SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-KSB

                 [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2001
                                       OR

               [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
              For the transition period ________ from to ________.
                         Commission file number 1-13856

                             SEL-LEB MARKETING, INC.
              (Exact name of small business issuer in its charter)

                 New York                         11-3180295
          (State of incorporation)   (I.R.S. Employer Identification No.)

                  495 River Street, Paterson, New Jersey 07524
               (Address of principal executive offices) (Zip Code)

         Issuer's telephone number, including area code: (973) 225-9880

        Securities registered pursuant to Section 12(b) of the Act: NONE

          Securities registered pursuant to Section 12(g) of the Act:
                          Common Stock, $.01 par value
                                (Title of Class)


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

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B 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
amendments to this Form 10-KSB. [X]

The issuer's revenues for its most recent fiscal year were $21,451,140.

The aggregate market value of voting stock held by non-affiliates of the
registrant on April 2, 2002 was approximately $2,554,372. On such date, the
closing price of the issuer's common stock was $2.09 per share. Solely for the
purposes of this calculation, shares beneficially owned by directors, executive
officers and stockholders of the issuer that beneficially own more than 10% of
the issuer's voting stock have been excluded, except such shares, if any, with
respect to which such directors and officers disclaim beneficial ownership. Such
exclusion should not be deemed a determination or admission by the issuer that
such individuals are, in fact, affiliates of the registrant.

The number of shares of the registrant's Common Stock, $.01 par value,
outstanding on April 2, 2002 was 2,261,018.

                      DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Company's Proxy Statement in connection with its Annual Meeting
scheduled to be held on May 30, 2002 are incorporated by reference in Part III.
The Company's Proxy Statement will be filed within 120 days after December 31,
2001.

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                             SEL-LEB MARKETING, INC.
                          Annual Report on Form 10-KSB
                   For the Fiscal Year Ended December 31, 2001

                                TABLE OF CONTENTS

                                                                            Page
PART I

Item 1.  Description of Business                                             1
Item 2.  Description of Property                                             7
Item 3.  Legal Proceedings                                                   7
Item 4.  Submission of Matters to a Vote of Security Holders                 7

PART II

Item 5.  Market for Common Equity and Related Stockholder Matters            7
Item 6.  Management's Discussion and Analysis or Plan of Operation           8
Item 7.  Financial Statements                                               14
Item 8.  Changes in and Disagreements with Accountants on
         Accounting and Financial Disclosure                                14

PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         Compliance with Section 16(a) of the Exchange Act                  14
Item 10. Executive Compensation                                             14
Item 11. Security Ownership of Certain Beneficial Owners and Management     14
Item 12. Certain Relationships and Related Transactions                     15
Item 13. Exhibits and Reports on Form 8-K                                   15

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                                     PART I

Item 1.  Description of Business

General

Sel-Leb Marketing, Inc. was incorporated under the laws of the State of New York
in September 1993. The Company is primarily engaged in the distribution and
marketing of consumer merchandise to retail sellers such as mass merchandisers,
discount chain stores and food, drug and electronic retailers. The Company's
business presently consists of the following activities: (i) marketing and
selling the Company's own proprietary brands of budget-line health, beauty aid
and cosmetic products, which are filled for the Company by contract fillers,
(ii) opportunistic purchasing and secondary sourcing (i.e., distributing
merchandise on a wholesale basis outside of normal distribution channels to
retail merchants) of a broad range of name-brand and off-brand products such as
health and beauty aids, cosmetics, fragrances, kitchen items and other household
items, and (iii) marketing and selling products to be promoted by celebrity
spokespersons and sold to mass merchandise retailers. The Company's strategy is
to capitalize on increased consumer demand for value and convenience resulting
from the increased acceptance by consumers of mass merchandisers, electronic
retailers and other mass marketing retail outlets, as well as on the popularity
of consumer products endorsed by celebrity spokespersons.

In September 1997, the Company and RBCJJ Associates, LLC ("RBCJJ"), an
unaffiliated third party, formed Ales Signature, Ltd., a New York corporation
("Ales"), for the purpose of acquiring from SBC Corporation, Inc. ("SBC") a line
of women's cosmetic, corrective and treatment products (e.g., blemish creams and
eye creams) sold under the Signature(TM) name. The Company owns 80% of Ales
Signature, Ltd. The Company, in connection with the acquisition, acquired rights
to the following trademarks: (i) all rights of SBC in and to certain trademarks
(including the Signature Solutions(R) mark and the Signature Beauty Care(R), Lip
Set(R) and Salon Essence(R) registered trademarks) and (ii) finished products
and other inventory (including works in progress and component parts) related to
the product lines bearing the acquired trademarks. Unless otherwise specified
herein, references to the "Company" shall refer collectively to Sel-Leb
Marketing, Inc. and its subsidiary Ales Signature, Ltd.

SALE OF PROPRIETARY BRAND NAME PRODUCTS. The Company is currently engaged in the
marketing and sale of its own proprietary brand name budget-line health, beauty
aid and cosmetic products. The Company's beauty aid and cosmetic products
include bath products, as well as budget-line lipsticks, lip pencils, nail
polishes and eye pencils sold under the Linette(R), Loud Music(R), Ghoul
Tools(R), Quick Thang(R), Loud Sticks(TM), Signature Solutions(R) and Signature
Beauty Care(R) brand names. The Company's products are sold to department
stores, retail chains and other mass merchandisers located throughout the United
States, Canada, Puerto Rico and Europe. All of the Company's proprietary beauty
aid and cosmetic products are manufactured and supplied by third parties. The
Company purchases all materials for these products (including raw materials and
packaging) through individually placed purchase orders to various suppliers.
During the fiscal year ended December 31, 2001, no supplier accounted for 10% or
more of such purchases. The Company has credit arrangements with suppliers that
allow it to purchase merchandise on credit with payment generally due 30 days
after purchase. To date, the Company has not experienced any shortages of or
difficulties in obtaining the raw materials used in its products or the
materials used for the packaging of its products. Furthermore, the Company
believes that alternate sources of supply for such materials are readily

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available  and  that  the  loss of any one of its  suppliers  would  not  have a
material  adverse effect.  The Company  believes that it has good  relationships
with the suppliers of raw materials and packaging for its proprietary products.

Typically, materials purchased by the Company for its proprietary beauty aid and
cosmetic products are delivered by the suppliers to the Company's warehouse
facilities. The Company thereafter delivers such materials, on an as-needed
basis, to its contract fillers, which are engaged by the Company to provide
filling services and perform quality control with respect to the finished
products. During the fiscal year ended December 31, 2001, no such contract
filler accounted for 10% or more of the Company's filling services. Once
completed, the products are delivered to the Company, which packs out the
products and distributes the finished products to its customers. Although the
Company believes that its contract fillers have the capacity to produce volumes
of the Company's products sufficient to meet the Company's foreseeable needs,
there can be no assurance of such. Furthermore, although the Company believes
that it has a good relationship with its contract fillers and that the Company
will continue to obtain its finished beauty aid and cosmetic products from such
fillers in the foreseeable future, the Company does not have written contracts
with any of these fillers and there can therefore be no assurance of such. In
the event the Company were to experience difficulties with or the loss of
services of its present fillers, the Company believes that it would be able to
retain the services of other fillers; however, there can be no assurance that
such services could be retained on a timely basis or on terms as favorable as
those with its present fillers.

As part of the Company's strategy of taking advantage of the growth in mass
merchandising and value retailing, the Company will seek to expand its existing
proprietary brand name product lines as well as continue to introduce new brand
name products, thereby providing the Company with a supply of products and
making the Company less reliant on third party and/or opportunistic sources of
merchandise. The Company may also seek to acquire rights to additional
proprietary product lines through licensing or other arrangements, although
there can be no assurance of such.

OPPORTUNISTIC PURCHASING AND SECONDARY SOURCING ACTIVITIES. The Company acts as
a secondary sourcer of a broad range of name-brand and off-brand merchandise,
including health and beauty aids, cosmetics, kitchen items and other household
products. The Company acquires its merchandise either directly from consumer
goods manufacturers or from wholesalers, retailers, financially distressed
businesses, duty-free distributors and other secondary sources located in the
United States and, to a very limited extent, in Europe, and sells the
merchandise to retail chains and other mass merchandisers located throughout the
United States, Canada and Puerto Rico. During the year ended December 31, 2001,
the Company purchased merchandise from over 50 different suppliers and sold the
merchandise to over 30 different retailers, including, among others, BJ's
Wholesale Club, Ames Department Stores, Variety Wholesale and Roses Stores, Inc.
which accounted for approximately 35.9%, 23.6%, 19.1% and 15.1%, respectively,
of the Company's net opportunistic sales in 2001. The Company believes that its
longstanding relationships with many of its suppliers and customers are
important to the secondary sourcing activities of the

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Company, and that its relationship with its suppliers and customers are good.

In connection with its distribution activities, the Company has the ability to
reconfigure merchandise acquired by it or to provide other value-added services
at the request of a retailing customer. For example, if the Company were to
acquire merchandise which had been packaged by the manufacturer as a four-pack
item (i.e., four items to the package), the Company could, if requested by the
retailer, reconfigure the item as a ten-pack item prior to delivery of the
merchandise to the customer. Likewise, at a customer's request, the Company has
the ability to reconfigure several different items together to create a gift or
bonus package. The Company believes that its ability to provide such value-added
services allows it to service the ongoing needs of its customers and to enhance
its sales and customer relations.

Because the Company focuses on the opportunistic acquisition of merchandise such
as purchases of closed-out, overstocked and/or change-of-packaging brand name
items, the Company is generally able to purchase such merchandise at a discount
below wholesale cost. The Company then sells the merchandise to discount
retailers and other mass merchandisers who seek to purchase products at discount
prices in order to supplement their normal inventory purchases or for special
promotions. The merchandise is sold at prices that are above the Company's cost,
although at prices that are still generally below wholesale. Although the
Company typically purchases merchandise before it has located customers for such
merchandise, it has sold substantially all merchandise acquired by it in each of
the last three fiscal years.

The Company purchases the name-brand and off-brand merchandise which it sells to
retailers from over 50 suppliers, including consumer goods manufacturers,
wholesalers, retailers, financially distressed businesses, duty-free
distributors and other secondary sources. The Company is continually seeking to
locate new sources of merchandise. Generally, the Company will be contacted by a
manufacturer or other supplier when such supplier has excess merchandise that is
available for resale through the secondary market; alternatively, the Company
will also contact a supplier if it becomes aware that the supplier has
merchandise which it desires to sell. Although certain suppliers may have
provided a majority or all of a particular type of product or particular
category of merchandise, no supplier accounted for more than 10% of the
Company's total opportunistic merchandise purchases for the year ended December
31, 2001. During the year ended December 31, 2001, substantially all of the
Company's secondary sourcing merchandise was purchased from domestic suppliers.
The Company believes that the loss of any one of its suppliers would not have a
material adverse effect on the Company and that alternative sources of
merchandise are readily available in all existing product categories as well as
additional product categories.

All merchandise is purchased by the Company from its suppliers through
individually placed purchase orders. The Company does not have any contractual
relationships, except as described elsewhere herein, with any of its suppliers
and depends, instead, on its ongoing relationships and prior dealings with such
suppliers to obtain merchandise at favorable prices when it becomes available to
secondary suppliers. The Company believes that such ongoing relationships with
its suppliers have resulted from its prior dealings with such suppliers, in many
cases over a period of years, and its reliability and strength as a customer.
Several of the Company's principals have been involved in the opportunistic
purchasing business for more than 20 years and have developed many on-going
contacts with suppliers.

Currently, all purchasing and pricing decisions with respect to the Company's
opportunistic purchasing activities are made by Paul Sharp, the Company's
President and Chief Executive Officer, and Jorge Lazaro, the Company's Executive
Vice President, who locate sources of merchandise and determine whether any
given product will be suitable for wholesale distribution to mass merchandise
retailers or other customers. Generally, the Company believes that it has the
ability to sell all merchandise that is acquired by it. The Company

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has credit arrangements with substantially all of its existing suppliers,
thereby allowing the Company to purchase merchandise on account. Generally, such
credit arrangements allow the Company to purchase merchandise with payment
generally due 30 days after the purchase. However, in certain cases the Company
purchases merchandise with payment made upon the receipt of goods in order to
enable the Company to obtain favorable prices.

The Company has also acted as a wholesale distributor of prestige, designer
fragrances. Historically, manufacturers of such fragrances have sold their
products primarily to leading department stores. As a result, mass merchandisers
have traditionally only been able to obtain such items from secondary sources
such as the Company. Typically, the Company has purchased these fragrances from
other secondary sources such as export and import companies, duty-free
distributors and department stores which were liquidating their excess
inventory. Unlike other merchandise acquired by the Company at prices
significantly below wholesale, the Company has purchased certain designer
fragrances at above-wholesale prices (although still well below their normal
retail price). The Company, in turn, has sold such items to other mass
merchandisers. The Company believes that revenue from the sales of fragrances
(or its consulting services, described below, relating to fragrance sales) will
continue to constitute a portion of its sales, although there can be no
assurance of such.

Within this segment, the Company has also sought to develop further its bath
products lines and to become less dependent on sales of lipsticks, lip pencils,
nail polishes eye pencils and cosmetics in general. In July, 2001, the Company
entered into an arrangement with RJS Scientific, Inc. relating to the Company's
sale of bath and home fragrance products manufactured by RJS. Under the
agreement, all profits and losses are to be divided equally between the Company
and RJS. The agreement with RJS is terminable upon sixty days notice by either
party. The revenues generated by the Company's agreement with RJS accounted for
approximately 7% of the Company's net sales in 2001. There can be no assurance
that any products made by RJS and sold by the Company pursuant to this agreement
will meet with consumer acceptance or provide ongoing significant revenues to
the Company.

In August 2001, the Company entered into an agreement with Perfume Center of
America, Inc. ("PCA"), a leading fragrance importer, pursuant to which the
Company sold to PCA its fragrance rack program supply arrangement for a mass
merchandise retailer, together with the Company's inventory of fragrances
relating to that retailer's program. In consideration for the transfer of the
program and rack assets, the Company received approximately $245,000 in 2001,
with the balance payable to the Company in two installments of $100,000 each due
by December of 2002 and 2003. The Company received approximately $248,000 for
the inventory. In connection with the sale, the Company agreed to serve as
consultant to PCA concerning PCA's relationship with the retailer, for which PCA
is to pay to the Company a specified percentage of net sales.

MARKETING AND SALE OF "CELEBRITY-ENDORSED" PRODUCTS. The Company believes that
the increasing popularity of consumer products endorsed by celebrities may
provide significant future opportunities for the Company. Accordingly, the
Company is seeking to develop products for promotion by celebrity spokespersons
which products would be sold by the Company to mass merchandising and electronic
retailers. In this connection, the Company will seek to enter into agreements
with celebrities for whom it believes it will be able to successfully develop
products which will have consumer appeal.

In September 1996, the Company entered into an arrangement with ACI, Inc., a
developer and marketer of cosmetic products, relating to the distribution and
marketing of products endorsed by celebrity spokespersons through electronic
media and other retail channels. Pursuant to this arrangement, the Company
provides the financing required in connection with developing, marketing and
distributing the products to be promoted by such celebrities and sold in the
retail market. ACI's fee is equivalent to approximately 50% of the profit (after
giving effect to any royalty payments required to be made to celebrity
spokespersons and certain management fees payable to ACI) resulting from the
sale of such products. To date, the Company has provided the financing for a
line of cosmetics developed by ACI (including, without limitation, lipsticks,
blushes and other beauty products) which are being promoted by a leading make-up
artist and sold through the electronic media. The revenues generated by the
Company's arrangement with ACI accounted for approximately 40.5% of the
Company's net sales in 2001. There can be no assurance that any other products
will be developed by ACI and financed by the Company pursuant to this agreement
or that any such products that are developed will meet with consumer acceptance
or provide significant revenues for the Company.

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In December 2001, the Company entered into a trademark license and product
promotion agreement with Kobra International, Ltd. pursuant to which Kobra
agreed to provide to the Company the services of Nicole Miller, a world famous
designer, in connection with the grant to the Company of a license for the
production, manufacture and sale of a line of Nicole Miller jewelry through
electronic and traditional retail channels. Under the agreement, the Company is
to pay Kobra a specified percentage of net sales, subject to a minimum royalty
for each year. The agreement has an initial term of three years, subject to
renewal or early termination under specified circumstances.

In September 2000, the Company entered into a product promotion agreement with Z
Metro, Inc. ("Metro, Inc."), pursuant to which Metro, Inc. agreed to provide to
the Company the services of Zoe Metro, a jewelry and handbag designer, who is to
assist in the design of, and endorse and promote, various products through
electronic retailers. Under this agreement, Ms. Metro has made several
appearances on The Shop Channel in Japan and is scheduled to make an additional
appearance in July 2002. In return for the grant to the Company of Ms. Metro's
services and the use of certain trademarks and other rights, the Company is to
pay to Metro, Inc. a specified percentage of net sales in accordance with the
terms of the agreement. The agreement has an initial term of thirty months,
subject to renewal or early termination under specified circumstances.

Although the Company is seeking to develop the "celebrity-endorsed" product area
of its business, including by marketing and distributing in the traditional
retail market merchandise which is originally offered for sale on television or
by developing products to be promoted by celebrities and sold directly in such
traditional markets, there can be no assurance that the Company will be
successful in its endeavors. There can be no assurance that the Company will be
able to continue to develop any new celebrity products or that any such products
developed by the Company will meet with consumer acceptance. In addition, except
as described above, as of the date hereof the Company has no agreements,
understandings or commitments related to such plan of development.

Inventory

Merchandise acquired by the Company in connection with its opportunistic
purchasing activities for resale to its mass market customers is generally
shipped by the supplier to the Company's warehouse facility, which is located in
Paterson, New Jersey, or, in certain situations, is shipped by the supplier
directly to a customer from whom the Company has received a purchase order. The
Company utilizes its Paterson facility for the centralized receipt of goods from
suppliers, as well as the storage of inventory and the shipment of inventory to
its customers. In addition, value-added services such as reconfiguring of goods
are also performed at this facility.

Typically, all raw materials purchased by the Company for its proprietary beauty
aid and cosmetic products, are delivered to the Company's warehouse facility.
Thereafter, the Company delivers such materials, on an as-needed basis, to its
contract fillers, which provide filling services and perform quality control
with respect to the finished products. Once completed, the products are
delivered to the Company, which reconfigures or packs out the products and
distributes the finished goods from its warehouse to its customers.

Competition

The areas of business in which the Company engages are highly competitive. The
Company believes that it competes with the following:

In the opportunistic purchasing area of its business, the Company competes with
other secondary sourcers, as well as with wholesale distributors and retailers,
with respect to its ability to obtain merchandise. In addition, with respect to
sales of such merchandise to its customers, the Company competes with other

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secondary suppliers, as well as with manufacturers who sell directly to retail
merchandisers. The Company believes that its ability to purchase a broad array
of merchandise at competitive prices is critical to its success. In connection
with its sale of proprietary brand name products including the Linette(R), Quick
Thang(R), Loud Sticks, Loud Music(R), Ghoul Tools(R), Signature Solutions(R) and
Signature Beauty Care(R) products, the Company competes at the retail level with
other manufacturers of budget-line health, beauty aid and cosmetic products for
shelf space and promotional space. In connection with its celebrity-endorsed
products business, the Company competes with manufacturers and marketing
organizations that seek out celebrities to endorse products and assist in
marketing programs for their merchandise, as well as with celebrity agents who
can negotiate directly with retailers in order to secure marketing contracts for
the celebrities they represent. The Company believes that it will compete on the
basis of its ability to design products which are consistent with celebrities'
respective preferences and characters and to provide such products to retailers
at competitive prices.

Many of the Company's existing or potential competitors are well established
companies and have or will have substantially greater financial, marketing and
other resources than the Company. The Company believes that it competes on the
basis of value, product assortment and availability, service to customers and
reputation, as well as on the basis of its long-standing and well established
relationships with both its suppliers and customers. Although the Company
believes that it will be able to compete effectively on the basis of such
factors, there can be no assurance of such.

Trademark and Servicemark Protection

Products developed by the Company are sold under the Linette(R), Quick Thang(R),
Loud Sticks(TM), Signature Solutions(R) and Signature Beauty Care(R) trademarks
and the Loud Music(R) and Ghoul Tools(R) marks. The Company has registered the
Linette(R), Loud Music(R) and Ghoul Tools(R) trademarks with the United States
Patent and Trademark Office (the "Trademark Office") and, in connection with the
acquisition of the product lines from SBC, Ales acquired all of SBC's rights in
and to the Signature Solutions(R) mark and the Signature Beauty Care(R),
Groomer's Secret(R), Lip Set(R) and Salon Essence(R) trademarks. There can be no
assurance that the names and marks used by the Company do not or will not
violate the proprietary rights of others, that such names and marks would be
upheld if challenged or that the Company would not be prevented from using any
names and trademarks in the future.

Personnel

The Company currently employs approximately 18 full-time salaried employees
and approximately 24 hourly employees (the exact number of which fluctuates from
time to time based on the Company's needs). The terms of employment of the
Company's hourly employees are governed by a collective bargaining agreement
which commenced on September 1, 1997 and continues for a term of five years.
Management believes that its employee relations are good.

Insurance

To date, no material product liability claims have been made against the
Company; however, as a distributor of merchandise, including health and beauty
aids, cosmetics, and household items, the Company could be exposed to possible
liability claims from others for personal injury or property damage due to
design or manufacturing defects or otherwise. The Company maintains a product
liability insurance policy that has a $1,000,000 per occurrence limit and a
$2,000,000 aggregate limit, and a $5,000,000 umbrella liability insurance policy
to cover claims in excess of the limits of its product liability insurance. In
addition, the Company believes that the suppliers from whom it purchases such
merchandise, including the manufacturers thereof, maintain adequate levels of
product liability insurance. The Company also maintains

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other insurance, including insurance relating to property and personal injury,
which the Company believes is similar to that maintained by comparable
businesses and in amounts which the Company currently considers adequate. The
Company believes that its insurance coverage, including without limitation its
product liability coverage, is adequate in light of prior experience and future
expectations. Nevertheless, a partially or completely uninsured claim against
the Company, if successful and of sufficient magnitude, could have a material
adverse effect on the Company.

Item 2.       Description of Property.

The Company's principal executive offices are located at 495 River Street,
Paterson, New Jersey, 07524. Such premises include approximately 50,500 square
feet of office and warehouse space. The lease which commenced April 1, 1997, has
been renewed through the period ending March 31, 2004. Thereafter, the lease
will be subject to two one-year renewal options at increasing rental rates. The
current monthly rent (including tax) is $24,864. The Company is also obligated
to reimburse the lessor for the Company's proportionate share of any increases
in real estate taxes and assessments over the amount of such taxes and
assessments during calendar year 1997.

The Company believes that the space afforded by its properties is adequate for
the current needs of its business.

Item 3.       Legal Proceedings

Except for proceedings in the normal course of business, the Company is not a
party to or involved in any pending legal proceedings.

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

The Company did not submit any matters to the vote of security holders during
the fourth quarter of the fiscal year ended December 31, 2001.

                                     PART II

Item 5.       Market for Common Equity and Related Stockholder Matters

       A.     Market Information.

The shares of Common Stock of the Company commenced trading on the Nasdaq Small
Capitalization Market under the symbol "SELB" on July 13, 1995. The range of
high and low reported closing sales prices for the Common Stock as reported by
Nasdaq during the fiscal years ended December 31, 2000 and 2001 were as follows:

                                                               HIGH        LOW
                                                              -------    -------
FISCAL YEAR 2000 Quarter Ended:
        March 31, 2000 ..................................   $ 3.75     $ 2.25
        June 30, 2000 ...................................   $ 3.25     $ 1.125
        September 30, 2000 ..............................   $ 2.0625   $ 1.3125
        December 31, 2000 ...............................   $ 1.75     $ 0.6875

 FISCAL YEAR 2001 Quarter Ended:
        March 31, 2001 ..................................   $ 1.50     $  .85
        June 30, 2001 ...................................   $ 1.16     $  .50
        September 30, 2001 ..............................   $ 1.16     $  .75
        December 31, 2001 ...............................   $ 1.80     $  .80

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The prices set forth above reflect inter dealer prices, without retail mark-up,
mark-down or commission and may not necessarily represent actual transactions.

       B.     Holders.

       On April 1, 2002, as reported by the Company's transfer agent, shares of
Common Stock were held by 43 persons, based on the number of record holders,
including several holders who are nominees for an undetermined number of
beneficial owners.

       C.     Dividends.

       The Company did not pay any dividends during 2000 and 2001. The payment
by the Company of dividends, if any, is within the discretion of the Board of
Directors and will depend on the Company's earnings, if any, its capital
requirements and financial condition, as well as other relevant factors. The
Board of Directors does not intend to declare any dividends in the foreseeable
future, but instead intends to retain earnings, if any, for use in the Company's
business operations.

Item 6.       MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

       The following discussion and analysis of the Company's results of
operations, liquidity and financial condition should be read in conjunction with
the Consolidated Financial Statements of the Company and related notes thereto.
The Annual Report on Form 10-KSB contains certain forward-looking statements.
Actual results could differ materially from those projected in the
forward-looking statements due to a number of factors, including but not limited
to general trends in the retail industry (both general as well as electronic
outlets), the ability of the Company to extend its financing arrangements (or
obtain satisfactory alternative financing) on favorable terms, or at all, the
ability of the Company to successfully implement its expansion plans, consumer
acceptance of any products developed and sold by the Company, the ability of the
Company to develop its "celebrity" product business, the ability of the Company
to sell its specially purchased merchandise at favorable prices, on a timely
basis or at all, and other factors set forth herein or in reports and other
documents filed by the Company with the SEC.

Summary of Significant Accounting Policies and Estimates

       Our discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these consolidated financial
statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an on-going basis, we evaluate our
estimates, including those related to accounts receivable, inventories, property
and equipment, stock based compensation, income taxes and contingencies. We base
our estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.

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Note 1 of the notes to consolidated financial statements included in this Annual
Report sets forth the principal accounting policies, assumptions and bases for
estimates used in preparing the Company's financial statements as summarized
below.

REVENUE RECOGNITION -- Sales are recognized when the earnings process is
complete and collectibility is assured, which is usually when the goods are
shipped to customers. The Company generally extends credit to its customers, a
significant portion of which are in the retail industry. Approximately 54% and
37% of the Company's net sales were derived from two major customers during 2001
and 2000, respectively. The Company closely monitors the extension of credit to
its customers while maintaining apppropriate allowances for potential credit
losses.

RELATED PARTY TRANSACTIONS -- From time-to-time, the Company transacts business
with parties related to the minority stockholders of Ales. During 2001 and 2000,
the Company purchased inventories at a total cost of approximately $428,000 and
$1,440,000, respectively, from companies affiliated with the minority
stockholders. At December 31, 2001, accounts payable included a total of
approximately $43,000 that arose primarily from such purchases. In addition,
during 2001 and 2000, the Company made sales of merchandise to companies
affiliated with minority stockholders aggregating approximately $102,000 and
$606,000, respectively. At December 31, 2001, accounts receivable included a
total of approximately $39,000 that arose primarily from such sales.

INVENTORIES -- Inventories, consisting primarily of finished goods, are stated
at the lower of cost or market. Cost is determined by the first-in, first-out
method. Management monitors and periodically reviews inventory quantities and
agings and, when appropriate, inventory is sold at lower than normal margins in
order to reduce the levels of excess or older goods.

PROPERTY AND EQUIPMENT -- Property and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation is computed using the
straight-line method over the estimated useful lives of the related assets which
ranged from two to seven years for machinery and equipment, three years for
display fixtures and three to five years for computer equipment. Amortization of
leasehold improvements is computed using the straight-line method over the term
of the lease.

Impairment losses on property and equipment are recognized when events indicate
that the undiscounted cash flows estimated to be generated by such assets are
less than their carrying value and all or a portion of such carrying value may
not be recoverable. The Company did not recognize any impairment losses during
2001 and 2000.

GOODWILL -- Goodwill is comprised of costs in excess of net assets of acquired
businesses that were being amortized on a straight-line basis over periods not
exceeding ten years. In June 2001, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" ("SFAS 142"). Under SFAS 142, goodwill and other intangible
assets with indefinite useful lives will no longer be systematically amortized.
Instead such assets will be subject to reduction only when their carrying
amounts exceed their estimated fair values based on impairment tests established
by SFAS 142 that will be made at least annually. The Company will be required to
apply the provisions of SFAS 142 and discontinue amortization effective as of
January 1, 2002. The Company will also be required to make its first impairment
tests no later than December 31, 2002. The effects of these tests on the
Company's consolidated financial position and results of operations has not been
determined. As of December 31, 2001, goodwill had an immaterial carrying value
that was included in other assets.

ADVERTISING -- The Company expenses the cost of advertising and promotions as
incurred.

                                       9
<PAGE>

STOCK OPTIONS -- In accordance with the provisions of Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), the
Company will only recognize compensation costs as a result of the issuance of
stock options to employees based on the excess, if any, of the fair value of the
underlying stock at the date of grant or award (or at an appropriate subsequent
measurement date) over the amount the employee must pay to acquire the stock.
Therefore, the Company will not be required to recognize compensation expense as
a result of any grants to employees at an exercise price that is equal to or
greater than fair value. The Company will also make pro forma disclosures, in
accordance with the provisions of Financial Accounting Standards Board ("FASB")
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), of net income or loss as if a fair value based
method of accounting for stock options had been applied instead, if such amounts
differ materially from the historical amounts.

EARNINGS PER SHARE -- The Company has adopted the provisions of Statement of
Financial Accounting Standards No. 128 "Earnings per Share," which require the
presentation of "basic" and, if appropriate, "diluted" earnings per common share
if that amount differs from basic earnings per share. Basic earnings per share
is calculated by dividing net income by the weighted average number of common
shares outstanding during each period. The calculation of diluted earnings per
share is similar to that of basic earnings per share, except that the
denominator is increased to include the number of additional common shares that
would have been outstanding if all potentially dilutive common shares, such as
those issuable upon the exercise of stock options and warrants, were issued
during the period.

In computing diluted earnings per share, the assumed exercise of all of the
Company's outstanding stock options and warrants, adjusted for the application
of the treasury stock method, would have increased the weighted average number
of common shares outstanding as shown in the table below:

                                                     2001           2000
                                                  ---------      ---------
Basic weighted average shares outstanding         2,261,018      2,261,018
Shares arising from assumed exercise of:
    Stock options                                    65,483        106,849
    Warrants                                                        29,634
                                                  ---------      ---------
Diluted weighted average shares outstanding       2,326,501      2,397,501
                                                  =========      =========


                                       10
<PAGE>

Consolidated Results of Operations: Year Ended December 31, 2001 Compared to the
Year Ended December 31, 2000:

Although the Company has identified three main areas of business activity (as
described more fully in Item 1. Description of Business), it manages and
accounts for these activities in two principal business segments: Opportunity
and Cosmetics (Opportunistic Purchasing and Secondary Sourcing are considered
to be Opportunity; Proprietary Brand Name Products and "Celebrity Endorsed"
products are considered to be Cosmetics).

                              DECEMBER 31,      DECEMBER 31,
                                  2001              2000           $ CHANGE
                             --------------------------------------------------
Net sales:
 Opportunity                 $  9,087,478      $ 8,832,579        $  254,899 (A)
 Cosmetics                     12,363,662       11,874,690           488,972 (B)
                             --------------------------------------------------
Total sales                    21,451,140       20,707,269           743,871
                             --------------------------------------------------
Cost of sales:
 Opportunity                    6,103,725        6,545,926          (442,201)(C)
 Cosmetics                     10,182,980        9,481,662           701,318 (D)
                             --------------------------------------------------
Total cost of sales            16,286,705       16,027,588           259,117
Selling general and
administrative expenses         4,502,924        4,060,211           442,713 (E)
                             --------------------------------------------------
Total operating expenses       20,789,629       20,087,799           701,830
                             --------------------------------------------------
Operating income                  661,511          619,470            42,041
                             --------------------------------------------------
Other income (expense):
 Litigation settlement            280,000                            280,000 (F)
 Other                             19,042                             19,042
 Interest expense, net           (370,948)        (449,791)          (78,843)(G)
                             --------------------------------------------------
Totals                            (71,906)        (449,791)          377,885
                             --------------------------------------------------
Income before income taxes   $    589,605      $   169,679        $  419,926
                             ==================================================

(A)  The increase in sales for this segment of our business primarily resulted
from the successful introduction of a new line of bath and home fragrance
products partially offset by a decrease in sales of specially purchased
merchandise, as well as improved supply resources, allowing for quicker
responses to retailer requirements.

(B)  During the year ended December 31, 2001, sales for this segment of our
business increased primarily as a result of growth in the electronic media
portion of our business as well as the successful continued introduction of new
products and development of new customers.

(C)  For the year ended December 31, 2001, cost of sales for this segment was
approximately 67.2% of sales as compared to 74.1% for the year ended December
31, 2000. Improved margins for this segment resulted primarily from the
continuing effect of sales of specially purchased merchandise sold during the
year at higher margins.

(D)  Cost of sales for the "Cosmetics" segment of our business was approximately
82.4% of sales for the year ended December 31, 2001 as compared to 79.8% for the
year ended December 31, 2000. The decrease in margins for

                                       11
<PAGE>


this segment of our business resulted primarily from the sale of slower moving
merchandise at lower profit margins, based on the Company's decision to reduce
inventory levels, especially in the Cosmetics segment.

(E)  Selling, general and administrative expenses consist principally of
payroll, rent, commissions, insurance, professional fees, and travel and
promotional expenses. During the year ended December 31, 2001 these costs
increased primarily as a result of increased sales related expenses.

(F)  Litigation settlement reflects proceeds from the settlement of a legal
action brought by the Company against one of its licensors for an alleged breach
of contract.

(G)  The decrease in interest expense results primarily from lower borrowings
under our credit facility during the year, coupled with lower borrowing rates.

Liquidity and Capital Resources

At December 31, 2001 we had working capital of approximately $9,015,000
including cash and cash equivalents of approximately $60,300.

During the year ended December 31, 2001, our operations generated cash and cash
equivalents of approximately $1,433,000, primarily from net income of
approximately $444,000 plus noncash charges of approximately $328,000. The
balance of our increase arose from liquidating our inventory by approximately
$1,500,000 and an increase in accounts payable, accrued expenses and other
liabilities of approximately $3,636,000. These increases were offset in part by
an increase in accounts receivable of approximately $4,325,000.

During the year ended December 31, 2001 we used approximately $62,000 for the
acquisition of property and equipment, and received $45,000 from the sale of
property and equipment.

During the year ended December 31, 2001 approximately $1,600,000 of cash and
cash equivalents was used to reduce long term and short term debt.

In December, 1998 we entered into a credit facility ("Facility") with Merrill
Lynch Business Financial Services, Inc. ("Merrill Lynch"). At December 31, 2001,
the credit facility, as amended, provided for the following:

1)     A revolving line of credit through October 31, 2002, with maximum
       borrowings of $3,800,000 against the Company's eligible accounts
       receivable and inventories. At December 31, 2001 we had $2,622,390
       outstanding under the revolving line of credit, representing a net
       decrease in our utilization of the revolving line of credit of $782,115.
       As of April 2, 2002, the outstanding balance under the revolving line of
       credit was $3,574,850.

2)     A $900,000 term loan originating in December 1998 payable in monthly
       installments of $10,714 plus interest through January 2006. This term
       loan had an outstanding balance of $525,000 as of December 31, 2001.

3)     A $500,000 term loan originating in October 1999 payable in monthly
       installments of $8,333 plus interest through November 2004. This term
       loan had an outstanding balance of $300,000 as of December 31, 2001.

4)     A $600,000 term loan originating in January, 2001 having an outstanding
       balance of $50,000 as of December 31, 2001, which was repaid during
       January, 2002.

The revolving line of credit with Merrill Lynch requires interest to be paid
monthly at 2.75% above the 30 day London Interbank offering (LIBOR) rate (an
effective rate of 4.62% at December 31, 2001).

The Company intends to engage in discussions with Merrill Lynch with a view to
extending and increasing the Facility and presently believes that it will be
able to reach such an agreement with Merrill Lynch. In the event Merrill Lynch
does not extend the Facility, however, the Company intends to contact other
banks

                                       12
<PAGE>

and financing sources and believes that it would then be able to arrange
adequate alternative financing, although there can be no assurance of such. If
the Company is unable to extend the current Facility and cannot obtain adequate
alternative financing, and its cash available from operations is insufficient to
satisfy the Company's obligations then due to Merrill Lynch, Merrill Lynch would
be entitled to exercise all remedies available to it as a secured lender.

In addition to the Merrill Lynch credit facility, on September 26, 1997 and
December 28, 1999, the Company entered into two other 6% term loans in the
amount of $100,000 each. As of December 31, 2001, $45,663 and $76,691 were
outstanding under the 1997 loan and 1999 loan, respectively.

The tables below summarize our long term debt and our lease commitments as of
December 31, 2001:

                                            Payments Due by Period
                                ------------------------------------------------
    Long term debt Obligations              Less than    1- 3    4 - 5    After
    As of December 31, 2001       Total       1 year     years   years   5 years
    -------------------------   ---------   ---------    -----   -----   -------
    Merrill Lynch               $875,000    $272,000   $583,000 $20,000     --
    -------------------------
    Other                       $122,000    $ 35,000   $ 87,000    --       --
    -------------------------

                                   Amount of Commitment Expiration Per Period
                                ------------------------------------------------
                                  Total
    Lease Commitments            Amounts    Less than    1- 3    4 - 5    Over
    As of December 31, 2001     Committed    1 year      years   years   5 years
-----------------------------   ---------   ---------    -----   -----   -------
    495 River Street            $648,000    $275,000   $373,000    --       --
    -------------------------

Our Merrill Lynch credit facility contains certain restrictive covenants which,
among other things, require the maintenance of certain financial ratios,
including minimum levels of Stockholders equity and certain levels of cash flow
(as defined within the credit facility agreement). As of December 31, 2001 the
Company was in compliance with the covenants contained in the agreement. Should
circumstances arise that would cause us to be in default, Merrill Lynch would
have the ability to accelerate the maturity on the credit facility agreement.

The Company anticipates that its working capital, together with anticipated cash
flow from the Company's operations, will be sufficient to satisfy the Company's
cash requirements for at least twelve months assuming that the Company's
Facility is extended or adequate alternative financing arrangements are obtained
by the Company. In the event the Company's plans change, due to unanticipated
expenses or difficulties or otherwise, or if the working capital and projected
cash flow otherwise are insufficient to fund operations or if the

                                       13
<PAGE>


Company's Facility is not extended on satisfactory terms, the Company could be
required to seek financing sooner than currently anticipated. Except for the
revolving credit portion of the Facility, which expires on October 31, 2002, and
various term loans, the Company has no current arrangements with respect to, or
sources of, financing. Accordingly, there can be no assurance that financing
will be available to the Company when needed, on commercially reasonable terms,
or at all. The Company's inability to obtain adequate financing when needed
would have a material adverse effect on the Company. In addition, any equity
financing obtained by the Company could involve substantial dilution to the
interests of the Company's stockholders.

Item 7.       Financial Statements

The financial statements of the Company are set forth in a separate section of
this Annual Report on Form 10-KSB. See "Item 13. Exhibits and Reports on Form
8-K" and the Index to Financial Statements on page F-1 of this Annual Report on
Form 10-KSB.

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

None

                                    PART III

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

See the section captioned "Election of Directors" included in the Company's
Proxy Statement in connection with its Annual Meeting scheduled to be held on
May 30, 2002, which section is incorporated herein by reference.

Item 10.      Executive Compensation

See the section captioned "Executive Compensation" included in the Company's
Proxy Statement in connection with its Annual Meeting scheduled to be held on
May 30, 2002, which section is incorporated herein by reference.

Item 11.      Security Ownership of Certain Beneficial Owners and Management

       (a)    Security Ownership of Certain Beneficial Owners

       See the section captioned "Principal Shareholders of the Company"
       included in the Company's Proxy Statement in connection with its Annual
       Meeting scheduled to be held on May 30, 2002, which section is
       incorporated herein by reference.

       (b)    Security Ownership of Management

       See the section captioned "Principal Shareholders of the Company"
       included in the Company's Proxy Statement in connection with its Annual

                                       14
<PAGE>


       Meeting scheduled to be held on May 30, 2002, which section is
       incorporated herein by reference.

       (c)    Changes in Control

       The Company knows of no contractual arrangements which may, at a
subsequent date, result in a change of control of the Company.

Item 12.      Certain Relationships and Related Transactions

See the section captioned "Certain Transactions" included in the Company's Proxy
Statement in connection with its Annual Meeting scheduled to be held on May 30,
2002, which section is incorporated herein by reference.

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

       (a)    Exhibits

       (1)    The financial statements of the Company and the report thereon on
the Index to Financial Statements on page F-1 hereof are filed as part of this
Annual Report on Form 10-KSB.

       (2)    The following exhibits are being filed as part of this Annual
Report on Form 10-KSB:

       2.1    Agreement and Plan of Merger of Lea Cosmetics, Inc. into the
              Company dated July 31, 1995, together with Certificate of Merger
              filed with the Secretary of State of the State of Delaware on
              August 3, 1995 (incorporated by reference to Exhibit 2.1 to the
              Company's Annual Report on Form 10-KSB for the fiscal year ended
              December 31, 1995).

       3.1    Certificate of Incorporation of the Company, as amended
              (incorporated by reference to Exhibit 3.1 to the Company's Annual
              Report on Form 10-KSB for the fiscal year ended December 31,
              1995).

       3.2    Amended and Restated By-Laws of the Company (incorporated by
              reference to Exhibit 3.2 to the Company's Quarterly Report on Form
              10-QSB for the quarterly period ended June 30, 1995).

       4.1    Form of Certificate for Common Stock (incorporated by reference to
              Exhibit 4.1 to Amendment No. 2 to the Company's Registration
              Statement on Form SB-2 (Registration No. 33-88134), as filed with
              the Securities and Exchange Commission on June 28, 1995
              ("Amendment No. 2")).

       4.2    Warrant and Registration Agreement dated as of July 20, 1995
              between the Company and Jan Mirsky (incorporated by reference to
              Exhibit 4.5 to the Company's Annual Report on Form 10-KSB for the
              fiscal year ended December 31, 1995).

       4.3    Warrant Extension Agreement Between Sel-Leb Marketing, Inc. and
              Jan S. Mirsky dated March 3, 2000 (incorporated by reference to
              Exhibit 4.3 to the Company's Annual Report on Form 10-KSB for the
              fiscal year ended December 31, 1999).

       4.4    1995 Stock Option Plan of the Registrant (incorporated by
              reference to Exhibit 4.3 to the Company's Quarterly Report on Form
              10-QSB for the period ended June 30, 1995).

                                       15
<PAGE>


       4.5    1995 Nonemployee Directors' Stock Option Plan of the Registrant
              (incorporated by reference to Exhibit 10.3 to the Company's
              Quarterly Report on Form 10-QSB for the period ended June 30,
              1995).

       4.6    Form of Stock Option Agreements under the 1995 Stock Option Plan
              (incorporated by reference to Exhibit 4.3 to the Company's
              Registration Statement on Form S-8, as filed with the Commission
              on January 10, 1997).

       4.7    Form of Stock Option Agreement under the 1995 Nonemployee
              Directors' Stock Option Plan (incorporated by reference to Exhibit
              4.4 to the Company's Registration Statement on Form S-8, as filed
              with the Commission on January 10, 1997).

       10.1   Trademark License Agreement dated January 28, 1997 between Bell
              Abbott Haussmann Inc. and the Company (incorporated by reference
              to Exhibit 10.25 to the Company's Annual Report on Form 10-KSB for
              the fiscal year ended December 31, 1996).

       10.2   Merchandising License Agreement dated as of October 16, 1996
              between Viacom Consumer Products, Inc. and the Company
              (incorporated by reference to Exhibit 10.27 to the Company's
              Annual Report on Form 10-KSB for the fiscal year ended December
              31, 1996).

       10.3A  Lease dated as of February 5, 1997 between Bascom Corp. and the
              Company (incorporated by reference to Exhibit 10.28 to the
              Company's Annual Report on Form 10-KSB for the fiscal year ended
              December 31, 1996).

       10.3B  Lease Renewal dated as of January 29, 2002, between Bascom Corp.
              and the Company.

       10.4   Shareholders Agreement dated June 26, 1996 among Sel-Leb
              Marketing, Inc., B.B. Associates, LLC, Seth Markowitz and Beau
              Brummel Sel-Leb Marketing, Inc. (incorporated by reference to
              Exhibit 10.1 to the Company's Quarterly Report on Form 10-QSB for
              the quarterly period ended March 31, 1997).

       10.5   Environmental Indemnity Agreement dated October 22, 1997 between
              the Company, Ales and Summit Bank (incorporated by reference to
              Exhibit 10.3 to the Company's Quarterly Report on Form 10-QSB for
              the quarterly period ended September 30, 1997).

       10.6   Security Agreement dated September 26, 1997 between the Company
              and Paterson Restoration Corporation (incorporated by reference to
              Exhibit 10.4 to the Company's Quarterly Report on Form 10-QSB for
              the quarterly period ended September 30, 1997).

       10.7   Stockholder's Agreement between RBCJJ Associates LLC and the
              Company (incorporated by reference to Exhibit 10.5 to the
              Company's Quarterly Report on Form 10-QSB for the quarterly period
              ended September 30, 1997).

       10.8   Asset Purchase Agreement dated as of September 15, 1997 between
              SBC Corporation, Inc. and Ales (incorporated by reference to

                                       16
<PAGE>


              Exhibit 10.6 to the Company's Quarterly Report on Form 10-QSB for
              the quarterly period ended September 30, 1997).

       10.9   Collective Bargaining Agreement dated September 1, 1997 between
              Local 300-S Production Service & Sales District Council I.U.C.
              AFL-CIO and the Company (incorporated by reference to Exhibit
              10.23 to the Company's Annual Report on Form 10-KSB for the fiscal
              year ended December 31, 1997).

       10.10  Promissory Note and Security Agreement between Sel-Leb Marketing,
              Inc. and Paterson Restoration Corporation dated December 29, 1999
              (incorporated by reference to Exhibit 10.19 to the Company's
              Annual Report on Form 10-KSB for fiscal year ended December 31,
              1999).

       10.11  Product Promotion Agreement ("Zoe Metro") (incorporated by
              reference to Exhibit 10.1 to the Company's Quarterly Report on
              Form 10-QSB for the quarterly period ended September 30, 2000).

       10.12  License Agreement ("Juliet") (incorporated by reference to Exhibit
              10.2 to the Company's Quarterly Report on Form 10-QSB for the
              quarterly period ended September 30, 2000).

       10.13  Trademark License and Product Promotion Agreement ("Nicole
              Miller").

       10.14  Agreement of Sale dated August 28, 2001, between the Company and
              Perfume Center of America, Inc.

       10.15  Letter Agreement between the Company and RJS Scientific Inc.

       10.16  Working Capital Management Account (WCMA) and Term Loan Agreement
              dated as of November 16, 1999 between Sel-Leb Marketing, Inc. and
              Merrill Lynch Business Financial Services Inc. (incorporated by
              reference to Exhibit 10.18 to the Company's Annual Report on Form
              10-KSB for fiscal year ended December 31, 1999).

       10.17  Letter Agreement dated August 3, 2000 by and between Merrill Lynch
              Business Financial Services, Inc. ("MLBFS") and Sel-Leb Marketing,
              Inc., amending the WCMA and Term Loan and Security Agreement with
              MLBFS (incorporated by reference to Exhibit 10.1 to the Company's
              Quarterly Report on Form 10-QSB for the quarterly period ended
              June 30, 2000).

       10.18  Letter Agreement dated August 3, 2000 by and between Merrill Lynch
              Business Financial Services, Inc. ("MLBFS") and Sel-Leb Marketing,
              Inc., amending the Term Loan and Security Agreement with MLBFS
              (incorporated by reference to Exhibit 10.2 to the Company's
              Quarterly Report on Form 10-QSB for the quarterly period ended
              June 30, 2000).

       10.19  Extension of Temporary Increase and Renewal for the WCMA Line of
              Credit (incorporated by reference to Exhibit 10.3 to the Company's
              Quarterly Report on Form 10-QSB for the quarterly period ended
              September 30, 2000).

       10.20  Extension of WCMA Line of Credit and Temporary Increase of Line of
              Credit (incorporated by reference to Exhibit 10.23 to the
              Company's Annual Report on Form 10-KSB for fiscal year ended
              December 31, 2000).

       10.21  Extension of Temporary Increase and Renewal for the WCMA Line of
              Credit (incorporated by reference to Exhibit 10.1 to the Company's

                                       17
<PAGE>


              Quarterly Report on Form 10-QSB for the quarterly period ended
              March 31, 2001).

       10.22  Extension of Temporary Increase and Renewal for the WCMA Line of
              Credit (incorporated by reference to Exhibit 10.1 to the Company's
              Quarterly Report on Form 10-QSB for the quarterly period ended
              June 30, 2001).

       10.23  Extension of WCMA Line of Credit (incorporated by reference to
              Exhibit 10.1 to the Company's Quarterly Report on Form 10-QSB for
              the quarterly period ended September 30, 2001).

       11.1   Statement re: computation of per share earnings (not required
              because the relevant computation can be clearly determined from
              material contained in the financial statements).

       21     Subsidiary of the Company.

       23.1   Consent of J.H. Cohn LLP.

       (b)    Reports on Form 8-K

       No Current Reports on Form 8-K were filed by the Company during the last
quarter of the fiscal year ended December 31, 2001.

                                       18
<PAGE>

                                   SIGNATURES

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

                             SEL-LEB MARKETING, INC.
                                  (Registrant)


                                        By:  /s/ Harold Markowitz
                                           -------------------------------------
                                             Harold Markowitz
                                             Chairman of the Board


Date:  April 3, 2002

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

Date              Name                               Title
----              ----                               -----

April 2, 2002   /s/ Harold Markowitz      Chairman of the Board and Director
                ------------------------
                    Harold Markowitz

April 2, 2002                             President, Chief Executive Officer and
                /s/ Paul Sharp            Director (Principal Executive Officer)
                ------------------------
                      Paul Sharp

April 2, 2002                             Chief Financial Officer (Principal
                /s/ George Fischer        Financial and Accounting Officer)
                ------------------------
                     George Fischer

April 2, 2002   /s/ Jack Koegel           Vice Chairman of the Board,
                ------------------------  Chief Operating Officer and Director
                      Jack Koegel

April 2, 2002   /s/ Jorge Lazaro          Executive Vice President, Secretary
                ------------------------  and Director
                     Jorge Lazaro

April 2, 2002   /s/ Stanley R. Goodman    Director
                ------------------------
                   Stanley R. Goodman

April 2, 2002   /s/ Edward C. Ross        Director
                ------------------------
                    Edward C. Ross

                                       19
<PAGE>

                     SEL-LEB MARKETING, INC. AND SUBSIDIARY


                          INDEX TO FINANCIAL STATEMENTS
                          -----------------------------


                                                                           PAGE

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                                  F-2

CONSOLIDATED BALANCE SHEET
     DECEMBER 31, 2001                                                    F-3

CONSOLIDATED STATEMENTS OF INCOME
     YEARS ENDED DECEMBER 31, 2001 AND 2000                               F-4

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
     YEARS ENDED DECEMBER 31, 2001 AND 2000                               F-5

CONSOLIDATED STATEMENTS OF CASH FLOWS
     YEARS ENDED DECEMBER 31, 2001 AND 2000                               F-6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                F-7/18



                                      * * *

                                      F-1
<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
                    ----------------------------------------


To the Board of Directors and Stockholders
Sel-Leb Marketing, Inc.


We  have  audited  the  accompanying   consolidated  balance  sheet  of  SEL-LEB
MARKETING,  INC.  AND  SUBSIDIARY  as of  December  31,  2001,  and the  related
consolidated  statements  of income,  changes in  stockholders'  equity and cash
flows for the years ended December 31, 2001 and 2000. These financial statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  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 consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial position of Sel-Leb Marketing,
Inc. and Subsidiary as of December 31, 2001, and their results of operations and
cash flows for the years ended  December 31, 2001 and 2000, in  conformity  with
accounting principles generally accepted in the United States of America.



                                                 J.H. COHN LLP

Roseland, New Jersey
April 1, 2002

                                      F-2
<PAGE>


                     SEL-LEB MARKETING, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2001


                                     ASSETS
                                     ------

Current assets:
  Cash and cash equivalents                                         $    60,300
  Accounts receivable, less allowance for doubtful accounts
    of $266,120                                                       9,163,755
  Inventories                                                         8,297,918
  Deferred tax assets                                                   297,545
  Prepaid expenses and other current assets                             832,460
                                                                    -----------
        Total current assets                                         18,651,978
Property and equipment, at cost, net of accumulated
  depreciation and amortization of $1,153,237                           164,130
Other assets                                                            214,203
                                                                    -----------

        Total                                                       $19,030,311
                                                                    ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------

Current liabilities:
  Note payable under line of credit                                 $ 2,622,390
  Current portion of long-term debt                                     307,080
  Accounts payable                                                    4,626,583
  Accrued expenses and other liabilities                              2,080,918
                                                                    -----------
    Total current liabilities                                         9,636,971
Long-term debt, net of current portion                                  690,274
                                                                    -----------
        Total liabilities                                            10,327,245
                                                                    -----------

Commitments and contingencies

Stockholders' equity:
  Preferred stock, $.01 par value; 10,000,000 shares
    authorized; none issued                                                  --
  Common stock, $.01 par value; 40,000,000 shares
    authorized; 2,261,018 shares issued and outstanding                  22,611
  Additional paid-in capital                                          6,496,359
  Retained earnings                                                   2,223,096
  Less receivable in connection with equity transactions                (39,000)
                                                                    -----------
        Total stockholders' equity                                    8,703,066
                                                                    -----------

        Total                                                       $19,030,311
                                                                    ===========


See Notes to Consolidated Financial Statements.

                                      F-3
<PAGE>


                     SEL-LEB MARKETING, INC. AND SUBSIDIARY

                        CONSOLIDATED STATEMENTS OF INCOME
                     YEARS ENDED DECEMBER 31, 2001 AND 2000

                                                        2001            2000
                                                    -----------     -----------

Net sales                                           $21,451,140     $20,707,269
                                                    -----------     -----------

Operating expenses:
  Cost of sales                                      16,286,705      16,027,588
  Selling, general and administrative expenses        4,502,924       4,060,211
                                                    -----------     -----------
        Total operating expenses                     20,789,629      20,087,799
                                                    -----------     -----------

Operating income                                        661,511         619,470
                                                    -----------     -----------

Other income (expense):
  Interest expense, net of interest income
    of $2,688 and $18,176                              (370,948)       (449,791)
  Income from litigation settlement                     280,000
  Gain on sales of property and equipment                12,954
  Other                                                   6,088
                                                    -----------     -----------
        Totals                                          (71,906)       (449,791)
                                                    -----------     -----------

Income before provision for income taxes                589,605         169,679

Provision for income taxes                              145,936          75,318
                                                    -----------     -----------

Net income                                          $   443,669     $    94,361
                                                    ===========     ===========

Net earnings per share:
  Basic                                             $       .20     $       .04
                                                    ===========     ===========

  Diluted                                           $       .19     $       .04
                                                    ===========     ===========

Weighted average shares outstanding:
  Basic                                               2,261,018       2,261,018
                                                    ===========     ===========

  Diluted                                             2,326,501       2,397,501
                                                    ===========     ===========


See Notes to Consolidated Financial Statements.

                                      F-4
<PAGE>


                     SEL-LEB MARKETING, INC. AND SUBSIDIARY

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                     YEARS ENDED DECEMBER 31, 2001 AND 2000

<TABLE>
<CAPTION>
                                                                                          Receivable in
                                      Common Stock           Additional                     Connection        Total
                                -----------------------        Paid-in        Retained      with Equity    Stockholders'
                                  Shares        Amount         Capital        Earnings     Transactions       Equity
                                ---------      --------      ----------      ----------   -------------    -------------
<S>                             <C>            <C>           <C>             <C>             <C>            <C>
Balance, January 1, 2000        2,261,018      $ 22,611      $6,496,359      $1,685,066      $(45,000)      $8,159,036

Partial payment of
  balance receivable                                                                            3,000           3,000

Net income                                                                       94,361                         94,361
                                ---------      --------      ----------      ----------      --------       ----------

Balance, December 31, 2000      2,261,018        22,611       6,496,359       1,779,427       (42,000)       8,256,397

Partial payment of
  balance receivable                                                                            3,000            3,000

Net income                                                                      443,669                        443,669
                                ---------      --------      ----------      ----------      --------       ----------

Balance, December 31, 2001      2,261,018      $ 22,611      $6,496,359      $2,223,096      $(39,000)      $8,703,066
                                =========      ========      ==========      ==========      ========       ==========
</TABLE>

See Notes to Consolidated Financial Statements.

                                      F-5
<PAGE>


                     SEL-LEB MARKETING, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 2001 AND 2000

                                                          2001          2000
                                                       ----------    ----------

Operating activities:
  Net income                                           $  443,669    $   94,361
  Adjustments to reconcile net income to net cash
    provided by (used in) operating activities:
    Depreciation and amortization                         228,390       299,179
    Provision (credit) for doubtful accounts              113,001       (35,644)
    Gain on sales of property and equipment               (12,954)
    Deferred income taxes                                    (670)       (8,680)
    Changes in operating assets and liabilities:
      Accounts receivable                              (4,325,605)      786,836
      Inventories                                       1,500,938    (1,467,018)
      Prepaid expenses and other current assets          (213,784)      (84,367)
      Other assets                                         64,151       (17,684)
      Accounts payable, accrued expenses and
        other liabilities                               3,635,733      (261,534)
                                                       ----------    ----------
            Net cash provided by (used in)
              operating activities                      1,432,869      (694,551)
                                                       ----------    ----------


Investing activities:
  Purchases of property and equipment                     (61,522)      (45,977)
  Proceeds from sales of property and equipment            45,050
                                                       ----------    ----------
            Net cash used in investing activities         (16,472)      (45,977)
                                                       ----------    ----------

Financing activities:
  Net proceeds from (net repayments of) note
    payable under line of credit                         (782,115)      456,149
     Proceeds from long-term debt                                       600,000
     Repayments of long-term debt                        (790,902)     (262,733)
     Decrease in receivable in connection
       with equity transactions                             3,000         3,000
                                                       ----------    ----------
            Net cash provided by (used in)
              financing activities                     (1,570,017)      796,416
                                                       ----------    ----------

Net increase (decrease) in cash and cash equivalents     (153,620)       55,888

Cash and cash equivalents, beginning of year              213,920       158,032
                                                       ----------    ----------

Cash and cash equivalents, end of year                 $   60,300    $  213,920
                                                       ==========    ==========

Supplemental disclosure of cash flow information:
  Interest paid                                        $  370,013    $  467,967
                                                       ==========    ==========

     Income taxes paid                                 $   30,506    $  352,502
                                                       ==========    ==========

See Notes to Consolidated Financial Statements.

                                      F-6
<PAGE>


                     SEL-LEB MARKETING, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Organization and summary of significant accounting policies:

            Organization  and  principles  of  consolidation:

               The accompanying  consolidated  financial  statements include the
               accounts of Sel-Leb Marketing,  Inc. (a New York Corporation) and
               Ales Signature, Ltd. ("Ales"), its 80%-owned subsidiary.  Sel-Leb
               Marketing,  Inc. and Ales are referred to collectively  herein as
               the "Company." The Company is primarily  engaged in  distributing
               and  marketing  cosmetics  and  consumer  products  through  mass
               merchandisers,   discount   chain  stores  and  food,   drug  and
               electronic retailers.

               All significant  intercompany balances and transactions have been
               eliminated  in  consolidation.  The minority  interest in the net
               equity of Ales as of December 31, 2001 and the minority  interest
               in  the  results  of  its   operations  in  2001  and  2000  were
               immaterial.

            Use of estimates:

               The  preparation  of  financial  statements  in  conformity  with
               accounting  principles generally accepted in the United States of
               America  requires  management to make  estimates and  assumptions
               that   affect   certain   reported   amounts   and   disclosures.
               Accordingly, actual results could differ from those estimates.

            Revenue recognition:

               Sales are  recognized  when the earnings  process is complete and
               collectibility  is assured,  which is usually  when the goods are
               shipped to customers.  Amounts  billed for shipping and handling,
               which  have not  been  significant,  are  included  in sales  and
               shipping and handling costs are included in cost of sales.

            Cash equivalents:

               The Company  considers all highly liquid debt  instruments with a
               maturity  of  three  months  or less  when  purchased  to be cash
               equivalents.

            Inventories:

               Inventories,  consisting  primarily of finished goods, are stated
               at the  lower  of  cost or  market.  Cost  is  determined  by the
               first-in, first-out method.

            Property and equipment:

               Property  and  equipment  are  stated  at cost  less  accumulated
               depreciation and amortization. Depreciation is computed using the
               straight-line  method  over  the  estimated  useful  lives of the
               related  assets.   Amortization  of  leasehold   improvements  is
               computed  using  the  straight-line  method  over the term of the
               lease.

               Impairment  losses on property and equipment are recognized  when
               events indicate that the undiscounted  cash flows estimated to be
               generated by such assets are less than their  carrying  value and
               all or a portion of such carrying  value may not be  recoverable.
               The Company did not recognize any  impairment  losses during 2001
               and 2000.

                                      F-7
<PAGE>


                     SEL-LEB MARKETING, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Organization and summary of significant accounting policies
         (continued):

            Goodwill:

               Goodwill  is  comprised  of  costs in  excess  of net  assets  of
               acquired  businesses that were being amortized on a straight-line
               basis over periods not  exceeding  ten years.  In June 2001,  the
               Financial   Accounting   Standards  Board  issued   Statement  of
               Financial  Accounting  Standards  No.  142,  "Goodwill  and Other
               Intangible  Assets"  ("SFAS 142").  Under SFAS 142,  goodwill and
               other  intangible  assets with  indefinite  useful  lives will no
               longer be systematically  amortized.  Instead such assets will be
               subject to  reduction  only when their  carrying  amounts  exceed
               their estimated fair values based on impairment tests established
               by SFAS 142 that will be made at least annually. The Company will
               be required to apply the  provisions of SFAS 142 and  discontinue
               amortization  effective  as of January 1, 2002.  The Company will
               also be required to make its first impairment tests no later than
               December  31, 2002.  The effects of these tests on the  Company's
               consolidated financial position and results of operations has not
               been determined.

               As of December 31,  2001,  goodwill  had an  immaterial  carrying
               value that was included in other  assets.  Goodwill  amortization
               totaled approximately $34,000 in 2001 and 2000, respectively.

            Product development costs:

               The  Company  expenses  product  development  costs as  incurred.
               Product  development  costs  charged to  operations  amounted  to
               approximately $78,000 and $72,000 in 2001 and 2000, respectively.

            Advertising:

               The Company  expenses the cost of  advertising  and promotions as
               incurred.  Advertising  costs charged to  operations  amounted to
               approximately   $47,000   and   $105,000   in  2001   and   2000,
               respectively.

            Stock options:

               In accordance with the provisions of Accounting  Principles Board
               Opinion No. 25,  "Accounting for Stock Issued to Employees" ("APB
               25"),  the Company will only  recognize  compensation  costs as a
               result of the issuance of stock options to employees based on the
               excess,  if any, of the fair value of the underlying stock at the
               date  of  grant  or  award  (or  at  an  appropriate   subsequent
               measurement  date)  over  the  amount  the  employee  must pay to
               acquire the stock. Therefore, the Company will not be required to
               recognize  compensation  expense  as a result  of any  grants  to
               employees  at an exercise  price that is equal to or greater than
               fair value. The Company will also make pro forma disclosures,  in
               accordance with the provisions of Financial  Accounting Standards
               Board ("FASB")  Statement of Financial  Accounting  Standards No.
               123,  "Accounting for Stock-Based  Compensation" ("SFAS 123"), of
               net income or loss as if a fair value based method of  accounting
               for stock options had been applied instead if such amounts differ
               materially from the historical amounts.

                                      F-8
<PAGE>


                     SEL-LEB MARKETING, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Organization and summary of significant accounting policies
         (concluded):

            Income taxes:

               The Company  accounts for income taxes  pursuant to the asset and
               liability  method which requires  deferred  income tax assets and
               liabilities  to be computed  annually for  temporary  differences
               between  the  financial  statement  and tax bases of  assets  and
               liabilities that will result in taxable or deductible  amounts in
               the future based on enacted tax laws and rates  applicable to the
               periods in which the  differences  are expected to affect taxable
               income.  Valuation  allowances are established  when necessary to
               reduce deferred tax assets to the amount expected to be realized.
               The  income  tax  provision  or  credit  is the  tax  payable  or
               refundable  for the period  plus or minus the  change  during the
               period in deferred tax assets and liabilities.

            Earnings per share:

               The Company has adopted the  provisions of Statement of Financial
               Accounting Standards No. 128, "Earnings per Share," which require
               the  presentation  of  "basic"  and,  if  appropriate,  "diluted"
               earnings  per  common  share if that  amount  differs  from basic
               earnings per share.  Basic  earnings per share is  calculated  by
               dividing  net  income by the  weighted  average  number of common
               shares outstanding during each period. The calculation of diluted
               earnings  per  share is  similar  to that of basic  earnings  per
               share,  except that the  denominator  is increased to include the
               number  of   additional   common  shares  that  would  have  been
               outstanding if all potentially  dilutive  common shares,  such as
               those  issuable  upon the exercise of stock options and warrants,
               were issued during the period.

               In computing  diluted earnings per share, the assumed exercise of
               all of the  Company's  outstanding  stock  options and  warrants,
               adjusted for the application of the treasury stock method,  would
               have  increased  the  weighted  average  number of common  shares
               outstanding as shown in the table below:

                                                               2001       2000
                                                            ---------  ---------

               Basic weighted average shares outstanding    2,261,018  2,261,018
               Shares arising from assumed exercise of:
                  Stock options                                65,483    106,849
                  Warrants                                                29,634
                                                            ---------  ---------

               Diluted weighted average shares outstanding  2,326,501  2,397,501
                                                            =========  =========

            Recent accounting pronouncements:

               In addition to SFAS 142,  the FASB and the  Accounting  Standards
               Executive Committee of the American Institute of Certified Public
               Accountants    ("ACSEC")    had   issued    certain    accounting
               pronouncements as of December 31, 2001 that will become effective
               in subsequent  periods;  however,  management of the Company does
               not  believe  that  any  of  those   pronouncements   would  have
               significantly   affected  the  Company's   financial   accounting
               measurements  or disclosures  had they been in effect during 2001
               and 2000 or that they will have a significant  effect at the time
               they become effective.

                                      F-9
<PAGE>


                     SEL-LEB MARKETING, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 2 - Property and equipment:

            Property  and  equipment  at  December  31,  2001  consisted  of the
            following:

                                                      Estimated
                                                        Useful
                                                         Lives          Amount
                                                     ------------     ----------
               Machinery and equipment               2 to 7 years     $  817,019
               Display fixtures                           3 years        283,080
               Computer equipment                    3 to 5 years        152,790
               Leasehold improvements                    10 years         64,478
                                                                      ----------
                                                                       1,317,367
               Less accumulated depreciation
                 and amortization                                      1,153,237
                                                                      ----------

                        Total                                         $  164,130
                                                                      ==========

            Depreciation  expense  aggregated  $193,930 and $264,719 in 2001 and
            2000, respectively.


Note 3 - Note payable under line of credit:

               During  December 1998, the Company  entered into a loan agreement
               pursuant to which Merrill Lynch Business Financial Services, Inc.
               ("Merrill Lynch") is providing the Company with a credit facility
               (the  "Facility").  Based on the  latest  amendments  to the loan
               agreement  as of December 31,  2001,  the Facility  consists of a
               revolving line of credit,  with maximum  borrowings of $3,800,000
               against  the   Company's   eligible   accounts   receivable   and
               inventories  through  October 31, 2002, and three term loans (see
               Note 4).  Borrowings  under the revolving  line of credit,  which
               totaled $2,622,390 at December 31, 2001, bear interest,  which is
               payable  monthly,  at 2.75%  above the  30-day  London  Interbank
               Offering  Rate (an  effective  rate of 4.62% as of  December  31,
               2001).  Outstanding  borrowings under the Facility are secured by
               substantially all of the Company's assets.

               The  loan   agreement   with  Merrill  Lynch   contains   certain
               restrictive  covenants  which,  among other  things,  require the
               maintenance  of certain  financial  ratios  and limit  additional
               indebtedness.

                                      F-10
<PAGE>


                     SEL-LEB MARKETING, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 4 - Long-term debt:

            At December 31, 2001, long-term debt consisted of the following:

               Term loans payable to Merrill Lynch (A):
                 Due in monthly installments of $50,000 and a final
                   payment made in January 2002                         $ 50,000
                 Due in monthly installments of $8,333 and a final
                   payment in November 2004                              300,000
                 Due in monthly installments of $10,714 and a final
                   payment in January 2006                               525,000
               Other Loans payable (B):
                 Due in monthly installments of $1,461 and a final
                   payment in October 2004                                45,663
                 Due in monthly installments of $1,461 and a final
                   payment in January 2007                                76,691
                                                                        --------
                                                                         997,354
               Less current portion                                      307,080
                                                                        --------

               Long-term debt                                           $690,274
                                                                        ========

               (A)  The loans bear interest  payable  monthly at 2.75% above the
                    30-day  London  Interbank  Offering  Rate  (LIBOR)  and  are
                    secured by  substantially  all of the assets of the  Company
                    (see Note 3).

               (B)  The loans bear  interest  at an annual rate of 6%. The loans
                    are secured by a second lien on the Company's  machinery and
                    equipment.

            Principal amounts due under the Company's  long-term  obligations in
            each of the  five  years  subsequent  to  December  31,  2001 are as
            follows:

                    Year Ending
                    December 31,                                         Amount
                    ------------                                        --------

                         2002                                           $307,080
                         2003                                            263,646
                         2004                                            259,918
                         2005                                            146,114
                         2006                                             20,596

                                      F-11
<PAGE>


                     SEL-LEB MARKETING, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 5 - Preferred stock, stock options and warrants:

            Preferred stock:

               On May 27, 1998, the Company's stockholders approved an amendment
               to the Company's  Certificate of  Incorporation  which authorizes
               the  issuance  by  the  Company  of up to  10,000,000  shares  of
               preferred stock with a par value of $.01 per share. The preferred
               stock  may be  issued  in one or more  series  with the terms and
               preferences to be determined by the Company's Board of Directors.
               No shares of preferred stock had been issued by the Company as of
               December 31, 2001.

            Stock options:

               The Company has a Stock  Option Plan (the  "Option  Plan")  which
               provides  for  the  issuance  of  incentive   stock  options  and
               nonincentive  stock  options to  employees of the Company for the
               purchase  of shares of common  stock at a price not less than the
               fair  market  value of the shares on the date of grant,  provided
               that the exercise price of any incentive  stock option granted to
               an employee owning more than 10% of the outstanding common shares
               of the Company is not less than 110% of the fair market  value of
               the shares on the date of grant.  The term of each option and the
               manner of  exercise  are  determined  by the Board of  Directors.
               Employees  are fully vested in the options  three years after the
               date of grant  and the  options  are  exercisable  up to 10 years
               after the date of the grant.

               In  addition,  the Company  has a  Nonemployee  Directors'  Stock
               Option  Plan  (the  "Directors'  Plan")  which  provides  for the
               issuance of options to  nonemployee  directors of the Company for
               the  purchase  of shares of common  stock at a price  that is not
               less  than the fair  market  value of the  shares  on the date of
               grant.  The term of each  option  and the manner of  exercise  is
               determined by the Board of Directors,  but the options  cannot be
               exercisable  more than 10 years  after  the date of  grant.  Upon
               election to the Board of  Directors,  and after each  reelection,
               each nonemployee  director is granted an option to purchase 1,250
               common shares exercisable from the date of grant.

                                      F-12
<PAGE>


                     SEL-LEB MARKETING, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 5 - Preferred stock, stock options and warrants (continued):

            Stock options (continued):

               A  summary  of the  status of the  Company's  shares  subject  to
               options as of December  31, 2001 and 2000 and changes  during the
               years then ended is presented below:

                                                  2001               2000
                                            -----------------   ----------------
                                                     Weighted           Weighted
                                            Shares    Average   Shares   Average
                                               or    Exercise      or   Exercise
                                             Price     Price     Price    Price
                                            -------   ------    -------  ------

               Outstanding, at beginning
                 of year                    545,758   $ 2.40    563,910  $ 2.44
               Granted                      104,750     1.10      8,750    2.36
               Canceled                        (500)   (0.94)   (26,902)  (3.17)
                                            -------             -------

               Outstanding, at end of year  650,008   $(2.19)   545,758  $ 2.40
                                           ========   ======    =======  ======

               Options exercisable, at
                 end of year                524,383             423,306
                                           ========             =======

               Weighted average fair
                 value of options granted
                 during the year               $.86               $2.11
                                           ========               =====

            The following table summarizes information about fixed stock options
            outstanding at December 31, 2001:

                                                                    Options
                             Options Outstanding                  Exercisable
               ----------------------------------------------  -----------------
                                         Weighted
                                          Average
                                         Years of    Weighted           Weighted
                                Number   Remaining    Average  Number   Average
                  Exercise       Out-   Contractual  Exercise   Exer-   Exercise
                   Prices     standing     Life       Price    cisable   Price
               -------------  --------  -----------  --------  -------  --------

                   $.4375      105,689     6.76      $  .4375  105,689  $  .4375
                 .578-2.125    211,505     7.99        1.30    118,192    1.42
                2.375-2.719    199,126     5.76        2.44    171,564    2.45
                 3.00-6.67     123,688     4.29        3.60    118,938    3.58
                 8.00-27.00     10,000     4.96       17.38     10,000   17.38
                               -------                         -------
               $.4375-$27.00   650,008     6.35      $ 2.19    524,383  $ 2.35
               ==============  =======     ====      ======    =======  ======

                                      F-13
<PAGE>


                     SEL-LEB MARKETING, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 5 - Preferred stock, stock options and warrants (continued):

            Shares subject to warrants:

               At December 31, 2000,  the Company had warrants  outstanding  for
               the  purchase  of  86,622   shares  of  common  stock  that  were
               originally exercisable through April 15, 2001 at $1.25 per share.
               On April 9, 2001, the Company extended the expiration date of the
               warrants to April 15,  2002.  The fair market value of the shares
               on April 9, 2001 was $.75 per share.

            Shares reserved for issuance:

               At December  31, 2001,  shares of common stock were  reserved for
               the following:

               Exercise of outstanding stock options                     650,008
                                                                       ---------

               Exercise of stock options available for grant:
                  Option Plan                                             98,190
                  Directors' Plan                                         53,750
                                                                       ---------
                     Total                                               151,940
                                                                       ---------

               Exercise of warrants                                       86,622
                                                                       ---------

                     Total                                               888,570
                                                                       =========

            Pro forma information:

               Since the Company  has elected to continue to use the  provisions
               of APB 25 in accounting for stock options and warrants granted to
               employees  and  the  exercise  price  of all of the  options  and
               warrants  granted to employees  has been equal to or greater than
               the fair market value at the date of grant, no earned or unearned
               compensation  cost was  recognized in the  accompanying  2001 and
               2000  consolidated  financial  statements  for stock  options and
               warrants granted to employees.  The pro forma amounts computed as
               if the  Company had elected to  recognize  compensation  cost for
               stock options and warrants granted to employees based on the fair
               value  of the  options  and  warrants  at the  date of  grant  as
               prescribed  by  SFAS  123  and  the  related  historical  amounts
               reported in the  accompanying  consolidated  statements of income
               are set forth below:

                                                             2001         2000
                                                           --------    --------
               Net income - as reported                    $443,669    $ 94,361
                                                           ========    ========
               Net income - pro forma                      $362,149    $ 18,754
                                                           ========    ========
               Basic earnings per share - as reported          $.20        $.04
                                                               ====        ====
               Basic earnings per share - pro forma            $.16        $.01
                                                               ====        ====
               Diluted earnings per share - as reported        $.19        $.04
                                                               ====        ====
               Diluted earnings per share - pro forma          $.16        $.01
                                                               ====        ====

                                      F-14
<PAGE>


                     SEL-LEB MARKETING, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 5 - Preferred stock, stock options and warrants (concluded):

            Pro forma information (concluded):

               The fair value of each  option  granted was  estimated  as of the
               date of grant using the Black-Scholes  option-pricing  model with
               the  following  weighted-average  assumptions  used  for 2001 and
               2000:

                                                    2001       2000
                                                   ------     ------

               Expected volatility                  116%        100%
               Risk-free interest rate              4.4%        6.0%
               Expected years of option life        5.0         5.0
               Expected dividends                     0%          0%

               The pro forma  charges  for  compensation  derived  from the fair
               value option pricing model as describe above totaled  $81,520 and
               $75,607 (net of tax effects) in 2001 and 2000, respectively.


Note 6 - Income taxes:

               Deferred  tax assets at December 31, 2001 (there were no deferred
               tax  liabilities)  were  attributable  to  temporary  differences
               related to the following:

               Inventories                                              $165,015
               Allowance for bad debts                                   102,995
               Other                                                      29,535
                                                                        --------

                        Deferred tax assets                             $297,545
                                                                        ========

            The net provision for income taxes in 2001 and 2000 consisted of the
            following provisions (credits):

                                                           2001          2000
                                                         --------       -------

               Federal:
                 Current                                 $154,052       $50,509
                 Deferred                                     240        (5,741)
                                                         --------       -------

                      Totals                              154,292        44,768
                                                         --------       -------

               State:
                 Current                                   (7,448)       33,489
                 Deferred                                    (908)       (2,939)
                                                         --------       -------

                      Totals                               (8,356)       30,550
                                                         --------       -------

                      Totals                             $145,936       $75,318
                                                         ========       =======

                                      F-15
<PAGE>


                     SEL-LEB MARKETING, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 6 - Income taxes (concluded):

               The  provision for income taxes in 2001 and 2000 differs from the
               amount  computed  using  the Federal  statutory  rate of 34% as a
               result of the following:

                                                                2001       2000
                                                                ----       ----

               Tax at Federal statutory rate                      34%        34%
               Increase (decrease) from effects of:
                 State income taxes, net of Federal income
                   tax benefit                                     3         12
                 Nondeductible expenses and other permanent
                   differences                                     1          8
                 Prior year overaccrual                          (13)       (12)
                 Other (primarily surtax exemption)                           2
                                                                 ---        ---

                        Totals                                    25%        44%
                                                                 ===        ===


Note 7 - Related party transactions:

               From  time-to-time,  the Company transacts  business with parties
               related to the  minority  stockholders  of Ales.  During 2001 and
               2000,  the  Company  purchased  inventories  at a  total  cost of
               approximately   $428,000  and  $1,440,000,   respectively,   from
               companies affiliated with the minority stockholders.  At December
               31,  2001,  accounts  payable  included a total of  approximately
               $43,000 that arose  primarily from such  purchases.  In addition,
               during 2001 and 2000,  the Company made sales of  merchandise  to
               companies  affiliated  with  minority  stockholders   aggregating
               approximately  $102,000 and $606,000,  respectively.  At December
               31, 2001,  accounts  receivable included a total of approximately
               $39,000 that arose primarily from such sales.


Note 8 - Commitments and contingencies:

            Leases:

               The Company has a  noncancelable  operating  lease for office and
               warehouse  facilities that expires on March 31, 2004. In addition
               to base  rentals,  the lease  requires  payments  for real estate
               taxes and other operating costs.

               Minimum  rental  payments  under the lease  from  January 1, 2002
               until  its  expiration  on March  31,  2004  total  approximately
               $648,000 and are payable as follows:  $275,000 in 2002;  $298,000
               in 2003; and $75,000 in 2004.

               Rent expense amounted to  approximately  $258,000 and $291,000 in
               2001 and 2000, respectively.

                                      F-16
<PAGE>


                     SEL-LEB MARKETING, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 8 - Commitments and contingencies (concluded):

            Promotional and licensing agreements:

               The Company  has various  promotional  and  licensing  agreements
               whereby it pays  royalty  fees to  celebrities  and/or  licensors
               based  upon  a  percentage  of  net  sales  attributable  to  the
               celebrities'  appearances  or sales of the  licensor's  products.
               Royalty  fees  charged to  operations  amounted to  approximately
               $776,000 and $390,000 in 2001 and 2000, respectively.

            Litigation:

               The Company is involved in various claims and lawsuits incidental
               to its business. Management believes that the probable resolution
               of such contingencies will not materially affect the consolidated
               financial position or results of operations of the Company.

               On May 30, 2001, the Company  entered into an agreement to settle
               a legal action it had brought against one of its licensors for an
               alleged breach of contract.  The accompanying  2001  consolidated
               statement  of  income  includes  the  Company's  income  from the
               litigation settlement which totaled $280,000.

            Concentrations of credit risk:

               Financial  instruments which  potentially  subject the Company to
               concentrations  of credit risk consist primarily of cash and cash
               equivalents  and  accounts  receivable.  From time to time,  cash
               balances exceed Federal insurance limits. Exposure to credit risk
               is  reduced  by  placing   such   deposits  in  major   financial
               institutions and monitoring their credit ratings.

               The  Company  generally  extends  credit  to  its  customers,   a
               significant   portion  of  which  are  in  the  retail  industry.
               Approximately 54% and 37% of the Company's net sales were derived
               from two major customers during 2001 and 2000, respectively.  The
               two customers also accounted for approximately  $7,048,000 of the
               Company's  accounts  receivable balance at December 31, 2001. The
               Company closely monitors the extension of credit to its customers
               while  maintaining  appropriate  allowances for potential  credit
               losses. Accordingly, management does not believe that the Company
               was exposed to significant credit risk at December 31, 2001.

Note 9 - Fair value of financial instruments:

               The Company's material financial instruments at December 31, 2001
               and 2000 for which disclosure of estimated fair value is required
               by  certain  accounting  standards  consisted  of cash  and  cash
               equivalents, accounts receivable, accounts payable, notes payable
               and long-term  debt. In the opinion of  management,  (i) cash and
               cash equivalents,  accounts  receivable and accounts payable were
               carried at values that approximated  their fair values because of
               their liquidity and/or their short-term maturities and (ii) notes
               payable  and   long-term   debt  were   carried  at  values  that
               approximated their fair values because substantially all of those
               obligations  had interest  rates  equivalent  to those  currently
               prevailing    for    financial     instruments    with    similar
               characteristics.

                                      F-17
<PAGE>


                     SEL-LEB MARKETING, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10- Segment information:

               The Company has adopted the  provisions of Statement of Financial
               Accounting  Standards No. 131,  "Disclosures about Segments of an
               Enterprise and Related Information" ("SFAS 131"). Pursuant to the
               provisions  of SFAS 131, the Company is reporting  segment  sales
               and gross  margins in the same format  reviewed by the  Company's
               management  (the  "management  approach").  The  Company  has two
               reportable   segments:   "Opportunity"   and   "Cosmetics".   The
               Opportunity segment is comprised of the operations connected with
               the   acquisition,   sale  and  distribution  of  name-brand  and
               off-brand  products  which  are  purchased  from   manufacturers,
               wholesalers  or retailers as a result of  close-outs,  overstocks
               and/or  changes  in  the  packaging  of  brand  name  items.  The
               Cosmetics  segment  is  comprised  of the  acquisition,  sale and
               distribution   of  all  other  products,   including   "celebrity
               endorsed"  and  "tie-in"  cosmetics  and  health  and  beauty aid
               products and designer and all other fragrances.

               Net sales,  cost of sales and other related  segment  information
               follows:

                                                         2001           2000
                                                     -----------    -----------
               Net sales:
                 Opportunity                         $ 9,087,478    $ 8,832,579
                 Cosmetics                            12,363,662     11,874,690
                                                     -----------    -----------
                        Totals                        21,451,140     20,707,269
                                                     -----------    -----------

               Cost of sales:
                 Opportunity                           6,103,725      6,545,926
                 Cosmetics                            10,182,980      9,481,662
                                                     -----------    -----------
                        Totals                        16,286,705     16,027,588
               Selling, general and
                 administrative expenses               4,502,924      4,060,211
                                                     -----------    -----------
                        Total operating expenses      20,789,629     20,087,799
                                                     -----------    -----------

               Operating income                          661,511        619,470
                                                     -----------    -----------

               Other income (expense):
                 Interest expense, net                  (370,948)      (449,791)
                 Income from litigation settlement       280,000
                 Gain on sales of property
                   and equipment                          12,954
                 Other                                     6,088
                                                     -----------    -----------
                        Totals                           (71,906)      (449,791)
                                                     -----------    -----------


               Income before provision for
                 income taxes                        $   589,605    $   169,679
                                                     ===========    ===========

               Segment assets:
                 Inventories:
                   Opportunity                       $ 1,456,274    $ 2,465,454
                   Cosmetics                           6,841,644      7,333,402
                                                     -----------    -----------
                        Totals                         8,297,918      9,798,856
                 Other assets                         10,732,393      6,722,070
                                                     -----------    -----------

                        Total assets                 $19,030,311    $16,520,926
                                                     ===========    ===========

                                      F-18