[x]Table Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended September 30, 2000Contents

[UNITED ]STATES SECURITIES ~~Transition~~AND ~~Report~~EXCHANGE ~~Pursuant to Section 13 or 15(d) of the~~COMMISSION ~~Securities~~Washington, ~~Exchange~~D.C. ~~Act of 1934~~20549

Georgia	22-2135522
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

FORM 10-K

~~Indicate~~ byAnnual ~~check~~Report ~~mark~~Pursuant ~~whether Registrant has filed all reports required~~ to ~~be filed by~~ Section 13 or 15(d) of the Securities ~~Exchange~~ Exchange Act of 1934 ~~during~~for the ~~preceding~~fiscal 12year ~~months~~ended ~~(or for such shorter period that Registrant was required to file such reports)~~September 30, ~~and~~ ~~has been subject to such filing requirements for the past~~2001 ~~90 days. Yes X No~~

~~Indicate~~ byTransition ~~check~~Report ~~mark~~Pursuant ~~if disclosure of delinquent filers pursuant~~ to ~~Item~~Section 13 ~~405~~or 15(d) of ~~Regulation~~the ~~S-K is not contained herein, and will~~Securities ~~not~~Exchange beAct ~~contained, to the best~~ of ~~Registrant's knowledge, in definitive~~1934 ~~proxy or information statements incorporated by reference in Part~~ ~~III of this Form 10-K or any amendment to this Form 10-K [ ]~~

~~The~~Commission ~~aggregate~~File ~~market~~Number: ~~value of the voting stock held by non~~1-~~affiliates~~12942 ~~of the Registrant (3,149,643 shares), as of December 1, 2000,~~ ~~was approximately $9,055,224 (at closing price of $2.875).~~

~~The~~VSI ~~Registrant had 33~~HOLDINGS,~~179,825~~ ~~shares of Common Stock, $~~INC.01 ~~par~~(Exact ~~value,~~name ~~outstanding~~of onRegistrant ~~December~~as 1,specified ~~2000,~~in ~~excluding~~its ~~400,250~~charter) ~~treasury shares.~~

~~Item~~Georgia 1(State or other jurisdiction of incorporation or organization) 22-2135522 (I.R.S. ~~Business~~Employer Identification No.)

~~VSI~~41000 ~~Holdings~~Woodward ~~helps~~Avenue Bloomfield ~~corporations~~Hills, ~~improve~~Michigan ~~their~~48304-2263 (Address ~~performance.~~of principal executive offices) (Zip Code)

~~That~~Registrant’s ~~deceptively~~telephone ~~simple~~number, ~~statement~~including isarea ~~the~~code: ~~easiest description~~(248) 644-0500 ~~of what we do because it covers the vast array of services we~~ ~~offer.~~

~~Over~~Securities ~~the~~registered ~~past~~pursuant ~~two~~to ~~decades~~Section 12(b) ~~the explosion~~ of ~~new media and information sources has greatly complicated~~ the ~~marketing process. In the~~Act: ~~not-too-distant~~Common ~~past a company could hire an advertising agency~~Stock, ~~develop~~ an$.01 ~~advertising~~par ~~plan,~~value; ~~and~~American ~~make~~Stock ~~strategic media buys, and~~Exchange ~~have a reasonable assumption that their message would get through~~ ~~to their potential customers.~~

InSecurities ~~today's~~registered ~~media~~pursuant ~~marketplace~~to ~~a consumer has a choice of hundreds of cable television channels, digital broadcasting, satellite television~~ Section 12(~~and radio~~g), ~~and~~of the ~~ever-increasing~~Act: ~~choices on the~~None ~~internet. This has forced many companies to re-evaluate their~~ marketing strategies, not just in terms of what external avenues to use to reach customers, but also to find ways to coordinate their efforts within their organization so that their messages are consistent, effective and impactful.

~~VSI~~Indicate ~~Holdings~~by ~~(hereinafter~~check ~~referred~~mark towhether asRegistrant ~~the~~has ~~"company", "we",~~filed ~~"us",~~all ~~"our")~~reports ~~helps~~required ~~companies~~to be dofiled ~~just~~by ~~that.We~~Section 13 ~~employ~~or ~~approximately~~15(d) ~~1,000~~of ~~individuals~~the inSecurities ~~all operations,~~Exchange ~~none~~Act of ~~which~~1934 ~~are~~during ~~covered by an employment contract,~~the ~~nor~~preceding ~~are~~12 months ~~represented~~(or byfor asuch ~~union.~~shorter Toperiod ~~date,~~that weRegistrant ~~believe~~was werequired ~~have been~~to ~~successful~~file insuch ~~our~~reports), ~~efforts to recruit~~ and ~~retain~~has ~~qualified~~been ~~employees, but~~subject ~~there~~to issuch nofiling ~~assurance~~requirements ~~that~~for ~~we will continue to be as successful~~the inpast ~~the future~~90 days. ~~We believe relations with our employees are good.~~Yes No

WeIndicate ~~operate~~by ~~our~~check ~~business~~mark ~~through~~if ~~two~~disclosure ~~separate~~of ~~business~~delinquent ~~segments:~~filers pursuant to Item 405 ~~Marketing~~of ~~Services~~Regulation S-K ~~segment~~is not contained herein, and ~~Entertainment~~will /not ~~Edutainment~~be ~~segment.~~contained, to the ~~See~~best ~~Note~~of 13Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of ~~Notes~~this toForm 10-K ~~Consolidated~~or ~~Financial~~any ~~Statements~~amendment ~~for~~to ~~detailed~~this ~~segment~~Form 10-K ~~information.~~

~~Marketing~~The ~~Services~~aggregate ~~Segment~~market ~~(Visual~~value ~~Services,~~of ~~Inc.~~the voting stock held by non-affiliates of the Registrant (3,149,643 ~~Vispac~~shares), ~~Inc.~~ ~~PSG~~as ~~International~~of ~~Inc.~~November 28, ~~eCity~~2001, ~~Studios~~was approximately $3,181,394 ~~Inc~~(at closing price of $1.01).

~~INTEGRATED~~The ~~MARKETING~~Registrant ~~SOLUTIONS Our~~had ~~products~~33,415,780 ~~and~~shares ~~services encompass a vast range~~ of ~~capabilities that~~Common ~~can~~Stock, be$.01 ~~customized~~par ~~and assembled to meet the specific needs~~value, ofoutstanding aon ~~client.~~November 28, ~~Several~~2001, ~~examples~~excluding of400,250 ~~this~~treasury ~~integrated approach from the past year are listed below~~shares.

~~General~~DOCUMENTS ~~Motors~~INCORPORATED ~~Auto~~BY ~~Show in Motion - In less than 90 days,~~REFERENCE—None ~~we orchestrated a large product experience, aimed at non-GM-owning~~ households. The traveling event, held within a one million square-foot site, featured six test tracks with the opportunity to drive up to 130 GM cars and trucks, along with selected competitive vehicles, in a neutral environment. From internet registration to interactive product information displays that allowed participants to choose the information they wanted, consumers were met at every turn with convenient technology and entertaining product experiences. We produced the event on a "turn-key" basis, providing GM with:

·TABLE ~~Development~~OF and management of competitive customer databases · Mailed invitations to consumers · Event registration over the internet and other methods · Product information presentations and displays · Site management · Travel and logistics · Consumer researchCONTENTS

InPART ~~the~~I ~~first~~PART ~~nine~~II ~~months~~PART ofIII ~~2000,~~INDEPENDENT ~~the~~AUDITOR’S ~~event~~REPORT ~~logged~~PART ~~more~~IV ~~than 115,000~~SIGNATURES ~~test~~EXHIBIT ~~drives~~INDEX inEX- ~~5 markets with more than 37,000 participants~~10. ~~More~~1 ~~than~~- 94Loan ~~percent~~Agreement ofdated ~~the~~July ~~participants~~12, ~~said~~2001 ~~they~~EX- ~~were~~10.2 ~~likely to~~- ~~consider~~Loan aGuaranty GMdated ~~product~~July ~~for their next vehicle purchase or lease~~12, ~~and~~ 952001 ~~percent~~EX-21.1 ~~said~~- ~~they~~List ~~would~~of ~~likely~~Subsidiaries ~~visit~~of ~~a GM dealership~~ the ~~next~~ ~~time~~Registrant ~~they~~EX-23.1 ~~were~~- inConsent ~~the~~of ~~market~~Plante ~~for~~and aMoran ~~new vehicle.~~LLP

FordTable Blue Oval Certified - In the past year Ford Motor Company changed its pricing structure with dealers by requiring dealers to meet a long list of customer satisfaction criteria in order to qualify for a price discount from the company. We communicated this program to dealers in a series of regional meetings. In addition, we created and continue to manage a website designed to keep dealers informed of their status and performance in the program.Contents

~~Chevrolet~~PART ~~Silverado Heavy Duty Launch - Chevrolet selected us to launch their new line of Heavy Duty Silverado pickups to its internal audience of dealerships and sales consultants~~I. We ~~produced a series of informational "ride-and-drive"~~ ~~meetings where dealership personnel not only learn about the trucks,~~ but drive them in a trackside environment. We prepared the curriculum, conducted the events and handled all travel and logistics, as well as producing a software which matched the right truck for a buyer's specific needs.

~~Visteon Mobile Communications Center - Visteon is the newly independent automotive supplier spun off from Ford Motor Company~~Item 1. As part of our strategy to help Visteon take its message to Wall Street and customers, we created a "Mobile Communications Center", a high-tech, high-touch mobile venue to create awareness and communicate Visteon capabilitiesBusiness. ~~The unit includes:~~ ~~· Tractor-trailer and generator~~ ~~· Trailer that expands to allow a 22 x 40-foot presentation~~ area · 33" Plasma display screen with looping welcome video · Card-scan registration with bar code to track visitors for follow-up · "Safety buck" which emulates front-end vehicle crash to showcase Visteon systems at work · A "technoscope" that uses two and three dimensional animation and video to explore Visteon technologies "under the skin" of a vehicle · "Vistelink" touch-screen computer monitor that combines video, audio, graphics and animation to allow participants to interactively "discover" more than 50 separate Visteon technologies and systems

~~The Mobile Communications Center debuted in June, 2000 to various~~General ~~Wall Street audiences in conjunction with Visteon's debut as an~~ independent, publicly-traded company. Since then, the unit has made numerous appearances at manufacturing sites and other venues in the U.S. and Mexico, and is scheduled for additional sites well into 2001.

~~Ford~~VSI ~~Motor~~Holdings, ~~Company~~Inc. ~~E-Commerce We~~(“VSIH” ~~are~~or the ~~manager~~“Company”) is a full-service provider of marketing ~~the~~and ~~Ford~~customer ~~iCollection~~relationship ~~Web~~management ~~site.~~services, ~~The~~and ~~development~~entertaining and educational animatronic displays and ~~operation~~other ofentertainment/edutainment ~~this~~products. The ~~online~~Company’s ~~store~~marketing isservices ~~one~~segment ofserves aprimarily ~~suite~~the ofautomotive ~~services~~and wepharmaceutical ~~have~~industries ~~developed~~and toits ~~address~~entertainment/edutainment ~~internet~~segment ~~marketing~~serves primarily ~~needs~~theme ~~for~~parks, ~~our clients~~casinos and museums. ~~The~~During ~~iCollection~~fiscal ~~offers~~year ~~consumers~~2001, approximately a96% ~~convenient~~of ~~and~~the ~~secure online~~Company’s ~~retail~~revenues ~~store~~were toderived ~~purchase~~from ~~Ford,~~its ~~Lincoln,~~marketing services ~~Mercury~~segment and ~~Mustang apparel,~~approximately ~~vehicle~~4% ~~accessories~~of ~~and~~the ~~product~~Company’s ~~literature~~revenues were derived from its entertainment/edutainment services segment. InFurther ~~addition~~information toregarding these ~~Ford~~segments ~~consumer~~of ~~stores,~~the weCompany’s ~~also~~business ~~manage~~may ~~Rotunda~~be ~~Online,~~found below in Items an1 ~~exclusive~~and ~~iCollection~~in ~~internet~~Item 7. ~~retailer~~“Management’s ~~for~~Discussion ~~dealers~~and ~~that~~Analysis ~~offer~~of Financial Condition ~~equipment~~and Results of Operations,” and ~~materials~~in Notes 2 and 13 to the Company’s consolidated financial statements.

~~Team~~The ~~Ford~~Company ~~Racing Seeking~~has tobeen ~~capitalize~~providing onits ~~the~~marketing ~~growing~~and ~~interest~~customer inrelationship management ~~motor~~services ~~sports, Ford~~since ~~Motor~~1961 ~~Company~~and ~~chose~~has usbeen toproviding ~~set~~its entertainment/edutainment upservices asince ~~website~~1987. ~~and~~Prior ~~"virtual"~~to 1997, these services ~~connection~~were toprovided ~~fans~~through ofVisual ~~its~~Services, ~~race~~Inc., ~~vehicles~~Advanced Animations, Inc. and Vispac, ~~drivers~~Inc., ~~The~~which ~~subscription~~were privately-~~funded site~~held ~~offers~~sub-chapter ~~exclusive~~S ~~information~~corporations and predecessors ~~updates~~to ~~for~~the ~~members~~Company. In 1997, ~~along~~in a series of transactions, these corporations combined with ~~special~~The ~~opportunities~~Banker’s toNote, ~~purchase~~Inc., ~~souvenirs~~a ~~and~~publicly-held ~~racing~~company incorporated ~~paraphernalia~~in Texas in 1981. In connection with such business combination, WeBanker’s ~~developed~~Note ~~the~~reincorporated ~~internet~~in ~~site~~Georgia and ~~continue~~changed its name to ~~manage~~“VSI itHoldings, Inc.” As of September 30, 1998, the Company had sold the retail operations previously conducted by the Banker’s Note.

~~Bristol-Myers~~The ~~Squibb We~~Company’s ~~handle~~headquarters ~~over~~are ~~900,000~~located ~~phone~~at ~~calls~~41000 aWoodward ~~year~~Avenue, ~~with Bristol-Myers Squibb~~Bloomfield ~~customers requesting more information on pharmaceutical products. Our specially trained phone operators provide interface with consumers~~Hills, ~~answering~~ ~~questions,~~Michigan ~~sending~~48304; ~~literature~~telephone: ~~within the 48 hours required by law and making referrals to health care professionals at Bristol~~(248) 644-~~Myers Squibb~~0500. ~~We also help maintain Bristol-Myers Squibb's consumer~~ ~~database by making daily information transfers to their database~~ ~~vendor.~~

~~Ford XL2000:~~ The ~~Next~~Company’s ~~Generation Sometimes~~operations anare ~~organization~~conducted ~~must~~primarily go beyond information or skill-based training and change its collective attitude and build a new culture. We help Ford effect this process by developing and executing sessions that force participants to re-examine fundamental beliefs and conduct. We have begun pilot implementation of the follow-up to the Excellence in ~~Leadership (XL2000) training and culture change initiative for Ford Motor Company managers and dealership management teams. The "next generation" will build on~~ the ~~XL2000 learning~~United ~~initiatives~~States ~~to enable participants to achieve new, higher levels~~ of ~~customer care and understanding. The three-and-a-half~~ ~~day~~America ~~curriculum was developed by our instructional design team~~ and ~~is conducted by professional trainers~~Canada. The ~~course~~Company isalso ~~held at~~conducts ~~the~~operations ~~XL Center~~ in ~~Allen Park, Michigan, a 42,000 square foot conference center with a training capacity of 150 participants, which we designed and built~~Australia. ~~After the course is attended by the~~ ~~participant, we have satellite broadcasts on a regular basis which~~ aim to sustain the changes people initiate at the XL Center. Since its inception in 1995, more than 18,000 Ford, Lincoln, Mercury and Jaguar dealers and managers, as well as Ford Motor Company representatives, have participated.

~~OUR~~Marketing ~~PRODUCTS~~Services ~~AND SERVICES~~Segment ~~Our specific products and services can be divided into four broad~~ ~~categories:~~

~~Education~~The ~~and~~Company ~~Training~~provides ~~(within~~its ~~the~~marketing ~~Marketing~~and ~~Services~~customer ~~segment)-~~relationship management Weservices ~~help~~through ~~companies~~four ~~improve~~subsidiaries: ~~the~~Visual ~~performance~~Services, ofInc., ~~their~~Vispac, ~~people~~Inc., ~~offering~~PSG ~~training~~International Inc., ~~from~~and ~~the~~eCity ~~traditional~~Studios, ~~classroom~~Inc. toThe ~~satellites~~services ~~and~~provided ~~the~~by these ~~internet.~~subsidiaries include:

~~Back~~-~~End~~ ~~Services~~Education ~~(within~~and ~~the~~training ~~Marketing Services segment)-~~services; We- ~~help~~Marketing ~~companies develop~~ and ~~enhance~~customer ~~ongoing~~relationship ~~dialogue~~management ~~with their~~services; ~~customers,~~- Administrative and ~~help~~promotional ~~deliver~~services; eand -~~commerce~~ ~~and~~Web ~~other~~site ~~fulfillment services~~development.

MarketingTable Services (within the Marketing Services segment)- Using a variety of traditional and high-technology solutions, we help companies market and sell their products and develop and maintain relationships with their customers.Contents

~~Edutainment/Entertainment~~The ~~(within~~Company’s ~~the~~education ~~Entertainment~~and /training ~~Edutainment segment)-~~services Wefocus ~~make~~on ~~science~~product ~~and~~information, skills ~~technology~~training, ~~come~~in-dealership ~~alive~~consulting ~~for~~and ~~the~~cultural ~~public~~and behavioral training. ~~with~~The ~~animatronic~~goals ~~(animated~~of /the ~~robotic)~~Company’s ~~characters~~education and ~~display~~training ~~properties that~~services ~~make~~include ~~learning~~translating often anhighly ~~entertaining~~technical ~~experience.~~information Weinto ~~also~~understandable ~~make~~and ~~displays~~readily accessible ~~that~~databases, ~~are~~improving ~~fun~~sales, presentation, negotiation and ~~entertaining~~management ~~for~~skills, and ~~amusement~~creating ~~parks~~more ~~and~~effective ~~other~~sales ~~general audience~~organizations ~~venues~~and behavior.

~~Education~~The Company delivers its education and ~~Training~~training skills through a variety of ~~People~~media. ~~are~~The ~~the~~Company ~~key~~provides interactive Web-based and CD-Rom-based training courses that enable clients to ~~success~~obtain training through their computers. It also provides interactive satellite-based training in ~~any~~which ~~organization,~~an ~~and~~instructor ~~corporations~~is ~~realize~~connected ~~they~~to ~~won't~~a beremote ~~successful~~classroom ~~unless~~through ~~their~~a ~~people~~live ~~have~~signal transmitted via satellite. In addition, the Company’s training services are delivered through instructor-led classroom training, toseminars, ~~make~~videos, ~~them~~print ~~effective~~and live product demonstrations.

As a full-service provider of training solutions, wethe ~~work~~Company works closely with its clients to: ~~· Identify specific needs~~ ~~· Set objectives based on real-world applications · Develop curriculum · Produce courses · Conduct the actual training · Evaluate results · Modify where appropriate~~

~~Our~~- ~~instructional~~Identify ~~designers~~specific training needs; - Set objectives based on real-world applications and ~~writers~~clearly ~~are~~defined ~~involved~~student expectations; - ~~during~~Develop curriculum; ~~this~~- ~~entire~~Produce ~~process,~~courses ~~ensuring~~and tests that ~~clearly~~measure learning retention; -~~defined~~ ~~objectives~~Conduct the actual training and testing; and ~~are~~- ~~set~~Tabulate, evaluate and ~~met~~report results.

WeThe ~~also~~Company’s ~~develop~~marketing and ~~execute~~customer ~~certification~~relationship ~~programs~~management ~~that~~services ~~aim~~focus on tostandardizing ~~maximize~~and ~~training~~synchronizing ~~effectiveness~~brand inand anproduct ~~organization.~~messages ~~These~~and ~~programs: ·~~delivering ~~Set clearly-defined expectations of students (representing~~those amessages ~~variety~~to ofits ~~job~~clients’ ~~titles) ·~~customers ~~Ensure~~in ~~that~~an ~~the~~efficient ~~training~~and ~~material~~effective ~~improves~~manner. ~~on-the-job~~As ~~performance ·~~part ~~Develop~~of ~~tests~~these ~~that~~services, ~~measure learning retention · Execute~~ the ~~testing~~Company ~~process ·~~will ~~Tabulate~~develop ~~and~~core ~~report~~marketing ~~results ·~~materials ~~Reward students · Develop~~ and ~~maintain a participant database~~ Weconcepts ~~develop~~through ~~and execute~~ a variety of ~~training~~means, ~~through traditional~~including: ~~and high-tech media.~~

~~Types~~- New product launch events; - Business shows and meetings for well-defined target audiences; - Internet applications; - Personalized direct mail; - In-bound call center applications (where consumers call a toll-free number for information); - Point-of-sale ~~Training~~displays; - Touring exhibits; - On-site promotional events; - Product demonstration programs; - Video; and - Publications/literature.

~~Product~~The ~~Information~~Company’s -administrative ~~Before~~services ~~sales~~are ~~people~~designed ~~can~~to ~~sell~~provide aits ~~product,~~clients ~~they~~comprehensive ~~must~~support ~~know~~for ~~features~~the ~~and~~delivery ~~benefits~~ and ~~how~~fulfillment toof ~~effectively~~their ~~present those~~educational ~~attributes to prospects. Our product information training~~and ~~translates~~training ~~what~~programs isand ~~often~~their ~~highly~~marketing ~~technical~~and ~~information~~customer ~~into~~relationship ~~practical~~management ~~benefits that a sales person can readily understand and use with customers~~efforts. ~~Above~~The ~~all,~~Company’s ~~our~~administrative ~~product~~services ~~training focuses on the real~~include: ~~world environment of the sales consultants and their customers.~~

~~Skills Training~~ - ~~Product~~Administrative ~~training concentrates on the "what"~~support; ~~part of the sales equation. Our skills training concentrates on the "how"~~ - ~~how~~Online ~~the~~Internet ~~product~~ordering ~~information is presented. We offer sales people the opportunity to improve their selling, presenting~~ and ~~negotiating skills. We also help supervisors improve~~processing; ~~their management skills.~~

In-DealershipTable Consulting - We also do extensive in-dealership work, helping automotive retailers improve their operations by assisting with organizational issues and processes, and by working directly with dealership managers and employees. This consulting includes one-on-one sessions with the dealer principal, small-group sessions with managers, as well as direct training of dealership staff.Contents

~~Process,~~- ~~Cultural~~Database ~~and Behavior Change~~ processing; - ~~Sometimes~~Complete ~~an organization~~binding; ~~must~~- goHigh ~~beyond~~volume ~~information or skill~~black-~~based~~and-white ~~training~~ and ~~change~~color-capable printing; ~~its~~- ~~collective~~Electronic ~~attitude~~ and ~~build~~press aprinting; - ~~new~~Just-in-time ~~culture.~~fulfillment; - WeWarehousing ~~help~~and ~~the organization~~distribution; ~~effect~~- ~~this~~Electronic ~~process~~file bytransfers ~~developing~~to ~~and~~digital ~~executing~~print ~~sessions~~on-demand ~~that~~center; ~~force~~- ~~participants~~Custom-designed todata rereports; -~~examine~~ ~~fundamental~~Toll-free ~~beliefs~~hotlines; - ~~and~~Interactive ~~conduct.~~data systems; ~~Our~~- ~~XL2000~~Call ~~session,~~center ~~described~~services; ~~previously,~~and - isInformation aanalysis ~~perfect~~and ~~example~~management. ~~Training Media~~

~~Internet~~The -Company’s ~~The~~call ~~growth~~center services act as an extension of its clients’ operations and serve as the ~~internet~~voice isof ~~impacting~~the ~~how~~brand. ~~people~~More than 90 percent of all ~~learn~~calls to the Call Center are from consumers seeking product information or purchase assistance. WeExamples ~~see~~of the ~~internet~~Company’s ~~being~~call ~~used~~center ~~increasingly~~services ~~for education~~include: direct sales (sales in response to mail offer, Web site offers and ~~training.~~transactions occurring Weat ~~are~~automotive ~~developing~~dealerships); ~~interactive~~catalog sales and order processing and fulfillment; web-based ~~training~~communications; vehicle service reminders and recall ~~courses~~campaigns; ~~that~~owner ~~literally~~retention ~~deliver~~programs; ~~the~~customer ~~information~~lead togeneration; ~~the~~market ~~employee's~~research; ~~workstation~~and automotive retail operations support.

~~Interactive~~The ~~Distance~~Company’s ~~Learning~~information ~~(IDL)~~analysis -and Wemanagement ~~are~~services ainclude: ~~developer of~~24-hour ~~curriculum~~operation ~~for~~with ~~this satellite~~in-~~based~~house ~~teaching~~technical ~~medium.~~support ~~IDL~~staff, ~~connects an~~disaster ~~instructor~~recovery toand ~~a remote classroom through a live signal transmitted~~security ~~over~~services; ~~satellite.~~open ~~While~~system ~~the~~environment ~~teachers~~that ~~cannot~~can ~~see~~transfer ~~their~~data ~~students, they~~from ~~can~~multiple ~~talk with them~~client environments, ~~and~~accepting ~~the~~various ~~students~~data ~~not~~in ~~only~~various ~~talk~~formats ~~with~~and/or ~~the~~platforms; ~~instructors,~~development ~~but~~and ~~also~~management ~~see~~of ~~them~~intranet ~~(as~~and ~~well~~Internet assites; ~~visual~~daily ~~instructional~~internet ~~materials~~communication --with ~~graphics,~~clients ~~charts,~~to ~~videos,~~transfer ~~etc.).~~secure ~~IDL~~information; ~~has~~secure ~~proven~~client tolinks beto adata ~~highly~~and ~~cost-effective~~servers ~~way~~through tothe ~~train~~use ~~large~~of ~~groups~~firewalls; design of ~~people~~customized ~~spread~~programs, ~~over~~databases aand ~~wide~~reports/query ~~area.~~tools ~~For~~to ~~example,~~help ~~employees~~clients atcollect anand ~~automobile~~analyze ~~dealership~~data; ~~can~~and ~~take~~development aand ~~course~~management ~~at their desks or work stations, instead~~ of ~~having~~client ~~to drive 200~~Internet-~~300~~based ~~miles~~ordering systems for aonline ~~training~~processing ~~session. VSI Holdings not only develops the courses, but also trains~~ and ~~manages~~ ~~subject~~business-to-business ~~matter experts who can deliver this kind of training~~applications.

~~CD-ROM~~Additional -information ~~Computer~~regarding ~~disc~~the ~~technology~~Company’s ismarketing ~~also~~services ~~helping~~segment toand the ~~make~~segment’s ~~interactive training~~revenues ~~more~~from ~~accessible~~external tocustomers, ~~organizations~~profit or loss and ~~corporations.~~total Weassets ~~develop~~for ~~training~~each ~~that~~of ~~individuals~~the ~~can~~last ~~take~~three atfiscal ~~their~~years ~~own~~can ~~work~~be ~~stations at~~found ~~their~~below ~~own~~in ~~time~~Item 7. “Management’s ~~This~~Discussion ~~makes~~and ~~the~~Analysis ~~training~~of ~~extremely~~Financial ~~flexible in~~Condition ~~terms~~and Results of Operations” ~~scheduling~~and ~~for~~in ~~the~~Notes ~~individual~~2 and 13 to the ~~organization~~Company’s consolidated financial statements.

~~Classroom~~Entertainment/Edutainment ~~Training - Live, instructor-led classroom training~~Segment ~~remains an effective way to teach, especially when the material~~ ~~is complicated, and when discussion and small-group exercises~~ ~~are important. Our instructional designers and writers develop these courses, and our instructors deliver the actual sessions.~~

~~Learning~~The ~~Centers/Seminars~~Company’s -Advanced WeAnimations, ~~also~~Inc. ~~develop~~subsidiary ~~and~~is ~~execute~~a ~~these live~~worldwide ~~training~~supplier ~~"events"~~of entertaining ~~that~~and ~~may~~educational ~~spread~~animatronic ~~over~~(animatronics ~~the~~uses ~~course~~hydraulic and ofpneumatic ~~several~~compliant ~~hours~~motion ortechnology ~~several~~to ~~days.~~create ~~These~~lifelike ~~training~~creatures ~~sessions may~~with berealistic ~~held~~facial inand abody ~~remote~~movements) ~~hotel~~displays orfor ~~conference~~the ~~center~~theme park, ormuseum, casino inand ~~our~~retail ~~own "Vision~~industries. ~~Center",~~It aalso ~~38,000~~specializes ~~square~~in ~~foot~~the ~~training~~design ~~center~~and fabrication ~~with~~of ~~theater,~~entertainment ~~break-out~~products ~~rooms~~(including animatronics, ~~cafeteria~~kiosks, sets and ~~showroom/display area~~scenery), and or in ~~our~~touring ~~XL2000~~shows, ~~Center~~museum ~~(previously~~exhibitions ~~mentioned)~~and other edutainment-based attractions.

Ride-and-DriveTable - In training a sales consultant in how to sell a particular vehicle, there is no substitute for getting that person behind the wheel of the vehicle. A ride-and-drive event does just that, for hundreds of sales people. They get a chance to drive the vehicles on a controlled track with various simulations (hills, braking, obstacle courses, acceleration, wet-pavement, etc.).Contents

~~Video~~Examples -of ~~"Seeing~~the ~~is believing." That'~~Company’s ~~why~~work ~~video remains such an important role~~ in ~~training.~~this ~~While~~segment ~~"stand alone"~~include: ~~video is still used effectively to train various audiences, the~~ ~~trend is to incorporate video into other media - Web, CD-ROM, IDL, classroom, etc. We produce more than 120 training videos a year.~~

~~Print~~- Universal Studio’s Theme Parks (Florida, California, Japan) T2: 3D Cyborg attraction and the Men In Black attraction in the Florida park; - ~~Printed~~Actors ~~material~~from ~~remains~~the anAtlantis ~~important~~Fountain ~~support~~Show ~~element~~at the Forum Mall in Las Vegas; ~~for~~- ~~virtually~~MGM ~~every~~Grand ~~kind~~Theatre’s of“Morgana” ~~training.~~The ~~Instructor~~Fire ~~and~~Breathing ~~participant~~Dragon in Las Vegas ~~manuals,~~- ~~meeting~~Elvis ~~leader~~Presley ~~guides,~~at ~~product~~Toussaud’s ~~documentation,~~Museum ~~reference~~in Las Vegas; ~~materials,~~- ~~brochures,~~The ~~flyers~~Signature Clock Tower at certain FAO Schwarz retail stores; - ~~all~~Grossology: ~~serve~~The to(Impolite) ~~reinforce~~Science of the ~~training~~Human Body — an interactive ~~message~~5,000-square-foot ~~and~~exhibition ~~all~~that ~~are~~is ~~developed~~based ~~and~~on ~~produced~~a popular series of books by science usteacher Sylvia Branzei which promotes scientific discovery of the human body; and - The Drunk Driving Simulator — a traveling road show with three tours that put students behind the wheel of an interactive vehicle programmed to simulate driving under the influence of alcohol.

~~Marketing~~Additional ~~Services~~information regarding the Company’s entertainment/edutainment ~~Marketing~~segment and ~~selling~~the ~~products~~segment’s ~~has~~revenues ~~never~~from ~~been~~external ~~easy. Today~~customers, ~~with~~profit or loss and ~~the~~total ~~explosion~~assets for each of the ~~internet~~last ~~leading~~three tofiscal anyears ~~increasingly~~can ~~complicated~~be found below in Item ~~media~~7. ~~marketplace,~~“Management’s ~~the~~Discussion ~~competition~~and ~~seems~~Analysis toof ~~focus~~Financial asCondition ~~much~~and onResults ~~gaining~~of ~~"share~~Operations” ofand ~~mind"~~in ~~with~~Notes ~~customers,~~2 asand it13 ~~does~~to ~~with~~the ~~actual share~~Company’s ofconsolidated ~~market~~financial statements.

~~Our~~Customer ~~marketing services encompasses a broad range of disciplines,~~Relationships ~~including writing, art direction, print and graphic production~~ ~~to effectively support a variety of marketing efforts:~~

~~Communications~~The ~~Services~~Company -receives Weover ~~create~~90% ~~plans~~of ~~for~~its ~~standardizing~~revenue from the automotive industry with ~~and~~the ~~synchronizing~~bulk ~~product~~of ~~messages.~~its Werevenues ~~develop~~coming ~~core~~from ~~materials~~ Ford and ~~apply~~General ~~them~~Motors. ~~across~~The following table sets forth the ~~board~~percentage toof ~~everything~~the Company’s revenues from ~~launch~~each ~~events~~of those tocustomers ~~public~~during ~~relations.~~the last five fiscal years:

New Product Launch Events - These events can be targeted to consumers and/or key internal audiences, such as suppliers, field personnel and retailers. We conduct the events in a variety of ways - satellite/videoconference broadcasts, seminars, ride-and-drive events, demonstrations, clinics, point of sale materials and displays, shows/meetings, or combinations of these media.


			Percentage of Revenues

Customer	2001		2000		1999		1998		1997

Ford		42		39		32		25		29
General Motors		27		32		23		44		32
Nissan		5		3		10		9		10

~~Shows/Meetings~~The -loss ~~Business theater continues to be an effective way to reach large corporate audiences. Our event producers make use~~ of aany ~~variety~~ of ~~media~~these ~~and~~customers ~~technologies~~could tohave ~~stage~~a ~~entertaining and~~material ~~often~~adverse ~~elaborate~~effect ~~theatrical~~on ~~productions to reach key audiences~~the ~~with various messages~~Company. WeWhile ~~handle~~the ~~all~~companies ~~elements~~identified ofabove ~~the~~have ~~show~~historically ~~production, including: ·~~been ~~Overall planning~~steady ·customers, ~~Theme~~there ~~development~~can ~~and~~be ~~conceptualization ·~~no ~~Creative~~assurance ~~(writing,~~that ~~multi-media~~such ~~production) ·~~relationships ~~Show~~will ~~production and execution~~continue. ~~· Logistics~~ ~~· Travel~~

~~Ride-and-Drive~~Future ~~Events~~revenues -are ~~While~~dependent ~~most~~on ~~ride-and-drive~~such ~~events~~factors ~~concentrate on~~as ~~training~~new ~~sales~~product ~~people~~introductions, acceptance weof ~~have~~our ~~also~~marketing ~~used~~strategies ~~the~~such ~~concept~~as attention to ~~introduce~~process improvement ~~consumers~~within tothe ~~cars~~dealerships, the industry’s focus on customer satisfaction and global ~~trucks~~training, asand ~~described~~the ~~above.~~speed at which the

CustomerTable Relationship Management - We help establish and maintain relationships with consumers through a variety of interactive tools, including: · Internet applications · Personalized direct mail · In-bound call center applications (consumers call a toll-free number for information) Contents

~~Experience-Based~~Company’s ~~Marketing~~clients -embrace electronic Wecommerce ~~help~~as ~~companies~~an ~~meet customers where they are~~alternative. WeShould ~~develop~~our ~~and~~automotive ~~execute~~clients ~~experiential events that allow customers to see, touch, feel and~~ use ~~products and services.~~other ~~These~~forms ~~events can help companies launch products, reach new audiences or build brand and product awareness with existing customers. We use a variety~~ of ~~resources~~marketing ~~and~~such ~~skills~~as tovehicle ~~develop~~incentives ~~these~~instead ~~"experiences": · Point-~~of~~-sale~~ ~~displays ·~~our ~~Interactive kiosks~~marketing ·services, ~~Touring~~our ~~exhibits ·~~revenues ~~On-site~~will ~~promotional events~~decline. ~~· Product demonstration programs~~ ~~· Video · Publications/literature~~

~~Internal~~International ~~Campaigns - In addition to providing comprehensive~~Operations ~~training for company employees, we also develop informational~~ ~~campaigns that reach key support personnel within an organization~~ ~~so that they understand products, services and processes essential to ensure effective sales and operations.~~

~~Back-End~~The ~~Services A~~Company ~~great~~also ~~web~~conducts ~~site,~~operations orin ~~for~~Canada ~~that~~and ~~matter a great marketing campaign is only a start~~Australia. ~~Business does not operate on image alone.~~ The ~~need~~ ~~for behind-the-scenes "fulfillment" has always~~Company’s ~~been~~foreign ~~important~~operations ~~for~~have ~~companies;~~contributed ~~with~~approximately ~~the~~5%, ~~explosion~~3%, ~~of web-based communications~~4%, ~~that~~3% ~~traditional~~and ~~fulfillment~~0% ~~role~~of ~~has taken on~~the ~~even~~Company’s ~~greater~~revenues ~~significance.~~during Wefiscal ~~have~~years ~~expanded~~2001, ~~our~~2000, ~~long-standing traditional fulfillment capabilities into highly integrated delivery solutions. We offer client companies comprehensive support for material production~~1999, ~~fulfillment~~1998 and ~~distribution~~1997, respectively. ~~This~~The ~~year~~Company ~~we fulfilled~~currently ~~and~~employs ~~shipped~~approximately ~~more~~10 ~~than~~people ~~80,000~~in ~~package requests per week~~its ~~and~~foreign ~~printed more than 100 million impressions~~operations.

~~Our~~The ~~comprehensive~~Company’s ~~back~~foreign ~~end~~operations ~~services~~are ~~include: ·~~subject ~~Administrative~~to ~~support ·~~certain ~~Online~~risks ~~internet~~typically encountered ~~ordering~~in ~~and~~such ~~processing ·~~operations, ~~Database~~including ~~processing ·~~fluctuations ~~Complete~~in ~~binding~~foreign currency ·exchange ~~High~~rates ~~volume black-~~and~~-white~~ ~~and~~controls, ~~color~~expropriation ~~capable~~and ~~printing ·~~other ~~Electronic~~economic and ~~press printing~~local ·policies ~~Just-in-time~~of ~~fulfillment ·~~foreign ~~Warehousing~~governments, and ~~distribution Our~~the ~~fulfillment~~laws and ~~distribution~~policies ~~services~~of ~~keep~~the ~~our~~U.S. ~~clients in~~and ~~touch~~local ~~with~~governments ~~every~~affecting ~~aspect~~foreign oftrade ~~their~~and ~~project,~~investment. ~~using~~For ~~various communication~~information ~~resources: ·~~regarding ~~Client~~net ~~terminal-to-computer~~sales, ~~tie-ins~~operating ~~provide~~profit ~~clients direct links to specific program information~~ (loss) and ~~data~~identifiable ~~stored~~assets onof ~~our servers~~the ·Company’s ~~Electronic~~foreign ~~file~~operations, ~~transfers~~see toNote ~~digital~~13 ~~print~~to ~~on-demand center ·~~the ~~Custom-designed~~Consolidated ~~data reports~~Financial ~~· Toll-free hotlines~~Statements. ~~· Interactive data systems~~

~~Call Center~~Employees ~~Our Call Center provides services that support a client's overall~~ ~~marketing effort. It is not a "boiler room," the kind~~ of outbound telephone soliciting that annoys customers and gives telemarketing a bad name. Rather, it is an extension of our clients' operations. When our specialists communicate with a client's customers, these specialists are the voice of the brand. More than 90 percent of all calls to the Call Center are from consumers seeking product information or purchase assistance.

~~Examples~~As of ~~One-to-One~~September 30, ~~Marketing~~2001, ~~Programs at~~ the ~~Call~~Company ~~Center: ·~~had ~~Direct~~approximately ~~sales~~830 ~~(sales~~employees. ~~in response to mail offer, web site~~The ~~offers~~Company ~~and~~believes ~~transactions~~that ~~occurring~~it athas ~~automotive~~a ~~dealerships) ·~~satisfactory ~~Catalog~~relationship ~~sales~~with ~~and~~its ~~order processing and fulfillment~~employees. ·None ~~Web-based~~of ~~communications ·~~the ~~Vehicle~~Company’s ~~service~~employees ~~reminders~~are ~~and~~currently ~~recall~~members ~~campaigns ·~~of ~~Owner retention programs~~unions. ~~· Lead generation~~ ~~· Market research · Automotive retail operations support~~

~~The~~Information ~~Center~~regarding isthe ~~located~~Company’s indirectors ~~Livonia,~~and ~~Michigan~~executive officers can be found below in aItem 10. ~~45,000~~“Directors ~~square foot~~and ~~center~~Executive ~~with~~Officers ~~over~~of ~~400~~the ~~workstations~~Registrant. ”

~~Information Technology~~Competition ~~Managing information is an important function for any business,~~ ~~but it can be a cumbersome task, especially for large organizations.~~ ~~Our Information Technologies (IT) operations help fulfill this critical component for many companies. Our IT services allow companies to focus on core business competencies.~~

~~Our~~We ~~comprehensive~~provide ~~set~~a ofbroad ~~tools~~range ~~and~~of services ~~for~~and ~~building~~products ~~analytical solutions~~that ~~include: ·~~compete ~~24-hour~~primarily ~~operation~~ with ~~in-house~~a variety ~~technical~~of ~~support staff~~agencies, ~~disaster~~ ~~recovery~~incentive and ~~security~~distribution ~~services ·~~fulfillment, ~~Open~~and ~~system environment can transfer data from multiple~~marketing ~~client~~services ~~environments,~~firms. ~~accepting~~These ~~various~~firms ~~data~~generally inprovide ~~various~~a ~~formats and/or~~limited ~~platforms ·~~range ~~Development and management~~ of ~~intranet~~services ~~and internet sites~~that ·compete ~~Daily~~only ~~communication~~ with ~~clients~~a ~~that~~portion ~~uses~~of ~~the~~our ~~internet to~~services. ~~transfer~~Management ~~secure~~believes ~~information, File Transfer Protocol~~ that ~~allows~~no single ~~various~~company ~~file formats to be exchanged,~~ or ~~connectivity~~small ~~using~~group ~~T-1 lines ·~~of ~~Secure~~companies ~~client~~dominates ~~links to data and servers through~~ the ~~use of~~markets ~~firewalls~~or ·industries ~~Design of customized programs, databases and reports/query~~in ~~tools~~which towe ~~help clients collect and analyze data~~compete. ~~· Development and management of client internet-based ordering~~ ~~systems for online processing and business-to-business applications~~

~~Entertainment~~Competition in our marketing services segment and our entertainment/~~Edutainment~~edutainment ~~VSI~~sector ~~Holdings~~is ~~subsidiary~~intense, ~~Advanced~~and ~~Animations,~~we ~~Inc.~~expect isthat acompetition ~~worldwide supplier~~in each of ~~entertaining~~those ~~and~~segments will ~~educational~~increase. ~~animatronic~~We ~~(animatronics uses~~compete ~~hydraulic~~on the basis of service quality, product quality, creativity and ~~pneumatic~~price. ~~compliant~~We ~~motion~~compete ~~technology~~against tomany ~~create~~companies, some of which have ~~lifelike~~significantly ~~creatures~~greater ~~with~~financial ~~realistic~~resources ~~facial~~than ~~and~~we ~~body~~have. ~~movements)~~There ~~displays~~can be no ~~for~~assurance that we will have the ~~theme~~financial ~~park~~resources, ~~corporate,~~technical ~~museum,~~expertise ~~casino~~or marketing, distribution and ~~retail~~support ~~industries~~capabilities to compete in the future. WeCompetitive ~~design~~pressures ~~and~~could ~~fabricate~~reduce ~~entertainment~~the demand for our products, ~~including~~and ~~animatronics~~services, ~~touring~~cause ~~shows~~us ~~and~~to ~~exhibits,~~reduce ~~kiosks~~prices, ~~sets~~increase ~~and~~expenses ~~scenery~~or cause delays or cancellations of customer orders, ~~and~~any ~~much~~of which could adversely affect our business and ~~more~~results of operations.

ExamplesTable of our work include: · Universal Studio's Theme Parks (Florida, California, Japan) T2: 3D Cyborg attraction and the Men In Black attraction in the Florida park · Actors from the Atlantis Fountain Show at the Forum Mall in Las Vegas · MGM Grand Theatre's "Morgana" The Fire Breathing Dragon in Las Vegas · Elvis Presley at Toussaud's Museum in Las Vegas · The Signature Clock Tower at certain FAO Schwarz retail storesContents

WeItem 2. ~~also specialize in event marketing, touring shows, museum exhibitions and other edutainment-based attractions~~Properties.

WeOur ~~are~~corporate ~~heavily~~headquarters ~~involved~~are located in ~~expanding~~Bloomfield ~~the~~Hills, ~~edutainment~~Michigan ~~industry~~and consists of 103,000 square feet that are leased from an unrelated third party. Our lease continues until February 2003 and has a five-year renewal option. This facility is also the headquarters for our subsidiary Visual Services, Inc (“VSI”). VSI also leases a ~~new~~training ~~form~~facility/office of ~~amusement~~38,000 ~~which~~square ~~takes~~feet ~~the~~in Rochester ~~value~~Hills, Michigan, a training facility/office of ~~education~~42,000 square feet in Allen Park, Michigan, a 23,000 square foot storage facility in Livonia, Michigan, whose lease expired in November 2001 and ~~adds~~was not renewed and a ~~healthy~~12,000 square ~~dose~~foot ofsales ~~entertainment~~office toin ~~create~~Cypress, ~~memorable~~California. VSI owns a 45,000 square foot ~~interactive~~office ~~learning~~building ~~experiences~~in Livonia, Michigan, which houses its dialogue center and secures a mortgage of $2,285,000.

~~Edutainment-~~Vispac is based ~~attractions~~in ~~produced~~a 149,000 square foot office/warehouse building in Livonia, Michigan that it leases from a partnership that is owned by usa ~~include:~~Toth family investment partnership. Vispac owns two warehouse facilities in Livonia, Michigan of 92,000 and 93,000 square feet that secure mortgages of $2,495,000 and $2,288,000.

~~Grossology:~~Our ~~The~~entertainment/edutainment ~~(Impolite)~~segment ~~Science~~is ~~of the Human Body - an interactive exhibition~~ based onin a ~~popular series of books by science teacher Sylvia Branzei. The 5~~26,~~000-~~900 square~~-foot~~ ~~exhibition promotes scientific~~foot ~~discovery~~office/manufacturing ofplant ~~the human body based on the theory that the best way to get kids interested~~ in ~~science~~Stockbridge, ~~is to present it in terms they find most appealing~~Vermont. ~~Grossology~~This ~~premiered~~property ~~January 2000 at ScienceWorld British Columbia and~~ is ~~touring~~owned ~~North America on~~by aAdvanced ~~five-year commitment visiting major museums~~Animations, ~~science centers, theme parks and other similar venues~~Inc. ~~Bookings for our two Grossology~~ ~~exhibits cover the next four years.~~

~~The~~We ~~Drunk~~currently ~~Driving~~believe ~~Simulator~~we -have aexcess ~~traveling~~productive ~~road~~capacity ~~show~~in ~~with~~our ~~three~~facilities ~~tours~~operated ~~that~~by ~~puts~~each ~~students~~of ~~behind~~our ~~the~~industry ~~wheel~~segments. ofWe anare ~~interactive~~currently ~~vehicle programmed~~trying to ~~simulate~~sell ~~driving~~our 92,000 ~~under~~and ~~the~~93,000 ~~influence~~square offeet ~~alcohol. The~~facilities ~~tours~~in ~~travel~~Livonia, toMichigan. ~~high~~We ~~schools~~are ~~throughout the United States~~currently ~~and~~undertaking ~~have~~an ~~made~~extensive ~~more~~study ~~than~~of ~~3,250~~our ~~appearances~~organizational inreal ~~200~~estate ~~cities.~~needs ~~Nearly~~with ~~one~~particular ~~million~~focus ~~students~~on ~~have~~the ~~participated~~alternatives ~~with~~available for the ~~simulator,~~headquarters’ ~~and~~operations ~~three~~after ~~million~~that ~~people~~lease ~~have~~expires ~~observed~~in ~~the tour since 1988~~2003.

~~Customers Both VSI and Vispac receive over 90% of their revenue in the automotive industry~~Item 3. ~~The~~Legal ~~various divisions of Ford, General Motors, and Nissan accounted for 74%, 65%, and 78% of our revenues for fiscal years 2000, 1999, and 1998 respectively~~Proceedings. ~~The loss of any of these customers~~ ~~would have a material adverse effect on us. While these companies~~ ~~have historically been steady customers, there can be no assurance~~ ~~that such relationships will continue.~~

~~Future~~The ~~revenues~~Company ~~are~~is ~~dependent~~periodically oninvolved ~~such~~in ~~factors~~routine asproceedings. ~~new~~Except ~~product~~as ~~introductions,~~described ~~the~~in ~~automotive~~Note ~~industry's~~16 ~~attention~~of ~~to process improvement within~~ the ~~dealerships, the industry'~~Company’s ~~focus~~consolidated onfinancial ~~customer satisfaction~~statements and ~~global training, and~~ in the ~~speed~~following atparagraph, ~~which~~there ~~our~~are ~~clients embrace~~no ~~electronic~~legal ~~commerce~~matters, asexisting, anpending, ~~alternative.~~or threatened, ~~Recent~~which ~~developments among~~management ~~our~~presently ~~automotive~~believes ~~clients~~could ~~suggests~~result ~~that~~in ~~the~~a ~~migration~~material loss to ~~electronic commerce~~the ~~will be rapid~~Company.

InOn ~~addition~~September 21, we2001, ~~have~~the Company filed a ~~small~~class ~~percentage~~action lawsuit, on its own behalf and on behalf of ~~our~~a ~~business~~plaintiff class consisting of the Company’s approximately 1,600 shareholders and optionholders, against SPX Corporation and its directors alleging that such corporation had failed to perform its isobligations ~~based~~under onan ~~long-term~~agreement ~~contracts~~and plan of merger between the Company and such corporation. The Company’s suit asks that the court either require SPX Corporation to complete the proposed merger with ~~our~~the ~~customers~~Company or award the Company and the plaintiff class damages. ~~For~~In late December 2001, the ~~nearly~~defendants ~~four~~in ~~decades~~this action filed an answer denying the Company’s allegations and a counterclaim alleging breach of ~~our~~contract ~~core~~and ~~marketing~~seeking ~~service~~recovery ~~business,~~of wedamages ~~have~~and ~~needed~~a totermination ~~constantly~~fee ~~develop~~of approximately $9,000,000. As this matter is in a very preliminary stage and ~~sell~~its ~~new~~outcome ~~programs~~is not presently determinable, the Company has not recorded any contingent receivable or liability related to its outcome.

~~Industry~~Item 4. ~~and~~Submission ~~Competition The number~~ of ~~suppliers~~Matters to ~~the~~a ~~automotive~~Vote ~~industry~~of isSecurity ~~dwindling~~Holders. ~~Manufacturers are demanding capital investments in systems and~~ ~~technology from their suppliers. This trend is causing suppliers~~ to consolidate and streamline their operations. As a turnkey business communication provider to the automotive industry, management believes it is well positioned to continue to compete in this highly competitive environment.

~~Manufacturers~~No ~~are~~matters ~~focusing~~were onsubmitted ~~their core business processes, which generally involves product development, assembly, distribution, and financing. We expect~~ to ~~continue~~a tovote ~~benefit from the practice~~ of ~~turning~~security ~~other~~holders ~~essential~~during ~~but~~the ~~non-core business processes such~~fourth asquarter ~~marketing,~~of ~~communication,~~fiscal ~~and training functions over to third party vendors~~2001.

AsTable a consolidator of business product training and technique, we believe that the use of on-line and distance learning technology will continue to grow. More and more corporations are using web and distance learning training as an alternative to costly trips to attend or conduct training sessions.Contents

WePART ~~provide a broad range of services and products that compete~~II ~~primarily with a variety of agencies, incentive and distribution~~ ~~fulfillment and marketing services firms. These firms generally~~ ~~provide a limited range of services that compete only with a portion of our services. Management believes that no single company or small group of companies dominates the marketing services industry.~~

~~We are aggressively implementing new technologies to help our clients communicate with consumers and train their employees~~Item 5. We ~~offer~~Market ~~web-based~~for ~~solutions,~~Registrant’s ~~satellite-based~~Common ~~training,~~Equity ~~CD-ROMs~~ and aRelated ~~variety~~Stockholder ~~of other methods described in this report~~Matters. ~~The accelerating~~ ~~rate of change in technology makes it more difficult to predict~~ ~~the future of the technologies our business will need to use in~~ ~~order for us to continue to be successful.~~

~~Competition~~The inCompany’s ~~the~~common ~~Marketing~~stock ~~Services segment~~ is ~~intense,~~traded ~~and we expect that competition will increase. We compete~~ on the ~~basis of~~American ~~service~~Stock ~~quality,~~Exchange ~~creativity~~under ~~and price. We compete against many~~the ~~companies~~symbol, ~~some of which have significantly greater financial resources than we have~~“VIS”. ~~There~~The ~~can~~following betable nosets ~~assurance~~forth ~~that we will have~~ the ~~financial~~high ~~resources, technical expertise or marketing, distribution~~ and ~~support~~low ~~capabilities~~sale toprices ~~compete in~~ for the ~~future. Competitive~~Company’s ~~pressures~~common ~~could~~stock ~~reduce~~by ~~the~~quarter ~~demand~~ for ~~our~~each ~~products and~~full ~~services,~~quarterly ~~cause~~period uswithin ~~to reduce prices, increase expenses or~~the ~~cause~~two ~~delays~~most orrecent ~~cancellations~~fiscal ~~of customer orders, any of which could adversely affect our business and results of operations~~years.

In October 2000, the Marketing Services segment had backlogs of approximately $92 million, all of which is expected to be completed by the coming fiscal year. This is an 8% increase over the approximately $85 million in October 1999. We consider backlog to represent firmly committed business. The firmness of such orders is subject to future events (e.g. cancellation of a purchase order by a client due to strike, budget constraints, or other client internal matters) which may cause the amount of the backlog actually fulfilled to change. The principal markets for our services are the North American operations of automobile manufacturers and their distribution networks, including automotive dealerships. Services are sold directly to the manufacturer and/or dealer. We use a variety of distribution methods to deliver services, including the U.S. Postal Service, commercial freight services, the internet and satellite transmissions.


Fiscal Quarter	High		Low

First Quarter, 2000	$	4.44	$	3.00

Second Quarter, 2000		4.00		2.75

Third Quarter, 2000		3.38		2.50

Fourth Quarter, 2000		3.81		2.13

First Quarter, 2001	$	3.63	$	2.13

Second Quarter, 2001		4.19		2.63

Third Quarter, 2001		4.95		1.80

Fourth Quarter, 2001		2.30		0.60

~~There~~As ~~are~~of currently no products in development that would require significant additional financial investment to bring to market. Materials have historically been widely available from numerous sources. We have no material patentsNovember 20, ~~trademarks~~2001, ~~licenses, franchises, or concessions. There is no significant seasonality in~~ the ~~Marketing Services~~Company ~~segment.~~had ~~The~~350 ~~Marketing~~recorded ~~Services~~holders ~~segment competes primarily in the automotive industry, where slow payment~~ of ~~invoices is~~its aoutstanding ~~standard~~shares ~~practice. Bank lines~~ of ~~credit~~Common ~~are used to finance receivables~~Stock. ~~The Entertainment / Edutainment Segment: Advanced Animations, Inc. (AAI)~~

~~Advanced~~The ~~Animations'~~Company ~~products~~has ~~are~~neither ~~sold~~declared onnor apaid ~~custom,~~any ~~made-to-order~~cash dividends on its Common ~~basis~~Stock ~~directly~~in tothe ~~companies~~two ~~worldwide~~most recent fiscal years.

~~Materials~~The ~~have~~Company ~~historically~~may ~~been~~pay ~~widely~~cash ~~available~~dividends ~~from~~on ~~numerous sources.~~its WeCommon ~~have~~Stock noat ~~material~~times ~~patents,~~determined ~~trademarks,~~by its ~~franchises~~board ~~or concessions.~~of ~~There~~directors isand nowhen ~~significant~~legally ~~seasonality~~allowed. inThe ~~the~~payment ~~Entertainment~~of dividends by /the ~~Edutainment~~Company ~~segment.~~may Webe ~~receive~~contingent ~~payments~~on asits ~~work~~receipt ~~progresses~~of dividends from its onsubsidiaries. ~~custom~~The ~~projects,~~payment soof ~~there~~dividends ~~are~~also nois ~~significant~~subject ~~working~~to ~~capital~~limitations imposed ~~issues.~~by ~~AAI~~the ~~has~~Company’s nocredit ~~customers~~agreements. ~~who~~The ~~constitute~~Company ~~more~~does ~~than~~not ~~10%~~intend ofto ~~consolidated~~pay any cash ~~revenue~~dividends in the foreseeable future.

InTable October 2000 the Entertainment / Edutainment segment had backlogs of approximately $2 million, all of which is expected to be completed in the coming fiscal year. This compares to approximately $6 million in October 1999. The firmness of such orders is subject to future events which may cause the amount of the backlog actually fulfilled to change.Contents

~~Competition in the Entertainment / Edutainment segment is intense, and we expect that competition will increase~~Item 6. WeSelected ~~compete~~Financial ~~on the basis of product quality, creativity and price~~Data. ~~There can be no~~ ~~assurance that we will have the financial resources, technical~~ ~~expertise or marketing, distribution and support capabilities~~ to compete in the future. Competitive pressures could reduce the demand for our products and services, cause us to reduce prices, increase expenses or cause delays or cancellations of customer orders, any of which could adversely affect the business and results of operations.

History of Company As of October 1, 1996, Martin S. Suchik, was the President of The Banker's Note, Inc. ("TBN"), a public company incorporated in April 1981. Prior to 1997, Suchik's uncle - Steve Toth, Jr., the President and Chief Executive Officer of the Company and its affiliates ("Toth") held a 33% interest in TBN as the result of the provision of financing which had started in 1991. In February 1997, TBN acquired Advanced Animations, Inc. ("AAI"), a company controlled by Toth, for 7,563,077 shares of TBN stock and Toth became TBN's controlling shareholder. In April 1997, the Company reincorporated in Georgia from Texas, changed its corporate name to "VSI Holdings, Inc." (VSIH) from "The Banker's Note, Inc.", and placed its retailing business in an operating subsidiary, BKNT Retail Stores, Inc. ("RSI"). As of July 1 and September 30, 1997, the Company acquired Vispac, Inc. ("Vispac") for 6,200,000 shares of VSIH stock and Visual Services, Inc. ("VSI") for a net of 14,285,715 shares of VSIH stock. Both Vispac and VSI were also controlled by Toth. As of September 30, 1998, we sold subsidiaries constituting the former retail segment to Mr. Suchik and related entities. See Item 13 Contingent Liability for Discontinued Operations.


BALANCE SHEET DATA						As of

(in thousands)	Sep. 30			Sep. 30		Sep. 30		Sep. 30		Sep. 30
	2001(1)			2000 (1)		1999 (1)		1998 (1)		1997 (1)(2)


Working Capital		($17,258	)	$	9,340	$	9,074	$	9,121		($1,969	)

Total Assets		109,072			120,908		98,302		89,555		77,069

Long-Term Debt		11,993			19,429		19,296		17,506		5,281

Redeemable Common Stock		0			0		0		1,960		0

Total Liabilities		103,945			93,357		75,983		69,413		65,402

Stockholders’ Equity		5,127			27,551		22,319		20,142		11,667

Item 2. Properties.


OPERATING DATA						Year Ended
(in thousands,
except per share)	Sep. 30			Sep. 30		Sep. 30			Sep. 30		Sep. 30
	2001 (1)(4)			2000 (1)(4)		1999 (1)(4)			1998 (1)		1997 (2)(3)

Net Sales	$	124,581		$	187,255	$	143,360		$	163,158	$	130,526

Income (Loss) from Continuing Operations		(21,209	)		5,550		(498	)		9,211		9,658

Income (Loss) from Continuing Operations Per Share		(0.64	)		0.17		(0.02	)		0.28		0.20

Number of Shares		33,309			33,070		32,816			32,851		32,784

~~Our~~1. September 30, ~~headquarters are located in Bloomfield Hills~~2001, ~~Michigan and consists of 103~~2000,~~000~~ ~~square~~1999 ~~feet.~~and ~~The~~1998 ~~current~~balance ~~lease~~sheet ~~continues until~~data ~~February 2003~~ and ~~has a five-year renewal option. This facility~~operating isdata ~~also~~exclude ~~the~~BNKT ~~base~~Retail ~~for subsidiary VSI~~Stores, ~~which~~Inc. ~~also~~accounts. ~~leases~~The aCompany ~~training facility/office~~did ofnot ~~38,000~~pay ~~square~~any dividends ~~feet~~on inits ~~Rochester~~Common ~~Hills,~~Stock ~~Michigan, a~~during ~~training~~any ~~facility/office~~ of ~~42,000~~the ~~square~~periods ~~feet~~presented. ~~in Allen Park~~However, ~~Michigan,~~ ~~a 23,000 square foot storage facility in Livonia, Michigan~~see ~~and~~Item 13 aDeclared ~~12,000~~Distributions ~~square~~to ~~foot~~Stockholders ~~sales~~regarding ~~office~~distributions ~~in Cypress, California.~~of ~~VSI~~previously ~~owns~~taxed aundistributed ~~45,000~~earnings ~~square~~to ~~foot~~the ~~office~~stockholders ~~building~~of ~~in Livonia, Michigan,~~acquired ~~which~~subsidiaries. ~~houses~~Such ~~its~~distributions ~~dialogue~~reduced ~~center~~working capital and ~~has a collateralized mortgage~~stockholders’ ~~of $2,349,000~~equity.

~~Vispac is based in a 149~~2. September 30,~~000~~ ~~square~~1997 ~~foot~~Balance ~~office/warehouse~~Sheet ~~building in~~data ~~Livonia,~~includes ~~Michigan~~the ~~that~~accounts itof ~~leases~~BKNT ~~from a partnership that is~~Retail ~~owned~~Stores, ~~by a Toth family investment partnership~~Inc. ~~Vispac~~The ~~owns~~operating ~~two warehouse~~data ~~facilities~~excludes inthe ~~Livonia,~~operations ~~Michigan~~ of ~~92,000~~BKNT ~~and~~Retail 93Stores,~~000~~ ~~square feet that collateralize mortgages of $2,553,000 and $2,352,000~~Inc.

TheTable Entertainmentof / Edutainment segment is based in a 26,900 square foot office/manufacturing plant in Stockbridge, Vermont. The property is owned by AAI.Contents

We3. 1997 ~~generally~~operating ~~consider~~data ~~the productive capacity of each facility operated by each of our industry segments to be adequate~~ and ~~suitable for~~earnings ~~our~~per ~~requirements.~~share Weinformation are ~~currently~~pro ~~undertaking~~forma ~~an extensive~~amounts ~~study~~and ofhave ~~our~~been ~~organizational~~calculated ~~real~~as ~~estate~~if ~~needs with particular focus on~~ the ~~alternatives~~subsidiaries ~~available~~had ~~for~~been ~~the headquarters' operations after that lease expires in 2003~~consolidated.

4. The loss from continuing operations in 1999 includes charges to earnings of $421,000 and $2,154,000 related to the impairment of long-lived assets and a reduction in the value of goodwill, respectively. The income from continuing operations in 2000 includes a charge to earnings of $516,000 related to the impairment of long-lived assets. The loss from continuing operations in 2001 includes charges to earnings of $1,900,000 and $5,318,000 related to professional fees associated with the proposed merger with SPX Corporation and permanent impairment of investments. See Item 7 below and Notes 2, 3. ~~Legal~~and ~~Proceedings~~4 of Notes to Consolidated Financial Statements.

~~The Company is periodically involved in routine proceedings~~Item 7. ~~There~~ ~~are no legal matters, existing, pending, or threatened,~~Management’s ~~which~~Discussion ~~management~~and ~~presently~~Analysis ~~believes~~of ~~could~~Financial ~~result~~Condition inand aResults ~~material loss~~of ~~to the Company~~Operations.

~~Item~~The 4following discussion and analysis should be read in conjunction with the consolidated financial statements and the notes thereto included elsewhere in this report. ~~Submission~~The offollowing ~~Matters~~discussion contains certain forward-looking statements relating to aour ~~Vote~~anticipated future financial conditions and operating results and our current business plans. In the future, our financial condition and operating results could differ materially from those discussed herein and our current business plans could be altered in response to market conditions and other factors beyond our control. Important factors that could cause or contribute to such difference or changes include those discussed elsewhere in this report (see the disclosures under “Cautionary Statement for the Purpose of ~~Security~~the ~~Holders~~“Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995”).

NoOPERATING ~~matters were submitted to a vote of security holders during~~RESULTS ~~the fourth quarter of fiscal 2000.~~

~~Item~~Marketing 5.Services ~~Market for Registrant's Common Equity and Related Stockholder Matters.~~Segment:

The ~~Common~~Company’s ~~Stock~~marketing ~~trades~~services onsegment ~~the~~is ~~American~~comprised ~~Stock~~of ~~Exchange~~Visual Services, Inc., Vispac, Inc., PSG International, Inc., and eCity Studios, Inc., which provides marketing services under single or multiple phase contractual arrangements with ~~the~~customers ~~"VIS"~~for ~~symbol~~projects generally ranging from 3 months to 24 months in duration. ~~The~~Following ~~table~~execution ~~sets~~of ~~forth~~a written contract obligating the ~~trading~~customer ~~prices~~to pay for ~~the~~services ~~Common~~rendered, ~~Stock~~revenue byis ~~quarter~~recognized on completion of each project phase or otherwise as ~~reported~~the ~~for~~services are rendered, in each case as specified in the ~~last~~agreement ~~two~~with ~~years~~the customer. Such revenue is recognized at the estimated ~~The~~realizable ~~range~~amount ofattributable ~~prices~~under ~~for~~the agreement with the ~~Common~~customer ~~Stock~~to the completed project phase or the service rendered, as ~~reported~~applicable. Revenue for services attributable to customer changes to project specifications is recognized when the customer has executed a written change order and the services contemplated by ~~Reuters~~the change order have been rendered or the applicable ~~Limited~~project phase has been completed, ~~follows:~~whichever occurs later. Unbilled trade accounts receivable result from revenue recognized for completed project phases in advance of customer billings. (See Note 2 to the Company’s consolidated financial statements.)

Fiscal Quarters	High	Low
First Quarter, 1999	$6.00	$3.19
Second Quarter, 1999	7.25	4.75
Third Quarter, 1999	5.88	4.13
Fourth Quarter, 1999	4.69	3.13
First Quarter, 2000	$4.44	$3.00
Second Quarter, 2000	4.00	2.75
Third Quarter, 2000	3.38	2.50
Fourth Quarter, 2000	3.81	2.13

Year Ended September 30, 2001 compared to Year Ended September 30, 2000

~~Based~~Revenues onfrom ~~past requests for proxy materials, we believe that we have substantially more beneficial holders of our Common Stock than~~ the ~~approximately~~Company’s ~~375~~marketing ~~"of~~services ~~record"~~segment ~~holders~~decreased ~~on December~~to 1$120, ~~2000. We currently reinvest all earnings rather than paying cash dividends and~~200,000 for the ~~foreseeable~~year ~~future~~ended September 30, ~~intend~~2001 tofrom ~~continue that~~$182,403,000 ~~policy.~~for ~~Our loan agreements prohibit~~ the ~~payment of cash~~ ~~dividends without prior bank approval. No dividends were declared in the two~~ year ~~period~~ ended September 30, 2000. This

ItemTable 6.of Selected Financial Data.Contents

BALANCE SHEET DATA	As of
(in thousands)	Sep. 30	Sep. 30	Sep. 30	Sep. 30	Sep. 30
	2000	1999	1998	1997	1996
Working Capital	$10,231	$9,074	$9,121	($1,969)	$9,105
Total Assets	116,129	98,302	89,555	77,069	66,856
Long-Term Debt	19,429	19,296	17,506	5,281	1,900
Redeemable Common Stock	0	0	1,960	0	0
Total Liabilities	88,578	75,983	69,413	65,402	36,784
Stockholders' Equity	27,551	22,319	20,142	11,667	28,072
See footnotes below	1	1	1	2 & 3	2

34.1% decrease was due to several factors, including the refocus of our clients’ marketing dollars from events and other marketing campaigns to vehicle incentives (which reduced budgets that could be used with our Company). In addition, competitive pressure forced us to reduce prices with our clients and our Vispac, Inc. subsidiary lost its two biggest customers.

OPERATING DATA	Year Ended
(in thousands, except per share)	Sep. 30	Sep. 30	Sep. 30	Sep. 30	Sep. 30
	2000	1999	1998	1997	1996
Net Sales	$187,255	$143,360	$163,158	$130,526	$128,213
Income (Loss) from Continuing Operations	5,550	(498)	9,211	9,658	9,141
Income (Loss) from Continuing Operations Per Share	0.17	(0.02)	0.28	0.20	0.18
Number of Shares	33,070	32,816	32,851	32,784	32,767
See footnotes below	1 & 5	1 & 5	1	2 & 4	2 & 4

Income from Operations from the Company’s marketing services segment decreased from $17,524,000 for fiscal year 2000, to a loss of $19,624,000 for fiscal year 2001. This is mainly due to our operating expenses (personnel expenses and contract labor) not being reduced in a timely or significant enough of a manner as our revenue declined. Operating expenses increased to $91,667,000 for fiscal year 2001 from $90,737,000 for fiscal year 2000.

~~The~~Year ~~Company~~Ended ~~paid~~September 30, no2000 ~~dividends~~compared onto ~~its~~Year ~~Common~~Ended ~~Stock during any of the periods presented~~September 30, ~~and has no current plans to change that~~1999 ~~policy.~~

1.Revenues ~~September~~from the Company’s marketing services segment increased 36% to $182,403,000 for the year ended September 30, 2000 from $134,295,000 for the year ended September 30, 1999. ~~and~~This ~~1998~~increase ~~balance~~reflected ~~sheet~~several ~~data~~new ~~and~~projects ~~operating~~during ~~data~~fiscal ~~exclude~~year ~~BNKT~~2000, ~~Retail~~including ~~Stores~~vehicle launch activities, ~~Inc~~test drive programs, and dealership training. ~~accounts~~During the year, a continuing contract with annual revenue of approximately $15 million was lost.

2.Income ~~September~~from ~~30,~~Operations ~~1997,~~from ~~and~~the ~~1996~~Company’s ~~Balance~~marketing ~~Sheet~~services ~~data~~segment ~~include~~increased ~~the~~from ~~accounts~~$486,000 offor ~~BKNT~~fiscal ~~Retail~~year ~~Stores~~1999, ~~Inc~~to $17,524,000 for fiscal year 2000. The rate of increase in operating ~~data~~expenses ~~excludes~~ was less than the ~~operations~~rate of ~~BKNT~~increase ~~Retail~~in revenues ~~Stores~~because we were able to better utilize our core skilled staff. Thus, we ~~Inc~~were able to experience significant revenue growth without having to increase our staff as much as we would have needed to otherwise. The increase in operating expenses is primarily personnel expense increases.

3.Entertainment/Edutainment ~~See Item 13 Declared Distributions to Stockholders regarding~~Segment: ~~distributions of previously taxed undistributed earnings to the~~ ~~stockholders of acquired subsidiaries. This reduced working capital~~ ~~and stockholders' equity.~~

4The Company’s entertainment/edutainment segment reflects the activities of Advanced Animations, Inc., ~~1997~~which manufactures product simulators, animatronic figures and ~~1996~~displays ~~operating~~for ~~data~~theme parks, casinos and ~~earnings~~retailers ~~per~~under ~~share~~written display ~~information~~contracts of varying duration. It recognizes revenue on each of those contracts based on its estimate of the percentage of work under the contract that has been completed. A percentage of the contract price, determined by the ratio of incurred costs to total estimated costs, is included in revenue and the incurred costs are ~~pro~~charged ~~forma~~against ~~amounts~~this revenue. Revisions in cost and profit ~~have~~estimates ~~been~~during ~~calculated~~the ascourse ifof a contract are reflected in the accounting ~~subsidiaries~~period in which the facts that require the revision become known. ~~had~~Billings ~~been~~are ~~consolidated~~made ~~for~~in ~~both~~accordance ~~years~~with contract terms. At the time a loss on a contract becomes known, the entire amount of the estimated loss is accrued.

5.Year ~~The~~Ended ~~loss from continuing operations in 1999 includes charges to earnings of $421~~September 30,~~000~~ ~~and~~2001 ~~$2,154,000~~compared ~~related~~ to ~~the~~Year ~~impairment of~~Ended ~~long-lived assets and a reduction in the value of goodwill~~September 30, ~~respectively.~~ ~~The income from continuing operations in~~ 2000 ~~includes~~ ~~a charge to earnings of $516,000 related to the impairment of~~ ~~long-lived assets. See Notes 2 and 4 of Notes to Consolidated~~ ~~Financial Statements.~~

~~Item~~Revenues 7.from ~~Management'~~the Company’s ~~Discussion~~entertainment/edutainment segment decreased 10% to $4,381,000 for the year from $4,852,000 last year. Because this is discretionary spending on the part of our clients, mainly theme park and casinos, ~~Analysis~~in a difficult economic environment they do not make expenditures of this ~~Financial~~nature. ~~Condition~~Our Grossology touring exhibits and ~~Results~~exhibit sales along with projects for Disney and Universal Studios, were our primary sources of ~~Operations~~revenue for fiscal year 2001. The Drunk Driving Simulator program, which in prior years generated revenues of approximately $2 million, completed in December, 2000. Thus far we have not been successful in finding another sponsor for that program.

TheTable following discussion and analysis should be read in conjunction with the consolidated financial statements and the notes thereto included elsewhere in this report. The following discussion contains certain forward-looking statements relating to our anticipated future financial conditions and operating results and our current business plans. In the future, our financial condition and operating results could differ materially from those discussed herein and our current business plans could be altered in response to market conditions and other factors beyond our control. Important factors that could cause or contribute to such difference or changes include those discussed elsewhere in this report (see the disclosures under "Cautionary Statement for the Purpose of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995").Contents

~~Future~~Loss ~~Accounting~~from ~~Changes~~operations -from Inthe ~~December~~Company’s ~~1999,~~entertainment/edutainment ~~the~~segment ~~Securities~~was ~~and~~$1,642,000 ~~Exchange~~for ~~Commission~~fiscal ~~issued~~year ~~Staff~~2001, ~~Accounting~~as ~~Bulletin~~compared ~~101. The~~to ~~staff~~an ~~accounting~~operating ~~bulletin~~loss ~~summarizes certain~~ of ~~the staff's~~$3,240,000 ~~views~~for infiscal ~~applying~~year ~~generally~~2000. ~~accepted~~The ~~accounting~~improvement ~~principles~~was due primarily to the reduction of ~~revenue~~personnel ~~recognition~~and improvement in ~~financial~~gross ~~statements.~~profit ~~Any~~and ~~changes~~reduction ~~that~~in depreciation expense ~~may~~due beto ~~required~~asset asimpairments awhich ~~result~~were ofrecorded ~~this~~in ~~bulletin~~fiscal ~~are~~year ~~required~~2000. toBecause bethe ~~implemented~~market nofor ~~later~~our ~~than~~products ~~the~~appears ~~last~~to ~~fiscal~~be ~~quarter~~soft ofin the ~~fiscal year~~near ~~beginning October 1~~future, ~~2000.~~it ~~Management~~ is ~~finalizing its assessment~~uncertain ofwhether ~~the~~or ~~impact~~not this ~~bulletin~~sector will ~~have,~~be ifprofitable. ~~any,~~It onis ~~the~~difficult ~~Company's~~to anticipate ~~financial~~sales ~~statements~~and income trends.

~~OPERATING~~Year ~~RESULTS~~Ended September 30, 2000 compared to Year Ended September 30, 1999

~~Marketing~~Revenues ~~Services~~from ~~Segment:~~the Company’s entertainment/edutainment segment decreased 47% to $4,852,000 for the year from $9,065,000 last year. During the year we were told by our potential customers that their plans were on hold. Our Grossology touring exhibits and the Drunk Driving Simulator, were our primary sources of revenue for fiscal year 2000. The Drunk Driving Simulator program completed in December, 2000.

~~Year~~The ~~Ended~~Company’s ~~September~~entertainment/edutainment ~~30,~~segment ~~2000 Revenues~~incurred ~~from~~a ~~the~~loss ~~Marketing~~from ~~Services segment increased 36% to~~operations of $~~182~~3,~~403~~240,000 ~~for~~in ~~the~~fiscal year ~~ended~~2000 ~~September~~as ~~30,~~compared ~~2000~~to ~~from~~an operating income of $~~134~~2,~~295~~352,000 ~~last~~ for fiscal year 1999. ~~This~~The ~~increase~~decrease was due primarily to ~~various~~the ~~projects,~~lack ~~including~~of ~~those~~revenue ~~projects~~ mentioned ~~in Item 1~~above. ~~The~~Although ~~largest~~revenues ~~new projects this year were vehicle launch activities~~decreased, ~~test~~operating ~~drive~~expenses ~~programs, and~~rose ~~dealership~~as ~~training.~~we ~~During~~shifted ~~the~~production ~~year,~~efforts ato ~~continuing~~the ~~contract~~construction ~~with annual revenue~~ of ~~approximately~~three ~~$15~~Grossology touring ~~million was lost~~exhibits. WeUpon docompletion ~~not expect the see the entire impact~~ of ~~this~~these ~~in the next year~~exhibits, ~~as it~~layoffs isand ~~being~~other ~~phased out. Management will seek to replace the business or make~~ cost cutting measures aswere ~~necessary~~implemented.

~~Cost~~LIQUIDITY ofAND ~~revenue~~CAPITAL ~~as a percentage of sales increased approximately~~RESOURCES: ~~four percentage points from last year. The large value of the~~ ~~jobs mentioned in the revenue paragraph above had a higher cost~~ ~~of revenue proportion than our other revenues.~~

~~Income~~The ~~from~~significant ~~Operations~~reduction ~~from~~in ~~the~~revenue ~~Marketing~~and ~~Services~~profitability ~~segment~~encountered by the ~~increased~~Company ~~from~~in ~~$486,000,~~2001 tohas ~~$17,524,000~~had ina significant adverse effect on the ~~current~~Company’s ~~year~~liquidity and capital resources. ~~The~~We have developed a plan and instituted several actions ~~rate~~to ofimprove ~~increase~~profitability. inEmployees ~~operating~~have ~~expenses~~taken ~~was~~pay ~~less~~reductions, ~~than~~we ~~the~~have ~~rate~~laid off ofmany ~~increase~~employees, inand ~~revenues~~we ~~because~~are weevaluating ~~were~~all ~~able~~of toour ~~better~~business ~~utilize~~operations to ~~our~~determine ~~core~~if ~~skilled~~there ~~staff.~~are ~~Thus,~~types of business we ~~were~~should ~~able~~consider toexiting. ~~experience~~See ~~significant~~also ~~revenue~~Note ~~growth~~17 ~~without~~of ~~having~~Notes to ~~increase~~Consolidated Financial Statements. A prolonged economic downturn in the automobile industry could cause our ~~staff~~major ascustomers ~~much~~to asfurther wedelay ~~would~~or eliminate marketing services programs that we have ~~needed~~traditionally provided. Our ability to ~~otherwise~~successfully implement our cost cutting plans will be essential if such revenue reductions occur. ~~The~~There ~~increase~~can inbe ~~operating~~no ~~expenses~~assurances that issuch ~~primarily~~steps ~~personnel~~will ~~expense~~be ~~increases~~successful.

~~Year~~Operating ~~Ended September 30, 1999 Revenues from the Marketing Services segment decreased 14% to $134,295,000 for the year ended September 30, 1999 from $155,681,000 in the previous year~~Activities. ~~This decrease was due to approximately $10,000,000~~ ~~in various projects which were completed and not replaced with~~ ~~similar work during the fiscal year, and another $11,000,000 was~~ lost due to project scope reduction and schedule slippage. Cost of revenue as a percentage of sales decreased approximately four percentage points from the previous year. The jobs mentioned in the revenue paragraph above had a higher cost of revenue proportion than our other revenues, and accounted for the decrease.

~~Income~~Our ~~from~~two ~~Operations~~market ~~from~~segments ~~the~~have ~~Marketing~~contrasting ~~Services~~operating ~~segment decreased~~capital ~~from $14,834,000, to $486,000~~needs. ~~Our~~The ~~operating expenses~~marketing ~~decreased~~services ~~slightly~~segment inrequires ~~1999.~~considerable ~~The~~operating ~~rate~~capital ofto ~~decrease~~support ~~in operating~~its ~~expenses~~accounts ~~was~~receivable ~~less~~and ~~than~~maintain ~~the~~its ~~rate~~marketing ofinfrastructure; ~~decrease~~while inbilling ~~revenues. While~~is ~~there~~periodic ~~was~~with alittle ~~decrease~~risk inof ~~operating expenses~~non-payment, ~~this~~client ~~decrease~~payment ~~was not~~is ~~sufficient~~typically toslow. While ~~offset~~it ~~the~~has ~~unexpected~~historically ~~decline~~experienced ina ~~revenues.~~relatively ~~Although sales~~steady ~~decreased~~cash ~~and~~flow; ~~personnel~~there ~~reductions~~is ~~were made, management~~a ~~chose~~historically toincreased ~~maintain~~need afor ~~core~~working ~~skilled~~capital ~~staff~~in asthe welate ~~anticipated~~summer ~~future~~and early ~~sales~~autumn ~~growth~~as ~~opportunities.~~new ~~Another~~vehicle ~~factor~~communications ~~which~~services ~~negatively~~are ~~impacted operating~~provided, ~~expenses was depreciation expense~~ which ~~rose~~results ~~$800,000~~in ~~primarily~~greater ~~due~~bank toborrowings aduring ~~full~~that ~~year's~~time ~~depreciation~~ of ayear. ~~call~~In ~~center building and related equipment, purchased in~~ fiscal year ~~1998~~2001, ~~and its~~our ~~contents.~~decreased ~~$2,154,000~~sales ofled ~~Goodwill~~to insignificant ~~PSG~~decreases ~~was~~in ~~written~~our ~~off~~trade ~~because~~accounts receivable itand ~~was~~trade ~~considered~~accounts topayable bebalances ~~impaired~~at ~~(see~~year ~~Note 2 of Notes to the Consolidated Financial Statements)~~end.

~~Year~~The ~~Ended~~entertainment/edutainment ~~September 30, 1998 Revenues from the Marketing Services~~ segment ~~increased~~requires ~~26%~~relatively ~~to $155,681,000~~little ~~for~~capital ~~the year ended September 30, 1998 from $124,020,000 in 1997. This increase was due in large part to the pilot phase of a ride and drive program~~ for ~~an automotive manufacturer. VSI~~ ~~drew~~operating ~~from the full range of its in-house capabilities to create~~purposes, ~~produce and field the program within a 90-day timeframe. VSI also~~ ~~completed the launch of a new truck product for an automotive manufacturer and was immediately awarded the assignment to launch two new 1999 model year trucks.~~

IncomeTable from Operations from the Marketing Services segment increased 27% for fiscal 1998, to $14,834,000, up from $11,674,000 the year before. The increase is attributable to an increase in sales and the efficient utilization of overhead.Contents

~~Entertainment~~because its clients typically pay sizable deposits before projects begin, and make progress payments during project fabrication. Sales represent discretionary spending on the part of its customers and their customers. Because of this, projects are sometimes delayed; conversely several different projects can be awarded in a short period of time. The revenue and earnings of the entertainment/edutainment ~~Edutainment~~segment ~~Sector:~~are highly variable, and will probably continue to be so.

~~Year Ended September 30~~Generally, ~~2000 Revenues~~all ~~from~~obligations ~~the~~are ~~Entertainment~~met /out ~~Edutainment~~of ~~segment~~cash ~~decreased 47%~~flow togenerated ~~$4,852,000 for the year~~ from ~~$9,065,000~~operations and ~~last year~~borrowings. ~~During the~~Based ~~year we were told by our potential customers that their plans were~~ on ~~hold.~~current ~~Our~~business ~~Grossology touring exhibits and the Drunk Driving Simulator~~conditions, aswe ~~mentioned~~expect into ~~Item~~meet ~~1, were~~ our ~~primary revenue for~~ ~~the~~current ~~year.~~obligations ~~The~~with ~~Drunk~~cash ~~Driving~~flow ~~Simulator~~generated ~~program~~from ~~completed in December~~operations, ~~2000.~~ ~~Unless~~borrowings and ~~until another sponsor can be arranged, revenues~~ ~~for~~sales ~~this~~of ~~segment~~assets ~~will~~not beused ~~approximately~~in $2our ~~million~~continuing ~~lower than it otherwise would be~~operations.

~~Income~~Investing ~~from operations from the Entertainment / Edutainment segment decreased to a loss of $3,240,000 from an operating income of $2,352,000 for the prior year~~Activities. ~~The decrease was due primarily~~ ~~to the lack of revenue mentioned above. Although revenues decreased,~~ ~~operating expenses rose as we shifted production efforts to the~~ construction of three Grossology touring exhibits. Upon completion of these exhibits, layoffs and other cost cutting measures have been implemented. The market for our products appears to remain soft. While we do not expect to have this kind of loss next year, it is uncertain whether or not this sector will be profitable. It is difficult to anticipate sales and income trends.

~~Year~~Capital ~~Ended~~expenditures ~~September~~for ~~30,~~fiscal ~~1999 Revenues~~year ~~from~~2001 ~~the~~were ~~Entertainment~~$2,241,000 /compared ~~Edutainment segment increased 21%~~ to $97,~~065~~165,000 ~~for~~in ~~the~~fiscal year ~~ended~~2000. ~~September~~This ~~30,~~decrease ~~1999~~is ~~from~~primarily ~~$7,477,000~~attributed to a ~~for~~concerted ~~the~~effort ~~prior~~to ~~year.~~minimize ~~The~~capital ~~increase~~outlays ~~was~~as ~~due~~revenues ~~primarily~~for tothe ~~new~~current ~~animation~~fiscal ~~work~~year ~~received~~were ~~from~~lower. ~~Universal~~In ~~Studios~~addition, ~~Florida~~capital ~~Men~~expenditures in ~~Black~~fiscal ~~exhibit and~~year ~~for~~2000 ~~the~~included approximately E$2.T.5 million ~~Adventure~~of ~~attraction~~Grossology ~~coming~~exhibit toconstruction ~~Universal~~costs ~~Studios~~which have -not ~~Japan~~been incurred in the current fiscal year.

~~Income~~Venture ~~from~~investments ~~operations~~include ~~from~~Navidec, ~~the~~Oz Entertainment /Company ~~Edutainment~~(OEC), and ~~segment~~eCollege.com. ~~increased~~Navidec ~~48%~~is toa ~~$2,352,000~~developer ~~from~~of ~~$1,584,000~~web ~~for~~sites ~~the~~and ~~prior year~~information services. ~~The~~Oz Entertainment ~~increase~~Company was ~~due~~attempting ~~primarily~~ to ~~efficiencies~~develop ~~achieved~~a theme park, both physically ~~from~~and ~~utilization~~virtually, based on the Wizard of ~~existing~~Oz ~~tooling~~movie and ~~technologies~~40 onadditional ~~repetitive~~books in the ~~projects~~Oz series. IteCollege.com is ~~difficult~~a toprovider ~~anticipate~~of ~~trends~~online learning solutions for colleges and universities, as well as advanced web-based corporate training. Bank covenants prohibit us from making significant additional investments in these companies.

~~Year~~Prior ~~Ended~~to ~~September~~the ~~30,~~current ~~1998 Revenues~~fiscal ~~from~~year, ~~the~~we ~~Entertainment~~exercised /options ~~Edutainment~~to ~~segment~~purchase ~~increased~~431,000 ~~15%~~shares toof Navidec, Inc. (NASDAQ — NVDC) for $72,~~477~~450,000. Navidec is a developer of web sites and web based complete automotive purchase transaction and information services for prospective customers. Their primary product, referred to as Driveoff.com, was sold during the year ~~ended~~to ~~September~~CarPoint 30in exchange for an equity interest in CarPoint, ~~1998~~which ~~from~~is $6majority-owned by Microsoft (NASDAQ - MSFT). As a result of Navidec’s performance and condition,~~506~~ and believing their stock price decline to be other-than-temporary,~~000~~ we recognized an impairment on ~~for~~our ~~the~~investment ~~prior~~during the year. ~~The~~This ~~increase~~impairment ~~was~~increased ~~due~~our ~~primarily~~net toloss ~~new animation~~before ~~work~~income ~~received~~taxes ~~from~~by ~~Universal~~$2,006,000, ~~Studios~~and ~~Hollywood~~left ~~for~~us ~~T2:3D~~with ~~"Battle~~an investment balance in Navidec ~~Across~~of ~~Time"~~$444,000. ~~attraction~~At ~~and~~November 29, ~~for~~2001, the ~~E.T.~~431,525 ~~Adventure~~shares, ~~attraction~~originally acquired for ~~coming~~$2,450,000, tohad ~~Universal~~a ~~Studios~~fair -market ~~Japan~~value of $190,000.

~~Income~~As ~~from~~of ~~operations~~September 30, ~~from~~2001, ~~the~~we ~~Entertainment~~had /invested ~~Edutainment~~$4.5 million in Oz Entertainment ~~segment~~Company ~~increased~~(“OEC”) ~~58%~~and in a limited partnership (as a limited partner) which planned to develop a theme park, in Kansas, based on the story “The Wizard of Oz”. We have recognized losses totaling $1,~~584~~188,000 ~~from~~prior to this fiscal year. During the year, $1.4 million of Accounts Receivable from OEC was collected from additional funds invested by a related party. During the year,~~002~~ the governmental authority,~~000~~ ~~for~~whose approval would have been needed to proceed, voted against any further consideration of the ~~prior~~development of the park. As a result we wrote off our investment balance of $3,312,000 this fiscal year. ~~The~~We recognized ~~increase~~operating ~~was~~losses ~~due~~of ~~primarily~~$658,000 and $530,000 for the years ended September 30, 2000, and 1999, respectively, related to ~~efficiencies~~this ~~achieved~~investment. See ~~from~~Item 13 ~~utilization~~for a discussion of ~~existing~~related ~~tooling~~party ~~and~~investments ~~technologies~~in onK.C. ~~repetitive~~Investors, LP and ~~projects~~in OEC.

~~LIQUIDITY~~During ~~AND~~fiscal ~~CAPITAL~~year ~~RESOURCES:~~1999, we invested $3.5 million in convertible preferred stock in a private placement offering of eCollege.com, a company engaged in providing technology and services

OperatingTable Activities. Our two market segments have contrasting operating capital needs. The Marketing Services segment requires considerable operating capital to support its accounts receivable and maintain its marketing infrastructure; while billing is periodic with little risk of non-payment, client payment is typically slow. It also experiences a relatively steady cash flow; there is a historically increased need for working capital in the late summer and early autumn as new vehicle communications services are provided. This results in greater bank borrowings during that time of year; the lines of credit are designed to meet any such need we may have. This year, our increased sales led to significant increases in our accounts receivable, accounts payable and notes payable balances at year end. Certain amounts received from clients in advance had been restricted and held in escrow until costs related to a specific job are incurred by the Company. During the year ended September 30, 2000, the escrow arrangement was terminated, resulting in reduced balances for cash in escrow and advances from clients.Contents

~~The~~that ~~Entertainment~~enable /colleges ~~Edutainment~~and ~~segment~~universities ~~requires relatively~~to ~~little~~offer ~~capital~~an ~~for~~online ~~operating~~environment ~~purposes,~~for ~~because~~distance ~~its~~and ~~clients~~off-campus ~~typically~~virtual learning. ~~pay~~eCollege.com ~~sizable~~sold ~~deposits~~4.5 million ~~before~~shares ~~projects~~of ~~begin,~~its ~~and~~common ~~make~~stock ~~progress~~in an initial public ~~payments~~offering ~~during~~which ~~project~~took ~~fabrication.~~place ~~Sales~~during ~~represent~~our ~~discretionary spending~~fiscal onyear ~~the~~2000. As part of ~~its~~the ~~customers~~offering, our ~~and~~investment ~~their~~converted ~~customers.~~into ~~Because of this~~468,808 ~~projects~~shares ~~are~~of ~~sometimes~~common ~~delayed;~~stock. ~~conversely~~During ~~several~~the ~~different~~year, ~~projects~~we ~~can~~also beinvested ~~awarded~~an inadditional a$50,000 ~~short~~to ~~period~~acquire of4,500 ~~time.~~shares ~~The~~of ~~revenue~~eCollege.com. ~~and~~At ~~earnings~~November 29, of2001 ~~the~~our ~~Entertainment~~investment /in ~~Edutainment~~eCollege.com ~~segment~~(NASDAQ ~~are~~— ~~highly variable,~~ECLG) ~~and~~had ~~will~~a ~~probably~~fair market ~~continue~~value toof ~~be so~~$1,586,000.

~~Generally,~~See ~~all~~the ~~obligations~~discussion ~~are~~in ~~met~~Item 13 ~~out~~regarding ofrelated ~~cash~~party ~~flow~~notes ~~generated~~receivable and ~~from~~payable ~~operations~~ and ~~borrowings.~~advances, ~~Based~~and ondeclared ~~current~~distributions ~~business conditions, we expect~~ to ~~meet our current obligations with cash flow generated from operations and borrowings~~stockholders.

~~Investing~~Financing Activities. ~~Capital expenditures for 2000 were approximately $4.1 million~~ ~~higher than 1999. This is primarily attributed to the construction~~ of three Grossology touring exhibits in our Entertainment / Edutainment segment, and to investment in Interactive Voice Response and other systems for our call center in our Marketing Services segment.

~~Venture~~At ~~investments~~September 30, ~~include Navidec~~2001, Ozwe ~~Entertainment~~had ~~Company~~two lines of credit totaling $62,000,000; interest on these lines were at London Inter-Bank Offered Rate (~~OEC~~“LIBOR”) plus 1.5%; at September 30, 2001 the interest rate was 4.13% and ~~eCollege~~the outstanding balances were $51,068,000.~~com.~~ ~~Navidec~~When ~~(NVDC~~some -of ~~Nasdaq)~~these islines awere ~~developer~~renewed in October of2001, ~~web~~our ~~sites~~borrowing ~~and~~ability ~~information~~on ~~services.~~the Ozrenewed ~~Entertainment~~lines ~~Company is~~was ~~developing~~reduced afrom ~~theme~~$37,000,000 to ~~park~~$31,000,000, ~~both~~which ~~physically~~reduced ~~and~~our ~~virtually~~total borrowing ability to $56,000,000. ~~based~~The interest was increased on the ~~Wizard~~renewed lines to LIBOR plus 2.75%. These lines of credit Ozmature ~~movie~~in June and 40July, ~~additional~~2002. ~~books~~These inlines ~~the~~of Ozcredit ~~series;~~have covenants ~~the~~restricting ~~park~~us isfrom ~~scheduled~~borrowing ~~for~~elsewhere, ~~completion~~loaning inor ~~2004.~~guaranteeing ~~eCollege.com is~~ a ~~provider~~loan of another ~~online~~company ~~learning~~without ~~solutions~~the ~~for~~prior ~~colleges~~written ~~and~~consent ~~universities,~~of the bank; transferring asassets ~~well~~except asin ~~advanced~~the ~~web-based~~ordinary ~~corporate~~course ~~training.~~of Webusiness; ~~view~~and ~~these~~declaring dividends. ~~strategic~~Other ~~investments~~covenants inmandate ~~equity~~certain ~~positions~~levels asof ~~opportunities~~net toworth and working capital, and ~~leverage~~that ~~our~~the ~~core~~ratio ~~competencies~~of total liabilities to ~~expand~~net ~~our~~worth, ~~business~~debt ~~lines~~service ratio and ~~enter~~current ~~new~~ratio ~~markets.~~do ~~Bank~~not ~~covenants~~exceed ~~prohibit~~certain usamounts. ~~from~~At ~~making~~September 30, ~~significant~~2001 the Company ~~additional~~was ~~investments~~not in ~~these~~compliance ~~companies~~with the latter covenants.

~~Navidec~~During isthe ayear, ~~developer~~we ofsigned ~~web~~a ~~sites~~new ~~and~~$25,000,000 ~~web~~credit ~~based~~line ~~complete automotive~~(included ~~purchase~~in ~~transaction~~the totals ~~and~~above), ~~information~~which ~~services~~was designed for ~~prospective~~our extended service contract business ~~customers.~~for ~~Their~~Ford ~~product,~~Motor ~~referred~~Company toand astheir ~~Driveoff~~dealership affiliates.~~com,~~ ~~was~~We ~~sold~~purchase and ~~during~~administer the ~~year~~loans used for consumers to ~~CarPoint,~~purchase ~~which~~extended isservice ~~majority-owned~~contracts on bytheir ~~Microsoft~~automobiles. At ~~January~~This 9,business ~~2001,~~started during the ~~431~~year and at September 30,~~525~~ ~~shares~~2001, ~~acquired~~we ~~for~~had borrowed $219,~~450~~025,000 to fund the purchases of service contracts accounts receivable. In order to continue this business, it will be ~~had~~necessary ato ~~fair~~increase ~~market~~our ~~value~~line of $1credit for this activity. This line of credit carries similar covenants to our other lines of credit. As of September 30,~~510~~ 2001,~~000~~ we were in default on those covenants. There can be no assurances that this line of credit will be increased to allow us to continue in this business. If we are unable to increase this line of credit, or effect a securitization in a suitable time frame, we may have to discontinue this business. This business is expected to generate approximately $5 million in revenue during the next fiscal year.

~~During~~As ~~the~~a ~~year,~~result weof ~~invested an additional $500,000 in Oz Entertainment Company (OEC), bringing~~ our ~~total~~financial ~~investment~~performance toand ~~$4.5 million~~condition, of ~~which $4 million is invested in K.C. Investors, LP (~~as awell ~~limited partner). This partnership was formed~~ as anthe ~~investment partnership~~fact tothat ~~fund~~we ~~the~~are ~~continuing~~not ~~development of OEC, a corporation~~ in ~~which the~~compliance ~~partnership~~with ~~holds~~ a ~~majority~~number ~~interest. OEC will develop the Wonderful World Of Oz theme park. We recognized losses~~ of ~~$658,000 and~~our ~~$530,000~~loan ~~for the years ended September 30~~covenants, ~~2000,~~our ~~and 1999,~~lenders ~~respectively,~~have ~~related~~required us to ~~this~~devise ~~investment.~~a Wefinancial ~~expect~~plan to ~~see~~improve ~~continued losses until~~ the ~~opening~~Company’s ~~of the park, currently scheduled for~~financial ~~2004~~performance. ~~The~~As ~~park~~a isresult ~~planned to be constructed on 9,000 acres~~ of ~~land~~ ~~owned~~our byfinancial ~~the federal government. It is necessary to receive title to the land before construction can begin. In order to receive title to the land~~condition, ~~approval~~our ~~must~~interest berate ~~received~~may ~~from two governmental authorities. The first authority tabled consideration of this until February, 2001. It is anticipated that title will~~ be ~~received~~ ~~during~~increased the next year. The success of the park as an investment is dependent upon receiving title to the land, as well as certain infrastructure improvements being completed by or paid by governmental agencies, financing arranged through governmental agencies, as well as additional public or private financing. If the park does not open, the entire investment, currently valued at ~~$3,312,000, is~~any ~~at risk~~time. ~~The projections provided and prepared by the management~~ ~~of K.C. Investors, LP and OEC forecast that the park will be profitable~~ ~~upon opening. See Item 13 for a discussion of related party investments in K.C. Investors, LP and in OEC.~~

~~During~~As ~~fiscal~~indicated ~~year 1999, we invested $3.5 million~~ in ~~convertible preferred~~Note ~~stock~~17 in athe ~~private~~accompanying ~~placement~~financial ~~offering~~statements, ofour ~~eCollege.com,~~financial astatements ~~company~~have ~~engaged~~been inprepared ~~providing~~under ~~technology~~the ~~and~~assumption ~~services~~ that ~~enable colleges~~the ~~and~~Company ~~universities to offer an online environment for distance~~will ~~and~~continue ~~off-campus~~as ~~virtual~~a ~~learning.~~going ~~They currently have contracts with more than 190 education partners~~concern. ~~eCollege.com~~However, ~~sold~~the ~~4.5~~Company’s ~~million~~independent auditors’ ~~shares~~report ofincludes ~~its~~an ~~common~~explanatory ~~stock~~paragraph inindicating ansubstantial ~~initial~~doubt ~~public~~as ~~offering~~to ~~which~~the ~~took~~ability ~~place~~of ~~during~~the ~~our~~Company ~~fiscal~~to ~~year~~continue ~~2000.~~as Asa ~~part~~going ~~of the offering~~concern, ~~our~~ ~~investment~~due ~~converted~~to ~~into~~the ~~468,808 shares of common stock.~~Company’s ~~During~~losses ~~the~~in ~~year~~2001, weits ~~also~~working ~~invested~~capital andeficit ~~additional~~at ~~$50~~October 31,~~000~~ to2001 ~~acquire~~and the ~~4,500~~violation ~~shares~~ of ~~eCollege.com.~~loan Atcovenants ~~January~~in 9,its ~~2001~~bank ~~our~~financing ~~investment in eCollege~~agreements.~~com~~ ~~(ECLG~~Note -17 ~~Nasdaq)~~to ~~had~~the financial astatements ~~fair market value of $2,544,000.~~also

PurchaseTable of the Performance Systems Group Inc. In February 1998, we acquired the assets of The Performance Systems Group for approximately $4.5 million, consisting of 280,000 shares of our common stock and $2.6 million in cash. Performance Systems Group provides in-field consulting and change process sustainment services primarily to automobile dealerships in Canada, Australia, and New Zealand. The acquisition was accounted for under the purchase method. See Notes 1 and 2 of Notes to Consolidated Financial Statements.Contents

~~See~~identifies ~~the~~management’s ~~discussion~~plans infor ~~Item~~improving 13cash ~~regarding~~flow and ~~related~~profitability, ~~party~~some ~~notes receivable~~of ~~and~~which ~~payable~~have ~~and~~been ~~advances,~~or ~~and~~are ~~declared~~in ~~distributions to~~the ~~stockholders~~process of being implemented.

~~Financing~~There ~~Activities. At~~can ~~September~~be ~~30,~~no ~~2000,~~assurances wethat ~~had~~the lines of credit ~~totaling~~will ~~$37,000,000; interest~~be onrenewed ~~these~~when ~~lines were at London Inter-Bank Offered Rate~~they ~~("LIBOR")~~mature ~~plus~~or ~~1.5%;~~maintained atuntil ~~September~~their ~~30,~~maturity ~~2000 the interest rate was 8~~date.~~12%~~ ~~and~~If ~~the~~we ~~outstanding~~are ~~balances~~unable ~~were~~to ~~$35,214,000.~~renew or ~~These~~maintain these lines of credit ~~mature in March~~, ~~2001~~other ~~and~~sources ~~March, 2002. These lines~~ of ~~credit~~financing ~~have~~would ~~covenants~~be ~~restricting us from borrowing elsewhere~~sought, ~~loaning~~either ~~or guaranteeing~~ a ~~loan~~line of ~~another~~credit ~~company~~from ~~without~~another ~~the prior~~banking ~~written~~institution ~~consent~~or ofadditional ~~the bank; transferring assets except~~equity investment in the ~~ordinary course of business; and declaring dividends~~Company. ~~Other covenants~~There ~~mandate~~can ~~certain~~be ~~levels~~no ofassurance ~~net~~that ~~worth~~we ~~and~~would ~~working~~be ~~capital,~~able to ~~and~~obtain ~~that~~such ~~the~~other ~~ratio~~sources of ~~total~~financing. ~~liabilities~~Failure to ~~net~~obtain ~~worth,~~adequate ~~debt service~~financing ~~ratio~~would ~~and~~have ~~current~~a ~~ratio~~material doadverse ~~not~~effect ~~exceed~~on ~~certain~~the ~~amounts~~Company.

WeSince ~~have~~we ~~had~~are a ~~long~~net ~~term~~borrower ~~relationship~~of ~~with~~funds, ~~the~~minimal ~~bank.~~cash ~~Through the~~balances ~~years,~~are itkept ~~has~~on ~~provided~~hand. At ~~financing~~any ~~and~~point ~~lines~~in oftime, ~~credit~~we ~~for~~may ~~us. There~~have ~~can,~~more ~~however,~~money bein nochecks ~~assurances~~outstanding ~~that~~than the cash ~~lines~~balance. ofWhen ~~credit will~~checks beare ~~renewed~~presented ~~when~~for ~~they~~payment, ~~mature.~~the Ifbank wenotifies ~~are~~us, ~~unable~~and we toborrow ~~renew~~on ~~these~~ our lines of credit, ~~other~~to ~~sources~~cover ofthe ~~financing~~checks. ~~would~~At beDecember 18, ~~sought~~2001, ~~primarily~~we aare allowed by line of credit ~~from~~formulas ~~another~~to ~~banking~~borrow ~~institution~~$45,227,000. At December 18, 2001, the outstanding loan balance was $44,667,000.

~~Since~~At weSeptember 30, ~~are~~2001, aour ~~net~~long-term ~~borrower~~debt consists of ~~funds~~mortgages and a term note relating to building improvements totaling $7,102,000. ~~minimal~~The ~~cash~~mortgages ~~balances~~bear ~~are~~interest ~~kept~~at onfixed ~~hand~~rates ranging from 6.30% Atto ~~any~~8.17% ~~point~~and inat ~~time~~prime (6.00% at September 30, we2001). ~~may~~The ~~have~~mortgages ~~more~~include ~~money~~a balloon payment for any unpaid inbalances ~~checks~~at ~~outstanding~~the ~~than~~end of the ~~cash~~term ~~balance~~of the notes. ~~When~~The ~~checks~~balloon payments are ~~presented~~due ~~for~~beginning ~~payment~~June, ~~the~~2004 ~~bank~~through ~~notifies us~~October, ~~and~~2005. weNo ~~borrow~~other onlong-term ~~our~~debt ~~lines~~financing for facilities is expected in fiscal year 2002. We anticipate selling both of the ~~credit~~warehouses we own in Livonia, Michigan; the sale price is expected to exceed ~~cover~~the net book value, and would generate cash in excess of the ~~checks~~mortgage balance.

~~During~~Capital ~~the year, we borrowed $4~~Activities.~~5 million from related parties~~ ~~at a 7.00 interest rate, due on demand. At September 30, 2000,~~ ~~the balance was $3,420,000.~~

AtEmployees ~~September~~exercised ~~30,~~stock ~~2000,~~options ~~our~~for ~~long-term debt consists of mortgages totaling $7~~74,~~254~~000, 440,000 and ~~a term note relating to building improvements of $390~~2,000. ~~The~~shares ~~mortgages bear interest at fixed rates ranging~~in ~~from~~fiscal ~~6.30%~~year to2001, ~~8.17%~~2000 and at1999 ~~prime (9~~respectively.~~50%~~ atWe ~~September~~granted ~~30,~~stock ~~2000). The~~options ~~mortgages~~at ~~include~~ a ~~balloon payment for any unpaid balances~~ atweighted ~~the~~average ~~end~~price of ~~the~~$3.66 ~~term~~and of$6.81 ~~the~~for ~~notes.~~168,000 ~~The~~and ~~balloon~~153,000 ~~payments~~in ~~are~~fiscal ~~due~~year ~~beginning~~2000 ~~June,~~and ~~2004~~1999 ~~through October, 2005~~respectively. No ~~other~~grants ~~long-term debt~~were ~~financing~~made ~~for facilities is expected~~ in fiscal year 2001. The Weoptions ~~anticipate~~are ~~selling~~exercisable ~~one~~two ofand ~~the~~three ~~warehouses~~years wefrom ~~own in Livonia, Michigan;~~ the ~~sale~~date ~~price~~of isgrant ~~expected~~in totwo ~~exceed the net book value,~~equal parts, and ~~would~~expire ~~generate~~five ~~cash~~years inafter ~~excess of~~ the ~~mortgage~~date ~~balance~~of grant.

OnIn December 1997, we implemented a ~~long-term~~restricted ~~basis~~stock plan for 500,000 ~~increased~~shares. During ~~financing~~1999, ~~may~~the benumber ~~necessary to~~of ~~fund~~shares ~~any~~authorized ~~large~~for ~~project~~the ~~awarded~~plan was increased to 1,000,000. usAwards of 51,000 orand ~~any~~102,298 ~~acquisitions~~shares wewere granted under the ~~may~~restricted ~~make~~stock plan during the fiscal years ended September 30, 2000 and 1999 respectively. ~~While~~No ~~there~~awards ~~are~~were nomade ~~current~~during ~~plans~~fiscal toyear ~~conduct~~2001. anThe ~~offering~~shares vest one, two and three years from the date of ~~stock,~~grant in ~~the~~three ~~long~~equal ~~term~~parts; in December 2001, ~~that~~2000 ~~cannot~~and be1999, ~~ruled~~we ~~out~~issued 10,000, 163,000 and 175,000 shares respectively.

~~During~~We ~~fiscal~~do ~~year~~not ~~2000~~expect the exercise of stock options, weor ~~acquired~~purchase ~~$321~~of shares,~~000~~ by employees and directors to be a material source of ~~treasury~~capital ~~stock~~in fiscal year 2002. We believe that cash flows from operations along with borrowings and the sale of assets not used in our continuing operations will be sufficient to finance our activities in 2002. We have no current plans to conduct an offering of our shares to the public in fiscal year 2002.

~~Capital~~Financial ~~Activities.~~ Condition ~~Employees exercised stock options for 440,000, 2,000 and 64,000~~ ~~shares in fiscal year 2000, 1999 and 1998 respectively. We granted~~ stock options at a weighted average price of $3.66, $6.81 and $6.28 for 168,000, 153,000 and 586,000 in fiscal year 2000, 1999 and 1998 respectively. The options are exercisable two and three years from the date of grant in two equal parts, and expire five years after the date of grant.

InOur ~~December~~total ~~1997,~~assets wedecreased ~~implemented~~from ~~a restricted stock plan for 500~~$120,908,000 ~~shares.~~at ~~During 1999~~September 30, ~~the~~2000 ~~number of shares authorized for the plan was increased~~ to 1 $109,~~000~~072,000. ~~Awards~~at ~~of 51,000, 102,298 shares and 462,375 shares were granted under the restricted stock plan during the fiscal years ended~~ September 30, ~~2000, 1999 and 1998, respectively~~2001. ~~The~~This ~~shares~~decrease ~~vest~~in ~~one,~~total ~~two~~assets ~~and~~was ~~three years from~~due ~~the~~primarily ~~date~~to ofa ~~grant~~18% indecrease ~~three equal parts;~~ in ~~December 2000, 1999~~our ~~and 1998, we issued 163,000, 175,000 and 154,000 shares respectively.~~

WeTable do not expect the exercise of stock options, or purchase of shares, by employees and directors to be a material source of capital in fiscal year 2001. We believe that cash flows from operations along with borrowings will be sufficient to finance our activities in 2001. We have no current plans to conduct an offering of our shares to the public in fiscal year 2001.Contents

~~Outlook Although~~accounts ~~the~~receivable. ~~past~~Those ~~few~~receivables decreased ~~months~~$14,191,000 ~~have~~from ~~been~~$77,211,000 ~~challenging ones~~at ~~for~~September 30, ~~the~~2000 ~~stock~~to ~~market~~$63,020,000 ~~the~~at September 30, U2001.S ~~economy's continued~~The ~~control~~decrease ofin ~~inflationary~~the ~~factors~~Company’s ~~and~~accounts ~~modest~~receivable ~~interest~~reflected ~~rates~~a $22,561,000, ~~added~~or to47%, ~~low~~decrease ~~unemployment,~~in ~~argues~~billed ~~for~~trade aaccounts ~~relatively~~receivable, ~~stable~~a ~~automotive~~$17,630,000, ~~market.~~or ~~Truck~~76%, ~~sales~~decrease ~~continue~~in tounbilled ~~fuel~~trade ~~the~~account ~~auto~~receivables, ~~industry's~~and a ~~growth~~$26,000,000, ~~with~~or ~~most~~449%, ~~automotive~~increase ~~industry~~in ~~analysts~~purchased ~~predicting~~accounts ~~sales~~receivable. The decrease ofin ~~approximately~~billed ~~15,000,000~~trade toaccount ~~16,000,000~~receivables ~~new~~was ~~vehicles~~primarily ~~(automobiles~~attributable to cyclically ~~and~~high ~~trucks)~~billings in ~~the~~September ~~United~~2000 ~~States~~that were collected in ~~2001~~the subsequent quarter. The ~~While~~decrease ~~this~~in billed and unbilled trade accounts receivable is attributable to lower revenue associated with the softening economy and lower marketing ~~than~~expenditures ~~sales~~by inthe ~~2000~~automotive industry, as well as greater focus on the billing ~~market~~and ~~has~~collection ~~been~~process. ~~relatively~~Unbilled ~~consistent~~trade accounts receivable continued to ~~over~~decline, ~~the~~reflecting ~~past~~more ~~few~~expeditious ~~years~~billing. ~~Approximately~~Purchased ~~90%~~accounts ofreceivable reflects ~~our~~installment ~~revenues~~payments ~~are~~owed by consumers on automotive extended service ~~directly~~contracts ~~associated~~purchased ~~with~~by the Company from an automotive ~~industry~~manufacturer and its dealers. WePayments ~~cannot~~on ~~determine what~~these ~~impact~~contracts are collected over a ~~reduction~~period inof ~~automobile~~time, ~~sales~~not exceeding ~~may~~18 months. ~~have~~Purchased onaccounts usreceivable generated revenues of approximately $2.8 million, accounts receivable of approximately $31.8 million, and accounts payable of approximately $3.9 million. See the Liquidity and Capital Resources section for details.

InCash ~~the~~increased ~~Marketing~~$3,814,000 ~~Services~~as ~~segment,~~a weresult ~~continue~~of toincreased ~~align~~borrowings ~~ourselves~~at September 30, ~~with~~2001. ~~people~~The Company’s investment in partnerships, ~~products~~non-marketable securities and available-for-sale ~~processes~~securities ~~that~~decreased ~~recognize~~approximately ~~and~~$8.8 million. ~~take~~See ~~advantage~~the ofInvesting ~~how~~Activities ~~the~~section ~~world~~for ~~goes~~more ~~about~~details. ~~conducting~~Refundable ~~business~~Federal ~~and~~Income ~~accessing~~Tax ~~information.~~and ~~Our~~Deferred ~~ties~~Tax toAsset ~~the~~reflect ~~auto~~overpayments ~~industry~~and ~~includes~~anticipated ~~customer~~benefits ~~contact~~from ~~activities~~current year losses. The ~~emphasis~~decrease onin ~~globalization,~~federal ~~combined~~income ~~with~~taxes ~~budgets~~payable reflects the ~~needed~~payment toof ~~reach~~previously aanticipated ~~worldwide~~federal ~~audience,~~income istax ~~placing~~liabilities ~~new~~and ~~emphasis~~the lack onof ~~training~~taxable ~~opportunities~~income onin the ~~World~~current ~~Wide~~fiscal ~~Web~~year. ~~Our~~Property, ~~substantial~~Plant and Equipment ~~investments~~decreased in$6,536,000 ~~this~~due ~~area~~to ~~make~~depreciation usand ~~poised~~the reclassification of two buildings to ~~take~~Property ~~advantage~~Held offor Sale in the ~~opportunities~~ asamount ~~they~~of ~~arise~~$3,310,000.

~~Customer~~The ~~Relationship~~Company’s ~~Management~~total ~~initiatives~~current ~~are~~liabilities ~~placing~~increased ~~increasingly~~$18,024,000, or 24%, from ~~critical~~$73,928,000 ~~importance~~at onSeptember 30, ~~e-business~~2000 ~~within~~to ~~the~~$91,952,000 ~~auto~~at ~~industry~~September 30, as2001. This ~~clients~~increase ~~look~~was ~~for~~attributable ~~answers~~to ~~and~~a ~~assistance~~$1,765,000 ~~from~~decrease ~~turnkey~~in ~~solution~~accounts payable, a ~~providers~~$15,854,000 ~~such~~increase asin ~~us.~~notes Wepayable ~~help~~to ~~clients~~bank, ~~identify~~a ~~their~~decrease ~~customer~~of $2,139,000 in ~~base~~federal income tax payable, ~~create~~an increase of $6,550,000 in current portion of long-term debt, a decrease of $1,776,000 in notes payable-related party, an increase of $2,528,000 in advances from customers for uncompleted projects, and a ~~execute~~decrease ~~strategic~~of ~~tactical~~$1,228,000 ~~marketing~~in accrued liabilities. The decline in trade accounts payable is associated with lower sales this year, ~~distribute~~partially offset by an increase in the current month’s accounts payable liability for purchases of accounts receivable from automotive manufacturers and ~~fulfill~~their dealers. Notes payable to bank increased approximately $15.9 million due to the purchasing and financing ~~ultimately~~of ~~evaluate~~accounts ~~results~~receivable relating to ~~justify~~the purchased accounts receivable and the ~~expenditure~~timing of payments to suppliers. In addition, current notes Aspayable-related ~~manufacturers~~party ~~continue~~and tolong-term ~~outsource~~notes payable-related party decreased $1,776,000 weand ~~have~~$344,000, anrespectively, ~~opportunity~~as a result of the partial repayment of ~~for~~that ~~growth~~indebtedness. byCurrent ~~providing~~portion ~~additional~~of ~~services~~long-term todebt ~~these~~increased ~~manufacturers~~$6, ~~advertisers~~550,000 as a result of the reclassification of obligations to current liabilities; this occurred because of financial covenant violations with our bank. See the Liquidity and ~~other~~Capital ~~marketers~~Resources section for details.

WeTotal ~~believe~~stockholder’s ~~that~~equity ~~experiential~~decreased ~~events~~approximately ~~are~~$22.4 million ~~becoming increasingly~~from ~~popular~~$27,551,000 ~~among~~at ~~clients~~September 30, as2000 ~~they continue~~ to ~~realize~~$5,127,000 ~~the~~at ~~impressive long-term~~September 30, ~~results from this area of customer relationship building~~2001. This Wedecline ~~deliver~~was ~~all-inclusive~~primarily ~~experiential~~attributable ~~events~~to ~~that~~a ~~encompass~~total ~~the wide~~comprehensive ~~array~~loss of ~~products and services that we can offer our clients~~$23,412,000 ~~from~~for ~~internet~~the ~~online~~year. ~~registration~~Approximately ~~to product procurement and exit interview research studies~~$5.3

"CAUTIONARYTable STATEMENT FOR THE PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995" Certain statements in Management Discussion and Analysis of Financial Condition and Results of Operations and certain other sections of this Annual Report are forward-looking. These may be identified by the use of forward-looking words or phrases such as "believe," "expect," "anticipate," "should," "planned," "estimated," and "potential," among others. These forward-looking statements are based on our reasonable current expectations. The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for such forward-looking statements. In order to comply with the terms of the safe harbor, we note that a variety of factors could cause our actual results or experience to differ materially from the anticipated results or other expectations expressed in such forward-looking statements. The risks and uncertainties that may affect the operations, performance, development and our results include but are not limited to: (1) the complexity and uncertainty regarding the development and customer acceptance of new products and services; (2) the loss of market share through competition; (3) the introduction of competing products or service technologies by other companies; (4) pricing pressures from competitors and/or customers; (5) our inability to protect proprietary information and technology; (6) market acceptance of our touring exhibits in our Entertainment / Edutainment segment; (7) the loss of key employees and / or customers; (8) our customers continued reliance on outsourcing; (9) changes in our capital structure and cost of capital, and ability to borrow sufficient funds at reasonable rates (10) inability of the developers of the "Wonderful World of Oz" theme park to obtain final transfer of the property, to complete the timely construction of the park, and to operate it profitably once the park opens; (11) uncertainties relating to business and economic conditions; (12) management evaluation of staffing levels.Contents

~~Item~~million 7Aof such loss was attributable to the impairment of investments. ~~Quantitative~~See ~~and~~the ~~Qualitative~~Investing ~~Disclosures~~Activities ~~About~~section ~~Market~~for ~~Risk~~details.

~~Interest Rate Risk. Our earnings are affected by changes in~~Inflation ~~short-term interest rates as a result of our revolving credit~~ ~~agreements, which bear interest at a floating rate. We do not~~ use derivative or other financial instruments to mitigate the interest rate risk or for trading purposes. Risk can be estimated by measuring the impact of a near-term adverse movement of 100 basis points in short-term market interest rates. If short-term market interest rates average 100 basis points more in the next 12 months, the adverse impact on our results of operations would be approximately $194,000, net of income tax benefit. We do not anticipate any material near-term future earnings or cash flow expenses from changes in interest rates related to our long-term debt obligations as almost all of our long-term debt obligations have fixed rates.

~~Foreign Currency Risk.~~ Although wethe ~~conduct~~Company ~~business~~cannot inaccurately ~~foreign countries,~~anticipate ~~principally~~the ~~Canada~~effect ~~and~~of ~~Australia,~~inflation ~~foreign currency~~on ~~translation~~its ~~gains and losses are not material to our consolidated financial position~~operations, ~~results~~management ofbelieves ~~operation~~that orinflation ~~cash~~has ~~flows.~~not ~~Accordingly~~had, we ~~are~~and ~~not~~is ~~currently subject to material foreign currency exchange~~not ~~rate~~likely ~~risks~~in ~~from~~ the ~~effects~~foreseeable ~~that~~future ~~exchange~~to ~~rate movements of foreign currencies would~~ have, ona ~~our~~material ~~future~~impact ~~costs or~~ on ~~future~~its ~~cash~~results ~~flows~~to ~~we would receive from our foreign investment. To date, we have~~operations ~~not entered into any foreign currency forward exchange contracts~~ ~~or other derivative financial instruments for trading purposes or to hedge the effects of adverse fluctuations in foreign currency exchange rates.~~

~~Investment~~Effects ~~Risk. We invest in equity instruments~~ of ~~privately-held companies~~New inAccounting ~~the internet information technology and entertainment~~Pronouncements ~~areas for business and strategic purposes. These investments are~~ ~~included in long-term assets, and are accounted for under the~~ cost method or the equity method. For these non-quoted investments, our policy is to regularly review the assumptions underlying the operating performance and cash flow forecasts in assessing the carrying values. We identify and record impairment losses on these investments when events and circumstances indicate that such assets are permanently impaired. To date, no such impairment has been recorded.

WeThe ~~are~~Financial ~~also~~Accounting ~~exposed~~Standards toBoard ~~equity~~issued ~~price~~Statement ~~risk~~number on142 ~~our investments~~regarding inamortization ~~publicly~~of ~~traded companies~~goodwill. ~~Our~~Any ~~available-for-sale~~changes ~~securities at~~that ~~September~~may ~~30,~~be ~~2000~~required ~~include~~as ~~our~~a ~~equity~~result ~~positions~~of ~~in Navidec,~~this ~~Inc.~~bulletin ~~and~~are ~~eCollege.com,~~required ~~which~~to ~~have~~be ~~experienced~~implemented ~~significant~~for ~~volatility in~~fiscal ~~their~~years ~~stock~~beginning ~~prices. We do not attempt to reduce or eliminate~~after ~~our~~December 15, ~~market exposure on these securities~~2001. AManagement ~~20%~~is ~~adverse~~finalizing ~~change in~~its ~~equity~~assessment ~~price~~of ~~would~~the ~~result~~impact ~~in an approximate $810,000 decrease~~this inbulletin ~~fair~~will ~~value in our available-for-sale securities~~have, ~~based~~if ~~upon January 9~~any, ~~2001~~on ~~closing~~the ~~market~~Company’s ~~prices~~financial ~~for Navidec and eCollege~~statements.~~com..~~ ~~Item 8. Financial Statements and Supplementary Data.~~

~~See~~“CAUTIONARY ~~Consolidated~~STATEMENT ~~Financial~~FOR ~~Statements~~THE ~~and~~PURPOSES ~~Notes~~OF toTHE ~~Consolidated Financial~~“SAFE ~~Statements~~HARBOR” ~~attached~~PROVISIONS ~~for~~OF ~~financial~~THE PRIVATE ~~statements~~SECURITIES ~~and~~LITIGATION ~~supplementary~~REFORM ACT OF 1995” ~~data.~~

~~Item~~Certain 9statements in Management Discussion and Analysis of Financial Condition and Results of Operations and certain other sections of this Annual Report are forward-looking. ~~Changes~~These inmay be identified by the use of forward-looking words or phrases such as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” and ~~Disagreements~~“potential,” among others. These forward-looking statements are based on our reasonable current expectations. The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for such forward-looking statements. In order to comply with ~~Accountants~~the terms of the safe harbor, we note that a variety of factors could cause our actual results or experience to differ materially from the anticipated results or other expectations expressed in such forward-looking statements. The risks and uncertainties that may affect the operations, performance, development and our results include but are not limited to: (1) the complexity and uncertainty regarding the development and customer acceptance of new products and services; (2) the loss of market share through competition; (3) the introduction of competing products or service technologies by other companies; (4) pricing pressures from competitors and/or customers; (5) our inability to protect proprietary information and technology; (6) value of investments of the Company; (7) the loss of key employees and / or customers; (8) our customers continued reliance on ~~Accounting~~outsourcing; (9) changes in our capital structure and ~~Financial~~cost ~~Disclosure~~of capital, and ability to borrow sufficient funds at reasonable rates; (10) completion of our planned merger with SPX Corporation; (11) uncertainties relating to business and economic conditions; (12) management’s ability to maintain proper contract and employee staffing levels; (13) cutbacks in client budgets, project deferrals and cancellations; (14) our ability to sell assets not used in our operations in a timely manner and at reasonable prices; (15) management’s ability to reduce expenses in a timely and meaningful manner; and (16) our ability to convert unbilled trade accounts receivables into billed trade accounts receivables;.

~~None~~Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

~~Item~~Interest 10Rate Risk. ~~Directors~~Our ~~and~~earnings ~~Executive~~are ~~Officers~~affected by changes in short-term interest rates as a result of our revolving credit agreements, which bear interest at a floating rate. We do not use derivative or other financial instruments to mitigate the ~~Registrant~~interest rate risk or for trading purposes. Risk can be estimated by measuring the impact of a near-term adverse movement of 100 basis points in

SteveTable Toth, Jr., age 76, became President and Chief Executive Officer of the Company in April 1997 and has been a Board member since March 1994. Toth has served as President of subsidiary Visual Services, Inc. since 1962. He also serves as President of subsidiaries Vispac, Inc. and Advanced Animations, Inc.Contents

~~Martin~~short-term Smarket interest rates. ~~Suchik,~~If ~~age~~short-term ~~55,~~market isinterest arates ~~director~~average 100 ofbasis points more in the ~~Company~~next ~~since~~12 months, the adverse impact on our results ~~1997~~of operations would be approximately $337,000, net of income tax benefit. ~~Suchik~~Due to isour ~~the~~financial ~~President~~condition, atour banks have the ~~former~~right ~~subsidiary~~to ~~BKNT~~change ~~Retail~~our interest ~~Stores~~rate at any time. As of December 17, ~~Inc~~2001, they had not done so. At September 30, ~~where~~2001, hewe ~~has~~had ~~served~~3 inlines ~~that~~of ~~capacity~~credit ~~since~~totaling ~~its~~$62,000,000; ~~1981~~interest on these ~~founding~~lines were at London Inter-Bank Offered Rate (“LIBOR”) plus 1.5%; ~~Suchik~~at isSeptember 30, 2001 the ~~nephew~~interest ofrate ~~Toth~~was 4.13% and the outstanding balances were $51,068,000.

~~Thomas~~Foreign WCurrency Risk. ~~Marquis~~Although we conduct business in foreign countries, principally ~~age~~Canada 56and Australia, ~~has~~foreign ~~been~~currency ~~the~~translation ~~Chief~~gains ~~Financial~~and ~~Officer~~losses ofare ~~subsidiary~~not ~~Visual~~material ~~Services~~to our consolidated financial position, ~~Inc.~~results ~~since~~of ~~1988~~operation or cash flows. HeAccordingly, ~~became~~we ~~Treasurer and~~are ~~Chief~~not ~~Financial~~currently ~~and~~subject ~~Accounting~~to ~~Officer~~material offoreign currency exchange rate risks from the ~~Company~~effects inthat ~~April 1997,~~exchange ~~became~~rate ~~Secretary~~movements of foreign ~~the~~currencies ~~Company~~would inhave ~~June~~on ~~1998,~~our ~~and~~future ~~has~~costs ~~been~~or on future cash flows we awould ~~Board~~receive ~~member~~from ~~since~~our ~~March~~foreign ~~1994~~investment. ~~Marquis~~To ~~serves~~date, aswe ~~Senior~~have ~~Vice~~not entered into ~~President,~~any ~~Secretary~~foreign ~~and~~currency ~~Treasurer~~forward ofexchange ~~subsidiaries~~contracts ~~Visual~~or ~~Services,~~other derivative financial ~~Inc.,~~instruments ~~Vispac,~~for ~~Inc.~~trading ~~and~~purposes ~~Advanced~~or ~~Animations,~~to ~~Inc~~hedge the effects of adverse fluctuations in foreign currency exchange rates.

~~Harold~~Investment ARisk. ~~Poling,~~We ~~age~~invest ~~75,~~in ~~has~~equity ~~been~~instruments aof ~~Board~~privately-held ~~member~~companies ~~since~~in ~~May,~~the ~~2000.~~Internet Heinformation ~~was~~technology ~~Chairman~~and ofentertainment ~~the~~areas ~~Board~~for ~~and~~business ~~Chief Executive~~and ~~Officer~~strategic ofpurposes. ~~Ford~~These ~~Motor~~investments ~~Company.~~are Heincluded ~~retired~~in ~~January~~long-term 1assets, ~~1994.~~and ~~Recently,~~are heaccounted ~~was~~for ~~appointed~~under ~~Chairman~~the ofcost ~~Eclipse~~method ~~Aviation~~or ~~Corporation~~the equity method. HeFor these non-quoted isinvestments, aour ~~Director~~policy ofis ~~Shell~~to ~~Oil~~regularly ~~Company,~~review ~~Flint~~the ~~Ink~~assumptions ~~Corporation,~~underlying ~~Kellogg~~the ~~Company,~~operating ~~Meritor~~performance ~~Automotive,~~and ~~Inc.~~cash ~~and~~flow ~~Thermadyne~~forecasts ~~Holdings~~in ~~Corporation~~assessing the carrying values. HeWe isidentify ~~also~~and arecord ~~board~~impairment ~~consultant~~losses ~~for~~on ~~The~~these ~~LTV~~investments ~~Corporation,~~when ~~and~~events isand oncircumstances indicate that such assets are permanently impaired. During the year, ~~Investment~~we ~~Banking~~recognized ~~Advisory~~an ~~Board~~impairment to these investments of ~~Donaldson~~$3,312,000. ~~Lufkin~~See the &Investing ~~Jenrette~~Activities section of Item 7 above for details.

~~Ralph~~We ~~Armijo,~~are ~~age~~also ~~47,~~exposed ~~has~~to ~~been~~equity aprice ~~Board~~risk ~~member~~on ~~since~~our ~~May,~~investments ~~2000.~~in publicly traded Hecompanies. ~~has~~Our ~~served~~available-for-sale assecurities ~~the~~at ~~President~~September 30, ~~Chief~~2000 ~~Executive~~include ~~Officer and as~~our aequity ~~Director~~positions ofin Navidec, ~~since~~Inc. ~~its~~and ~~inception~~eCollege.com, which have experienced significant volatility in ~~1993~~their stock prices. HeWe ~~serves~~do asnot attempt to reduce or ~~Chairman~~eliminate ofour market exposure on these securities. During the ~~Board~~year, we recognized an impairment of ~~DriveOff.com~~$2,006,000 ~~Inc~~on our investment in Navidec., ~~and~~A is20% adverse achange ~~Director~~in equity price would result in an approximate $355,000 decrease in fair value in our available-for-sale ~~the~~securities, ~~Internet~~based ~~Automobile~~upon ~~Dealers~~November 29, 2001 ~~Marketing~~closing ~~Association~~market prices for Navidec and eCollege.com..

~~William James, age 66, has been a Board member since May, 2000~~Item 8. He ~~has~~Financial ~~been~~Statements ~~President~~ and ~~Chief~~Supplementary ~~Executive Officer of James Cable Partners, L~~Data.~~P., a privately held Delaware limited partnership~~ ~~and a provider of cable television in nine states, since its formation~~ ~~in 1988. Prior to that, he was an Executive Vice President with~~ ~~Capital Cities Communications (which became Capital Cities / ABC, Inc.).~~

~~Robert~~See ~~Sui,~~Consolidated ~~age~~Financial ~~47,~~Statements ~~became~~and aNotes ~~Company~~to ~~director~~Consolidated ~~in 1998. He is~~Financial aStatements ~~Senior~~attached ~~Vice President with Merrill Lynch's Private Client Group, where he has served~~ for ~~the~~financial ~~last~~statements 22and ~~years~~supplementary data.

~~Steve~~Item 9. ~~Schultz,~~Changes ~~age~~in ~~44, is Executive Vice President of Sales~~and ~~for~~Disagreements ~~subsidiary~~with ~~Visual~~Accountants ~~Services,~~on ~~Inc.,~~Accounting ~~where~~and heFinancial ~~has served since 1994~~Disclosure.

~~Terry Davis, age 61, is Executive Vice President of Strategic Planning for subsidiary Visual Services, Inc~~None.~~, where he has served~~ ~~since 1982.~~

InTable the last year, the Board held three meetings, which all directors attended. Toth, Marquis, and Sui comprise the Executive Committee; James, Sui, and Poling comprise the Audit Committee; Poling, Armijo, and Marquis comprise the Compensation Committee. None of the Committees met last year.Contents

~~Each~~PART ~~non-executive officer director receives a $15,000 annual~~III ~~fee, plus a $5,000 meeting fee for meetings in excess of three~~ ~~per year, with no additional payment for membership on or meetings~~ of any committees, except pursuant to the Independent Director Stock Option Plan (see stock ownership table). Except for Toth and Suchik, no officer or director is related to another by blood, marriage or adoption, not more remote than first cousin. In the last year, Forms 4 were filed by Toth (6), and by Suchik (5). All Forms 4 were filed on a timely basis. Except as noted, all directors are believed to have filed this year's annual Forms 5 on a substantially timely basis; James filed several days late, and we have been unable to ascertain whether Suchik has filed his Form 5.

~~Officers~~Item 10. ~~serve~~Directors atand ~~the~~Executive ~~discretion~~Officers of the ~~Board of Directors~~Registrant. ~~All Directors are elected at each annual meeting of shareholders.~~

~~Item~~Steve 11Toth, Jr., age 77, became President and Chief Executive ~~Compensation~~Officer of the Company in April 1997 and has been a Board member since March 1994. Mr. Toth has served as President of subsidiary Visual Services, Inc. since 1962. He also serves as President of our subsidiaries Vispac, Inc. and Advanced Animations, Inc.

~~The~~Martin ~~compensation~~S. ~~for~~Suchik, ~~the~~age ~~last~~56, ~~three~~is ~~years~~a ~~paid~~director of the Company's since 1997. Mr. Suchik ~~executive~~is ~~officers~~the ~~were:~~President at the former subsidiary BKNT Retail Stores, Inc., where he has served in that capacity since its 1981 founding. Mr. Suchik is the nephew of Mr. Toth.

					Long Term Compensation
	Annual Compensation				Awards
(a)	(b)	(c)	(d)	(e)	(f)
Name and Principal Position	Year	Salary ($)	Bonus ($)	Other Annual Compensation ($)	Restricted Stock Awards ($)
Steve Toth Jr. CEO	2000	312,000	0	0
	1999	312,000	0	1,920
	1998	642,000	0	950
Thomas W. Marquis Treasurer, Secretary	2000	170,000	0	0
	1999	150,000	0	1,800
	1998	150,000	0	885
Steve Schultz Exec V P - Sales	2000	220,000	0	0
	1999	206,660	0	1,920
	1998	206,660	0	950	$566,234
Terry Davis Exec V P	2000	300,000	0	0
	1999	300,000	0	1,920
	1998	300,000	0	950

Thomas W. Marquis, age 57, has been the Chief Financial Officer of subsidiary Visual Services, Inc. since 1988. He became Treasurer and Chief Financial and Accounting Officer of the Company in April 1997, became Secretary of the Company in June 1998, and has been a Board member since March 1994. Mr. Marquis serves as Senior Vice President, Secretary and Treasurer of our subsidiaries Visual Services, Inc., Vispac, Inc. and Advanced Animations, Inc.

~~None~~Harold A. Poling, age 76, has been a Board member since May, 2000. He was Chairman of the ~~executive~~Board ~~officers~~and ~~have~~Chief ~~contractual~~Executive ~~compensation~~Officer of Ford Motor Company. He ~~agreements~~retired January 1, 1994. ~~The~~He ~~"other"~~is ~~amounts~~Chairman ~~listed~~of ~~are~~Eclipse ~~the~~Aviation ~~Company's~~Corporation. He is ~~401(k)~~a ~~contributions.~~Director ~~Other~~of ~~than~~Flint ~~noted~~Ink Corporation, ~~none~~ArvinMeritor, ofand Thermadyne Holdings Corporation. He is also on the ~~above~~Investment ~~officers received~~Banking ~~long~~Advisory ~~term~~Board ~~compensation~~of ~~payouts~~Donaldson, Lufkin or& ~~awards~~Jenrette ~~covered~~and bya member of the Board of Directors and a Trustee of ~~table~~William ~~above~~Beaumont Hospital.

InRalph ~~fiscal~~Armijo, ~~year~~age ~~1998~~49, ~~Steve~~has ~~Schultz~~been ~~was~~a ~~awarded~~Board ~~88,821~~member ~~shares of~~since ~~restricted stock~~May, of2000. ~~which~~He ~~29,607~~has ~~shares~~served ~~were issued in December,~~as ~~1998~~the President, ~~1999~~Chief Executive Officer and ~~2000.~~as ~~Officers~~a ~~may~~Director ~~participate~~of inNavidec ~~the~~since ~~Company's~~its ~~401(k)~~inception ~~and~~in ~~stock option plans~~1993. ~~Such~~He ~~stock~~served ~~option~~as ~~plans~~Chairman ~~provide that~~of the ~~price~~Board of ~~any common stock issued to officers~~DriveOff.com, ~~directors~~Inc., ~~employees~~ and ~~their~~as ~~affiliates~~a ~~pursuant~~Director tofor ~~any~~the ~~stock~~Internet ~~grant~~Automobile ~~or exercise~~Dealers ofMarketing ~~any stock option shall be no less than the fair market~~Association ~~value~~from of1998 ~~the~~to ~~Common Stock on the date of the stock or option grant~~2000.

~~SEC~~William ~~rules require a performance graph comparing~~James, ~~over~~age ~~a five-year period~~68, ~~the~~has ~~performance~~been ofa ~~our~~Board ~~common~~member ~~stock~~since ~~against~~May, a2000. ~~broad~~He ~~market~~has been ~~index~~President and ~~against~~Chief ~~either~~Executive aOfficer ~~published industry or line-~~of~~-business index~~ orJames aCable ~~group~~Partners, ofL.P., ~~peer issuers or issuers with similar market~~a ~~capitalization.~~privately Weheld ~~chose~~Delaware ~~the~~limited ~~Wilshire~~partnership ~~Small~~and ~~Cap~~a ~~Index~~provider asof ~~the~~cable ~~broad~~television ~~market~~in ~~index~~nine states, ~~and~~since ~~the~~its ~~Russell~~formation ~~2000~~in ~~Index~~1988. ~~because~~Prior ~~the~~to ~~companies covered by~~ that, ~~index~~he ~~include~~was ~~many~~an ~~of the companies in the Marketing~~Executive ~~Services~~Vice ~~industry.~~President ~~The~~with ~~performance~~Capital ~~graph~~Cities ~~assumes~~Communications an(which ~~initial~~became ~~investment~~Capital Cities of/ ~~$100~~ABC, ~~and reinvestment of all dividends~~Inc.).

Chart Points	09/30/95	09/30/96	09/30/97	09/30/98	09/30/99	09/30/00
VSI Holdings, Inc.	100.00	77.78	1,055.56	911.11	788.89	655.56
Wilshire Small Cap	100.00	111.45	157.62	123.72	162.39	216.42
Russell 2000	100.00	111.60	146.21	117.14	137.67	167.98

Steve Schultz, age 45, is Executive Vice President of Sales for our subsidiary Visual Services, Inc., where he has served since 1994.

~~[GRAPH]~~Terry Davis, age 62, is Executive Vice President of Strategic Planning for our subsidiary Visual Services, Inc., where he has served since 1982.

~~Item~~Although 12Mr. Suchik ~~Security~~is ~~Ownership~~the nephew of ~~Certain~~Mr. Toth, ~~Beneficial~~no ~~Owners~~other director or executive officer is related to any other director or executive officer of the Company (or of any of its subsidiaries) by blood, marriage or adoption. There are no arrangements or understandings between any of our directors or executive officers and ~~Management~~any other person pursuant to which that director or executive officer was nominated or elected a director or nominated or elected an executive officer of the Company or any of its subsidiaries.

VotingTable rights are held by the owners of the Common Stock, of which each share is entitled to one vote on each matter coming before the shareholders. Only one class of Common Stock is authorized; none of the authorized Preferred Stock has been issued. On December 1, 2000, the Company had 33,179,825 shares of Common Stock (net of 400,250 treasury shares) outstanding. Such shares, and shares issuable under options exercisable within 60 days, were owned by:Contents

Name and Address	Shares Owned	% Ownership
Steve Toth, Jr. and family members (1) 41000 Woodward Avenue Bloomfield Hills, Michigan 48304	27,905,755	84.10%
Martin S. Suchik (2) 1778 Ellsworth Industrial Blvd. Atlanta, Georgia 30318	504,025	1.52%
Thomas W. Marquis (3) 41000 Woodward Avenue Bloomfield Hills, Michigan 48304	514,431	1.55%
Steve Schultz 41000 Woodward Avenue Bloomfield Hills, Michigan 48304	97,192	.29%
Terry Davis 41000 Woodward Avenue Bloomfield Hills, Michigan 48304	918,906	2.77%
Harold Poling (4) 290 Town Center Drive, Suite 322 Dearborn, Michigan 48126	309,600	0.93%
Ralph Armijo (4) 6399 South Fiddler Green Circle Greenwood Village, Colorado 80111	2,100	.01%
Robert F. Sui (4) 39577 Woodward Avenue Bloomfield Hills, Michigan 48304	4,600	.01%
William James (4) 38710 Woodward Avenue Bloomfield Hills, Michigan 48304	7,100	.02%
All directors and officers as a group (9 persons) (1-4)	30,263,709	90.57%

Messrs. Toth and Marquis are the only directors of the Company who are also employees of the Company or any of its subsidiaries.

~~(1)~~No ~~Toth~~director isor ~~trustee~~executive officer of ~~trusts~~the ~~benefiting~~Company ~~him that own 400,000 and 11,826,323 shares. Toth's spouse~~ is ~~the~~a ~~trustee~~party ofto ~~trusts benefiting~~any ~~Toth's daughter that owns 11,712,199 shares, and of~~material ~~another~~legal ~~trust benefiting her that owns 1~~proceeding,~~010,797~~ ~~shares.~~or ~~Toth disclaims~~has ~~beneficial~~a material interest in ~~the~~any ~~shares held by trusts benefiting his daughter and spouse, but~~ such ~~shares~~legal ~~are~~proceeding ~~included with his~~that ~~holdings.~~is ~~CLT,~~adverse ato ~~Michigan~~the ~~partnership~~Company ~~affiliated~~or ~~with~~any ~~Toth ("CLT"), holds 2,055,586 shares. 900,850 shares are held by a charitable foundation,~~ of ~~which~~its ~~Toth is executive director~~subsidiaries.

Section 16(2a) ~~Suchik~~Beneficial ~~owns~~Ownership ~~422,392~~Reporting ~~shares, while his IRA owns another~~Compliance ~~11,113 shares. Suchik is fully vested in two options for 40,000~~ ~~and 30,520 shares under the 1986 Incentive and Non-Qualified Plans~~ ~~exercisable at $.55 and $.50 per share, respectively; these options expire on January 15, 2001.~~

Section 16(3a) ~~Marquis~~of isthe ~~trustee~~Exchange ofAct arequires ~~trust~~our ~~benefiting~~directors ~~him~~and ~~that owns~~executive ~~261~~officers,~~567~~ ~~shares.~~and ~~His~~persons ~~spouse~~who isown ~~trustee~~more than 10 percent of a ~~trust~~registered ~~benefiting~~class ~~her that owns 252,864 shares. Marquis disclaims beneficial ownership~~ of ~~his spouse's shares.~~our ~~(4)~~equity ~~Poling owns 250~~securities,~~000~~ ~~shares~~to ~~and~~file ~~was~~with ~~granted~~the ~~15,000~~SEC ~~non-employee options~~initial ~~exercisable~~reports atof ~~$6.20~~ownership ~~per share in November, 1997,~~ and ~~85,000~~reports ~~non-employee~~of ~~options~~changes in ~~November,~~ownership ~~1998,~~of ~~with~~the ~~50,000~~common ~~exercisable at~~stock ~~$5.75 per share~~ and ~~35,000~~other ~~exercisable~~equity ~~at $8.20 per share.~~securities ~~James~~of ~~was~~the ~~granted 5,000 non-employee options exercisable at $6~~Company.~~20 per~~ ~~share in December~~Officers, ~~1997.~~directors ~~Under the Independent Director Stock Option Plan, Poling, James, Armijo~~ and ~~Sui~~greater ~~were~~than ~~granted~~10 percent ~~new 30,000~~stockholders ~~share~~are ~~options~~required inby ~~May, 2000 exercisable for $3.25 per share; such options vest at~~ the ~~rate~~SEC ofregulation ~~2,100~~to ~~shares~~furnish ~~for~~us ~~each Board meeting attended,~~ with acopies ~~minimum~~ of ~~7,500~~all ~~annually. Sui's appointment~~Section as 16(a) ~~director~~forms ~~was~~they ~~confirmed by the shareholders on April 8, 1998 at which time he received a 10,000 share option exercisable for $6~~file.~~375 per share; of which 2,500 have vested, and 7,500 have been~~ ~~canceled. Poling, James, Armijo and Sui are vested in 59,600,~~ ~~7,100, 2,100 and 4,600 shares respectively.~~

~~Item~~Except 13as noted in the next sentence, to our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports are required, all Section 16(a) filing requirements applicable to its officers, directors and greater than 10 percent beneficial owners were complied with during fiscal year 2001. ~~Certain~~Mr. James inadvertently ~~Relationships~~filed a Form 5 with respect to the Company and ~~Related~~fiscal ~~Transactions~~year 2001 several days late, and we have unable to ascertain whether Mr. Armijo timely filed a Form 5 with respect to the Company and fiscal year 2001.

~~Steve~~Officers ~~Toth,~~serve ~~Jr.~~at ~~(Toth),~~the ~~President,~~discretion ~~with~~of ~~his~~the ~~family,~~Board ~~directly and~~of ~~indirectly owns 84~~Directors.~~10%~~ ofAll ~~the~~Directors ~~Company~~are elected asat ofeach ~~December~~annual 1,meeting ~~2000~~of shareholders.

~~Loans to and from Toth Family~~Item 11. AtExecutive ~~September 30, 2000 and September 30, 1999, we had advanced $804,000 and $686,000, respectively, to Toth, which amounts are non-interest bearing and unsecured~~Compensation. ~~In addition, a demand note in the amount of $500,000 which bears~~ ~~interest at 7.00% and is unsecured, was borrowed from Toth, and~~ ~~is outstanding at September 30, 2000. No restrictive covenants were imposed.~~

~~Note~~The ~~Payable~~following totable ~~CLT~~sets ~~Associates,~~forth ~~L.P.~~information ~~(CLT).~~concerning ~~CLT~~compensation isfor ~~a partnership~~services ~~which~~in isall ~~controlled~~capacities awarded to, earned by ~~Toth.~~or ~~During~~paid ~~the~~to ~~year,~~each weof ~~borrowed~~the $4four ~~million~~most highly ~~from~~compensated ~~CLT~~executive atofficers ~~7.00%.~~of ~~The~~the ~~note~~Company is(the ~~unsecured,~~“named ~~and~~executive ~~imposes~~officers”) for nothe ~~restrictive covenants.~~last ~~The~~three ~~balance~~fiscal atyears ~~September~~whose ~~30,~~salary ~~2000~~and ~~was~~bonus exceeded $2100,~~920,~~000 in the fiscal year 2001.

CLT Stock Option. The 1993 reorganization plan of the former Retail segment provided that Toth be issued stock options for 1,600,000 shares. Toth assigned an 825,000 share option to CLT, which exercised the last 425,000 shares in November, 1999 at $.15625 per share.

Long Term Compensation Awards

Annual Compensation

Awards

Payouts

Restricted

Securities

Stock

Underlying

LTIP

All Other

Other Annual

Award(s)

Options/SARS

Payouts

Compensation

Name and Principal Position

Year

Salary ($)

Bonus ($)

Compensation ($)

($)

(#)

($)

Steve Toth Jr.

2001

416,000

Chairman, President
and CEO

2000

312,000

CLTTable has invested $7.63 million in Oz Entertainment Corporation and KC Investors, LP. These are the organizations which are developing the Wonderful World of Oz theme park which is scheduled to open in 2004. Our investment, combined with CLT totaled was $12.13 million at September 30, 2000. Together, these investments account for direct and indirect ownership of approximately 30% of Oz Entertainment Corporation. See Note 3 of Notes to Consolidated Financial Statements.Contents

Declared Distributions to Stockholders. Prior to their acquisition, in February, July and September 1997, the income of each subsidiary (Advanced Animations, Inc., Vispac, Inc. and Visual Services, Inc.) was taxed to their respective stockholders and members. A portion of such income was distributed to pay such taxes. At September 30, 1997, we had declared, and owed, distributions of $20,659,000 to such stockholders and members. Such distributions relate not only to income earned by such subsidiaries from October 1, 1996 until their acquisition, but also include income previously retained by such subsidiaries as necessary working capital. $11,494,000 of the $20,659,000 was converted into a subordinated note payable from us to these former Stockholders, bearing interest at 7.00 %, due December,2002, and subordinated to all bank debt. $7,553,000 of this subordinated note belongs to Toth. Interest of $529,000 owing to Toth was paid during the fiscal year.


									Long Term Compensation Awards

	Annual Compensation								Awards				Payouts

									Restricted		Securities
									Stock		Underlying		LTIP		All Other
							Other Annual		Award(s)		Options/SARS		Payouts		Compensation
Name and Principal Position	Year		Salary ($)		Bonus ($)		Compensation ($)		($)		(#)		($)		($)

		1999		312,000		0		1,920		0		0		0		0
Thomas W. Marquis		2001		187,000		0		0		0		0		0		0
Treasurer, Secretary		2000		170,000		0		0		0		0		0		0
		1999		150,000		0		1,800		0		0		0		0
Steve Schultz		2001		227,000		50,000		0		0		0		0		0
Exec V P — Sales		2000		220,000		0		0		0		0		0		0
		1999		206,660		0		1,920		0		0		0		0
Terry Davis		2001		269,000		0		0		0		0		0		0
Exec V P		2000		300,000		0		0		0		0		0		0
		1999		300,000		0		1,920		0		0		0		0

~~Lease~~None of ~~Real Estate. Toth directly and indirectly owns~~ the ~~entire~~ ~~interest~~executive inofficers ahave ~~partnership~~contractual ~~(CLT)~~compensation ~~that owns the building in which Vispac is based~~agreements. The ~~lease is for $551,000 per year until~~ ~~November,~~“other” ~~2001~~amounts ~~and~~listed ~~$638,000~~are ~~thereafter until it expires in September 2006. The rental charges do not exceed those ordinarily and customarily paid in~~ the ~~community. Contingent~~Company’s ~~liability~~401(k) ~~for discontinued operations~~contributions. WeOther ~~are the guarantor~~than ~~of several store leases being used by the BKNT Retail Stores~~noted, ~~Inc.~~ Atnone ~~September~~of ~~30, 2000~~ the ~~lease~~above ~~obligations~~officers ~~amounted~~received tolong ~~$435,000. This~~term ~~amount~~compensation ~~will~~payouts ~~reduce to $113,000 in the fiscal year ending~~or ~~2001;~~awards ~~$25,000~~covered ~~in the fiscal year ending 2002. This contingent liability is offset~~ by the ~~pledging~~table ~~of 216,250 Company shares by Martin Suchik~~above.

Report Letter	1
Consolidated Financial Statements
Balance Sheet	2
Statement of Operations	3-4
Statement of Changes in Stockholders' Equity	5
Statement of Cash Flows	6
Notes to Consolidated Financial Statements	7-29

Officers may participate in the Company’s 401(k) and stock option plans. Such stock option plans provide that the price of any common stock issued to officers, directors, employees and their affiliates pursuant to any stock grant or exercise of any stock option shall be no less than the fair market value of the Common Stock on the date of the stock or option grant.

ToThe Company has stock options outstanding or issuable for the ~~Board~~benefit of employees ~~Directors~~(including ~~and~~the ~~Stockholders~~named executive officers) under the following plans ~~VSI~~(the ~~Holdings,~~“employee ~~Inc.~~stock ~~and~~option ~~Subsidiaries~~plans”):

We1986 ~~have~~Incentive ~~audited~~Stock ~~the~~Option ~~accompanying~~Plan. ~~consolidated~~Options ~~balance~~under ~~sheet of~~this ~~VSI~~plan ~~Holdings,~~were ~~Inc.~~granted to officers and ~~subsidiaries~~key asemployees at prices not less than the market price at date of grant. ~~September~~Options ~~30,~~are ~~2000~~generally exercisable one-third annually commencing 12 ~~and~~months ~~1999~~after the date granted and ~~the~~expire ~~related~~at ~~consolidated~~the ~~statements~~end of ~~operations,~~six years. This plan was ~~changes~~completed in ~~stockholders'~~March ~~equity~~1996 and ~~cash~~no ~~flows~~new ~~for~~options ~~each~~have ~~year~~been ~~in the~~granted ~~three-year~~under ~~period~~the ~~ended~~plan since ~~September 30, 2000~~then. ~~These~~The ~~consolidated financial~~remaining ~~statements~~40,000 ~~are~~options ~~the~~were ~~responsibility~~exercised ofduring the ~~Company's~~year ~~management.~~ended ~~Our~~September 30, ~~responsibility~~2001. isThere towere ~~express~~no anoptions ~~opinion~~exercised onduring ~~these~~fiscal ~~consolidated~~years 2000 ~~financial~~and ~~statements~~1999. ~~based~~No onoptions ~~our~~remain ~~audits~~outstanding at September 30, 2001.

We1986 ~~conducted~~Nonqualified ~~our~~Stock ~~audits~~Option ~~in accordance with generally accepted auditing standards~~Plan. ~~Those~~Options ~~standards~~under ~~require~~this ~~that we~~ plan ~~and~~were ~~perform~~granted to ~~the~~officers ~~audits~~and toemployees ~~obtain~~at ~~reasonable~~prices ~~assurance~~not ~~about~~less ~~whether~~than the ~~consolidated financial~~market ~~statements~~price ~~are~~at ~~free~~date of ~~material misstatement~~ grant. AnOptions ~~audit includes~~are ~~examining,~~generally onexercisable aone-third ~~test~~annually ~~basis,~~commencing ~~evidence~~12 months ~~supporting~~after the ~~amounts~~ date granted and ~~disclosures~~expire inat the ~~consolidated~~end ~~financial~~of ~~statements~~10 years. AnThis ~~audit~~plan was ~~also~~completed ~~includes~~at ~~assessing~~March ~~the~~1996 ~~accounting~~and ~~principles~~no ~~used~~new ~~and~~options ~~significant~~have been granted under the plan ~~estimates~~since ~~made~~then. byOptions ~~management~~for 33,620, as15,000, ~~well~~and as2,090 ~~evaluating~~shares ~~the~~were ~~overall~~exercised during ~~financial~~fiscal ~~statement~~years ~~presentation.~~2001, We2000 ~~believe~~and ~~that~~1999, ~~our~~respectively. ~~audits~~No ~~provide a~~options ~~reasonable~~remain ~~basis~~outstanding at ~~for~~September 30, ~~our opinion~~2001.

InTable our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of VSI Holdings, Inc. and subsidiaries at September 30, 2000 and 1999 and the consolidated results of their operations and their cash flows for each year in the three-year period ended September 30, 2000, in conformity with generally accepted accounting principles.Contents

~~Ann~~1997 ~~Arbor~~Nonqualified Stock Option Plan and 1997 Incentive Stock Option Plan. These plans were established during 1997 to issue options to officers and employees at prices not less than the market price at date of grant. Each plan is authorized to issue options for 500,000 ~~Michigan~~shares of common stock. During the ~~December~~fiscal 22year ended September 30, 1999, an additional 1,000,000 options were authorized under the 1997 Incentive Stock Option Plan. Generally, the options vest over a three-year period with 50 percent vesting after two years and the remaining vesting after three years from the date of grant. During fiscal years 2001, 2000 and 1999, 0, 48,000, and 67,666 incentive stock options, respectively, were granted. Options for 146,000, 64,666 and 51,000 were cancelled during fiscal years 2001, 2000 and 1999, respectively. No options have been exercised under these plans. Options for 372,000 shares remain outstanding at September 30, 2001.

~~VSI~~Aggregate ~~Holdings,~~Option/SAR ~~Inc.~~Grants ~~and~~in ~~Subsidiaries~~the ~~Consolidated~~Last ~~Balance~~Fiscal ~~Sheet~~Year

	September 30
	2000	1999
Assets
Current Assets
Cash	$905,000	$552,000
Cash in escrow	-	2,930,000
Trade accounts receivable (net of allowance of $526,000 and $0 at September 30, 2000 and 1999, respectively):
Billed	53,907,000	39,820,000
Unbilled	18,525,000	9,548,000
Notes receivable and advances	201,000	92,000
Inventory	438,000	410,000
Accumulated costs of uncompleted programs	3,744,000	4,883,000
Deferred tax asset (Note 8)	899,000	207,000
Prepaid federal income tax	-	1,451,000
Investment in available-for-sale securities (Note 3)	-	5,259,000
Other current assets	761,000	609,000
Total current assets	79,380,000	65,761,000
Notes Receivable - Officers	921,000	777,000
Property, Plant and Equipment - Net (Note 4)	22,394,000	21,575,000
Deferred Tax Asset (Note 8)	830,000	715,000
Goodwill	1,283,000	1,710,000
Investment in Available-for-Sale Securities (Note 3)	7,131,000	-
Investments (Note 3)	4,190,000	7,764,000
Total assets	$116,129,000	$98,302,000
	=========	=========
Liabilities and Stockholders' Equity
Current Liabilities
Current portion of long-term debt (Note 6)	$552,000	$516,000
Notes payable related party (Note 5)	3,420,000	-
Trade accounts payable	23,479,000	18,452,000
Notes payable to bank (Note 5)	35,214,000	28,426,000
Accrued liabilities	3,970,000	3,318,000
Federal income tax payable	2,139,000	-
Advances from customers for uncompleted projects	375,000	5,975,000
Total current liabilities	69,149,000	56,687,000
Notes Payable - Related parties (Note 5)	12,337,000	11,636,000
Long-term Debt - Net of current portion (Note 6)	7,092,000	7,660,000
Stockholders' Equity (Note 12)
Preferred stock - $1.00 par value per share,
2,000,000 shares authorized, no shares issued	-	-
Common stock - $.01 par value per share, 60,000,000 shares authorized, 33,580,000 shares issued in 2000 and 32,960,000 shares issued in 1999	336,000	330,000
Additional paid-in capital	8,071,000	6,949,000
Retained earnings	20,270,000	14,720,000
Accumulated other comprehensive income	730,000	1,855,000
Treasury stock, at cost - 400,000 shares in 2000 and 300,000 shares in 1999	(1,856,000)	(1,535,000)
Stock subscription receivable	-	-
Total stockholders' equity	27,551,000	22,319,000
Total liabilities and stockholders' equity	$116,129,000	$98,302,000
	=========	=========

There were no options granted during fiscal year 2001 to any of the named executive officers.

~~See~~Aggregate ~~Accompanying~~Option/SAR ~~Summary~~Exercises ~~of Accounting Policies~~ and ~~Notes~~Fiscal toYear-End ~~Consolidated~~Option/SAR ~~Financial~~Value ~~Statements 2~~Tables

~~VSI~~The ~~Holdings~~following table sets forth certain information concerning stock options/SARs granted to the named executive officers by the Company under its 1986 Incentive Stock Option Plan, ~~Inc.~~its 1986 Nonqualified Stock Option Plan, its 1997 Nonqualified Stock Option Plan and ~~Subsidiaries~~its ~~Consolidated~~1997 ~~Statement~~Incentive ofStock ~~Operations~~Option Plan.

	Year Ended September 30
						Number of
	2000	1999	1998
		Shares		Value		Securities
Revenue	$187,255,000	$143,360,000	$163,158,000
Name		Acquired On		Realized		Underlying Unexercised Options/SARs at				Value Of Unexercised
Expenses
		Exercise (#)		($)		Fiscal Year-End (#)				In-The-Money Options/SARs At Fiscal Year-End ($)
Cost of revenue	82,471,000	57,105,000	71,861,000
						Exercisable		Unexercisable		Exercisable		Unexercisable
Operating expenses	90,737,000	82,901,000	74,810,000
Steve Toth Jr.			0		0		0		0		0		0
Total expenses	173,208,000	140,006,000	146,671,000
Thomas W. Marquis			0		0		0		0		0		0
Operating Income	14,047,000	3,354,000	16,487,000
Steve Schultz			0		0		60,000		0		0		0
Other Income (Expenses)
Terry Davis			0		0		0		0		0		0
Equity in losses of unconsolidated investee (Note 3)	(1,515,000)	(400,000)	-
Interest and other income (expense)	69,000	(516,000)	(37,000)
Gain (loss) on sale of assets	168,000	-	(32,000)
Interest expense	(3,708,000)	(3,005,000)	(2,320,000)
Total other expenses	(4,986,000)	(3,921,000)	(2,389,000)
Income (Loss) - Before income taxes	9,061,000	(567,000)	14,098,000
Provision for (Benefit from) Income Taxes (Note 8)	3,511,000	(69,000)	4,887,000
Income (Loss) from continuing operations	5,550,000	(498,000)	9,211,000
Discontinued Operations (Note 14)
Loss from discontinued operations - Net of income tax benefit of $220,000	-	-	(428,000)
Gain on disposal of subsidiary - Net of income tax of $140,000	-	-	271,000
Total discontinued operations	-	-	(157,000)
Net Income (Loss)	5,550,000	(498,000)	9,054,000
Other Comprehensive Income (Expense) - Net of tax
Foreign currency translation adjustment	(17,000)	24,000	(23,000)
Unrealized gain (loss) on securities (Note 3)	(1,108,000)	1,854,000	-
Total other comprehensive income (expense)	(1,125,000)	1,878,000	(23,000)
Comprehensive Income	$4,425,000	$1,380,000	$9,031,000
	==========	==========	==========

SeeTable Accompanying Summary of Accounting Policies and Notes to Consolidated Financial Statements 3Contents

~~VSI~~Director ~~Holdings, Inc. and Subsidiaries Consolidated Statement of Operations (Continued)~~compensation

	Year Ended September 30
	2000	1999	1998
Earnings Per Share
Basic:
Income (loss) from continuing operations	$ 0.17	$ (0.02)	$ 0.28
Loss from discontinued operations	-	-	(0.01)
Gain on disposal of subsidiary	-	-	0.01
Basic net income (loss) per share	$ 0.17	$ (0.02)	$ 0.28
	=========	=========	=========
Fully diluted:
Income (loss) from continuing operations	$ 0.17	$ (0.02)	$ 0.27
Loss from discontinued operations	-	-	(0.01)
Gain on disposal of subsidiary	-	-	0.01
Fully diluted net income (loss) per share	$ 0.17	$ (0.02)	$ 0.27
	=========	=========	=========
Weighted Average Shares Outstanding
Basic	33,070,000	32,816,000	32,851,000
Effect of stock options	262,000	-	682,000
Fully diluted	33,332,000	32,816,000	33,533,000
	=========	=========	=========

General. We do not pay directors who are also officers of VSI Holdings additional compensation for their service as directors. In fiscal year 2001, compensation for our non-employee directors included the following:

~~See~~- ~~Accompanying~~$15,000 ~~Summary~~annual retainer; - $5,000 for each Board meeting and Board committee meeting attended in excess of ~~Accounting~~three ~~Policies~~meetings per year; - reimbursement for reasonable expenses incurred in connection with attending a Board meeting or Board committee meeting; and ~~Notes~~- options to ~~Consolidated~~acquire ~~Financial~~shares ~~Statements~~of 4common stock at fair market value on the date the option is issued. Each option is issued pursuant to our Independent Directors Stock Option Plan.

~~VSI~~Independent ~~Holdings~~Director Stock Option Plan. Options under this plan are granted to independent directors who are neither employees nor beneficial owners of 5 percent or more of the Company’s common stock at prices equal to the market price of the Company’s common stock at date of grant. During fiscal years 2001 and 2000, ~~Inc~~0 and 120,000 options, respectively, were granted. No options were granted during fiscal year 1999. During fiscal year 2000, options for 27,500 were cancelled. No options were exercised during fiscal years 2001, 2000 and 1999. ~~Subsidiaries~~Options ~~Consolidated~~granted ~~Statement~~are usually exercisable 30 days from date of ~~Changes~~grant as determined by vesting schedules in ~~Stockholders'~~the ~~Equity~~plan. Options for 90,000 shares remain outstanding at September 30, 2001.

	Common Stock						Accumulated Other Comprehensive Income
	Shares	Amount	Additional Paid-in Capital	Retained Earnings	Treasury Stock	Stock Subscriptions Receivable	Foreign Currency Translation Adjustments	Unrealized Gain (Loss) on Investments	Total Stockholders' Equity
Balance - October 1, 1997	40,371,000	404,000	7,917,000	6,253,000	(2,907,000)	-	-	-	11,667,000
Net income	-	-	-	9,054,000	-	-	-	-	9,054,000
Exercise of stock options (Note 12)	64,000	-	45,000	-	-	-	-	-	45,000
Issuance of stock options (Note 12)	-	-	83,000	-	-	-	-	-	83,000
Acquisition of stock for treasury	-	-	-	-	(736,000)	-	-	-	(736,000)
Distributions to stockholders	-	-	-	(89,000)	-	-	-	-	(89,000)
Foreign currency translation adjustments	-	-	-	-	-	-	(23,000)	-	(23,000)
Stock issued in acquisition (Note 1)	280,000	3,000	-	-	-	-	-	-	3,000
Issuance of stock	26,000	-	163,000	-	-	(25,000)	-	-	138,000
.
Balance - September 30, 1998	40,741,000	407,000	8,208,000	15,218,000	(3,643,000)	(25,000)	(23,000)	-	20,142,000
Net loss	-	-	-	(498,000)	-	-	-	-	(498,000)
Exercise of stock options (Note 12)	2,000	-	1,000	-	-	-	-	-	1,000
Issuance of restricted stock (Note 11)	154,000	2,000	985,000	-	-	-	-	-	987,000
Acquisition of stock for treasury	-	-	-	-	(798,000)	-	-	-	(798,000)
Foreign currency translation adjustments	-	-	-	-	-	-	24,000	-	24,000
Issuance of stock	87,000	1,000	417,000	-	-	-	-	-	418,000
Retirement of treasury stock	(8,024,000)	(80,000)	(2,826,000)	-	2,906,000	-	-	-	-
Repayment of stock subscriptions	-	-	-	-	-	25,000	-	-	25,000
Tax benefit of stock options exercised	-	-	92,000	-	-	-	-	-	92,000
Issuance of stock options (Note 12)	-	-	72,000	-	-	-	-	-	72,000
Unrealized gain on investments	-	-	-	-	-	-	-	1,854,000	1,854,000
Balance - September 30, 1999	32,960,000	$330,000	$6,949,000	$14,720,000	$(1,535,000)	$-	$1,000	$1,854,000	$22,319,000
Net income	-	-	-	5,550,000	-	-	-	-	5,550,000
Exercise of stock options (Note 12)	440,000	4,000	70,000	-	-	-	-	-	74,000
Issuance of restricted stock (Note 11)	175,000	2,000	1,037,000	-	-	-	-	-	1,039,000
Acquisition of stock for treasury	-	-	-	-	(321,000)	-	-	-	(321,000)
Foreign currency translation adjustments	-	-	-	-	-	-	(17,000)	-	(17,000)
Issuance of stock	5,000	-	15,000	-	-	-	-	-	15,000
Unrealized loss on investments	-	-	-	-	-	-	-	(1,108,000)	(1,108,000)
Balance - September 30, 2000	33,580,000	$336,000	$8,071,000	$20,270,000	$(1,856,000)	$-	$(16,000)	$746,000	$27,551,000
	========	======	========	=========	=========	=========	=========	========	=========

Compensation Committee Interlocks and Insider Participation

~~See~~In ~~Accompanying~~fiscal ~~Summary~~year 2001 the members of ~~Accounting~~the ~~Policies~~Company’s ~~and~~Compensation ~~Notes~~Committee towere Ralph ~~Consolidated~~Armijo, ~~Financial~~Thomas ~~Statements~~W. 5Marquis and Harold A. Poling.

~~VSI~~No ~~Holdings~~executive officer of the Company served as a member of the compensation committee (or other board committee performing equivalent functions or, ~~Inc~~in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served on the compensation committee or Board of Directors of the Company. ~~and~~No ~~Subsidiaries~~executive ~~Consolidated~~officer ~~Statement~~of the Company served as a director of ~~Cash~~another ~~Flows~~entity, one of whose executive officers served on the compensation committee or Board of Directors of the Company. No executive officer of the Company served as a member of the compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served as a director of the Company.

	Year Ended September 30
	2000	1999	1998
Cash Flows from Operating Activities
Net income (loss)	$5,550,000	$ (498,000)	$9,054,000
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation and amortization	5,817,000	5,669,000	4,865,000
Write-off of goodwill	-	2,154,000	-
Bad Debt expense	526,000	-	-
Equity in losses of unconsolidated investee	1,515,000	400,000	295,000
Noncash retirement plan contribution	-	229,000	-
Noncash proceeds from sale of subsidiary	-	-	(736,000)
Deferred income taxes	(237,000)	(347,000)	244,000
(Gain) Loss on sale of property, plant and equipment	(168,000)	-	32,000
Issuance of stock options	-	72,000	83,000
Write-off of assets	516,000	421,000	-
Changes in operating assets:
Trade accounts receivable	(24,090,000)	198,000	(12,881,000)
Inventory	(28,000)	(1,000)	381,000
Accumulated costs of uncompleted programs	1,139,000	(1,663,000)	(555,000)
Other current assets	(152,000)	556,000	2,361,000
Prepaid/accrued federal income tax	3,590,000	(5,921,000)	4,562,000
Trade accounts payable	5,027,000	6,526,000	2,000,000
Accrued liabilities	1,691,000	488,000	1,607,000
Advances from customers for uncompleted projects	(2,670,000)	800,000	1,177,000
Net cash provided by (used in) operating activities	(1,974,000)	9,083,000	12,489,000
Cash Flows from Investing Activities
Additions to property, plant and equipment	(7,165,000)	(3,061,000)	(13,506,000)
Proceeds from sale of property, plant and equipment	608,000	-	2,000
Additions to notes receivable and advances	(253,000)	(146,000)	(1,138,000)
Payments on notes receivable and advances	-	1,200,000	9,708,000
Investments in affiliates	-	-	(2,925,000)
Investment in available-for-sale securities	(50,000)	(2,450,000)	-
Purchase of other investments	(941,000)	(7,150,000)	(307,000)
Net cash used in investing activities	(7,801,000)	(11,607,000)	(8,166,000)
Cash Flows from Financing Activities
Principal payments on long-term debt	(532,000)	(918,000)	(164,000)
Proceeds from long-term debt	-	2,621,000	3,580,000
Principal payments on related party debt	(1,080,000)	(18,000)	-
Proceeds from related party debt	5,201,000	160,000	11,055,000
Net borrowings on notes payable	6,788,000	3,287,000	1,994,000
Proceeds from issuance of stock	89,000	190,000	211,000
Distributions to stockholders	-	-	(20,748,000)
Acquisition of treasury stock	(321,000)	(798,000)	-
Proceeds from payment of stock subscription	-	25,000	-
Redemption of common stock	-	(1,960,000)	-
Net cash provided by (used in) financing activities	10,145,000	2,589,000	(4,072,000)
Effect of Exchange Rate Changes on Cash	(17,000)	24,000	(23,000)
Net Increase in Cash	353,000	89,000	228,000
Cash - Beginning of year	552,000	463,000	235,000
Cash - End of year	$905,000	$552,000	$463,000
	=========	=========	=========

Item 12. Security Ownership of Certain Beneficial Owners and Management.

~~See~~Voting ~~Accompanying~~rights ~~Summary~~are held by the owners of ~~Accounting~~our ~~Policies~~common ~~and~~stock, ~~Notes~~of which each share is entitled to ~~Consolidated~~one ~~Financial~~vote ~~Statements~~on 6each matter coming before the shareholders. Only one class of Common Stock is authorized; none of the authorized Preferred Stock has been issued. On December 1, 2001, the Company had 33,415,780 shares of common stock (net of 400,250 treasury shares) outstanding. Such shares, and shares issuable under options exercisable within 60 days of December 1, 2001, were owned by:

VSITable Holdings,of Inc. and Subsidiaries Notes to Consolidated Financial Statements September 30, 2000 and 1999Contents

Note 1 - Organization of the Company and Basis of Presentation The accompanying consolidated financial statements include the accounts of VSI Holdings, Inc. (the "Company"), its wholly owned subsidiaries, consisting of Advanced Animations, Inc., Vispac, Inc., Visual Services, Inc., PSG International, Inc. and its majority owned subsidiary, eCity Studios, Inc. Intercompany balances and transactions have been eliminated in consolidation. Advanced Animations, Inc. designs and manufactures product simulators and animatronic displays. Customers are primarily from the retail and entertainment industry throughout the world. Vispac, Inc. provides administrative and promotional services, warehousing and packaging operations and call center operations predominantly for North American automobile manufacturers. Visual Services, Inc. is a broad-based provider of educational curriculums and product training, interactive technology-based Distance Learning Systems, product launches, web site development, direct response and site-based marketing, and change process and cultural change consulting. Customers are primarily North American automobile manufacturers. During the year ended September 30, 2000, the Company, in connection with Oz Entertainment Co. (see Note 3), formed eCity Studios, Inc., a Corporation in which VSI Holdings, Inc. acquired a 70% interest in the stock. eCityStudios, Inc. has been included in the consolidated financial statements. eCity Studios, Inc. provides web-site development consulting to customers throughout North America. PSG International, Inc. provides curriculum development and product training to automobile manufacturers at the dealership level throughout Canada, Australia, New Zealand and Taiwan. PSG International, Inc. was formed during the year ended September 30, 1998 when the Company completed the purchase of the assets of an unrelated company. The total purchase price was $4,543,625 and resulted in goodwill of $4,484,000. The Company issued 280,000 shares of common stock valued at $7.00 per share, with the balance of $2,583,625 paid in cash. As part of the PSG International, Inc. purchase agreement, the shares issued to the seller were subject to a "put option" in which the seller had the option to sell the shares back to the Company in April 1999 for $2,100,000 ($7.50 per share). During the year ended September 30, 1999, the "put option" was exercised and the shares were subsequently retired to treasury stock.


Name and Address		Shares Owned		% Ownership
	Steve Toth, Jr. and family members (1) 41000 Woodward Avenue Bloomfield Hills, Michigan 48304		27,905,755		83.51	%

	Martin S. Suchik (2) 1778 Ellsworth Industrial Blvd Atlanta, Georgia 30318		485,025		1.45	%

	Thomas W. Marquis (3) 41000 Woodward Avenue Bloomfield Hills, Michigan 48304		514,431		1.54	%

	Steve Schultz (4) 41000 Woodward Avenue Bloomfield Hills, Michigan 48304		97,192		.29	%

	Terry Davis 41000 Woodward Avenue Bloomfield Hills, Michigan 48304		918,906		2.75	%

	Harold Poling (5) 290 Town Center Drive, Suite 322 Dearborn, Michigan 48126		365,900		1.09	%

	Ralph Armijo (5) 6399 South Fiddler Green Circle Greenwood Village, Colorado 80111		15,900		.05	%

	William James (5) 38710 Woodward Avenue Bloomfield Hills, Michigan 48304		20,900		.06	%

	All directors and officers as a group (8 persons) (1-5)		30,324,009		90.17	%

7(1) Mr. Toth is trustee of trusts benefiting him that own 400,000 and 11,826,323 shares. Mr. Toth’s spouse is the trustee of trusts benefiting Mr. Toth’s daughter that owns 11,712,199 shares, and of another trust benefiting her that owns 1,010,797 shares. Mr. Toth disclaims beneficial interest in the shares held by trusts benefiting his daughter and spouse, but such shares are included with his holdings. CLT, a Michigan partnership affiliated with Mr. Toth (“CLT”), holds 2,055,586 shares. 900,850 shares are held by a charitable foundation, of which Mr. Toth is executive director.

Note 2 - Significant Accounting Policies Revenue Recognition - Visual Services, Inc., Vispac, Inc., PSG International, Inc., and eCity Studios, Inc. recognize revenue over the period of the contract as individually identifiable phases of contracts are completed. Amounts recognized are accumulated in unbilled accounts receivable until billed in accordance with contract terms. Advanced Animations, Inc. records revenue on display contracts of varying duration on the basis of the Company's estimates of the percentage of completion of individual contracts. A percentage of the contract price, determined by the ratio of incurred costs to total estimated costs, is included in revenue and the incurred costs are charged against this revenue. Revisions in cost and profit estimates during the course of the work are reflected in the accounting period in which the facts that require the revision become known. Billings are made in accordance with contract terms. At the time a loss on a contract becomes known, the entire amount of the estimated loss is accrued. Cash in Escrow - Certain amounts received from clients in advance had been restricted and held in escrow until costs related to a specific job are incurred by the Company. During the year ended September 30, 2000, the escrow arrangement was terminated. Inventory - Inventory, which consists of raw materials and supplies, is recorded at the lower of cost, determined on the specific unit basis, or market. Accumulated Costs of Uncompleted Programs - Accumulated costs of uncompleted programs consist of costs accumulated on various service-related contracts of Visual Services, Inc. The accumulated costs are included as a current asset, as they consist of ongoing job costs, which will be recorded as cost of revenue against the appropriate revenue recognized within the next fiscal year. At September 30, 2000 and 1999, indirect contract costs amounting to $733,000 and $720,000, respectively, were capitalized and included in accumulated costs. Property, Plant and Equipment - Property, plant and equipment are recorded at cost. Depreciation is computed using accelerated and straight-line methods over the estimated useful lives of the assets. Amortization of leasehold improvements is computed on the straight-line method over the estimated useful lives of the assets or the lease term. Costs of maintenance and repairs are charged to expense when incurred. Production costs, representing the direct materials, labor, overhead costs and interest associated with self-constructed assets, are capitalized during construction. Once completed and placed in service, the assets are reclassified to equipment and depreciated over the appropriate depreciable lives. 8 Note 2 - Significant Accounting Policies (Continued) Goodwill - Goodwill represents the excess cost of acquiring PSG International, Inc. over the fair value of its net assets at the date of acquisition. The carrying value of goodwill is evaluated annually based on the projected discounted cash flows of PSG International, Inc. To the extent the carrying value of goodwill significantly exceeds the projected discounted cash flows, a write-down of goodwill is recorded. During the year ended September 30, 1999, as a result of a reduction in the estimated future business generated by PSG International, Inc., goodwill of $2,154,000 relating to the acquisition was written off because it was considered to have no continuing value. In addition, the Company reduced the life over which the remaining goodwill was being amortized from 15 to 6 years. This change in the estimated life of the goodwill had the effect of decreasing net income for the year ended September 30, 1999 by $260,000 ($0.01 per share) Mr. Suchik Atowns ~~September 30~~473,912 2000 and 1999, accumulated amortization amounted to $1,047,000 and $620,000, respectively. Total amortization expense amounted to $427,000, $422,000 and $198,000 for the years ended September 30, 2000, 1999 and 1998, respectively. Income Taxes - Deferred tax assets and liabilities are recognized based on the difference between financial statement carrying amounts and income tax bases of assets and liabilities using currently enacted income tax rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the year in deferred tax assets and liabilities. Retirement Plan - The Company has a voluntary retirement savings plan designed in accordance with Section 401(k) of the Internal Revenue Code that covers all eligible employees. Employer contributions are discretionary and determined annually by management. There was no contribution made for the year ended September 30, 2000. Employer contributions amounted to $229,000 of the Company's stock and $212,000 of cash for the years ended September 30, 1999 and 1998, respectively. Earnings per Share - Earnings per share is computed using the weighted average number of shares ~~outstanding. Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the year~~, ~~without~~while ~~regard~~his toIRA ~~stock~~owns ~~options~~another ~~and restricted stock awards outstanding. In the computation of fully diluted earnings per share~~11,113 ~~the treasury stock method of determining weighted average~~ shares ~~is required, which assumes the exercise of existing stock options and awards and the repurchase of shares with the proceeds, if such a computation has a dilutive effect~~. 9 Note 2 - Significant Accounting Policies (Continued) Stock Options - The Company has several stock option plans (see Note 12). Options granted to nonemployees are accounted for at fair value. Options granted to employees and directors are accounted for using the intrinsic value method, under which compensation expense is recorded at the amount by which the market price of the underlying stock at the grant date exceeds the exercise price of an option. Under the Company's plans, the exercise price on all options granted equals or exceeds the fair value of the stock at the grant date. Accordingly, no compensation cost is recorded as a result of stock option awards to employees under the plans. Impairment of Long-Lived Assets - The Company reviews long-lived assets for impairment when circumstances indicate the carrying amount of an asset may not be recoverable. An impairment is recognized when the sum of undiscounted estimated future cash flows expected to result from the use of the asset is less than the carrying value. Investments - The Company's securities investments that are bought and held principally for the purpose of selling them in the near term are classified as trading securities. Trading securities are recorded at fair value on the balance sheet in current assets, with the change in fair value during the period included in earnings. Debt securities that the Company has the positive intent and ability to hold to maturity are classified as held-to-maturity securities and recorded at amortized cost in investments. Securities investments not classified as either held-to-maturity or trading securities are classified as available-for-sale securities. Available-for-sale securities are recorded at fair value in investments on the balance sheet, with the change in fair value during the period excluded from earnings and recorded net of tax as a component of other comprehensive income. The Company's investment in nonmarketable securities is stated at cost. Investment in Partnerships - Investments in partnerships are accounted for using the equity method. Comprehensive Income - Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Certain changes in assets and liabilities, however, such as unrealized gains and losses on available-for-sale securities and foreign currency translation adjustments, are reported as a direct adjustment to the equity section of the balance sheet. Such items, along with net income, are considered components of comprehensive income . 10 Note 2 - Significant Accounting Policies (Continued) Foreign Currency Translation - The assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the current rate of exchange on the last day of the reporting period, revenue and expenses are translated at the average monthly exchange rates, and all other equity transactions are translated using the actual rate on the date of the transaction. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. For example, the Company recognizes certain revenue using the percentage of completion method, which requires the use of significant estimates. Actual results could differ from those estimates. Future Accounting Changes - In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin 101. The staff accounting bulletin summarizes certain of the staff's views in applying generally accepted accounting principles to revenue recognition in financial statements. Any changes that may be required as a result of this bulletin are required to be implemented no later than the last fiscal quarter of the fiscal year beginning October 1, 2000. Management is finalizing its assessment of the impact this bulletin will have, if any, on the Company's financial statements. Reclassifications - The Company has made certain reclassifications to the statement of operations. These reclassifications had no impact on net income, earnings per share or stockholders' equity.

NoteTable 3 - Investments The available-for-sale securities consist of the following:Contents

	2000	1999
431,525 shares of Navidec, Inc. common stock (representing a less than 5 percent ownership interest).	$ 3,344,000	$ 5,259,000
473,308 shares of eCollege.com common stock (representing a less than 5 percent ownership interest).	3,787,000	-
Total investment in available-for-sale securities	$ 7,131,000	$ 5,259,000
	=========	========

(3) Mr. Marquis is trustee of a trust benefiting him that owns 261,567 shares. His spouse is trustee of a trust benefiting her that owns 252,864 shares. Mr. Marquis disclaims beneficial ownership of his spouse’s shares.

11(4) Includes 60,000 options that can be exercised within sixty days of December 1, 2001.

~~Note~~(5) Mr. Poling 3owns 250,000 shares and was granted 15,000 non-employee ~~Investments~~options exercisable ~~(Continued)~~at $6.20 per share in November, 1997, and 85,000 non-employee options in November, 1998, with 50,000 exercisable at $5.75 per share and 35,000 exercisable at $8.20 per share. Mr. James was granted 5,000 non-employee options exercisable at $6.20 per share in December, 1997. Under the Independent Director Stock Option Plan, Messrs. Poling, James and Armijo were granted new 30,000 share options in May, 2000 exercisable for $3.25 per share; such options vest at the rate of 2,100 shares for each Board meeting attended, with a minimum of 7,500 annually. Messrs. Poling, James and Armijo are vested in 115,900, 20,900 and 15,900 shares respectively.

~~During the year ended September 30, 2000, upon a public offering by eCollege~~Item 13.~~com,~~ ~~the~~Certain ~~Company~~Relationships converted its nonmarketable investment in eCollege.com into 468,808 shares of common stock. Upon the public offering, the Company purchased an additional 4,500 shares of common stock. Unrealized gains on the available-for-sale securities are included as a separate component of stockholders' equity, net of any related tax effect. At September 30, 2000 and ~~1999,~~Related ~~gross unrealized holding gains on available-for-sale securities amounted to $1,131,000, and $2,809,000, respectively~~Transactions. As of December 22, 2000, the market value of the available-for-sale securities was approximately $2,737,000, and the gross unrealized holding loss was approximately $3,273,000. The Company's investment in partnerships and nonmarketable securities consists of the following:

	2000	1999
KC Investors, L.P.	$ 2,812,000	$ 3,470,000
Corporate Eagle Five, L.L.C.	540,000	762,000
Visual Learning Systems, L.L.C.	(124,000)	32,000
Performance Planning, L.L.C.	462,000	-
Total investment in partnerships	3,690,000	4,264,000
Nonmarketable equity securities	500,000	3,500,000
Total investment in partnership	$ 4,190,000	$ 7,764,000
and nonmarketable securities	=========	========

Steve Toth, Jr., The Chairman, President and CEO, of the Company, together with his family, directly and indirectly owns 83.51% of the Company as of December 1, 2001.

~~The~~Loans investment in partnerships consists of several partnership investments that have been accounted for under the equity method. The investment in KC Investors, L.P. (KCI) represents an approximate 15 percent interest in the partnership. KCI was formed as an investment partnership to fund the continuing development of the Oz Entertainment Company, a corporation in which KCI holds a majority interest. The Oz Entertainment Company is a development stage company engaged in the early stages of development of a theme park and ~~resort~~from inToth ~~Kansas based on the 1939 MGM film, "The Wizard of Oz"~~Family. 12At ~~Note 3 - Investments (Continued) In addition to the cash invested~~September 30, ~~the~~2001 ~~Company has provided web-site development~~ and ~~promotional services totaling $2,247,000 to the Oz Entertainment Company. At~~ September 30, ~~1999~~2000, ~~the Company~~ we had ~~receivables~~advanced ~~of approximately~~ $195,~~410,~~000 and ~~accumulated costs on uncompleted programs of approximately~~ $~~147~~804,000, ~~relating~~respectively, to ~~KCI and the Oz Entertainment Company~~Mr. Toth, ~~The~~which amounts ~~were~~are non-interest ~~collected~~bearing ~~subsequent~~and ~~to September 30, 2000 from additional funds invested by CLT Associates, L~~unsecured.P. ~~CLT~~In ~~Associates~~addition, ~~L.P.~~demand ~~(CLT),~~notes ~~a partnership controlled by the majority stockholder of the Company~~totalling $715,000 ~~owns~~bearing ~~an additional 6 percent~~ interest inat ~~KC Investors, L~~7.P.00% and aunsecured, ~~direct~~were ~~interest~~borrowed infrom ~~preferred stock of the Oz Entertainment Company~~Mr. ~~The investment in nonmarketable securities at September 30~~ Toth, and ~~2000 consists of 1~~$603,~~342~~000 ~~shares~~is ofoutstanding ~~senior preferred stock in Oz Entertainment Company, a corporation in which KCI (a partnership investment of the Company) holds a majority interest. The investment in nonmarketable securities~~ at September 30, ~~1999~~2001. ~~consisted~~No ofrestrictive ~~100,014~~covenants were ~~shares of convertible preferred stock in eCollege~~imposed.~~com.~~

Note 4Payable -to ~~Property~~CLT Associates, ~~Plant~~L.P. ~~and~~(CLT). ~~Equipment~~CLT ~~Property,~~is ~~plant~~a ~~and~~partnership ~~equipment~~which ~~consist~~is controlled by Mr. Toth. At the start of the ~~following:~~fiscal year, we had borrowed $2,920,000 from CLT at 7.00%. The note is unsecured, and imposes no restrictive covenants. The balance at September 30, 2001 was $90,000. This amount was reduced by repayments.

	2000	1999	Depreciable Life - Years
Land and land improvements	$1,286,000	$1,286,000	-
Building	8,171,000	8,171,000	18-39
Furniture, fixtures and equipment	38,547,000	35,539,000	5-10
Leasehold improvements	3,810,000	3,808,000	18-39
Production costs	-	1,250,000	-
Vehicles	960,000	2,113,000	5
Total	52,774,000	52,167,000
Less accumulated depreciation and amortization	30,380,000	30,592,000
Net carrying amount	$22,394,000	$21,575,000
	=========	=========

CLT Stock Option. The 1993 reorganization plan of our former retail segment provided that Mr. Toth be issued stock options for 1,600,000 shares. Mr. Toth assigned an 825,000 share option to CLT, which exercised the last 425,000 shares in November, 1999 at $.15625 per share.

CLT has invested $9.7 million in Oz Entertainment Corporation and KC Investors, LP. These are the organizations which had hoped to develop the Wonderful World of Oz theme park. Our investment, combined with CLT totaled $13.2 million at September 30, 2001. We have written off all of our investment at September 30, 2001. See Note 3 of Notes to the Company’s consolidated financial statements.

~~Note~~Declared 4Distributions -to ~~Property,~~Stockholders. ~~Plant~~Prior ~~and~~to ~~Equipment~~their ~~(Continued)~~acquisition ~~Depreciation~~by ~~expense~~the Company ~~amounted~~in ~~to $5~~February,~~390,000,~~ ~~$5,668,000~~July and $4September 1997,~~666,000~~ ~~for~~ the ~~years~~income ~~ended~~of ~~September 30~~Advanced Animations, ~~2000~~Inc., ~~1999 and 1998~~Vispac, ~~respectively~~Inc. ~~During~~and ~~the~~Visual ~~year ended September 30~~Services, ~~2000,~~Inc. ~~a touring exhibit~~ was ~~deemed~~taxed to betheir respective ~~impaired~~stockholders and ~~written~~members. ~~down~~A toportion ~~fair~~of ~~value.~~such ~~Fair~~income ~~value~~ was ~~determined~~distributed to bypay ~~estimating~~such ~~future cash inflows from the exhibit~~taxes. ~~The~~At ~~Company~~September 30, ~~estimated~~1997, ~~that~~we ~~there~~had ~~would~~declared, ~~be no future net cash flows~~ and ~~recorded~~owed, distributions ~~an impairment loss~~ of $~~516~~20,659,000 ~~(included~~to insuch ~~operating~~stockholders ~~expenses)~~and ~~for the year ended September 30, 2000~~members. ~~During~~Such distributions ~~the~~related ~~year~~not ~~ended~~only ~~September~~to ~~30,~~income ~~1999,~~earned ~~several~~by ~~customized~~such ~~trailers~~subsidiaries ~~with electronic equipment~~from October 1, ~~along~~1996 ~~with~~until ~~specialized~~their ~~tents used for specific jobs~~acquisition, ~~were~~but ~~deemed~~also toincluded beincome ~~impaired~~previously retained ~~and~~by ~~written~~such ~~down~~subsidiaries toas ~~their~~working ~~fair value~~capital. ~~Fair~~In ~~value~~1997, ~~which~~$11,494,000 ~~was determined by estimating the future cash inflows~~ of ~~such assets, exceeded their carrying value by~~ the $~~421~~20,659,000. Anwas ~~impairment~~converted ~~loss~~into ofa ~~that~~subordinated ~~amount~~note ~~(included~~payable infrom ~~operating~~us ~~expenses) has been charged~~ to ~~operations for the year ended September 30, 1999.~~these

NoteTable 5 - Notes Payable The Company has several lines of credit, as follows:Contents

		2000	1999
	Bank line of credit permitting borrowings up to $32,000,000 at .50 percent below the bank's prime rate (9.50 percent at September 30, 2000). Borrowings equal to or greater than $500,000 can be made for fixed periods of time at a fixed rate equal to LIBOR plus 1.50 percent (LIBOR at September 30, 2000 was 6.62 percent). Collateralized by all assets of the Company and expiring in March 2001.	$24,434,000	$22,413,000
	Bank line of credit permitting borrowings up to $5,000,000 at .50 percent below the bank's prime rate (9.50 percent at September 30, 2000). Borrowings equal to or greater than $500,000 can be made for fixed periods of time at a fixed rate equal to LIBOR plus 1.50 percent (LIBOR at September 30, 2000 was 6.62 percent). Collateralized by all assets of the Company and expiring in March 2002	4,900,000	3,750,000
14
Note 5 -	Notes Payable (Continued)
	Checks written but not yet presented to the bank. Upon presentation to the bank, additional borrowings will be made on the line of credit. The Company policy is to reflect these checks as additional amounts payable to the bank	5,880,000	2,263,000
	Total notes payable to bank	$35,214,000	$28,426,000
		=========	=========

former stockholders, bearing interest at 7.00%, due December,2002, and subordinated to all bank debt. Approximately $10,250,000 of this subordinated note belongs to Mr. Toth. Interest of $713,000 owing to Mr. Toth was paid or accrued during the fiscal year.

~~The~~Lease ~~loan~~of ~~agreements~~Real ~~contain~~Estate. ~~certain~~Mr. Toth ~~covenants~~directly ~~requiring~~and ~~that,~~indirectly ~~among~~owns ~~other things,~~ the ~~Company~~entire ~~maintain~~interest in ~~certain~~a ~~levels~~partnership of(CLT) that ~~net~~owns ~~worth~~the ~~and~~building ~~working~~in ~~capital~~which ~~and~~Vispac ~~that~~is ~~the~~based. ~~ratio~~The lease ofis ~~total~~for ~~liabilities~~$551,000 toper ~~net~~year ~~worth~~until November, ~~debt~~2001 ~~service ratio~~ and ~~current~~$638,000 ~~ratio~~thereafter until doit ~~not~~expires ~~exceed~~in ~~certain~~September ~~amounts~~2006. ~~Notes~~The ~~payable~~rental tocharges ~~related~~do ~~parties~~not ~~consists~~exceed ofthose ordinarily and customarily paid in the ~~following:~~community.

		2000	1999
	Notes payable to stockholders of VSI Holdings, Inc., unsecured, bearing interest at 7.00 percent and due December 31, 2002. The notes are subordinated to all bank debt.	$12,337,000	$11,636,000
	Note payable to a partnership in which the Company's controlling stockholder owns 100 percent through direct and indirect ownership. The unsecured note is due on demand and bears interest at 7.00 percent.	2,920,000	-
	Note payable to a stockholder, unsecured, bearing interest at 7.00 percent and due on demand.	500,000	-
	Total Less current portion Long-term portion	15,757,000 3,420,000 $12,337,000	11,636,000 - $11,636,000
		==========	==========
The weighted-average interest rate on short-term notes payable was 8.70 percent and 6.90 percent as of September 30, 2000 and 1999, respectively.

~~Note~~VSI 6Holdings, -Inc. ~~Long-term~~and ~~Debt Long-term debt consists of the following:~~Subsidiaries

	2000	1999
Mortgage payable to bank, bearing interest at the bank's prime rate (9.50 percent at September 30, 2000), due in monthly installments of $21,765 including interest, with a final principal payment due on September 1, 2004. The mortgage is collateralized by the related land and building with a net book value of $2,768,000 at September 30, 2000	2,352,000	2,400,000
Mortgage payable to bank, bearing interest at 6.30 percent, due in monthly installments of $18,199 including interest, with a final principal payment due on October 8, 2005. The mortgage is collateralized by the related land and building with a net book value of $3,355,000 at September 30, 2000	2,349,000	2,415,000
Term loan payable to bank, bearing interest at 6.52 percent, due in monthly installments of $33,724 including interest with the final payment due October 8, 2001. The loan is collateralized by all assets of the Company	390,000	756,000
Mortgage payable to bank, bearing interest at 8.17 percent, due in monthly installments of $22,201 including interest, with a final principal payment due on June 4, 2004. The mortgage is collateralized by the related land and building with a net book value of $691,000 at September 30, 1999	2,553,000	2,605,000
Total Less current portion Long-term portion	7,644,000 552,000 $7,092,000	8,176,000 516,000 $7,660,000
	========	========

Consolidated Financial Report

16September 30, 2001

NoteTable 6of - Long-term Debt (Continued)Contents

~~Estimated~~VSI ~~principal~~Holdings, ~~payments~~Inc. ~~due~~and ~~on the long-term debt are as follows:~~Subsidiaries

Years Ending September 30	Amount
		Contents
2001	$552,000
Report Letter			1
2002	246,000
Consolidated Financial Statements
2003	229,000
	Balance Sheet		2
2004	4,586,000
	Statement of Operations		3
2005	93,000
	Statement of Changes in Stockholders’ Equity		4
2006 and thereafter	1,938,000
	Statement of Cash Flows		5
Total	$7,644,000
	Notes to Consolidated Financial Statements		6-28
	========

NoteTable 7 - Commitments and Contingencies Lease Commitments - The Company utilizes operating leases for equipment, warehouses and operating facilities. For most locations, the Company pays taxes, insurance and maintenance costs. Lease terms generally range from one to six years with renewal options for additional three- to five-year periods. The Company leases one of its primary operating facilities from a partnership, of which the Company's controlling stockholder owns 100 percent through direct and indirect ownership. The minimum lease payments for the remaining years under the above leases are as follows:Contents

Years Ending September 30	Related Party	Other	Total
2001	$551,000	$4,102,000	$4,653,000
2002	623,000	3,791,000	4,414,000
2003	638,000	1,759,000	2,397,000
2004	638,000	121,000	759,000
2005	638,000	30,000	668,000
2006 and thereafter	797,000	-	797,000
Total	$3,885,000	$9,803,000	$13,688,000
	========	========	=========

Independent Auditor’s Report

17To the Board of Directors and Stockholders

~~Note~~VSI 7Holdings, -Inc. ~~Commitments~~ and ~~Contingencies (Continued)~~Subsidiaries

~~The~~We ~~Company~~have ~~remains~~audited the ~~guarantor~~accompanying consolidated balance sheet of ~~the~~VSI ~~operating~~Holdings, Inc. ~~leases~~and ofsubsidiaries ~~BKNT~~as ~~Retail~~of ~~Stores~~September 30, ~~Inc.~~2001 ~~(see~~and ~~Note~~2000 ~~14).~~and ~~The~~the ~~sole~~related consolidated ~~stockholder~~statements of ~~BKNT~~operations, ~~Retail~~changes ~~Stores~~in stockholders’ equity, ~~Inc.~~and cash ~~has~~flows ~~pledged~~for ~~216,750~~each ~~shares~~year ofin ~~VSI~~the ~~Holdings~~three-year period ended September 30, ~~Inc~~2001. These asconsolidated ~~collateral~~financial ~~relating~~statements toare the ~~lease~~responsibility ~~commitments.~~of ~~The~~the ~~minimum~~Company’s management. ~~lease~~Our ~~payments~~responsibility ~~for~~is ~~the~~to ~~remaining~~express ~~years~~an ~~under~~opinion on these ~~leases~~consolidated financial ~~are~~statements asbased ~~follows:~~on our audits.

Years Ending September 30	Amount
2001	322,000
2002	88,000
2003	25,000
Total	$435,000
	========

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits 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 financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

~~Rent~~In ~~expense~~our ~~was~~opinion, asthe ~~follows~~consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of VSI Holdings, Inc. and subsidiaries at September 30, 2001 and 2000 and the consolidated results of their operations and their cash flows for each year in the ~~years~~three-year period ended September 30:, 2001, in conformity with accounting principles generally accepted in the United States of America.

	2000	1999	1998
Related party	$551,000	$551,000	$551,000
Other	3,133,000	3,169,000	4,176,000
Total	$3,684,000	$3,720,000	$4,727,000
	========	========	========

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 17, the Company incurred a net loss of $21,209,000 for the year ended September 30, 2001. At September 30, 2001, the Company has a working capital deficit of $17,258,000 and the Company has violated restrictive covenants on its bank credit facilities. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans with respect to these matters are also disclosed in Note 17. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

~~Note~~Plante 8& ~~- Income Taxes The following is a summary of the deferred tax assets and liabilities at September 30~~Moran, ~~2000 and 1999:~~LLP

	2000	1999
Deferred tax assets:
Depreciation and amortization	$1,050,000	$991,000
Net operating loss carryforwards	-	36,000
Accrued expenses not deductible for tax purposes	900,000	670,000
Losses from partnership investments - Equity method	405,000	180,000
Total deferred tax assets	2,355,000	1,877,000
Deferred tax liabilities - Unrealized gain from investments	(385,000)	(955,000)
Net deferred tax asset before valuation allowance	1,970,000	922,000
Valuation allowance	(241,000)	-
Net deferred tax asset	$ 1,729,000	$ 922,000
	=======	========

Ann Arbor, Michigan
December 13, 2001

TheTable provision for income taxes consists of the following:Contents

	2000	1999	1998
Current	$3,748,000	$278,000	$ 4,643,000
Deferred	(237,000)	(347,000)	244,000
Total provision for (benefit from) income taxes	$3,511,000	$(69,000)	$4,887,000
	=======	========	=======

VSI Holdings, Inc. and Subsidiaries

					Consolidated Balance Sheet

						September 30

						2001			2000

				Assets
Current Assets
	Cash					$	4,719,000		$	905,000
	Trade accounts receivable (net of allowance of $1,026,000 and $526,000 at September 30, 2001 and 2000, respectively):
		Billed					25,555,000			48,116,000
		Unbilled					5,674,000			23,304,000
		Purchased receivables (Note 2)					27,012,000			4,900,000
	Notes receivable and advances						167,000			201,000
	Inventory						307,000			438,000
	Accumulated costs of uncompleted programs (net of allowance of $343,000 and $0 at September 30, 2001 and 2000, respectively)						2,822,000			3,744,000
	Deferred tax asset (Note 8)						1,574,000			899,000
	Refundable federal income tax						5,625,000			—
	Other current assets						1,239,000			761,000

			Total current assets				74,694,000			83,268,000
Purchased Receivables (Note 2)							4,779,000			891,000
Notes Receivable — Officers							1,065,000			921,000
Property, Plant, and Equipment (Note 4)							15,858,000			22,394,000
Property Held for Sale (Note 2)							3,310,000			—
Deferred Tax Asset (Note 8)							6,002,000			830,000
Goodwill							855,000			1,283,000
Investment in Available-for-Sale Securities (Note 3)							1,885,000			7,131,000
Investments (Note 3)							624,000			4,190,000

			Total assets			$	109,072,000		$	120,908,000

				Liabilities and Stockholders’ Equity
Current Liabilities
	Current portion of long-term debt (Note 5)					$	7,102,000		$	552,000
	Notes payable — Related party (Note 6)						1,644,000			3,420,000
	Trade accounts payable						21,714,000			23,479,000
	Notes payable to bank (Note 5)						51,068,000			35,214,000
	Accrued liabilities						2,742,000			3,970,000
	Federal income tax payable						—			2,139,000
	Advances from customers for uncompleted projects						7,682,000			5,154,000

			Total current liabilities				91,952,000			73,928,000
Notes Payable — Related parties (Note 6)							11,993,000			12,337,000
Long-term Debt — Net of current portion (Note 5)							—			7,092,000
Stockholders’ Equity (Note 12)
	Preferred stock — $1.00 par value per share, 2,000,000 shares authorized, no shares issued						—			—
	Common stock — $.01 par value per share, 60,000,000 shares authorized, 33,816,000 shares issued in 2001 and 33,580,000 shares issued in 2000						338,000			336,000
	Additional paid-in capital						9,057,000			8,071,000
	Retained earnings (accumulated deficit)						(939,000	)		20,270,000
	Accumulated other comprehensive income (loss)						(1,473,000	)		730,000
	Treasury stock, at cost — 400,000 shares in 2001 and 2000						(1,856,000	)		(1,856,000	)

			Total stockholders’ equity				5,127,000			27,551,000

			Total liabilities and stockholders’ equity			$	109,072,000		$	120,908,000

~~Note~~See 8Accompanying -Summary ~~Income~~of ~~Taxes~~Accounting Policies ~~(Continued)~~and Notes to Consolidated Financial Statements.

~~A reconciliation of taxes on income from continuing operations based on the statutory federal income tax rate to the provision for income taxes is as follows:~~2

	2000	1999	1998
Tax computed at statutory federal income tax rate	$3,080,000	$(193,000)	$4,793,000
Nondeductible expenses	196,000	164,000	92,000
Change in valuation allowance	241,000	-	-
Adjustments to prior year taxes and other	(6,000)	(40,000)	2,000
Total provision for (benefit from) income taxes	$ 3,511,000	$(69,000)	$4,887,000
	========	========	=======

AVSI ~~valuation~~Holdings, ~~allowance~~Inc. ~~has~~and ~~been established due to the uncertainty~~Subsidiaries ~~of the Company being able to realize certain losses from partnerships~~ ~~for tax purposes.~~

Note 9 - Cash Flows Cash paid during the years ended September 30, 2000, 1999 and 1998 for interest amounted to $3,589,000, $3,013,000 and $2,123,000, respectively. Cash paid for income taxes in those years was $158,000, $6,199,000 and $6,000, respectively. The Company had the following noncash transactions: · During 2000, the Company received 1,342 shares of senior preferred stock in Oz Entertainment Company in exchange for a reduction of an accounts receivable due from Oz Entertainment Company of $500,000. · During the years ended September 30, 2000 and 1999, the Company issued 174,713 and 154,126 shares of stock under its restricted stock compensation plan, respectively (see Note 11). As a result, the Company reduced the accrual for stock compensation and recorded additional stock and paid-in capital totaling $1,039,000 and $987,000, respectively. · During 1998, the Company purchased PSG International, Inc. As part of the purchase price, the Company issued 280,000 shares of common stock with a value at the date of purchase of $1,960,000 (see Note 1). · During 1998, the Company received 144,000 shares of its own common stock valued at $736,000 as proceeds on the sale of the discontinued operations. 20

							Consolidated Statement of Operations

				Year Ended September 30

				2001			2000			1999

Revenue				$	124,581,000		$	187,255,000		$	143,360,000
Expenses
	Cost of revenue				54,401,000			82,471,000			57,105,000
	Operating expenses				91,667,000			90,737,000			82,901,000

			Total expenses		146,068,000			173,208,000			140,006,000

Operating Income (Loss)					(21,487,000	)		14,047,000			3,354,000
Other Income (Expenses)
	Permanent impairment on investments (Note 3)				(5,318,000	)		—			—
	Equity in losses of unconsolidated investee (Note 3)				(23,000	)		(1,515,000	)		(400,000	)
	Interest income and other income (expense)				521,000			69,000			(516,000	)
	Gain (loss) on sale of assets				(300,000	)		168,000			—
	Interest expense				(3,663,000	)		(3,708,000	)		(3,005,000	)

			Total other expenses		(8,783,000	)		(4,986,000	)		(3,921,000	)

Income (Loss) - Before income taxes					(30,270,000	)		9,061,000			(567,000	)
Provision for (Benefit from) Income Taxes (Note 8)					(9,061,000	)		3,511,000			(69,000	)

Net Income (Loss)					(21,209,000	)		5,550,000			(498,000	)
Other Comprehensive Income (Losses) - Net of tax
	Foreign currency translation adjustment				(49,000	)		(17,000	)		24,000
	Unrealized gain (loss) on securities (Note 3)				(4,160,000	)		(1,108,000	)		1,854,000
	Less: Permanent losses recognized during the period (Note 3)				2,006,000			—			—

			Net other comprehensive income (loss)		(2,203,000	)		(1,125,000	)		1,878,000

Comprehensive Income (Loss)				$	(23,412,000	)	$	4,425,000		$	1,380,000

Earnings Per Share
	Basic net income (loss) per share			$	(0.64	)	$	0.17		$	(0.02	)

	Fully diluted net income (loss) per share			$	(0.64	)	$	0.17		$	(0.02	)

Weighted Average Shares Outstanding
	Basic				33,309,000			33,070,000			32,816,000
	Effect of stock options				—			262,000			—

		Fully diluted			33,309,000			33,332,000			32,816,000

~~Note~~See 10Accompanying -Summary ~~Self-insurance Plan The Company is substantially self-insured for employee medical and dental claims. The policy year~~ of ~~the~~Accounting Policies plan is October 1 to September 30. The Company has purchased stop-loss insurance for individual claims that exceed $75,000 annually. The Company has estimated the amount of incurred but not reported claims (IBNR) based on historical claims reported after year end and ~~has~~Notes ~~recorded an accrual~~ to ~~the~~Consolidated Financial ~~extent that the estimated IBNR exceeds any pre-funded amounts~~Statements.

Note 11 - Stock Compensation In December 1997, the Board of Directors approved a restricted stock compensation plan for certain key employees. Under the plan, key employees are allocated the right to receive stock, subject to forfeiture if employment terminates prior to the end of prescribed periods ranging from one to three years. During the years ended September 30, 2000, 1999 and 1998, the Company awarded key employees the right to receive shares. The market value of these shares will be recognized and charged as compensation expense as earned over the future service period. The following is a summary of the activity in the restricted stock compensation plan:3

	2000		1999		1998
	Unissued Shares	Unrecognized Compensation	Unissued Shares	Unrecognized Compensation	Unissued Shares	Unrecognized Compensation
Share rights outstanding:
Balance - Beginning of year	381,525	$663,000	462,375	$ 1,604,000	-	$ -
Rights awarded during year	51,000	149,000	102,298	463,000	462,375	2,961,000
Rights forfeited during year	(26,805)	(161,000)	(29,022)	(188,000)	-	-
Shares issued during year	(174,713)	-	(154,126)	-	-	-
Compensation recognized	-	(468,000)	-	(1,216,000)	-	(1,357,000)
Balance - End of year	231,007	$183,000	381,525	$663,000	462,375	1,604,000
	=======	========	======	========	======	========
Vested, unissued shares - End of year	-		-

21VSI Holdings, Inc. and Subsidiaries

~~Note~~Consolidated 12Statement - Stock Options The Company issued options for the Company's common stock in the following arrangements: Mr. Toth's Options In 1993, the Company granted its majority stockholder options to purchase 825,000 shares of ~~common~~Changes ~~stock at $.15625 per share for providing assistance with financing~~ in ~~accordance~~Stockholders’ with a Plan of Reorganization. The final 425,000 of options as of September 30, 1999 were exercised during the year ended September 30, 2000. Other Options During the years ended September 30, 1999 and 1998, the Company issued stock options for 85,000 and 58,000 common shares, respectively, to certain consultants of the Company. The exercise prices for the years ended September 30, 1999 and 1998 ranged from $5.75 to $8.20 and $6.20 to $8.20, respectively. The fair value of the options amounted to $89,000 and $83,000, respectively, which was charged to expense. Generally, the options are exercisable between two and three years from the date of issuance. No options have been exercised. Options for 143,000 shares remain outstanding at September 30, 2000. The Company has stock options outstanding or issuable for the benefit of employees and directors under the following plans: 1986 Incentive Stock Option Plan - Options under this plan were granted to officers and key employees at prices not less than the market price at date of grant. Options are generally exercisable one-third annually commencing 12 months after the date granted and expire at the end of six years. This plan terminated in March 1996 and no new options will be granted. There were no options exercised during the years ended September 30, 2000 and 1999. Options for 22,000 shares were exercised during the year ended September 30, 1998. Options for 40,000 shares remain outstanding at September 30, 2000. 1986 Nonqualified Stock Option Plan - Options under this plan were granted to officers and employees at prices not less than the market price at date of grant. Options are generally exercisable one-third annually commencing 12 months after the date granted and expire at the end of 10 years. This plan terminated in March 1996 and no new options will be granted under the plan. Options for 15,000, 2,090 and 42,290 shares were exercised during the years ended September 30, 2000, 1999 and 1998, respectively. Options for 33,620 shares remain outstanding at September 30, 2000. 22 Note 12 - Stock Options (Continued) 1997 Nonqualified Stock Option Plan and 1997 Incentive Stock Option Plan - These plans were established during 1997 to issue options to officers and employees at prices not less than the market price at date of grant. Each plan is authorized to issue options for 500,000 shares of the Company's common stock. During the year ended September 30, 1999, the Company approved the addition of 1,000,000 options to the 1997 Incentive Stock Option Plan. Generally, the options vest over a three-year period with 50 percent vesting after two years and the remaining vesting after three years from the date of grant. During the years ended September 30, 2000, 1999 and 1998, 48,000, 67,666, and 518,000 incentive stock options were granted, respectively. Options for 64,666 and 51,000 were cancelled during the years ended September 30, 2000 and 1999, respectively. No options have been exercised under these plans. Options for 518,000 shares remain outstanding at September 30, 2000. Independent Director Stock Option Plan - Options under this plan are granted to independent directors who are neither employees nor beneficial owners of 5 percent or more of the Company's common stock at prices equal to the market price of the Company's common stock at date of grant. During the years ended September 30, 2000 and 1998, 120,000 and 10,000 options were granted, respectively. No options were granted during the year ended September 30, 1999. During the year ended September 30, 2000, options for 27,500 were cancelled. No options were exercised during the years ended September 2000, 1999 and 1998. Options granted are usually exercisable 30 days from date of grant as determined by vesting schedules in the plan. Options for 122,500 shares remain outstanding at September 30, 2000. The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation. Accordingly, no compensation cost has been recognized for the stock option plans. Had compensation cost for the Company's stock option plans been determined based on the fair value at the grant date, the Company's income from continuing operations for 2000, 1999 and 1998 would have been reduced by $386,000 ($.01 per share), $236,000 ($.01 per share), and $100,000 (no effect on earnings per share), respectively.Equity


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

Balance - October 1, 1998		40,741,000		$	407,000		$	8,208,000		$	15,218,000		$	(3,643,000	)
Net loss		—			—			—			(498,000	)		—
Exercise of stock options (Note 12)		2,000			—			1,000			—			—
Issuance of restricted stock (Note 11)		154,000			2,000			985,000			—			—
Acquisition of stock for treasury		—			—			—			—			(798,000	)
Foreign currency translation adjustments		—			—			—			—			—
Issuance of stock		87,000			1,000			417,000			—			—
Retirement of treasury stock		(8,024,000	)		(80,000	)		(2,826,000	)		—			2,906,000
Repayment of stock subscriptions		—			—			—			—			—
Tax benefit of stock options exercised		—			—			92,000			—			—
Issuance of stock options (Note 12)		—			—			72,000			—			—
Unrealized gain on investments		—			—			—			—			—

Balance - September 30, 1999		32,960,000			330,000			6,949,000			14,720,000			(1,535,000	)
Net income		—			—			—			5,550,000			—
Exercise of stock options (Note 12)		440,000			4,000			70,000			—			—
Issuance of restricted stock (Note 11)		175,000			2,000			1,037,000			—			—
Acquisition of stock for treasury		—			—			—			—			(321,000	)
Foreign currency translation adjustments		—			—			—			—			—
Issuance of stock		5,000			—			15,000			—			—
Unrealized loss on investments		—			—			—			—			—

Balance - September 30, 2000		33,580,000			336,000			8,071,000			20,270,000			(1,856,000	)
Net loss		—			—			—			(21,209,000	)		—
Exercise of stock options (Note 12)		74,000			1,000			38,000			—			—
Issuance of restricted stock (Note 11)		160,000			1,000			942,000			—			—
Foreign currency translation adjustments		—			—			—			—			—
Issuance of stock		2,000			—			6,000			—			—
Unrealized holding losses on investments		—			—			—			—			—
Permanent losses recognized during current period		—			—			—			—			—

Balance - September 30, 2001		33,816,000		$	338,000		$	9,057,000		$	(939,000	)	$	(1,856,000	)

~~Note~~[Additional 12columns ~~- Stock Options (Continued) Information regarding these fixed-price option plans for the years ended September 30, 2000, 1999 and 1998 are as follows:~~below]

	2000		1999		1998
	Shares	Weighted Average Exercise Price	Shares	Weighted Average Exercise Price	Shares	Weighted Average Exercise Price
Options outstanding - Beginning of year	1,221,286	$3.91	1,121,710	$3.64	600,000	$0.38
Canceled	(92,166)	5.92	(51,000)	7.19	-	-
Granted	168,000	3.66	152,666	6.81	586,000	6.28
Exercised	(440,000)	0.17	(2,090)	0.50	(64,290)	0.71
Options outstanding - End of year	857,120	5.57	1,221,286	3.91	1,121,710	3.64
Option price range - End of year	$.50 to $8.70		$.15625 to $8.70		$.15625 to $8.70
Option price range for exercised shares	$.15625 to $.50		$.50		$.50 to $.75
Options available for future grants - End of year	1,249,000		1,417,000		570,000
Weighted average fair value of options granted during the year	$0.57		$1.22		$1.13

[Continued from above table, first column(s) repeated]

The following table summarizes information about fixed price stock options outstanding at September 30, 2000:


				Accumulated Other
				Comprehensive Income

				Foreign
	Stock			Currency			Unrealized			Total
	Subscriptions			Translation			Gain (Loss) on			Stockholders'
	Receivable			Adjustments			Investments			Equity

Balance - October 1, 1998	$	(25,000	)	$	(23,000	)	$	—		$	20,142,000
Net loss		—			—			—			(498,000	)
Exercise of stock options (Note 12)		—			—			—			1,000
Issuance of restricted stock (Note 11)		—			—			—			987,000
Acquisition of stock for treasury		—			—			—			(798,000	)
Foreign currency translation adjustments		—			24,000			—			24,000
Issuance of stock		—			—			—			418,000
Retirement of treasury stock		—			—			—			—
Repayment of stock subscriptions		25,000			—			—			25,000
Tax benefit of stock options exercised		—			—			—			92,000
Issuance of stock options (Note 12)		—			—			—			72,000
Unrealized gain on investments		—			—			1,854,000			1,854,000

Balance - September 30, 1999		—			1,000			1,854,000			22,319,000
Net income		—			—			—			5,550,000
Exercise of stock options (Note 12)		—			—			—			74,000
Issuance of restricted stock (Note 11)		—			—			—			1,039,000
Acquisition of stock for treasury		—			—			—			(321,000	)
Foreign currency translation adjustments		—			(17,000	)		—			(17,000	)
Issuance of stock		—			—			—			15,000
Unrealized loss on investments		—			—			(1,108,000	)		(1,108,000	)

Balance - September 30, 2000		—			(16,000	)		746,000			27,551,000
Net loss		—			—			—			(21,209,000	)
Exercise of stock options (Note 12)		—			—			—			39,000
Issuance of restricted stock (Note 11)		—			—			—			943,000
Foreign currency translation adjustments		—			(49,000	)		—			(49,000	)
Issuance of stock		—			—			—			6,000
Unrealized holding losses on investments		—			—			(4,160,000	)		(4,160,000	)
Permanent losses recognized during current period		—			—			2,006,000			2,006,000

Balance - September 30, 2001	$	—		$	(65,000	)	$	(1,408,000	)	$	5,127,000

		Options Outstanding		Options Exercisable
Range of Exercise Prices	Number Outstanding at September 30, 2000	Weighted Average Remaining Contractual Life	Weighted Average Exercise	Number Exercisable at September 30, 2000	Weighted Average Exercise Price
$ .50 to .55	73,620	1 year	.53	73,620	.53
3.25 to 4.00	149,000	5 years	3.40	8,400	3.25
5.20 to 6.70	521,000	2 years	6.28	247,500	6.38
7.90 to 8.70	113,500	2 years	8.42	63,000	8.60
.50 to 8.70	857,120		5.57	392,520	5.57
	=======			======

See Accompanying Summary of Accounting
Policies and Notes to Consolidated
Financial Statements.

244

NoteTable 13 - Segment Information and Major Customers The Company's operations are classified into two major business segments: marketing services and entertainment. The marketing services segment performs administrative and data management services, creates, prints and prepares promotional materials and performs other marketing services. In addition, the marketing services segment provides product and leadership training and creates and produces video training products, industrial theater and meetings. The entertainment segment designs and manufactures animated displays for the retail and entertainment industry throughout the world. In addition, the entertainment segment operates and administers touring animated educational displays. The Company had sales from foreign activities of $5,422,000, $5,269,000 and $5,375,000 for the years ended September 30, 2000, 1999 and 1998, respectively. Summarized financial information by each of the Company's two industry segments for the three-year period ended September 30, 2000 is as follows:Contents

	2000	1999	1998
Revenue:
Marketing services sector	$182,403,000	$134,295,000	$155,681,000
Entertainment sector	4,852,000	9,065,000	7,477,000
Consolidated total	$187,255,000	$143,360,000	$163,158,000
	==========	==========	==========
Income (loss) from operations:
Marketing services sector	$17,524,000	$486,000	$14,834,000
Entertainment sector	(3,240,000)	2,352,000	1,584,000
Equity in earnings of unconsolidated investee	(1,515,000)	(400,000)	-
Interest expense	(3,708,000)	(3,005,000)	(2,320,000)
Consolidated income (loss) from operations before income taxes	$9,061,000	$(567,000)	$14,098,000
	========	=========	=========

VSI Holdings, Inc. and Subsidiaries

25Consolidated Statement of Cash Flows

Note 13 - Segment Information and Major Customers (Continued)


					Year Ended September 30

					2001			2000			1999

Cash Flows from Operating Activities
	Net income (loss)				$	(21,209,000	)	$	5,550,000		$	(498,000	)
	Adjustments to reconcile net income (loss) to net cash from operating activities:
		Depreciation and amortization				5,569,000			5,817,000			5,669,000
		Write-off of goodwill				—			—			2,154,000
		Bad debt expense				1,465,000			526,000			—
		Allowance for accumulated costs of uncompleted programs				343,000			—			—
		Equity in losses of unconsolidated investee				23,000			1,515,000			400,000
		Permanent impairment on investments				5,318,000			—			—
		Noncash retirement plan contribution				—			—			229,000
		Deferred income taxes				(4,745,000	)		(237,000	)		(347,000	)
		(Gain) loss on sale of property, plant, and equipment				300,000			(168,000	)		—
		Issuance of stock options				—			—			72,000
		Write-off of assets				—			516,000			421,000
		Changes in operating assets:
			Trade accounts receivable			11,326,000			(24,090,000	)		198,000
			Inventory			131,000			(28,000	)		(1,000	)
			Accumulated costs of uncompleted programs			579,000			1,139,000			(1,663,000	)
			Other current assets			(478,000	)		(152,000	)		556,000
			Refundable (accrued) federal income tax			(7,764,000	)		3,590,000			(5,921,000	)
			Trade accounts payable			(1,765,000	)		5,027,000			6,526,000
			Accrued liabilities			(285,000	)		1,691,000			488,000
			Advances from customers for uncompleted projects			2,528,000			(2,670,000	)		800,000

				Net cash provided by (used in) operating activities		(8,664,000	)		(1,974,000	)		9,083,000
Cash Flows from Investing Activities
	Purchases of property, plant, and equipment					(2,241,000	)		(7,165,000	)		(3,061,000	)
	Proceeds from sale of property, plant, and equipment					10,000			608,000			—
	Additions to notes receivable and advances					(144,000	)		(253,000	)		(146,000	)
	Payments on notes receivable and advances					34,000			—			1,200,000
	Distribution from partnership					481,000			—			—
	Investment in available-for-sale securities					—			(50,000	)		(2,450,000	)
	Purchase of other investments					(250,000	)		(941,000	)		(7,150,000	)

				Net cash used in investing activities		(2,110,000	)		(7,801,000	)		(11,607,000	)
Cash Flows from Financing Activities
	Principal payments on long-term debt					(542,000	)		(532,000	)		(918,000	)
	Proceeds from long-term debt					—			—			2,621,000
	Principal payments on related party debt					(3,273,000	)		(1,080,000	)		(18,000	)
	Proceeds from related party debt					2,553,000			5,201,000			160,000
	Net borrowings on notes payable					15,854,000			6,788,000			3,287,000
	Proceeds from issuance of stock					45,000			89,000			190,000
	Acquisition of treasury stock					—			(321,000	)		(798,000	)
	Proceeds from payment of stock subscription					—			—			25,000
	Redemption of common stock					—			—			(1,960,000	)

				Net cash provided by financing activities		14,637,000			10,145,000			2,589,000
Effect of Exchange Rate Changes on Cash						(49,000	)		(17,000	)		24,000

Net Increase in Cash						3,814,000			353,000			89,000
Cash - Beginning of year						905,000			552,000			463,000

Cash - End of year					$	4,719,000		$	905,000		$	552,000

	2000	1999	1998
Identifiable assets:
Marketing services sector	$110,952,000	$91,175,000	$83,848,000
Entertainment sector	5,177,000	7,127,000	5,707,000
Consolidated total	$116,129,000	$98,302,000	$89,555,000
	=========	=========	=========
Depreciation and amortization:
Marketing services sector	$4,173,000	$7,408,000	$4,564,000
Entertainment sector	1,644,000	415,000	301,000
Consolidated total	$5,817,000	$7,823,000	$4,865,000
	========	========	========
Capital expenditures:
Marketing services sector	$4,658,000	$2,736,000	$11,848,000
Entertainment sector	2,507,000	325,000	1,658,000
Consolidated total	$7,165,000	$3,061,000	$13,506,000
	========	=========	========

See Accompanying Summary of Accounting
Policies and Notes to Consolidated
Financial Statements.

~~The following companies are considered major customers of the marketing service sector and comprise 10 percent or greater of the Company's net sales:~~5

	2000	1999	1998
Customer A	39%	32%	25%
Customer B	32	23	44
Customer C	3	10	9
Total	74%	65%	78%
	===	===	===

Note 14 - Discontinued Operations On June 30, 1998, the Company adopted a formal plan to sell the stock of its wholly owned subsidiaries, BKNT Retail Stores, Inc., J.D. Dash, Inc. and BKNT, Inc. to Mr. Martin Suchik, a former officer in VSI Holdings, Inc., in exchange for stock in VSI Holdings, Inc. The Company completed the sale on September 30, 1998. The VSI Holdings, Inc. stock exchanged had a total value of $736,000 on the date the sale was completed. 26 Note 14 - Discontinued Operations (Continued) Operating results of BKNT Retail Stores, Inc., J.D. Dash, Inc. and BKNT, Inc. for the nine months ended June 30, 1998 are shown separately as discontinued operations in the accompanying statement of operations. Net sales of BKNT Retail Stores, Inc., J.D. Dash, Inc. and BKNT, Inc. for the year ended September 30, 1998 was approximately $12,190,000 and has not been included in net sales in the accompanying statement of operations.Subsidiaries

~~Note~~Notes 15to -Consolidated ~~Quarterly~~Financial ~~Results~~Statements ~~(unaudited)~~September ~~The~~30, ~~Company~~2001 believes that the following information reflects all normal recurring adjustments necessary for a fair presentation of the information for the periods presented. The following tables contain selected unaudited consolidated statements of income for each quarter for fiscal 2000 and ~~1999. The operating results for any quarter are not necessarily indicative of results for any future period.~~2000

	Fiscal Year 2000
	4th Quarter	3rd Quarter	2nd Quarter	1st Quarter
	(in thousands, except for per share data)
Revenue	$58,830	$45,636	$44,689	$38,100
Operating Income	4,766	5,022	3,897	2,130
Net Income (Loss)	1,048	2,195	1,451	856
Net Income per common share:
Basic	0.03	0.07	0.04	0.03
Fully diluted	0.03	0.07	0.04	0.03
Weighted average shares outstanding (a):
Basic	33,172	33,198	33,261	32,761
Fully diluted	33,383	33,397	33,430	32,972

Note 1 — Organization of the Company and Basis of Presentation

27The accompanying consolidated financial statements include the accounts of VSI Holdings, Inc. (the “Company”), its wholly owned subsidiaries, consisting of Advanced Animations, Inc., Vispac, Inc., Visual Services, Inc., PSG International, Inc., and its majority owned subsidiary, eCity Studios, Inc. Intercompany balances and transactions have been eliminated in consolidation. Advanced Animations, Inc. designs and manufactures product simulators and animatronic displays. Customers are primarily from the retail and entertainment industry throughout the world. Vispac, Inc. provides administrative and promotional services, warehousing, packaging operations, and call center operations predominantly for North American automobile manufacturers. Visual Services, Inc. is a broad-based provider of educational curriculums and product training, interactive technology-based distance learning systems, product launches, Web site development, direct response and site-based marketing, and change process and cultural change consulting. Customers are primarily North American automobile manufacturers. eCity Studios, Inc. provides Web site development consulting to customers throughout North America. PSG International, Inc. provides curriculum development and product training to automobile manufacturers at the dealership level throughout Canada and Australia.

Note 152 -— ~~Quarterly~~Significant ~~Results~~Accounting ~~(unaudited) (Continued)~~Policies

	Fiscal Year 1999
	4th Quarter	3rd Quarter	2nd Quarter	1st Quarter
	(in thousands, except for per share data)
Revenue	$39,071	$28,439	$40,513	$35,337
Operating Income (Loss)	173	(2,747)	3,139	2,789
Net Income (Loss)	(1,125)	(2,327)	1,444	1,510
Net Income (loss) per common share:
Basic	(0.03)	(0.07)	0.04	0.05
Fully diluted	(0.03)	(0.07)	0.04	0.05
Weighted average shares outstanding (a):
Basic	32,631	32,623	32,916	32,822
Fully diluted	32,631	32,623	33,602	33,448

Revenue Recognition - Visual Services, Inc., Vispac, Inc., PSG International, Inc., and eCity Studios, Inc. provide marketing services under single- or multiple-phase contractual arrangements with customers for projects generally ranging from 3 months to 24 months in duration. Following execution of a written contract obligating the customer to pay for services rendered, revenue is recognized upon completion of each project phase or otherwise as the services are rendered, in each case as specified in the agreement with the customer. Such revenue is recognized at the estimated realizable amount attributable under the agreement with the customer to the completed project phase or the service rendered, as applicable. Revenue for services attributable to customer changes to project specifications is recognized when the customer has executed a written change order and the services contemplated by the change order have been rendered or the applicable project phase has been completed, whichever occurs later. Unbilled trade accounts receivable result from revenue recognized for completed project phases in advance of customer billings.

(a) Earnings per common share are computed independently for each of the quarters presented. Therefore, the sum of the quarterly per common share information may not equal the annual earnings per common share.6

NoteTable 16 - Fair Values of Financial Instruments A summary of the fair values of financial instruments, as well as the methods and significant assumptions used to estimate fair values, is as follows: Short-term Financial Instruments - The fair value of short-term financial instruments, including cash, trade accounts receivable and payable, accrued liabilities and advances from customers, approximate the carrying amounts in the accompanying consolidated financial statements due to the short maturity of such instruments. Marketable Securities - The carrying amount of investments in available-for-sale securities is equal to their fair values based on quoted market prices. 28 Note 16 - Fair Values of Financial Instruments (Continued) Investments - Investments consist of investments in a privately held corporation and partnership interests. There is no market for the Company's investment in the privately held corporation or its investment in partnerships. It was impracticable to estimate the fair values of those investments. The following is a summary of combined pertinent information about the investment in Oz Entertainment Company and the Company's investment in K.C. Investors, L.P.:Contents

	2000	1999
Total assets	$26,017,000	$23,718,000
Total equity	11,085,000	15,660,000
Total revenue	-	-
Net loss	(6,189,000)	(4,993,000)

VSI Holdings, Inc. and Subsidiaries

Notes ~~Receivable and Advances, Notes Payable~~ to ~~Bank~~Consolidated ~~and~~Financial ~~Long-term~~Statements Debt - The fair values approximate the carrying amounts since the note rates approximate rates currently available to the Company for notes with similar terms and maturities. Notes Payable to Related Parties - The estimated fair value of the note payable to related parties at September 30, ~~2000~~2001 and ~~1999 was approximately $15,064,000 and $11,636,000, respectively. The estimated fair value was determined using rates currently available to the Company.~~2000

Note 172 ~~Litigation~~— AsSignificant ofAccounting ~~September~~Policies 30, 2000 the Company has pending litigation with a former employee and stockholder who is seeking damages for wrongful discharge and denial of the fair value for Company stock options. Management feels the case is without merit and plans to vigorously defend the lawsuit. At this time, the case is in preliminary stages and the outcome is not determinable, although management believes the outcome will not have a material effect on the Company's financial position.(Continued)

29Advanced Animations, Inc. manufactures product simulators, animatronic figures, and displays for theme parks, casinos, and retailers under written display contracts of varying duration. It recognizes revenue on each of those contracts based on its estimate of the percentage of work under the contract that has been completed. A percentage of the contract price, determined by the ratio of incurred costs to total estimated costs, is included in revenue and the incurred costs are charged against this revenue. Revisions in cost and profit estimates during the course of a contract are reflected in the accounting period in which the facts that require the revision become known. Billings are made in accordance with contract terms. At the time a loss on a contract becomes known, the entire amount of the estimated loss is accrued. Accounts Receivable - The Company’s accounts receivable are due primarily from customers in the automobile manufacturing industry, who are located throughout the world. At September 30, 2001 and 2000, approximately 74 percent and 70 percent, respectively, of the Company’s accounts receivable were due from two customers. Purchased Receivables - Purchased receivables consist of consumer receivables arising from specific vendor warranty programs that the Company purchases from the vendor. Visual Services, Inc. purchases the contracts at face value less an agreed-upon administration fee. The Company performs administrative services and collects the receivables over a period of 12 to 18 months, depending on the length of the contract. The administration fee revenue is recognized evenly over the length of the contract. In the event of default of payment by the consumer, the vendor is generally obligated to reimburse the Company for the unpaid balance on the account. Accordingly, no allowance for uncollectible accounts has been recorded at September 30, 2001. The amounts expected to be collected past 12 months from the balance sheet date have been classified as noncurrent receivables. Inventory - Inventory, which consists of raw materials and supplies, is recorded at the lower of cost, determined on the specific unit basis, or market. Accumulated Costs of Uncompleted Programs - Accumulated costs of uncompleted programs consist of costs accumulated on various service-related contracts of Visual Services, Inc. The accumulated costs are included as a current asset, as they consist of ongoing job costs, which will be recorded as cost of revenue against revenue recognized within the next fiscal year. At September 30, 2001 and 2000, indirect contract costs amounting to $459,000 and $733,000, respectively, were capitalized and included in accumulated costs.

~~Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.~~7

(a)Table Financialof Statements, Financial Statement Schedules and Exhibits.Contents

~~1. Consolidated Financial Statements of~~ VSI Holdings, Inc. ~~and~~ ~~subsidiaries~~ and ~~Independent Auditors' Report are filed herewith~~Subsidiaries ~~as a separate section of this report.~~

2.Notes ~~All~~to ~~schedules~~Consolidated ~~for~~Financial ~~which~~Statements ~~provision~~September is30, ~~made~~2001 ~~in the applicable accounting regulations of the Securities~~ and Exchange Commission have been omitted because such schedules are not required under the related instructions or are inapplicable or because the information required is included in the Consolidated Financial Statements or notes thereon.2000

3.Note ~~Exhibits:~~2 *— ~~signifies~~Significant ~~exhibit~~Accounting ~~incorporated~~Policies ~~herein by reference~~(Continued) ~~+ signifies exhibit filed herewith~~

*Property, 3Plant, and Equipment - Property, plant, and equipment are recorded at cost.1 ~~Articles~~Depreciation is computed using accelerated and straight-line methods over the estimated useful lives of ~~Incorporation~~the assets. Amortization of leasehold improvements is computed on the ~~Registrant~~straight-line ~~dated~~method ~~April 21~~over the estimated useful lives of the assets or the lease term. Costs of maintenance and repairs are charged to expense when incurred. Property Held for Sale - Property held for sale consists of two buildings that are no longer being used for operating purposes and are being held for sale. These assets are recorded at the lower of their carrying value or fair market value less additional costs to dispose. Due to the loss of a significant portion of business in the marketing segment, ~~1997~~the Company has begun to consolidate its operations, ~~together~~making ~~with~~these ~~Articles~~two operating facilities available for sale. As of ~~Merger~~September 30, 2001, the carrying value of ~~Registrant~~these ~~and~~available-for-sale assets was $3,310,000. Goodwill - Goodwill represents the excess cost of acquiring PSG International, Inc. over the fair value of its net assets at the date of acquisition. The ~~Banker's~~ ~~Note~~carrying value of goodwill is evaluated annually based on the projected discounted cash flows of PSG International, Inc. ~~dated~~To ~~April~~the 21extent the carrying value of goodwill significantly exceeds the projected discounted cash flows, ~~1997~~a write-down of goodwill is recorded. During the year ended September 30, ~~filed~~1999, as ~~Exhibit~~a result of a reduction in the estimated future business generated by PSG International, Inc.3, goodwill of $2,154,000 was written off because it was considered to have no continuing value.1 In addition, the Company reduced the life over which the remaining goodwill was being amortized from 15 years to ~~form~~6 ~~10-K~~years. This change in the estimated life of the goodwill had the effect of decreasing net income for ~~fiscal~~the year ended September 30,~~1997~~ 1999 by $260,000 ($0.01 per share). At September 30, 2001 and 2000, accumulated amortization amounted to $1,475,000 and $1,047,000, respectively. Total amortization expense amounted to $428,000, $427,000, and $422,000 for the years ended September 30, 2001, 2000, and 1999, respectively. Income Taxes - Deferred tax assets and liabilities are recognized based on the difference between financial statement carrying amounts and the income tax basis of assets and liabilities using currently enacted income tax rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the year in deferred tax assets and liabilities.

* 3.2 By-Laws of the Registrant, amended and effective on September8 ~~12, 1997, filed as Exhibit.3.2 to form 10-K for fiscal year ended~~ ~~September 30,1997.~~

*Table 4.1of VSI Holdings, Inc. 1997 Incentive Stock Option Plan as approved at the Annual Shareholders' Meeting held on April 21, 1997, filed as Exhibit.4.1 to form 10-K for fiscal year ended September 30,1997.Contents

* 4.2 VSI Holdings, Inc. ~~1997~~and ~~Non-Qualified Stock Option Plan~~Subsidiaries ~~as approved at the Annual Shareholders' Meeting held on April~~ ~~21, 1997, filed as Exhibit.4.2 to form 10-K for fiscal year ended September 30, 1997.~~

*Notes ~~4.3 The Banker's Note, Inc. Independent Director Stock Option Plan as approved at the Annual Shareholders' Meeting held on June 23, 1989, filed as Exhibit.4.3~~ to ~~form~~Consolidated ~~10-K~~Financial ~~for~~Statements ~~fiscal year ended~~ September 30, ~~1997.~~2001 and 2000

* 4.4 The Banker's Note, ~~Inc.~~2 ~~1986~~— ~~Incentive~~Significant ~~Stock~~Accounting ~~Option~~Policies ~~Plan~~(Continued) ~~as approved at the Annual Shareholders' Meeting held on June 16,~~ ~~1986, filed as Exhibit 4.1 to Form 10-K for fiscal year ended~~ ~~September 30, 1996.~~

*Retirement ~~4.5~~Plan - The ~~Banker'~~Company has a voluntary retirement savings plan designed in accordance with Section 401(k) of the Internal Revenue Code that covers all eligible employees. Employer contributions are discretionary and determined annually by management. There was no contribution made for the years ended September 30, 2001 and 2000. Employer contributions amounted to $229,000 of the Company’s ~~Note~~stock for the year ended September 30, ~~Inc~~1999. ~~1986~~Earnings ~~Non~~per Share -~~Qualified~~ Earnings per share is computed using the weighted average number of shares outstanding. Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the year, without regard to stock options and restricted stock awards outstanding. In the computation of fully diluted earnings per share, the treasury stock method of determining weighted average shares is required, which assumes the exercise of existing stock options and awards and the repurchase of shares with the proceeds, if such a computation has a dilutive effect. For 2001 and 1999, the effect of the stock options was not considered because to do so would have been antidilutive. Stock ~~Option Plan~~Options as- ~~approved~~The Company has several stock option plans (see Note 12). Options granted to nonemployees are accounted for at fair value. Options granted to employees and directors are accounted for using the ~~Annual~~intrinsic ~~Shareholders'~~value ~~Meeting~~method, ~~held~~under onwhich ~~June 16~~compensation expense is recorded at the amount by which the market price of the underlying stock at the grant date exceeds the exercise price of an option. Under the Company’s plans, ~~1986~~the exercise price on all options granted equals or exceeds the fair value of the stock at the grant date. Accordingly, ~~filed~~no compensation cost is recorded as ~~Exhibit~~a 4result of stock option awards to employees under the plans.2 Impairment of Long-lived Assets - The Company reviews long-lived assets, including all investments, for impairment when circumstances indicate the carrying amount of an asset may not be recoverable. An impairment is recognized when the sum of undiscounted estimated future cash flows expected to ~~Form~~result 10from the use of the asset is less than the carrying value or when the value of an investment is deemed to be other than temporary. Investments -K The Company’s investments in marketable securities are classified as available for ~~fiscal~~sale. ~~year~~Available-for-sale ~~ended September~~securities 30are recorded at fair value in investments on the balance sheet, ~~1996~~with the change in fair value during the period excluded from earnings and recorded net of tax as a component of other comprehensive income. The Company’s investment in nonmarketable securities was stated at cost. Investments in Partnerships - Investments in partnerships are accounted for using the equity method.

* 4.6 VSI Holdings, Inc. Restricted Stock Plan December 1,9 ~~1997 as approved at the annual shareholders meeting held on April~~ ~~8, 1998, filed as Exhibit 4.6 to Form 10-K for fiscal year ended September 30, 1998.~~

*Table 4.7of VSI Holdings, Inc. Employee Stock Purchase Plan October 7, 1997 as approved at the annual shareholders meeting held on April 8, 1998, filed as Exhibit 4.7 to Form 10-K for fiscal year ended September 30, 1998..Contents

*VSI ~~4.8 Advanced Animations~~Holdings, Inc. ~~Agreement~~ and ~~Plan of Merger~~Subsidiaries ~~dated February 7, 1997, filed as Exhibit 4.8 to Form 10-K for~~ ~~fiscal year ended September 30, 1998.~~

*Notes ~~4.9 VISPAC, Inc. Agreement and Plan of Merger dated June 13, 1997, filed as Exhibit 4.9~~ to ~~Form~~Consolidated ~~10-K~~Financial ~~for~~Statements ~~fiscal year ended~~ September 30, ~~1998.~~2001 and 2000

*Note ~~4.10~~2 ~~Visual~~— ~~Services,~~Significant ~~Inc.~~Accounting ~~Agreement~~Policies ~~and Plan of Merger dated~~(Continued) ~~September 24, 1997, filed as Exhibit 4.10 to Form 10-K for fiscal~~ ~~year ended September 30, 1998.~~

+Comprehensive 21Income - Accounting principles generally require that recognized revenue, expenses, gains, and losses be included in net income. Certain changes in assets and liabilities, however, such as unrealized gains and losses on available-for-sale securities and foreign currency translation adjustments, are reported as a direct adjustment to the equity section of the balance sheet. Such items, along with net income, are considered components of comprehensive income. Significant Accounting Estimates Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. For example, the Company recognizes certain revenue using the percentage of completion method, which requires the use of significant estimates. Actual results could differ from those estimates. Deferred Tax Assets - Realization of approximately $7,576,000 of total deferred tax assets, representing ordinary and capital losses, is dependent on the Company’s ability to generate approximately $18,375,000 and $3,905,000 of future taxable income and capital gains, respectively. Management believes that it is more likely than not that the future taxable income, including income that may be generated as a result of certain tax-planning strategies, will be sufficient to utilize the net operating losses carrying forward prior to their expiration in 2021 and a portion of the capital loss carryforwards that exist at September 30, 2001 and 2000. A valuation allowance of $1,538,000 ~~List~~and $241,000 has been recorded at September 30, 2001 and 2000, respectively. The amount of ~~Subsidiaries~~the deferred tax assets considered realizable could be reduced if estimates of future taxable income and capital gains are reduced. Such an occurrence could materially adversely affect the ~~Registrant~~Company’s consolidated results of operations and financial condition. The Company will continue to evaluate the realizability of the deferred tax assets quarterly by assessing the need for and amount of a valuation allowance.

~~+ 23.1 Consent of Plante & Moran LLP, Independent Auditors.~~10

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

~~By:~~VSI ~~/s/ Steve Toth~~Holdings, JrInc. ~~Steve~~and ~~Toth, Jr.,~~ Subsidiaries ~~President and~~ ~~Chief Executive Officer~~

~~Date:~~Notes ~~January~~to 12Consolidated Financial Statements September 30, 2001 and 2000

~~Pursuant~~Note to2 ~~the~~— ~~requirements~~Significant ofAccounting ~~the~~Policies ~~Securities Exchange Act~~(Continued) ~~of 1934, this report has been signed below by the following persons~~ ~~on behalf of the Registrant and in the capacities and on the dates~~ ~~indicated.~~

/Risks and Uncertainties - A large portion of the Company’s/ ~~Steve~~sales ~~Toth~~are to customers in the automobile industry. Sales to three of the Company’s customers in this industry accounted for 74 percent, Jr74 percent, and 65 percent of the Company’s total sales in 2001, 2000, and 1999, respectively. ~~Director~~During the year ended September 30, ~~President~~2001, the automobile industry experienced challenging economic and ~~January~~ 12financial conditions. As a result, many of the Company’s customers cancelled, modified, or delayed projects and contracts that the Company had been engaged to complete during the year ended September 30, 2001. ~~Chief~~Although ~~Executive~~the ~~Officer Steve~~continued ~~Toth~~delay, Jrcancellation, or significant modification to existing and future client projects and contracts are not anticipated, there is no assurance that these adverse conditions will not continue to occur. In addition, increased competition could result in changes in the Company’s customer base over time and it is therefore possible that the Company could lose one or more of its largest customers over time and, as a result, operations could be materially impacted. Foreign Currency Translation - The assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the current rate of exchange on the last day of the reporting period, revenue and expenses are translated at the average monthly exchange rates, and all other equity transactions are translated using the actual rate on the date of the transaction.

~~/s/~~Note ~~Martin~~3 S.— ~~Suchik Director~~ Investments ~~January 12, 2001~~ ~~Martin S. Suchik~~

~~/s/~~The ~~Thomas~~available-for-sale W.securities ~~Marquis~~consist ~~Director,~~of ~~Treasurer,~~the ~~Secretary January 12, 2001 Thomas W. Marquis Chief Accounting Officer, and Principal Financial Officer~~following:

/s/ Robert Sui Director January 12, 2001 Robert Sui


		2001		2000

431,525 shares of Navidec, Inc. common stock (representing a less than 5 percent ownership interest)		$	181,000	$	3,344,000
473,308 shares of eCollege.com common stock (representing a less than 5 percent ownership interest)			1,704,000		3,787,000

	Total investment in available-for-sale securities	$	1,885,000	$	7,131,000

~~January~~During 12the year ended September 30, 2001 ~~Harold~~, ~~Poling~~the investment in Navidec, Inc. was written down to its estimated realizable value, because in the opinion of management, the decline in market value of those securities is considered to be other than temporary. The writedown in value amounting to $2,006,000 for the year ended September 30, 2001 has been charged to income as a permanent impairment on investments.

11 ~~January 12, 2001~~ ~~Ralph Armijo~~

JanuaryTable 12,of 2001 William JamesContents

~~Exhibit~~VSI 21Holdings, Inc.1 and Subsidiaries

~~LIST~~Notes OFto ~~SUBSIDIARIES~~Consolidated OFFinancial ~~VSI~~Statements ~~HOLDINGS~~September 30, ~~INC.~~2001 and 2000

~~Visual~~Note ~~Services,~~3 ~~Inc.,~~— aInvestments ~~wholly owned Georgia corporation~~(Continued)

~~Vispac~~Unrealized gains or losses on the available-for-sale securities are included as a separate component of stockholders’ equity, ~~Inc~~net of any related tax effect. At September 30, a2001, ~~wholly~~the ~~owned~~gross ~~Georgia~~unrealized ~~corporation~~holding losses on available-for-sale securities, exclusive of permanent impairment losses recognized, amounted to $2,125,000. At September 30, 2000 and 1999, the gross unrealized holding gains were $1,131,000 and $2,809,000, respectively. The Company’s investment in partnerships and nonmarketable securities consists of the following:

Advanced Animations, Inc., a wholly owned Georgia corporation


		2001		2000

KC Investors, L.P.		$	—	$	2,812,000
Corporate Eagle Five, L.L.C.			408,000		540,000
Visual Learning Systems, L.L.C.			—		(124,000	)
Performance Planning, L.L.C.			216,000		462,000

	Total investment in partnerships		624,000		3,690,000
Nonmarketable equity securities			—		500,000

	Total investment in partnerships and nonmarketable securities	$	624,000	$	4,190,000

~~PSG~~The ~~International~~investment in partnerships consists of several partnership investments that have been accounted for under the equity method. The investment in KC Investors, ~~Inc~~L.P. (KCI) represents an approximate 15 percent interest in the partnership. KCI was formed as an investment partnership to fund the continuing development of the Oz Entertainment Company, a ~~wholly~~corporation ~~owned~~in ~~Georgia~~which KCI holds a majority interest. The Oz Entertainment Company is a development stage company engaged in the early stages of development of a theme park and resort in Kansas based on the 1939 MGM film, The Wizard of Oz. A partnership controlled by the majority stockholder of the Company also owns an interest in KCI (approximately 6 percent) and a direct interest in preferred stock of the Oz Entertainment Company. The investment in nonmarketable securities at September 30, 2000 consists of 1,342 shares of senior preferred stock in Oz Entertainment Company, a corporation in which KCI (a partnership investment of the Company) holds a majority interest.

~~Exhibit 23.1~~12

WeTable consent to the inclusion in this Annual Report on Form 10-K of our independent auditor's report dated December 22, 2000 on the financial statements of VSI Holdings, Inc. for the year ended September 30, 2000.Contents

~~PLANTE~~VSI ~~& MORAN~~Holdings, ~~LLP~~Inc. and Subsidiaries

~~Ann~~Notes ~~Arbor,~~to ~~Michigan January~~Consolidated 11Financial Statements September 30, 2001 and 2000

~~SIGNATURE~~Note ~~AUTHORIZATION~~3 ~~FOR~~— ~~ELECTRONIC~~Investments ~~FILING~~(Continued)

~~(Regulation~~At ~~S-T~~September 30, ~~Sec~~2001, the investments in KCI and Oz Entertainment Company have been written down to zero. ~~232~~During October 2001, the Company was informed that the local government where the theme park was to be located concluded to delay the decision on the use of the land for an indefinite period of time.~~302)~~ The management of Oz Entertainment Company and KCI has since delayed the project indefinitely. As a result of these events and the significant potential future capital requirements necessary to fund any further commitments, the Company has determined that it cannot continue funding this project. Based on these events, management believes its investment in the project cannot be recovered. Accordingly, a writedown in value, totaling $3,312,000, for the year ended September 30, 2001, has been charged to income as a permanent impairment on investments.

InNote ~~connection~~4 ~~with~~— ~~the Annual Report on Form 10-K of VSI Holdings~~Property, ~~Inc.~~ ~~for the year ended September 30~~Plant, ~~2000,~~and ~~we hereby authenticate,~~Equipment ~~acknowledge or otherwise authorize the use of the Plante &~~ ~~Moran, LLP signature in typed form on our independent auditor's~~ ~~report dated December 22, 2000 and on the Consent of Independent Auditors dated January 11, 2001.~~

~~PLANTE~~Property, ~~& MORAN~~plant, ~~LLP~~and equipment consist of the following:

Ann Arbor, Michigan January 11, 2001


						Depreciable
		2001		2000		Life - Years

Land and land improvements		$	491,000	$	1,286,000		—
Building			4,029,000		8,171,000		18-39
Furniture, fixtures, and equipment			33,315,000		38,547,000		5-10
Leasehold improvements			3,810,000		3,810,000		18-39
Vehicles			937,000		960,000		5

	Total		42,582,000		52,774,000
Less accumulated depreciation and amortization			26,724,000		30,380,000

	Net carrying amount	$	15,858,000	$	22,394,000

			Depreciation expense amounted to $5,141,000, $5,390,000, and $5,668,000 for the years ended September 30, 2001, 2000, and 1999, respectively.

			During the year ended September 30, 2000, a touring exhibit was deemed to be impaired and written down to fair value. Fair value was determined by estimating future cash inflows from the exhibit. The Company estimated that there would be no future net cash inflows and recorded an impairment loss of $516,000 (included in operating expenses) for the year ended September 30, 2000.

VSI Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2001 and 2000

Note 4 — Property, Plant, and Equipment (Continued)

During the year ended September 30, 1999, several customized trailers with electronic equipment, along with specialized tents used for specific jobs, were deemed to be impaired and written down to their fair value. Fair value, which was determined by estimating the future cash inflows of such assets, exceeded their carrying value by $421,000. An impairment loss of that amount (included in operating expenses) has been charged to operations for the year ended September 30, 1999.

Note 5 — Bank Credit Facilities

The Company has several lines of credit, as follows:


	2001		2000

Bank line of credit permitting borrowings up to $32,000,000 at .50 percent below the bank’s prime rate (prime was 6.00 percent at September 30, 2001). Borrowings equal to or greater than $500,000 can be made for fixed periods of time at a fixed rate equal to LIBOR plus 1.50 percent (LIBOR at September 30, 2001 was 2.63 percent).
Collateralized by all assets of the Company, except for certain accounts receivable that are pledged as first security to the line of credit below, and expiring in September 2001	$	24,826,000	$	24,434,000
Bank line of credit permitting borrowings up to $5,000,000 at .75 percent below the bank’s prime rate. Borrowings equal to or greater than $500,000 can be made for fixed periods of time at a fixed rate equal to LIBOR plus 1.50 percent. Collateralized by all assets of the Company, except for certain accounts receivable that are pledged as first security to the line of credit below, and expiring in March 2002		4,990,000		4,900,000
Bank line of credit permitting borrowings up to $25,000,000 at .75 percent below the bank’s prime rate. Borrowings equal to or greater than $1,000,000 can be made for fixed periods of time at a fixed rate equal to LIBOR plus 1.25 percent. Collateralized with a first security interest in certain receivables and a secondary security interest in all assets of the Company, and expiring in July 2002		19,025,000		—
Checks written but not yet presented to the bank Upon presentation to the bank, additional borrowings will be made on the line of credit. The Company policy is to reflect these checks as additional amounts payable to the bank		2,227,000		5,880,000

Total notes payable to bank	$	51,068,000	$	35,214,000

The weighted-average interest rate on short-term notes payable was 5.30 percent and 8.70 percent as of September 30, 2001 and 2000, respectively.

VSI Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2001 and 2000

Note 5 — Bank Credit Facilities (Continued)

			Subsequent to September 30, 2001, the terms of the $32,000,000 and $5,000,000 lines of credit were revised. The new terms include a change in the permitted borrowing amounts from $32,000,000 to $25,000,000 (of which $5,000,000 is set aside for future letters of credit) and from $5,000,000 to $6,000,000, respectively. Interest rates on both lines range from .25 percent to 1.00 percent above the bank’s prime rate depending on the Company’s debt service coverage ratio. Borrowings equal to or greater than $500,000 can be made for fixed periods of time at a fixed rate ranging from 1.50 percent to 2.75 percent above LIBOR at the time the amounts are converted to fixed terms depending on the Company’s debt service coverage ratio. In the event of default or violation of the bank covenants, the interest rates charged on both lines is increased 2 percent. The lines of credit expire in June 2002.

			Long-term bank debt consists of the following:


	2001		2000

Mortgage payable to bank, bearing interest at the bank’s prime rate (6.00 percent at September 30, 2001), due in monthly installments of $21,765 including interest, with a final principal payment due on September 1, 2004. The mortgage is collateralized by the related land and building with a net book value of $2,702,000 at September 30, 2001	$	2,288,000	$	2,352,000
Mortgage payable to bank, bearing interest at 6.30 percent, due in monthly installments of $18,199 including interest, with a final principal payment due on October 8, 2005. The mortgage is collateralized by the related land and building with a net book value of $3,271,000 at September 30, 2001		2,285,000		2,349,000
Term loan payable to bank, bearing interest at 6.52 percent, due in monthly installments of $33,724 including interest with the final payment due October 8, 2001. The loan is collateralized by all assets of the Company		34,000		390,000

VSI Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2001 and 2000


Mortgage payable to bank, bearing interest at 8.17 percent, due in monthly installments of $22,201 including interest, with a final principal payment due on June 4, 2004. The mortgage is collateralized by the related land and building with a net book value of $608,000 at September 30, 2001			2,495,000		2,553,000

	Total		7,102,000		7,644,000
	Less current portion		7,102,000		552,000

	Long-term portion	$	—	$	7,092,000

Note 5 — Bank Credit Facilities (Continued)

			The line of credit agreements and the long-term bank debt contain certain restrictive financial covenants requiring that, among other things, the Company maintain certain levels of net worth and working capital and that the ratio of total liabilities to net worth, debt service ratio, and current ratio do not exceed certain amounts. At September 30, 2001, the Company was in violation of its bank covenants and the bank has not waived these covenants. Accordingly, all long-term bank debt has been classified as a current obligation.

			Future principal payments due on the long-term debt based on the original payment terms in the debt agreements are as follows:


Years Ending
September 30	Amount

2002	$	246,000
2003		229,000
2004		4,590,000
2005		93,000
2006		1,944,000

Total	$	7,102,000

VSI Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2001 and 2000

Note 6 — Related Party Notes Payable

Notes payable to related parties consist of the following:


	2001		2000

Notes payable to stockholders of VSI Holdings, Inc., unsecured, bearing interest at 7.00 percent and due December 31, 2002. The notes are subordinated to all bank debt	$	11,993,000	$	12,337,000
Note payable to a partnership in which the Company’s controlling stockholder owns 100 percent through direct and indirect ownership. The unsecured note is due on demand and bears interest at 7.00 percent		120,000		2,920,000
Notes payable to stockholders of VSI Holdings, Inc., unsecured, bearing interest at 7.00 percent and due on demand		1,524,000		500,000

Total		13,637,000		15,757,000
Less current portion		1,644,000		3,420,000

Long-term portion	$	11,993,000	$	12,337,000

Note 7 — Commitments and Contingencies

			Lease Commitments - The Company utilizes operating leases for equipment, warehouses, and operating facilities. For most locations, the Company pays taxes, insurance, and maintenance costs. Lease terms generally range from one to six years with renewal options for additional three- to five-year periods.

			The Company leases one of its primary operating facilities from a partnership, of which the Company’s controlling stockholder owns 100 percent through direct and indirect ownership.

			The minimum lease payments for the remaining years under the above leases are as follows:


Years Ending
September 30			Related Party		Other		Total

	2002		$	623,000	$	4,238,000	$	4,861,000
	2003			638,000		2,096,000		2,734,000
	2004			638,000		371,000		1,009,000
	2005			638,000		221,000		859,000
	2006			638,000		16,000		654,000
2007 and thereafter				160,000		—		160,000

		Total	$	3,335,000	$	6,942,000	$	10,277,000

Rent expense was as follows for the years ended September 30:

VSI Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2001 and 2000


		2001		2000		1999

Related party		$	551,000	$	551,000	$	551,000
Other			4,452,000		4,459,000		4,001,000

	Total	$	5,003,000	$	5,010,000	$	4,552,000

VSI Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2001 and 2000

Note 8 — Income Taxes

The following is a summary of the deferred tax assets and liabilities at September 30, 2001 and 2000:


				2001			2000

Deferred tax assets:
	Unearned revenue			$	410,000		$	—
	Depreciation and amortization				1,193,000			1,050,000
	Net operating loss carryforwards				3,448,000			—
	Accrued expenses not deductible for tax purposes				1,164,000			900,000
	Losses from partnership investments — Equity method				374,000			405,000
	Permanent impairment on investments				1,808,000			—
	Unrealized loss on investments				717,000			—

			Total deferred tax assets		9,114,000			2,355,000
Deferred tax liabilities — Unrealized gain from investments					—			(385,000	)

		Net deferred tax asset before valuation allowance			9,114,000			1,970,000
	Valuation allowance				(1,538,000	)		(241,000	)

			Net deferred tax asset	$	7,576,000		$	1,729,000

			A valuation allowance has been established due to the uncertainty of the Company being able to realize capital losses from investments for tax purposes.

			At September 30, 2001, the Company has a net operating loss carryforward of approximately $10,142,000, which can be used to offset future taxable income. The net operating loss expires on September 30, 2021.

			The provision for income taxes consists of the following:


		2001			2000			1999

Current		$	(4,316,000	)	$	3,748,000		$	278,000
Deferred			(4,745,000	)		(237,000	)		(347,000	)

	Total provision for (benefit from) income taxes	$	(9,061,000	)	$	3,511,000		$	(69,000	)

VSI Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2001 and 2000

Note 8 — Income Taxes (Continued)

A reconciliation of taxes on income from continuing operations based on the statutory federal income tax rate to the provision for income taxes is as follows:


		2001			2000			1999

Tax (benefit) computed at statutory federal income tax rate		$	(10,292,000	)	$	3,080,000		$	(193,000	)
Nondeductible expenses			60,000			196,000			164,000
Change in valuation allowance			1,297,000			241,000			—
Adjustments to prior year taxes and other			(126,000	)		(6,000	)		(40,000	)

	Total provision for (benefit from) income taxes	$	(9,061,000	)	$	3,511,000		$	(69,000	)

Note 9 — Cash Flows

			Cash paid during the years ended September 30, 2001, 2000, and 1999 for interest amounted to $2,933,000, $3,589,000, and $3,013,000, respectively. Cash paid for income taxes in those years was $3,464,000, $158,000, and $6,199,000, respectively.

			The Company had the following significant noncash investing and financing transactions:

			•		During 2001, the Company reduced accounts receivable due from Oz Entertainment Company and recorded a corresponding reduction in a note payable to CLT (a related party partnership) for $1,400,000. CLT received an additional partnership interest from Oz Entertainment Company as a result of satisfying the accounts receivable obligation owed to the Company.

			•		During 2000, the Company received 1,342 shares of senior preferred stock in Oz Entertainment Company in exchange for a reduction of an accounts receivable due from Oz Entertainment Company of $500,000.

			•		During the years ended September 30, 2001, 2000, and 1999, the Company issued 160,233, 174,713, and 154,126 shares of stock, respectively, under its restricted stock compensation plan (see Note 11). As a result, the Company reduced the accrual for stock compensation and recorded additional stock and paid-in capital totaling $943,000, $1,039,000, and $987,000, respectively.

VSI Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2001 and 2000

Note 10 — Self-insurance Plan

The Company is substantially self-insured for employee medical and dental claims. The policy year of the plan is October 1 to September 30. The Company has purchased stop-loss insurance for individual claims that exceed $75,000 annually. The Company has estimated the amount of incurred but not reported claims (IBNR) based on historical claims reported after year end and has recorded an accrual to the extent that the estimated IBNR exceeds any prefunded amounts.

Note 11 — Stock Compensation

In December 1997, the Board of Directors approved a restricted stock compensation plan for certain key employees. Under the plan, key employees are allocated the right to receive stock, subject to forfeiture if employment terminates prior to the end of prescribed periods ranging from one to three years. During the years ended September 30, 2001, 2000, and 1999, the Company awarded key employees the right to receive shares. The market value of these shares will be recognized and charged as compensation expense as earned over the future service period. The following is a summary of the activity in the restricted stock compensation plan:


		2001						2000						1999

		Unissued			Unrecognized			Unissued			Unrecognized			Unissued			Unrecognized
		Shares			Compensation			Shares			Compensation			Shares			Compensation
Share rights outstanding:
	Balance — Beginning of year		231,007		$	183,000			381,525		$	663,000			462,375		$	1,604,000
	Rights awarded during year		10,000			26,875			51,000			149,000			102,298			463,000
	Rights forfeited during year		(29,670	)		(86,151	)		(26,805	)		(161,000	)		(29,022	)		(188,000	)
	Shares issued during year		(160,233	)		—			(174,713	)		—			(154,126	)		—
	Compensation recognized		—			(107,311	)		—			(468,000	)		—			(1,216,000	)

	Balance — End of year		51,104		$	16,413			231,007		$	183,000			381,525		$	663,000

	Vested, unissued shares — End of year		—						—						—

Note 12 — Stock Options

			The Company issued options for the Company’s common stock in the following arrangements:

			Mr. Toth’s Options

			In 1993, the Company granted its majority stockholder options to purchase 825,000 shares of common stock at $.15625 per share for providing assistance with financing in accordance with a Plan of Reorganization. The final 425,000 options that were outstanding as of September 30, 1999 were exercised during the year ended September 2000.

VSI Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2001 and 2000

Note 12 — Stock Options (Continued)

			Other Options

			During the years ended September 1999 and 1998, the Company issued stock options for 85,000 and 58,000 common shares, respectively, to certain consultants of the Company. The exercise prices for the years ended September 1999 and 1998 ranged from $5.75 to $8.20 and $6.20 to $8.20, respectively. The fair value of the options amounted to $89,000 and $83,000, respectively, which was charged to expense. Generally, the options are exercisable between two and three years from the date of issuance. No options have been exercised. Options for 143,000 shares remain outstanding at September 30, 2001.

			The Company has stock options outstanding or issuable for the benefit of employees and directors under the following plans:

			1986 Incentive Stock Option Plan - Options under this plan were granted to officers and key employees at prices not less than the market price at date of grant. Options are generally exercisable one-third annually commencing 12 months after the date granted and expire at the end of six years. This plan terminated in March 1996 and the remaining 40,000 options were exercised during the year ended September 30, 2001.

			1986 Nonqualified Stock Option Plan - Options under this plan were granted to officers and employees at prices not less than the market price at date of grant. Options are generally exercisable one-third annually commencing 12 months after the date granted and expire at the end of 10 years. This plan terminated in March 1996 and the remaining 33,620 options were exercised during the year ended September 30, 2001.

			1997 Nonqualified Stock Option Plan and 1997 Incentive Stock Option Plan - These plans were established during 1997 to issue options to officers and employees at prices not less than the market price at date of grant. Each plan is authorized to issue options for 500,000 shares of the Company’s common stock. During the year ended September 30, 1999, the Company approved the addition of 1,000,000 options to the 1997 Incentive Stock Option Plan. Generally, the options vest over a three-year period with 50 percent vesting after two years and the remaining vesting after three years from the date of grant. During the years ended September 30, 2000 and 1999, 48,000 and 67,666 incentive stock options were granted, respectively. There were no options granted during the year ended September 30, 2001. Options for 146,000, 64,666, and 51,000 shares were cancelled during the years ended September 2001, 2000, and 1999, respectively.

			No options have been exercised under these plans. Options for 372,000 shares remain outstanding at September 30, 2001.

Note 12 — Stock Options (Continued)

Independent Director Stock Option Plan - Options under this plan are granted to independent directors who are neither employees nor beneficial owners of 5 percent or more of the Company’s common stock at prices equal to the market price of the Company’s common stock at date of grant. During the year ended

VSI Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2001 and 2000

			September 30, 2000, 120,000 options were granted. No options were granted during the years ended September 30, 2001 or 1999. During the years ended September 30, 2001 and 2000, 32,500 and 27,500 options were cancelled. No options have been exercised to date. Options granted are usually exercisable 30 days from date of grant as determined by vesting schedules in the plan. Options for 90,000 shares remain outstanding at September 30, 2001.

			The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation. Accordingly, no compensation cost has been recognized for the stock option plans. Had compensation cost for the Company’s stock option plans been determined based on the fair value at the grant date, the Company’s income from continuing operations for 2001, 2000, and 1999 would have been reduced by $159,000 ($.01 per share), $386,000 ($.01 per share), and $236,000 ($.01 per share), respectively.

			Information regarding these fixed-price option plans for the years ended September 30, 2001, 2000, and 1999 are as follows:


	2001					2000					1999

				Weighted					Weighted					Weighted
				Average					Average					Average
				Exercise					Exercise					Exercise
	Shares			Price		Shares			Price		Shares			Price

Options outstanding — Beginning of year		857,120		$	5.57		1,221,286		$	3.91		1,121,710		$	3.64
Canceled		(178,500	)		6.53		(92,166	)		5.92		(51,000	)		7.19
Granted		—			—		168,000			3.66		152,666			6.81
Exercised		(73,620	)		0.53		(440,000	)		0.17		(2,090	)		0.50

Options outstanding — End of year		605,000			5.90		857,120			5.57		1,221,286			3.91

Option price range — End of year	$3.25 to $8.20					$.50 to $8.70					$.15625 to $8.70
Option price range for exercised shares	$.50 to $.55					$.15625 to $.50						$.50
Options available for future grants — End of year		1,499,000					1,249,000					1,417,000
Weighted average fair value of options granted during the year		—					$0.57					$1.22

VSI Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2001 and 2000

Note 12 — Stock Options (Continued)

The following table summarizes information about fixed price stock options outstanding at September 30, 2001:


			Options Outstanding			Options Exercisable

			Weighted
	Number		Average			Number
Range of	Outstanding at		Remaining	Weighted		Exercisable at			Weighted
Exercise	September 30,		Contractual	Average		September 30,			Average
Prices	2001		Life	Exercise		2001		Exercise Price

$3.25 to $4.00		115,000	2 years		3.41		47,700		$	3.25
$5.20 to $6.375		323,000	2 years		6.11		308,000		$	6.13
$6.50 to $8.20		167,000	2 years		7.20		149,500		$	7.26

		605,000			5.90		505,200		$	6.19

Note 13 — Segment Information and Major Customers

			The Company’s operations are classified into two major business segments: marketing services and entertainment. The marketing services segment performs administrative and data management services, creates, prints, and prepares promotional materials, and performs other marketing services. In addition, the marketing services segment provides product and leadership training and creates and produces video training products, industrial theater, and meetings.

			The entertainment segment designs and manufactures animated displays for the retail and entertainment industry throughout the world. In addition, the entertainment segment operates and administers touring animated educational displays.

			The Company had sales from foreign activities of $5,903,000, $5,422,000, and $5,269,000 for the years ended September 30, 2001, 2000, and 1999, respectively.

VSI Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2001 and 2000

Note 13 — Segment Information and Major Customers (Continued)

Summarized financial information for each of the Company’s two industry segments for the three-year period ended September 30, 2001 is as follows:


			2001			2000			1999

Revenue:
	Marketing services sector		$	120,200,000		$	182,403,000		$	134,295,000
	Entertainment sector			4,381,000			4,852,000			9,065,000

		Consolidated total	$	124,581,000		$	187,255,000		$	143,360,000

Income (loss) from operations:
	Marketing services sector		$	(19,624,000	)	$	17,524,000		$	486,000
	Entertainment sector			(1,642,000	)		(3,240,000	)		2,352,000
	Permanent impairment on investments			(5,318,000	)		—			—
	Equity in losses of unconsolidated investee			(23,000	)		(1,515,000	)		(400,000	)
	Interest expense			(3,663,000	)		(3,708,000	)		(3,005,000	)

		Consolidated income (loss) from operations before income taxes	$	(30,270,000	)	$	9,061,000		$	(567,000	)

Identifiable assets:
	Marketing services sector		$	104,351,000		$	115,731,000		$	91,175,000
	Entertainment sector			4,721,000			5,177,000			7,127,000

		Consolidated total	$	109,072,000		$	120,908,000		$	98,302,000

Depreciation and amortization:
	Marketing services sector		$	4,417,000		$	4,173,000		$	7,408,000
	Entertainment sector			1,152,000			1,644,000			415,000

		Consolidated total	$	5,569,000		$	5,817,000		$	7,823,000

Capital expenditures:
	Marketing services sector		$	2,043,000		$	4,658,000		$	2,736,000
	Entertainment sector			198,000			2,507,000			325,000

		Consolidated total	$	2,241,000		$	7,165,000		$	3,061,000

VSI Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2001 and 2000

Note 13 — Segment Information and Major Customers (Continued)

The following companies are considered major customers of the marketing service sector and comprise 10 percent or greater of the Company’s net sales:


		Percent

		2001		2000		1999

Customer A			42		39		32
Customer B			27		32		23
Customer C			5		3		10

	Total		74		74		65

Note 14 — Quarterly Results (Unaudited)

The following tables contain selected unaudited consolidated statements of income for each quarter for fiscal 2001 and 2000. The Company believes that the following information reflects all normal recurring adjustments necessary for a fair presentation of the information for the periods presented. The operating results for any quarter are not necessarily indicative of results for any future period.


			Fiscal Year 2001

		4th Quarter			3rd Quarter			2nd Quarter			1st Quarter

		(in thousands, except for per share data)
Revenue		$	14,923		$	33,445		$	32,884		$	43,329
Operating income (loss)			(17,690	)		(2,064	)		(5,261	)		3,528
Net income (loss)			(15,602	)		(3,497	)		(3,548	)		1,438
Net income (loss) per common share:
	Basic		(0.47	)		(0.10	)		(0.11	)		0.04
	Fully diluted		(0.47	)		(0.10	)		(0.11	)		0.04
Weighted average shares outstanding (a):
	Basic		33,416			33,416			33,393			33,180
	Fully diluted		33,416			33,416			33,393			33,279

VSI Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2001 and 2000

Note 14 — Quarterly Results (Unaudited) (Continued)


		Fiscal Year 2000

		4th Quarter		3rd Quarter		2nd Quarter		1st Quarter

		(in thousands, except for per share data)
Revenue		$	58,830	$	45,636	$	44,689	$	38,100
Operating income			2,998		5,022		3,897		2,130
Net income			1,048		2,195		1,451		856
Net income per common share:
	Basic		0.03		0.07		0.04		0.03
	Fully diluted		0.03		0.07		0.04		0.03
Weighted average shares outstanding (a):
	Basic		33,172		33,198		33,261		32,761
	Fully diluted		33,383		33,397		33,430		32,972

(a)

Earnings per common share are computed independently for each of the quarters presented. Therefore, the sum of the quarterly per common share information may not equal the annual earnings per common share.

Note 15 — Fair Values of Financial Instruments

			A summary of the fair values of financial instruments, as well as the methods and significant assumptions used to estimate fair values, is as follows:

			Short-term Financial Instruments - The fair value of short-term financial instruments, including cash, trade accounts receivable and payable, accrued liabilities, and advances from customers, approximates the carrying amounts in the accompanying consolidated financial statements due to the short maturity of such instruments.

			Marketable Securities - The carrying amount of investments in available-for-sale securities is equal to their fair values based on quoted market prices.

			Investments - Investments consist of investments in privately held partnership interests. There is no market for the Company’s investment in the privately held investment partnerships. It was impracticable to estimate the fair values of those investments. During the year ended September 30, 2001, the Company wrote down its investment in the partnership, as management believes that a permanent impairment in the value has occurred (see Note 3).

			Purchased Receivables - At September 30, 2001 and 2000, the estimated fair value of the purchased receivables was approximately $30,578,000 and $5,569,000, respectively. The fair value was estimated using a discounted cash flow approach based on investments with similar terms and maturity.

VSI Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2001 and 2000

Note 15 — Fair Values of Financial Instruments (Continued)

			Notes Receivable and Advances, Notes Payable to Bank, and Long-term Debt - The fair values approximate the carrying amounts since the note rates approximate rates currently available to the Company for notes with similar terms and maturities.

			Notes Payable to Related Parties - At September 30, 2001, the estimated fair value of the notes payable to related parties was approximately the carrying value. The estimated fair value of the notes payable to related parties at September 30, 2000 was approximately $15,064,000. The estimated fair value was determined using rates currently available to the Company.

Note 16 — Litigation

			As of September 30, 2001, the Company has pending litigation with a former employee and stockholder who is seeking damages for wrongful discharge and denial of the value for Company stock options. Management feels the case is without merit and plans to vigorously defend the lawsuit. At this time, the case is in preliminary stages and the outcome is not determinable, although management believes the outcome will not have a material effect on the Company’s financial position.

			In addition, on September 21, 2001, the Company filed a class action lawsuit, on its own behalf and on behalf of a plaintiff class consisting of the Company’s approximately 1,600 stockholders and option holders, against SPX Corporation and its directors alleging that such corporation had failed to perform its obligations under an agreement and plan of merger between the Company and such corporation. The Company’s suit asks that the court either require SPX Corporation to complete the proposed merger with the Company or award the Company and the plaintiff class damages. In late December 2001, the defendants in this action filed an answer denying the Company’s allegations and a counterclaim alleging breach of contract and seeking recovery of damages and a termination fee of approximately $9,000,000. As this matter is in a very preliminary stage and its outcome is not presently determinable, the Company has not recorded any contingent receivable or liability related to its outcome.

VSI Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2001 and 2000

Note 17 — Management’s Plan

			The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. During 2001, the Company incurred a significant loss, having a working capital deficit of $17,258,000 at September 30, 2001, and the Company has violated restrictive covenants on its bank credit facilities. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Due to the significant losses experienced within the current year, the Company has implemented a strategic plan that includes a significant amount of cost reduction, improvement to cash collection procedures, sale of assets, and business divestiture. The details of these items include:

			•		Further job eliminations, which could reduce expenses by approximately $11,000,000 in fiscal year 2002

			•		Sale of two operating facilities, which would reduce debt service requirements and operating expenses

			•		Sale of a partnership interest, which management estimates may generate cash flow of approximately $1,000,000

			•		Sale or liquidation of eCity Studios, Inc., which resulted in a net loss to the Company of approximately $1,200,000 during the year ended September 30, 2001

			•		Changes in the operational structure, which will accelerate billing and cash collection

			During the year ended September 30, 2001, the Company reduced its workforce and realized a cost savings of approximately $2,400,000. For the upcoming fiscal year, the Company estimates that these cuts will save an additional $5,400,000 in addition to the future job eliminations noted above.

			The Company is also in the process of analyzing certain aspects of its business for future viability and upon conclusion of such analysis will decide to cease those which will not be profitable.

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a) Financial Statements, Financial Statement Schedules and Exhibits.

1. Consolidated Financial Statements of VSI Holdings, Inc. and subsidiaries and Independent Auditors’ Report are filed herewith as a separate section of this report.

2. All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission have been omitted because such schedules are not required under the related instructions or are inapplicable or because the information required is included in the Consolidated Financial Statements or notes thereon.

3. Exhibits: * signifies exhibit incorporated herein by reference
+ signifies exhibit filed herewith

* 3.1 Articles of Incorporation of the Registrant dated April 21, 1997, together with Articles of Merger of Registrant and The Banker’s Note, Inc. dated April 21, 1997, filed as Exhibit 3.1 to form 10-K for fiscal year ended September 30, 1997.

* 3.2 By-Laws of the Registrant, amended and effective on September 12, 1997, filed as Exhibit 3.2 to form 10-K for fiscal year ended September 30, 1997.

* 4.1 VSI Holdings, Inc. 1997 Incentive Stock Option Plan as approved at the Annual Shareholders’ Meeting held on April 21, 1997, filed as Exhibit 4.1 to form 10-K for fiscal year ended September 30, 1997.

* 4.2 VSI Holdings, Inc. 1997 Non-Qualified Stock Option Plan as approved at the Annual Shareholders’ Meeting held on April 21, 1997, filed as Exhibit 4.2 to form 10-K for fiscal year ended September 30, 1997.

* 4.3 The Banker’s Note, Inc. Independent Director Stock Option Plan as approved at the Annual Shareholders’ Meeting held on June 23, 1989, filed as Exhibit 4.3 to form 10-K for fiscal year ended September 30, 1997.

* 4.4 The Banker’s Note, Inc. 1986 Incentive Stock Option Plan as approved at the Annual Shareholders’ Meeting held on June 16, 1986, filed as Exhibit 4.1 to Form 10-K for fiscal year ended September 30, 1996.

* 4.5 The Banker’s Note, Inc. 1986 Non-Qualified Stock Option Plan as approved at the Annual Shareholders’ Meeting held on June 16, 1986, filed as Exhibit 4.2 to Form 10-K for fiscal year ended September 30, 1996.

* 4.6 VSI Holdings, Inc. Restricted Stock Plan December 1, 1997 as approved at the annual shareholders meeting held on April 8, 1998, filed as Exhibit 4.6 to Form 10-K for fiscal year ended September 30, 1998

* 4.7 VSI Holdings, Inc. Employee Stock Purchase Plan October 7, 1997 as approved at the annual shareholders meeting held on April 8, 1998, filed as Exhibit 4.7 to Form 10-K for fiscal year ended September 30, 1998.

* 4.8 Advanced Animations, Inc. Agreement and Plan of Merger dated February 7, 1997, filed as Exhibit 4.8 to Form 10-K for fiscal year ended September 30, 1998.

* 4.9 VISPAC, Inc. Agreement and Plan of Merger dated June 13, 1997, filed as Exhibit 4.9 to Form 10-K for fiscal year ended September 30, 1998.

* 4.10 Visual Services, Inc. Agreement and Plan of Merger dated September 24, 1997, filed as Exhibit 4.10 to Form 10-K for fiscal year ended September 30, 1998.

+10.1 Loan agreement dated July 12, 2001 between Visual Services, Inc. and Bank One, Michigan.

+10.2 Loan Guaranty dated July 12, 2001 between VSI Holdings, Inc. and Bank One, Michigan.

+ 21.1 List of Subsidiaries of the Registrant.

+ 23.1 Consent of Plante & Moran LLP, Independent Auditors.

(b) Reports on Form 8-K: None

SIGNATURES

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

VSI Holdings, Inc.
(Registrant)


	By: /s/ Steve Toth, Jr. Steve Toth, Jr., President and Chief Executive Officer

	Date: December 20, 2001

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.


Signature	Title	Date
/s/ Steve Toth, Jr. Steve Toth, Jr.	Director, President and Chief Executive Officer (Principal Executive Officer)	January 10, 2002

/s/ Martin S. Suchik Martin S. Suchik	Director	January 10, 2002

/s/ Thomas W. Marquis Thomas W. Marquis	Director, Treasurer, Secretary, Principal Financial Officer	January 10, 2002

/s/ Harold Poling Harold Poling	Director	January 10, 2002

Ralph Armijo	Director	January 10, 2002

William James	Director	January 10, 2002

Exhibit Index


Exhibit Number		Description


Exhibits: * signifies exhibit incorporated herein by reference
+ signifies exhibit filed herewith

* 3.1		Articles of Incorporation of the Registrant dated April 21, 1997, together with Articles of Merger of Registrant and The Banker’s Note, Inc. dated April 21, 1997, filed as Exhibit 3.1 to form 10-K for fiscal year ended September 30, 1997.

* 3.2		By-Laws of the Registrant, amended and effective on September 12, 1997, filed as Exhibit 3.2 to form 10-K for fiscal year ended September 30, 1997.

* 4.1		VSI Holdings, Inc. 1997 Incentive Stock Option Plan as approved at the Annual Shareholders’ Meeting held on April 21, 1997, filed as Exhibit 4.1 to form 10-K for fiscal year ended September 30, 1997.

* 4.2		VSI Holdings, Inc. 1997 Non-Qualified Stock Option Plan as approved at the Annual Shareholders’ Meeting held on April 21, 1997, filed as Exhibit 4.2 to form 10-K for fiscal year ended September 30, 1997.


* 4.3		The Banker’s Note, Inc. Independent Director Stock Option Plan as approved at the Annual Shareholders’ Meeting held on June 23, 1989, filed as Exhibit 4.3 to form 10-K for fiscal year ended September 30, 1997.

* 4.4		The Banker’s Note, Inc. 1986 Incentive Stock Option Plan as approved at the Annual Shareholders’ Meeting held on June 16, 1986, filed as Exhibit 4.1 to Form 10-K for fiscal year ended September 30, 1996.

* 4.5		The Banker’s Note, Inc. 1986 Non-Qualified Stock Option Plan as approved at the Annual Shareholders’ Meeting held on June 16, 1986, filed as Exhibit 4.2 to Form 10-K for fiscal year ended September 30, 1996.

* 4.6		VSI Holdings, Inc. Restricted Stock Plan December 1, 1997 as approved at the annual shareholders meeting held on April 8, 1998, filed as Exhibit 4.6 to Form 10-K for fiscal year ended September 30, 1998.

* 4.7		VSI Holdings, Inc. Employee Stock Purchase Plan October 7, 1997 as approved at the annual shareholders meeting held on April 8, 1998, filed as Exhibit 4.7 to Form 10-K for fiscal year ended September 30, 1998.

* 4.8		Advanced Animations, Inc. Agreement and Plan of Merger dated February 7, 1997, filed as Exhibit 4.8 to Form 10-K for fiscal year ended September 30, 1998.

* 4.9		VISPAC, Inc. Agreement and Plan of Merger dated June 13, 1997, filed as Exhibit 4.9 to Form 10-K for fiscal year ended September 30, 1998.

* 4.10		Visual Services, Inc. Agreement and Plan of Merger dated September 24, 1997, filed as Exhibit 4.10 to Form 10-K for fiscal year ended September 30, 1998.

+10.1		Loan agreement dated July 12, 2001 between Visual Services, Inc. and Bank One, Michigan.

+10.2		Loan Guaranty dated July 12, 2001 between VSI Holdings, Inc. and Bank One, Michigan.

+ 21.1		List of Subsidiaries of the Registrant.

+ 23.1		Consent of Plante & Moran LLP, Independent Auditors.

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