Exhibit 99.1

                                  RISK FACTORS

     Set forth below are the risk factors included in LearningStar's
Registration Statement on Form S-4, as amended.  Certain risk factors relating
solely to the combination of Earlychildhood and SmarterKids.com have been
omitted and certain other risk factors have been revised solely to reflect that
the combination of Earlychildhood and SmarterKids.com has been consummated. The
risk factors described below are not a comprehensive list of risk factors that
apply to our business. Actual results could differ materially from those
anticipated in the forward-looking statements contained in the Form 10-Q as a
result of certain factors, including those set forth in the following risk
factors and elsewhere in LearningStar's Registration Statement on Form S-4 and
other reports on file with the Commission.

WE MAY FAIL TO REALIZE THE ANTICIPATED BENEFITS OF THE COMBINATION OF
EARLYCHILDHOOD AND SMARTERKIDS.COM, CAUSING OUR REVENUES AND MARKET PRICE TO
DECLINE.

     We cannot assure you whether and to what extent the integration and
consolidation of Earlychildhood and SmarterKids.com will be successfully
implemented or will be able to achieve increased revenues, cost savings or
operating synergies. The combination involves the integration of two companies
that have previously operated independently. We cannot assure you that the
respective operations of SmarterKids.com and Earlychildhood can be integrated
without encountering difficulties. The success of the combination will depend,
in large part, on the ability of SmarterKids.com, Earlychildhood and
LearningStar to implement a strategic plan that will enable LearningStar to
realize the anticipated growth opportunities and synergies from combining the
business of SmarterKids.com with the business of Earlychildhood. If members of
our management team are not able to develop strategies and implement a business
plan that achieves these goals and the other objectives described below, the
anticipated benefits of the combination may not be realized. In particular,
anticipated growth in revenue, earnings before interest, taxes, depreciation and
amortization, or "EBITDA," and cash flow may not be realized. Failure to realize
these objectives could cause a decline in the market price of shares of our
common stock and a continuation of operating losses at the combined company
necessitating the implementation of significant employee cutbacks and other cost
savings programs as we attempt to achieve long-term profitability. To realize
the anticipated benefits of this combination, members of the our management team
must develop strategies and implement a business plan that will achieve the
following objectives:

  .  effectively combine Earlychildhood's children's product catalog and school
fund raising programs with SmarterKids.com's e-commerce technology and
infrastructure;

  .  successfully take advantage of the anticipated opportunities for cross-
promoting and cross-selling Earlychildhood's and SmarterKids.com's products and
services and for increasing revenues from the sale of products, services and
information;

  .  effectively and efficiently integrate SmarterKids.com's and
Earlychildhood's policies, procedures, operations and employees;

  .  successfully retain and attract key employees, including operating
management and key technical personnel, during a period of transition and in
light of the competitive employment market; and

  .  while integrating Earlychildhood's and SmarterKids.com's operations and
significant facilities, which are located in California, Florida, Georgia,
Massachusetts, Pennsylvania and Texas, maintain adequate focus on the core
businesses of the combined company in order to take advantage of competitive
opportunities and to respond to competitive challenges.

OUR COMMON STOCK MAY NOT ACHIEVE A VALUATION THAT FULLY REFLECTS THE TRUE VALUE
OF THE COMBINED COMPANY.

     Shares of our common stock may not achieve a valuation on the public market
that fully reflects the true value of the combined company, including its
synergies and benefits. We are a provider of children's educational products and
our business model includes both web-based and traditional catalog sales of
products and services to the home and school markets. Financial analysts and
investors may have difficulty identifying and applying measures of financial
performance that reflect the value of the combined company. The market value of
shares of


common stock generally reflects a "multiple" of selected measures of financial
performance, such as operating profits or earnings per share. The multiple for
shares of our common stock may be based on the financial performance of
SmarterKids.com, or it may be based on the financial performance of
Earlychildhood, or it may reflect a "blending" of the two. The ultimate basis
upon which the market values the combined entity's stock may not be indicative
of our true value.

THERE MAY BE SALES OF A SUBSTANTIAL AMOUNT OF OUR COMMON STOCK NOW THAT THE
COMBINATION HAS BEEN COMPLETED, AND THESE SALES COULD CAUSE THE PRICE OF OUR
COMMON STOCK TO DECLINE.

  After the expiration of 180 days from April 30, 2001 (or earlier pursuant to a
waiver), the lock-up restrictions to which 6,402,583 shares of our common stock
are subject will expire, and these shares may thereafter be sold. Sales of these
shares could cause the price of our common stock to fall. In connection with the
combination agreement, each of the directors and executive officers and certain
significant stockholders of SmarterKids.com, as well as each of the members of
the Earlychildhood management committee, each Earlychildhood executive officer
and all holders of outstanding membership interests in Earlychildhood, entered
into lock-up agreements with us. Pursuant to these lock-up agreements, all of
the shares of our common stock received by these persons in connection with the
combination may not be sold for a period of 180 days from April 30, 2001 without
a waiver approved by us. It is conceivable that our board of directors may
conclude that such a waiver might be in the best interests of the company and
our stockholders as a means to enhance our public float in advance of the 180-
day lock-up period and, in such case, some or all of these shares may be
registered by us or otherwise permitted to be sold earlier than they would have
been absent this waiver. Accordingly, investors considering a purchase of our
common stock should not base their investment decision on the presumption that
any or all of these shares will remain under lock-up for the full 180 days. A
majority of the members of our board of directors or their affiliates are
subject to such lock-up restrictions, and the interests of these members in
obtaining earlier liquidity for their shares made possible by a waiver from the
lock-up restrictions and registration by us may represent a conflict of interest
for them. We presently anticipate that any waiver of lock-up restrictions
pertaining to, and any registration of, a material number of shares (other than
pursuant to the registration statement rights agreement) would be made pro rata
for all stockholders subject to the lock-up restrictions and with advance
notification to the market at large. Upon expiration of the lock-up agreements
(or earlier pursuant to a waiver), these 6,402,583 securities may be sold in the
future to the extent permitted under Rule 144, Rule 145 or another exemption
under the Securities Act or upon the effectiveness of a resale registration
statement with respect to these shares.  Pursuant to the registration rights
agreements, we have agreed to register under the Securities Act of 1933 up to an
aggregate of 5,605,269 shares held by Earlychildhood members and 797,354 shares
held by SmarterKids.com stockholders. The supply of our common stock created by
sales pursuant to the expiration or waiver of the lock-up agreement and any
registration effected by us in connection therewith, pursuant to registration of
our common stock in accordance with the terms of the registration rights
agreements or pursuant to Rule 144, Rule 145 or another permitted exemption
under the Securities Act may cause the price of our common stock to decline.

SMARTERKIDS.COM HAS INCURRED SIGNIFICANT OPERATING LOSSES TO DATE, AND FAILURE
TO INCREASE SMARTERKIDS.COM'S REVENUES WHILE REDUCING OPERATING COSTS COULD
PREVENT US FROM ACHIEVING PROFITABILITY.

  We need to generate greater revenues and operating profits while significantly
reducing costs and operating expenses in order to achieve profitability.
Earlychildhood incurred a pro forma net loss of $2.3 million for the twelve
months ended December 31, 2000. SmarterKids.com incurred a net loss of $32.8
million for the twelve months ended December 31, 2000 and has not achieved
profitability on a quarterly or annual basis. SmarterKids.com's revenues may not
continue to grow and SmarterKids.com may never generate sufficient revenues to
achieve profitability, which could negatively impact our results of operations.
SmarterKids.com has incurred significant losses since its inception and may
incur losses in the future. Continuing losses by SmarterKids.com or
Earlychildhood could significantly reduce our ability to achieve profitability
and result in a decline of our stock price.

ADDITIONAL FINANCING MAY NOT BE AVAILABLE WHEN NEEDED OR MAY ONLY BE AVAILABLE
ON TERMS THAT COULD RESULT IN HIGHER DEBT SERVICE COSTS FOR US, WHICH COULD
CAUSE A REDUCTION IN OUR RESULTS OF OPERATIONS.

  If we are unable to negotiate borrowing arrangements that will permit us to
meet our credit objectives, short-term revenue growth may be reduced and our
long-term ability to meet our strategic objectives may be


impaired. If cash from available sources is insufficient for our capital needs,
we may need to raise additional capital. Additional financing, if needed, may
not be available on satisfactory terms or at all. In addition, any additional
issuance of equity or equity-related securities to raise capital would be
dilutive to our existing stockholders. Any debt financing may also result in
additional restrictions on our ability to pay dividends, which could cause our
stock price to decline and restrictive covenants which could impair our ability
to operate our business and fully implement our strategic plan. The businesses
of SmarterKids.com and Earlychildhood are capital intensive. The integration and
expansion of their businesses will require a significant commitment of
resources, including, but not limited to, the expansion or addition of existing
leased warehouse space and associated equipment, and additional hardware and
software to expand internal networks and external Internet-based operations.
Both businesses require significant levels of inventory leading up to their peak
business periods, which we fund via a revolving line-of-credit. Our ability to
fund our operations, make scheduled debt payments and planned capital
expenditures and to remain in compliance with financial covenants under any
credit facility will depend on their and our future operating performance and
cash flow, which in turn, are subject to prevailing economic conditions and to
financial, business and other factors, some of which are beyond our control.

EACH OF SMARTERKIDS.COM'S AND EARLYCHILDHOOD'S BUSINESSES ARE HIGHLY SEASONAL,
CAUSING EACH COMPANY TO BE OVERLY DEPENDENT ON A SINGLE QUARTER FOR ANNUAL
REVENUES.

  Seasonal shopping patterns affect SmarterKids.com's business. A significant
portion of SmarterKids.com's sales occurs in the fourth quarter, coinciding with
the holiday shopping season. As such, SmarterKids.com's results of operations
for the entire year depend largely on its fourth quarter results.  Factors that
could cause SmarterKids.com's sales and profitability to suffer include:

  .  the availability of, and customer demand for, particular products;

  .  unfavorable economic conditions, which decreases consumer confidence and
lowers consumer discretionary spending;

  .  the inability to hire adequate temporary personnel;

  .  the inability to purchase or maintain appropriate inventory levels, which
levels, if too low, could cause fulfillment delays of high demand product and,
if too high, could leave SmarterKids.com with excess inventory of unpopular
products; and

  .  a late Thanksgiving, which reduces the number of shopping days between
Thanksgiving and the holiday season.

  Earlychildhood's business is also subject to seasonality. A significant
portion of Earlychildhood's sales occurs in the third quarter, coinciding with
the start of the U.S. school year. As a result, Earlychildhood's results of
operations for the entire year depend largely on its third quarter results.
Factors that could cause Earlychildhood's sales and profitability to suffer
include:

  .  the availability of and customer demand for particular products;

  .  unfavorable economic conditions, which decreases consumer confidence and
lowers consumer discretionary spending; and

  .  the inability to purchase or maintain appropriate inventory levels, which
levels, if too low, could cause fulfillment delays of high demand product and,
if too high, could leave SmarterKids.com with excess inventory of unpopular
products.

AFFILIATES OF EARLYCHILDHOOD HAVE SIGNIFICANT INFLUENCE OVER US, WHICH COULD
LIMIT OUR OTHER STOCKHOLDERS' ABILITY TO INFLUENCE CORPORATE DECISIONS.


  Immediately after completion of the combination, two of the former largest
holders of membership interests in Earlychildhood owned, in the aggregate,
approximately 59.3% of our common stock on a fully-diluted basis. As a result,
these stockholders, if they act together, will be able to control all matters
requiring approval of a majority of our stockholders, including any merger, sale
of assets and other significant corporate transactions. This control could:

  .  delay or prevent a change of control of us;

  .  deprive our stockholders of an opportunity to receive a premium for their
common stock as a part of a sale of us or our assets; and

  .  negatively affect the market price of our common stock.

OUR OPERATIONS COULD BE DISRUPTED IF SMARTERKIDS.COM'S OR EARLYCHILDHOOD'S
INFORMATION SYSTEMS FAIL INDEPENDENTLY OR AS PART OF THE INTEGRATION.

  Our success will be highly dependent upon the successful integration of each
of SmarterKids.com's and Earlychildhood's hardware and software systems. Failure
to successfully integrate these technologies could result in our operations
being slowed or interrupted, reducing the performance of websites, fulfillment
operations and customer service.

  Both SmarterKids.com's and Earlychildhood's businesses depend on the efficient
and uninterrupted operation of their computer and communications software and
hardware systems. Both companies regularly make investments to maintain, enhance
and replace their individual systems. Each must assess and, if deemed necessary,
appropriately expand the capacity of their information systems to accommodate
the anticipated growth of the combined company or its operations could suffer.

  In addition, continued customer access to both SmarterKids.com's and
Earlychildhood's websites is important to our success and the perception of our
brand. Both websites may experience occasional system interruptions that make
their website unavailable or prevent them from efficiently fulfilling orders.
These interruptions may reduce the volume of goods sold, the attractiveness of
products and services offered and damage Earlychildhood's, SmarterKid.com's and
our reputation. Earlychildhood and SmarterKids.com may require additional
software and hardware to upgrade the systems and network infrastructure of their
websites to accommodate increased traffic and sales volume. Neither
SmarterKids.com nor Earlychildhood can accurately project the rate or timing of
any increases in traffic or sales volume on their individual websites and,
therefore, the integration and timing of these upgrades are uncertain.

  Earlychildhood also depends heavily on software which is utilized in its
order-taking, customer service, inventory management, and fulfillment
operations. If problems with this software develop, Earlychildhood's operations
could be slowed or interrupted, reducing the volume of goods sold and shipped
and the attractiveness of products, services and information offered, causing
damage to its reputation.

  Neither SmarterKids.com nor Earlychildhood have a formal recovery plan to
prevent delays or other complications arising from information systems failure.
Neither company's business interruption insurance may adequately compensate them
for losses that may occur.

WE ARE SUBJECT TO INTENSE COMPETITION WHICH MAY IMPEDE OR PREVENT US FROM
ATTAINING GREATER MARKET SHARE AND COULD IMPAIR THE GROWTH OF OUR REVENUES.

  Intense competition and increased consolidation, which could result in one
company's dominance in the marketplace, may result in loss of market share for
us and ultimately reduce our revenues. Some of SmarterKids.com's direct
competitors are specialty educational and creative toy and game retailers such
as Zany Brainy and Learning Express. These retailers are continuing to expand
and could impede SmarterKids.com's ability to increase its sales.
SmarterKids.com is also subject to competition from mass market retailers and
discounters such as Toys "R" Us, WalMart and Target which have greater brand
recognition and greater financial, marketing and other resources than
LearningStar.  SmarterKids.com could be at a disadvantage in responding to these


competitors' merchandising and pricing strategies, advertising campaigns and
other initiatives. Several of these competitors, including Toys "R" Us, have
launched successful Internet shopping sites that compete with SmarterKids.com
and educational "boutique" areas within their retail sites. In addition, an
increase in focus on the specialty retail market or the sale by these
competitors of additional products similar to SmarterKids.com's could cause
SmarterKids.com to lose market share. SmarterKids.com faces growing competition
from Internet-only retailers, such as Amazon.com, which may have a cost
advantage over SmarterKids.com and reach a broader market, as well as non-toy
specialty retailers, which compete with SmarterKids.com's children's educational
product business and could limit SmarterKids.com's ability to expand in these
markets.

  SmarterKids.com's sales and profitability could suffer if:

  .  new competitors enter markets in which SmarterKids.com is currently
operating;

  .  SmarterKids.com's competitors implement aggressive pricing strategies;

  .  SmarterKids.com's competitors expand their operations;

  .  SmarterKids.com's suppliers sell their products directly or enter into
exclusive arrangements with SmarterKids.com's competitors; or

  .  SmarterKids.com's competitors adopt innovative merchandising strategies
that are similar to those of SmarterKids.com.

  Earlychildhood's direct competitors are educational supply companies such as
School Specialty, Inc., Lakeshore Learning Materials, The Kaplan Companies, ABC
School Supply, Inc., Beckley Cardy Co., U.S. Toy Company, Childcraft Education
Corp., and J.L. Hammett Co.'s Earlychildhood Division.

  There has been consolidation among these competitors over the last several
years; specifically, Beckley Cardy and Childcraft Education have all been
purchased by School Specialty, Inc. Some of Earlychildhood's competitors, such
as The Kaplan Companies and School Specialty, Inc. have launched successful
websites which offer both products and information that compete with
Earlychildhood's website.

  Earlychildhood manufactures products domestically and develops products
internationally to offer low-cost, higher margin company-developed products. If
one of its competitors pursued an aggressive manufacturing program, a competing
line of similar company-developed products could cause Earlychildhood to lose
market share.

  In addition, capital requirements in the school supply distribution industry
are low, and there are few barriers to entry. A number of industry participants
(including Discount School Supply and Educational Products, Inc.) have grown
consistently, buoyed by strong industry fundamentals. Attracted by this growth,
entrants could potentially re-create Earlychildhood's successful operating
strategies, which could cause us to lose additional market share.

  Earlychildhood's sales and profitability could suffer if:

  .  new competitors enter markets in which Earlychildhood is currently
operating;

  .  Earlychildhood's competitors implement aggressive pricing strategies;

  .  Earlychildhood's competitors expand their operations; or

  .  Earlychildhood's competitors recreate its operating strategies,
specifically the importation and manufacture of company-developed products.

IF OUR SUPPLIERS AND DISTRIBUTORS ALTER PURCHASING TERMS, OUR MARGINS AND
PROFITABILITY WILL SUFFER.


  Many of our suppliers provide us with incentives, such as return privileges,
volume purchasing allowances and cooperative advertising. A reduction or
discontinuation of these incentives could increase costs and decrease our
margins and profitability.

IF A SHIPMENT OF PRODUCTS THAT WE IMPORT IS INTERRUPTED OR DELAYED, OUR
INVENTORY LEVELS AND SALES COULD DECLINE.

  We import some of our product offerings from foreign manufacturers. These
foreign manufacturers are located in countries such as Japan, China, Taiwan,
Germany and South Korea, among others. We are subject to the following risks
inherent in relying on foreign manufacturers:

  .  the inability to return products which could result in excess inventory;

  .  fluctuations in currency exchange rates which could potentially result in a
weaker U.S. dollar in overseas markets, increasing the cost of inventory
purchased;

  .  transportation delays and trade restrictive actions by foreign governments
which could result in delays in shipping products to our customers;

  .  the laws and policies of the United States affecting importation of goods,
including duties, quotas and taxes and;

  .  trade infringement claims.

  Interruptions or delays in our imports could cause shortages in product
inventory and a decline in our sales unless we secure alternative supply
arrangements. Even if we could locate alternative sources, these alternative
products may be of lesser quality or more expensive.  Our sales could also
suffer if our suppliers experience similar problems with foreign manufacturers.

WE MAY BE EXPOSED TO PRODUCT LIABILITY LAWSUITS AND OTHER CLAIMS IF WE FAIL TO
COMPLY WITH GOVERNMENT AND TOY INDUSTRY SAFETY STANDARDS.

  Children can sustain injuries from toys and other educational products. Each
of SmarterKids.com, Earlychildhood and LearningStar may be subject to claims or
lawsuits resulting from such injuries. There is a risk that claims or
liabilities may exceed all of SmarterKids.com's, Earlychildhood's and
LearningStar's insurance coverage. Moreover, each of SmarterKids.com,
Earlychildhood and LearningStar may be unable to retain adequate liability
insurance in the future. SmarterKids.com, Earlychildhood and LearningStar are
also subject to regulation by the Consumer Product Safety Commission and similar
state regulatory authorities and our products could be subject to recalls and
other actions by such authorities.

WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY, WHICH COULD IMPAIR BRAND
AND REPUTATION.

  Efforts by SmarterKids.com, Earlychildhood and LearningStar to protect our
proprietary rights may be inadequate. Each company regards its intellectual
property as important to the marketing strategy of the combined company. To
protect our proprietary rights, SmarterKids.com, Earlychildhood and LearningStar
generally rely on copyright, trademark and trade secret laws, confidentiality
agreements with employees and third parties and license agreements with
consultants and suppliers. However, a third party could, without authorization,
copy or otherwise appropriate information from any of the companies.
Furthermore, with respect to Earlychildhood, whose trademark in
Earlychildhood.com is a descriptive mark that has not been and likely will not
be registered with the United States Patent and Trademark Office, third parties
may use marks similar to Earlychildhood's, potentially diminishing
Earlychildhood's brand name and reputation. Employees, consultants and others
who participate in development activities could breach their confidentiality
agreements, and we may not have adequate remedies for any such breach. Our
failure or inability to protect our proprietary rights could materially decrease
our value, and each company's individual, as well as our combined, brand and
reputation could be impaired.

THE COST OF MATERIALS USED TO MANUFACTURE PRODUCTS IS SUBJECT TO VOLATILITY,
WHICH COULD REDUCE OUR PROFITABILITY.


  The unavailability of raw materials or a substantial increase in their prices
could reduce our profitability and have a negative impact on our stock price.
Currently, Earlychildhood manufactures certain products, including non-toxic
tempera paints, finger paints, glues and other water-based art mediums.
Earlychildhood may, from time to time, experience difficulty in obtaining
adequate raw material requirements at competitive prices, and experience
shortages of raw materials used in its manufacturing process.

EARLYCHILDHOOD IS SUBJECT TO REGULATION BY FEDERAL AND STATE ENVIRONMENTAL
AUTHORITIES AND MAY BE SUBJECT TO ENVIRONMENTAL CLAIMS RELATING TO ITS
MANUFACTURING PROCESSES.

  If Earlychildhood fails to comply with environmental laws and regulations, it
may incur material liabilities in the form of administrative, civil, or criminal
enforcement by government agencies or other parties, which would reduce our
profitability and cause our stock price to decline. Earlychildhood's
manufacturing operations are subject to numerous federal, state, and local
environmental and occupational health and safety laws and regulations, which
include laws and regulations governing waste disposal, air and water emissions,
the handling of hazardous substances, workplace exposure, and other matters.

  Although at this time neither we nor Earlychildhood is required to make any
material capital expenditures, in the future, we and/or Earlychildhood may be
required to make material capital expenditures to remain in compliance with
applicable environmental laws and regulations. In the future, we or
Earlychildhood may also be required to make expenditures to maintain
environmental control systems, to remedy spills or leaks of toxic materials
stored in its facilities, or to dispose of hazardous materials like batteries
required in its manufacturing process. Such expenditures could reduce our
profitability. In addition, the adoption of new environmental laws and
regulations, changes in existing laws and regulations, or their interpretation,
stricter enforcement of existing laws and regulations, or governmental or
private claims for damage to persons, property, or the environment resulting
from our business may force us to expend additional capital and resources on
environmental compliance.

PROVISIONS OF OUR CHARTER AND BYLAWS AND DELAWARE LAW MAY HAVE ANTI-TAKEOVER
EFFECTS THAT COULD PREVENT A CHANGE IN CONTROL OF LEARNINGSTAR.

  Certain provisions of the our restated certificate of incorporation and
amended and restated bylaws and Delaware law may have the effect of delaying or
preventing a change of control of LearningStar and, therefore, could cause the
price of our common stock to decline.

  Our restated certificate of incorporation authorizes our board of directors to
issue, without shareholder approval, shares of preferred stock with voting,
conversion and other rights and preferences that could adversely affect the
voting power or other rights of the holders of our common stock. The issuance of
preferred stock or of rights to purchase preferred stock could be used to
discourage an unsolicited acquisition proposal. In addition, the possible
issuance of preferred stock could discourage a proxy contest, make more
difficult the acquisition of a substantial block of our common stock or limit
the price that investors might be willing to pay in the future for shares of our
common stock. Our restated certificate of incorporation and amended and restated
bylaws also provide that:

  .  our board of directors may adopt, amend or repeal the bylaws or any
provision of our restated certificate of incorporation, however, the affirmative
vote of the holders of at least 75% of the voting power of all outstanding
shares of our capital stock voting as a single class is required to adopt, amend
or repeal the amended and restated bylaws or any provision of our restated
certificate of incorporation or;

  .  our stockholders may not take any action by written consent;

  .  special meetings of our stockholders may be called only by the chairman of
the board of directors or a majority of our board of directors and business
transacted at any special meeting shall be limited to matters relating to the
purposes set forth in the notice of the special meeting; and

  .  our board of directors will be divided into three classes serving staggered
three-year terms.


  In addition, we are subject to certain "anti-takeover" provisions of the
Delaware General Corporation Law which, subject to certain exceptions, restrict
certain transactions and business combinations between a corporation and a
shareholder owning 15% or more of the corporation's outstanding voting stock (an
"interested shareholder") for a period of three years from the date the
shareholder becomes an interested shareholder.

THE IMPOSITION OF STATE SALES TAX AND OTHER TAX OBLIGATIONS ON E-COMMERCE COULD
CAUSE OUR REVENUES TO DECREASE AND LIMIT SMARTERKIDS.COM'S AND EARLYCHILDHOOD'S
GROWTH.

  The broader imposition of sales and use tax collection responsibilities on
LearningStar, Earlychildhood or SmarterKids.com would increase the direct cost
to customers of our products, as well as increase the administrative and
overhead costs associated with the collection and payment of these taxes. Our
competitive position could be weakened relative to local competitors who are
already subject to these tax collection requirements and non-local competitors
who might still be free of these requirements. Neither SmarterKids.com nor
Earlychildhood currently collects state sales and use taxes or other similar
taxes with respect to its marketing of products to customers in states where it
does not have a tax "nexus." It is possible that potential changes in the way
that SmarterKids.com and Earlychildhood do business after the combination could
result in LearningStar being more broadly subject to sales and use tax
collection responsibilities or to state income taxes which could reduce our
revenues or profits.

  A number of proposals have been made at the federal, state, local and
international levels that would impose taxes on the sale of goods and services
through the Internet in circumstances where no tax or tax collection
responsibility is presently thought to be imposed. These proposals, if adopted,
could substantially impair the growth of e-commerce and our business prospects
and growth.

  Any or all of these potential changes and developments, either in the combined
companies' methods of operations or the tax rules that govern them, could
diminish the combined companies' revenues and future results of operations and
weaken its financial condition.

  In addition, there is currently in effect in the United States a three-year
moratorium expiring on October 20, 2001 on new state and local taxes on Internet
access and "multiple or discriminatory" taxes on e-commerce. Sales or use taxes
imposed on those buying or selling products or services over the Internet are
not generally affected by this moratorium. The full effect of this moratorium on
our business is not clear. To the extent that the moratorium provides a material
benefit, its expiration on October 20, 2001 could reduce our revenues and
results of operations and weaken our financial condition.