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

                                   FORM 10-KSB

(Mark one)

     [X]  ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR 15(D)  OF THE  SECURITIES
          EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

          For the fiscal year ended December 31, 1999

                                       OR

     [_]  TRANSITION  REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES
          EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

          For the transition period from ________ to _________

          Commission file number 000-29113


                                SYCONET.COM, INC.
                 (Name of Small Business Issuer in its charter)

           Delaware                                              54-1838089
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

9208A Venture Court
Manassas, Virginia                                                  20111
(Address of principal executive offices)                          (Zip Code)

Issuer's telephone number: (703) 366-3900

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

    Title of each class                          Name of each exchange on which
    to be so registered                          each class is to be registered

          N/A                                                  N/A

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

                                  Common Stock
                                (Title of Class)


<PAGE>


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.

Yes [_]     No [X]

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained,  to the  best of  Registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year. $1,153,536.

State the aggregate market value of the voting and non-voting common equity held
by  nonaffiliates  computed by reference to the price at which the common equity
was sold,  or the  average bid and asked  prices of such  common  equity as of a
specified date within the past 60 days.  (See definition of an affiliate in Rule
12b-2 of the Exchange  Act.) The closing price of the  Company's  stock on March
28, 2000 was $ 1.86 .

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest  practicable  date.  12,834,958 shares of Common Stock,
$.0001 par value, outstanding as of March 28, 2000.


                   DOCUMENTS INCORPORATED BY REFERENCE - None

            Transitional Small Business Disclosure Format: Yes [_] No [X]


                                        2
<PAGE>


                                     PART I

     Unless the context  otherwise  requires,  all  references in this Report to
"us," "we," "our" or "SyCo" mean SyCoNet.Com, Inc.

Item 1. Description of Business.

A.   Overview.

     SyCoNet.Com,  Inc.  was formed in Delaware in June 1997 under the name SyCo
Comics and Distribution Inc. and is the successor to a limited partnership named
SyCo  Comics  and  Distribution  formed  under the laws of the  Commonwealth  of
Virginia  on January  15,  1997,  by Sy Robert  Picon and  William  Spears,  the
co-founders and principal  shareholders  of  SyCoNet.Com.  On February 17, 1999,
SyCo Comics and Distribution Inc. changed its name to SyCoNet.Com, Inc.

     Our principal place of business is 9208A Venture Court, Manassas,  Virginia
20111, and our telephone number is (703) 366-3900.

     Our common  stock is listed on  NASDAQ's  Over-the-Counter  Bulletin  Board
under the symbol "SYCD".

     As more fully described below, SyCoNet.Com,  Inc. is engaged principally in
the distribution and direct marketing of Anime -- animated  cartoons produced in
Japan and shipped to the United States where  English  subtitles or dialogue are
inserted prior to distribution on videocassettes  -- and Anime-related  toys and
other  merchandise.  We sell  directly to  individuals  over the Internet and at
Anime conventions.  We are also a wholesale  distributor to small retail outlets
such as Anime specialty stores,  comic book specialty stores,  video stores, toy
stores and electronic stores.

B.   Business Development.

     Our original plan of operation was to distribute comic books and comic book
character-based  trading cards and T- shirts to comic book specialty  stores and
traditional  outlets.  The response from the comic book retailers to our efforts
was  minimal  because  we could not offer them the  comics  published  by Marvel
Entertainment Group, Inc. and the other principal comic book publishers,  all of
which had entered  into and were subject to  exclusive  distribution  agreements
with Diamond  Comic  Distributors,  Inc.  Accordingly,  we incurred  substantial
losses in the first three  quarters of 1997.  In the fourth  quarter of 1997, we
refocused our operations on the distribution of Anime. We are no longer involved
in  comic-book  distribution.  Distribution  of  Anime  currently  accounts  for
approximately  90% of our revenues,  and Anime- related  merchandise,  including
toys and trading cards,  accounts for  approximately  10%. 85% of our catalog is
devoted to VCR tapes,  10% to DVD,  and 5% to toys and  trading  cards.  Our VHS
products  are  priced  from 28% to 50% less  than the  manufacturer's  suggested
retail  price  and  our  DVD  products  are  priced  28% to 30%  less  than  the
manufacturer's  suggested  retail price.  Notwithstanding  our rapid growth,  we
cannot  assure  you that  our  growth  will be  sustained  or that we will  gain
significant market share in the future.

C.   Description of Our Business.

Anime

     Anime differs from American  animation in several  important  ways.  Unlike
American animation,  which is created mainly for children, Anime is targeted for
specific age groups which range from young children to adults. Therefore,  Anime
has  more  developed  storylines  and  more  lifelike  characters,   which  grow
emotionally and socially throughout the story. The storylines and characters can
be  as  varied  and  detailed  as  in a  feature-length  movie  or  long-running
television  series.  In addition,  the characters'  actions and  characteristics
drive stories more than they do with American animation. Characters learn how to
obtain help from their friends and overcome their own weaknesses.  That internal
growth  is the  focus  of the  story,  which  makes  the  overall  plot far more
compelling, believable and relevant to the audience.


                                        3
<PAGE>


     Anime  videos  also  have a  high  degree  of  sensory  appeal,  due to the
high-quality  music and  graphics.  Also,  the  graphic  style of most  Anime is
focused  more on the  visual  context  and use of  backgrounds  and  less on the
simulations of fluid body movements and other action.  This method provides more
information  about  the  overall  impression  of the scene  than  with  American
cartoons,  while the lower priority  assigned to life-like body movement enables
Anime to be produced at a far lower cost per frame.

     Unlike American animation,  Anime appeals to both males and females.  Anime
makes liberal use of romantic themes, and 60% of all Anime films and series have
female leads as either the hero or the love interest.

Market

     More than 2,500  Anime  titles  are now  available  in the  United  States,
principally  through  national  chains  selling  or renting  videocassettes.  We
distribute  virtually  the entire  line of Anime  videos,  as well as  ancillary
products such as toys and trading cards based on the Anime movies.

Product

     We  obtain  product  on a  non-exclusive  basis  from 15  Anime  suppliers,
including Central Park Media,  Pioneer,  A.D. Vision, Viz Communications,  Irwin
Toys, ADV Films and MGM's Orion  Pictures.  Since we obtain our Anime  cassettes
from multiple sources,  we believe we have a secure source of product,  although
we cannot give any assurances.  We distribute over 2,500 available video titles,
including  Pokemon,  Dragon  Ball Z and Sailor  Moon  videos,  as well as select
Anime-related toys and other  merchandise.  We maintain an inventory of products
in high demand so as to offer prompt  service and fast  delivery,  and we obtain
other products to fulfill orders we receive. Between October 31 and December 30,
1999,  we fulfilled  98.7% of over 4000 orders  within our stated  delivery time
frame of two days and 100% of our  orders  were  filled  in time for  Christmas.
Approximately 85% of the videos we purchase from suppliers are returnable.

Marketing and Distribution

     Initially  our products were offered only through our own catalogs to small
retail customers that focused almost  exclusively on Anime products.  We plan to
continue  providing  wholesale  services to retail stores that are interested in
the Anime product line. However,  now we are focusing on direct marketing to the
individual consumer through the Internet.  Currently, all of our products can be
ordered through our two web sites  "www.animedepot.com" and "www.altvidwar.com".
We intend to make the  Internet  our primary  distribution  channel to consumers
since  Anime  buyers  are  opting  for this  method of buying  over  traditional
shopping  malls  and  specialty   shops.   We  believe  that  this  medium  will
significantly  reduce our expenses.  We also market our products to  individuals
and  retailers  at  trade  shows  and  conventions,  as  well as  through  trade
publications and headers on selected Internet search engines.

     We rely on agreements  with United Parcel Service to deliver  products from
suppliers as well as to customers.  Charges associated with delivery of products
to us are frequently borne by our suppliers.  We intend to establish  facilities
in  various  regions  of the  United  States to allow  for  faster  receipt  and
distribution  of our  products if  warranted  by new business and subject to the
availability of the necessary capital.

Competition

     Anime producers have not granted exclusive  distribution  agreements to any
distributor, although we cannot assure you that this situation will continue.

     The four major wholesale  distributors of Anime videos in the United States
are Bandai,  Pioneer, Baker & Taylor, and Ingram Entertainment.  They specialize
in providing products to large general retailers, toy retailers and video chains
that are  interested  primarily in selling only the 20 to 30 most popular  Anime
titles.  We do not sell to large retail accounts and therefore we do not compete
with these large distribution companies.

     We focus on  providing  a high degree of service to smaller  retailers.  We
have our main  competitors  who, like us, are  relatively  small  privately held
companies that serve the Anime niche market of small specialty retailers. These


                                        4
<PAGE>


companies are Central Park Media,  Media Blasters,  Animego,  and AD Vision, and
they have greater  financial,  personnel,  marketing and sales resources than we
do. We compete with these companies on the basis of price,  service,  selection,
availability  and product  knowledge.  We also compete with many smaller  retail
outlets  that sell  Anime  either  by  itself or as part of a product  line that
includes role playing games, video games, and other hobbyist activities.

Intellectual Property

     We have  service  mark  applications  pending  for the  following:  "SYCO",
"ANIMEDEPOT.COM",    "YUGI-OH"   "YUGI-OH.COM",   "YUGI-OH   DEPOT",   "OHUGI-OH
DEPOT.COM", "OTAKU", "OTAKU USA", "OTAKU USA.COM", "ANIME USA", "ANIME USA.COM",
"SYCONET",   "SYCONET.COM",   "SYCOZONE",   "SYCOZONE.COM",   "KID  ANIME",  and
"KIDANIME.COM".

Employees

     As of March 28, 2000, we had 44 employees, all of whom are full-time.

Item 2.   Description of Property.

     The Company leases from an unaffiliated landlord approximately 6,000 square
feet of office and warehouse  space in Manassas,  Virginia for $2,325 per month,
pursuant to an eight month lease  extension  that expires in September  2000. We
terminated this lease subject to a two-month cancellation penalty, and effective
April 1,  2000,  we  entered  into a one- year  lease  agreement  for  temporary
offices,  pending completion of the construction of our new office  headquarters
described below.

     The  Company  has  entered  into a lease  agreement  with  an  unaffiliated
landlord of  approximately  15,120 square feet of office and warehouse  space at
10390 Central Park Drive, Manassas, Virginia. The lease is for a five year term,
with two  five-year  renewal  options  plus an option to purchase  the  premises
during the initial lease term. The annual base rent is $210,000.

Item 3.   Legal Proceedings.

     None.

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

     No matters were  submitted to a vote of security  holders during the fourth
quarter of the fiscal year covered by this Report.

                                     PART II

Item 5.   Market for Common Equity and Related Stockholder Matters.

     (a) Market information.

     Our common stock is listed on the Over-the-Counter Bulletin Board under the
symbol "SYCD".

     The  following  table  sets  forth  the  range of high and low bid  closing
quotations  for our  common  stock for each  quarter  within the last two fiscal
years since  quotation  commenced.  These  quotes were  provided by the National
Quotation Bureau,  Inc. and reflect  inter-dealer prices without retail mark-up,
mark-down or commission and may not represent actual transactions.


                                        5
<PAGE>


<TABLE>
<CAPTION>
            Period                          Closing Bid            Closing Ask
             -----                     --------------------    --------------------
                                         High        Low         High         Low
                                       --------    --------    --------    --------
<S>                                    <C>         <C>         <C>         <C>
October 13 (first
availability) through
December 31, 1998                      $    .62    $    .01    $   1.25    $    .44

January 4 through
March 31, 1999                              .56         .19         .62         .25

April 1 through
June 30, 1999                               .73         .22         .78         .25

July 1 through
September 30, 1999                         2.40         .42        2.45         .45

October 1 through
December 31, 1999                          2.69        1.19        2.75        1.22
</TABLE>

     (b)  Holders

     As of March 28, 2000, there were 90 holders of record of our common stock.

     (c)  Dividends

     Since our inception, we have not declared any dividends on our common stock
and, since we currently  intend to retain earnings for use in operations and the
expansion of our business, we do not anticipate paying any cash dividends in the
foreseeable future.

Recent Sales of Unregistered Securities

     In June 1997,  we sold our 31 founders  4,592,053  shares for an  aggregate
price of $457 ($.0001 per share) in reliance on the exemption from  registration
provided  by  Section  4(2) of the  Securities  Act of  1933,  as  amended  (the
"Securities Act"), for transactions not involving a public offering.

     In September,  November and December 1997, we sold to 40 investors  686,000
shares of common stock for an aggregate  price of $343,000 ($.50 per share) in a
private placement made pursuant to the exemption from  registration  provided by
Section 3(b) of the  Securities  Act and Rule 504 of  Regulation  D  promulgated
under the Securities Act. The investors paid cash for their shares.

     In March,  April, May and June 1998, we sold to 39 investors 728,000 shares
of common stock for an aggregate price of $364,000 ($.50 per share) in a private
placement made pursuant to the exemption from  registration  provided by Section
3(b) and Rule 504.

     In October 1998 we issued 400,000 shares of common stock to two consultants
for services rendered aggregating $200,000. This issuance was in reliance on the
exemption from registration provided by Section 3(b) and Rule 504.

     From November  1998 through  February  1999,  in connection  with a private
placement made pursuant to the exemption from registration provided by Rule 504,
we (a) sold 2,012,500 shares of common stock to 12 private  investors at a price
of $.20 per share,  for an aggregate  price of $402,500 in cash,  and (b) issued
180,000 shares to five consultants for services rendered valued at $36,000.


                                        6
<PAGE>


     In March and  April  1999,  we sold to three  investors  667,500  shares of
common stock at a price of $.20 per share,  for an aggregate  price of $133,500,
in cash, in a private placement made pursuant to the exemption from registration
provided by Section 3(b) and Rule 504.

     In June  1999,  we sold to two  accredited  investors  1,520,000  shares of
common stock at a price of $.15 per share,  for an aggregate  price of $228,000,
in a private placement made pursuant to the exemption from registration provided
by Section  3(b) and Rule 504 of the  Securities  Act and Section  203(t) of the
Pennsylvania Securities Act of 1972.

     In October  1999,  we sold to one  accredited  investor  394,000  shares of
common stock at a price of $.75 per share,  for an aggregate  price of $295,500,
in a private placement made pursuant to the exemption from registration provided
by Section  3(b) and Rule 504 of the  Securities  Act and Section  203(t) of the
Pennsylvania Securities Act of 1972.

     In November  1999,  we issued 5,000 shares at a price of $.05 per share for
an aggregate  price of $250 to an employee who  exercised  stock  options.  This
issuance was in reliance on the exemption from registration  provided by Section
4(2) of the Securities Act.

     In November and December 1999, we sold to 26 accredited  investors  700,583
shares of common stock at a price of $.85 per share,  for an aggregate  price of
$595,495,   in  a  private   placement  made  pursuant  to  the  exemption  from
registration  provided by Section 4(2) and 4(6) of the  Securities  Act and Rule
506 of Regulation D promulgated under the Securities Act.

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

Overview

     The following is a discussion of certain factors  affecting our results for
the three  fiscal  years ended  December  31, 1997 and 1998,  and 1999,  and our
liquidity and capital  resources.  This  discussion and analysis  should be read
along with our financial statements and their notes, contained elsewhere in this
registration   statement.   The  SEC  is  currently   reviewing   the  financial
classification  of distribution and fulfillment  costs as reported by e-commerce
companies.  Concurrent  with  industry  practice,  we present these costs on the
financial  statements  as a  component  of selling,  general and  administrative
expenses.  The SEC may later  decide to require  the  classification  of certain
distribution  costs as cost of sales. If this occurs,  we will reclassify  these
costs  pursuant  to the  new SEC  requirements,  and our  gross  profit  will be
negatively impacted  accordingly.  However,  such reclassification will not have
any impact on our sales, operating profit or loss, or net profit or loss.

     As a reminder,  our fiscal year ends on  December  31. The years  mentioned
throughout are fiscal years.

     Since inception,  we have incurred losses,  and as of December 31, 1999, we
had an accumulated deficit of $6.4 million. We believe that sales growth will be
contingent on our ability to (a) establish name recognition  among fans of Anime
and capitalize on up-selling  and  cross-selling  opportunities;  (b) select and
market  product lines that will gain  popularity  among Anime fans and will have
cross-over  potential to mainstream  animation  fans;  (c) provide our customers
good value, in terms of competitive pricing and order fulfillment;  (d) identify
and capitalize on advertising  media that will best reach our target  customers;
(e) acquire and successfully  market product licenses or alternatively,  acquire
emerging companies that have specialized skills,  particularly in gaming and web
entertainment  technologies.  We have entered into short-term (under six months)
on-line  advertising  agreements  with  World  Wrestling  Federation  and Lycos,
renewable at the option of either  party.  In January,  2000, we entered into an
alliance  with USA  Network  Interactive,  which  will  enable  us to  launch an
integrated  advertising and branding campaign for our Anime product line through
a site  link  between  USA  Networks  Interactive's  science  fiction  web site,
Scifi.com,  and  animedepot.com,  our  premier  Anime  website.  In  addition to
directly  targeting  Anime  fans,  the site link will  provide a venue for us to
cross-sell to science  fiction  enthusiasts,  build brand  awareness,  and drive
traffic to our web site, thereby potentially  increasing sales. In addition, the
agreement  also calls for the joint  development  of web  content,  print  media
advertising, promotional events, and direct targeting through millions of banner
impressions.


                                        7
<PAGE>


     We plan to expand our consumer oriented e-commerce business,  and we expect
that  additional  spending  will occur in this area.  We believe that  achieving
profitability  will be highly  dependent  on our ability to grow this segment of
the business, in addition to increasing our licensing and advertising revenues.

     We have  expanded  our  product  lines  from  primarily  comics  in 1997 to
sub-titled and dubbed videos,  DVDs, trading cards, toys and apparel during 1998
and 1999.  Because  of these  changes  in the  product  line mix and the  recent
increase in our on-line  customer sales, a historical  comparative  analysis may
not necessarily be meaningful or indicative of our future operating results.

     Overall,  our sales may  fluctuate  as a result of  promotional  discounts,
convention  marketing,  current trends which influence the popularity of certain
of our  product  lines,  inventory  levels,  and  seasonal  demand.  Although we
continue to experience sales growth relative to the same periods in prior years,
our quarterly sales during a given year reflect seasonality, with the lowest and
highest   volumes   reported  during  the  first  quarter  and  fourth  quarter,
respectively.  Other  factors  that  may  impact  sales  in the  future  include
unforeseen  technological  problems  associated  with  web  traffic  and  server
availability,  government regulations on web transactions, and the general state
of the economy.  In order to carve a significant  niche in the largely  untapped
Anime  market,  which  has grown  significantly  based on the  success  of Anime
entertainment  like  Pokemon and  Princess  Mononoke,  we will incur  additional
expenditures  in  marketing  costs,  web  technology,  business-to-consumer  and
business-to-business   e-commerce   solutions,   enhancing   our  web  presence,
establishing  a  highly  automated  order  fulfillment   system,  and  upgrading
back-office and  infrastructure  support.  Although we expect to have sufficient
capital to make these  expenditures  and that our sales will grow as a result of
these  expenditures,  we cannot assure you that we will have the necessary funds
or that the  anticipated  level of growth  will occur or will offset the planned
expenditures.

     Operating  margins  will be  significantly  impacted  by (a) our ability to
maintain  and  satisfy our  existing  repeat  customers,  as well as attract new
customers with the same level of loyalty; (b) competitive pricing pressures; (c)
the  effectiveness  of advertising and marketing  expenditures  and management's
ability to measure and evaluate results; (d) the effectiveness of our web design
and content in attracting and leading consumers to consummate on-line sales; (e)
shipping  efficiencies;  (f)  proportion  of  distributor  sales in  relation to
consumer sales; and (g) general economies of scale.

Results of Operations

     Comparison of the years ended December 31, 1999 and 1998

     Net sales, consisting of the selling price of VHS and DVD products, trading
cards,  toys and apparel,  net of  discounts  and  customer  returns,  were $1.2
million for the twelve  months ended  December 31, 1999, an increase of 84% from
net sales of  $626,000  during  1998.  We  attribute  the  growth in 1999 to the
effectiveness of on-line  advertising in generating  on-line customer sales, the
popularity of certain  video titles in the product  line, an increased  customer
base, and continued repeat sales, in addition to seasonal peak holiday shopping.
Increased  sales  also arose  from the  Company's  presence  at  tradeshows  and
conventions.


                                        8
<PAGE>



     The  following  table  sets  forth  certain  financial  data  for  us  as a
percentage of net sales for the indicated periods:


                                                               (Audited)
                                                        Years ended December 31
                                                         1999             1998
                                                       -------          -------

Net Sales                                               100.00%         100.00%
Cost of Goods Sold                                       73.81           81.80
Gross Margin                                             26.19           18.20
Selling, General and Administrative
Expenses                                                485.41          123.23
                                                       -----------------------
Operating Loss                                         (459.22)        (105.03)
Other Expense                                             (.05)          (0.57)
                                                       -----------------------
Net Loss                                               (459.27)        (105.60)
                                                       =======================

     Gross profit is defined as sales less cost of sales,  which consists of the
cost of product sold to the customers and related  shipping costs. The growth in
our gross margin arose from increased  on-line  consumer sales,  which generally
yield higher margins than sales to retailers.  Our gross profit was $302,000 for
the year ended  December 31, 1999, a 165%  increase over the gross profit during
1998.  We expect gross  margins to fluctuate  from period to period based on any
shift  in  the  customer  base  (wholesaler/retailer  versus  consumer),  mix of
products sold, or change in shipping and handling costs.

     Selling,  general and  administrative  (SG&A) expenses include the costs of
personnel  involved  in  product  distribution,   customer  service,   financial
administrative  and  executive  functions,  in addition to travel,  advertising,
investor relations,  legal and professional  services,  stock compensation,  and
other operating costs.

     Factors  accounting  for the  increased  costs during 1999 include  greater
requirements  for  additional  in-house order  fulfillment  personnel to service
on-line customers; casual labor support and travel related to trade conventions;
grass roots marketing and on-line  advertising;  and development of web content,
primarily  on our  animedepot.com  web site.  We believe  that these  costs will
continue  to  increase  as a result of our  commitment  to build and enhance our
infrastructure.  SG&A expenses for 1999 also included a one-time charge for fees
payable to a  consultant  in stock for  investor  relations,  research and press
coverage services,  which upon contract termination had a fair value of $292,188
and  a  $3.8  million  charge  for  stock  compensation  costs  associated  with
non-qualified  stock option grants during the fourth  quarter which vested as of
year-end.  Projected stock  compensation  costs for existing  non-qualifed stock
option grants  outstanding as of December 31, 1999 include  $510,000,  $190,300,
and $22,000 for the years ended December 31, 2000, 2001 and 2002,  respectively.
During the year 2000, we expect our operating costs to continue to escalate as a
result of our  wide-scale  marketing  and  advertising  campaign;  warehouse and
office expansion;  additional customer service, order fulfillment, and warehouse
personnel to process an anticipated  increase in on-line sales;  amortization of
software costs and  capitalized  labor  associated  with  e-commerce  solutions;
depreciation   of  newly  purchased  PCs  and  computer   peripherals;   network
engineering and telecommunications to continuously secure our various web sites;
and the build-out of more web sites to increase Anime market  penetration and to
cater to specific market segments. Despite our focused efforts, we cannot assure
you that we will  achieve a level of sales  commensurate  with the  increase  in
expenditures.

     We expect to continue to utilize stock options as  compensation  as part of
our  strategy  to  attract  and  retain  key  personnel,  as well as reward  key
management personnel.  However,  because the vesting periods for recently issued
stock options are now generally longer, we do not expect  recognizable  expenses
arising  from  compensatory  stock  option  grants to be made in 2000 and in the
immediate  foreseeable  future to be of the same magnitude as stock compensation
costs incurred in 1999.


                                        9
<PAGE>


Pro Forma Results of Operations

     Pro  forma   information   regarding  the  Company's   results,   excluding
stock-based  compensation  (discussed above) and one-time stock-based consulting
fees are presented  for  informational  purposes and are not in accordance  with
generally  accepted  accounting  principles.  Also  see  Notes  8 and  11 of the
financial statements.

<TABLE>
<CAPTION>
                                                                    Year Ended December 31,
                                                     1999                    1998                 1997
                                                 ------------            ------------          -----------
<S>                                              <C>                     <C>                   <C>
Pro forma net loss
  Excluding costs of stock-
  Based compensation and one-time
  Stock-based consulting fees                    $ (1,159,771)           $   (661,029)         $  (489,735)
                                                 ============            ============          ===========

Pro forma  basic and  diluted  loss
  Per share,  excluding  costs of
  Stock-based compensation and one-time
  Stock-based consulting fees                    $       (.12)           $       (.12)         $      (.10)
                                                 ============            ============          ===========

Shares used in computation of pro
  Forma basic and diluted loss per
  Share                                             9,682,754               5,625,507            5,153,058
                                                 ============            ============          ===========
</TABLE>


     Comparison of the fiscal years ended December 31, 1998 and 1997

     No  meaningful  comparison  can be made between 1998 and 1997 sales because
during 1998 we changed our product line to consist primarily of Anime videos and
DVDs. In 1997, sales consisted  primarily of comic books. Our decision to change
our product line resulted in a 258% increase in net sales, from $175,000 in 1997
to $626,000 in 1998.

     The negative  profit margin for 1997 reflects a provision for the write-off
of the remaining  inventory,  consisting primarily of comic books, at the end of
that  year.  As a  result,  the 1997  fiscal  year's  negative  gross  margin of
$(71,000) is not comparable  with the gross margin of $114,000 for the full 1998
fiscal year, which did not reflect a similar write-off.

     Selling,  general and administrative  expenses were $771,000 for the fiscal
year ended  December  31, 1998  compared  to $416,000  for the fiscal year ended
December 31, 1997. We attribute the increase to additional  personnel  necessary
to service and warehouse greater inventory as a result of the new product line.

Income Taxes

     We made no provision for any current or deferred U.S. federal, state income
tax or  benefit  for any of the  periods  presented.  Since  inception,  we have
experienced  operating losses, which have recently been declining in relation to
sales.  Although  management  expects the improved trend to continue,  we cannot
provide any assurance as to when profits will materialize.  Therefore, we cannot
predict when we can use the net  operating  loss  carry-forwards  which begin to
expire in 2017,  and which may be subject to certain  limitations  imposed under
Section  382 of the  Internal  Revenue  Code  of  1986.  Due to the  uncertainty
concerning  our ability to realize the related tax benefit,  we have  provided a
full valuation  allowance on the deferred tax asset, which consists primarily of
net operating loss carry- forwards.

Year 2000

     As of the end of  1999,  we  substantially  replaced  disparate  financial,
purchasing,  and customer order databases with a fully integrated  Y2K-compliant
enterprise-wide  platform of front office, back office, financial and e-business
solutions.  We have  made  an  assessment  of our  internal  systems,  software,
computer technology and other services


                                       10
<PAGE>


internally   developed  by  third  party  vendors  and  have  not  detected  any
malfunctions  or any system  failures at or beyond the year 2000.  These systems
include the software to run our financial  accounting  system,  search  engines,
sales order fulfillment, inventory control,  transaction-processing,  as well as
monitoring  and back-up  capabilities.  Failure of these systems to be Year 2000
compliant could adversely impact the accounting  operations,  order  fulfillment
and other  operations  of our web site.  Based upon our  assessment  to date, we
believe  that our  systems  are year 2000  compliant,  although  there can be no
unconditional  assurance in this regard.  In connection with our assessment,  we
have  partially  relied on  assurances  from our  vendors,  including  financial
institutions   to   process   credit   card   payments   for   Internet   sales,
telecommunications and Internet Service Providers.  Currently, we do not believe
that it will be necessary to implement a  remediation  plan for our  third-party
software,  third-party vendors and computer technology and services with respect
to year 2000  compliance.  The costs of the year 2000 readiness  internal review
incurred prior to and during the year 2000 were not material and were charged to
operations  in the  respective  periods that they  occurred.  Although we do not
expect to experience,  nor have we experienced,  business disruptions associated
with Year  2000-related  problems,  we cannot assure you that all potential Year
2000 defects have been uncovered or corrected in our internal systems, including
third party software and related products.

Impact of Recently Issued Accounting Standards

     As of  January  1,  1998,  we adopted  Statement  of  Financial  Accounting
Standards No. 130 ("SFAS No. 130") entitled  "Reporting  Comprehensive  Income,"
which  establishes  standards  for the  reporting  and display of  comprehensive
income and its components in the financial statements.  Currently,  there are no
reportable items of comprehensive income (loss).

     In  March  1998,  the  Accounting   Standards  Executive  Committee  issued
Statement of Position 98-1 ("SOP 98-1"),  entitled  "Accounting for the Costs of
Computer  Software  Developed or Obtained for Internal  Use," which requires all
costs  related to the  development  of internal  use  software  other than those
incurred  during the application  development  stage to be expensed as incurred.
Costs  incurred  during the  application  development  stage are  required to be
capitalized  and amortized over the estimated  useful life of the software.  SOP
98-1 will be effective for our fiscal year ending  December 31, 1999.  Projected
expenditures for our e-commerce infrastructure will be capitalized in compliance
with this pronouncement.

     In April 1998,  the  American  Institute of  Certified  Public  Accountants
issued SOP 98- 5, entitled "Reporting on the Costs of Start-Up  Activities." SOP
98-5 is  effective  for our fiscal  year  ending  December  31,  1999.  SOP 98-5
requires costs of start-up  activities and organization  costs to be expensed as
incurred.  We do not expect  adoption  of the  subject  pronouncement  to have a
material effect on the financial statements.

Liquidity and capital resources

     As of December 31, 1999,  our cash  position  consisted of $588,000 in cash
compared to $21,000 in cash for the same period in 1998.

     We have funded our operations  primarily  through private equity  financing
from accredited investors pursuant to Regulation D, which is a limited offer and
sale of securities  without  registration  under the Securities Act of 1933. Our
primary sources of cash were funds raised through  numerous  private  placements
during  1997,  1998,  and 1999.  During  1999,  net cash  provided by  financing
included $1.6 million in private placement funds compared to $523,000 for all of
1998. The Company raised $512,000 through private placements during 1997.

     Net cash used in operations  were $939,000 during 1999 compared to $587,000
and $448,000 for 1998 and 1997,  respectively.  During 1999, the use of cash was
due primarily to a loss from  operations  which was $5.3 million (which on a pro
forma basis was a loss of $1.2 million prior to the  recognition  of stock-based
compensation and consulting  expenses)  compared to $661,000 and $490,000 during
1998 and 1997,  respectively.  The expansion of our product  offerings to ensure
product  availability has required us to increase our inventory levels,  thereby
causing an additional strain on our cash flows during 1999 and 1998.


                                       11
<PAGE>


     For all comparative periods net cash used in investing activities consisted
primarily of purchases of PCs and peripheral equipment.  Towards the end of 1999
and into  the year  2000,  we  expect  that we will  incur  significant  capital
expenditures  to enhance our  technological  capabilities  in e-commerce and web
deployable order fulfillment solutions.

     In December,  1999,  we received a  $2,000,000  funding  commitment  from a
venture capital firm that has funded numerous  emerging  growth  companies.  The
funds will be made available to us in four $500,000 tranches as follows: (a) the
date we file with the SEC a  registration  statement on Form 10; (b) the date on
which the SEC  declares  effective  our Form  SB-2;  (c) 60 days  following  the
effectiveness  of our SB-2, and (d) 120 days following the  effectiveness of our
SB-2  registering that number of shares at a stated price equal to the principal
plus interest  accrued to the payment date,  and warrants  entitling the venture
firm to  purchase  600,000  shares of our  common  stock at a price of $ .01 per
share.  On January  26,  2000,  pursuant to the subject  funding  agreement,  we
received an initial loan of $500,000.

     During  the  first  quarter  of 2000,  we  entered  into  three  new  lease
agreements:  (a) a  6-month  lease  commencing  on  January  2000,  for a larger
warehouse,  pending  identification of a permanent  distribution facility; (b) a
one-year  lease for  temporary  corporate  headquarters,  commencing on April 1,
2000, pending the completion of a built-to-suit facility in Manassas,  Virginia;
(c) a 5-year lease on a building with an expected  completion  date in the third
quarter of 2000. We expect to vacate our existing facility by April 1st, 2000.

     We believe that we will require additional financing, credit facilities and
cash to be generated from operations to build our e-commerce  infrastructure and
undertake a major up-selling and cross-selling  marketing campaign to help boost
our sales during 2000 and beyond.  Working  capital and other  capital needs may
also   increase   as  result  of  changes   in   corporate   strategy,   product
diversification, and order fulfillment process improvements. Accordingly, we may
seek  such  capital  through   additional  bank  borrowings,   debt  or  private
placements,   equity  offerings  or  other  sources.   The  sale  of  equity  or
equity-related  securities could result in additional  dilution to shareholders.
Subject to  shareholder  approval,  we will  increase  the number of  authorized
common  shares  from  14,500,000  to  85,000,000  and the  number of  authorized
preferred  shares  from  500,000  to  1,000,000,  to provide  greater  financing
flexibility  and  capability  for us. From time to time,  we will  consider  the
acquisition of, or a strategic partnership with,  complementary businesses which
might further impact our liquidity position or require the issuance of equity or
debt  securities.  Although we have  entered into letters of intent with certain
companies,  we have not completed our due diligence  review of their  operations
and thus have not entered into any definitive acquisition agreements, and we may
never do so. We have been in  discussions  with a number  of  parties  regarding
obtaining additional financing; however, we cannot assure you that our financing
requirements  can be met by  current  available  facilities  or that  additional
facilities will be available on terms and conditions favorable to us, if at all.

ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS.

The  "Overview"  and  the  "Liquidity  and  Capital  Resources"  section  of the
Management's  Discussion  and  Analysis  cover risk  factors that may impact the
Company's  operating  results.  We have  identified  additional  risk factors as
listed below.

WE HAVE A LIMITED OPERATING HISTORY WHICH CONSTRAINS OUR FORECASTING ABILITY.

Because of limited historical financial data, changes in the product line during
the last two years along with changes in consumer trends and preferences,  and a
recent  growth  in  web-based  consumer  sales,  we are  unable to  identify  an
established trend on which to base planned operating expenses.  Consequently, we
may  not be  able to  contain  our  costs  in a  timely  manner  to  offset  any
unfavorable  sales trend,  or ramp up our  infrastructure  to absorb  unexpected
sales growth.  As a result,  we may incur a net loss during any quarter that may
be greater than expected.

WE ANTICIPATE OPERATING LOSSES TO CONTINUE.

In order to expand our market  share and  enhance  branding,  we expect to incur
significant  marketing  and  advertising  expenses.  Certain  of these  expenses
include web-based targeted  advertising as well as partner/ affiliate  marketing
programs to generate new  customers.  In  connection  with the  recruitment  and
retention of additional key personnel, we expect to utilize stock options, which
may  result  in  increased  stock  compensation  costs.   Additionally,   future
acquisitions


                                       12
<PAGE>


may result in the  recognition of goodwill,  the  amortization of which will not
impact cash flows, but will adversely impact results of operations.

ANY INABILITY TO STREAMLINE AND/ OR CONSOLIDATE OUR  DISTRIBUTION  FACILITY WILL
MATERIALLY IMPACT OUR OPERATIONS.

We  currently  operate  an 8,100  square  foot  distribution  facility  based in
Manassas,  VA  which we are  leasing  over an 8- month  period.  If the  current
facility during this time period is not able to accommodate  increases in demand
and customer orders, our operating results will be materially  impacted.  In the
event  that we  move  the  distribution  facility  elsewhere,  we may  expect  a
temporary  disruption  in our  business as well as  unexpected  costs during the
transition period pending  connection of the new location to our automated order
fulfillment system.

WE HAVE EXPOSURE TO INVENTORY RISK.

We have  expanded  our  inventory to provide our  customers  variety and greater
access to popular as well as rare  product  titles.  Certain of these titles are
stocked based on past demand and on our  expectations  of future demand.  We may
not accurately predict changes in consumer tastes and may temporarily  overstock
on certain  items.  Although we are able to return most of our stock,  increased
inventory  levels would  subject us to  additional  inventory  risks,  including
shrinkage.  Although we have tight security measures and systems in place at our
distribution  center,  we may not successfully  prevent  inventory  shrinkage in
future periods.

OUR SALES  GROWTH IS PARTLY  DEPENDENT ON OUR ABILITY TO DEVELOP OUR WEBSITE AND
EMPLOY THE MOST RECENT E-COMMERCE TECHNOLOGY.

Commencing in late 1999 through the present time, we have expended  considerable
resources  in  enhancing  our  web  site  and   leveraging   unique   e-commerce
capabilities.  Significant  effort has been expended  towards the development of
web content,  graphics,  as well as web  maintenance  to include  timely product
pricing and product  availability  information.  Our inability to update our web
site, facilitate on-line shopping,  and cater to changing tastes and preferences
will result in lost  customers  and sales.  In order to remain  competitive  and
improve  our  internet  sell-through  rates,  we must  continue  to upgrade  the
functionality and features of our online stores.


                                                        13


<PAGE>


Item 7.  Financial Statements.

                              FINANCIAL STATEMENTS


                                 C O N T E N T S

                                                                        Page

REPORT OF INDEPENDENT ACCOUNTANTS
   ON THE FINANCIAL STATEMENTS                                          F-1

FINANCIAL STATEMENTS

   Balance sheets                                                       F-2
   Statements of operations                                             F-3
   Statements of stockholders' equity                                   F-4
   Statements of cash flows                                             F-5
   Notes to financial statements                                      F-6-F-14


<PAGE>


                        REPORT OF INDEPENDENT ACCOUNTANTS




To the Board of Directors
Syconet.com, Inc.


     We have audited the accompanying balance sheets of Syconet.com,  Inc. as of
December  31,  1999  and  1998,  and  the  related   statements  of  operations,
stockholders'  equity and cash flows for the years ended  December  31, 1999 and
1998 and for the period from  January 15, 1997 (date of  inception)  to December
31, 1997. These financial statements are the responsibility of the Corporation's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

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

     In our opinion,  the financial statements referred to above present fairly,
in all material  respects,  the financial  position of  Syconet.com,  Inc. as of
December 31, 1999 and 1998 and the results of its  operations and its cash flows
for the years ended  December  31, 1999 and 1998 and for the period from January
15, 1997 (date of inception) to December 31, 1997 in conformity  with  generally
accepted accounting principles.




YOUNT, HYDE & BARBOUR, P.C.
Winchester, Virginia
March 14, 2000


<PAGE>


                                SYCONET.COM, INC.

                                 Balance Sheets
                           December 31, 1999 and 1998

<TABLE>
<CAPTION>
                                                                             December 31,
                                                                       --------------------------
    Assets                                                                1999           1998
                                                                       -----------    -----------
<S>                                                                    <C>            <C>
Current Assets
     Cash and cash equivalents                                         $   587,559    $    20,676
     Accounts receivable, net of allowance for
          doubtful accounts of $15,000 and $8,202 at
          December 31, 1999 and 1998, respectively                          63,233         40,506
     Due from employee                                                          --          2,000
     Due from officers                                                      65,000             --
     Prepaid expenses                                                        4,324             --
     Inventories                                                           352,176        167,507
     Other current assets                                                    1,930             --
                                                                       -----------    -----------
          Total current assets                                         $ 1,074,222    $   230,689
                                                                       -----------    -----------

Property and Equipment, at cost                                        $    84,869    $    25,703
     Less accumulated depreciation                                         (12,679)        (5,475)
                                                                       -----------    -----------
          Total property and equipment                                 $    72,190    $    20,228
                                                                       -----------    -----------

Other Assets                                                           $     5,000    $     5,000
                                                                       -----------    -----------

          Total assets                                                 $ 1,151,412    $   255,917
                                                                       ===========    ===========

     Liabilities and Stockholders' Equity

Current Liabilities
     Current maturities of long-term debt                              $    31,974    $    22,483
     Accounts payable and accrued expenses                               1,020,428        301,302
     Stock subscriptions refund payable                                     22,500         22,500
     Loans from officers                                                        --         10,000
                                                                       -----------    -----------
          Total current liabilities                                    $ 1,074,902    $   356,285

Long-Term Debt, less current maturities                                         --         15,858
                                                                       -----------    -----------
          Total liabilities                                            $ 1,074,902    $   372,143
                                                                       -----------    -----------

Stockholders' Equity
     Preferred stock, authorized, 500,000 shares; no shares
          outstanding                                                  $        --    $        --
     Common stock, $0.0001 par value, authorized 14,500,000
          shares in 1999 and 1998; issued and outstanding 11,795,429
          and 6,500,053 shares in 1999 and 1998, respectively                1,180            650
     Additional paid-in capital                                          7,245,967      1,033,888
     Deferred compensation                                                (721,900)            --
     Retained earnings (deficit)                                        (6,448,737)    (1,150,764)
                                                                       -----------    -----------
          Total stockholders' equity                                   $    76,510    $  (116,226)
                                                                       -----------    -----------

          Total liabilities and stockholders' equity                   $ 1,151,412    $   255,917
                                                                       ===========    ===========
</TABLE>


See Notes to Financial Statements.



                                       F-2
<PAGE>

                                SYCONET.COM, INC.

                            Statements of Operations
               For the Years Ended December 31, 1999 and 1998 and
            for the Period from January 15, 1997 (Date of Inception)
                              to December 31, 1997

<TABLE>
<CAPTION>
                                                                                       Period from
                                                                                     January 15, 1997
                                                         Year Ended    Year Ended   (Date of Inception)
                                                         December 31,  December 31,   to December 31,
                                                            1999           1998           1997
                                                         -----------    -----------    -----------
<S>                                                      <C>            <C>            <C>
Net sales                                                $ 1,153,536    $   625,955    $   174,880

Cost of goods sold                                           851,478        512,024        246,222
                                                         -----------    -----------    -----------

          Gross profit (loss)                            $   302,058    $   113,931    $   (71,342)

Operating expenses:
     Selling, general and administrative expenses          5,599,437        771,395        415,971
                                                         -----------    -----------    -----------

          Operating (loss)                               $(5,297,379)   $  (657,464)   $  (487,313)

Nonoperating expense, net                                       (594)        (3,565)        (2,422)
                                                         -----------    -----------    -----------

          Net (loss)                                     $(5,297,973)   $  (661,029)   $  (489,735)
                                                         ===========    ===========    ===========

Loss per common share, basic and diluted                 $     (0.55)   $     (0.12)   $     (0.10)
                                                         ===========    ===========    ===========

Weighted average shares outstanding, basic and diluted     9,682,754      5,625,507      5,153,058
                                                         ===========    ===========    ===========
</TABLE>


See Notes to Financial Statements.


                                       F-3
<PAGE>

                                SYCONET.COM, INC.

                       Statements of Stockholders' Equity
               For the Years Ended December 31, 1999 and 1998 and
              the Period from January 15, 1997 (Date of Inception)
                              to December 31, 1997

<TABLE>
<CAPTION>
                                                                  Additional                    Retained
                                                      Common        Paid-In      Deferred       Earnings
                                                       Stock        Capital    Compensation     (Deficit)
                                                    -----------   -----------  ------------    -----------
<S>                                                 <C>           <C>           <C>            <C>
Balance, January 15, 1997 (date of inception)       $        --   $        --   $        --    $        --
     Net (loss)                                              --            --            --       (489,735)
     Issuance of 5,153,053 shares of common stock           515       511,273            --             --
                                                    -----------   -----------   -----------    -----------
Balance, December 31, 1997                          $       515   $   511,273   $        --    $  (489,735)
     Net (loss)                                              --            --            --       (661,029)
     Issuance of 1,347,000 shares of common stock           135       522,615            --             --
                                                    -----------   -----------   -----------    -----------
Balance, December 31, 1998                          $       650   $ 1,033,888   $        --    $(1,150,764)
     Net (loss)                                              --            --            --     (5,297,973)
     Issuance of 5,290,376 shares of common stock           529     1,643,915            --             --
     Exercise of 5,000 common stock options                   1           250            --             --
     Deferred compensation related
      to common stock options                                --     4,567,914    (4,567,914)            --
     Amortization of deferred compensation
       related to common stock options                       --            --     3,846,014             --
                                                    -----------   -----------   -----------    -----------
Balance, December 31, 1999                          $     1,180   $ 7,245,967   $  (721,900)   $(6,448,737)
                                                    ===========   ===========   ===========    ===========
</TABLE>


See Notes to Financial Statements.


                                       F-4
<PAGE>

                                SYCONET.COM, INC.

                            Statements of Cash Flows
               For the Years Ended December 31, 1999 and 1998 and
              the Period from January 15, 1997 (Date of Inception)
                              to December 31, 1997

<TABLE>
<CAPTION>
                                                                                                                Period from
                                                                                                              January 15, 1997
                                                                          Year Ended         Year Ended     (Date of Inception)
                                                                         December 31,        December 31,     to December 31,
                                                                             1999                1998              1997
                                                                        ---------------    ---------------    ---------------
<S>                                                                     <C>                <C>                <C>
Cash Flows From Operating Activities
     Net loss                                                           $    (5,297,973)   $      (661,029)   $      (489,735)
     Adjustments to reconcile net loss to net cash
          (used in) operating activities:
               Depreciation                                                       7,204              4,552                923
               Amortization of deferred compensation
                 related to stock options                                     3,846,014                 --                 --
               Changes in assets and liabilities:
                    (Increase) in accounts receivable                           (22,727)           (22,494)           (18,012)
                    (Increase) decrease in prepaid expenses                      (4,324)             5,000             (5,000)
                    (Increase) in inventory                                    (184,669)          (167,507)                --
                    (Increase) in other assets                                   (1,930)                --             (5,000)
                    Increase in accounts payable and accrued expenses           719,126            232,401             68,901
                    Increase in stock subscription refund payable                    --             22,500                 --
                                                                        ---------------    ---------------    ---------------
                         Net cash (used in) operating activities        $      (939,279)   $      (586,577)   $      (447,923)
                                                                        ---------------    ---------------    ---------------

Cash Flows From Investing Activities,
     purchase of property and equipment                                 $       (59,166)   $       (16,473)   $        (9,230)
                                                                        ---------------    ---------------    ---------------

Cash Flows From Financing Activities
     Proceeds from issuance of stock                                    $     1,644,695    $       522,750    $       511,788
     Short-term loans from officers                                             (10,000)            10,000                 --
     Short-term loans to officers                                               (65,000)                --                 --
     Short-term loans to employees                                                2,000             (2,000)                --
     Proceeds from long-term borrowing                                               --                 --             50,000
     Principal payments on long-term debt                                        (6,367)           (10,289)            (1,370)
                                                                        ---------------    ---------------    ---------------
                         Net cash provided by financing activities      $     1,565,328    $       520,461    $       560,418
                                                                        ---------------    ---------------    ---------------

                         Increase (decrease) in cash and cash
                              equivalents                               $       566,883    $       (82,589)   $       103,265

Cash and Cash Equivalents
     Beginning                                                                   20,676            103,265                 --
                                                                        ---------------    ---------------    ---------------

     Ending                                                             $       587,559    $        20,676    $       103,265
                                                                        ===============    ===============    ===============

Supplemental Disclosures of Cash Flow Information,
     cash payments for interest                                         $         1,173    $         2,712    $         1,630
                                                                        ===============    ===============    ===============
</TABLE>


See Notes to Financial Statements.


                                       F-5
<PAGE>

                                SYCONET.COM, INC.

                          Notes to Financial Statements


Note 1.   Nature of Business and Significant Accounting Policies

          From January 15, 1997,  date of  inception,  to February 1, 1997,  the
          Corporation  operated  as a  general  partnership  between  Sy  Robert
          Picone,  Chief Executive  Officer of Syconet.com,  Inc. ("SyCo" or the
          "Corporation"),  and William Spears,  President of SyCo. From February
          1,  1997 to June 30,  1997,  the  Corporation  operated  as a  limited
          partnership  which  included  nine  separate  partners and on June 30,
          1997, the Corporation was  incorporated in the State of Delaware under
          the name Syco Comics &  Distribution.  The Company changed its name in
          early 1999 to Syconet.com, Inc.

          From the date of  inception  to December  31,  1997,  the  Corporation
          primarily operated as a distributor of comic books,  trading cards and
          collectible toys to independent  retailers  nationwide.  Subsequent to
          1997, the  Corporation  replaced the  distribution of comic books with
          the  distribution  of  Japanese  anime  videos.  Sales are made in the
          United  States and  internationally  through  several  websites on the
          internet,  the  publication of a catalog and attendance at conventions
          across the United States.

          A summary of the Corporation's accounting policies are as follows:

               Cash and Cash Equivalents

                    For purposes of reporting the statements of cash flows,  the
                    Corporation  includes  all  cash  accounts,  which  are  not
                    subject to withdrawal  restrictions  or  penalties,  and all
                    highly liquid debt instruments  purchased with a maturity of
                    three   months  or  less  as  cash  and  cash   equivalents.
                    Certificates  of  deposit,  regardless  of  maturities,  are
                    included as cash and cash  equivalents  on the  accompanying
                    balance sheets.

               Accounts Receivable

                    Accounts  receivable are shown net of related  allowance for
                    doubtful  accounts.  The allowance for doubtful  accounts is
                    $15,000  and  $8,202  for   December   31,  1999  and  1998,
                    respectively.

               Inventories

                    Inventories  are  stated  at the  lower  of cost  (first-in,
                    first-out  method) or market.  Inventories  at December  31,
                    1999 and 1998  consisted of goods,  primarily  anime videos,
                    purchased for redistribution.


                                       F-6
<PAGE>

                          Notes to Financial Statements


               Property and Equipment

                    Property and equipment,  principally  computer  hardware and
                    software,  are stated at  historical  cost less  accumulated
                    depreciation.  The costs of additions and  improvements  are
                    capitalized,  while  maintenance  and repairs are charged to
                    expense.  Depreciation  is provided using the  straight-line
                    method   over  a  three   to   five-year   estimated   life.
                    Depreciation expense totaled $7,204, $4,552 and $923 for the
                    years ended  December  31, 1999 and 1998 and the period from
                    January 15, 1997,  date of inception,  through  December 31,
                    1997, respectively.

               Earnings Per Share

                    Per Financial  Accounting Standards Board Statement No. 128,
                    "Earnings Per Share,"  basic  earnings per share is computed
                    on the weighted  average  number of shares  outstanding  and
                    excludes  any  dilutive  effects of  options,  warrants  and
                    convertible  securities.   Diluted  earnings  per  share  is
                    computed  in a manner  similar  to  basic  EPS,  except  for
                    certain  adjustments  to the numerator and the  denominator.
                    Diluted EPS gives  effect to all dilutive  potential  common
                    shares that were  outstanding  during the  period.  Dilution
                    reduces EPS and results from the assumption that convertible
                    securities  were  converted,  that options or warrants  were
                    exercised,  or  that  other  shares  were  issued  upon  the
                    satisfaction of certain conditions. Common equivalent shares
                    are  excluded  from  the  computation  if  their  effect  is
                    antidilutive.

               Revenue Recognition

                    The Corporation  recognizes  revenue from product sales, net
                    of any  discounts  which  range  from  28% to 50%,  when the
                    products  are shipped to  customers.  Outbound  shipping and
                    handling  charges are included in net sales. The Corporation
                    provides  an  allowance  for sales  returns,  which has been
                    insignificant, based on historical experience.

               Advertising Costs

                    Advertising  costs are  expensed  as  incurred.  Advertising
                    costs were $72,762,  $17,030 and $12,012 for the years ended
                    December  31, 1999 and 1998 and the period from  January 15,
                    1997,  date  of  inception,   through   December  31,  1997,
                    respectively.

                    The  Corporation  has also entered into certain  advertising
                    agreements, which include fixed fees through 2000. The costs
                    associated  with  these   agreements  are  recognized  on  a
                    systematic basis over the term of the related  agreements as
                    services are received.


                                       F-7
<PAGE>

                          Notes to Financial Statements


               Software Development Costs

                    In   accordance   with   Statement  of  Position  No.  98-1,
                    "Accounting  for Costs of  Computer  Software  Developed  or
                    Obtained  for  Internal  Use," the  Corporation  capitalizes
                    software  development  costs in the application  development
                    stage of the software  development  project. To date, all of
                    the  Corporation's  costs for  research and  development  of
                    software  development  have been expensed as incurred  since
                    the amount of software development costs incurred subsequent
                    to the preliminary product stage has been immaterial.

               Income Taxes

                    Deferred  taxes are provided on a liability  method  whereby
                    deferred tax assets are recognized for deductible  temporary
                    differences and operating loss and tax credit  carryforwards
                    and  deferred tax  liabilities  are  recognized  for taxable
                    temporary   differences.   Temporary   differences  are  the
                    differences  between  the  reported  amounts  of  asset  and
                    liabilities  and their tax  bases.  Deferred  tax assets are
                    reduced by a  valuation  allowance  when,  in the opinion of
                    management,  it is more likely than not that some portion or
                    all  of the  deferred  tax  assets  will  not  be  realized.
                    Deferred  tax assets and  liabilities  are  adjusted for the
                    effects  of  changes  in tax laws  and  rates on the date of
                    enactment.

               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 revenues
                    and expenses  during the reporting  period.  Actual  results
                    could differ from those estimates.


Note 2.   Accounts Payable and Accrued Expenses

          The Corporation's accounts payable and accrued expenses consist of the
          following:

                                                       December 31,
                                                ---------------------------
                                                   1999             1998
                                                ----------       ----------

     Accounts payable                           $  330,151       $  160,686
     Professional services                         461,103           54,813
     Salaries                                      123,480            1,630
     Payroll taxes                                  74,052           82,368
     Other                                          31,642            1,805
                                                ----------       ----------
                                                $1,020,428       $  301,302
                                                ==========       ==========



                                       F-8
<PAGE>

                          Notes to Financial Statements


Note 3.   Long-Term Debt

          The Corporation's long-term debt is as follows:

                                                            December 31,
                                                        -------------------
                                                          1999        1998
                                                        -------     -------
     Note payable, due in monthly
          installments of $1,517, interest
          at 9.25%, uncollateralized,
          due September 2000                            $31,975     $38,341
     Less current maturities                             31,975      22,483
                                                        -------     -------
                                                        $    --     $15,858
                                                        =======     =======

          Aggregate maturities of long-term debt due in 2000 are $31,975.


Note 4.   Payroll Taxes Payable

          During 1997 and the first three quarters of 1998, the  Corporation was
          in compliance with payroll tax reporting requirements but was not able
          to remit  the  related  tax  amounts.  Consequently,  the  Corporation
          entered into an installment  payment  agreement with the IRS and began
          making payments to cover the back taxes and penalties. The payroll tax
          liability  was  $64,768,  plus  penalties  and  interest of $17,600 at
          December 31, 1998.  The  Corporation  paid off its back taxes in 1999,
          and is now current with its payroll tax obligations.

Note 5.   Credit Risk

          The  Corporation  maintains  its cash  accounts  and  certificates  of
          deposit at various  commercial  banks.  At December 31, 1999 and 1998,
          all deposits were covered by the FDIC.

Note 6.   Related Party Transactions

          The amounts due from employees and loans due to stockholders represent
          short-term  cash advances.  At December 31, 1998, the  Corporation had
          $2,000 due from an employee  and $10,000 due to  officers,  which were
          collected  and remitted in 1999,  respectively.  At December 31, 1999,
          the Corporation  had $65,000 due from an officer,  which was collected
          in early 2000.



                                       F-9
<PAGE>

                          Notes to Financial Statements


Note 7.   Loss Per Share

          The effect on weighted  average number of shares of diluted  potential
          common stock are not included in the  computation  if their  inclusion
          would have an  antidilutive  effect (reduce the loss per common share)
          applicable to the loss from  operations  for the years ended  December
          31,  1999 and 1998 and the  period  from  January  15,  1997,  date of
          inception, through December 31, 1997.

          Options  of  14,916,000,  5,471,000  and  5,400,000  shares  were  not
          included in computing loss per share  assuming  dilution for the years
          ended December 31, 1999 and 1998 and the period from January 15, 1997,
          date of inception,  through December 31, 1997,  respectively,  because
          their effects were  antidilutive.  The potential  common stock did not
          have an effect on net loss.

Note 8.   Stock Options

          The Corporation  authorized the grant of 3,320,000  non-qualified  and
          6,130,000 qualified stock options in 1999, 86,000  non-qualified stock
          options in 1998 and 5,400,000  non-qualified  stock options in 1997 to
          key  employees  or directors of the  Corporation.  The vesting  period
          ranges from one month to three years for the options  granted in 1999,
          immediately to one year for those granted in 1998 and  immediately for
          all stock  options  granted in 1997.  Financial  Accounting  Standards
          Board  ("SFAS")  Statement  No.  123,   "Accounting  for  Stock  Based
          Compensation,"  provides  for a fair value  method of  accounting  for
          employee  options and measures  compensation  expense  using an option
          valuation  model that takes into  account,  as of the grant date,  the
          exercise price and expected life of the options,  the current price of
          the underlying stock, and the risk-free interest rate for the expected
          term of the option. The Corporation has elected to continue accounting
          for employee  stock-based  compensation  under  Accounting  Principles
          Board  Opinion  ("APB")  No.  25 and  related  interpretations,  which
          generally  requires  that  compensation  cost  be  recognized  for the
          difference,  if any,  between the quoted market price of the stock and
          the amount an employee must pay to acquire the stock.

          The Corporation recorded aggregate deferred compensation of $4,567,914
          in 1999. The amount represents the difference  between the grant price
          and the deemed fair value of the Corporation's common stock for shares
          subject  to options  granted in 1999.  The  amortization  of  deferred
          compensation  will be charged to operations over the vesting period of
          the  options,  which  range  from  one  month to  three  years.  Total
          amortization recognized was $3,846,014 for the year ended December 31,
          1999. The underlying  stock options were granted in the fourth quarter
          of 1999 and  substantially  vested as of year end.  Prior to  October,
          1998, the  Corporation's  stock was not readily  marketable and had no
          determinable fair value.  Under APB No. 25, because the exercise price
          of all outstanding options was equal to or greater than the fair value
          of the underlying stock on the date of grant, no compensation  expense
          was  recognized  during the year ended  December  31, 1998 and for the
          period from January 15, 1997 to December 31, 1997.



                                      F-10
<PAGE>

                          Notes to Financial Statements


          If the fair value method of  accounting  for stock  options under SFAS
          123 had been applied there would have been no expense  relating to the
          stock options for 1998 and 1997 since there was no  determinable  fair
          value for the  related  stock at the grant date of the stock  options.
          Net income would have been reduced in 1999 as follows:

                                                                  1999
                                                               -----------
     Net loss
          As reported                                          $(5,297,973)
          Pro forma                                             (8,511,679)


          In  determining  the pro forma amounts  above,  the fair value of each
          employee-related  grant is  estimated  at the  grant  date  using  the
          Black-Scholes option-pricing model with the following weighted-average
          assumptions  for grants in 1999:  Price  volatility of 85%,  risk-free
          interest  rate of 6.5%,  dividend  rate of 0% and expected  lives of 7
          years. Loss per share would remain unchanged in 1999 because including
          the stock options would have an antidilutive effect.

          A summary of the status of the  outstanding  options at  December  31,
          1999,  1998 and 1997 and  changes  during the  periods  ended on those
          dates is as follows:

<TABLE>
<CAPTION>
                                           December 31, 1999                December 31, 1998                December 31, 1997
                                      -----------------------------    ----------------------------     ----------------------------
                                                      Weighted                           Weighted                         Weighted
                                                       Average                           Average                          Average
                                                      Exercise                           Exercise                         Exercise
                                        Shares          Price            Shares           Price           Shares           Price
                                      ----------     -------------     ----------     -------------     ----------     -------------
<S>                                    <C>           <C>                <C>           <C>                <C>           <C>
Outstanding at beginning
     of year                           5,471,000     $        0.01      5,400,000     $        0.01             --     $          --
Granted                                9,450,000              1.16         86,000              0.03      5,400,000              0.01
Exercised                                  5,000              0.05         15,000              0.01             --                --
                                      ----------                       ----------                       ----------
Outstanding at end of year            14,916,000                        5,471,000                        5,400,000              0.01
                                      ==========                       ==========                       ==========
Exercisable at end of year             5,916,000                        5,446,000                        5,400,000
</TABLE>


          The  weighted-average  fair value of options  granted  during the year
          ended  December  31, 1999 was $1.18 and $1.76 for  options  granted at
          fair market value and for options  granted at below fair market value,
          respectively.  The weighted-average  exercise price of options granted
          during  the year  ended  December  31,  1999 was  $1.49  and $0.53 for
          options  granted at fair market value and for options granted at below
          fair market value, respectively.




                                      F-11
<PAGE>

                          Notes to Financial Statements


          The following table summarizes  information about options  outstanding
          at December 31, 1999:

<TABLE>
<CAPTION>
                                          Options Outstanding                          Options Exercisable
                        -----------------------------------------------------   -----------------------------------
                                              Weighted-
                                               Average          Weighted                                Weighted
                                              Remaining          Average                                Average
      Range of               Number          Contractual        Exercise             Number             Exercise
   Exercise Prices        Outstanding           Life              Price            Outstanding           Price
----------------------  -----------------  ----------------  ----------------   ------------------    -------------
<S>                          <C>                     <C>             <C>               <C>                 <C>
 $0.01 - 0.50                 5,466,000              3.41            $ 0.01            5,466,000           $ 0.01
  0.51 - 2.03                 9,450,000              9.92              0.16              450,000             0.51
                             ----------                                                ---------
                             14,916,000                                                5,916,000
                             ==========                                                =========
</TABLE>


Note 9.   Operating Leases

          The Corporation  leases certain office equipment and automobiles under
          various operating leases. Scheduled payments under these leases are as
          follows:

          Year ended December 31,
                   2000                                        $ 14,680
                   2001                                           7,152
                   2002                                           3,037
                                                               --------
                                                               $ 24,869
                                                               ========

          The total rental expense  included in the statements of operations for
          the years ended December 31, 1999 and 1998 and the period from January
          15, 1997,  date of inception,  through  December 31, 1997 was $50,566,
          $53,314 and $8,857, respectively.


Note 10.  Income Tax Matters

          Net  deferred tax assets  consist of the  following  components  as of
          December 31, 1999 and 1998:


                                                  1999           1998
                                             ---------      ---------
          Deferred tax assets:
               Loss carryforwards            $ 867,000      $ 377,400

               Less valuation allowance       (867,000)      (377,400)
                                             ---------      ---------
                                             $      --      $      --
                                             =========      =========



                                      F-12
<PAGE>

                          Notes to Financial Statements


          During the years ended  December  31, 1999 and 1998,  the  Corporation
          recorded  a  valuation  allowance  of  $867,000  and  $377,400  on the
          deferred  tax assets to reduce the total to an amount that  management
          believes  will  ultimately  be realized.  Realization  of deferred tax
          assets is dependent upon  sufficient  future taxable income during the
          period that deductible  temporary  differences and  carryforwards  are
          expected to be available to reduce taxable income.  There was no other
          activity in the valuation allowance account during 1999 or 1998.

          Loss  carryforwards  for tax purposes as of December 31, 1999 have the
          following expiration dates:

          Expiration Date                                          Amount
          ---------------                                        -----------
               2017                                              $   480,000
               2018                                                  630,000
               2019                                                1,440,000
                                                                 -----------
                                                                 $ 2,550,000
                                                                 ===========

          The income tax  provision  is less than would be  obtained by applying
          the statutory Federal corporate income tax rate to pre-tax  accounting
          income as a result of the following items:

<TABLE>
<CAPTION>
                                                                                    Period from
                                                                                    January 15,
                                                                                       1997
                                                     Years Ended December 31,         through
                                                  ----------------------------      December 31,
                                                      1999             1998            1997
                                                  -----------      -----------      -----------
<S>                                               <C>              <C>              <C>
          Income tax (benefit) computed at
               federal statutory rates            $(1,801,311)     $  (224,750)     $  (166,510)
          Increase (decrease) in income taxes
               resulting from:
                    Nondeductible stock-based
                         compensation expense       1,307,645               --               --
                    Valuation allowance               499,600          214,200          163,200
                    Other                              (5,934)          10,550            3,310
                                                  -----------      -----------      -----------
                                                  $        --      $        --      $        --
                                                  ===========      ===========      ===========
</TABLE>





                                      F-13
<PAGE>

                          Notes to Financial Statements


Note 11.  Commitments and Contingencies

          The  Corporation  entered into a  consulting  agreement in early 1999,
          which specified both payments of cash and the issuance of common stock
          of  the   Corporation.   The  stock  was  not  issued  in  1999,   and
          subsequently,  the two  parties  have  agreed to a payment  of 137,500
          shares of the Corporation's common stock in 2000.

          The  Corporation  entered into various  advertising  contracts in late
          1999 and early  2000 which  commit  the  Corporation  to  expenses  of
          $316,906 in 2000.

Note 12.  Subsequent Events

          Additional Sources of Capital

               The  Corporation  has funded  its  operations  primarily  through
               private  equity  financing  pursuant to  Regulation D, which is a
               limited offer and sale of securities  without  registration under
               the Securities Act of 1933.  Additional funds were raised through
               various private  placements through March 2000 totaling in excess
               of $450,000.

          New Line of Credit

               The  Corporation  has  signed a Letter of Intent for a $5 million
               line of  credit  with a  venture  capital  firm  that has  funded
               numerous emerging growth companies.  The Letter of Intent expires
               at the end of 2000.

          Funding Agreement

               The Corporation  entered into a $2 million funding agreement with
               a venture  capital  firm in late 1999.  The funding will occur in
               four separate  installments  in 2000 and is  contingent  upon the
               Corporation  meeting  certain filing  deadlines.  The Corporation
               received $500,000 in early 2000. The obligations bear interest at
               12% per annum and are  repayable  in shares of common stock equal
               to the principal plus interest accrued to the payment date.

          Lease Commitments

               The Corporation  has entered into three new lease  commitments in
               early  2000 for the  rental of office and  warehouse  space.  The
               lease  commitments  over the next six years are: 2000,  $266,175;
               2001, $296,349;  2002, $288,000;  2003, $288,000;  2004, $288,000
               and 2005, $72,000.


                                      F-14


<PAGE>


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

               N/A

                                    PART III

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

     (a)  Officers and  directors:  The  following  table  provides  information
concerning  each of our executive  officers and  directors.  All directors  hold
office until the next annual meeting of shareholders  or until their  successors
have been elected and  qualified,  or until a director's  death,  resignation or
removal.

Name                            Age        Position
-----                          -----       -------
Sy Robert Picon                 41         President, Chief Executive Officer,
                                             Treasurer and Director

William Spears                  37         Executive Vice President and Director

Jean-Claude Geha                36         Executive Vice President and Chief
                                           Operating Officer

Philip Jacobson                 39         Executive Vice President

Kathryn T. Jacobson             43         Chief Financial Officer

J. Larry Hineline               54         Secretary and Director

Edward E. Kramer                39         Director

Francis H. Yano                 52         Director

     Sy Robert  Picon:  Mr. Picon is one of our  co-founders  along with William
Spears.  He has been our  Chairman  of the Board,  Chief  Executive  Officer and
Treasurer since our inception and was elected our President in June 1998. He was
a co-founder  of the  Virginia  limited  partnership  formed on February 1, 1997
which is our  predecessor.  He has been  involved in the comic book industry for
over ten years.  In 1991, he founded SyCo Comics,  a supplier of comic books and
related media to disabled individuals, which he sold in 1996. Mr. Picon has also
worked as a chief administrator for a major telecommunications firm.

     William Spears:  Mr. Spears is one of our co-founders along with Mr. Picon.
He has been one of our Directors since our inception.  He was our President from
inception until June 1998, when he became our Executive Vice President. He was a
co-founder of the Virginia limited  partnership formed on February 1, 1997 which
is our  predecessor.  He has been in the comic book industry  since 1989 when he
created a comic book title which he published. In 1995, he opened a retail comic
book specialty store in San Carlos, California and expanded onto the Internet in
1996. Since 1982, he has owned and operated the Perfect Shirt & Sign Company,  a
promotional  screen  printing  facility  which in 1990 expanded  into  supplying
computer accessories.

     Jean-Claude  Geha:  Mr. Geha has been an Executive  Vice  President and our
Chief Operating  Officer since January 2000. He has more than 10 years of senior
management experience and has worked in the fields of engineering, operating and
marketing  at MCI.  From 1998 until he joined us, Mr.  Geha was the  Director of
Product Management and Market  Communications for Apex Global Internet Services,
a Tier 1 Internet  backbone  company,  where his  responsibilities  included the
design and implementation of AGIS' domestic and international  Internet and data
products and services.  From 1996 to 1999, he was the Senior  Marketing  Manager
and Consultant for Broadband Marketing at Bell Canada/Stentor. From 1991 to 1996
he worked at MCI,  first as a Special  Services  Engineer,  then as a Manager of
Global Data  Engineering  and  Provisioning,  and later of Internet MCI Services
and, finally,  as a Senior Sales Support Manager in Customer Business Solutions.
Mr. Geha has an M.S. in  Telecommunications  Management from Southern  Methodist
University and a B.S. in Electrical Engineering from the University of Maryland.


                                       14
<PAGE>


     Philip  Jacobson:  Mr.  Jacobson  joined us as Executive  Vice President in
January  2000.  From July 1999 to January 2000, he was the founder and President
of a financial  planning and partner  marketing  consulting  firm called Network
Conceptions  LLC.  From April 1998 to July 1999,  he was  Director  of  Business
Development for Apex Global  Internet  Services and from January 1984 to January
1998 he  worked  for MCI  Communications  managing  a series  of  financial  and
marketing  departments,  with an  emphasis  on Internet  services  and  advanced
products, most recently as Senior Manager, Partner Marketing. Mr. Jacobson has a
B.A. in Accounting  from the University of  Massachusetts  and he is a certified
public accountant. He is the husband of Kathryn Jacobson.

     Kathryn T. Jacobson:  Mrs.  Jacobson has been our Chief  Financial  Officer
since November 1999. Her background includes controllership, Enterprise Resource
Planning systems  conversions,  treasury functions,  financing and acquisitions.
From July 1998 to September  1999,  she was  Controller at  Information  Systems
Support Inc.  From October 1987 to July 1998,  she worked at CACI  Technologies,
Inc., a division of CACI, Inc. (NASDAQ: CACI), formerly QuesTech, Inc., first as
a Senior  Accountant,  then  Manager  of  Financial  Reporting,  then  Assistant
Controller  and finally as  Director  of  Accounting  and  Financial  Reporting,
managing that company's accounting and SEC reporting functions. Prior to joining
CACI, she worked in various professional capacities in finance and accounting at
Computer Sciences Corporation, and MCI Worldcom (formerly MCI). Mrs. Jacobson is
a certified  public  accountant and received her M.B.A. in Finance and a Masters
in Accounting from George Washington University. She is a member of the American
Institute of  Certified  Public  Accountants  and the  Institute  of  Management
Accountants. She is the wife of Philip Jacobson.

     J. Larry Hineline: Mr. Hineline has been one of our Directors since January
1998 and our  Secretary  since June 1998.  From 1978 to 1991 he was  employed at
U.S.  Surgical,  most recently as Senior  Director of Operations,  a position he
held for seven years.  From 1991 to 1992, he was the  Vice-President  of Product
Operations  for Joint Medical  Products  Corporation.  Since October 1993 he has
been  the  owner of JVR  Systems  Inc.  and Bear  Services  Inc.,  computer  and
consulting  companies,  respectively.  Since  February 1997 he also has been the
owner of DavDez Arts Inc., a publisher of comic books, short stories and graphic
novels.  Mr.  Hineline  received  his  undergraduate   degree  from  Troy  State
University in 1976 and his M.B.A from California Coast University in 1999. He is
currently working towards a Ph.D. in Business Administration.

     Edward E. Kramer:  Mr. Kramer has been one of our  Directors  since October
1997.  He has been in the  comic  book  industry  since  1987,  when he became a
co-owner of Titan Games and Comics,  a position that he currently  holds.  Since
1992, Mr. Kramer also has been a Technology  Associate at Metropolitan  Regional
Educational  Service Agency, a division of the Georgia  Department of Education,
in Atlanta,  Georgia.  Mr. Kramer is also an award-winning  writer and editor of
nearly two dozen books in the science fiction and horror genres. He received his
undergraduate  degree in Psychology from Emory  University and a Master's Degree
in Administration and Planning from Emory University School of Medicine.

     Francis H. Yano:  Mr. Yano has been one of our  Directors  since  February,
2000. Since April 1973 Mr. Yano has been an attorney in private  practice.  From
1984 to the present, Mr. Yano has been President,  Director and co-owner of TVF,
Inc., a suntan lotion company in Honolulu, Hawaii. Mr. Yano received his B.A. in
Biology  from the  University  of Hawaii  and his J.D.  from the  University  of
Colorado Law School.

     (b) Key employees:

     R. Scott  Murphy:  Mr.  Murphy,  age 39,  joined us in January  2000 as the
Director of Technical  Services and Web Design.  From  September 1999 to January
2000, he was a Senior Systems Programmer at Command Technologies, Inc. From June
1998 to September  1999,  he held a  management  position at KPMG where he led a
project  to create  an  intranet  portal  service  that  allows  KPMG  employees
worldwide to access a complete library of tax services.  Mr. Murphy was employed
by West Virginia  University  since February 1997 as its coordinator of all user
access and systems  security.  He received a B.A. in Computer Art from Davis and
Elkins  College  and is  working on the  requirements  for an M.S.  in  Computer
Science from West Virginia University.

     Keith Impink: Mr. Impink, age 35, joined us in January 2000 as our Creative
Director and Webmaster. Mr. Impink is a professional artist and web designer who
is responsible for the design of our corporate and e-commerce websites,  as well
as all of our marketing and  convention  materials.  For the last five years Mr.
Impink has worked as a free-lance  web developer and graphic  designer  based in
California.  During those five years,  he worked as Webmaster for companies such
as M.P. Mountanos, Inc. and Oscar Knows, which runs the www.oscarknows.com site.
From 1981 to 1995,  Mr.  Impink was a  free-lance  commercial  artist  designing
t-shirts,  album  covers,  convention  materials and  marketing  literature  for
clients such as  Hewlett-Packard,  BMW, the American Heart Association,  Capitol
Records and

                                       15

<PAGE>


rock bands such as The Grateful Dead and Lynryd Skynryd.

Item 10.  Executive Compensation.

     (a) Summary  Compensation:  The following table summarizes the compensation
for the  fiscal  year ended  December  31,  1999 and the prior two fiscal  years
earned by or paid to our chief executive  officer.  No other  executive  officer
earned more than $100,000 for these years.


                                                         Long Term Compensation
                                                        ------------------------
                                   Annual Compensation             Awards
                                                                 Securities
Name and                                                         Underlying
principal position            Year          Salary      Bonus  Options(#)/SARS
------------------            ----         ---------    -----  -----------------

Sy R. Picon, CEO              1999         $ 103,955    $  0      4,600,000
                              1998         $  58,231    $  0              0
                              1997         $  42,058    $  0      2,285,000



<TABLE>
<CAPTION>
                                      Option/SAR Grants in Last Fiscal Year
                                                 Individual Grants
                       ----------------------------------------------------------------------
                        Number of      % of Total
                        Securities     Options/SARS
                        Underlying     Granted to      Exercise or               Market Price
                       Options/SARS     Employees      Base Price  Expiration    on  Date of
Name                    Granted (#)   in Fiscal Year    ($/share)     Date       of Grant ($)
----------             ------------   --------------  -----------  ----------    ------------
<S>                      <C>               <C>            <C>       <C>              <C>
Sy R. Picon              1,000,000         10%            $0.51     01/03/10         $2.03
                         1,000,000         10%            $2.03     01/03/10         $2.03
                         2,600,000         27%            $1.23     12/31/12         $1.23
</TABLE>


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

     Unless otherwise indicated,  we believe that the individuals listed in this
Item have the sole  power to vote and  dispose  of the  number of shares  listed
opposite their respective names.

     (a) Security ownership of certain beneficial owners

     The following table contains information  regarding ownership of our common
stock, which are our only voting securities,  which are deemed under the current
rules of the Securities and Exchange  Commission to be beneficially owned by any
person -- including any "group" as that term is used in Instruction No. 4 to S-B
Item 403 -- known by us to be the  beneficial  owner of more than  five  percent
(5%) of our common stock as of March 28, 2000:

Name and address                   No. of
of beneficial owner             Shares Owned              Percentage of Class
---------------                 ------------              -------------------

Sy Robert Picon                 6,756,967(1)                    40%
c/o SyCoNet.Com, Inc.
9208A Venture Court
Manassas, VA 20111

William Spears                  5,900,039(2)                    33
c/o SyCoNet.Com, Inc.
9208A Venture Court
Manassas, VA 20111

J. Larry Hineline                 679,503(3)                     5
9266 Oak Hammock Lane
Jupiter, FL 33478


                                       16
<PAGE>


----------

(1)  Includes  options to purchase  4,501,667 shares and 250,000 shares owned by
     Mr. Picon's wife, as to which he disclaims beneficial ownership.

(2)  Includes options to purchase 5,198,333 shares.

(3)  Includes options to purchase 28,750 shares.

     (b)  Security Ownership of Management.

     The following table contains information  regarding ownership of our common
stock, which are our only voting securities,  which are deemed under the current
rules of the Securities and Exchange  Commission to be beneficially owned by our
directors,  our executive  officers named in Item 5 below, and our directors and
executive officers as a group, as of March 28, 2000:

<TABLE>
<CAPTION>
                                                                     No. of
Name and Address                          Office                  Shares Owned        Percentage of Class
-------------                         ---------------             -------------       -------------------
<S>                                    <C>                        <C>                        <C>
Sy Robert Picon                        President, Chief           6,756,967(1)               40%
c/o SyCoNet.Com, Inc.                  Executive Officer,
9208A Venture Court                    Treasurer and
Manassas, VA 20111                     Director

William Spears                         Executive Vice             5,900,039(2)               33
c/o SyCoNet.Com, Inc.                  President,
9208A Venture Court                    and Director
Manassas, VA 20111

J. Larry Hineline                      Secretary and                679,503(3)                5
9266 Oak Hammock Lane                  Director
Jupiter, FL 33478

Edward E. Kramer                       Director                     288,750(4)                2
2480 Honeycomb Way
Duluth, GA 30096

Philip Jacobson                        Executive                    123,000(5)               (6)
9029 Edgepark Road                     Vice President
Vienna, Virginia 22182

Kathryn Jacobson                       Chief Financial              123,000(7)               (6)
9029 Edgepark Road                     Officer
Vienna, Virginia 22182

Francis H. Yano                        Director                     144,850(8)                1
1466 Pule Place
Honolulu, HI 96816

Jean-Claude Geha                       Chief Operating              100,000(9)               (6)
3615 Devilwood Ct.                     Officer
Fairfax, Virginia 22030

All Officers and                                                 13,993,109                  61
Directors as a Group
(8 individuals)
</TABLE>


                                       17

<PAGE>


----------
(1)  Includes  options to purchase  4,501,667 shares and 250,000 shares owned by
     Mr. Picon's wife, as to which he disclaims beneficial ownership.

(2)  Includes options to purchase 5,198,333 shares.

(3)  Includes options to purchase 28,750 shares.

(4)  Includes options to purchase 258,750 shares.

(5)  Includes options to purchase 25,000 shares and includes options to purchase
     62,500 shares owned by his wife Kathryn Jacobson,  as to which Mr. Jacobson
     disclaims beneficial ownership.

(6)  Less than one percent.

(7)  Includes  options to purchase  62,500 shares and includes 35,500 shares and
     options to purchase 25,000 shares owned by her husband, Philip Jacobson, as
     to which Mrs. Jacobson disclaims beneficial ownership.

(8)  Includes  1,750 shares  owned by his son, 700 shares held by his  daughter,
     and 6,900 shares held by his wife, as trustee for her mother.

(9)  Consists of options to purchase 100,000 shares.

Item 12.  Certain Relationships and Related Transactions

     In the fourth quarter of 1999, we loaned to our Chief Executive  Officer Sy
Picon, an aggregate of $65,000 as follows:  $20,000 on October 28, 1999, $15,000
on November 8, 1999 and $30,000 on November 30, 1999.  The $65,000 was repaid in
full in early 2000.

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

     (a) Exhibits.

            3.1    Certificate of Incorporation -
                   incorporated by reference to
                   Exhibit 3.1 to Registration
                   Statement on Form 10-SB
                   (SEC File No.000-29113)

            3.1a   Certificate of Amendment of the
                   Certificate of Incorporation,
                   dated March 11, 1998 -
                   incorporated by reference to
                   Exhibit 3.1a to Registration
                   Statement on Form 10-SB (SEC
                   File No.000-29113)

            3.1b   Certificate of Amendment of
                   Certificate of Incorporation,
                   dated February 17, 1999 -
                   incorporated by reference to
                   Exhibit 3.1b to Registration
                   Statement on Form 10-SB (SEC
                   File No.000-29113)

            3.2    By-Laws - incorporated by
                   reference to Exhibit 3.2 to
                   Registration Statement on
                   Form 10-SB
                   (SEC File No.000-29113)

              4    Specimen Common Stock
                   Certificate - incorporated by
                   reference to Exhibit 4 to
                   Amendment No. 1 to Registration
                   Statement on Form 10-SB
                   (SEC File No.000-29113)


                                       18
<PAGE>



            10.1   Funding Agreement with
                   Alliance Equities, Inc.,
                   dated December 16, 1999 -
                   incorporated by reference to
                   Exhibit 10.1 to Registration
                   Statement on Form 10-SB
                   (SEC File No.000-29113)

            10.2   Lease Agreement with
                   John G. and Mary Immer,
                   dated November 15, 1997 -
                   incorporated by reference to
                   Exhibit 10.2 to Registration
                   Statement on Form 10-SB
                   (SEC File No.000-29113)

            10.3   Amendment, dated January 4,
                   2000, to the Lease Agreement
                   with John G. and  Mary Immer -
                   incorporated by reference to
                   Exhibit 10.3 to Registration
                   Statement on Form 10-SB
                   (SEC File No.000-29113)

            10.4   Commercial Lease Agreement
                   with Broadwater Investments, II,
                   dated March 1, 2000 -
                   incorporated by reference to
                   Exhibit 10.4 to Amendment No. 1
                   to the Registration Statement on
                   Form 10-SB (SEC File No.000-29113)

            10.5   Addendum No. 1, dated
                   March 1, 2000, to Commercial
                   Lease Agreement with Broadwater
                   Investments, II  - incorporated by
                   reference to Exhibit 10.5 to
                   Amendment No. 1 to Registration
                   Statement on Form 10-SB
                   (SEC File No. 000-29113)

            21     Subsidiaries - incorporated by
                   reference to Exhibit 21 to
                   Amendment No. 1 to Registration
                   Statement on Form 10-SB
                   (SEC File No. 000-29113)

            27     Financial Data Schedule -
                   incorporated by reference to
                   Exhibit 27 to Amendment No. 1
                   to Registration  Statement on
                   Form 10-SB (SEC File No. 000-29113)


(b)  No  reports on Form 8-K were  filed  during the last  quarter of the period
     covered by this report.


                                       19
<PAGE>


                                   SIGNATURES

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


                                                SYCONET.COM, INC.
                                            ---------------------------
                                                  (Registrant)


                                   By       /s/ Sy R. Picon
                                            ---------------------------
                                            Sy R. Picon
                                            Principal Executive Officer

                                            Date: March 30, 2000

                                   By       /s/ Kathryn Jacobson
                                            ---------------------------
                                            Kathryn Jacobson
                                            Principal Financial Officer

                                            Date:   March 30, 2000



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


                                   By       /s/ Sy R. Picon
                                            ---------------------------
                                            Sy R. Picon
                                            Director

                                            Date:   March 30, 2000


                                   By       /s/ William Spears
                                            ---------------------------
                                            William Spears
                                            Director

                                            Date:   March 30, 2000


                                   By       /s/ J. Larry Hineline
                                            ---------------------------
                                            J. Larry Hineline
                                            Director

                                            Date:   March 30, 2000


                                       20