UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, D.C.


                                   FORM 10-KSB


                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF

                       THE SECURITIES EXCHANGE ACT OF 1934


                     FOR THE FISCAL YEAR ENDED JULY 31, 2000

                            THE MILLBROOK PRESS INC.
           (Name of Small Business Issuer as Specified in its Charter)

             Delaware                                     06-1390025
(State or other jurisdiction of                (IRS Employer Identification No.)
incorporation or organization)

                             2 Old New Milford Road
                              Brookfield, CT 06804
                    (Address of principal executive offices)
                                 (203) 740-2220
                (Issuer's telephone number, including area code)

Securities Registered pursuant to Section 12 (b) of the Exchange Act:
                                                          Common Stock

Securities Registered pursuant to Section 12 (g) of the Exchange Act:
                                                          None

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

Check if disclosure of delinquent  filers pursuant to Item 405 of Regulation S-B
is not contained herein, and will not be contained,  to the best of Registrant's
knowledge,  in  definitive  proxy  of  information  statements  incorporated  by
reference in Part III of this form 10-KSB or any  amendment to this Form 10-KSB.
(X)

Revenues for the Fiscal year ended July 31, 2000 were $21.4 million.

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant,  based upon  price of the Common  Stock on  October  25,  2000,  was
approximately  $3,501,000.  As of July 31, 2000, the Registrant had  outstanding
2,859,887 shares of Common Stock.


<PAGE>

                            THE MILLBROOK PRESS INC.
                            FORM 10-KSB ANNUAL REPORT

                                Table of Contents



                                     PART I

                                                                            Page
Item 1.   Description of Business.............................................3

Item 2.   Description of Properties..........................................11

Item 3.   Legal Proceedings..................................................12

Item 4.   Submission of Matters to a Vote of Security Holders................12


                                     PART II

Item 5.   Market for Common Equity and Related Stockholders Matters..........12

Item 6.   Management's Discussion and Analysis or Plan of Operations.........13

Item 7.   Financial Statements...............................................17

Item 8.   Changes in and Disagreements with Accountants
          on Accounting and Financial Disclosures............................30


                                    PART III

Item 9.   Directors, Executive Officers, Promoters and Control Persons;
          Compliance with Section 16(a) of the Exchange Act..................31

Item 10.  Executive Compensation.............................................31

Item 11.  Security Ownership of Certain Beneficial Owners and
          Management.........................................................31

Item 12.  Certain Relationships and Related Transactions.....................31

Item 13.  Exhibits, List and Reports on Form 8-K.............................32


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<PAGE>
PART I

Item 1.  Description of Business

Overview

The  Millbrook  Press Inc.  (the  "Company" or  "Millbrook"),  is a publisher of
children's nonfiction books, in both hardcover and paperback, for the school and
library market and the consumer market. The Company began operations in 1989 and
has  published  more than 1,400  hardcover  and 600  paperback  books  under its
Millbrook,  Copper Beech, and Twenty-First Century imprints. The Company's books
have been placed on numerous recommended lists by libraries,  retail bookstores,
and educational organizations. Books published under the Millbrook imprint range
from  information  intensive  school and  library  books to  graphic,  colorful,
general  interest  titles.  Therefore,  many of its books are distributed to the
school  and  public  library  market  while  simultaneously  distributed  to the
consumer  market.  Copper  Beech books are  published in a number of formats for
both the consumer and library  markets.  Twenty-First  Century  Books titles are
published  primarily for the educational market at a secondary school level. The
Company's senior  management has extensive  experience in publishing  comprising
over 100 years of employment in the industry.

The consumer market in children's books consists of books purchased by consumers
through  traditional  trade  bookstores  such as Barnes & Noble and  Borders and
educational stores such as Zany Brainy, as well as non-traditional  distribution
channels such as direct sales,  catalogs,  direct mail, book clubs,  book fairs,
non-book retail stores,  including  museums,  national parks,  historical sites,
theme parks, gift shops and toy stores.

The Company intends to expand and upgrade its publishing  program in both areas.
In addition  the Company is  embarking on new programs to publish and market (i)
high quality children's picture books and young peoples fiction and (ii) develop
programs for classroom sales of supplementary reading enrichment materials.  The
Company  does not believe it will  release any fiction  books until at least the
spring of 2001.

Both programs fit into the Company's marketing capabilities and should allow the
Company  to expand  its  established  sales base on a minimal  risk  basis.  The
editorial  staff is in the process of being  augmented to accommodate  these new
programs.


Industry Background

School and Library Market

The school and public  library  market is undergoing  significant  change due to
long-term social and economic forces.  The United States Department of Education
predicts that the student  population  from  kindergarten  through twelfth grade
will  increase 8% from 2000 to 2008,  with an

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overall net gain of  approximately  3.8 million  students.  Because  many school
districts  allocate  instructional  material  funds on a "per head"  basis,  the
Company  believes that money allocated to schools for book  acquisitions  should
increase  as the  student  population  increases.  In  addition  to  demographic
changes,  demand  for books has also  increased  as a result of the  school  and
public  library market  becoming  aware of, and  responsive  to,  supporting the
innovative instructional programs being developed and used in the classroom. New
teaching  philosophies such as the "reading  initiative," and  "cross-curriculum
teaching"  developed  in the 1980s and  1990s  have  increased  the  demand  for
different and better books.  Librarians are working with  classroom  teachers to
select  books that meet  classroom  criteria  of being  multicultural,  visually
stimulating, interesting, curriculum-related and suitable for a range of reading
ability.

Consumer Market

Demand for children's books in the consumer market has increased  because of the
increase in the number of channels in which  hardcover and  paperback  books are
distributed.  Traditionally, books were primarily sold at small local bookstores
with  limited  selections.  Many such  bookstores  were  replaced by larger mall
bookstores  which in turn were  replaced by book  superstores  (such as Barnes &
Noble).  Concurrently,  alternate  means of  distribution  have  developed.  For
example,  books are now sold by certain  retailers such as TJ Maxx,  educational
chain  stores such as Zany  Brainy,  outlets and  warehouse  clubs such as Sam's
Warehouse,  Costco,  and B.J.'s as well as museums,  national parks,  historical
sites,  theme parks, gift shops and toy stores. The Company sells a considerable
quantity of books  through  direct  sellers  such as book clubs,  book fairs and
display sales operations. As more direct sales move to the internet, the Company
expects its direct sales market to expand proportionately.

Crossover of Sales

Demand for children's books has also increased because a book can now be sold to
both the school and  public  library  and the  consumer  market.  Traditionally,
hardcover library books addressed topics typical for school reports and research
and were created with the purpose of maximizing  information content rather than
appealing  to  consumers.  Because  books sold in the school and public  library
market  in the past  were  sold to  librarians/teachers  based on  content,  the
product was often informationally rich, but somewhat aesthetically  unappealing.
Conversely,  a paperback book sold in the consumer market was not designed as an
information  source,  but rather to attract a consumer's  attention  and thereby
sell itself from the shelf.  Accordingly  these books failed to address  certain
topics and lacked the  informational  content of library  books.  The  Company's
books, and books for the children's book market in general,  are now designed to
appeal to both  markets.  A book filled  with  information  is combined  with an
attractive  title,  cover and  internal  design to catch the eye of the consumer
browsing the shelf. The same book can then be bound as a hardcover book and sold
to  school  and  public  libraries.  Additionally,  as either a  hardcover  or a
paperback,  the book appeals to teachers and can be used as supplemental reading
in the classroom.


Company Strategy

The Company's goal is to be a "one-stop  publisher,"  publishing and marketing a
diverse product

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line servicing most of the major  segments of the  children's  book market.  The
Company's  strategy is to continue to diversify  its  products and  distribution
channels for those  products by  capitalizing  on the long-term  and  short-term
changes occurring in the children's book publishing  industry in both the school
and public library market and in the consumer market.

The Company believes that this diversified  approach to its product line enables
it to achieve market  penetration in the children's book market and minimize the
risk of  fluctuations  or weakness in any one  particular  segment.  The Company
believes that its experience in publishing  children's  books and its reputation
for  quality,  combined  with the  evolution  and  anticipated  growth rates for
children's books in the school and public library and consumer markets,  creates
an opportunity for the Company to expand the list of books in which it maintains
a  significant  ownership  interest and increase  the  recognition  of its brand
names. The Company believes that the elements  required to achieve this goal are
(i) publishing books of the highest quality, created in house, through packaging
arrangements or licensed, with the ability to satisfy two or more of the markets
which it now services, (ii) expanding its product offerings to take advantage of
its  investments  in  distribution  and its exposure to the consumer  market and
(iii) enhancing its existing  marketing  operations to support its  product-line
expansion initiatives. The key elements of the Company's strategy are:

o        Crossover of Sales. The Company believes that significant opportunities
         exist to market products typically  developed for one market into other
         markets.  To initiate its strategy of selling  books that can crossover
         into two or more markets,  in 1995 the Company began  reformatting many
         of its  previously  published  ("backlist")  school and public  library
         books under its Millbrook imprint into paperback books, selling them in
         the consumer market.  In addition,  the Company's  paperback books have
         also been sold as supplemental materials for the classroom.  Similarly,
         the Company's  trade paperback books under the Copper Beech imprint are
         also  published  in  hardcover  format to sell to the school and public
         library  market.  The Company will seek to continue to produce books in
         the future under both the Millbrook and Copper Beech imprints that will
         appeal to two or more markets in order to fully  exploit a book's sales
         potential. (see "Products")

o        New Market  Opportunities.  Millbrook will continue to seek appropriate
         acquisitions along the lines of its 21st Century Books acquisition from
         Henry Holt Company in fiscal 1998. The  acquisition of 21st Century has
         been a major factor in enhancing  Millbrook's  secondary school library
         sales.  The  Company  currently  has  no  commitments,   agreements  or
         understandings with respect to any acquisition.

         In the past fiscal year,  the Company  entered into a contract with Net
         Library,  a major seller of  electronic  books to academic,  public and
         school  libraries.  The  agreement  allows Net Library to reformat  and
         distribute an electronic  version of over 300 of the Company's  titles.
         The Company  will  participate  with  Follett  Library  Resources,  Net
         Library's  agent in the school market in joint  promotion  efforts.  To
         date,  the  Company  has  received  only  minimal  revenues  from  this
         agreement and there can be no assurance that this agreement will result
         in significant revenues to the Company in the future.

o        Enhance  Marketing and Sales Force.  Since  inception,  the Company has
         increased its  penetration  into the school and public library  market.
         The management of the school and

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<PAGE>

         library   marketing   department  and  sales  force  was  significantly
         strengthened in fiscal 1999, which has led to substantial  direct sales
         growth in fiscal 2000 which is expected to continue.

o        Expand  Distribution.  The Company believes that  decision-making  with
         respect  to  purchasing  books  is  becoming  more  complex  due to the
         expansion in types of outlets  selling books and that expanding the use
         of marketing  techniques to put the Millbrook imprint in direct contact
         with children,  parents and teachers will increase  sales.  The Company
         will increase its participation in book fairs, book clubs, catalogs and
         continue to distribute its books to alternative  retail outlets as well
         as increase its direct selling and direct mail activities.  The Company
         may also seek to enter into additional strategic partnerships to extend
         its  distribution in both the consumer and in school and public library
         market channels.

o        Adapt to New  Technologies.  The Company intends to improve its website
         to make it more user friendly and provide better  information access to
         the library  community.  The website will be  completely  redesigned to
         allow updating on a constant  basis. It will be promoted as a source of
         information  on the  Company's  titles as well as a convenient  way for
         libraries to purchase.  At some future date, the Company will study the
         possibility of a general consumer website.

o        Continue to Develop High Quality Books.  The Company intends to develop
         additional books through internal development in collaboration with its
         network of authors and artists. The Company is now selectively entering
         into agreements with certain  high-profile  authors and illustrators to
         increase the recognition of its brand names.


Products

The Company  publishes  children's books in hardcover and paperback  formats for
the school and public library market and the consumer  market.  When the Company
began  publishing  books in 1991, the books created were mainly series books and
were intended to be sold singularly and in sets to the school and public library
market.  Since then,  the Company's  products have evolved into a diverse set of
highly graphic,  consumer-oriented  single books. The Company designs all of its
books to appeal to teachers and librarians,  as well as to children and parents.
This approach allows the Company's books to be introduced simultaneously in more
than one market,  with the intent of increasing  sales.  For example,  in fiscal
2000, the Company  published 108 hardcover books under the Millbrook imprint for
the school and public  library  market,  of which 47 books were suitable for and
published  simultaneously  as  hardcover or paperback to be sold in the consumer
market, and 40 hardcover books under the Copper Beech imprint for the school and
library market, of which 20 books were suitable for and published simultaneously
as hardcover or paperback, to be sold in the consumer market.


Product Development

The Company develops books through internal and external resources.  The Company
may also acquire books through co-publishing arrangements and/or the acquisition
of other licenses.

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<PAGE>

Internal Development

The Company's  editorial  staff produces most of the books  published  under the
Millbrook imprint. A book concept can originate from a number of sources such as
(i)  analysis of the  Company's  sales  statistics  of an existing  book to help
assess how a similar book targeting a similar age group will fair, (ii) analysis
of school age  demographics  and other  social  and  economic  factors  from the
current  philosophical  trends in education to the  globalization  of education,
(iii)  review of  competitors'  books to  determine  if and how the  Company can
publish a superior book on a similar topic, (iv) reading children's magazines to
determine  what young  people are  interested  in and (v)  maintaining  personal
contact with  librarians,  teachers,  and  booksellers.  Once conceived,  a book
proposal is circulated  to sales,  production,  marketing,  design and financial
departments  of the Company for their input and  depending on their  input,  the
proposal will go forward or terminate. A favorable decision causes the editorial
department to contract with an appropriate author and/or artist from its pool of
approximately  350 authors and artists.  The Company  believes it has  excellent
relationships  with its authors and artists,  including many well-known names in
the field.

Authors and artists  are  typically  engaged on a royalty  basis.  Royalties  on
hardcover and paperback  editions are paid on the net sales and range from 6% to
10% of net sales with an average of 7% of net sales for  hardcover and paperback
books.  Virtually  all of  Millbrook's  contracts  call for an  advance  payment
against future  royalties.  In almost all cases,  the Company retains control of
all book club,  reprint,  electronic,  foreign,  serialization,  and  commercial
rights.  The income  generated  from such  arrangements  is divided  between the
Company and the author.

Upon the delivery of a manuscript from an author/illustrator  and after editing,
fact checking and approval,  the Company's in-house staff plans and prepares the
layout,  illustrations and cover to be used for the book. Upon completion of the
editing,  graphics and layout, a computer produces a mechanical of the book with
all elements in place. A cost estimate is then prepared which  determines  print
quantity  and  retail  price of the book.  Book  printing  is done by an outside
supplier,  usually in the United States,  on a bid contract basis. The Company's
products  require  varying  periods  of  development  time  depending  upon  the
complexity  of the  graphics  and design and the  editing  process.  Most of the
Company's  books can be  developed in a period that ranges from nine to eighteen
months.  Millbrook  is  often  cited in  reviews  of its  books  for one or more
outstanding design elements (cover,  layout,  type, etc.).  Jackets and interior
design are either  created  in-house or assigned to freelance  artists under the
supervision  of the  Company's  art  department.  The  use of  outside  authors,
illustrators and freelancers for jacket design,  fact-checking  and copy editing
allows the Company to produce a large number of books per year with a relatively
small staff and generally  allows for the flexibility  needed for the Company to
continue to produce a broad product line.

External Development

Approximately 25% of books published under the Millbrook imprint are produced by
outside  sources.  Most of these books are  produced by outside  packagers  that
cooperate  and  consult  with  Millbrook  during  the  development  process  but
otherwise provide the full range of services needed to publish children's books.
The Company has entered into an exclusive,  long-term joint venture with Aladdin
Books Limited  ("Aladdin"),  a major children's  packager for the

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international  market,  to produce 40 nonfiction titles per year to be published
under the Company's Copper Beech imprint.  The exclusive  agreement  between the
Company and Aladdin was designed to produce  books with strong  consumer  market
appeal in  popularly  priced  paperback  books as well as content  suitable  for
hardcover  books  for  sales  to  libraries.  Aladdin  is  responsible  for  the
production,  printing and binding of such books,  although development costs for
such books are shared by Aladdin  and the  Company.  Aladdin  retains  the sales
rights for these books to countries other than the United States, Canada and the
Philippines.  Royalties  are  paid to  Aladdin  based  on the  Company's  sales.
Development  recovery  amounts are paid to the Company based on sales by Aladdin
to other parts of the world.

Licenses

In the normal course of its business, the Company acquires licenses from foreign
book  publishers  for the rights to market and sell in the United  States  books
that were created  either with or without input from the Company.  The licensing
usually includes all subsidiary  rights such as first and second  serialization,
commercial rights,  electronic rights,  foreign and translation rights,  reprint
rights and rights to any means yet to be developed for transmitting information.
As the Company expands its own publishing program,  fewer books will be obtained
from foreign publishers.


Marketing and Distribution

The  Company's  sales and  marketing  efforts are  designed  to broaden  product
distribution,  increase the number of first-time and repeat purchasers,  promote
brand-name  recognition,  assist  retailers and properly  position,  package and
merchandise  the Company's  products.  The Company  utilizes  various  marketing
techniques  designed to promote brand  awareness and recognition and to maximize
the  amount of shelf  space  devoted  to its  product  line in  retail  outlets,
including   complimentary   copies,   reviews  and  recommendations,   catalogs,
advertising,  brochures,  exhibits, publicity campaigns and in-store promotions.
The Company's marketing efforts are geared toward its two major markets: (i) the
school and public library market and (ii) the consumer market.

School and Public Library

The Company  targets the school and public  library  market  through  three main
channels:  wholesalers,  telemarketing and direct sales. Large school and public
library systems tend to purchase their books through wholesalers on a bid basis,
while smaller systems purchase  directly from a commission sales  representative
or through a telemarketing program such as the one the Company conducts.  During
the fiscal year ended July 31, 2000, a significant amount of the Company's sales
in the school and public  library  market were made through  wholesalers.  While
most  wholesalers do not engage in sales and marketing  efforts on behalf of the
Company's products,  they provide schools and public libraries with a wide range
of selection  and  convenience  as well as  discounts on bulk orders.  Through a
complementary marketing program of telemarketing,  advertising,  review programs
and direct sales calls, the Company believes that one of its greatest  strengths
is its ability to reach the individual  teacher,  principal or librarian  making
the purchase decision.  Telemarketing penetrates the market through its "preview

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program" where books are given on loan to teachers and other  decision-makers on
the premise  that the quality of the book will sell itself.  In September  1998,
the Company  initiated a website that allows  librarians to  participate  in the
"preview  program"  electronically.  This should extend the reach of the program
significantly.  The  remaining  sales in this area  result  from  direct-selling
efforts where commissioned salespersons conduct face-to-face meetings at schools
and libraries with  decision-makers  or by purchase from the Company's  catalogs
and  advertising.  Direct  purchases  by schools and  libraries  are the fastest
growing areas of the Company's sales.

The Company markets its books in numerous ways to support the foregoing efforts.
The Company sends  complementary  copies of each newly published book to library
media  reviewers and columnists and major county or district school systems that
have their own review and  recommendation  process.  The Company believes that a
favorable review in a respected library journal can significantly  influence the
sales  prospects of a particular  book.  Many of the Company's  books  published
under the  Millbrook  imprint  have  received  favorable  reviews.  The  Company
produces  six  catalogs  and one  magazine  insert per year.  For its school and
library accounts,  the Company produces one full-line  catalog,  consisting of a
complete  annotated  backlist as well as new  publications  for the Fall that is
mailed to 100,000  current and  prospective  accounts.  The  Company  produces a
Spring list  catalog for mailing to the same  audience.  The Company  produces a
21st  Century  Book catalog for mailing to most  secondary  schools.  Its direct
sales force also  distributes the Company's  catalogs.  The Company produces two
full-line  catalogs per year for the consumer  market in May and  December.  The
Company also advertises in many consumer  journals,  newsletters and newspapers.
The Company  produces  promotional  materials  for  individual  titles,  themes,
authors and illustrators.  It also produces standard  "leave-behind" sell sheets
that refresh a librarian's  recollection of a sales presentation.  Finally,  the
Company exhibits its books at many national  conventions covering the school and
public library and consumer markets.

The expanding use of children's books in the classroom,  especially in paperback
formats,  provides  new  opportunity.  The  Company  intends  to create  special
publishing and marketing programs to take advantage of this development.

Consumer

The sales  channels in the consumer  market are more diverse than the school and
public library market and require a different  marketing  approach.  The Company
has recently attracted  experienced and talented sales and marketing  personnel.
The  in-house  consumer  sales  group  covers the two major  areas:  traditional
consumer book markets and non-traditional consumer book markets.

The Company has three sales groups:  the in-house sales group,  the commissioned
sales group and the special sales group. The in-house sales group consists of an
in-house  vice  president  of sales  and an  assistant  responsible  for  sales,
promotion and  merchandising to the major national and large regional  accounts.
The commissioned sales group currently consists of approximately 25 commissioned
representatives who are responsible for sales to independent  bookstores,  small
regional  chains and certain  special  sales outlets and regional  jobbers.  The
special sales group  managed by a sales vice  president  markets to  specialized
retail outlets such as museums,  national parks,  historical sites, theme parks,
gift shops and toy stores,  consumer  and school  catalogs,  direct  mail,  book
fairs, book clubs, and display sales companies. The Company's sales

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representatives sell the full range of the Company's products.  The sales groups
provide the Company  with highly  valuable  insight by obtaining  feedback  from
customers on current product  performance  and potential  acceptance of proposed
products.  In addition to the marketing  efforts  discussed  with respect to the
school and public library  market,  the Company  conducts  additional  marketing
designed to increase brand name recognition in the consumer market.  The Company
makes certain that good reviews,  which can stimulate sales, are sent to schools
and libraries on a regular basis. The Company  participates with various outlets
in  advertising  directly to  individuals  through media and catalogs.  In-store
promotions,  such as posters,  points of purchase displays,  brochures,  holiday
end-of-counter and front-of-store  displays, are also utilized by the Company to
further enhance its sales in the consumer market.


Manufacturing and Shipping

All of the Company's  books are printed and bound by third-party  manufacturers.
During fiscal year 2000, approximately 32% of the Company's printing and binding
needs were provided by one major printer,  an industry leader in  library-bound,
short-run printing and binding.  Manufacturing is a significant expense item for
the Company,  with a total of $5.5 million (or  approximately  25% of net sales)
spent in 2000. The Company has used this printer's  services since the Company's
inception and enjoys a good working relationship with them. The Company believes
it has  sufficient  alternative  sources of  manufacturing  services to meet its
foreseeable  needs should this printer's  services no longer be available to the
Company, although manufacturing costs could be adversely impacted.

Shipping  orders  accurately  and  promptly  upon their  receipt is an important
factor in the Company's  customer service and in closing a sale. Most publishing
companies ship products within one week of receipt of a customer  order,  and in
general the  Company  meets or reduces  this  timetable.  The Company  processes
customer orders through an in-house  processing  department.  The Company leases
warehouse  space from,  and its products are shipped from Mercedes  Distribution
Center of Brooklyn, New York.


Competition

The  children's  book  publishing  marketplace  in the school and public library
market  and  in  the  consumer  market  is  fragmented  and  very   competitive.
Competition  in the school and public  library  market is based upon  quality of
products,  brand name recognition and book content.  In the consumer market, the
primary  factors are brand name  recognition,  book  content,  availability  and
price.

There  are  many  publishers  of  material  similar  to  the  Company's  product
offerings.  The Company's chief and direct  competitors in the school and public
library  market  include  Childrens  Press,  Franklin  Watts  Inc.,  and  Lerner
Publications  Co. The  Company's  chief and direct  competitors  in the consumer
market include Barron's  Educational  Series Inc.,  Candlewick  Press,  Larousse
Kingfisher Chambers Inc., Random House Inc. and Usborne Publishing Ltd.

The Company also  competes  with a large number of other  publishers  for retail
shelf  space in

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<PAGE>

large  bookstore  chains  such as Barnes & Noble,  Borders and  Waldenbooks.  In
addition to  competition  among like types of publishing  programs,  the overall
competition for limited  educational  budgets is intense when other producers of
materials  used in classrooms and libraries are included,  especially  producers
and  distributors  of  electronic  hardware  and  software.  A  number  of these
competitors have considerably greater financial and marketing resources than the
Company.  Nevertheless, the Company believes that the depth of experience of its
management  and its  relationships  in the  education  sector give the Company a
competitive  edge not only in producing  quality books  marketable in the school
and  library  and  consumer  markets,  but  also  in  foreseeing  long-term  and
short-term social and economic forces influencing the children's book industry.


Protection of Proprietary Rights

Nearly all the Company's  books have been  copyrighted in the United States,  in
the name of the author or artist and then all such copyrights have been assigned
to the Company. As a result, the Company owns the exclusive right to exploit the
copyright in the marketplace.  On books created in-house by the Company, it owns
world  rights  for  all  aspects  of the  market,  including  first  and  second
serialization,  commercial rights,  electronic  rights,  foreign and translation
rights,  reprint  rights,  and  rights  to any  means  yet to be  developed  for
transmitting information.  There are a limited number of books for which foreign
rights and  electronic  rights will revert to the author if the Company does not
exploit  them in a given period of time.  On books that are  imported  under the
Millbrook  imprint,  the  Company  has  exclusive  rights for all United  States
markets and the Philippines. The Company's trade names, Millbrook,  Twenty-First
Century and Copper Beech, are used to publish books primarily for the school and
library market and consumer  market  respectively.  The Company  considers these
trade names material to its business.

For the Copper Beech titles, the Company has exclusive rights for all markets in
the United States and Canada.  World rights are retained for books originated by
Aladdin and the Company participates in the profits generated from such sales on
a 25% basis.


Employees

As of July 31, 2000, the Company had  approximately  51 employees,  86% of which
were full-time and 14% were part-time.  The Company has never experienced a work
stoppage and its employees are not covered by a collective bargaining agreement.
The Company believes its relations with its employees are good.


Item 2.  Description of Properties

The Company owns no real property.  The Company  conducts its operation  through
two  facilities.  The Company leases  approximately  7,000 square feet of office
space in  Brookfield,  Connecticut at a current rental of $134,000 per year plus
utilities  and taxes.  This lease  expires in December  2002.  The Company  also

                                       11

<PAGE>

leases  approximately  1,900 square feet in New York City at a rental of $34,600
per year plus utilities and taxes. This lease expires in April 2004. The Company
also leases office space in Southampton, New York at a current rental of $12,000
per year plus utilities and taxes. This lease expires in September 2001.


Item 3.   Legal Proceedings

The Company is not currently a party to any material legal proceedings


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

                                    None



PART II

Item 5.    Market for Common Equity and Related Stockholders Matters

The Common Stock of The Millbrook  Press Inc. is traded under the symbol MILB on
the NASDAQ  SmallCap  Market.  The Company's  Common Stock is also traded on the
Boston Stock Exchange under the symbol MILB. The following  table sets forth the
ranges of the high and low  closing  bid  prices  for the  Common  Stock for the
fiscal  years ended July 31, 2000 and July 31,  1999,  as reported on the NASDAQ
SmallCap  Market,  the  principal  trading  market  for the  Common  Stock.  The
quotations  are  interdealer  prices  without  adjustment  for  retail  markups,
markdowns, or commission and do not necessarily represent actual transactions.

                                  COMMON STOCK

                            YEAR ENDED JULY 31, 2000


                                 High                                Low

First Quarter                    2.75                                1.88

Second Quarter                   2.75                                1.53

Third Quarter                    2.37                                1.93

Fourth Quarter                   2.25                                1.81

                                       12

<PAGE>



                            YEAR ENDED JULY 31, 1999

First Quarter                    3.50                                1.75

Second Quarter                   6.62                                1.87

Third Quarter                    3.94                                2.50

Fourth Quarter                   3.00                                2.25

As of  July  31,  2000,  the  Company  had  2,859,887  shares  of  Common  Stock
outstanding and 58 holders of record of the Company's  Common Stock. The Company
believes that at such date, there were in excess of 600 beneficial owners of the
Company's Common Stock.

The  Company  has never paid any  dividends  on its Common  Stock.  The  Company
currently intends to retain all earnings, if any, to support the development and
growth of the Company's business.  In addition,  the Company's revolving line of
credit with People's Bank prohibits the Company from the  declaration or payment
of  dividends.  Accordingly,  the  Company  does  not  anticipate  that any cash
dividends will be declared on its Common Stock in the foreseeable future.


Item 6.  Management's Discussion and Analysis or Plan of Operation

The following  discussion and analysis  should be read in  conjunction  with the
Financial  Statements  of The  Millbrook  Press Inc.  and  related  Notes to the
Financial Statements, which are included elsewhere in this Form 10-KSB.


Overview

General

In February  1994, the Company was  incorporated  and acquired the assets of The
Millbrook Press Inc.,  which had commenced  operations in 1989. Prior to January
1991, The Millbrook Press Inc. had no revenues and incurred  expenses related to
administrative  costs  associated with the formation and production of its first
publication  list.  Subsequent to January 1991, the Company has had  significant
net sales in the school and public library  consumer  markets.  Books  published
under the Millbrook imprint have evolved from  information-intensive  school and
library  books to include its current mix of highly  graphic,  consumer-oriented
books. Therefore,  the Company has incurred significant expenses relating to the
establishment of the infrastructure that can enable the Company to sell books to
the consumer  market and/or develop books that can appeal to both the school and
public library market and the consumer market.

                                       13

<PAGE>

Sales Incentives and Returns

In  connection  with  the  introduction  of new  books,  many  book  publishers,
including the Company,  discount  prices of existing  products,  provide certain
promotional  allowances and give other sales incentives to their customers.  The
Company  intends to continue  such  practices in the future.  In  addition,  the
practice in the publishing industry is to permit customers including wholesalers
and retailers to return merchandise.  Most books not sold may be returned to the
Company,  and the  Company  gives  credit.  The rate of  return  also can have a
significant  impact on quarterly  results since certain  wholesalers have in the
past  returned  large  quantities  of  products  at  one  time  irrespective  of
marketplace  demand for such  products,  rather than  spreading  out the returns
during the course of the year.  The Company  computes net sales by  concurrently
deducting a reserve for returns from its gross sales.  Return allowance may vary
as a percentage  of gross sales based on actual return  experience.  The Company
believes that as gross sales to the consumer  market increase as a proportion of
its overall sales,  returns will  constitute a greater  proportion of net sales.
Although the Company believes its reserves have been adequate to date, there can
be no  assurance  that  returns  by  customers  in the  future  will not  exceed
historically  observed  percentages or that the level of returns will not exceed
the amount of  reserves  in the  future.  In the event that the amount  reserved
proves to be  inadequate,  the  Company's  operating  results  will be adversely
affected.

Acquisition

On December 5, 1997, the Company  completed an  acquisition to purchase  certain
assets of  Twenty-First  Century  Books,  a division  of Henry Holt & Co.,  Inc.
("Holt").  The  purchase  was  effective  as of  December  1,  1997.  Under  the
agreement, the Company paid Holt $2,013,000 for the assets.

School and Public Library Market

The  addition of  Twenty-First  Century  Books was one element in  substantially
increasing  school and public  library  sales.  The second  element  was greater
emphasis on telemarketing and direct sales.  Both elements produced  substantial
results in fiscal year 2000.



Results of Operations

Fiscal 2000 Compared to Fiscal 1999

Fiscal 2000  revenues  increased  14% from $18.7 million in fiscal 1999 to $21.4
million in fiscal 2000. Increased sales resulted from major increases in special
sales to direct sales organizations,  book clubs, book fairs and catalogs,  plus
an increase in  wholesale  sales to school and public  libraries  and through an
increase in direct sales.

Gross profits for the year ended July 31, 2000 were $9,604,000,  or 44.9% of net
sales  compared to  $7,805,000 or 41.6% of net sales for the year ended July 31,
1999.  This  percentage  increase in margin is due to the increased sales in the
more profitable school and library market.

                                       14


<PAGE>

Selling and  marketing  expenses  for fiscal 2000  decreased to 27% of net sales
from 32% of net sales for fiscal 1999.  Selling and marketing expenses decreased
by $82,000 even though the Company  increased  its direct mail  expenditures  by
$200,000.

General and  administrative  expenses for fiscal 2000 have decreased $229,000 to
9% of net sales from 12% a year ago. This is a result of the Company's effort to
tightly control costs and increase productivity.

Net operating profit for the year ended July 31, 2000 was $1,835,000 compared to
a loss of $275,000 for the previous year.

Interest  expense  increased  from $399,000 in fiscal 1999 to $496,000 in fiscal
2000.  The increase in interest  expense is due to borrowing for the purchase of
595,113  shares of its common stock,  and increased  interest rates over 1999 on
its line of credit.

Net income after tax for the year ended July 31, 2000 was  $1,136,000,  compared
to a loss of $674,000 in the previous year.


Liquidity and Capital Resources

As of July 31,  2000,  the Company  had cash and working  capital of $0 and $5.2
million,  respectively,  as compared to cash and working capital of $133,000 and
$4.7 million,  respectively  as of July 31, 1999. (All cash at July 31, 2000 was
used to reduce the outstanding loan balance)

The Company has  available a $7,500,000  revolving  line of credit with People's
Bank. The line of credit  restricts the ability of the Company to obtain working
capital in the form of indebtedness, to grant security interest in the assets of
the Company or to pay  dividends  on the  Company's  securities.  As of July 31,
2000,  the Company has $3,683,000  outstanding  under this line, all of which is
classified as current  liabilities since it is due on demand.  The $7,500,000 is
the maximum available, however, it may be lower based upon the eligible value of
accounts  receivable  and  inventory.  As of July  31,  2000  the  maximum  loan
available was $6,962,000.  For further information relating to the People's Bank
loan agreement, see Note (4) of "Notes to Financial Statements".

Based on its current  operating  plan,  the Company  believes  that its existing
resources  together  with cash  generated  from  operations  and cash  available
through its credit line will be sufficient to satisfy the Company's contemplated
working capital requirements at least through July 31, 2001. However,  there can
be no assurance that the Company's working capital  requirements will not exceed
its  available  resources  or that these  funds will be  sufficient  to meet the
Company's  longer-term  cash  requirements for operations.  Accordingly,  either
before or after  July 31,  2001,  the  Company  may seek  additional  funds from
borrowings or through debt or equity financing.

                                       15

<PAGE>

Year 2000 Disclosure

The Company has no material  Year 2000 issues to report.  All internal and third
party  hardware and software has  functioned as expected  since January 1, 2000,
there has been no loss of business or disruption in day to day  operations.  The
Company's costs regarding Year 2000 compliance were in line with budget and were
not material to the Company's operating results or cash position.


Forward-Looking Statements

This Form 10-KSB contains certain forward-looking  statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, which are intended to be covered by
the  safe  harbors   created   hereby.   Investors   are   cautioned   that  all
forward-looking  statements  involve risks and  uncertainty,  including  without
limitation, the Company's future cash resources and liquidity and the ability of
the Company to fully exploit a book's sales  potential in the school and library
and  consumer  markets.  Although  the  Company  believes  that the  assumptions
underlying the forward-looking  statements contained herein are reasonable,  any
of the assumptions could be inaccurate, and therefore, there can be no assurance
that the  forward-looking  statements included in this Form 10-KSB will prove to
be  accurate.  In  light  of  the  significant  uncertainties  inherent  in  the
forward-looking  statements  included herein,  the inclusion of such information
should not be regarded as a  representation  by the Company or any other  person
that the objectives and plans of the Company will be achieved.



                                       16

<PAGE>


Item 7.          Financial Statements



                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



The Shareholders and The Board of Directors
The Millbrook Press Inc.:


We have audited the  accompanying  balance sheets of The Millbrook Press Inc. as
of  July  31,  2000  and  1999,  and  the  related   statements  of  operations,
stockholders'  equity and cash flows for the years then ended.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of The Millbrook Press Inc. as of
July 31, 2000 and 1999 and the results of its  operations and its cash flows for
the years  then  ended,  in  conformity  with  accounting  principles  generally
accepted in the United States.


Arthur Andersen LLP


Stamford, Connecticut
October 10, 2000

                                       17

<PAGE>


                            THE MILLBROOK PRESS INC.


                                 BALANCE SHEETS

                             JULY 31, 2000 AND 1999

<TABLE>
<CAPTION>

                                                                             2000                 1999
                                                                             ----                 ----
                             ASSETS

Current assets:
<S>                                                                   <C>                   <C>
     Cash                                                             $         -           $    133,000
     Accounts receivable (less allowance for returns and bad
      debts of $660,000 in 2000 and $803,000 in 1999)                   6,160,000              6,104,000
     Inventories                                                        6,649,000              7,079,000
     Royalty advances, net                                                725,000                699,000
     Prepaid expenses                                                     202,000                341,000
                                                                      -----------           ------------
                Total current assets                                   13,736,000             14,356,000

     Plant costs, net                                                   4,348,000              4,360,000
     Fixed assets, net                                                    236,000                237,000
     Goodwill, net                                                      2,912,000              3,126,000
     Royalty advances, net                                              1,158,000                852,000
                                                                      -----------           ------------
                Total assets                                          $22,390,000            $22,931,000
                                                                      ===========           ============
</TABLE>


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


                                       18

<PAGE>

                            THE MILLBROOK PRESS INC.


                                 BALANCE SHEETS

                             JULY 31, 2000 AND 1999

                                   (Continued)

<TABLE>
<CAPTION>

                                                                2000           1999
                                                                ----           ----

         LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
<S>                                                         <C>            <C>
     Notes payable to bank                                  $ 3,683,000    $ 5,458,000
     Accounts payable and accrued expenses                    4,089,000      3,892,000
     Royalties payable                                          412,000        308,000
     Current portion of long term debt                          400,000           -
                                                            -----------   ------------
                Total current liabilities                     8,584,000      9,658,000

Long term debt                                                  364,000           -
                                                            -----------   ------------
                Total liabilities                             8,948,000      9,658,000
                                                            -----------   ------------

Commitments

Stockholders' equity:
     Common stock, par value $.01 per share, authorized
       12,000,000 shares; 3,455,000 shares issued and
       2,859,887 shares outstanding in 2000 and
       3,455,000 shares issued and outstanding in 1999           35,000         35,000
     Additional paid-in capital                              17,556,000     17,556,000
     Treasury stock (595,113 shares at cost)                   (967,000)          -
     Accumulated deficit                                     (3,182,000)    (4,318,000)
                                                            -----------   ------------
                Total stockholders' equity                   13,442,000     13,273,000
                                                            -----------   ------------
                Total liabilities and stockholders' equity  $22,390,000    $22,931,000
                                                            ===========   ============
</TABLE>


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

                                       19

<PAGE>

                            THE MILLBROOK PRESS INC.


                            STATEMENTS OF OPERATIONS

                   FOR THE YEARS ENDED JULY 31, 2000 AND 1999
<TABLE>
<CAPTION>

                                                            2000               1999
                                                         -----------       ------------

<S>                                                      <C>               <C>
Net sales                                                $21,388,000       $18,763,000

Cost of sales                                             11,784,000        10,958,000
                                                         -----------       ------------
              Gross profit                                 9,604,000         7,805,000
                                                         -----------       ------------
Operating expenses:
     Selling and marketing                                 5,833,000         5,915,000
     General and administrative                            1,936,000         2,165,000
                                                         -----------       ------------
              Total operating expenses                     7,769,000         8,080,000
                                                         -----------       ------------
Operating income (loss)                                    1,835,000          (275,000)

Interest expense                                             496,000           399,000
                                                         -----------       ------------
Income (loss) before income tax                            1,339,000          (674,000)

Provision for income tax                                     203,000              -
                                                         -----------       ------------
Net income (loss)                                        $ 1,136,000       $  (674,000)
                                                         ===========       ============

Earnings (loss) per share (basic and diluted)            $       .37       $      (.20)
                                                         ===========       ============
Weighted average shares outstanding (basic and
 diluted)                                                  3,080,079         3,455,000
                                                         ===========       ============
</TABLE>


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


                                       20
<PAGE>

                            THE MILLBROOK PRESS INC.

                       STATEMENTS OF STOCKHOLDERS' EQUITY

                   FOR THE YEARS ENDED JULY 31, 2000 AND 1999

<TABLE>
<CAPTION>

                                                       Additional
                                 Common Stock            Paid-In        Treasury    Accumulated
                              Shares       Amount        Capital         Stock         Deficit          Total
                              ------       ------        -------         -----         -------          -----

<S>                          <C>           <C>         <C>            <C>           <C>                <C>
Balance at July 31, 1998     3,455,000     $35,000     $17,556,000    $      -      $ (3,644,000)      $13,947,000

Net (loss)                           -           -          -                -          (674,000)         (674,000)
                             ---------     -------     -----------    ----------    ------------       -----------
Balance at July 31, 1999     3,455,000      35,000      17,556,000           -        (4,318,000)       13,273,000

Purchase of treasury stock    (595,113)          -          -          (967,000)          -               (967,000)

Net income                           -           -          -                -         1,136,000         1,136,000
                             ---------     -------     -----------    ----------    ------------       -----------
Balance at July 31, 2000     2,859,887     $35,000     $17,556,000    $ (967,000)    $(3,182,000)      $13,442,000
                             =========     =======     ===========    ==========    ============       ===========
</TABLE>



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


                                       21

<PAGE>

                            THE MILLBROOK PRESS INC.

                            STATEMENTS OF CASH FLOWS

                       YEARS ENDED JULY 31, 2000 AND 1999

<TABLE>
<CAPTION>

                                                                        2000         1999
                                                                   -----------   -----------

Cash flows from operating activities:
<S>                                                                <C>           <C>
     Net income (loss)                                             $ 1,136,000   $  (674,000)
     Depreciation and amortization                                   1,890,000     1,912,000
     Changes in assets and liabilities:
            Increase in accounts receivable                            (56,000)   (1,159,000)
            Decrease (increase) in inventories                         430,000      (370,000)
            Increase in royalty advances                              (332,000)      (21,000)
            Decrease in prepaid expenses                               139,000        82,000
            Decrease in other assets                                      --          15,000
            Increase in accounts payable and accrued expenses          197,000       486,000
            Increase in royalties payable                              104,000        60,000
                                                                   -----------   -----------
              Net cash provided by operating activities              3,508,000       331,000
                                                                   -----------   -----------
Cash flows from investing activities:
   Capital expenditures                                                (96,000)      (81,000)
   Plant costs                                                      (1,567,000)   (1,734,000)
                                                                   -----------   -----------
             Net cash used in investing activities                  (1,663,000)   (1,815,000)
                                                                   -----------   -----------
Cash flows from financing activities:
     (Repayments of) proceeds from borrowings under notes payable   (1,775,000)    1,583,000
     Proceeds from long term debt                                      764,000          --
     Purchase of treasury stock                                       (967,000)         --
                                                                   -----------   -----------
            Net cash (used in) provided by financing activities     (1,978,000)    1,583,000
                                                                   -----------   -----------
            Net (decrease) increase in cash                           (133,000)       99,000

Cash at beginning of year                                              133,000        34,000
                                                                   -----------   -----------
Cash at end of year                                                $      --     $   133,000
                                                                   ===========   ===========
Supplemental disclosures:
     Interest paid                                                 $   496,000   $   399,000
                                                                   ===========   ===========
     Income taxes paid                                             $    57,000   $   145,000
                                                                   ===========   ===========
</TABLE>


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

                                       22

<PAGE>

                            THE MILLBROOK PRESS INC.

                          NOTES TO FINANCIAL STATEMENTS

                             JULY 31, 2000 AND 1999


(1)      Description of the Business:

         The Millbrook  Press Inc.  ("Company") was  incorporated  and commenced
         operations as an independent  company on February 23, 1994. The Company
         is a publisher of children's  nonfiction  books,  in both hardcover and
         paperbacks,  for preschoolers through young adults. The Company's books
         are  distributed  to  the  school  and  public  library  market,  trade
         bookstores and other  specialty  retail and direct sales markets in the
         United States through  wholesalers,  its own telemarketing  efforts and
         commissioned sales representatives.

(2)      Summary of Significant Accounting Policies:

         Cash and Cash Equivalents-

         Cash and cash  equivalents  consist of cash in banks and highly liquid,
         short-term investments with original maturities of three months or less
         at the date acquired.

         Revenue Recognition-

         Revenue from the sale of books is generally recognized at shipment. The
         Company   provides  a  reserve   for   product   returns.   Sales  from
         telemarketing  activities are recognized when the customer  accepts all
         or part of a sample shipment.

         Inventories-

         Inventories of sheets and bound books, which are primarily located in a
         public warehouse or at customers as inventory on preview, are stated at
         the lower of cost or market,  with cost  determined by the average cost
         method. Allowances are established to reduce recorded costs of obsolete
         and slow moving inventory to its net realizable value.

         Royalty Advances-

         Licensing  agreements for rights to future publications usually require
         a  non-refundable  partial  payment  of the  royalty  in advance of the
         publication.  The Company  charges  royalty  advances to expense in the
         period during which the related sales are recorded.  If it appears that
         an  advance  will  exceed  total  royalties  to be  earned  based  upon
         estimated sales, such excess is immediately expensed.  Royalty advances
         for publications to be published in excess of one year from the balance
         sheet date are classified as non-current assets.

                                       23

<PAGE>

         Plant Costs-

         Plant costs  consisting of plates,  photo  engravings,  separations and
         other text costs of  unpublished  books are  amortized  over five years
         from  publication  date or the  estimated  remaining  life, if shorter.
         Plant costs at July 31, 2000 and 1999 are presented net of  accumulated
         amortization of $9,296,000 and $7,716,000 respectively.

         Advertising Costs-

         Advertising  costs are  expensed  in the periods in which the costs are
         incurred.  Catalog  costs  consisting  of the  costs of  producing  and
         distributing  catalogs are expensed  ratably over the year in which the
         costs are  incurred in relation to sales.  Advertising  expense for the
         years  ended  July  31,  2000  and  1999  was  $750,000  and  $479,000,
         respectively.

         Fixed Assets-

         Fixed assets are recorded at cost.  Depreciation  and  amortization  of
         fixed assets are computed on the  straight-line  method based on useful
         lives ranging from 7-10 years for office  furniture and equipment and 5
         years for  computers.  Leasehold  improvements  are amortized  over the
         lesser of the lease term or the life of the asset.

         Goodwill and Other Long Lived Assets-

         Goodwill  represents  the excess of the cost over the fair value of the
         net assets acquired.  For financial reporting  purposes,  the excess of
         cost over the fair value of net assets  acquired is  amortized  over 20
         years using the straight-line method.  Accumulated amortization at July
         31, 2000 and 1999 is $1,266,000 and $1,051,000,  respectively. Pursuant
         to Internal  Revenue Code Section 197, for Federal  income tax purposes
         such goodwill is deductible over 15 years.

         The Company systematically reviews the recoverability of its long-lived
         assets  by  comparing  their   unamortized   carrying  value  to  their
         anticipated  undiscounted  future cash flows. Any impairment is charged
         to expense when such determination is made.

         Income Taxes-

         Deferred tax assets and  liabilities  are recognized for the future tax
         consequences   attributable   to  differences   between  the  financial
         statement carrying amounts of existing assets and liabilities and their
         respective tax bases and operating  loss and tax credit  carryforwards.
         Deferred  tax assets and  liabilities  are measured  using  enacted tax
         rates  expected to apply to taxable  income in the years in which those
         temporary  differences  are  expected to be  realized  or settled.  The
         effect on deferred tax assets and  liabilities of a change in tax rates
         is recognized in income in the period that includes the enactment date.

                                       24

<PAGE>

         Earnings (Loss) Per Share-

         Basic EPS is computed as net earnings  divided by the  weighted-average
         number  of  common  shares  outstanding  for the  period.  Diluted  EPS
         reflects the  potential  dilution  that could occur from common  shares
         issuable  through   stock-based   compensation  plans  including  stock
         options,  restricted  stock  awards,  warrants  and  other  convertible
         securities using the treasury stock method.

         Earnings  (loss) per share is net income (loss) divided by the weighted
         average number of common stock  outstanding for the periods.  Per share
         data for 2000 and 1999 does not assume  the  exercise  of common  stock
         options as the option  exercise  prices  are above the  average  market
         price of common stock for the year.

         Stock Options-

         The  Company   adopted  SFAS  No.  123,   "Accounting  for  Stock-Based
         Compensation",   which  allows   entities  to  continue  to  apply  the
         provisions  of APB  Opinion No. 25 and provide pro forma net income and
         pro forma  earnings per share  disclosures  for  employee  stock option
         grants made in fiscal 1996 and future years as if the  fair-value-based
         method defined in SFAS No. 123 had been applied.

         Use of Estimates-

         The  preparation of financial  statements in accordance with accounting
         principles  generally accepted in the United States requires management
         to make estimates and assumptions  that affect the reported  amounts of
         assets and liabilities and the reported amounts of revenue and expenses
         during  the  reported  periods.  Actual  results  could  vary  from the
         estimates and assumptions  used in the preparation of the  accompanying
         financial statements.

(3)      Fixed Assets:

         Fixed assets at July 31, 2000 and 1999 consist of the following:

                                                      2000             1999
                                                   ---------      ----------

           Office furniture and equipment          $ 185,000      $  184,000
           Computers                                 578,000         487,000
           Telecommunication equipment                62,000          61,000
           Leasehold improvements                     78,000          75,000
                                                   ---------      ----------
                                                     903,000         807,000

           Accumulated depreciation                 (667,000)       (570,000)
                                                   ---------      ----------
                                                   $ 236,000      $  237,000
                                                   =========      ==========

         Depreciation  expense  for the years  ended July 31,  2000 and 1999 was
         $97,000 and $80,000, respectively.

                                       25

<PAGE>

(4)      Notes Payable to Banks:

         On December 14,  1995,  the Company  entered  into a revolving  line of
         credit  agreement  with a  bank  that  provided  for  borrowings  up to
         $2,700,000.  The  bank  increased  the  available  line  of  credit  to
         $4,000,000  on June 17, 1997 and to  $7,500,000  on June 10, 1998.  The
         line of credit  provides for an interest  rate at the bank's prime rate
         (9.5 % and 8% at July 31, 2000 and 1999, respectively).  In addition, a
         certain portion of the line of credit may be priced at the 90 day Libor
         rate plus 2.0% (6.84%) at July 31, 2000.  At July 31, 2000,  the amount
         outstanding  under this credit agreement was $3,683,000  ($3,000,000 of
         which was priced at the Libor rate). Advances under this line of credit
         are  collateralized  by substantially all of the assets of the Company.
         The revolving line of credit, which is payable upon demand by the bank,
         contains various covenants which include, among other things, a minimum
         tangible net worth requirement.  The revolving line of credit prohibits
         the Company  from the  declaration  or payment of  dividends  on common
         stock. The $7,500,000 is the maximum available, however it may be lower
         based upon the eligible value of the accounts receivable and inventory.
         As of July 31, 2000, the eligible inventory and accounts receivable was
         $6,962,000.  The Company is in compliance  with all of its covenants of
         the loan agreement, as amended January 31, 2000.

         On January 31, 2000, the Company  borrowed an additional  $964,000 from
         People's  Bank for the purchase of 595,113  shares of its common stock,
         of which $600,000 is based on a 24 month unsecured term loan with equal
         monthly payments of $25,000 per month, with interest on the outstanding
         balance at prime plus 2%. The remaining $364,000 is secured by eligible
         accounts  receivable  and  inventory  of the  Company and is payable on
         January 1, 2002.  Interest on the outstanding  balance is at the Bank's
         prime rate.

(5)      Income Taxes:

         Federal income taxes were provided for the year ended July 31, 2000. No
         federal income taxes were provided for the year ended July 31, 1999 due
         to the Company's net operating losses.  The actual provision  (benefit)
         for income  taxes  differs  from the amount  computed by  applying  the
         statutory federal income tax rate to income before provision for income
         taxes. The sources and tax effects of the differences are as follows:
<TABLE>
<CAPTION>

                                                                   2000              1999
                                                                ---------         ----------
<S>                                                             <C>               <C>
         Income tax provision (benefit) at the federal
            statutory rate                                      $ 439,000         $ (229,000)
         State and local income taxes, net of federal tax
            provision (benefit)                                    76,000            (37,000)
         (Decrease) increase in valuation allowance              (250,000)           263,000
         Nondeductible expenses                                   (35,000)            13,000
         Other                                                    (27,000)           (10,000)
                                                                ---------         ----------
                       Provision for income taxes               $ 203,000         $       -
                                                                =========         ==========
</TABLE>

                                       26

<PAGE>

         The  tax  effects  of  temporary   differences  between  the  financial
         statement carrying amounts and tax bases of assets and liabilities that
         give rise to the deferred tax assets and  deferred tax  liabilities  at
         July 31, 2000 and 1999 are the following:
<TABLE>
<CAPTION>

                                                                   2000            1999
                                                              -----------       ----------

            Deferred tax assets:
<S>                                                             <C>             <C>
                 Accounts receivable allowances                 $ 263,000       $  320,000
                 Inventory reserves                               346,000          326,000
                 Unicap                                           418,000          373,000
                 Plate and revision costs                         101,000           80,000
                 Fixed assets                                      48,000           61,000
                 Pre-publication costs                            578,000          665,000
                 AMT credit                                        25,000           25,000
               Net operating loss carryforwards                       -            103,000
                 Other                                                -              2,000
                                                              -----------       ----------
                         Net deferred tax asset                 1,779,000        1,955,000
            Less:  Valuation allowance                           (710,000)        (960,000)
                                                              -----------       ----------
                         Net deferred tax asset                 1,069,000          995,000
                                                              -----------       ----------
            Deferred tax liabilities:
                 Returns allowances                              (289,000)             -
                 Goodwill amortization                           (266,000)        (240,000)
                 Other                                            (11,000)             -
                 Adjustment for change in tax
                   accounting method                             (503,000)        (755,000)
                                                              -----------       ----------
                         Net deferred tax liability            (1,069,000)        (995,000)
                                                              -----------       ----------
                         Net deferred income taxes            $       -         $      -
                                                              ===========       ==========
</TABLE>

         In  assessing  the  realizability  of deferred  tax assets,  management
         considers  whether it is more likely than not that some  portion or all
         of the deferred tax asset will be realized. The ultimate realization of
         the  deferred  tax asset is  dependent  upon the  generation  of future
         taxable income during the periods in which temporary differences or net
         operating loss carryforwards  become deductible.  The Company could not
         determine that such deferred tax assets could be realized and therefore
         has established a valuation allowance of $710,000 at July 31, 2000.

(6)      Stock Option Plan:

         The  Company  has  reserved  675,000  shares of common  stock under its
         non-qualified  1994 Stock Option Plan  ("Option  Plan") which  provides
         that a committee,  appointed by the Board of Directors, may grant stock
         options to eligible employees, officers and directors of the Company or
         its affiliates.  The number of shares reserved for issuance is adjusted
         in  accordance  with the  provisions  of the Plan.  All  stock  options
         granted by the Company  expire seven years after the grant date.  Stock
         options  vest over a period from 2-5 years as  determined  by the stock
         option committee.

         In October  1996,  the Company  amended the Option Plan to decrease the
         exercise  price on  outstanding  options  from  $8.00  per share to the
         initial public  offering price of $4.50 per share.  Non-vested  options
         outstanding  on the effective  date  (December 23, 1996) of the initial
         public offering,  representing  options for 283,500 shares,  vested 50%
         one year  from  that date and the

                                       27


<PAGE>

         additional  50% two years from that date. As of July 31, 2000 and 1999,
         there were options  outstanding  for 603,500 shares and 517,500 shares,
         respectively, under the Option Plan.

         The per share  weighted-average  fair  value of stock  options  granted
         during fiscal 2000,  calculated  in  accordance  with SFAS No. 123, was
         $1.50 on the date of grant using the Black Scholes option-pricing model
         with the following weighted-average assumptions: fiscal 2000 - expected
         volatility 58%, risk-free interest rate of 5.8% and an expected life of
         2 years.

         The Company  applies APB  Opinion No. 25 in  accounting  for its Option
         Plan. Had the Company  determined  compensation  cost based on the fair
         value at the grant date for its stock  options  under SFAS No. 123, the
         Company's net income (loss) would have changed to the pro forma amounts
         indicated below:
<TABLE>
<CAPTION>

                                                             2000             1999
                                                          -----------   -----------
<S>                                                       <C>           <C>
         Net income (loss)
              As reported                                 $ 1,136,000   $ (674,000)
              Pro forma                                     1,070,000     (764,000)
         Earnings (loss) per share (basic and diluted)
              As reported                                         .37         (.20)
              Pro forma                                           .35         (.22)
</TABLE>

         Pro forma net income (loss)  reflects all options  granted since August
         1, 1995.  Therefore,  the full impact of calculating  compensation cost
         for stock  options under SFAS No. 123 is not reflected in the pro forma
         net loss amounts presented above because compensation cost is reflected
         over the options'  vesting periods of 2-5 years and  compensation  cost
         for options granted prior to August 1, 1995 is not considered.

         Stock Option Plan activity during the periods indicated is as follows:

                                                                   Weighted-
                                              Number of             Average
                                               Shares            Exercise Price
                                              ---------          --------------

         Balance at July 31, 1998              527,000              4.50
              Granted                             -                  -
              Forfeited                         (9,500)             4.54
                                               -------
         Balance at July 31, 1999              517,500              4.50

              Granted                          147,500              2.25
              Forfeited                        (61,500)             4.50
                                               -------
         Balance at July 31, 2000              603,500              3.94
                                               =======

         At July 31,  2000 and 1999,  the range of  exercise  prices was $2.25 -
         $6.075. The weighted-average  remaining contractual life of outstanding
         options at July 31, 2000 and 1999 was 4.1 and 4.2 years, respectively.

                                       28

<PAGE>

         At July 31,  2000 and 1999,  the  number of  options  exercisable  were
         391,000 and 353,000,  respectively,  and the weighted-average  exercise
         price of those options was $3.94.

         In December 1996 in connection  with the initial public  offering,  the
         Company sold to the  Underwriter for $100, the  Underwriter's  Purchase
         Option ("Purchase  Option"),  consisting of the right to purchase up to
         an aggregate of 170,000 shares of common stock.  The Purchase Option is
         exercisable  at $6.075 per share for a period of four years  commencing
         on December 17, 1997.

(7)      401(k) Profit Sharing Plan:

         The Company  maintains a  Non-standardized  Prototype  Cash or Deferred
         Profit Sharing 401(k) Plan (the "Plan").  Participation  in the Plan by
         employees  requires  that they  complete  six months of service for the
         Company and attain 21 years of age.  Employees on the Plan's  effective
         date did not have to satisfy the  six-month  service  requirement.  The
         Company  determines  each year a discretionary  matching  contribution.
         Such additional  contribution,  if any, shall be allocated to employees
         in proportion to each participant's  contribution.  The Company did not
         contribute to the Plan during the years ended July 31, 2000 and 1999.

(8)      Commitments

         The Company  leases  office  facilities  under  operating  leases which
         expire at  various  dates  through  2004.  The  leases  are  subject to
         escalation  clauses as they  relate to certain  expenses of the lessor,
         i.e., utilities and real estate taxes.

         Minimum future rental payments under  non-cancelable  operating  leases
         having initial or remaining terms in excess of one year are as follows:

                  Year ending July 31                 Amount
                  -------------------                 ------

                        2001                         $173,000
                        2002                          177,000
                        2003                          103,000
                        2004                           39,000
                        Thereafter                       -
                                                     --------
                                                     $492,000
                                                     ========

         Rent  expense for the years  ended July 31, 2000 and 1999 was  $178,000
         and $158,000, respectively.

         In May 1994, the Company  entered into an agreement with Aladdin Books,
         a British publishing company, whereby Aladdin agreed to produce no less
         than 50 titles per year for  Millbrook  through  January  1, 2002.  The
         titles are to be wholly owned by Millbrook.  Aladdin is responsible for
         production,  printing  and  binding.  Production  costs  are  shared by
         Aladdin and Millbrook. Aladdin retains sales rights for these titles to
         countries  other than the United  States,  Canada and the  Philippines.
         Royalties  are paid to Aladdin  based on Millbrook  sales.  Development
         recovery  amounts  are paid to  Millbrook  based on sales by Aladdin to
         other parts of the world.  Net payables to Aladdin at July 31, 2000 and
         1999 are $652,000 and $858,000, respectively.

                                       29

<PAGE>

(9)      Fair Value of Financial Instruments:


         Cash, Accounts Receivable, Accounts Payable and Accrued Expenses-


         The carrying amount  approximates  fair value because of the short-term
         maturity of these instruments.

         Notes Payable-

         The carrying amount of these financial  instruments  approximates  fair
         values based on the fact that the related interest rates fluctuate with
         market rates.

(10)     Concentration of Credit Risk:

         The Company extends credit to various  companies in the retail and mass
         merchandising  industry  for the  purchase  of its  merchandise,  which
         results in a concentration of credit risk. This concentration of credit
         risk  may  be  affected  by  changes  in  economic  or  other  industry
         conditions and may,  accordingly,  impact the Company's  overall credit
         risk. Although the Company generally does not require  collateral,  the
         Company  performs  ongoing  credit  evaluations  of its  customers  and
         reserves for potential  losses are maintained.  One customer  accounted
         for 11% and 10% of the Company's net sales for the years ended July 31,
         2000 and 1999,  respectively.  Two  customers  accounted for 29% of the
         Company's accounts receivable as of the year ended July 31, 2000.

(11)     Purchase of Treasury Stock:

         On December 16, 1999,  the Company  purchased  595,113 shares of Common
         Stock in a private  transaction  from a related  party for an aggregate
         purchase price of $967,000 or $1.625 per share.  Upon  consummation  of
         the transaction,  the repurchased shares of Common Stock were placed in
         treasury. On January 31, 2000, the Company borrowed additional funds to
         finance the transaction  (see "Notes Payable to Bank").  For the period
         from  December  16, 1999 to January 31,  2000,  the  Company's  working
         capital was used to finance this transaction.


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

                                      None


                                       30


<PAGE>

PART III

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

The  information  required  by Item 9 regarding  directors  is  incorporated  by
reference to the information appearing under the caption "Election of Directors"
in the Company's  definitive Proxy Statement relating to its 2000 Annual Meeting
of Stockholders to be filed with the Securities and Exchange  Commission  within
120 days after the close of its fiscal year.


Item 10.  Executive Compensation.

The  information  required  by  Item  10 is  incorporated  by  reference  to the
information  appearing  under  the  caption  "Executive   Compensation"  in  the
Company's  definitive  Proxy  Statement  relating to its 2000 Annual  Meeting of
Stockholders to be filed with the Securities and Exchange  Commission within 120
days after the close of its fiscal year.



Item 11.  Security Ownership of Certain Beneficial Owners and Management

The  information  required  by  Item  11 is  incorporated  by  reference  to the
information  appearing under the caption  "Security  Ownership" in the Company's
definitive  Proxy Statement  relating to its 2000 Annual Meeting of Stockholders
to be filed with the  Securities and Exchange  Commission  within 120 days after
the close of the fiscal year.


Item 12.  Certain Relationships and Related Transactions

The  information  required  by  Item  12 is  incorporated  by  reference  to the
information  appearing  under the  caption  "Certain  Relationships  and Related
Transactions" in the Company's  definitive Proxy Statement  relating to its 2000
Annual  Meeting of  Stockholders  to be filed with the  Securities  and Exchange
Commission within 120 days after the close of the fiscal year.


                                       31

<PAGE>

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

          (a)  Exhibits


Exhibit
Number                    Description of Exhibit

**3.1         Restated Certificate of Incorporation of the Company.

**3.2         By-laws of the Company, as amended.

**4.1         Form of Common Stock Certificate.

**4.2         Form of Underwriter's Purchase Option granted to GKN Securities.

**4.3         Form of bridge Warrant.

 *10.1        Employment  Agreement,  dated as of August 1, 1998, by and between
              the Company and Jeffrey Conrad.

**10.2        Employment  Agreement,  dated  as of  December  12,  1996,  by and
              between the Company and Jean E. Reynolds.

**10.3        Consulting  Agreement,  dated  as of  December  13,  1996,  by and
              between the Company and Farrell Associates, Inc.

**10.4        Consulting  Agreement,  dated  as of  December  13,  1996,  by and
              between  the  Company  and  Graham  International  Publishing  and
              Research, Inc.

**10.5        Form of Indemnification Agreement between each of the Officers and
              Directors of the Company and the Company.

**10.6        Agreement of Lease,  dated  September 27, 1994, by and between the
              Company and Arnold S. Paster.

**10.7        Agreement  of Lease,  dated  March 26,  1996,  by and  between the
              Company and Land First II Group.

**10.8        Agreement of Lease and rider attached thereto,  dated February 15,
              1996, by and between the Company and Ninety-Five Madison Company.

**10.9        1994 Stock Option Plan, as amended.

**10.10       Loan and  Security  Agreement,  dated  as of  December  14,  1995,
              between People's Bank and the Company.

*10.11        Amendment  to Loan and  Security  Agreement,  dated June 10, 1998,
              between People's Bank and the Company.


                                       32

<PAGE>

**10.12       Agreement  made  effective  as of August  1,  1996 by and  between
              Aladdin Books Limited and the Company.

***10.13      Employment Agreement, dated as of January 1999, by and between the
              Company and David Allen.

****10.14     Amendment to loan and security  agreement  dated January 31, 2000,
              between People's Bank and the Company.

*****27       Financial Data Schedule

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

*             Filed as an Exhibit to the Company's  Annual Report on Form 10-KSB
              for the year ended July 31, 1998
**            Filed as an Exhibit to the  Company's  Registration  Statement  on
              Form SB-2 (No. 33-14631)
***           Filed as an Exhibit to the Company's  Annual Report on Form 10-KSB
              for the year ended July 31, 1999
****          Filed as an  Exhibit  to the  Company's  Quarterly  Report on Form
              10-QSB for the quarter ended January 31, 2000
*****         Filed Herewith.
              (b)  Reports on Form 8-K

                       None



                                       33

<PAGE>

                                   SIGNATURES

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

                                       THE MILLBROOK PRESS INC.

Dated:  October 25, 2000               By: /s/ Jeffrey Conrad
                                       ------------------------------------
                                               Jeffrey Conrad, President and
                                               Chief Executive Officer


         In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following  persons on behalf of the  registrant  and in
the capacities and on the dated indicated.

Signatures                      Title                              Date

/s/ Jeffrey Conrad
-------------------------       President and                   October 25, 2000
Jeffrey Conrad                  Chief Executive Officer
                                (Principal Executive
                                Officer)

/s/ David Allen
-------------------------       Chief Operating Officer         October 25, 2000
David Allen                     Chief Financial Officer
                                (Principal Financial
                                Officer and Principal
                                Accounting Officer)

/s/ Howard Graham
-------------------------       Chairman of the Board           October 25, 2000
Howard Graham

/s/ Frank J. Farrell            Director                        October 25, 2000
-------------------------
Frank Farrell

/s/ Bruno A. Quinson            Director                        October 25, 2000
-------------------------
Bruno A. Quinson

/s/ Joseph Kanon                Director                        October 25, 2000
-------------------------
Joseph Kanon

/s/ Hannah Stone                Director                        October 25, 2000
-------------------------
Hannah Stone

                                       34