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

                                   FORM 10-KSB

                   For the Fiscal Year ended December 31, 1999

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     Of the Securities Exchange Act of 1934

                                  EDUVERSE.COM
- --------------------------------------------------------------------------------
                 (Name of Small Business Issuer in its charter)

            Nevada                                       88-0277072
- ----------------------------------------      ----------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

           1135 Terminal Way
               Suite 209
              Reno, Nevada                               89502-2168
- ----------------------------------------      ----------------------------------
(Address of principal executive offices)                (Zip Code)

                    Issuer's telephone number: (775) 332-3325

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

                 None                                   Not Applicable
- ----------------------------------------      ----------------------------------
Title of each class to be so registered         Name of each exchange on which
                                                each class is to be registered

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

                         Common Stock, $0.001 par value
- --------------------------------------------------------------------------------
                                (Title of Class)

                                 Not Applicable
- --------------------------------------------------------------------------------
                                (Title of Class)

                                TABLE OF CONTENTS

                                                                                                               Page

NOTE REGARDING FORWARD LOOKING STATEMENTS.........................................................................1

ITEM 1        DESCRIPTION OF BUSINESS.............................................................................1
ITEM 2        DESCRIPTION OF PROPERTY.............................................................................7
ITEM 3        LEGAL PROCEEDINGS...................................................................................7
ITEM 4        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................................................7

PART II       ....................................................................................................7

ITEM 5        MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS............................................7
ITEM 6        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..............11
ITEM 7        FINANCIAL STATEMENTS...............................................................................16
ITEM 8        CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE...............16

PART III      ...................................................................................................17

ITEM 9        DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS:  COMPLIANCE WITH SECTION 16
              (A) OF THE EXCHANGE ACT............................................................................17
ITEM 10       EXECUTIVE COMPENSATION.............................................................................18
ITEM 11       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.....................................21
ITEM 12       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.....................................................21
ITEM 13       EXHIBITS AND REPORTS ON FORM 8K....................................................................22

Note Regarding Forward Looking Statements

     Except for statements of historical  fact,  certain  information  contained
herein constitutes  "forward-looking  statements,"  including without limitation
statements containing the words "believes,"  "anticipates," "intends," "expects"
and words of similar import, as well as all projections of future results.  Such
forward-looking  statements  involve known and unknown risks,  uncertainties and
other factors which may cause the actual results or  achievements of the Company
to be  materially  different  from any  future  results or  achievements  of the
Company expressed or implied by such  forward-looking  statements.  Such factors
include,  but are not limited to the following:  the Company's limited operating
history,   competition,   management  of  growth  and   integration,   risks  of
technological  change,  the  Company's  dependence on key  personnel,  marketing
relationships and the other risks and uncertainties described under "Description
of Business - Risk Factors" in this Form 10-KSB.  Certain of the forward looking
statements contained in this annual report are identified with  cross-references
to this  section  and/or to specific  risks  identified  under  "Description  of
Business - Risk Factors."

ITEM 1   DESCRIPTION OF BUSINESS

Overview

     The Company  develops and markets  software  programs under several product
names to assist  non-English  speaking students in learning spoken English.  The
Company  has begun the  process  of  withdrawing  from the  traditional  "boxed"
software  sales sold through  retail  stores.  The  Company's  primary  focus is
partnering with governments to build the largest Internet  audience by combining
education, the Internet and corporate advertising.

     eduverse.com  makes  available  its  English  as a  Second  Language  (ESL)
training   course  free  to  students,   paid  for  by  corporate   advertising.
eduverse.com's ESL course is delivered over school or university  Intranets,  or
through the Internet and on CD ROMs.  Corporate  advertising  is embedded in the
course software.

     The eduverse.com business model provides users with free and easy access to
quality  online  education,  while  reducing  to zero  the  cost to  educational
institutions  of providing  educational  content.  Thus  eduverse.com is able to
attract valuable users at a fraction of the industry average cost.  Further,  it
offers corporate  sponsors an effective and, for the first time,  measurable way
to advertise their products and services to a highly targeted audience.

     There are 3 important  distinguishing  features of eduverse.com's  business
model: its products, distribution channels and its revenue source.

     The    Company's    common   stock    currently    trades   on   the   NASD
Over-The-Counter-Market  Bulletin Board  ("OTCBB")  under the symbol "EDUV." The
Company's  registered  office is located at Suite 209, 1135 Terminal Way,  Reno,
Nevada,  U.S.A.  89502-2168  and its  phone  number  at that  address  is  (775)
332-3325.  EDUVERSE  DOT COM (Canada)  INC.'s  principal  executive  offices are
located at 2nd Floor,  1235 West Pender  Street,  Vancouver,  British  Columbia,
Canada V6E 2V1 and its phone number at that address is (604) 623-4864.

Industry Background

     The  market  for  educational  software  is  growing  rapidly.  It is often
described in two market  segments:  consumers and educational  institutions.  In
2000,  the  Company  plans to compete  in both of these  segments.  The  factors
driving  the growth in the market  include  increasing  penetration  of personal
computers in homes,  expanding  distribution  channels for educational software,
growth in consumer and educational  publications  featuring educational software
and  increased  awareness  of  the  potential  of  multimedia  as  an  effective
educational tool.

     The distribution  channels for consumer  educational software products have
expanded  significantly in recent years.  Traditionally these products were sold
through specialty  software stores.  Today, these products are increasingly sold
through these and other distribution channels,  including the Internet, computer
superstores, consumer electronic stores, mass merchants, office supply, discount
warehouse stores and bookstores. While the

                                       1

number of distribution outlets has increased, competition for retail shelf space
and  customer  awareness  has also  increased  due to growth in the  numbers  of
products  and  publishers  competing  for that shelf  space and  awareness.  The
Company   believes  that,  with   proliferation   of  software  titles  and  the
corresponding  decrease in the  availability  of retail shelf space,  it becomes
increasingly  important  to find  alternative  methods of  offering  educational
software  products  to the public  such as via the  Internet  or in  educational
settings.

     The market for  educational  software in educational  institutions  is also
expanding and changing rapidly.  School sales of educational  software are being
driven by growth in  penetration  of  computers  into  schools,  upgrades of the
installed base to new multimedia computers,  increases in the number of teachers
trained to  incorporate  technology-based  products  into their  curriculum  and
changes  in  governmental  funding   authorizations  to  encourage  the  use  of
technology-based  instructional materials. In addition, educational institutions
are increasingly  requiring students to use particular software  applications as
part of their  coursework  requirements.  However,  with school  resources being
stretched,  available funding for educational  software is limited.  The Company
believes  that its  business  model of providing  free high quality  educational
software paid for by advertisers is the model for education in the future.

     The demand for English training is significant.  According to a major study
conducted by the British  Council about the future of English,  there are over 1
billion  people  currently  studying the language  worldwide.  As English is the
language of global  commerce,  communications,  the Internet and diplomacy,  the
worldwide  demand to learn to read,  write and speak  English  is  growing at an
ever-increasing pace.

eduverse.com

     The Company  develops and markets  software  programs under several product
names to assist  non-English  speaking students in learning spoken English.  The
Company's primary focus is to partner with governments to combine education, the
Internet and corporate  advertising.  During 1999, the Company began the process
of exiting the traditional  method of selling  software through retail channels.
As a result,  quarterly  revenues have been declining.  This will continue until
the third quarter of 2000 when advertising revenues are expected to begin.

     The  Company's  core  software  products  feature   phonetic-based  English
language   tutorial  systems,   which  use  multimedia   presentations  to  help
non-English   speaking  students  learn  English  language   pronunciation.   An
Internet-enabled  version of its software  called  ENGLISH PRO Web  Edition,  is
available  for  free  from  the  Company's  web  vortal  (vertical   portal)  at
http://www.freeENGLISH.com,  as is a  network-enabled  version  of its  software
called ENGLISH PRO Network Edition, which is designed to be installed on private
computer  networks.  Revenues  during 1999 were derived from three sources,  the
sale of CD-ROM  software  packages,  distribution  royalty fees and other income
derived  from the sale of two web site names.  For the year ended  December  31,
1999, 57% of the Company's  software  sales were derived from one customer.  The
Company  anticipates  generating  most of its revenues  from its ENGLISH PRO Web
Edition  and  ENGLISH  PRO  Network  Edition   products  by  charging  fees  for
advertising  that is placed  within the  ENGLISH PRO Web Edition and ENGLISH PRO
Network  Edition  software.  To date, the Company has not generated any revenues
from the ENGLISH PRO Web  Edition  and  ENGLISH  PRO Network  Edition  products.
Revenues from the Web and Network  editions are expected in the third quarter of
2000. All of the Company's products operate only on Windows computers.

     The Company still distributes ENGLISH PRO 6.2 in retail computer stores and
bookstores. However, the Company intends to withdraw from this sector by the end
of  2000.  The  Company   distributes   ENGLISH  PRO  Web  Edition  through  its
freeENGLISH.com  Internet  Web  site  and  through  Internet  Service  Providers
("ISPs")  and Web  portals.  Currently,  the Company has an  agreement  with the
Ministry of  University  Affairs in Thailand to offer its  software  products to
university students in Thailand via the University Network in Thailand (UniNet),
a proprietary  computer network operated by the Ministry.  It also has a similar
agreement  with SJK (C) Smart  School  Project in  Malaysia.  The Company  began
implementation  of ENGLISH PRO Network  Edition on the UniNet in October  1999 .
Approximately one million students in Thailand will have access to the Company's
English language teaching software.  The Company  anticipates  implementation of
the Smart School initiative in late spring, 2000 whereby  approximately  500,000
students in Malaysia will have access to the Company's English language teaching
software.  Through  December 31, 1999,  no revenues were  recognized  related to
these agreements.

                                       2

     The Company  intends to further promote the sale and use of its educational
software  products  by:

     o    Actively pursing other  ministries of education in Asia,Europe,  Latin
          America and South America;

     o    Making its educational  software  products  available free to Internet
          users; and

     o    Co-branding agreements with web portals, ISPs and PC manufacturers.

     Distribution  Through  Traditional  Retail Channels.  The Company currently
distributes its shrink-wrapped CD-ROM product,  ENGLISH PRO, through traditional
retail  outlets,  such as retail  computer  stores and  bookstores.  The Company
intends by the end of 2000 to exit the traditional  retail  distribution  market
and stop selling its English language software through this network.

     Free Distribution  over the Internet.  Since December 1998, the Company has
distributed its Internet-enabled software ENGLISH PRO Web Edition free of charge
from its Web vortal at  http://www.freeENGLISH.com.  To date,  the  Company  has
20,000  registered  users on its Web  vortal  . The  Company  plans to  generate
revenues  from this  product by  charging  fees for  advertising  that is placed
within the ENGLISH PRO Web Edition  software.  The Company is also  distributing
its products through  Ministry of Education  Intranets.  In most countries,  the
Ministry  of  Education  ("MOE")  Intranets  represent  the  largest  network of
computer  users and is often  many  times  larger  than the  country's  Internet
population.

     The  first  such  partnership  agreement  was  made  with the  Ministry  of
University Affairs in Thailand to deliver ENGLISH PRO to 24 public  universities
and  37  Information  Technology  campuses  via  Thailand's  University  Network
(UniNet).  UniNet  currently  supports 70,000  workstations  nationwide,  giving
eduverse.com  a  potential  1  million  users.  The  system is  currently  being
installed and the Company expects to have 200,000  registered  users by December
31, 2000 . The Company is also establishing itself with the private Universities
in Thailand and expects to announce results in the near future.

     The second  partnership under the Company's business model is with SJK (C )
Smart School  Project in Malaysia.  The SJK (C ) Smart School Project is offered
to 1,290 National Type Chinese Schools giving  eduverse.com a potential  500,000
users.

     The Company is actively  marketing  itself as a content provider whereby it
provides its English language programs and co-brands its product and educational
games with web portals,  ISPs and PC manufacturers.  Typically,  in this type of
program the Company and its partner  share the  revenues  generated  on an equal
basis.  The first  such  agreement  is with  StarTV(http://www.startv.com),  the
largest  satellite TV network in Asia.  The Company has agreed to supply  StarTV
initially with 10  educational  games, 9 of which have already been delivered to
StarTV.

     During 1999, the Company entered into the following agreements:

          Ministry of University Affairs - Thailand
          SJK (C) Smart School Project - Malaysia
          Satellite Television Asian Region Limited (STAR TV)

     Foreign Educational  Institutions and Private Online Networks.  In addition
to retail software sales and distribution  over the Internet,  the Company plans
to provide its ENGLISH PRO Network  Edition  software to  educational  and other
institutions that operate private computer networks and collect advertising fees
for advertisements placed within the software.  ENGLISH PRO Network Edition is a
multi-user  version of  ENGLISH  PRO Web  Edition.  The  Company's  wholly-owned
subsidiary, EDUVERSE DOT COM INC, recently signed an agreement with the Ministry
of University  Affairs in Thailand to provide  ENGLISH PRO Network Edition to 24
Universities and 37 Information  Technology campuses (a combined total of 70,000
workstations) on the University Network (UniNet) in Thailand. Under terms of the
agreement, the Company has agreed to provide installation,  support and upgrades
necessary to provide  ENGLISH PRO Network Edition to  approximately  one million
university  students using the UniNet.  Installation is comprised of the Company
placing  approximately  six ENGLISH PRO Network Edition servers (running Windows
NT, Microsoft SQL Server, Microsoft Internet Server and ENGLISH

                                       3

PRO Network  Edition server  software) on the UniNet.  These servers control the
data flow between the workstations  and the Company's  central server located in
Canada. The estimated cost for hardware, software and travel for installation of
the Company's servers on the UniNet is approximately  $35,000. In addition,  the
Company  has  agreed  to  provide  support  services  comprised  of a  Web-based
installation and management  system,  which controls the installation of ENGLISH
PRO  Network  Edition on the  workstations  and manages  the  connection  to the
ENGLISH PRO  Network  Edition  servers.  The  Company  expects  there will be no
significant  additional costs incurred by the Company for providing this support
as the web-based  installation  and management  system is a key component of the
ENGLISH PRO Network Edition software.  The Company,  via the ENGLISH PRO Network
Edition  servers and  workstation  software and the web-based  installation  and
management  system provides upgrades  immediately upon their release.  Under the
terms of the  agreement,  the Ministry  will receive a 15%  commission  on gross
revenues generated from advertising  displayed on the Company's software that is
accessed through its private computer network. The same framework is expected to
occur  with the  agreement  signed  with the SJK (C ) Smart  School  Project  in
Malaysia  that provides  ENGLISH PRO Network  Edition to  approximately  500,000
students.

     The Company is currently meeting with other educational  ministries in Hong
Kong, Taiwan, Japan, South Korea and China and with private corporations in Asia
which require  English  language  training.  The Company's goal is to enter into
similar  agreements  with one of these  ministries  and with one or more private
corporations prior to June 30, 2000.

Markets

     The Company has  identified 30 countries  that it believes have the largest
market  potential  for  its  products.  The  major  geographical  regions  these
countries  fall into are: Asia Pacific,  Latin & South  America,  North America,
Western Europe and the Middle East. Within these geographic regions, the Company
has identified the following market segments for its English  language  tutorial
products.

     Foreign Educational Institutions.  The Company intends to offer its ENGLISH
PRO  Network  Edition  software  free to  educational  institutions  that  allow
advertisements  to be displayed to their students.  The Company currently has an
affiliate program agreement with the Ministry of University  Affairs in Thailand
and the SJK Smart School Project in Malaysia, to distribute its English language
teaching software on its private computer network. The Company is presenting the
opportunity to use ENGLISH PRO Network  Edition on school networks to ministries
of  education in Hong Kong,  Taiwan,  Japan and China.  Sales  agents  acting on
behalf of the Company are  presenting  this same  opportunity  to  ministries in
South Korea and Colombia.  At present, the Company does not have any advertising
agreements for its installation in Thailand or Malaysia.

Product Development

     Research and development costs are expensed as incurred.  Computer software
development  costs  incurred  after  technological  feasibility  of a product is
established  are  capitalized.   Technological   feasibility  is  generally  not
established until  substantially all related product development is complete and
the product is released.

     The Company develops all of its products and Internet Web sites internally.
The  Company's  development  team  includes  software   programmers,   Web  site
developers, English course material developers and graphic artists.

     Currently,  the  Company  is  developing  additional  features  and  course
materials for ENGLISH PRO Web Edition,  including  whole  language  instruction;
interactive  lesson  breaks  that  provide  information  about  an  advertiser's
products and  services;  interactive  chat services via the Internet and via the
local or wide area network; message boards via the Internet and via the local or
wide area network;  user-generated design of the user interface; and support for
additional  advertising models. The course materials include lessons specific to
"going  shopping,"  "going to a restaurant,"  "meeting a friend,"  "having a job
interview"  and  other  practical  situations.  Also in  development  are  tools
providing better controls for targeting advertisements and reporting statistical
data to advertisers.  The Company has also developed ten educational  games that
focus on sound differentials, spelling, listening comprehension and grammar.

                                       4

Government Regulation

     The  Company is not  currently  subject to direct  federal,  state or local
regulation in the United States other than regulations  applicable to businesses
generally or directly applicable to electronic  commerce.  However,  because the
Internet is becoming  increasingly popular, it is possible that a number of laws
and  regulations  may be  adopted  in the  United  States  with  respect  to the
Internet.  These  laws  may  cover  issues  such as  user  privacy,  freedom  of
expression,  pricing,  content and quality of products and  services,  taxation,
advertising, intellectual property rights and information security. Furthermore,
the growth of electronic  commerce may prompt calls for more stringent  consumer
protection  laws.  Several states have proposed  legislation to limit the use of
personal  user  information  gathered  online  or  require  online  services  to
establish privacy  policies.  The Federal Trade Commission has indicated that it
may  propose  legislation  on this issue to  Congress in the near future and has
initiated  action  against at least one online  service  regarding the manner in
which  personal  information  was  collected  from users and  provided  to third
parties.  The adoption of such consumer protection laws could create uncertainty
in  Internet  usage and reduce the demand for all  products  and  services.  The
Company does not provide customer  information to third parties and,  therefore,
does not  anticipate  any  current or  proposed  legislation  relating to online
privacy to directly affect its activities to a material extent.

     The  Company  is not  certain  how  its  business  may be  affected  by the
application  of existing  laws  governing  issues  such as  property  ownership,
copyrights,  encryption and other intellectual property issues, taxation, libel,
obscenity  and export or import  matters.  The vast  majority of those laws were
adopted  prior  to  the  advent  of  the  Internet.  As a  result,  they  do not
contemplate   or  address  the  unique   issues  of  the  Internet  and  related
technologies.  Changes in laws  intended  to address  such issues  could  create
uncertainty in the Internet  marketplace.  That uncertainty  could reduce demand
for the Company's products or services or increase the cost of doing business as
a result of litigation costs or increased service delivery costs.

     In addition, because the Company's products and services are available over
the Internet in multiple states and foreign countries,  other  jurisdictions may
claim that the Company is  required  to qualify to do business  and pay taxes in
each state or foreign  country.  The Company is qualified to do business only in
Nevada.  The  Company's  failure to qualify  in other  jurisdictions  when it is
required  to do so could  subject  it to  penalties.  It could  also  hamper the
Company's ability to enforce contracts in those  jurisdictions.  The application
of laws or regulations from  jurisdictions  whose laws do not currently apply to
the Company's  business  could have a material  adverse  affect on its business,
results of operations and financial condition.

     The European Union has adopted a policy  directive that went into effect in
1998. Under this directive,  business entities domiciled in member states of the
EU are limited in the transactions they may do with business entities  domiciled
outside the EU unless they are  domiciled  in a  jurisdiction  with privacy laws
comparable to the EU privacy  directive.  The United States  presently  does not
have laws that satisfy the EU. Discussions between representatives of the EU and
the United  States are  ongoing and may lead to certain  safe harbor  provisions
which,  if adhered to,  would allow  business  entities in the EU and the United
States to continue to do business without limitation.  If these negotiations are
not successful and the EU begins  enforcement  of the privacy  directive,  there
could be an adverse impact on international  Internet  business.  If the Company
does  business  directly in the EU in the future the Company will be required to
comply with the privacy directive of the EU.

Plan of Operation

     During the next twelve  months,  the Company plans to release the following
new software products and upgrades to existing products:

     ENGLISH PRO Web Edition is a continuously updated software program. Updates
to the program are made  available over the Company's  freeENGLISH.com  Internet
Web site each month with additional  course  materials being made available each
week.  The Company plans to continue this upgrade  schedule for the  foreseeable
future.

     ENGLISH PRO Network Edition is also a continuously updated software program
and updates are made available to  institutional  clients.  Course materials for
ENGLISH PRO Web Edition are compatible with ENGLISH

                                       5

PRO  Network  Edition  and as such are made  available  to ENGLISH  PRO  Network
Edition  users  shortly  after being made  available  to ENGLISH PRO Web Edition
users.

     New features are added to the Company's  freeENGLISH.com  Internet Web side
on average  every three  months.  Under this  schedule,  the Company  expects to
deliver  approximately 10 new games and quizzes on its freeENGLISH.com  Internet
Web site through the end of third quarter 2000.  Additional  features  which the
Company plans to add to the  freeENGLISH.com  Internet Web site in 2000, include
chat rooms,  message  boards and an  education-focused  Internet  search engine.
www.freeENGLISH.com  is  currently  available  in English,  Chinese  (simplified
Chinese),  Spanish,  Thai and  Portuguese.  The  Company  plans  to add  British
English,  Thai , Chinese (traditional  Chinese),  Japanese,  German,  French and
Italian prior to the end of second quarter 2000.

     The  Company  plans to focus its  marketing  efforts  for  ENGLISH  PRO Web
Edition  and ENGLISH PRO Network  Edition on current  initiatives  in  Thailand,
Malaysia and expected agreements in Hong Kong, Columbia,  Taiwan, and China. The
marketing  focus is likely to be split between signing new ISPs, Web portals and
educational  institutions in new markets and generating  advertising revenues in
countries  where  ENGLISH PRO Web  Edition  and/or  ENGLISH PRO Network  Edition
currently  have  a  presence.  The  Company  expects  a  large  portion  of  its
advertising marketing efforts will be directed at Thailand, where the Company is
currently  implementing  ENGLISH  PRO Network  Edition on the  private  computer
network operated by the Ministry of University Affairs in Thailand.  The Company
expects  that it will begin  generating  revenues  from  these  efforts in third
quarter of 2000.  Further  research and  development of ENGLISH PRO Web Edition,
and Network  Edition,  will focus on the  development  of:  additional  phonetic
English language modules;  whole language English conversation practice modules;
reading  comprehension  practice modules;  grammar practice modules;  vocabulary
building   exercise   modules;   support  for  interactive  tests  and  quizzes.
Additionally,  new advertising  models are continuously  being developed for the
products along with the necessary Web-based management tools to deliver,  manage
and support the advertisings.

     Currently,  the Company's working capital needs are approximately US$80,000
per month. The Company will increase its expenditures upon receipt of additional
funding.  The Company is currently  seeking  financing  for its  operations  and
expects that it may need additional  financing in the future. In March 2000, the
Company announced a financing via private placement offering under Regulation D,
Rule 506 of the Securities and Exchange Commission. The Company intends to offer
and sell 1,000,000  units at $1 per unit,  consisting of one share of restricted
common stock and two warrants.  Each warrant entitles the holder to purchase one
additional  share of  restricted  common  stock at $2.50 per share and $5.00 per
share, respectively.

Employees

     As at December  31,  1999,  the Company had 18  employees,  including 10 in
research and development, 3 in marketing and sales and 5 in management,  finance
and  administration.  The  Company's  success  will  depend in large part on its
ability to attract and retain  skilled and  experienced  employees.  None of the
Company's  employees  are covered by a collective  bargaining  agreement and the
Company  believes that  relations  with its employees are good. The Company does
not currently  have key man life  insurance on any of its directors or executive
officers.

Risk Factors

     The  business of the Company  involves a number of risks and  uncertainties
that could cause actual results to differ  materially from results  projected in
any  forward-looking  statement  in this report.  These risks and  uncertainties
include the risks set forth below. The Company's  securities are speculative and
investment  in the Company's  securities  involves a high degree of risk and the
possibility the investor will suffer the loss of the entire amount invested.

Limited Operating History; History of Losses; Increased Expenses

     The Company  incurred a net loss of $1,127,327  for the year ended December
31, 1999.  The Company has had minimal  revenue  since  inception , it has never
been profitable and there can be no assurance  that, in the future,  the Company
will be  profitable  on a quarterly or annual  basis.  In addition,  the Company
plans to  increase  its  operating  expenses  to expand its sales and  marketing
operations, fund greater levels of research and development,

                                       6

broaden its  customer  support  capabilities  and  increase  its  administration
resources.  In view of the rapidly  evolving  nature of the Company's  business,
markets   and   limited   operating   history,   the   Company   believes   that
period-to-period comparisons of financial results are not necessarily meaningful
and should not be relied upon as an indication of future performance.

Need for Additional Financing

     The Company has accumulated  losses of $1,544,043 since it began operations
in May 1998 and will require additional working capital to complete its business
development  activities  and generate  revenue  adequate to cover  operating and
further development expenses.  The Company incurred a loss of $1,127,327 for the
year ended December 31, 1999, and as of December 31, 1999 had a working  capital
deficiency  of  $145,620.  Management  recognizes  that the Company  must obtain
additional  financial  resources by raising  capital from  shareholders or other
sources or  consider a  reduction  in  operating  costs to enable it to continue
operations with available  resources.  However,  no assurances can be given that
the Company will be successful in raising additional capital. Further, there can
be no assurance,  assuming the Company successfully raises additional funds that
the Company will achieve  positive cash flow. If the Company is unable to obtain
adequate financing, management will be required to sharply curtail the Company's
operating expenses.

ITEM 2   DESCRIPTION OF PROPERTY

     EDUVERSE DOT COM INC. , a wholly-owned subsidiary of the Company, currently
leases approximately 5,000 square feet of office space on a month-to-month basis
in  Vancouver,  British  Columbia,  Canada.  The monthly  rent is  approximately
US$1,070.  The Company's  www.eduverse.com Web site and its  www.freeENGLISH.com
Web  site  are  located  on  a  Company-owned  and  operated  server  housed  at
SMARTT.COM, a Canadian server farm. The Company's servers operating the Ministry
of University Affairs ENGLISH PRO Network Edition software are currently located
on servers  owned and  operated by the Company and located in the offices of the
Ministry of University Affairs in Bangkok, Thailand. The Company also maintained
a small  office in  Bangkok,  Thailand  during  1999 at a cost of  approximately
US$1,000 per month.

ITEM 3   LEGAL PROCEEDINGS

     The  Company  is not a party  to,  and none of the  Company's  property  is
subject to, any material pending or threatened legal proceeding.

ITEM 4   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to a vote of security holders during 1999.

                                    PART II

ITEM 5   MARKET FOR  COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The Company's Common Stock has traded on the NASD  Over-The-Counter  Market
Bulletin  Board  ("OTCBB")  since  July 6, 1998  under the  symbol  "EDUV."  The
following is a summary of trading, on a calendar quarter basis, in the shares on
the OTCBB during 1999:

    1999                   High           Low           Volume
    ----                   ----           ---           ------
    First Quarter          $1.59          $0.63          6,419,700
    Second Quarter         $2.00          $0.69          4,050,600
    Third Quarter          $1.50          $0.50          1,080,700
    Fourth Quarter         $0.82          $0.31          1,264,800

                                       7

     The price for the Company's  Shares on the OTCBB at December 31, 1999,  was
$0.50 (High) and $0.41 (Low), and the close price was $0.50.

     Other than described  above, the Company's shares are not and have not been
listed or quoted on any other exchange or quotation system.

     As at December 31, 1999, the Company had  approximately 800 shareholders of
record (including nominees and brokers holding street accounts) of the Company's
Common Stock.

     The  Company  has never paid  dividends  on its Common  Stock.  The Company
currently  intends  to  retain  earnings  for use in its  business  and does not
anticipate  paying any dividends in the foreseeable  future.  As at December 31,
1999 there are outstanding options to purchase 1,577,500 shares of common stock.

DESCRIPTION OF SECURITIES

Common Stock

     The  Company is  authorized  to issue  50,000,000  shares of Common  Stock,
$0.001 par value,  of which  13,185,089  were  outstanding at December 31, 1999.
Holders of Common Stock are entitled to  dividends,  pro rata,  when,  as and if
declared by the Board of Directors out of funds available therefore.  Holders of
Common  Stock  are  entitled  to  cast  one  vote  for  each  share  held at all
stockholder meetings for all purposes,  including the election of directors. The
holders of more than 50% of the Common Stock issued and outstanding and entitled
to vote,  present in person or by proxy,  constitute a quorum at all meetings of
stockholders.  The vote of the holders of a majority of Common Stock  present at
such a meeting will decide any question brought before such meeting,  except for
certain actions such as amendments to the Company's  Articles of  Incorporation,
mergers or  dissolutions  which require the vote of the holders of a majority of
the outstanding  Common Stock.  Upon  liquidation or dissolution,  the holder of
each outstanding  share of Common Stock will be entitled to share equally in the
assets of the Company legally  available for  distribution  to such  stockholder
after  payment of all  liabilities.  Holders of Common Stock are not granted any
preemptive,   subscription,   redemption  rights  or  registration  rights.  All
outstanding shares of Common Stock are fully paid and nonassessable.

Preferred Stock

     The Company is authorized  to issue  5,000,000  shares of Preferred  Stock,
$0.001 par value,  of which no shares are currently  outstanding at December 31,
1999.  Holders of  Preferred  Stock are not entitled to any voting  rights.  The
Company does not have any plans or arrangements to issue any Preferred Stock.

Anti-Takeover Provisions

     Provisions  of  applicable  Nevada  law may  affect  potential  changes  in
control. The cumulative effect of these provisions may make it more difficult to
acquire and exercise control and to make changes in management.

     Nevada  law  prohibits   combinations   between  Nevada   corporations  and
interested  stockholders  for a  period  of three  years  after  the  interested
stockholder's date of acquiring shares unless the combination or the purchase of
the shares by the interested stockholder is approved by the board of directors.

     Applicable Nevada law also prohibits business  combinations  between Nevada
corporations and interested stockholders following the expiration of three years
after  the  interested  stockholder's  date  of  acquiring  shares,  unless  the
combination meets the requirements  specified in Section 78.439 for director and
stockholder approvals or Sections 78.441 to 78.444 inclusive with respect to the
consideration to be received in the combination by all  stockholders  other than
the  interested   stockholder.   Applicable   Nevada  law  defines   "interested
stockholders"  to  include  persons  who,  alone or  together  with  affiliates,
beneficially  own at least 10% of the outstanding  stock of the  corporation.  A
Nevada  corporation may opt out of the application of these provisions,  but the
Company has not opted out.

                                       8

     Applicable  Nevada  law also  denies  voting  rights to a  stockholder  who
acquires  a  controlling  interest  in a Nevada  corporation,  unless the voting
rights are approved by a majority of the voting  powers of the  corporations.  A
Nevada  corporation may opt out of the application of these provisions,  but the
Company has not opted out.

     Nevada law does not require a stockholder vote of the surviving corporation
of the merger if:

     o    the merger does not amend the existing articles of incorporation;

     o    each outstanding share of the surviving  corporation before the merger
          is unchanged; and

     o    the number of shares to be issued by the surviving  corporation in the
          merger does not exceed 20% of the shares outstanding immediately prior
          to such issuance.

     The effect of these provisions may make it difficult to accomplish a merger
or other takeover or change in control. To the extent these provisions have this
effect, removal of the Company's incumbent Board of Directors and management may
be rendered more difficult. Further, these provisions may make it more difficult
for  stockholders  to participate in a tender or exchange offer for common stock
and in so doing may diminish the market value of the common stock.

Transfer Agent and Registrar

     The registrar and transfer agent of the Company is Holladay Stock Transfer,
Inc., 2939 North 67th Place, Scottsdale, Arizona, US 85251

RECENT SALES OF UNREGISTERED SECURITIES

     On January 1, 1999,  the Company  issued  7,500  shares of common  stock to
Vaughn Barbon at a price per share of $1.093 for services rendered of$8,203. The
shares  were  issued  to a holder  outside  the  United  States  pursuant  to an
exclusion from registration under Regulation S under the Securities Act.

     On January 12, 1999,  the Company  issued  35,211 shares of common stock to
Tantum Ltd.  at a price per share of $0.71 for an  aggregate  purchase  price of
$24,999.81.  The  shares  were  issued to a holder  outside  the  United  States
pursuant  to an  exclusion  from  registration  under  Regulation  S  under  the
Securities Act.

     On January 29, 1999,  the Company  issued  30,768 shares of common stock to
Tantum  Ltd.  and  Bingo,  Inc.  at a price per share of $0.65 for an  aggregate
purchase  price of  $19,999.20.  The shares were  issued to holders  outside the
United States  pursuant to an exclusion  from  registration  under  Regulation S
under the Securities Act.

     In February 1999 and March 1999, the Company issued an aggregate of 119,038
shares of common stock to Tantum Ltd. at prices per share  ranging from $0.59 to
$1.00 for an aggregate purchase price of $85,998.98. The shares were issued to a
holder  outside the United  States  pursuant to an exclusion  from  registration
under Regulation S under the Securities Act.

     On March 3, 1999, the Company issued an aggregate  700,000 shares of common
stock to Bona Vista West Ltd.  at prices per share  ranging  from $0.75 to $1.00
for an aggregate purchase price of $575,000.  The shares were issued pursuant to
an exemption from registration provided by Rule 504 under the Securities Act.

     On March 15, 1999,  the Company  issued an  aggregate  of 49,999  shares of
common stock to Mark Bruk,  Marshall Farris and Zina Weston at a price per share
of $1.06 in exchange for services  and  interest  expense of $53,125  accrued on
inventory  loans.  The shares were issued to holders  outside the United  States
pursuant  to an  exclusion  from  registration  under  Regulation  S  under  the
Securities Act.

                                       9

     On March 31,  1999,  the Company  issued  5,294  shares of common  stock to
Vaughn  Barbon at a price per share of $0.88 for  services  rendered of $4,632 .
The shares were  issued to a holder  outside  the United  States  pursuant to an
exclusion from registration under Regulation S under the Securities Act.

     On March 31,  1999,  the Company  issued  3,393  shares of common  stock to
Marshall  Farris at a price per share of $0.88 for services  rendered of $2,969.
The shares were  issued to a holder  outside  the United  States  pursuant to an
exclusion from registration under Regulation S under the Securities Act.

     On May 21,  1999,  the Company  issued  102,669  shares of common  stock to
Re/Max Realty  Investments  Ltd. at a price per share of $0.487 for an aggregate
purchase  price of  $49,999.80.  The shares were issued to a holder  outside the
United States  pursuant to an exclusion  from  registration  under  Regulation S
under the Securities Act.

     On July 19, 1999, the Company issued 2,345 shares of common stock to Vaughn
Barbon  at a price  per share of $1.31  for  services  rendered  of $3,078 . The
shares  were  issued  to a holder  outside  the  United  States  pursuant  to an
exclusion from registration under Regulation S under the Securities Act.

     On October 13, 1999 the Company  issued  50,000  shares of common  stock to
Douglas Cairns at a price per share of $0.50 for an aggregate  purchase price of
$25,000.00.  The  shares  were  issued to a holder  outside  the  United  States
pursuant to an  exclusion  from  registration  under the  Regulation S under the
Securities Act.

     On October 13, 1999 the Company  issued  40,000  shares of common  stock to
Lambeth Investments Ltd. at a price per share of $0.50 for an aggregate purchase
price of  $20,000.00.  The shares  were  issued to a holder  outside  the United
States pursuant to an exclusion from  registration  under the Regulation S under
the Securities Act.

     On October 14, 1999 the Company  issued  50,000  shares of common  stock to
Michael Frost at a price per share of $0.50 for an aggregate  purchase  price of
$25,000.00.  The  shares  were  issued to a holder  outside  the  United  States
pursuant to an  exclusion  from  registration  under the  Regulation S under the
Securities Act.

     On October 18,  1999 the Company  issued  4,000  shares of common  stock to
Vaughn  Barbon at a price per share of $0.63 for  services  rendered of $2,500 .
The shares were  issued to a holder  outside  the United  States  pursuant to an
exclusion from registration under the Regulation S under the Securities Act.

     On October 18, 1999 the Company  issued  30,000  shares of common  stock to
Struan  Robertson at a price per share of $0.50 for an aggregate  purchase price
of  $15,000.00.  The shares  were issued to a holder  outside the United  States
pursuant to an  exclusion  from  registration  under the  Regulation S under the
Securities Act.

     On October 19, 1999 the Company  issued  100,000  shares of common stock to
Jean de  Gerlache  de Gomery  at a price  per  share of $0.50  for an  aggregate
purchase  price of  $50,000.00.  The shares were issued to a holder  outside the
United States pursuant to an exclusion from registration  under the Regulation S
under the Securities Act.

     On October 20, 1999 the Company  issued  60,000  shares of common  stock to
Mark  Chewter at a price per share of $0.50 for an aggregate  purchase  price of
$30,000.00.  The  shares  were  issued to a holder  outside  the  United  States
pursuant to an  exclusion  from  registration  under the  Regulation S under the
Securities Act.

     On November 11, 1999 the Company  issued  60,000  shares of common stock to
Michael Fernandez at a price per share of $0.50 for an aggregate  purchase price
of  $30,000.00.  The shares  were issued to a holder  outside the United  States
pursuant to an  exclusion  from  registration  under the  Regulation S under the
Securities Act.

     On November 11, 1999 the Company  issued  40,000  shares of common stock to
Theodore Bardacke at a price per share of $0.50 for an aggregate  purchase price
of  $20,000.00.  The shares  were issued to a holder  outside the United  States
pursuant to an  exclusion  from  registration  under the  Regulation S under the
Securities Act.

                                       10

     From July 1998 to June 1999, the Company issued non-interest  bearing notes
with no specific  terms of repayment  in the  aggregate  amount of $95,000.  The
notes were issued pursuant to an exclusion from registration  under Regulation S
under the Securities Act. The outstanding  principal  amounts of these notes was
paid in full as of August 27, 1999.

     In 1999 and 1998, the Company  issued an aggregate of 1,727,500  options to
purchase its common stock,  with exercise prices ranging from $0.38 to $5.50 per
share, to employees,  directors,  advisors and service  providers under its 1998
Stock Option  Plan.  Of these  options,  150,000  were  forfeited  in 1999.  The
issuance  of  these  options  and  the   underlying   shares  were  exempt  from
registration under Rule 701 under the Securities Act.

INDEMNIFICATION OF OFFICERS AND DIRECTORS

     The Nevada General  Corporation  Law (the "Nevada Act")  authorizes  Nevada
corporations  to  indemnify  any person who was or is a party to any  proceeding
(other than an action by, or in the right of, the corporation), by reason of the
fact that he or she is or was a  director,  officer,  employee,  or agent of the
corporation  or is or  was  serving  at the  request  of  the  corporation  as a
director,  officer,  employee,  or agent of another corporation or other entity,
against  liability  incurred in connection with such  proceeding,  including any
appeal  thereof,  if he or she  acted in good  faith  and in a manner  he or she
reasonably  believed  to be in, or not  opposed  to, the best  interests  of the
corporation  and,  with respect to any  criminal  action or  proceeding,  had no
reasonable  cause to believe his or her conduct was unlawful.  In the case of an
action by or on behalf of a corporation,  indemnification may not be made if the
person seeking  indemnification  is adjudged  liable,  unless the court in which
such action was brought determines such person is fairly and reasonably entitled
to  indemnification.  The  indemnification  provisions of the Nevada Act require
indemnification  if a director or officer has been  successful  on the merits or
otherwise in defense of any action, suit, or proceeding to which he or she was a
party by reason of the fact that he or she is or was a  director  or  officer of
the  corporation.  The  indemnification  authorized  under  Nevada  law  is  not
exclusive  and is in  addition  to any other  rights  granted  to  officers  and
directors under the Articles of  Incorporation or Bylaws of a corporation or any
agreement  between  officers and directors and a corporation.  A corporation may
purchase and maintain  insurance or furnish similar  protection on behalf of any
officer or  director  against  any  liability  asserted  against  the officer or
director  and incurred by the officer or director in such  capacity,  or arising
out of the status,  as an officer or  director,  whether or not the  corporation
would have the power to indemnify  him or her against such  liability  under the
Nevada Act.

     Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to  directors,  officers,  or persons  controlling  the Company
pursuant to the foregoing  provisions,  the Registrant has been informed that in
the opinion of the Commission such  indemnification  is against public policy as
expressed in the Securities Act and is therefore unenforceable.

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

     The following discussion contains  forward-looking  statements that involve
risks and  uncertainties.  The Company's actual results could differ  materially
from those discussed in these forward-looking  statements as a result of various
factors,  including  those set forth in "risk  factors"  and  elsewhere  in this
annual report.  The following  discussion should be read in conjunction with the
financial statements and notes thereto included elsewhere in this annual report.
See "Forward-looking Statements" and "Business-Risk Factors."

Overview

     The  Company  is a  technology-based  company  focused  on  developing  and
marketing interactive  multimedia educational software products. At December 31,
1999,  the  Company's  principal  markets  include  Canada and USA.  The Company
generates  revenues  from  the  retail  sale of its  English  language  tutorial
software product ENGLISH PRO. In late 1998, the Company started pioneering a new
e-commerce  educational  delivery  model that provides users with free access to
online  education.  The Company  expects to generate  the majority of its future
revenues from advertising  revenues by including an advertiser's message as part
of the  ENGLISH  PRO  tutorial.  In 1999 and 1998,  the  Company  recognized  no
advertising revenues.

                                       11

     Pursuant to a series of  transactions on May 28, 1998 and May 29, 1998, the
Company  acquired  all of the issued and  outstanding  share  capital of ESL PRO
Systems Inc.  ("ESL") and M&M Information and Marketing  Services Inc.  ("M&M"),
both Nevada companies  incorporated on May 5, 1998 and under common control. The
Company exchanged 2,000,000 common shares and 7,000,000 common shares for all of
the outstanding share capital of ESL and M&M, respectively. As a result of these
acquisitions,  the previous  shareholders of ESL and M&M, as a group, owned more
than  50%  of  the  issued  and  outstanding   voting  shares  of  the  Company.
Consequently,  this  business  combination  has been  accounted for as a reverse
acquisition  whereby  ESL and M&M are deemed to have been  combined  in a manner
similar  to  a  pooling  of  interests,   and  to  have  acquired  the  Company.
Accordingly,  these transactions  reflect the  recapitalization of businesses of
ESL and M&M on a combined basis.

     As at May 29,  1998,  the Company  had net  monetary  assets of $1.00.  For
purposes of the acquisition, the fair value of the net monetary assets of $1 has
been  ascribed to the  2,250,000  previously  outstanding  common  shares of the
Company deemed to be issued in the acquisition.

     On June 20, 1998, the Company formed EDUVERSE  Accelerated Learning Systems
(Canada)  Inc. and changed its name to EDUVERSE DOT COM INC. on October 18, 1999
("EDUVERSE  Canada").  EDUVERSE  Canada  operates the Company's  development and
marketing operations.

     The Company licensed the core software application contained in ENGLISH PRO
Version 6.2 in May 1998 and began  shipping  ENGLISH PRO Version 6.2 to computer
retailers and  bookstores in Canada in December 1998. In first quarter 1999, the
Company  began  offering its products in the United  States.  In order to direct
more of its internal resources to establishing awareness of its Internet-enabled
products, in March 1999, the Company appointed Tri Synergy, Inc. ("Tri Synergy")
as a non-exclusive  North American retail marketer of its CD-ROM based products.
In 1999, the Company began to exit its strategy of selling its software  through
traditional  distribution channels and expects to be completely out of this side
of  the   business  by  the  end  of  2000.   The  Company  will  focus  on  its
Internet/Intranet advertising based business model.

     The Company began development of its  Internet-enabled  software product in
August  1998 and  released  the first  version of ENGLISH PRO Web Edition on its
freeENGLISH.com Internet Web site in December 1998. Since that time, the Company
has  upgraded  the  program and added  additional  course  materials.  The first
version of ENGLISH PRO Network  Edition is currently being installed in Thailand
on the Ministry of University  Affairs  University  Network;  a private computer
network  operated  by  the  Ministry  and is  expected  to be  installed  in the
Malaysian  SJK Smart  School  Project in June 2000.  ENGLISH PRO Web Edition and
ENGLISH PRO Network  Edition are delivered  free to consumers over the Internet,
private computer networks and local and wide area networks.

     The Company derives revenues from the sale of CD-ROM products in the retail
marketplace  and plans to derive its  revenues  from the sale of  advertisements
embedded in the ENGLISH PRO Web Edition and ENGLISH PRO Network Edition software
and on its  freeENGLISH.com  Internet Web site.  Revenues are  recognized on its
CD-ROM products upon shipping to its retailers or distributors.  Typically,  the
Company enters into reseller and  distribution  arrangements  with retailers and
distributors for the sale of its CD-ROM products. Resellers are normally offered
a 40% discount off of the manufacturer's suggested list price, which for ENGLISH
PRO Version  6.2 is $29.99.  Distributors  are  normally  offered an  additional
discount up to 30%.

     To date,  the  Company  has not  derived  any  revenues  from the  sales of
advertising embedded in its Internet-and  network-enabled software.  However, in
order to increase  the number of users of its  ENGLISH PRO Web Edition  software
and its ENGLISH  PRO  Network  Edition  software,  the Company has entered  into
affiliate program  agreements with ISPs, Web portals,  private  corporations and
governmental  and  educational  institutions,  pursuant to which the Company has
agreed to share gross  revenues  derived from  advertising  and from the sale of
products  and  services on a third  party's  Web site that  result from  traffic
directed  from an  affiliate  program  participant's  Web site.  The  agreements
typically  require  the  Company to share 15% of any gross  revenues  generated;
however,  this  percentage  may be  higher  depending  upon  the  nature  of the
contributions by the third party. The Company has entered into an agreement with
the  Ministry  of  University  Affairs in  Thailand  to install  its ENGLISH PRO
Network Edition  software on a private computer network operated by the Ministry
and with the SJK Smart School Project in

                                       12

Malaysia.  The Company  estimates that upon  implementation,  approximately  one
million students in Thailand will have access to the Company's  English language
teaching software.  The Company expects to begin generating advertising revenues
from this contract in the third quarter of 2000.

     The Company has incurred losses since inception,  and at December 31, 1999,
had an  accumulated  deficit of $1,544,043 . The Company has recently  increased
its sales and  marketing  and  general  and  administrative  expenses  as it has
focused the entire efforts of its direct sales force to signing  agreements with
ISPs, Web portals and foreign  governmental  and educational  institutions.  The
Company has also increased  research and development  expenses as it has focused
almost  entirely  on  continued  development  of the ENGLISH PRO Web Edition and
ENGLISH PRO Network Edition software and its freeENGLISH.com  Internet Web site.
The Company plans to continue increasing  operating expenses to expand its sales
operations,   fund  greater   levels  of  research  and   development   for  its
Internet-based  product lines, improve its operational and financial systems and
expand  its  international  operations.  As a result,  the  Company is likely to
continue to incur losses,  and if the Company's revenues do not continue to grow
significantly, the Company may not ever be profitable.

Results of Operations

     The following  table  presents the Company's  results of operations for the
period  from May 5,  1998  (inception)  to  December  31,  1998 and  results  of
operations  for the year ended  December 31,  1999.  This data should be read in
conjunction with the Company's  consolidated  financial  statements  included in
this annual report.

                                                                                         Period from
                                                                                          May 5,1998
                                                                  Year ended          (inception) to
                                                                      31-Dec                  31-Dec
                                                                        1999                    1998
                                                               -------------            ------------
                                                                                      
Revenues:
   Software                                                        $100,119                 $14,824
   Distribution Royalties                                            20,596                       0
                                                               -------------            ------------
   Total Revenues                                                   120,715                  14,824

Cost of Goods Sold
   Cost of goods sold                                               (38,597)                 (6,873)
                                                               -------------            ------------
Gross Profit                                                         82,118                   7,951
                                                               -------------            ------------
Expenses
   Amortization and write-down of deferred charges                  159,800                  52,000
   Foreign currency translation loss                                 33,217                       0
   Depreciation                                                      17,705                   4,205
   General and administrative                                       557,917                 207,644
   Marketing                                                        276,103                  57,485
   Research and development                                         294,924                 103,333
                                                               -------------            ------------
        Total Expenses                                            1,339,666                 424,667

        Operating Loss                                           (1,257,548)               (416,716)
                                                               -------------            ------------
   Other income                                                     130,221                       0
                                                               -------------            ------------
   Net Loss for the period                                       (1,127,327)               (416,716)

   Deficit Beginning of period                                     (416,716)                      0
   Deficit end of period                                         (1,544,043)              (416,716)

                                       13

Year Ended December 31, 1999 Compared to Period from May 5, 1998  (inception) to
December 31, 1998

     Revenues.  The Company  derives its  revenues  from the retail sales of its
software  products and  royalties  received  from  distributors  of its software
products. Royalties are fees paid by third parties to obtain the exclusive right
to sell the  Company's  software  products  in a country  or region  for a fixed
period of time.  For the year ended  December  31,  1999,  57% of the  Company's
software  sales were  derived  from one  customer.  Revenues  for the year ended
December 31, 1999 were $120,715 compared with $14,824 for the period from May 5,
1998  (inception)  to December 31, 1998.  This  increase is primarily due to the
continuation of introducing  the Company's  ENGLISH PRO Version 6.2 product into
the retail  marketplace in Canada and the United States that started in December
1998.  The  Company  intends  to exit the  retail  sale of its  ENGLISH  PRO 6.2
software during 2000. The Company anticipates minimum revenues from retail sales
of its software  products  during  2000.  In addition,  it is  anticipated  that
additional  revenues  from the sale of  advertising  embedded  in the  Company's
Internet-enabled software product will be generated beginning the second quarter
of 2000.

     Cost of Goods Sold. Cost of Goods Sold consists of expenses associated with
the physical  production of the "boxed"  software  packages that are sold in the
retail  market.  During the year ended  December  31,  1999,  cost of goods sold
increased to $38,597 from $6,873 for the period from May 5, 1998  (inception) to
December 31, 1998. This increase is primarily due to increased costs  associated
with the increase in the sales of software packages.

     Amortization  and Write Down of Deferred  Charge.  The  amortized  deferred
charge  represents  a license  fee for the use of ENGLISH  PRO 6.2 and was being
amortized  on a  straight-line  basis over the  three-year  minimum  term of the
license  agreement.  As the Company  does not expect to obtain any future  value
from this licensing  agreement,  the entire  deferred charge balance of $159,800
was  written  off to expense in 1999.

     Depreciation.  Depreciation  expenses  consist of  depreciation on computer
equipment,  office  equipment  and  furniture.  Capital  assets such as computer
equipment and furniture and office  equipment are depreciated on a straight-line
basis over their estimated useful lives, computer equipment over three years and
furniture and office  equipment over five years.  During the year ended December
31, 1999,  depreciation expenses increased to $17,705 from $4,205 for the prieod
from May 5, 1998  (inception)  to December  31,  1998.  This is due to increased
depreciation  costs  associated  with the  increase  in  purchases  of  computer
equipment by the Company.

     General and Administrative  Expenses.  General and administrative  expenses
primarily consist of management, financial and administrative personnel expenses
and related  costs and  professional  service fees.  General and  administrative
expenses were $557,917 for the year ended December 31, 1999, which represents an
increase of 169% over the period from May 5, 1998  (inception)  to December  31,
1998.  This  increase is due  primarily  to an  increase in expenses  related to
auditing the Company's financial statements for the fiscal period ended December
31,  1999 and legal  fees  relating  to the  filing of the  Company's  10-SB and
10-QSB. The Company  anticipates that general and  administrative  expenses will
increase  significantly  in the  next  year  due to  the  implementation  of its
Internet/Intranet enabled software initiatives in South East Asia.

     Marketing  Expenses.  Marketing expenses consist primarily of marketing and
promotional costs relating to the development of the Company's brands as well as
personnel, travel and other costs. Marketing expenses were $276,103 for the year
ended December 31, 1999,  which were 380% higher than those incurred from May 5,
1998 (inception) to December 31, 1998. This increase was primarily  attributable
to increased travel expenses incurred to promote the Company's  Internet-enabled
software products in South East Asia. The Company anticipates marketing expenses
will increase over the next 12 months as a result of its current  initiatives in
Thailand  and Malaysia  throughout  Asia and Latin  America,  which will require
extensive travel for the its marketing staff.

                                       14

     Research  and  Development  Expenses.  Research  and  development  expenses
primarily include personnel costs relating to developing the Company's  software
and  maintaining  and enhancing the features  content and  functionality  of the
Company's  Internet  Web site and  related  systems.  Research  and  development
expenses were $294,924 for the year ended December 31, 1999 which  represents an
increase of 185% over the period from May 5, 1998  (inception)  to December  31,
1998. This increase was primarily due to increased  staffing in the research and
development  team.  The Company  anticipates  that its research and  development
staff will  continue to grow  through  and into 2000 as the  Company  focuses on
improving and expanding the features and  availability of its  Internet/Intranet
network-enabled  software products.  Research and development costs are expensed
as  incurred.  However,  computer  software  development  costs  incurred  after
technological   feasibility  of  a  product  is  established  are   capitalized.
Technological  feasibility is generally not established until  substantially all
related product development is complete and the product is released.

     Income Taxes.  No provision  for federal  income taxes has been recorded in
1999 or 1998 as a result of losses.  As at December  31,1999,  the Company had a
net  operating  loss for United  States  income tax  purposes  of  approximately
$190,000  which will begin to expire in 2018 if not utilized.  In addition,  the
Company has non-capital losses for Canadian income tax purposes of approximately
$900,000  at  December  31,  1999,  which  will  begin to  expire in 2005 if not
utilized.  The Company has recognized a valuation allowance of $500,000 equal to
the deferred tax assets due to the  uncertainty of realizing the benefits of the
asset.

     Other  Income.  Other  income  during  the year  ended  December  31,  1999
increased  to  $130,221  compared  to nil  for  the  period  from  May  5,  1998
(inception) to December 31, 1998. The increase was the result of the sale of two
web domains by the Company.

Liquidity and Capital Resources

     Since  inception,  the Company has financed  operations and met its capital
expenditure  requirements  primarily through private sales of equity securities,
which have resulted in net proceeds of $1,199,428  through December 31, 1999. At
December 31, 1999,  the Company had $43,584 in cash and cash  equivalents  and a
working  capital  deficit of $145,620.  In March 2000,  the Company  announced a
financing via private  placement  offering  under  Regulation D, Rule 506 of the
Securities  and  Exchange  Commission.  The  Company  intends  to offer and sell
1,000,000  units at $1 per  unit,  with  each  unit  consisting  of one share of
restricted  common stock and two warrants.  Each warrant  entitles the holder to
purchase one additional share of restricted  common stock at $2.50 per share and
$5.00 per share, respectively.

     The  Company  has not  yet  generated  positive  cashflows  from  operating
activities.  Cash used in operating activities was $815,181 and $241,396 for the
year ended December 31, 1999 and for the period from May 5, 1998  (inception) to
December  31,  1998,  respectively.  The  Company  does not  expect to  generate
positive cash from operations for the year ending December 31, 2000.

     The Company's investing  activities have consisted of capital  expenditures
totaling $54,027 and $20,298 for the year ended December 31, 1999 and the period
from May 5, 1998  (inception)  to December 31, 1998,  respectively.  The capital
expenditures  related  primarily  to the  acquisition  of computer  software and
equipment as well as furniture and fixtures used to support its growing employee
base.

     Net cash provided by financing activities was $888,207 and $297,778 for the
year ended  December  31,  1999 and the period from May 5, 1998  (inception)  to
December  31, 1998,  respectively.  Net cash  provided by  financing  activities
resulted primarily from issuance of capital stock, which was partially offset by
principal payments on capital leases and notes payable.

     The Company  does  foresee an increase  in  operating  expenses in order to
implement its Internet/Intranet enabled applications in Thailand and Malaysia as
well as the continue upgrade of its software application.  Further , the Company
expects  to sign  additional  Ministry  of  Education  and with  implementations
beginning  by the second  quarter  of 2000.  The  Company  expects to fund these
increase  with  further  issuance  of  common  stock  of the  Company  and  from
advertising revenues that are expected to begin in the third quarter of 2000.

                                       15

     The Company believes that anticipated  private placements of equity capital
and  anticipated  operating  revenues  will be  adequate  to fund the  Company's
operations over the next twelve months.  Thereafter, the Company expects it will
need to raise additional capital to meet its long-term  operating  requirements.
The Company may encounter  business  initiatives  that require  significant cash
commitments  or  unanticipated  problems  or  expenses  that  could  result in a
requirement  for  additional  cash  before  that  time.  If the  Company  raises
additional  funds through the issuance of equity or convertible debt securities,
the  percentage  ownership  of its  shareholders  would  be  reduced,  and  such
securities  might have rights,  preferences  or privileges  senior to its common
stock.  Additional  financing may not be available upon acceptable  terms, or at
all. If adequate  funds are not  available or are not  available  on  acceptable
terms, the Company's  ability to fund its expansion,  take advantage of business
opportunities,   develop  or  enhance  its  products  or  otherwise  respond  to
competitive  pressures would be significantly  limited, and it may significantly
restrict the Company's operations.

Foreign Currency Translation and Hedging

     Foreign  exchange gains (losses) have not been  significant to date and the
Company does not, at this time,  engage in forward  exchange  contracts  for the
purpose of hedging  against  fluctuations  in the exchange  rate between  United
States and Canadian dollars.

     During the second and third quarters of 2000, the Company intends to engage
in activities in foreign countries,  namely Thailand,  Malaysia,  Columbia, Hong
Kong,  Taiwan and China.  These  activities  will likely  result in  development
expenses  related to the  installation,  support and  maintenance of ENGLISH PRO
Network Edition on educational networks and sales and marketing expenses related
to  generating  advertising  revenues  in  these  regions.  The  Company  has no
immediate plans for hedging against fluctuations in these currencies.

ITEM 7   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Reference  is made to the  financial  statements  listed  under the heading
"Exhibits,  Financial  Statements  Schedules and Reports on Form 8-K" of Item 13
herein,  which  financial  statements  are  incorporated  herein by reference in
response to this Item 7.

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

     On May 28, 1998, upon recommendation by its Board of Directors, the Company
dismissed the accounting firm Barry L. Friedman, P.C., of 1582 Tulita Drive, Las
Vegas, Nevada, US 89123, as the auditors for the Company. On March 22, 1999, the
Company  retained  Ernst & Young LLP,  of 700 West  Georgia  Street,  Vancouver,
British Columbia, Canada V7Y1C7, as auditors for the Company.

     In  connection  with the  audits of the most  recent  fiscal  years and any
interim  period  preceding  dismissal,  no  disagreements  exist with any former
accountant  on  any  matter  of  accounting   principles  or  procedure,   which
disagreements if not resolved to the satisfaction of the former accountant would
have caused him to make  reference in connection  with his report to the subject
matter of the disagreement(s).

     The principal  accountant's  report on the financial  statements for any of
the past two years  contained no adverse  opinion or a disclaimer of opinion nor
was qualified as to uncertainty, audit scope or accounting principles.

                                       16

                                    PART III

ITEM 9   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
           COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Executive Officers and Directors

     The following table sets forth certain  information  concerning the certain
executive  officers  and  directors  of the Company and its  subsidiaries  as of
December 31, 1999.

     Name                   Age       Subsidiary
     ----                   ---       ----------------------------

     Mark E. Bruk           41        President, Chief Executive Officer,
                                      Treasurer and Chairman of the Board
                                      and Director

     Robert Harris          51        Manager of Creative Research,
                                      EDUVERSE DOT COM  (Canada) INC. ,
                                      Secretary and Director

     Marc Crimeni           41        Executive Vice President, EDUVERSE
                                      DOT COM (Canada) INC.

     Jeffrey Mah            38        Chief Technology Officer, EDUVERSE
                                      DOT COM (Canada) INC.

     Lorne Reicher          43        Vice President, Operations, EDUVERSE
                                      DOT COM (Canada) INC.

     Peter O'Donnell        48        Director

     Mark E. Bruk has  served as the  Company's  President,  Treasurer,  CEO and
Chairman since May 28, 1998. He is also President,  Treasurer,  CEO and Chairman
of the  Company's  wholly-owned  subsidiary  EDUVERSE DOT COM INC..;  President,
Secretary,  Treasurer and sole Director of the Company's wholly owned subsidiary
ESL PRO Systems, Inc.; and President,  Secretary, Treasurer and sole Director of
the Company's wholly owned subsidiary M&M Information & Marketing Services, Inc.
From July 1996 to August 1997, Mr. Bruk served as Vice President of Applications
and then Vice  President of Research &  Development  for InMedia  Presentations,
Inc., a multimedia  and software  company  ("InMedia").  From August 1995 to May
1996,  Mr.  Bruk  served  as  the  Product  Manager  for  Boswell  International
Technologies  Ltd., a software  development  company,  where he  supervised  the
redesign, development and production of the Boswell ESL system which the Company
has subsequently licensed.  From October 1994 to July 1995, Mr. Bruk founded and
served as the President of News4U,  an information  service for delivering  news
via  alpha-numeric  and numeric  pagers.  From October 1993 to October 1994, Mr.
Bruk served as  President  of  CanFuture  Development  Inc.,  a custom  software
development company.

     Robert  Harris  has  served as the  Manager  of  Creative  Research  of the
Company's  wholly owned  subsidiary  EDUVERSE  DOT COM INC and as Secretary  and
Director of the Company since June 3, 1998. From 1996 to 1998, Mr. Harris served
as  executive  assistant  to the  Investment  Director  of a private  investment
corporation based in Vancouver and Riyadh,  Saudi Arabia and as the assistant to
the President for Wayburn Resources Inc., a mineral  exploration  company.  From
November 1990 to November 1995, Mr. Harris served as a compliance  officer and a
director for SZL Sportsight Inc., a sports entertainment technology company.

     Marc Crimeni has served as the  Executive  Vice  President of the Company's
wholly  owned  subsidiary  EDUVERSE  DOT COM INC.  since  August 1,  1998.  From
November 1996 to July 1997,  Mr.  Crimeni  served as Vice President of Sales and
Marketing at InMedia.  From  February  1994 to November  1996,  he served as the
International  Sales Manager for Inetco Systems Inc., a software  company.  From
June 1992 to July 1993, Mr. Crimeni  served as  International  Sales Manager for
Prologic Computer  Corporation,  a software development company. On September 3,
1998, the British Columbia  Securities  Commission fined Mr. Crimeni  Cdn$10,000
for failing to disclose in a  regulatory  filing a pending  criminal  proceeding
involving the improper  storage of a firearm..  As a result of this action,  Mr.
Crimeni  agreed to resign any  position  he held as a  director  or officer of a
reporting issuer in British  Columbia,  to not serve as a director or officer of
any  reporting  issuer in British  Columbia  and to not  engage in any  investor
relations   activities  until  December  4,  1999.  Mr.  Crimeni   completed  an
educational  program  relating  to  securities  and is  eligible  to  serve as a
director or executive officer of a British Columbia reporting issuer.

                                       17

     Jeffrey  Mah has served as the Chief  Technology  Officer of the  Company's
wholly-owned  subsidiary  EDUVERSE  DOT COM INC. , since  August 1,  1998.  From
January 1998 to May 1998, Mr. Mah founded and was President of e-werks Software,
Inc., an educational software development firm. From March 1997 to January 1998,
he served as Senior Java  Programer at InMedia.  From May 1996 to November 1996,
Mr.  Mah was a member  of the  Scientific  and  Engineering  Staff at  MacDonald
Dettwiler and Associates,  an information  technology company.  From May 1994 to
May 1996,  Mr. Mah founded and was  President  of  Stormchaser  Productions,  an
information technology strategy and systems development and integration company.
Mr. Mah is also serving as an  Instructor at the British  Columbia  Institute of
Technology,  offering courses in object oriented  application design in Java and
structured  programming.  He received his Bachelor of Science Degree in Computer
Science from the University of British Columbia in 1985.

     Lorne  Reicher  has  served  as the Vice  President  of  Operations  of the
Company's wholly owned subsidiary EDUVERSE DOT COM INC. , since January 1, 1999.
From June 1991 to January  1998,  Mr.  Reicher was the Director of  Franchising,
Western Region for Hartco Enterprises Inc., a franchisor of systems integrators,
computer  resellers  and  computer  retailers.  From June 1985 to Jun 1991,  Mr.
Reicher  founded and was a partner and General  Manager of the Penny  Group,  an
independent computer reseller association.

     Peter O'Donnell has served as a Director of the Company since May 28, 1998.
Mr. O'Donnell is currently serving as the Vice-President, Marketing, of Intracom
Corporation,  an Internet  medical  imaging  company and as the Chief  Operating
Officer of Personal  Internet  Assistants,  Inc., an Internet  research service.
From 1997 to 1998, Mr. O'Donnell served as the Chief Executive Officer of Soqual
Creative  Marketing  Services,   a  marketing  company,  and  as  the  Executive
Vice-President,  Marketing,  of The Black Vodka Company.  From 1994 to 1997, Mr.
O'Donnell  served as the  Executive  Vice-President  of Sales and  Marketing for
OneVoice  Corp.,  a  multi-lingual  Web  content  and   translation/localization
service. Mr. O'Donnell currently serves on the Board of Advisors for VidBot.com,
a streaming video Internet directory company.  He received his Bachelor's Degree
in Journalism in 1972 from the University of Florida.

Board of Directors

     Each member of the Board of Directors is elected  annually and holds office
until the next annual  meeting of  shareholders  or until his successor has been
elected or appointed,  unless his office is earlier  vacated in accordance  with
the Bylaws of the Company. Officers serve at the discretion of the Board and are
appointed annually. The Board currently has no committees.

     None of the  Company's  directors or executive  officers are parties to any
arrangement  or  understanding  with any other  person  pursuant  to which  said
individual  was elected as a director or officer of the Company.  No director or
executive  officer of the  Company  has any family  relationship  with any other
officer or director of the Company.

ITEM 10   EXECUTIVE COMPENSATION

Compensation of Executive Officers

     The following table sets forth  compensation  information for the Company's
Chief  Executive  Officer during the year ended December 31, 1999 and the period
from May 5, 1998 (inception) to December 31, 1998:

                                    Summary Compensation Table

                                                                   Compensation
                                                                                   Other Annual
   Name and                            Period         Salary          Bonus        Compensation
   Principal Position                  ------         ------          -----        ------------
   ------------------                                   ($)             ($)              ($)

   Mark E. Bruk                      Year ended       60,000            --              --
   President, CEO and                Dec. 31,
   Chairman                          1999 and
                                     period from
                                     May 5, 1998
                                     (inception)
                                     to Dec. 31,
                                     1998

                                       18

                      Option/SAR Grants in Last Fiscal Year

     The following table shows information  regarding grants of stock options to
the Company's  Chief  Executive  Officer during the year ended December 31, 1998
and outstanding as of December 31, 1999.

                                                         Individual Grants
                              -----------------------------------------------------------------------
                                                  Percent of
                                Number of       Total Options
                                 Shares           Granted to
                               Underlying        Employees in           Exercise
                                 Options            Fiscal                Price            Expiration
   Name                       Granted(#)(3)       Year(%)(2)           ($/Share)(1)           Date
- --------------                -------------       ----------           ------------           ----
                                                                                  
Mark E. Bruk                     300,000            19.3%                 $0.75               6/3/02

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

(1)  The  exercise  price per share of each  option is equal to the fair  market
     value per share plus a premium of 10% of the fair market value per share of
     the underlying common stock on the date of grant.

(2)  Options to purchase  1,577,500  shares of common  stock were granted by the
     Company to its employees, consultants and directors.

(3)  The options vest 2% per month for a period of 50 months from June 3, 1998.

Employment Agreements

     As at May 3, 1999,  Marc  Crimeni,  Robert  Harris,  Jeffrey  Mah and Lorne
Reicher have entered into employment  agreements with EDUVERSE DOT COM INC., the
Company's wholly-owned subsidiary,  providing for annual salaries of Cdn$90,000,
Cdn$36,000, Cdn$108,000 and Cdn$60,000,  respectively. The employment agreements
may be  terminated  by the  Company  with  14  days  written  notice  and by the
employees  with 30 days written  notice.  Each of the above named  employees has
entered into confidentiality and non-competition agreements with the Company.

Stock Option and Purchase Plans

     1998 Stock Option  Plan.  The Board of Directors  and  shareholders  of the
Company adopted the 1998 Stock Option Plan (the "1998 Plan") on June 3, 1998 and
amended  it on May 30,  1999 and  again on June 30,  1999.  The 1998  Plan  will
terminate  on the  earlier  of June 3, 2008 or such  other  date as the Board of
Directors or committee  thereof may determine.  The 1998 Plan is administered by
the Board of Directors or by a committee thereof (the "Plan  Administrator") and
provides that options may be granted to employees and officers of the Company or
any of its subsidiaries and to directors of the Company who are employees of the
Company or any of its subsidiaries, based on the eligibility criteria set out in
the 1998 Plan.

     The 1998 Plan authorizes the grant of "incentive  stock options" as defined
in Section 422A of the Internal  Revenue Code of 1986,  as amended (the "Code"),
and  "non-qualified"  stock  options.  The options issued under the Stock Option
Plan are  exercisable  at a price fixed by the Plan  Administrator,  in its sole
discretion, subject to specific requirements relating to incentive stock options
under the Code.  Non-qualified  and incentive stock options generally expire ten
years from the grant date,  except  non-qualified  and  incentive  stock options
which are granted to a person owning more than 10% of the combined  voting power
of all  classes  of stock of the  Company  or any  parent or  subsidiary  of the
Company expire after five years from the grant date.

     The maximum number of the shares reserved for issuance under the 1998 Plan,
including  options currently  outstanding,  are 2,500,000 shares. As at December
31, 1999, a total of 1,552,500 options are outstanding .

                                       19

     1998 Director's Stock Option Plan . The Board of Directors and stockholders
of the  Company  adopted  the 1998  Director's  Stock  Option  Plan  (the  "1998
Directors  Plan") on June 3, 1998. The 1998 Directors Plan will terminate on the
earlier  of June  30,  2008 or such  other  date as the  Board of  Directors  or
committee thereof may determine.  The 1998 Directors Plan is administered by the
Board of Directors  or by a committee  thereof  (the "Plan  Administrator")  and
provides  that  options may be granted to  Directors  of the Company who are not
employees of the Company.

     Under the 1998 Directors Plan, options may be exercised at a price not less
than the fair market value of the  Company's  common stock on the date of grant,
which  is  deemed  to be the  closing  price  of the  Company's  shares  on NASD
Over-The-Counter Bulletin Board Market on the date of grant. Options are granted
under the 1998  Directors  Plan to eligible  Directors  in  accordance  with the
following formula:

     1.   Upon initial  election or  appointment  to the Board of Directors each
          director  is  entitled  to receive an option to  purchase up to 25,000
          share of the Company's common stock.

     2.   Upon  re-election  to the Board of Directors each director is entitled
          to receive and option to purchase up to 8,000 shares of the  Company's
          common stock.

In the event a Director  serves  only a partial  term  before  re-election,  the
number of options to purchase shares granted upon their  re-election is prorated
to reflect the amount of time served as a Director.  Options  typically  vest 2%
each month and expire 10 years from the date of grant.

     At December 31, 1999,  the granting of 25,000  options at an exercise price
of $0.68 per share had been  authorized by the Board of Directors;  however,  no
option agreements had been executed during 1999.

     The maximum number of shares reserved for issuance under the 1998 Directors
Plan,  including  options  currently  outstanding,  are  150,000  shares.  As of
December 31, 1999, a total of 25,000 options are issued and outstanding.

     1998 Employee  Stock  Purchase  Plan.  The Company has  established a share
compensation  arrangement  for its employees  known as the 1998  Employee  Stock
Purchase  Plan  (the  "1998  Purchase  Plan").  The 1998  Purchase  Plan  became
effective as of June 3, 1998 and will  terminate on the earlier of June 3, 2008,
the date on which  all  authorized  shares  under  the  1998  Purchase  Plan are
distributed or on a date determined by the Board of Directors. The 1998 Purchase
Plan is administered  by the Board of Directors or committee  thereof (the "Plan
Administrator"). Under the terms of the 1998 Purchase Plan, the aggregate number
of shares that may be issued pursuant to the plan is 500,000.

     The 1998 Purchase Plan provides that each  full-time  employee  (subject to
certain limited  exceptions) of the Company may purchase shares of the Company's
common stock by payroll deduction up to an amount equal to the lesser of (1) the
maximum  number  of  shares  set by the Plan  Administrator,  or (2) 200% of the
number of shares  determined  by dividing the dollar  amount in such  employee's
payroll  deduction  account  by 85% of the  closing  bid  price  on the NASD OTC
Bulletin  Board on the day previous to the purchase.  The number of shares which
an employee may  purchase  during any given  offering  period is  determined  by
dividing the amount  accumulated in such employee's  payroll  deduction  account
during the offering period by the lower of (1)  eighty-five  percent of the fair
market  value of a share of the  Company's  common stock on the first day of the
offering  period,  or (2)  eighty-five  percent of the fair market  value of the
Company's  common stock on the purchase date. At December 31, 1999, no employees
had yet been offered participation in the 1998 Purchase Plan.

Compensation of Directors

     During the most recently completed  financial year ended December 31, 1999,
there  was no  compensation  paid by the  Company  to the  directors  for  their
services  as  directors  except  as  otherwise  disclosed  herein.  There are no
standard   arrangements  for  any  such  compensation  to  be  paid  other  than
reimbursement  for  expenses  incurred  in  connection  with their  services  as
directors,  although the Company from time to time may grant  options to acquire
Common  Shares  for  directors.  As at  the  date  hereof  the  Company  has  no
outstanding  options to Directors  that have been granted for their  services as
such.

                                       20

ITEM 11   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth certain information concerning the number of
shares of Common Stock owned  beneficially  as of December 31, 1999 by: (i) each
person  known to the Company to own more than five  percent (5%) of any class of
the Company's voting  securities;  (ii) each director of the Company;  and (iii)
all  directors  and  officers  as  a  group.  Unless  otherwise  indicated,  the
shareholders listed possess sole voting and investment power with respect to the
shares shown.

                                                                     Amount and Nature of             Percent of
Title of Class        Name and Address (7) of a Beneficial Owner     Beneficial Owner                   Class(1)
- --------------        ------------------------------------------     ----------------                   --------
                                                                                              
Common Stock          Mark E. Bruk (2)                                  3,897,100                         29.5%
Common Stock          Marc Crimeni (3)                                  3,694,100                         28.0%
Common Stock          Robert Harris (4)                                    34,500                             *
Common Stock          Peter O'Donnell (5)                                  21,500                             *
Common Stock          All directors and officers of the Company as      3,953,100                         29.9%
                      a group (3 persons) (6)
- ---------------------

*    Represents less than 1% of the outstanding shares of common stock.

(1)  Based on an aggregate 13,185,089 shares outstanding as of December 31, 1999
(2)  Includes options to purchase 114,000 shares  exercisable  within 60 days of
     December 31, 1999.
(3)  Includes  options to purchase 38,000 shares  exercisable  within 60 days of
     December 31, 1999.
(4)  Includes  options to purchase 19,500 shares  exercisable  within 60 days of
     December 31, 1999.
(5)  Includes  options to purchase  6,500 shares  exercisable  within 60 days of
     December 31, 1999.
(6)  Includes options to purchase 140,000 shares  exercisable  within 60 days of
     December 31, 1999.
(7)  Unless  otherwise noted, the address of each beneficial owner is 2nd Floor,
     1235 West Pender Street, Vancouver, British Columbia V6E 2V1.

ITEM 12   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Except  as  otherwise  disclosed  herein,  no  director,   senior  officer,
principal  shareholder,  or any associate or affiliate thereof, had any material
interest, direct or indirect, in any transaction since the beginning of the last
financial year of the Company that has materially  affected the Company,  or any
proposed  transaction  that would materially  affect the Company,  except for an
interest  arising from the  ownership of shares of the Company  where the member
will receive no extra or special  benefit or advantage  not shared on a pro rata
basis by all holders of shares in the capital of the Company.

     During 1998,  Mr. Bruk loaned an  aggregate  of $48,685 to the Company,  of
which amount $45,000  represented  deferred consulting fees payable to Mr. Bruk.
The loan was interest free and contained no repayment  terms. As of December 31,
1999, all amounts outstanding under the loan have been repaid.

     In May 1999,EDUVERSE  DOT COM INC. entered into employment  agreements with
Marc Crimeni,  Robert  Harris,  Jeffrey Mah and Lorne  Reicher.  See  "Executive
Compensation -- Employment Agreements."

                                       21

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

1.   The  following  financial  statements of the  Registrant  and the Report of
     Independent  Chartered Accountants  thereon are included herewith in
     Item 7 above:

                                                                          Page
                                                                          ----
Report of Independent Chartered Accountants...............................F-1
Consolidated Balance Sheets...............................................F-2
Consolidated Statements of Operations.....................................F-3
Consolidated Statements of Shareholders' Deficit..........................F-4
Consolidated Statements in Cash Flows.....................................F-5
Notes to Financial Statements.............................................F-6

2.   Consolidated  financial  statement  schedules  and  Report  of  Independent
     Accountants in those schedules are included as follows:

     Not Applicable.

3.   Exhibits.

    EXHIBIT         DESCRIPTION OF EXHIBIT
    -------         ----------------------
     *2.1           Articles of Incorporation of the Registrant, as amended

     *2.2           Bylaws of the Registrant

     *3.1           Form of Common Stock share certificate

     *6.1           1998 Stock Option Plan, as amended

     *6.2           1998 Directors Stock Option Plan, as amended

     *6.3           1998 Employee Stock Purchase Plan

     *6.4           Form of Stock Option Agreement (1998 Stock Option Plan)

     *6.5           Form of Stock Option Agreement (1998 Director's Stock Option
                    Plan)

     *6.6           Form of Subscription Agreement (1998 Employee Stock Purchase
                    Plan)

     *6.7           Form of Affiliate Program Agreement

     *6.8           Form of Confidentiality and Non-Competition Agreement

     *6.9           freeENGLISH  Non-Exclusive  Linking  Agreement dated May 20,
                    1999 between the  Registrant  and the Ministry of University
                    Affairs (Thailand)

     *6.10          Memorandum of  Understanding  between  EDUVERSE  Accelerated
                    Learning  Systems   (Canada),   Inc.  and  the  Ministry  of
                    University Affairs (Thailand)

     *6.11          Manufacturer's  Representation Agreement dated March 1, 1999
                    between the Registrant and Tri Synergy, Inc.

     *6.12          Software  License  Agreement  dated May 7, 1998 by and among
                    the Registrant,  Boswell International Technologies Ltd. And
                    Boswell Industries Inc.

                                       22

    EXHIBIT         DESCRIPTION OF EXHIBIT
    -------         ----------------------

     *6.13          Employment  Agreement effective May 3, 1999 between EDUVERSE
                    Accelerated Learning Systems (Canada ) Inc. and Marc Crimeni

     *6.14          Employment  Agreement effective May 3, 1999 between EDUVERSE
                    Accelerated Learning Systems (Canada) Inc. and Robert Harris

     *6.15          Employment  Agreement effective May 3, 1999 between EDUVERSE
                    Accelerated Learning Systems (Canada) Inc. and Jeffery Mah

     *6.16          Employment  Agreement effective May 3, 1999 between EDUVERSE
                    Accelerated Learning Systems (Canada) Inc. and Lorne Reicher

     *8.1           Stock Exchange  Agreement and Plan of  Reorganization  dated
                    May 28, 1998 between the Registrant and ESL Pro Systems Inc.

     *8.2           Stock Exchange  Agreement and Plan of  Reorganization  dated
                    May 29, 1998 between the Registrant  and Marketing  Services
                    Inc.

      8.3           Agreement  dated  October  1999 between the  Registrant  and
                    Satellite Television Asian Region Limited.

     27.1           Financial Data Schedule

- ---------------------------
*    Previously  filed with the Company's  Registration  Statement on Form 10-SB
     filed September 3, 1999.

(b)  Reports on Form 8-K.

     None.

                                       23

                                   SIGNATURES

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

                                          EDUVERSE.COM

Date:  April 13, 1999                      By /s/ Mark E. Bruk
                                             -----------------------------------
                                             Mark E. Bruk
                                             President, Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
to be  signed  by the  following  persons  on  behalf  of  Wade  Cook  Financial
Corporation in the capacities and on the dates indicated.

Signature                       Title                               Date
- ---------                       -----                               ----

/s/ Mark E. Bruk                President, Chief Executive       April 13, 2000
- ---------------------------     Officer, Treasurer and
Mark E. Bruk                    Chairman of the Board and
                                Directors

/s/ Robert Harris               Manager of Creative              April 13, 2000
- ---------------------------     Research, EDUVERSE DOT COM
Robert Harris                   (Canada) INC., Secretary
                                and Director

/s/ Marc Crimeni                Executive Vice President,        April 13, 2000
- ---------------------------     EDUVERSE DOT COM (Canada)
Marc Crimeni                    INC.

/s/ Peter O'Donnell             Director                         April 13, 2000
- ---------------------------
Peter O'Donnell

                                    CONSOLIDATED FINANCIAL STATEMENTS

                                    EDUVERSE.COM

                                    December 31, 1999

                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of
eduverse.com

We have audited the  accompanying  consolidated  balance sheets of  eduverse.com
(the  "Company") as of December 31, 1999 and 1998, and the related  consolidated
statements  of  operations,  shareholders'  deficit  and cash flows for the year
ended December 31, 1999 and the period from May 5, 1998  (inception) to December
31, 1998. These consolidated  financial statements are the responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
consolidated 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  consolidated   financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and  significant  estimates made by  management,  as well as evaluating the
overall  consolidated  financial  statement  presentation.  We believe  that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
eduverse.com at December 31, 1999 and 1998, and the consolidated  results of its
operations  and its cash  flows for the year  ended  December  31,  1999 and the
period from May 5, 1998  (inception)  to December 31, 1998, in  conformity  with
accounting principles generally accepted in the United States.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated  financial statements,  the Company has a limited source of revenue
and is dependent  on its ability to raise  capital  from  shareholders  or other
sources to sustain  operations.  These factors,  along with other matters as set
forth  in Note 1,  raise  substantial  doubt  that the  Company  will be able to
continue  as a going  concern.  The  consolidated  financial  statements  do not
include any adjustments that might result from the outcome of this uncertainty.

Vancouver, Canada,
March 3, 2000.                                            Chartered Accountants

                                      F-1

eduverse.com

                           CONSOLIDATED BALANCE SHEETS

As at December 31                                                     (Expressed in U.S. dollars)

                                                                          1999              1998
                                                                            $                 $
- --------------------------------------------------------------------------------------------------
                                                                                    
ASSETS
Current
Cash                                                                    43,584            37,757
Accounts receivable, less allowance of $6,292 and $nil at
   December 31, 1999 and 1998, respectively                              8,826            18,477
Finished goods inventory                                                17,296            44,421
Other receivable                                                        10,123                --
Prepaid expenses and other                                              15,360             5,651
- --------------------------------------------------------------------------------------------------
Total current assets                                                    95,189           106,306
Capital assets, net [note 4]                                            53,096            31,774
Deferred charge, net of accumulated amortization of
   $52,000 at December 31, 1998 [note 5]                                    --           159,800
- --------------------------------------------------------------------------------------------------
Total assets                                                           148,285           297,880
- --------------------------------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' DEFICIT
Current
Accounts payable                                                       106,824            83,055
Accrued expenses                                                        19,585            19,723
Capital lease obligations                                                   --             7,041
Loans payable [note 7]                                                  10,000            78,685
Current portion of royalty payable [note 5]                            104,400            29,400
Unearned revenue                                                            --            20,138
- --------------------------------------------------------------------------------------------------
Total current liabilities                                              240,809           238,042
Royalty payable [note 5]                                                48,900           130,400
- --------------------------------------------------------------------------------------------------
                                                                       289,709           368,442
- --------------------------------------------------------------------------------------------------
Commitment [note 11]
Shareholders' deficit
Share capital [note 9]

Common stock - $0.001 par value
   Authorized shares:  50,000,000
   Issued and outstanding shares:  13,185,089 shares at
   December 31, 1999 and 11,607,046 shares at December 31,              13,185            11,607
   1998

Preferred stock - $0.001 par value
   Authorized shares:  5,000,000
   Issued and outstanding shares:  nil                                      --                --
Shares to be issued                                                      3,078            46,747
Additional paid in capital                                           1,384,683           286,127
Accumulated deficit                                                 (1,544,043)         (416,716)
Accumulated other comprehensive income                                   1,673             1,673
- --------------------------------------------------------------------------------------------------
Total shareholders' deficit                                           (141,424)          (70,562)
- --------------------------------------------------------------------------------------------------
Total liabilities and shareholders' deficit                            148,285           297,880
- --------------------------------------------------------------------------------------------------

See accompanying notes

On behalf of the Board:

                       Director                                  Director
- ----------------------                    ----------------------

                                      F-2

eduverse.com

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                      (Expressed in U.S. dollars)

                                                                                     Period from
                                                                                      May 5, 1998
                                                                    Year ended        (inception)
                                                                   December 31,     to December 31,
                                                                       1999              1998
                                                                         $                 $
- --------------------------------------------------------------------------------------------------
                                                                                     
REVENUE
Software sales [note 3]                                                100,119            14,824
Distribution royalties                                                  20,596                --
- --------------------------------------------------------------------------------------------------
Total revenues                                                         120,715            14,824
Cost of goods sold                                                      38,597             6,873
- --------------------------------------------------------------------------------------------------
Gross profit                                                            82,118             7,951
- --------------------------------------------------------------------------------------------------

EXPENSES
Writedown and amortization of deferred charge [note 5]                 159,800            52,000
Foreign currency transaction loss                                       33,217                --
Depreciation                                                            17,705             4,205
General and administrative [note 6]                                    557,917           207,644
Marketing                                                              276,103            57,485
Research and development                                               294,924           103,333
- --------------------------------------------------------------------------------------------------
                                                                     1,339,666           424,667
- --------------------------------------------------------------------------------------------------
Operating loss                                                      (1,257,548)         (416,716)
Other income [note 12]                                                 130,221                --
- --------------------------------------------------------------------------------------------------
Net loss for the period                                             (1,127,327)         (416,716)
- --------------------------------------------------------------------------------------------------
Comprehensive loss
Net loss for the period                                             (1,127,327)         (416,716)
Foreign currency translation                                                --             1,673
- --------------------------------------------------------------------------------------------------
Comprehensive loss for the period                                   (1,127,327)         (415,043)
- --------------------------------------------------------------------------------------------------

Net loss per common share:
   Basic and diluted                                                     (0.09)            (0.04)
- --------------------------------------------------------------------------------------------------

Weighted average number of common shares:
   Basic and diluted                                                12,641,546         9,512,400
- --------------------------------------------------------------------------------------------------

See accompanying notes

                                      F-3

eduverse.com

                                         CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT

                                                                                                        (Expressed in U.S. dollars)

                                            Common stock                                     Accumulated
                                      ----------------------                  Additional        other
                                       Number                   Shares to be    paid in     comprehensive  Accumulated
                                      of shares       Amount       issued       capital        income        deficit        Total
                                         #              $            $             $             $             $               $
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       
[note 9]
Balance on May 5, 1998
(inception)                                --             --            --            --          --             --             --
Shares issued upon
incorporation                         9,000,000        9,000            --        10,560          --             --         19,560
Additional shares issued
 as a result of the
 reverse acquisition                  2,250,000        2,250            --        (2,249)         --             --              1
Cash proceeds from issuance
 of common stock                        277,046          277            --       177,896          --             --        178,173
Cash proceeds from common
 stock to be issued
 [note 9(b)]                             52,630           --        30,000            --          --             --         30,000
Shares to be issued for
 services rendered                       37,541           --        16,747            --          --             --         16,747
Shares issued for settlement
 of royalty payable [note 9(b)]          80,000           80            --        51,920          --             --         52,000
Stock based compensation                     --           --            --        48,000          --             --         48,000
Foreign currency adjustment                  --           --            --            --       1,673             --          1,673
Net loss                                     --           --            --            --          --       (416,716)      (416,716)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998           11,697,217       11,607        46,747       286,127       1,673       (416,716)       (70,562)
- ------------------------------------------------------------------------------------------------------------------------------------

Cash proceeds from issuance
 of common stock                      1,417,686        1,418            --       970,277          --             --        971,695
Shares to be issued for
 services rendered [note 14]              2,345           --         3,078            --          --             --          3,078
Shares issued for cash received
 in 1998 [note 9(b)]                         --           90       (46,747)       46,657          --             --             --
Shares issued for services
 rendered [note 9(b)]                    45,187           45            --        52,707          --             --         52,752
Shares issued for interest
 expense [note 9(b)]                     24,999           25            --        20,652          --             --         20,677

Stock based compensation
 [note 9(c)]                                 --           --            --         6,120          --             --          6,120
Beneficial conversion feature
 of inventory loan                           --           --            --         2,143          --             --          2,143

Net loss                                     --           --            --            --          --     (1,127,327)    (1,127,327)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999           13,187,434       13,185         3,078     1,384,683       1,673     (1,544,043)      (141,424)
- ------------------------------------------------------------------------------------------------------------------------------------

See accompanying notes

                                      F-4

eduverse.com

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                      (Expressed in U.S. dollars)

                                                                                     Period from
                                                                                      May 5, 1998
                                                                    Year ended        (inception)
                                                                   December 31,     to December 31,
                                                                       1999              1998
                                                                         $                 $
- --------------------------------------------------------------------------------------------------
                                                                                  
OPERATING ACTIVITIES
Net loss                                                            (1,127,327)         (416,716)
Adjustment to reconcile net loss to net cash used in
   operating activities:
   Common shares to be issued for services rendered                      3,078            16,748
   Common shares issued for services rendered                           52,752                --
   Common shares issued in lieu of interest expense                     20,677                --
   Writedown and amortization of deferred charge                       159,800            52,000
   Depreciation                                                         17,705             4,205
   Effect of foreign currency                                           33,217                --
   Stock based compensation                                              6,120            48,000
   Beneficial conversion feature of inventory loan                       2,143                --
   Loss from theft of capital assets                                       294                --
   Provision for doubtful accounts                                       6,193                --
Changes in operating assets and liabilities:
   Accounts receivable                                                   4,176           (18,477)
   Finished goods inventory                                             27,801           (44,421)
   Other receivable                                                     (9,834)               --
   Prepaid expenses and other                                           (9,655)           (5,651)
   Accounts payable                                                     18,831           102,778
   Accrued expenses                                                        (98)               --
   Unearned revenue                                                    (21,054)           20,138
- --------------------------------------------------------------------------------------------------
Net cash used in operating activities                                 (815,181)         (241,396)
- --------------------------------------------------------------------------------------------------

INVESTING ACTIVITIES
Purchase of capital assets                                             (54,027)          (20,298)
Proceeds from insurance company for theft of capital assets             17,270                --
- --------------------------------------------------------------------------------------------------
Net cash used in investing activities                                  (36,757)          (20,298)
- --------------------------------------------------------------------------------------------------

FINANCING ACTIVITIES
Cash proceeds from loans payable                                        10,000            78,685
Payments of loans payable                                              (79,764)               --
Payments under capital lease obligations                                (7,224)           (8,640)
Repayment of royalty payable                                            (6,500)               --
Cash proceeds from issuance of common stock                            971,695           197,733
Cash received on common stock to be issued                                  --            30,000
- --------------------------------------------------------------------------------------------------
Net cash provided by financing activities                              888,207           297,778
- --------------------------------------------------------------------------------------------------
Effect of foreign exchange rate changes on cash                        (30,442)            1,673

Net increase in cash                                                     5,827            37,757
Cash, beginning of period                                               37,757                --
- --------------------------------------------------------------------------------------------------
Cash, end of period                                                     43,584            37,757
- --------------------------------------------------------------------------------------------------

See accompanying notes

                                      F-5

eduverse.com

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999                                    (Expressed in U.S. dollars)

1.   ORGANIZATION AND DESCRIPTION OF BUSINESS

Organization

eduverse.com  (the "Company") was  incorporated  on October 22, 1991,  under the
laws of the State of Nevada,  as Ward's  Futura  Automotive,  Ltd. The Company's
name was subsequently  changed to Perfect Future, Ltd. On June 11, 1998 its name
was changed to Eduverse Accelerated  Learning Systems,  Inc. and on May 19, 1999
to eduverse.com.

Pursuant  to a series of  transactions  on May 28,  1998 and May 29,  1998,  the
Company  acquired  all of the issued and  outstanding  share  capital of ESL Pro
Systems Inc.  ("ESL") and M&M Information and Marketing  Services Inc.  ("M&M"),
both Nevada companies  incorporated on May 5, 1998 and under common control. The
Company exchanged 2,000,000 common shares and 7,000,000 common shares for all of
the outstanding share capital of ESL and M&M, respectively. As a result of these
acquisitions,  the previous  shareholders of ESL and M&M, as a group, owned more
than  50%  of  the  issued  and  outstanding   voting  shares  of  the  Company.
Consequently,  this  business  combination  has been  accounted for as a reverse
acquisition  whereby  ESL and M&M are deemed to have been  combined  in a manner
similar  to  a  pooling  of  interests,   and  to  have  acquired  the  Company.
Accordingly, these transactions represent the recapitalization of the businesses
of ESL and M&M on a combined basis.

These  consolidated  financial  statements  are  issued  under  the  name of the
Company,  but are a continuation of the combined financial statements of ESL and
M&M and reflect  the  accounts  of ESL and M&M since  their  inception  at their
historic  net book  values.  As at May 29,  1998,  the Company had net  monetary
assets  of $1.  For  purposes  of the  acquisition,  the  fair  value of the net
monetary assets of $1 has been ascribed to the 2,250,000 previously  outstanding
common shares of the Company deemed to be issued in the acquisition.

Description of business

The Company is a  technology-based  company  focused on developing and marketing
interactive  multimedia educational software products. At December 31, 1999, the
Company's  principal  markets  include Canada and U.S.A.  The Company  generates
revenues from the retail sale of its English language tutorial software products
ENGLISH  PRO. In late 1998,  the Company  started  pioneering  a new  e-commerce
educational  delivery  model  that  provides  users  with free  access to online
education.  The Company  expects to generate the majority of its future revenues
from  advertising  revenues by including an advertiser's  message as part of the
ENGLISH PRO tutorial.  In 1999 and 1998,  the Company  recognized no advertising
revenues.

                                      F-6

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999                                    (Expressed in U.S. dollars)

1.   ORGANIZATION AND DESCRIPTION OF BUSINESS (cont'd.)

Going concern

The Company's  financial  statements  for the year ended  December 31, 1999 have
been prepared on a going concern basis which  contemplates  the  realization  of
assets and the settlement of liabilities and commitments in the normal course of
business for the foreseeable  future.  The company incurred a loss of $1,127,327
for the year ended  December 31, 1999, and as of December 31, 1999 had a working
capital  deficiency  of $145,620.  Management  recognizes  that the Company must
obtain  additional  financial  resources by raising capital from shareholders or
other  sources  or  consider  a  reduction  in  operating  costs to enable it to
continue  operations  with available  resources.  However,  no assurances can be
given  that the  Company  will be  successful  in  raising  additional  capital.
Further,  there can be no assurance,  assuming the Company  successfully  raises
additional  funds,  that the Company will  achieve  positive  cash flow.  If the
Company is unable to obtain adequate  additional  financing,  management will be
required to sharply curtail the Company's operating expenses.  Accordingly,  the
company's continuation as a going concern is in substantial doubt.

These financial statements do not include any adjustments to the carrying values
and  classification  of assets and  liabilities  which may be  necessary  if the
company is unable to continue its operations.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation

The consolidated  financial  statements  include the accounts of the Company and
its wholly-owned subsidiaries: eduverse dot com inc. (British Columbia, Canada),
ESL Pro Systems Inc. (Nevada,  USA), and M&M Information and Marketing  Services
Inc. (Nevada, USA). All significant  intercompany accounts and transactions have
been eliminated.

Cash and cash equivalents

Cash  and  cash  equivalents   consist  of  cash  and  highly  liquid  financial
instruments with remaining  maturities of three months or less when acquired and
which are readily convertible to cash.

Finished goods inventory

Finished goods inventory consists of English language tutorial software products
and is carried at the lower of weighted average cost and net realizable value.

                                      F-7

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999                                    (Expressed in U.S. dollars)

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)

Capital assets

Capital assets are stated at cost.  Depreciation  is computed on a straight-line
basis for financial  reporting  purposes  over the estimated  useful life of the
asset as follows:

     Computer equipment                                      3 years
     Furniture and office equipment                          5 years

Web-site development costs

Web-site development costs have been expensed as incurred.

Impairment of long-lived assets

The Company records  impairment  losses on long-lived  assets used in operations
when events and circumstances indicate that the assets might be impaired and the
undiscounted  cash flows estimated to be generated by those assets are less than
the carrying amounts of those assets.

Leases

Leases which transfer  substantially  all the benefits and risks of ownership of
the leased  property are accounted for as capital leases whereby the property is
recorded as an asset and the  obligation  incurred  is recorded as a  liability.
Under  this  method  of  accounting  for  leases,  the asset is  amortized  on a
straight-line basis over its estimated useful life and the obligation, including
interest  thereon,  is  amortized  over the life of the lease.  Operating  lease
payments are expensed as incurred.

Financial instruments

At December 31, 1999, the Company has the following financial instruments: cash,
accounts receivable, other receivable, accounts payable, accrued expenses, loans
and royalty  payable.  The  carrying  value of these  financial  instruments  is
considered to approximate fair value based on their short term nature.

                                      F-8

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999                                    (Expressed in U.S. dollars)

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)

Advertising costs

Advertising  costs are expensed as incurred.  The Company  incurred  advertising
expense of $84,190 in 1999. No advertising expense was incurred in 1998.

Deferred charge

The  deferred  charge  represents  a license fee for the use of software and was
being amortized on a straight-line basis over the three year minimum term of the
license  agreement.  As the Company  does not expect to obtain any future  value
from this licensing  agreement,  the entire  deferred charge balance of $159,800
was written off to expense in 1999.

Income taxes

The  Company  accounts  for  income  taxes  using  the  liability  method of tax
allocation. Under this method, deferred income taxes reflect the net tax effects
of temporary  differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes at
enacted tax rates expected to be in effect when the differences reverse.

Research and development

Research  and  development  costs are expensed as  incurred.  However,  computer
software development costs incurred after technological feasibility of a product
is  established  are  capitalized.  Technological  feasibility  is generally not
established until  substantially all related product development is complete and
the product is released.

Stock-based compensation

The  Company  accounts  for  stock-based  compensation  to  employees  based  on
Accounting Principles Board Opinion No. 25 and related interpretations,  whereby
the intrinsic value of options granted is recorded at the measurement  date. The
Company has adopted the  disclosure-only  provisions  of  Statement of Financial
Accounting  Standards ("SFAS") No. 123, Accounting for Stock-Based  Compensation
for stock options granted to employees.

                                      F-9

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999                                    (Expressed in U.S. dollars)

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)

Use of estimates

The  preparation  of  consolidated   financial  statements  in  conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Net loss per common share

The basic loss per share is computed by dividing the loss attributable to common
shareholders  by the weighted  average number of common shares  outstanding  for
that period.  Diluted loss per share is computed  giving  effect to all dilutive
potential common shares that were outstanding during the period. For the periods
ended December 31, 1999 and 1998, there were no dilutive potential common shares
outstanding since the Company is in a loss position.

Foreign currency translation

In 1998, the functional  currency of the Company was the Canadian dollar,  while
the reporting  currency in the financial  statements was the U.S. dollar.  Asset
and  liability  accounts  were  translated  into  United  States  dollars at the
exchange rate in effect at the balance sheet date.  Revenue and expense  amounts
were  translated  at the average  exchange  rate for the period from May 5, 1998
(inception) to December 31, 1998.  Gains or losses  arising on foreign  currency
translation  were  recorded in  shareholders'  equity as an  adjustment to other
accumulated comprehensive income/loss.

In 1999,  the  functional  currency of the Company  changed to the U.S.  dollar.
Accordingly,  for the Canadian  subsidiary,  monetary assets and liabilities are
translated into U.S.  dollars at exchange rates  prevailing at the balance sheet
date and  non-monetary  items are translated at exchange rates prevailing at the
historic rate. Revenue and expenses,  except  amortization are translated at the
average  exchange rate in the year.  Amortization is translated at the same rate
as the related  non-monetary  assets.  Gains or losses  arising on this  foreign
currency translation are recorded in income.

                                      F-10

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999                                    (Expressed in U.S. dollars)

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)

Revenue recognition

Revenue from the sale of software  products is  recognized  at the time products
are shipped to customers.  Distribution  royalty  revenue is recognized when the
terms of the  distribution  agreement have been met. Revenue received in advance
of shipment is recorded as unearned revenue.

Comprehensive loss

Comprehensive loss includes all changes in shareholders' deficit during a period
except  those   resulting   from   capital   transactions.   Accumulated   other
comprehensive income represents accumulated foreign currency adjustments for all
periods presented.

Recent pronouncements

The  Financial  Accounting  Standards  Board has issued  Statement  of Financial
Accounting Standards No. 133 "Accounting for Derivative  Instruments and Hedging
Activities"  (SFAS 133).  SFAS 133 will be effective for the Company's  year end
December 31, 2001.

The Financial  Accounting  Standards Board has issued EITF 00-2  "Accounting for
Web Site Development  Costs." EITF 00-2 will be effective for the Company's year
end December 31, 2000.

The Company has not determined the impact,  if any, of these  pronouncements  on
its consolidated financial statements.

3.   MAJOR CUSTOMERS

For the year ended  December 31, 1999,  57% of software  sales were derived from
one customer.  At December 31, 1999, the aggregate  accounts  receivable balance
relating to this customer was $nil.

For the  period  from May 5, 1998  (inception)  to  December  31,  1998,  36% of
software  sales were  derived  from one  customer.  At December  31,  1998,  the
aggregate accounts receivable balance relating to this customer was $5,715.

                                      F-11

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999                                    (Expressed in U.S. dollars)

4.   CAPITAL ASSETS

                                                                    Accumulated          Net Book
                                                       Cost        Depreciation            Value
                                                         $               $                   $
- --------------------------------------------------------------------------------------------------
                                                                                 
December 31, 1999
Computer equipment                                    58,566            15,590            42,975
Furniture and office equipment                        13,320             3,200            10,120
- --------------------------------------------------------------------------------------------------
                                                      71,886            18,790            53,096
- --------------------------------------------------------------------------------------------------
December 31, 1998
Computer equipment                                    28,230             3,430            24,800
Furniture and office equipment                         7,749               775             6,974
- --------------------------------------------------------------------------------------------------
                                                      35,979             4,205            31,774
- --------------------------------------------------------------------------------------------------

Computer  equipment  under  capital  leases  has a cost of $15,681  and  related
accumulated  depreciation of $2,348 at December 31, 1998. There was no equipment
under capital leases at December 31, 1999.

In May  1999,  several  of the  Company's  fixed  assets  were  stolen  from its
operating  facilities.  All capital  assets  were fully  insured and the Company
received total insurance proceeds of $15,699 for assets with a net book value of
$15,993 at the time of the theft, which resulted in a loss on the theft of $294.

5.   DEFERRED CHARGE

On May 7, 1998,  the  Company  entered  into a license  agreement  with  Boswell
International Technologies Ltd. (Boswell) to acquire certain rights to developed
software.  Pursuant  to the license  agreement,  the Company is required to make
certain  minimum annual  royalty  payments and may be required to pay additional
amounts based on sales levels for a minimum period of 3 years.

In 1998, the Company  capitalized the total value of the contract of $211,800 as
a deferred charge, to be amortized on a straight-line  basis over the three year
contract term. The Company also recorded a royalty  payable for $211,800,  to be
paid to Boswell based on a pre-determined  schedule, as defined in the contract.
The Company was required to make a minimum  royalty  payment of $29,400 in 1999.
However,  only  $6,500  was  repaid.  Future  minimum  payments,  including  the
remaining  amount  due in 1999,  under the terms of this  contract  are:  2000 -
$104,400 and 2001 - $48,900.

                                      F-12

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999                                    (Expressed in U.S. dollars)

5.   DEFERRED CHARGE (cont'd.)

As the Company is changing its software  delivery system from in-store retail to
on-line  delivery,  it is no longer using the developed  software  licensed from
Boswell  International  Technologies  Ltd. As no future  benefit will be derived
from this  deferred  license fee, the amount of $159,800 has been written off to
expense for the year ended December 31, 1999.

6.   RELATED PARTY TRANSACTIONS

General  and  administrative  expenses  include  consulting  fees of $65,000 and
$57,467 paid to officers of the Company  during the year ended December 31, 1999
and the period from May 5, 1998 (inception) to December 31, 1998, respectively.

General and administrative expenses include professional fees of $54,000 paid to
a relative of the Company's president in 1999 [1998 - nil].

7.   LOANS PAYABLE

                                                            December 31,
                                                     --------------------------
                                                       1999              1998
                                                         $                 $
- -------------------------------------------------------------------------------
Stockholder Loan                                         --            48,685
Inventory Loans                                      10,000            15,000
Third Party Loan                                         --            15,000
- -------------------------------------------------------------------------------
                                                     10,000            78,685
- -------------------------------------------------------------------------------

The  Stockholder  Loan,  due to a  stockholder  who is  also an  officer  of the
Company,  and the Third Party Loan that were  outstanding  at December  31, 1998
were non-interest bearing. Amounts were repaid in full in 1999.

The Inventory Loans outstanding at December 31, 1999 bear interest at 70%. These
loans are  unsecured,  with no  maturity  date.  At the option of the holder the
loans may be converted  into common  shares of the Company at a conversion  rate
equal to 65% of the market value of the common stock on the date of  conversion.
The  amount  of the  beneficial  conversion  has  been  expensed  in 1999 and is
presented in additional paid in capital.

Interest  expense amounted to $27,406 for the year ended December 31, 1999 [1998
- - $2,380].

                                      F-13

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999                                    (Expressed in U.S. dollars)

8.   NON-MONETARY TRANSACTIONS

In December 1999, the Company  entered into a  non-monetary  advertising  barter
transaction, whereby it exchanged advertising services from a magazine in return
for  advertising  services  on its  website.  As the  Company  does  not  have a
historical  practice  of  receiving  or  paying  cash  for  similar  advertising
transactions,  evidencing  fair  market  value of the  services  exchanged,  the
Company has not  recorded the revenue and expense  related to this  non-monetary
transaction.

9.   SHARE CAPITAL

[a]  Authorized

The  authorized  capital of the Company  consists of  50,000,000  voting  common
shares  with $0.001 par value and  5,000,000  non-voting  preferred  shares with
$.001 par value.

[b]  Issued and outstanding

On December 31, 1998, the Company issued 80,000 shares of common stock to settle
$52,000 of royalties payable.  These shares were issued at fair market value, as
determined  by the  closing  trading  price of the  common  stock on the date of
issuance.

In 1998, cash of $30,000 was received for shares issued in 1999.

In 1998, the Company awarded 37,541 shares of common stock for services rendered
of  $16,747.  These  shares  were  issued  in 1999,  at fair  market  value,  as
determined  by the  closing  trading  price of the  common  stock on the date of
award.

In 1999,  the Company  issued  45,187  common  shares for  services  rendered at
$52,752.  These shares were issued at fair market  value,  as  determined by the
closing trading price of the common stock on the date of issuance.

                                      F-14

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999                                    (Expressed in U.S. dollars)

9.   SHARE CAPITAL (cont'd.)

In 1999,  the Company issued 24,999 common shares in lieu of payment of interest
expense of $20,677,  related to the inventory loans. These shares were issued at
fair market  value,  as  determined  by the closing  trading price of the common
stock on the date of issuance.

[c]  Stock options

In 1998,  the Board of Directors  approved  the  creation of the "1998  Employee
Stock Purchase  Plan" pursuant to which the Company has reserved  500,000 shares
of common stock. No options have been granted under this plan.

In 1998,  the Board of  Directors  approved  the  creation of an employee  stock
option plan (the "1998 Stock Option Plan") and a director stock option plan (the
"1998  Directors'  Stock Option  Plan")  pursuant to which the Company  reserved
1,500,000 and 150,000 common  shares,  respectively,  for issuance.  On June 30,
1999,  the Board of  Directors  amended the 1998 Stock  Option to  increase  the
maximum number of shares of common stock reserved for issuance from 1,500,000 to
2,500,000. Options granted vest in equal amounts at 2% per month.

In 1998, the Company granted certain stock options to employees below the market
price of the  underlying  stock on the date of grant.  In addition,  in 1998 the
Company  granted  stock  options  to a  consultant  at the  market  price of the
underlying stock on the date of grant. Compensation expense of $6,120 related to
these options has been reflected in 1999 [1998 - $48,000].

Stock option  transactions  for the  respective  periods and the number of stock
options  outstanding  under the 1998 Stock  Option Plan and the 1998  Directors'
Stock Option Plan are summarized below:

                                                                        Outstanding Options
                                                  Shares      -----------------------------------
                                                 Available                       Weighted Average
                                               Under Option        Shares         Exercise Price
 ------------------------------------------------------------------------------------------------
                                                                                 
 Balance, May 5, 1998 (inception)                       --               --                  --
 Reserve shares                                  1,650,000               --                  --
 Granted                                        (1,262,500)       1,262,500               $0.70
 ------------------------------------------------------------------------------------------------
 Balance, December 31, 1998                        387,500        1,262,500               $0.70
 Reserve shares                                  1,000,000               --                  --
 Granted                                          (465,000)         465,000               $1.11
 Expired                                           150,000         (150,000)              $0.68
 ------------------------------------------------------------------------------------------------
 Balance, December 31, 1999                      1,072,500        1,577,500               $0.56
 ------------------------------------------------------------------------------------------------

                                      F-15

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999                                    (Expressed in U.S. dollars)

9.   SHARE CAPITAL (cont'd.)

During the period  ended  December  31, 1998 the Company  re-priced  400,000 and
362,500 stock options with exercise prices of $1.50 and $1.65  respectively,  to
$0.68 and $0.75  respectively.  As these  options  were  re-priced at the market
value of the common  stock on the date of the  re-pricing,  the  Company did not
recognize any additional compensation expense.

The following table summarizes  information  about stock options under the plans
outstanding at December 31, 1999:

                                      Options Outstanding               Options Exercisable
                               -------------------------------------------------------------------
                    Number         Weighted-                         Number
   Range of     Outstanding at      Average        Weighted-     Outstanding at     Weighted-
   Exercise      December 31,      Remaining        Average       December 31,       Average
    Prices           1999      Contractual Life  Exercise Price       1999        Exercise Price
- --------------------------------------------------------------------------------------------------
                                                                      
     $0.38            150,000     4.08 years         $0.38              3,000         $0.38
 $0.68 - $1.00      1,237,500     2.92 years         $0.72            359,750         $0.71
 $1.06 - $1.38        150,000     3.50 years         $1.32             22,000         $1.31
 $2.50 - $3.50         20,000     3.53 years         $3.00              2,800         $3.00
 $4.50 - $5.50         20,000     3.53 years         $5.00              2,800         $5.00
- --------------------------------------------------------------------------------------------------

Pro forma information regarding net income and earnings per share is required by
SFAS No. 123,  which also requires that the  information be determined as if the
Company had accounted for its employee stock options under the fair value method
of that  statement.  The fair value of each option  granted in 1999 and 1998 was
estimated  at the date of grant  using a  Black-Scholes  pricing  model with the
following weighted average  assumptions:  risk free interest rates of 5% [1998 -
5%]; dividend yield of 0% [1998 - 0%]; volatility factors of the expected market
price of the Company's  common stock of 1.29 [1998 - 1.1] and a weighted average
expected life of the option of 3.75 years [1998 - 3.75 years].

The weighted  average fair market value of options  granted during 1999 and 1998
was as follows:

                                                       1999              1998
                                                         $                 $
- -------------------------------------------------------------------------------
Exercise price:
   Equal to fair market value                          0.64                --
   Greater than fair market value                      0.76              0.81
   Less than fair market value                           --              0.75
- -------------------------------------------------------------------------------
                                                       0.70              0.81
- -------------------------------------------------------------------------------

                                      F-16

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999                                    (Expressed in U.S. dollars)

9.   SHARE CAPITAL (cont'd.)

For purposes of pro forma  disclosures,  the estimated fair value of the options
is  amortized  to expense  over the  vesting  period.  The  Company's  pro forma
information is as follows:

                                                                         1999              1998
                                                                           $                 $
- --------------------------------------------------------------------------------------------------
                                                                               
Net loss                                         As reported        (1,127,327)         (416,716)
APB 25 compensation expense                      As recorded             6,120            48,000
SFAS 123 compensation expense                    Pro forma            (278,958)          (98,002)
- --------------------------------------------------------------------------------------------------
Pro forma net loss                               Pro forma          (1,400,165)         (466,718)
- --------------------------------------------------------------------------------------------------
Pro forma net loss per common share:
   Basic and diluted                             Pro forma               (0.11)            (0.05)
- --------------------------------------------------------------------------------------------------

10.  INCOME TAXES

At December  31, 1999 the Company  has a net  operating  loss for United  States
income tax purposes of approximately $190,000 which will begin to expire in 2018
if not utilized.

In addition, the Company has non-capital losses for Canadian income tax purposes
of  approximately  $900,000 at  December  31, 1999 which will begin to expire in
2005 if not utilized.

Deferred income taxes reflect the net effects of temporary  differences  between
the carrying value of assets and  liabilities for financial  reporting  purposes
and the amounts  used for income tax  purposes.  The Company  has  recognized  a
valuation  allowance  of $500,000  equal to the  deferred  tax assets due to the
uncertainty of realizing the benefits of the assets.

11.  COMMITMENT

Operating lease

The Company leases its operating  facilities on a month-to-month basis at a rate
of $1,500 per month.

In 1999 and 1998,  the  Company  incurred  rent  expense of $20,654  and $7,176,
respectively.

                                      F-17

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999                                    (Expressed in U.S. dollars)

12.  OTHER INCOME

In 1999,  the  Company  recognized  $106,234  of  revenues  from the sale of two
website names. These revenues have been included in other income.  Also included
in other income is $23,987 of interest income and other miscellaneous income.

13.  SEGMENTED INFORMATION

The Company operates in one business  segment,  the development and marketing of
interactive multimedia educational software products. In 1999, total revenues of
$89,412  and  $31,303  were  to  customers  in the  United  States  and  Canada,
respectively [1998 - $nil and $14,824],  based on the geographic location of the
customers.  Predominantly  all of the  Company's  capital  assets are located in
Canada for the periods presented.

14.  SUBSEQUENT EVENTS

In January  2000,  the Company  issued 29,840 shares of common stock in exchange
for debt  outstanding  at December 31, 1999.  These shares were issued at prices
ranging from $0.50 - $0.75 per share.

In January 2000,  the Company issued 2,345 shares of common stock to an employee
for services  rendered in 1999.  These shares were issued at the market price of
the stock on the date of issuance for a total of $3,078.

Pursuant to a private placement on February 14, 2000, the Company issued 369,000
shares of common stock for cash proceeds of $184,500.

In March 2000, the Company announced a financing via private placement  offering
under  Regulation D, Rule 506 of the  Securities  and Exchange  Commission.  The
Company intends to offer and sell 1,000,000 units at $1 per unit, with each unit
consisting  of one  share of  restricted  common  stock and two  warrants.  Each
warrant  entitles  the holder to purchase  one  additional  share of  restricted
common stock at $2.50 per share and $5.00 per share, respectively.

15.  COMPARATIVE FIGURES

Certain  comparative figures have been reclassified in order to conform with the
presentation adopted in the current year.

                                      F-18

                                 EXHIBIT INDEX
                                 -------------

    EXHIBIT         DESCRIPTION OF EXHIBIT
    -------         ----------------------
     *2.1           Articles of Incorporation of the Registrant, as amended

     *2.2           Bylaws of the Registrant

     *3.1           Form of Common Stock share certificate

     *6.1           1998 Stock Option Plan, as amended

     *6.2           1998 Directors Stock Option Plan, as amended

     *6.3           1998 Employee Stock Purchase Plan

     *6.4           Form of Stock Option Agreement (1998 Stock Option Plan)

     *6.5           Form of Stock Option Agreement (1998 Director's Stock Option
                    Plan)

     *6.6           Form of Subscription Agreement (1998 Employee Stock Purchase
                    Plan)

     *6.7           Form of Affiliate Program Agreement

     *6.8           Form of Confidentiality and Non-Competition Agreement

     *6.9           freeENGLISH  Non-Exclusive  Linking  Agreement dated May 20,
                    1999 between the  Registrant  and the Ministry of University
                    Affairs (Thailand)

     *6.10          Memorandum of  Understanding  between  EDUVERSE  Accelerated
                    Learning  Systems   (Canada),   Inc.  and  the  Ministry  of
                    University Affairs (Thailand)

     *6.11          Manufacturer's  Representation Agreement dated March 1, 1999
                    between the Registrant and Tri Synergy, Inc.

     *6.12          Software  License  Agreement  dated May 7, 1998 by and among
                    the Registrant,  Boswell International Technologies Ltd. And
                    Boswell Industries Inc.

     *6.13          Employment  Agreement effective May 3, 1999 between EDUVERSE
                    Accelerated Learning Systems (Canada ) Inc. and Marc Crimeni

     *6.14          Employment  Agreement effective May 3, 1999 between EDUVERSE
                    Accelerated Learning Systems (Canada) Inc. and Robert Harris

     *6.15          Employment  Agreement effective May 3, 1999 between EDUVERSE
                    Accelerated Learning Systems (Canada) Inc. and Jeffery Mah

     *6.16          Employment  Agreement effective May 3, 1999 between EDUVERSE
                    Accelerated Learning Systems (Canada) Inc. and Lorne Reicher

    EXHIBIT         DESCRIPTION OF EXHIBIT
    -------         ----------------------

     *8.1           Stock Exchange  Agreement and Plan of  Reorganization  dated
                    May 28, 1998 between the Registrant and ESL Pro Systems Inc.

     *8.2           Stock Exchange  Agreement and Plan of  Reorganization  dated
                    May 29, 1998 between the Registrant  and Marketing  Services
                    Inc.

      8.3           Agreement  dated  October  1999 between the  Registrant  and
                    Satellite Television Asian Region Limited.

     27.1           Financial Data Schedule

- ---------------------------
*    Previously  filed with the Company's  Registration  Statement on Form 10-SB
     filed September 3, 1999.

This Agreement is made as of October, 1999.

BETWEEN:

          Satellite  Television  Asian Region Limited,  a company  organised and
          existing under the laws of Hong Kong,  having its registered office at
          8/F, One Harbourfront, 18 Tak Fung Street, Hunghom, Kowloon, Hong Kong
          ("Star TV");

AND

          eduverse.com,  a company  incorporated  under the laws of the State of
          Nevada,  having its registered office at 1135 Terminal Way, Suite 209,
          Reno, Nevada, U.S.A. 89502-2168 ("eduverse.com").

This  Agreement  comprises the Principal  Terms,  Standard  Terms and Schedule 1
appended hereto.

I.   Principal Terms

Acceptance Date:    As set out in clause 3.2 of the Standard Terms.

Delivery Schedule:  As set out in Schedule 1.

Delivery            Format:  Each Game will include the necessary HTML files and
                    SWF files required to place/position the games within a Star
                    TV web page(s),  together with the accompanying user manual,
                    if any.

Games:              At least ten (10) interactive  electronic  educational games
                    to be desStar TVed and produced by  eduverse.com  for use by
                    Star  TV,  more  particularly   described  in  the  attached
                    Schedule 1.

Revenue Sharing:    Star TV shall pay  eduverse.com a portion of the Net Revenue
                    in the manner as set out in clause 5 of the Standard Terms.

Net                 Revenue:   Net  Revenue  shall  mean  the  revenue  actually
                    received  by Star TV from  the sale of  advertising  banners
                    appearing  in the web  page(s)  where the Games are  posted,
                    less  non-recovered  costs for  producing,  maintaining  and
                    hosting such advertising banners (including, but not limited
                    to any required payments to third parties in connection with
                    generating  such  revenue,   advertising   management  fees,
                    general  sales costs,  any costs for the  production  of the
                    banner, agency fees, taxes and levies etc).

Technical
 Specification:     As set out in Schedule 1.

Term:               Subject to clause 9 of the Standard  Terms,  this  Agreement
                    shall expire on the first anniversary of the Acceptance Date
                    of the tenth Game  delivered  to Star TV as per the attached
                    Schedule 1.

                                       1

II.  Standard Terms

1.   Grant of Rights

1.1  In  consideration  of Star TV allowing  eduverse.com to create links to its
     web site pursuant to clause 4 and Star TV paying to  eduverse.com a portion
     of the Net Revenue (if any)  calculated  in the manner as set out in clause
     5, eduverse.com  hereby grants to Star TV the exclusive right to broadcast,
     distribute,  re-distribute,  display, exhibit, exploit, transmit,  publish,
     project,   and  simulcast  the  Games  on  the  World  Wide  Web,   through
     www.startv.com  or other  Star TV Group  properties.  The  exclusive  right
     granted herein shall last for the Term of this  Agreement.  Notwithstanding
     the foregoing, eduverse.com may use the Games on www.freeENGLISH.com.

1.2  eduverse.com agrees not to create,  design or produce any other interactive
     electronic  educational games for any third parties prior to termination of
     this Agreement.

2.   Delivery of Contents

2.1  eduverse.com shall deliver the Games in Delivery Format to Star TV.

2.2  The Games shall be delivered in accordance with the Delivery Schedule. Time
     is of essence.

3.   Testing and Acceptance

3.1  Star TV shall, upon receipt of the Games in Delivery Format,  conduct tests
     to verify whether the Games comply with the Technical Specifications as set
     out in Schedule 1. Such tests may  include  posting  Games on a Star TV web
     page(s) for its viewers to conduct free trials of the Games.

3.2  Promptly after receipt of each Game,  Star TV shall notify  eduverse.com in
     writing  that it accepts the Game or, if Star TV decides  that such Game is
     not in compliance with the Technical  Specifications or otherwise defective
     in any  respect,  Star TV shall  so  notify  eduverse.com  in  writing  and
     identify  the  reasons  for such  decision.  eduverse.com  shall  forthwith
     implement  free  of  charge,  such  reasonable  alterations  or  reasonable
     modifications to such Game to Star TV's  satisfaction  and acceptance.  The
     date when Star TV informs  eduverse.com  in writing of its  acceptance of a
     Game(s) shall be the "Acceptance Date" of such Game.

3.3  If  eduverse.com  is  unable  to alter  and/or  modify a Game to Star  TV's
     satisfaction within one (1) month from the date of a notification  pursuant
     to clause 3.2 above with respect to such Game,  Star TV may terminate  this
     Agreement forthwith upon written notice to eduverse.com.

4.   Linking and On-Air Promotions

4.1  During the term of this Agreement, Star TV may use the then current URL for
     the games  section  on  www.freeENGLISH.com  and the  words  "eduverse.com"
     and/or  "freeENGLISH.com"  in the creation of a link from web page(s) where
     the Games are posted to the games section on www.freeENGLISH.com.

4.2  During the term of this  Agreement,  eduverse.com  may use the then current
     URL for the games section on  www.startv.com  and the words "Star TV Games"
     and/or "Star  Games"  and/or  "StarTV.com  Games" in the creation of a link
     from www.eduverse.com and/or www.freeENGLISH.com to the Star TV web page(s)
     where the Games are posted.

4.3  Any links created  pursuant to clauses 4.1 and 4.2 above will only take the
     user to the games section of the  respective web sites and shall not create
     any  framing or other  interference  with the user's  connection  to or the
     presentation or functionality of the respective web sites.

4.4  Except as set forth in clause 1.1 above,  this Agreement does not grant any
     rights to either party in respect of the intellectual property of the other
     party.

                                       2

4.5  Either party may withdraw its  permission  granted  pursuant to clauses 4.1
     and 4.2 above immediately:

     a.   upon termination of this Agreement for whatever reason; or

     b.   by giving  written  notice to the  other  party if, in the  reasonable
          opinion of the party seeking  withdrawal,  the material  posted in the
          other party's web site is:

          (i)  harassing,  libellous,  abusive,  threatening,  harmful,  vulgar,
               obscene, indecent, or otherwise objectionable in any nature; or

          (ii) likely to contravene any government licence, laws, regulations or
               code of practice  applying from time to time.

4.6  Star TV may, in its sole  discretion,  promote the Games and/or  StarTV.com
     and/or  eduverse.com  and/or  freeENGLISH.com  in any  advertisements to be
     broadcast or otherwise transmitted by the Star TV channels. Notwithstanding
     the  foregoing,  Star TV will  cease to refer to  eduverse.com  in any such
     advertisements  if it is advised by eduverse.com  that such reference could
     adversely  affect  eduverse.com's  ability  to  rely  on any  exemption  or
     exclusion from  registration of its securities under the securities laws of
     any jurisdiction.

5.   Revenue Sharing of Advertising Banners

5.1  For the period starting on the Acceptance Date of the sixth Game, "Spelling
     Bee", until  termination of this Agreement,  the parties agree to share the
     Net Revenue in the following manner:

     a.   for the sale of banner  advertising  to customers  resulting  directly
          from an eduverse.com referral, Star TV shall pay to eduverse.com 57.5%
          of the Net Revenue received from such sales.
     b.   for all  other  sales of  banner  advertising,  Star TV  shall  pay to
          eduverse.com  42.5% of the Net Revenue  received from such sales.

5.2  For the avoidance of doubt,  this revenue  sharing only applies to sales of
     advertising  banners  appearing on web page(s)  where the Games are posted.
     This  clause 5 shall not apply to revenue  generated  by other web pages of
     Star TV or Star TV web  sites,  or to other  forms of  exploitation  of the
     Games.  This clause 5 shall not apply to any revenue generated prior to the
     Acceptance Date of the sixth Game, "Spelling Bee".

5.3  Within 30 days after  receiving a payment from a customer who places banner
     advertising,  Star TV shall  remit  to  eduverse.com  its  share of the Net
     Revenue with respect to such payment.

5.4  Star TV has the absolute  discretion  in  accepting or declining  any offer
     made for the purchase / sale of advertising banner(s). Star TV does not owe
     any  responsibility  or duty to  eduverse.com  to accept  referrals made by
     eduverse.com.

5.5  Nothing in this  Agreement  shall indicate or mean that either party is the
     partner or agent of the other. Neither party has the power nor the right to
     bind the other.

6.   eduverse.com's Representations and Warranties

6.1  eduverse.com warrants and represents that:

     a.   it has the full power and  authority  to enter into and  perform  this
          Agreement;
     b.   it is the  beneficial  owner of all rights  necessary  to provide  the
          Games in accordance  with this Agreement or is assigned such rights on
          such terms that  allow it to fulfil its  obligations  to Star TV under
          this  Agreement,  and, when the Games are delivered in accordance with
          this Agreement,  it will be the beneficial  owner of all rights in the
          Games or will have been  assigned such rights on such terms that allow
          it to fulfil its obligations to Star TV under this Agreement;
     c.   eduverse.com   has  obtained  all  requisite   copyright   clearances,
          licences,  permits  and  consents  with  respect to any  music,  audio
          soundtrack works or other works,

                                       3

          effects,  logos,  copyrighted  materials belonging to third parties to
          enable  Star  TV to  broadcast,  distribute,  re-distribute,  display,
          exhibit,  exploit,  publish,  transmit,  project  and  simulcast  (the
          "Activities")  the Games or any  portion  thereof,  on any Star TV web
          site or otherwise making the Games or any portion thereof available to
          the public through the Internet or other digital media service;
     d.   if it is  later  discovered  that  Star  TV  will  require  additional
          licences  (including  but  not  limited  to  copyright  and  trademark
          licences) from  eduverse.com or other third parties in order to engage
          in the Activities,  eduverse.com will use its commercially  reasonable
          best  efforts to execute (and  procure  third  parties to execute) all
          documents and do all acts  necessary to effectuate  such licence or to
          perfect the rights granted herein;
     e.   Star  TV's   engagement  in  the  Activities  will  not  infringe  any
          intellectual property or privacy rights of third parties;
     f.   the Games  produced and  delivered to Star TV will be suitable for the
          purpose  intended and free from any viruses or any defects  preventing
          compliance with the Technical Specifications as set out on Schedule 1;
     g.   eduverse.com  will not  create,  produce  or deliver  any  interactive
          electronic  educational  games for any third  party other than Star TV
          where  the  theme,  format,  genre  or other  characteristics  of such
          interactive  games are  reasonably  likely to  mislead  the  public to
          believe  that  such   interactive   games  are  sequels  or  otherwise
          associated with the Games.

6.2  All  representations  and warranties  made pursuant to this Agreement shall
     survive  for a period of two  years  from the date of  termination  of this
     Agreement.

7.   Star TV's Representations and Warranties

7.1  Star TV warrants and represents that it has the full power and authority to
     enter into and perform this Agreement.

7.2  All  representations  and warranties  made pursuant to this Agreement shall
     survive  for a period of two  years  from the date of  termination  of this
     Agreement.

8.   Indemnity

8.1  eduverse.com   shall  indemnify  and  keep  indemnified  Star  TV  and  its
     employees,  officers,  directors and affiliates against all losses,  actual
     damages,  costs  and  payments  (other  than  a pure  loss  of  profits  or
     consequential  damages),  including  reasonable  legal fees  incurred  as a
     result of eduverse.com's  breach,  non-observance or non-performance of any
     term of this Agreement.

8.2  Star  TV  shall  indemnify  and  keep  indemnified   eduverse.com  and  its
     employees,  officers,  directors and affiliates against all losses,  actual
     damages,  costs  and  payments  (other  than  a pure  loss  of  profits  or
     consequential  damages),  including  reasonable  legal fees  incurred  as a
     result of Star TV's breach,  non-observance or  non-performance of any term
     of this Agreement.

8.3  If a third party  claims or  threatens  to claim that the Games and/or Star
     TV's use of the Games  infringes  any third party's  intellectual  property
     rights,  eduverse.com  shall,  at  Star  TV's  request,  assist  in  or  be
     responsible  for  any  related  legal   proceedings  and  negotiations  for
     settlement,  provided that in no event shall  eduverse.com  be empowered to
     act as the agent of Star TV or to settle in a manner detrimental to Star TV
     any such claim or threatened claim to which Star TV is or could be a party.
     eduverse.com  shall also indemnify Star TV for costs and damages  including
     reasonable  legal  fees in  connection  with any such  claim or  threatened
     claim.

8.4  The  indemnities  contained in this Agreement shall survive the termination
     of this Agreement.

                                       4

8.5  Notwithstanding  anything  else  contained in this clause 8, neither  party
     shall be required to make any  indemnification  payment with respect to any
     third party claim that is paid,  settled or otherwise  resolved without the
     other  party  having  consented  in advance  to the terms of such  payment,
     settlement or resolution.

9.   Termination

9.1  Either party may terminate this Agreement:

     a.   where the other party is in breach of any term of this  Agreement  and
          (if the  breach is  capable of  remedy)  fails to remedy  such  breach
          within fourteen (14) days of receiving written notice thereof; or
     b.   upon the other  party is being  wound up,  commencing  the  process of
          liquidation or having a petition of winding-up  presented  against it;
          or
     c.   after giving the other party  thirty (30) days'  written  notice.  9.2
          Star TV may terminate  this  Agreement in  accordance  with clause 3.3
          above.

10.  Intellectual Property Rights

10.1 eduverse.com  shall own all rights,  title and  interest  worldwide  in the
     Games, including their title, theme, format, genre, characteristics, source
     code and object code.

10.2 eduverse.com  further acknowledges that, unless otherwise agreed in writing
     by the parties after the date of this Agreement,  no future compensation or
     payment  (apart from the share of Net Revenue as set out in clause 5 above)
     shall be due to  eduverse.com  or its  employees or agents or third parties
     related to  eduverse.com,  in respect of Star TV's use and  exploitation of
     the Games in accordance with this  Agreement,  regardless of the manner and
     extent  (consistent  with the  terms of this  Agreement)  to which  Star TV
     elects to exploit the Games.

11.  Miscellaneous

11.1 This  Agreement  represents  the entire  agreement  between the parties and
     supersedes  any prior  agreement  whether oral or written.  No amendment or
     variation to this  Agreement,  and no waiver of any term of this  Agreement
     shall take effect unless it is in writing and signed by both parties.

11.2 Each  provision of this Agreement  shall be severable.  If any provision is
     held invalid,  such  invalidity  shall not impair the effect of the rest of
     this Agreement.

11.3 No failure or delay on the part of either of the  parties to  exercise  any
     right  or  remedy  under  this  Agreement  shall be  construed  as a waiver
     thereof.

11.4 Neither  party shall  assign this  Agreement,  in whole or in part,  to any
     third party without the prior written consent of the other party.

11.5 Both parties shall keep the terms of this Agreement  confidential and shall
     not issue any press releases or make any public  announcements  in relation
     thereto without the prior written consent of the other. Notwithstanding the
     foregoing,  Star TV  acknowledges  that  if this  Agreement  is  deemed  to
     constitute a "material  contract"  of  eduverse.com  within the  applicable
     definition,  this  Agreement  will be required to be filed as an exhibit to
     eduverse.com's  publicly  available periodic filings with the United States
     Securities and Exchange Commission.

                                       5

11.6 Any notice, request,  instruction or other documents to be given under this
     Agreement shall be in writing to the parties at their respective  addresses
     set forth  below,  or to such  other  address  as a party may  subsequently
     specify  and shall be deemed to have been  received  (i) upon  delivery  in
     person,  (ii) upon the passage of ninety-six  (96) hours  following post by
     first  class  mail,  (iii)  upon the  passage  of  twenty-four  (24)  hours
     following  post  by  overnight  receipted  courier  service  or  (iv)  upon
     transmittal by confirmed telex, facsimile or email provided that if sent by
     facsimile  or email a copy of such  notice  shall be  concurrently  sent by
     mail,  postage  prepaid,  with an indication  that the original was sent by
     facsimile or email and the date of its transmittal.

           Notices to Star TV:
           Mr. CC Fong
           8th Floor, One Habourfront
           18 Tak Fung Street
           Hunghom, Kowloon
           Hong Kong Special Administrative Region

           Fax No.: (852) 2621 8867
           Email: ccfong@startv.com

           Copy to General Counsel
           Fax. No.: (852) 2621 8636
           Email:  ellawong@startv.com

           Notices to eduverse.com

           Mr. Mark E. Bruk
           1135 Terminal Way, Suite 209
           Reno, Nevada
           U.S.A. 89502-2168

           Fax No.: (775) 332 3326
           Email: mark@eduverse.com

           Copy to General Counsel
           c/o Vaughn Barbon, eduverse dot com, Inc.
           Fax No.: (604) 623 4828
           Email: corporate@eduverse.com

11.7 This  Agreement  shall be governed by and construed in accordance  with the
     laws of Hong  Kong  Special  Administrative  Region  without  regard to the
     choice of law and  conflicts  of laws  provisions  thereof,  and each party
     hereby agrees to submit to the exclusive jurisdiction of the courts of Hong
     Kong Special  Administrative Region in connection with any disputes arising
     hereunder.

                                       6

11.8 This Agreement may be signed in one or more counterparts, each of which may
     be termed an  original,  but all of which  together  shall  constitute  one
     Agreement.  Delivery of an executed counterpart of a signature page of this
     Agreement by facsimile will be effective as delivery of a manually executed
     counterpart of this Agreement.

IN WITNESS  WHEREOF the parties  hereto have  hereunto set their hands as of the
date first above written.

FOR AND ON BEHALF OF                      FOR AND ON BEHALF OF
Satellite Television Asian                eduverse.com
  Region Limited

Per:                                      Per:
    --------------------------------            --------------------------------

Name:                                     Name:
      ------------------------------            --------------------------------

Title:                                    Title:
      ------------------------------            --------------------------------

                                       7

                                               SCHEDULE 1

Name of Game                          Technical Specification                            Delivery Schedule
- --------------------------------------------------------------------------------------------------------------------
                                                                                   
BUNNY DROP                            The objective of Bunny Drop is to guess the        November 1, 1999
                                      correct word before the bunny drops through the
                                      hatch. You have six guesses to save the bunny.
                                      Each level of play features a variety of
                                      categories, such as names of people, sports,
                                      music, and general knowledge. Bunny Drop will
                                      test your knowledge in these categories and
                                      improve your vocabulary and spelling while you
                                      are having fun! *
- --------------------------------------------------------------------------------------------------------------------
SWAP GAME                             Form a sentence by unscrambling the words. You     November 1, 1999
                                      do this by swapping words and putting them in
                                      correct order.
                                      Each level of play features a variety of
                                      categories, such as names of people, sports,
                                      music and general knowledge. The Swap Game will
                                      test your knowledge of these categories and
                                      improve your grammar and vocabulary while you
                                      are having fun! *
- --------------------------------------------------------------------------------------------------------------------
JUNGLE GUY                            Help The Jungle Guy escape from the vicious lion!  November 1, 1999
                                      Select the correct word that completes the
                                      sentences and save Jungle Guy from the lion.
                                      Every time a question is answered incorrectly
                                      Jungle Guy becomes increasingly tired. *
- --------------------------------------------------------------------------------------------------------------------
SCRAMBLED SENTENCES                   Put each sentence in the correct order by          November 1, 1999
                                      clicking on the words one by one. Improve your
                                      grammar while you are having fun! *
- --------------------------------------------------------------------------------------------------------------------
SOUND OFF                             Match all of the English words to win! When two    November 1, 1999
                                      English words are matched, the sound is
                                      pronounced through the game.
                                      Using  Sound  Off is a fun way to learn to
                                      spell and pronounce  commonly used English
                                      words. *
- --------------------------------------------------------------------------------------------------------------------
SPELLING BEE                          After you hear each word, spell it correctly to    November 15, 1999
                                      make the teacher happy and go on to the next
                                      word. *
- --------------------------------------------------------------------------------------------------------------------
T.B.A. by Nov 15, 1999                                                                   January 15, 2000
                                      *
- --------------------------------------------------------------------------------------------------------------------
T.B.A. by Dec 15, 1999                                                                   February 15, 2000
                                      *
- --------------------------------------------------------------------------------------------------------------------
T.B.A. by Jan 15, 2000                                                                   March 15, 2000
                                      *
- --------------------------------------------------------------------------------------------------------------------
T.B.A. by Feb 15, 2000                                                                   April 15, 2000
                                      *
- --------------------------------------------------------------------------------------------------------------------

*    All Games are single player games and are developed  using a combination of
     Macromedia  Flash,  HTML and  Javascript,  with the  exception of Scrambled
     Sentences which is developed  using HTML and Javascript.  Each of the Games
     may be inserted  into and played  from within a single web page,  which web
     page may or may not contain other text and graphics.

                                       8

                     5

                   12-MOS
                          DEC-31-1999
                               DEC-31-1999
                                          43,584
                                         0
                                    8,826
                                    (6,292)
                                     17,296
                                95,189
                                               0
                                  17,705
                                 148,285
                          240,809
                                              0
                                0
                                          0
                                        13,185
                                           0
                   148,285
                                        120,725
                               120,725
                                           38,597
                                1,339,666
                                     0
                                     0
                                   0
                             (1,127,327)
                                         0
                         (1,127,327)
                                       0
                                      0
                                            0
                                (1,127,327)
                                      (0.09)
                                    (0.09)