a line of T-shirts and other tops,  predominately for men. U.S. Apparel began
operations in January 1997.

     In  January  2,  1998,  the  Company  acquired   3,571,429  shares  of  the
outstanding common stock of United Textiles and Toys Corp. ("United  Textiles"),
a company of which the Company's  President is also  President,  Chief Executive
Officer, and a Director. The issuance of these shares was at a price of $.28 per
share ($.01 above the closing price on December 31, 1997)  representing  payment
for  $1,000,000  loaned to United  Textiles by the Company.  As a result of this
transaction, the Company owns 78.5% of the outstanding shares of common stock of
United Textiles, effectively making United Textiles a subsidiary of the Company.

     United Textiles is a company that was engaged in the design, manufacturing,
and marketing of a variety of lower priced women's dresses, gowns, and separates
for special occasions and formal events.

     United  Textiles  owns 45.2% of the  outstanding  common shares of Play Co.
Toys and  Entertainment  Corp.  ("Play  Co."),  a company  that  sells  toys and
educational  games primarily on a retail basis.  NOTE 1.  DESCRIPTION OF COMPANY
(continued):

     In  March  1998,  United  Textiles,  having  sustained  continuous  losses,
discontinued operating activities.

     Nature of Relationship with Affiliates:

     As  described  in  the  following   footnotes,   the  Company   engages  in
transactions with affiliated  entities,  many of which are under common control.
These entities and the nature of the affiliates are as follows:

                         Affiliates Under Common Control
                    Name of Entity and Nature of Affiliation

     U.S.  Stores Corp.  ("U.S.  Stores"):  A private company whose president is
Ilan Arbel, who is also a director. Parent company of the Company.

     European American Capital Foundation ("EACF"): Foundation which is the sole
stockholder/beneficiary of Frampton Industries, Ltd. and ABC Fund, Ltd., and the
majority stockholder of American Telecom, PLC.

     European American Capital Corporation ("EACC"):  Entity of which Ilan Arbel
and/or his relatives is/are officer(s) and/or director(s).

     Frampton  Industries,  Ltd.  ("Frampton"):  Entity which is wholly owned by
EACF.

            American Telecom PLC: Entity which is 80% owned by EACF.

          ABC Fund, Ltd. ("ABC"): Entity which is wholly owned by EACF.

                                Other Affiliates
                         Name and Entity of Affiliation

     ZD Group,  L.L.C.  ("ZD"): ZD is a New York Trust, the beneficiary of which
is a member of the family of the Company's President.

     European Ventures Corp. ("EVC"): Parent company of Shopnet.com.  Ilan Arbel
is the President. Moses Mika is the majority shareholder.

     Shopnet.com ("Shopnet"): The Chairman of Play Co. (who is a relative of the
Company's President) is the President and a Director of Shopnet.


<PAGE>
NOTE 1. DESCRIPTION OF COMPANY (continued):

Nature of Relationship with Affiliates (continued):

     Breaking Waves, Inc. ("BWI"): This entity is the wholly owned subsidiary of
Shopnet and also owns 25% of Play Co.'s common  stock.  The  President of BWI is
also the Chairman of the Board of Play Co. and a relative of Ilan Arbel.

     The following chart graphically  depicts the Company's  ownership structure
at March 31, 1999 for those entities under common control:


                       Europe American Capital Foundation


Frampton Industries, Ltd. (100%) American Telecom PLC (80%) ABC Fund, Ltd.(100%)

                                     (100%)

                                U.S. Stores Corp.
                                     (67.7%)

                     Multimedia Concepts International, Inc.
                                 (78.5%) (100%)
                               U.S. Apparel Corp.
                          United Textiles & Toys Corp.
                                     (45.2%)

                       Play Co. Toys & Entertainment Corp.


NOTE 2. BASIS OF PRESENTATION:

     In May 1998,  the Company's  Board of Directors  voted to change the end of
the Company's  fiscal year from September 30th to March 31st.  Accordingly,  the
accompanying  consolidated financial statements as of March 31, 1998 reflect the
results of operations for the six months ended March 31, 1998.

                                       F-7


<PAGE>
            MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

     Principles of Consolidation:

     The consolidated  financial statements include the accounts of the Company,
its  subsidiaries  (U.S.  Apparel  and United  Textiles),  and United  Textiles'
subsidiary (Play Co.). All material  intercompany balances and transactions have
been eliminated in consolidation.

     Uses of Estimates:

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect  the  reported  amounts  of  assets  and  liabilities,
revenues,  and expenses and disclosure of contingent  assets and  liabilities at
the date of the  financial  statements.  Actual  amounts could differ from those
estimates.

     Concentration of Credit Risk:

     Financial instruments that potentially subject the Company to concentration
of credit risk consist primarily 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. Concentration with regard to accounts receivable are limited
due to the Company's large customer base.

     Merchandise Inventories:

     Merchandise  inventories  are  stated  at  the  lower  of  cost  (first-in,
first-out method - "FIFO") or market.

     Fair Value of Financial Instruments:

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

                                       F-8


<PAGE>
            MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

     Fixed Assets and Depreciation:

     Property and equipment is recorded at cost.  Depreciation  and amortization
are provided  using the  straight-line  method over the  estimated  useful lives
(3-15 years) of the related assets.  Leasehold  improvements  are amortized over
the lesser of the  related  lease  terms or the  estimated  useful  lives of the
improvements. Maintenance and repairs are charged to operations as incurred.

     Statements of Cash Flows:

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

     Revenue Recognition:

     The  Company  and its  subsidiaries  recognize  revenue  upon  shipment  of
finished goods to customers.  All sales are pursuant to firm contracts,  with no
title to  merchandise  passing at  shipping.  Sales  returns and  discounts  are
reflected in net sales and historically have not been significant.

     Income Taxes:

     The Company  accounts  for income  taxes in  accordance  with  Statement of
Financial Standards (SFAS) No. 109, Accounting for Income Taxes. Deferred income
taxes are recognized based upon the differences  between financial statement and
income tax bases of assets and liabilities using enacted rates in effect for the
year in which the differences are expected to reverse.  Valuation allowances are
established,  when  necessary,  to reduce the  deferred tax assets to the amount
expected to be  realized.  The  provision  for income taxes  represents  the tax
payable for the period and the change  during the period in deferred  tax assets
and liabilities,  including the effect of change in the valuation allowance,  if
any.

                                       F-9


<PAGE>
            MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):


     Net Loss Per Share

     During the three-month  period ended December 31, 1997, the Company adopted
the  provisions  of SFAS  No.  128,  Earnings  Per  Share,  which  requires  the
disclosure of "basic" and "diluted"  earnings  (loss) per share.  Basic earnings
(loss) per share is computed  by dividing  net income  (loss),  by the  weighted
average number of common shares  outstanding.  Diluted earnings (loss) per share
is similar in  calculation  except that the  weighted  average  number of common
shares is increased to reflect the effects of potential  additional  shares that
would  result  from  the  exercise  of  stock   options  or  other   convertible
instruments.  For the year ended March 31, 1999, there is no difference  between
basic and diluted loss per common share.

     Store Openings and Closing Costs:

     Costs incurred to open a new retail location such as advertising,  training
expenses  and  salaries  of newly  hired  employees  are  generally  expensed as
incurred and improvements to leased facilities are capitalized. Upon permanently
closing a retail location,  the costs to relocate fixtures,  terminate employees
and other related costs are expensed as incurred.  In addition,  the unamortized
balances of any abandoned leasehold improvements are expensed.

     In April 1998, the AICPA's Accountings Standards Executive Committee issued
Statement of Position (SOP) 98-5, Reporting on the Costs of Start-Up Activities.
The SOP, which is effective for fiscal years  beginning  after December 15, 1998
with earlier application  encouraged,  requires entities to expense start-up and
organization  costs for  establishing  new  operations.  The Company adopted the
provisions  of this  statement  as of March 31, 1999  without  impact  given its
historical treatment of store opening costs.

     Impairment of Long-Lived Assets:

     SFAS No.  121,  Accounting  for the  Impairment  of  long-lived  Assets and
long-lived Assets to be Disposed Of, requires that long-lived assets and certain
identifiable  intangibles  to be held  and used by an  entity  by  reviewed  for
impairment  whenever  events  or  changes  in  circumstances  indicate  that the
carrying  amount of an assets may not be  recoverable.  The Company adopted SFAS
No. 121  effective  April 1, 1997.  There was no impact of such  adoption on the
Company's financial condition and results of operations.

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

     Stock-Based Compensation:

     SFAS  No.  123,  Accounting  for  Stock-Based   Compensation,   established
financial   accounting  and  reporting   standards  for   stock-based   employee
compensation  plans and certain  other  transactions  involving  the issuance of
stock.  The Company  adopted  the  disclosure  requirements  of SFAS No. 123 for
stock-based employee compensation  effective April 1, 1996. However, the Company
continues to use the intrinsic value method for recording  compensation expenses
as prescribed by Accounting  Principles Board Opinion (APB) No. 125,  Accounting
for Stock Issued to Employees.

     The  fair  value  method  prescribed  by SFAS  No.  123 is  used to  record
stock-based compensation to non-employees.

     Effect of New Accounting Pronouncements:

     In June 1997, the FSAB issued SFAS No. 130, Reporting Comprehensive Income.
This statement  establishes standards for reporting and display of comprehensive
income and its components (revenues,  expenses, gains and losses) in an entity's
financial  statements.  This  statement  requires an entity to classify items of
other comprehensive  income by their nature in a financial statement and display
the accumulated balance of other  comprehensive  income separately from retained
earnings and additional  paid-in-capital in the equity section of a statement of
financial  position.  This  pronouncement,  which is effective  for fiscal years
beginning  after December 15, 1997, was adopted by the Company during the fiscal
year ending March 31, 1999 without impact to the financial statements for either
of the years ended March 31, 1999 or 1998.

     In June 1997, the FASB issued SFAS No. 131, Disclosure About Segments of an
Enterprise and Related  Information.  This statement requires public enterprises
to report financial and descriptive  information about its reportable  operating
segments  and  establishes  standards  for  related  disclosures  about  product
services, geographic areas, and major customers. This pronouncement is effective
for fiscal years  beginning  after  December 15, 1997.  Management  reviewed the
provision of this statement during the year ended March 31, 1999. While Play Co.
has expanded into several states during the year, management believes Play Co.'s
operations  to  be  limited  to  one  reporting  segment  being  a  retailer  of
educational,  specialty,  collectible,  and traditional  toys. All of Play Co.'s
sales have been domestic, and there are no foreign operations.



<PAGE>
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

     Restatement of Financial Statements - March 31, 1998:

     The  consolidated  financial  statements  for the year ended March 31, 1998
have  been  restated  to  reflect  a  restatement  by Play Co.  of its  dividend
attributable  to the  beneficial  conversion  feature of its Series E  preferred
stock. This restatement  resulted in an increase of $1,473,806 in its originally
reported net loss.

NOTE 4. INVESTMENT BY U.S. STORES CORP.:

     On January 20, 1998, 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 63% of the outstanding shares, effectively making the Company a subsidiary of
U.S. Stores.

     On February 28, 1998,  American Telecom  Corporation  ("American  Telecom")
acquired 100% of the outstanding common shares of U.S. Stores.  American Telecom
was incorporated on July 18, 1997. The Company's President is also President and
a Director  of  American  Telecom.  After  this  transaction,  American  Telecom
effectively   obtained   beneficial  voting  control  of  the  Company  and  its
subsidiaries.

     In April 1998,  American  Telecom  exchanged all of its outstanding  common
shares with American  Telecom,  PLC, a publicly traded company in Great Britain.
After this  transaction,  American  Telecom  effectively  became a subsidiary of
American  Telecom,  PLC.  Additionally,  as part of this  transaction,  American
Telecom,  PLC acquired 100% of the  outstanding  common  shares of U.S.  Stores,
thereby  effectively making U.S. Stores a direct subsidiary of American Telecom,
PLC.

NOTE 6. MINORITY INTEREST IN SUBSIDIARIES:

     The Company owns a majority  interest (78.5%) in United Textiles,  which in
turn  owns a  majority  interest  (45.2%)  in Play  Co.  The  minority  interest
liability  represents  the  minority  shareholders'  portion  (21.5%)  of United
Textiles' equity at March 31, 1999.

NOTE 7. RESTRICTED CERTIFICATE OF DEPOSIT:

     At March 31, 1999 and 1998, the Company has three  certificates  of deposit
which are restricted as to their nature. The first, in the amount of $2,000,000,
represents  collateral against a letter of credit securing financing to Play Co.
under the FINOVA Capital  Corporation  agreement ("FINOVA  Financing") (Note 10)
and is classified as a non-current  asset since the funds in the  certificate of
deposit will remain restricted until the letter of credit expires or is released
by FINOVA Capital Corporation ("FINOVA"). The second, in the amount of $250,000,
is collateral for a facility for letters of credit.  The third, in the amount of
$100,000,  is to cover an increase on the previously  mentioned letter of credit
facility.

NOTE 8. WORKING CAPITAL GUARANTEE OF MAJORITY SHAREHOLDER:

     For the year  ended  March 31,  1999,  the  Company's  Play Co.  subsidiary
reported a net loss of $1,566,857.  For the year ended March 31, 1998,  Play Co.
reported a restated net loss of $3,528,276.  These amounts  include the minority
shareholders' pro-rata share of net income or loss.

     The Company's  beneficial  and majority  shareholder  has  represented  his
intent and ability to provide additional working capital to Play Co.

NOTE 9. FIXED ASSETS:

<TABLE>
<CAPTION>
     Fixed assets consisted of the following:

                                           March 31,       March 31,
                                             1999            1998

<S>                                       <C>            <C>
Furniture, fixtures and equipment .....   $ 6,008,554    $ 4,260,738
Leasehold improvements ................     2,763,711      1,551,760
Signs .................................       501,798        317,363
Vehicles ..............................       104,912        104,912
Construction in progress ..............        68,065           --
                                            9,447,040      6,234,773
     Less: Accumulated depreciation and
     Amortization .....................    (4,096,755)    (3,452,387)
                                          -----------    -----------
                                          $ 5,350,285    $ 2,782,386
                                          ===========    ===========
</TABLE>
     The  reported  amounts for March 31, 1999  include the  consolidated  fixed
assets of United Textiles and Play Co.



<PAGE>
NOTE 10. FINANCING AGREEMENTS:

     On February 7, 1996,  Play Co.  borrowed,  under an agreement with Congress
Financial  Corporation  (Western)  (the  "Congress  Financing"),   approximately
$2,243,000,  the  proceeds  of which  were  used to repay  the then  outstanding
borrowings  under a bank  line  of  credit  agreement.  The  Congress  Financing
provided for maximum  borrowings up to $7,000,000 based upon a percentage of the
cost value of  eligible  inventory,  as  defined.  Outstanding  borrowings  bore
interest at 1.5% above the prime rate, as defined.

     In connection  with the Congress  Financing,  and the previous bank line of
credit agreement,  European American Capital Corp. ("EACC"),  an affiliate (Note
1), provided a $2,000,000  letter of credit for  collateral.  As compensation to
EACC,  Play Co.  granted  EACC  options  to acquire  shares of common  stock and
preferred  stock,  the  aggregate  value of which was  $458,000.  The  aggregate
$458,000 was initially  included in other assets,  as debt issuance  costs,  and
additional  paid-in  capital.  The option  values were  amortized  into interest
expense  through  the  February  1, 1998  maturity  of the  Congress  Financing,
resulting in aggregate interest charges of $196,849 for the year ended March 31,
1998.

     In March 1997,  the Congress  Financing  was amended to provide for,  among
other things,  increased borrowing ratios and an additional $1,000,000 letter of
credit  as  collateral  from  EACC.  Thereafter,   the  Congress  Financing  was
collateralized  by an  aggregate  3,000,000  in  letters of credit  through  its
maturity on February 1, 1998.

     On  February  3,  1998,  Play Co.  borrowed  $4,866,324  under  the  FINOVA
Financing,  the  proceeds  of  which  were  used  primarily  to  repay  the then
outstanding  borrowings under the Congress  Financing and to pay fees related to
the FINOVA Financing.

     The FINOVA Financing, as amended currently, provides for maximum borrowings
up to $8,300,000 based on a percentage of the cost value of eligible  inventory,
as defined.  Outstanding  borrowings  bear interest at 1.5% above prime rate, as
defined  (the  prime  rate at  March  31,  1999 and 1998  was  7.75%  and  8.5%,
respectively. The agreement matures on August 3, 2000 and can be renewed for one
additional year at the lender's option.


                                      F-10


<PAGE>
            MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE 11. CAPITAL LEASE OBLIGATIONS:

     During the year ended March 31, 1999,  Play Co. entered into several leases
with financing companies that have been classified as capital lease obligations.
The amounts  financed  ranged from  $49,901 to $232,098,  with  varying  monthly
installment  payments from $849 to $5,313,  at interest rates varying from 12.6%
to 19.6%. the leases, which have maturity dates ranging from October 15, 2001 to
March 1, 2004, require minimum payments as follows:

Year ending
March 31,

2000                                                               $    249,423
2001                                                                    249,423
2002                                                                    234,658
2003                                                                    213,986
2004                                                                    152,672
                                                                        -------

Total minimum lease payments                                          1,100,162

Less amount representing interest                                      (287,284)

Present value of minimum lease payments                                 812,878

Less current portion                                                   (227,197)

Long-term portion                                                   $   585,681
                                                                    ============



                                      F-11


<PAGE>
            MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE 12. NOTES PAYABLE:
<TABLE>
<CAPTION>
                                                                                                                 March 31,

                                                                                                   1999                      1998

Note payable to ABC, an affiliate (Note 1), bearing interest
at 5% per annum. Converted with accrued interest of $33,333, into
1,533,333 shares of Series E Preferred Stock.

<S>                                                                                        <C>                       <C>
                                                                                           $             -           $     1,500,000

Note payable to BWI, an affiliate (Note 1), bearing
interest at 15% per annum, paid in ten monthly installments
of $25,000 plus accrued interest through maturity on
December 31, 1998. Note was subordinate to the FINOVA
Financing (Note 10).


                                                                                                         -                   250,000

Note payable to stockholder of Toys International
non-interest bearing, guaranteed by United Textiles, an
affiliate (Note 1), paid in quarterly installments of
$25,000 through its maturity on January 16, 1999.

                                                                                                         -                   100,000


Note payable to Shopnet, an affiliate (Note 1), bearing
interest at 9% per annum, payable in monthly installments of
$25,000 with an original maturity of June 15, 1999. Note has
been verbally extended to an unspecified date.


                                                                                                       75,000                    -

Note payable to Full Moon Development, Inc., an
unaffiliated entity, bearing interest at 12%, payable in
monthly installments of $50,000 through maturity on July 30,
1999.

                                                                                                     200,000                     -

Note payable to Full Moon Development, Inc., an
unaffiliated entity, bearing interest at 12%, payable in
monthly installments of $66,667, except for the final
installment which is due at maturity on June 30, 1999,
twenty days after previous payment.


                                                                                                     200,000                     -

Convertible debenture to Frampton, an affiliate (Note
1), bearing interest at 5% per annum, with interest only
payments due monthly beginning March 1, 1999, convertible to
Series E Preferred Stock, due at maturity on December 31,
1999.


                                                                                                     500,000                     -

Convertible debenture to EACF, an affiliate (Note 1),
bearing interest at 5% per annum, with interest only
payments due monthly beginning March 1, 1999, convertible to
Series E Preferred Stock, due at maturity on December 31,
1999.


                                                                                                     150,000                     -

          Total notes payable                                                                      1,125,000              1,850,000
          Less current portion                                                                    (1,125,000)              (350,000)
          Long-term portion                                                                $              -         $     1,500,000
                                                                                     =========================     =================
</TABLE>


<PAGE>
NOTE 12. NOTES PAYABLE (continued):

     The above notes,  which are carried by Play Co., may carry  interest  rates
that  differ from  prevailing  interest  rates.  Play Co. has not  provided  for
imputed  interest on rate discounts or premiums as the effects are immaterial to
the financial statements.

     The above convertible  debentures to Frampton and EACF are both convertible
into Series E preferred  stock.  The debenture  holder has the right at any time
prior to the maturity date to convert all or part of the  outstanding  principal
plus any accrued  interest.  The  conversion  price is $.20 per share,  i.e. for
every $100,000 converted, the holder would receive 500,000 shares. Each share of
Series E preferred  stock is  convertible  into six shares of Play Co.'s  common
stock, at the option of the holder, subject to holding periods.

NOTE 13. CLOSURE OF RETAIL STORES - LITIGATION:

     During the year  ended  March 31,  1998,  Play Co.  closed  and  ultimately
vacated  five  retail  locations  prior to the end of their  lease  terms.  As a
result,  four of the five landlords  filed lawsuits  against Play Co. to collect
unpaid  rent as well as  rental  obligations  remaining  under  the terms of the
respective leases.

     Subsequent  to the filing of actions by the landlords and through May 1998,
Play Co., with the assistance of outside counsel,  reached settlement agreements
with the various  landlords.  These settlements  aggregated  $469,600,  of which
$57,820 remains outstanding on one settlement.

     The  settlement  of  operations  for the year ended March 31, 1999 and 1998
includes  $27,659 and $583,541 of "litigation  related  expenses" which comprise
the settlement costs on the  aforementioned  leases,  legal fees which comprises
the settlement costs on the aforementioned leases and legal fees associated with
negotiations.

     Play Co. currently has one remaining  landlord/tenant  matter which has yet
to be resolved as of March 31, 1999, Play Co. has accrued a liability related to
this matter,  which is an estimate by  management  on its  analysis.  Play Co.'s
management  expects this matter to be resolved  without further material effects
on the financial statements.


                                      F-12


<PAGE>
            MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE 14. INCOME TAXES:

     The  reconciliation  of income taxes computed at the federal  statutory tax
rate to income  taxes at the  effective  income  tax rate in the  statements  of
operations is as follows:
<TABLE>
<CAPTION>


                                                                                   March 31,

                                                                          1999                       1998
                                                                          ----                       ----

<S>                                                                           <C>                     <C>
Federal statutory income tax (benefit) rate                                   34.0%                   (34.0)%
Permanent adjustments                                                           4.4                          -
State income taxes, net of federal benefit                                      1.5                      0.1
Change in valuation allowance                                                (38.4)                    33.9
                                                                             ------                    ----

          Effective income tax rate                                             1.5%                        - %
                                                                            =========                  ========
</TABLE>


     At March 31, 1999, the Company has net operating  loss (NOL)  carryforwards
of  approximately   $5,800,000  for  federal  tax  purposes  and   approximately
$5,600,000 for state  purposes.  The federal NOLs are available to offset future
taxable  income and expire at various  dates  through  March 31,  2013 while the
state NOLs are available and expire at various dates through March 31, 2003.

     A portion  of the NOLs  described  above is subject  to  provisions  of the
Internal  Revenue  Code,  Sections 382,  which limits use of net operating  loss
carryforwards  when  changes in  ownership of more than 50% occur during a three
year testing period.


                                      F-13


<PAGE>
NOTE 14. INCOME TAXES (continued):

     Deferred income taxes reflect the net tax effects of temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes  and the  amounts  used for income  tax  purposes.  The tax  effects of
significant  items  comprising the Company's net deferred  income tax assets and
liabilities are as follows:
<TABLE>
<CAPTION>

                                                                            March 31,
                                                                         1999            1998

<S>                                                                 <C>            <C>
Inventories .....................................................   $  (329,264)   $  (227,696)
AMT tax credits .................................................       (23,260)       (23,260)
Accrued expenses ................................................        72,760        (19,779)

          Current portion of net deferred income tax
                (assets) liabilities ............................      (279,764)      (270,735)

Depreciation and amortization ...................................      (211,108)       (28,388)
Loss on disposal of assets ......................................       127,043         25,926
Net operating loss carryforwards ................................    (3,471,124)    (3,652,294)
Deferred rent liability .........................................       (50,099)       (43,891)
Income taxes ....................................................           794            508
Amortization of stock options ...................................      (200,520)      (202,049)

Long-term portion of net deferred income tax (assets) liabilities
                                                                     (3,805,014)    (3,900,188)

Total net deferred income tax (assets) liabilities ..............    (4,084,778)    (4,170,923)

Valuation allowance .............................................     4,084,778      4,170,923

          Net deferred income taxes .............................   $      --      $      --
                                                                    ===========    ===========


</TABLE>
NOTE 15. COMMITMENTS AND CONTINGENCIES:

     Operating Leases:

     The Company,  until June 30, 1999,  occupied  space at 1410  Broadway,  New
York, NY. It vacated these  premises and relocated to 1385  Broadway,  New York,
NY. U.S. Apparel Corp. is the prime tenant on the lease.

     The  lease  which was  signed  on June 29,  1999 runs for a period of three
years and provides for annual lease payments under this noncancellable  lease as
follows:

   Year Ending
    March 31,

       2000                               $24,503
       2001                                33,486
       2002                                34,576
       2003                                 8,712


     Play Co. leases its retail store properties under non-cancelable  operating
lease  agreements  which expire through October 2009 and require various minimum
annual rentals.  Several of the leases provide for renewal options to extend the
leases for additional five or ten year periods.

     Certain  store  leases also require the payment of property  taxes,  normal
maintenance  and  insurance  on the  properties  and  additional  rents based on
percentages of sales in excess of various specified retail sales levels.

     During the years ended March 31, 1999 and 1998, the Company incurred rental
expense under all operating  leases of $4,104,073 and $3,112,822,  respectively.
Contingent rent expense was insignificant  during the years ended March 31, 1999
and 1998.

     At March 31, 1999,  the aggregate  future  minimum lease payments due under
these non-cancelable leases,  including approximately $448,000 for the remaining
term of the lease for a closed retail  location  through  November  2003, are as
follows:
<TABLE>
<CAPTION>

                         Year ending    Related Party Office/     Retail
                         March 31,      Warehouse (Note 17)      Locations      Total
                         ---------      -------------------      ---------      -----

<S>                     <C>             <C>                      <C>             <C>
                        2000            $  247,289               $ 5,148,190     $ 5,395,479
                        2001                20,624                 4,952,250       4,972,874
                        2002                  --                   4,536,291       4,536,291
                        2003                  --                   4,374,766       4,374,766
                        2004                  --                   3,472,774       3,472,774
                        Thereafter            --                   7,447,655       7,447,655
Total minimum lease payments            $  267,913               $29,931,926     $30,199,839
                                       ===========               ===========     ===========

</TABLE>
                                       F-



<PAGE>
NOTE 15. COMMITMENTS AND CONTINGENCIES (continued):

     Convertible Debt Agreement:

     As  discussed  in Note 12, Play Co. has a $1.5 million note payable to ABC,
an affiliate.  Prior to the August 15, 2000 maturity  date,  the note payable is
convertible  into the common stock of a  subsidiary  of Play Co. ABC may, at its
option, convert all or a portion of the note and accrued unpaid interest thereon
into up to 25% of the common stock of the  subsidiary at an exercise price equal
to the net book value of the subsidiary's shares.

     In June 1998,  ABC, a Belize  corporation  which is (i) an affiliate of the
Company  and  Play  Co.  under  common  control  and  (ii)  the  holder  of a 5%
convertible secured subordinated Play Co. debenture - dated January 21, 1998 and
due August 15, 2000 - offered to amend the terms of the  debenture to enable the
conversion of the principal  amount and accrued  interest thereon into shares of
Play Co.'s Series E preferred  stock, at a conversion  price of $1.00 per share.
Play Co. agreed to convert the debenture  since the  conversion of the debt into
equity would result in a strengthened  equity  position which Play Co.  believed
would  provide  confidence  to its working  capital  lender,  FINOVA,  and trade
creditors.  Further,  converting the debt to equity eliminated on-going interest
expense  requirements  as well as the cash flow required to repay the debenture.
Simultaneously  with its offer to amend the  debenture,  ABC  elected to convert
same as of June 30, 1998,  whereby $1.5 million in principal  amount and $33,333
in accrued  interest were converted into 1,533,333  shares of Series E preferred
stock.  ABC did not  receive  any  registration  rights  regarding  the  shares.
Simultaneously,  ABC terminated the Subordinated  Security Agreement between the
parties and the  Intercreditor and  Subordination  Agreement,  dated January 21,
1998, by and between ABC and FINOVA.

     The  debenture  provided for the  conversion,  at the option of ABC, of the
debenture into shares of common stock of either (i) a subsidiary  which Play Co.
intended to form for the purpose of acquiring  those stores operated by Play Co.
(or its subsidiaries)  which conduct business as "Toys  International,"  or (ii)
any other subsidiary (such as Toys International.COM,  Inc.) which might acquire
a portion of the assets and  business  of Play Co.  This  option to convert  was
exercisable  at the net book  value of the  subsidiary's  shares on the date ABC
exercised the option with a limitation on such share  ownership being 25% of the
total  outstanding  shares of said subsidiary.  In September 1998, in accordance
with the terms of the debenture  ABC assigned its option to Tudor  Technologies,
Inc. ("Tudor"), an entity of which Mr. Moses Mika (a director of the Company and
Play Co. and the father of the Company's  president) is a  shareholder.  On July
15, 1999,  Tudor elected to exercise its right to purchase the Toys common stock
and  requested  that the exercise  price be amended to reflect the book value of
Toys at the most  recent  fiscal  quarter,  June 30,  1999.  Play Co.  agreed to
Tudor's request.

NOTE 15. COMMITMENTS AND CONTINGENCIES (continued):

     Dependence on Suppliers:

     For the year ended March 31, 1998,  United  Textiles  ceased  manufacturing
activities. All remaining inventory has been disposed of.

     The Company's sales through its  subsidiary,  U.S.  Apparel,  are generated
from short-term  purchase orders from customers who place orders on an as needed
basis. U.S. Apparel  typically  manufactures its products upon receipt of orders
from  customers and delivers  finished  goods within four weeks of receipt of an
order.  U.S.  Apparel  generally  manufactures  10% more goods than is needed in
anticipation of reorders from customers.

     The  Company  has been able to  purchase  raw  materials  from a variety of
suppliers.

     Approximately forty-one percent (41%) of Play Co.'s inventory purchases are
made directly from five (5) manufacturers. Play Co. typically purchases products
from its suppliers on credit  arrangements  provided by the  manufacturers.  The
termination  of  a  credit  line  or  the  loss  of  a  major  supplier  or  the
deterioration  of Play Co.'s  relationship  with a major  supplier  could have a
material adverse effect on Play Co.'s business.

     Seasonality:

     Play Co.'s business is highly seasonal with a large portion of its revenues
and  profits  being  derived   during  the  months  of  November  and  December.
Accordingly,  in order  for Play Co.  to  operate,  it must  obtain  substantial
short-term   borrowings  from  lenders  and  its  suppliers   during  the  first
three-quarters   of  each  year  to  purchase   inventory   and  for   operating
expenditures.  Historically,  Play  Co.  has been  able to  obtain  such  credit
arrangements  and  substantially  repay the amounts  borrowed from suppliers and
reduce  outstanding  borrowings from its lender during the fourth quarter of its
fiscal year.

     Financing Agreement:

     In November  1998,  Play Co.  entered into an agreement  with ZD, a related
party (Note 1), to secure additional financing.  Pursuant to this agreement,  ZD
issued a  $700,000  irrevocable  standby  letter of credit  ("L/C")  in favor of
FINOVA, Play Co.'s working capital lender.  FINOVA then lent a matching $700,000
to Play Co. in the form of a term loan  (Note  10).  The term  loan  expires  on
August 3, 2000 and bears interest at prime plus one percent.


<PAGE>
NOTE 15. COMMITMENTS AND CONTINGENCIES (continued):

     Financing Agreement (continued):

     As  consideration  for its  issuance of the L/C, ZD will  receive  payments
representing one-third (33%) of the net profits from three of Play Co.'s stores,
Great Lakes Crossing,  Gurnee Mills,  and Woodfield Mall (scheduled to open late
summer  1999).  The net  profit  of  each  store  will  include  an  appropriate
allocation  of  corporate  overhead.  The  expense  related  to the net  profits
interest due to ZD will be accrued  beginning  April 1, 1999, the effective date
of the agreement.  The duration of the agreement with ZD is equal to the current
lease term of each of the stores,  including any renewals,  but in any event not
beyond the  Company's  fiscal  year  ending  March 31,  2013.  The store  leases
currently expire,  including options for renewal,  at various dates through June
2009. The Company will  categorize  this expense as  (effective)  interest since
these costs represent compensation to secure additional financing.

     Additionally, as long as the agreement is in effect, ZD will have the right
to nominate and appoint one-third of Play Co.'s Board of Directors.

Note 16. YEAR 2000

     The  Company  does not  believe  that the impact of the Year 2000  computer
issue will have a significant  impact on its  operations or financial  position.
Furthermore,  the  Company  does  not  believe  that  it  will  be  required  to
significantly modify its internal computer systems. However, if internal systems
do not correctly recognize date information when the year changes to 2000, there
could be adverse impact on the Company's operations.  Furthermore,  there can be
no assurances that another entity's failure to ensure year 2000 capability would
not have an adverse effect on the Company and its subsidiary, Play Co.


                                      F-24


<PAGE>
            MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




Note 17. RELATED PARTY TRANSACTIONS:

     Office and warehouse lease:

     Play Co. leases an  office/warehouse  building from a partnership  of which
one of the  partners is Play Co.'s Chief  Executive  Officer and  Director.  The
original  lease was executed in October  1986.  The lease term was for a 10-year
period, with increases in the monthly rent tied to the CPI, adjusted every three
years. The lease was amended in 1993 to extend the term through April 2000, with
an  option  to  extend  for a period  of five  years  under  the same  terms and
conditions of the lease. Rent expense under this lease totaled $247,289 for each
of the years ended March 31, 1999 and 1998.

     Consulting Fees:

     Play Co. made payments  aggregating  $33,000 and $25,000 to the Chairman of
its Board of Directors for various  consulting  services  during the years ended
March 31, 1999 and 1998, respectively.

     Commitment of Financing:

     The  individual,  beneficiary  majority  stockholder  of the Company,  in a
letter dated May 15,  1998,  has  represented  his intent and ability to provide
additional  working  capital  to Play Co.,  should  such be  necessary,  through
September 1999.

Note 18. SUPPLEMENTAL CASH FLOW INFORMATION:

     Cash paid for income taxes and interest was as follows:

<TABLE>
<CAPTION>

                                                  Years ended March 31,

                                            1999                            1998

<S>                                      <C>                        <C>
Interest paid                            $        809,601           $              511,924
                                         ================

Income taxes                          $               805           $                  800
                                      ===================

</TABLE>


                                      F-25


<PAGE>
            MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




Note 19. SUBSEQUENT EVENTS:

     Consulting Agreement:

     In April 1999, U.S. Apparel entered into a verbal consulting agreement with
Yu Jin International,  Inc. ("Yu Jin") pursuant to which Yu Jin oversees the day
to day  production  of  garments  and  operating  activities  of U.S.  Apparel's
subcontractor.  During the 1st fiscal  quarter of 2000,  U.S.  Apparel  remitted
$51,800 to Yu Jin in accordance with the terms of the aforesaid agreement.

     Unsecured Promissory Notes:

     On April 22, 1999, Play Co. entered into an unsecured  promissory note with
Shopnet,  an  affiliate,  (Note 1) for  $100,000 at an  interest  rate of 9% per
annum. The principal payments and accrued interest are due monthly beginning May
31, 1999, with a maturity date of August 31, 1999.

     On May 17, 1999,  Play Co. entered into an unsecured  promissory  note with
Shopnet, an affiliate (Note 1) for $100,000 at an interest rate of 9% per annum.
The principal  payments and accrued interest are due monthly  beginning June 30,
1999, with a maturity date of September 30, 1999.

     Private Placement of Series F Stock:

     On May 18, 1999, the Board of Directors of Play Co.  unanimously  adopted a
Corporate  Resolution to enter into a Securities Purchase Agreement (the Private
Placement) with several investors.  The Private Placement was for 750,000 shares
of Play Co.'s Series F Preferred Stock ("Series F Stock"), par value of $.01 per
share, for gross proceeds of $750,000. Play Co. was also authorized to amend its
articles of  incorporation  to change the terms and  privileges  of the Series F
Stock.  The Series F Stock is convertible into two shares of Common Stock at any
time following the effective date of the registration  statement registering the
Series F Stock and underlying shares of Common Stock for resale.

     The Corporate  Resolution  also  authorized Play Co. to file a Registration
Statement with the Securities and Exchange  Commission for the securities issued
under the Private Placement.

                                      F-26


<PAGE>
            MULTIMEDIA CONCEPTS INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





Note 19. SUBSEQUENT EVENTS (continued):

     Private Placement of Series F Stock (continued):

     As part of the  Private  Placement,  Play  Co.  granted  an  option  to the
Placement  Agent and its  assignees  to purchase an aggregate  350,000  share of
Common  Stock,  with an  exercise  price of $3.00 per share for a period of four
years  from the date of  closing  of the  Private  Placement.  Additionally,  as
commission, the Placement Agent received a 10% fee, or $75,000, and a 1% fee, or
$7,500, to cover  administrative  expenses.  The Private Placement closed on May
27, 1999,  providing  net cash proceeds of $667,500 to Play Co. before legal and
other administrative expenses.

     On the May 27,  1999  closing  date of the  Private  Placement,  Play Co.'s
Common  Stock had a closing  price of $1.69.  As such,  the Series F Stock has a
beneficial  conversion  feature  which will result in  accounting  treatment  to
reflect non-cash dividends in future periods in a manner similar to the Series E
Stock transactions.

     Common Stock Compensation of Consultant:

     In May 1999,  Play Co. issued 45,333 shares of Common Stock to a consultant
as compensation  for site selections and negotiation of retail location  leases.
These  services  are being  provided for new Play Co.  stores  opening in fiscal
2000.  Play Co. has valued the shares based on the May 17, 1999 closing price of
$1.375 per share,  less a 10% discount  for  marketability  restrictions  for an
aggregate value of approximately $56,000.

     Private Placement of Common Stock:

     In July 1999, pursuant to Regulation S of the General Rules and Regulations
Under the  Securities  Act of 1933,  as amended,  Toys  International.COM,  Inc.
("Toys") sold 6.6% of its common stock in a private  transaction in exchange for
$2.8 million.

     Proposed Public Offering:

     In July  1999,  Toys also  entered  into an  investment  agreement  with an
investment banking firm to take Toys public in an initial public offering.  Toys
expects to raise  approximately  $20 million to $25 million  through the sale of
22% of its common stock within approximately 90 days.



                                      F-27


<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 5th day of August 1999.


                                         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                      8/5/99
Ilan Arbel                                                                                                Date

/s/ Rivka Arbel                                               Director                                    8/5/99
Rivka Arbel                                                                                               Date

/s/ Yair Arbel                                                Director                                    8/5/99
Yair Arbel                                                                                                Date

</TABLE>

                                      F-29