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, 2000

                                       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 $20,707,269.

The aggregate market value of voting stock held by non-affiliates of the
registrant on May 11, 2001 was approximately $867,753. On such date, the closing
price of the issuer's common stock was $.71 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,

--------------------------------------------------------------------------------
                                                                          Page 1
<PAGE>


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 May 11, 2001 was 2,261,018.
--------------------------------------------------------------------------------
                                                                          Page 2
<PAGE>


                             SEL-LEB MARKETING, INC.
                          Annual Report on Form 10-KSB
                   For the Fiscal Year Ended December 31, 2000

                                Table of Contents

                                                                            Page
PART I

    Item 1.   Description of Business                                         4
    Item 2.   Description of Property                                        11
    Item 3.   Legal Proceedings                                              11
    Item 4.   Submission of Matters to a Vote of Security Holders            11

PART II

    Item 5.   Market for Common Equity and Related Stockholder Matters       11
    Item 6.   Management's Discussion and Analysis or Plan of Operation      12
    Item 7.   Financial Statements                                           15
    Item 8.   Changes in and Disagreements with Accountants on
              Accounting and Financial Disclosure                            15

PART III

    Item 9.   Directors, Executive Officers, Promoters and Control
              Persons;
              Compliance with Section 16(a) of the Exchange Act              15
    Item 10.  Executive Compensation                                         18
    Item 11.  Security Ownership of Certain Beneficial Owners and
              Management                                                     26
    Item 12.  Certain Relationships and Related Transactions                 28
    Item 13.  Exhibits and Reports on Form 8-K                               28


--------------------------------------------------------------------------------
                                                                          Page 3
<PAGE>


                                     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) developing,
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) developing, marketing and selling, or
otherwise facilitating the development, marketing or sale of, 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
development, 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 budget-line lipsticks, lip pencils, nail polishes and eye
pencils, which are manufactured in a variety of colors and are 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 to retail chains
and other mass merchandisers located throughout the United States, Canada and
Puerto Rico. All of the Company's proprietary beauty aid and cosmetic products
are manufactured and supplied by third parties in accordance with the Company's
specifications. 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, 2000, no
supplier accounted for 10% or more of such

--------------------------------------------------------------------------------
                                                                          Page 4
<PAGE>


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
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, 2000, no such contract
filler accounted for 10% or more of the Company's filling services. All products
are filled pursuant to the Company's specifications on a purchase order basis.
Once completed, the products are delivered to the Company, which packages 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, fragrances, 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. During the year ended December 31, 2000, 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 and
Rite Aid, which accounted for approximately 14% and 9%,

--------------------------------------------------------------------------------
                                                                          Page 5
<PAGE>


respectively, of the Company's net opportunistic sales in 2000. The Company
believes that its longstanding relationships with many of its suppliers and
customers are important to the secondary sourcing activities of the Company, and
that its relationship with its suppliers and customers are good.

In connection with its distribution activities, the Company has the ability to
repackage 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, repackage 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 package 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, 2000. During the year ended December 31, 2000, 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 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

--------------------------------------------------------------------------------
                                                                          Page 6
<PAGE>


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 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 also acts 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 purchases these fragrances from
other secondary sources such as export and import companies, duty-free
distributors and department stores which are liquidating their excess inventory.
Unlike other merchandise which is acquired by the Company at prices that are
significantly below wholesale, the Company purchases the designer fragrances at
above-wholesale prices (although still well below their normal retail price).
The Company, in turn, sells such items to mass merchandisers. The Company
believes that sales of such fragrances will continue to constitute a portion of
its sales, although there can be no assurance of such.

The Company believes that a portion of the designer fragrances purchased by it
may include trademarked products manufactured in foreign countries and
trademarked products manufactured in the United States that may have been sold
to foreign distributors. From time to time, United States trademark owners and
their licensees and trade associations have initiated litigation or
administrative agency proceedings seeking to halt the importation into the
United States of such foreign manufactured or previously exported trademarked
products. Although the Company is not currently the subject of any such legal or
administrative actions, and is not aware of any such threatened legal or
administrative actions, there can be no assurance that the Company's business
activities will not become the subject of such actions in the future, or that
future judicial, legislative or administrative agency action will not limit or
eliminate some or all of the secondary sources of supply of prestige fragrances
used by the Company. However, the Company believes that any future limitation on
or elimination of its sources of supply for prestige fragrances for sale to its
customers would not have a material adverse effect on the Company, although
there can be no assurance of such.

DEVELOPMENT 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

--------------------------------------------------------------------------------
                                                                          Page 7
<PAGE>


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.
("ACI"), 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. All profits and losses (after giving
effect to any royalty payments required to be made to celebrity spokespersons)
resulting from the sale of such products are to be divided equally between the
Company and ACI. 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, Inc. accounted for approximately 23% of the Company's net
sales in 2000. 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.


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 made an appearance on The
Shop Channel in Japan in February 2001 and is scheduled to make an additional
appearance in July 2001. 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.

In October 2000, the Company entered into a license agreement with a recording
artist and performer known under the stage name "Juliet", pursuant to which the
Company obtained the exclusive right to use her name and likeness in connection
with the manufacture, promotion and sale of cosmetics, beauty products and
fragrances. Subject to the terms of the agreement, the Company is to pay
specified royalties, sublicense fees and bonuses. The agreement has an initial
term of five years, 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

--------------------------------------------------------------------------------
                                                                          Page 8
<PAGE>


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 repackaging 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 packages 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
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.

--------------------------------------------------------------------------------
                                                                          Page 9
<PAGE>


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 these marks do not or will not violate the proprietary rights of
others, that such marks would be upheld if challenged or that the Company would
not be prevented from using its trademarks.

Personnel

The Company currently employs approximately 19 full-time salaried employees and
approximately 49 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, fragrances 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 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.

--------------------------------------------------------------------------------
                                                                         Page 10
<PAGE>


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, is
for a period of five years. The monthly rent (including tax) was $25,159, which
increased to $25,202 on April 1, 2001. 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, 2000.

                                     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. On or about
April 27, 2001, as a result of the Company's delinquency in filing its Annual
Report on Form 10-KSB, the fifth character "E" was appended to its trading
symbol by Nasdaq. On April 25, 2001, the Company was notified by Nasdaq that
because it did not file as required its Form 10-KSB for the period ended
December 31, 2000, the Company's securities are subject to delisting from the
Nasdaq Smallcap Market. A hearing has been scheduled for May 25, 2001. The
Company was notified by Nasdaq on May 11, 2001 that in addition to the filing
delinquency, the Company has failed to maintain a minimum $1.00 per share
closing bid price for thirty consecutive trading days, as set forth in the
Nasdaq Marketplace Rules. This additional issue will be considered at the
Company's hearing with Nasdaq. There can be no assurance that the Company's
securities will continue to be listed on Nasdaq. 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, 1999 and 2000 were as follows:

                                                               HIGH        LOW
                                                              -------    -------
FISCAL YEAR 1999
   Quarter Ended:
         March 31, 1999 ..................................    $ 3.313    $ 1.250
         June 30, 1999 ...................................    $ 5.563    $ 2.250
         September 30, 1999 ..............................    $ 3.313    $ 2.281
         December 31, 1999 ...............................    $ 4.688    $ 2.125
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

--------------------------------------------------------------------------------
                                                                         Page 11
<PAGE>


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 May 10, 2001, as reported by the Company's transfer agent, shares of
Common Stock were held by 44 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 1999 and 2000. 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 DISCUSSIONS 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
Condensed 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, 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.

Consolidated Results of Operations: Year Ended December 31, 2000 Compared to the
Year Ended December 31, 1999:

The Company has two principal business segments (see Note 10 to the Company's
audited consolidated financial statements): Opportunity and Cosmetics.

                                DECEMBER 31,     DECEMBER 31,
                                    2000             1999           $ CHANGE
                                ------------------------------------------------
Net sales:
Opportunity                     $ 8,832,579       10,600,996      (1,768,417)(A)
Cosmetics                        11,874,690       10,826,534       1,048,156 (B)
                                ------------------------------------------------
Total net sales                  20,707,269       21,427,530        (720,261)
                                ------------------------------------------------
Cost of sales:
Opportunity                       6,458,829        8,948,368      (2,489,539)(C)
Cosmetics                         9,355,504        6,469,886       2,885,618 (D)
                                ------------------------------------------------
Total cost of sales              15,814,333       15,418,254         396,079

Selling general and
administrative expenses           4,273,466        4,247,550          25,916 (E)
                                ------------------------------------------------
Total operating expenses         20,087,799       19,665,804         421,995
                                ------------------------------------------------

Operating income                    619,470        1,761,726      (1,142,256)
                                ------------------------------------------------
Other income (expense):
Interest expense, net              (449,791)        (320,522)       (129,269)(F)
Other                                                  2,929          (2,929)
                                ------------------------------------------------
Totals                             (449,791)        (317,593)       (132,198)
                                ------------------------------------------------

Income before income taxes       $  169,679      $ 1,444,133     $(1,274,454)
                                ================================================

(A)  The "Opportunity" segment of our business is comprised of the acquisition,
     sale and distribution of name-brand and off-brand products which are
     purchased from either manufacturers, wholesalers, or retailers as a result
     of close-outs, overstocks and/or change-of-packaging of name-brand items.
     The decrease in this segment of our business primarily resulted from a
     conscious decision to restrict sales, because of the Company's perception
     that there were severe credit issues and problems with several accounts.

(B)  The "Cosmetic" segment of our business 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. During the year ended December 31, 2000 this segment
     of our business increased primarily as a result of growth in the electronic
     media portion of our business as well

--------------------------------------------------------------------------------
                                                                         Page 12
<PAGE>


     as the successful continued introduction of new products and development of
     new customers.

(C)  Although our cost of sales for the "Opportunity" segment of our business
     decreased by approximately $2,500,000, the decrease was not in proportion
     to the decrease in the sales for this segment. For the year ended December
     31, 2000 cost of sales for this segment was approximately 73% of sales as
     compared to 84% for the year ended December 31, 1999. Improved margins for
     this segment resulted primarily from the sale of specially purchased
     merchandise sold during the year at higher margins.

(D)  Cost of sales for the "Cosmetic" segment of our business was approximately
     79% of sales for the year ended December 31, 2000 as compared to 60% for
     the year ended December 31, 1999. The decrease in margins for this segment
     of our business result primarily from the sale of slower moving merchandise
     at lower profit margins, based on the Company's decision to reduce certain
     inventory levels, and sales at lower than usual margins to customers with
     whom the Company is hopeful of doing significant business in the future.

(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, 2000 we made a concerted
     effort to stabilize these costs and accordingly such expenses increased by
     only approximately 1%.

(F)  The increase in interest expense results primarily from additional
     borrowings under our credit facility during the year to fund our increase
     in inventory to meet anticipated sales.

Liquidity and Capital Resources

At December 31, 2000 we had working capital of approximately $8,543,000
including cash and cash equivalents of approximately $214,000. Our cash and cash
equivalents, at December 31, 2000 result primarily from our financing activities
more fully discussed below.

During the year ended December 31, 2000 we used approximately $695,000 in our
operations primarily to increase inventory by approximately $1,467,000 in order
to meet anticipated sales demands and take advantage of an opportunity to make a
significant purchase of specially priced merchandise. The use of cash and cash
equivalents to increase inventory was offset by a net decrease in accounts
receivable of approximately $787,000.

During the year ended December 31, 2000 we used approximately $46,000 for the
acquisition of property and equipment.

As stated above, our cash and cash equivalent position of approximately $214,000
at December 31, 2000 results primarily from our various financing activities. In
December, 1998 we entered into a credit facility ("Facility") with Merrill Lynch
Business Financial

--------------------------------------------------------------------------------
                                                                         Page 13
<PAGE>


Services, Inc. ("Merrill Lynch"). As amended, the credit facility provides for
the following:

1)   A revolving line of credit with maximum borrowings of $4,350,000 against
     the Company's eligible accounts receivable and inventories through May 15,
     2001. At December 31, 2000 we had $3,404,505 outstanding under the
     revolving line of credit, representing a net increase in our revolving line
     of credit of $456,149.

2)   A $900,000 term loan originated in December 1998 payable in monthly
     installments of $10,714 plus interest through January 2006. This term loan
     had an outstanding balance of $642,857 as of December 31, 2000.

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 $391,667 as of December 31, 2000.

4)   A $600,000 term loan originated in December 2000 payable in monthly
     installments of $50,000 plus interest through December 2001.

Each of the aforementioned loans with Merrill Lynch require interest to be paid
monthly at 2.65% above the 30-day commercial paper rate (an effective rate of
9.2% at December 31, 2000).

In addition to the Merrill Lynch credit facility, on September 26, 1997 the
Paterson Restoration Corporation provided us with a $100,000 term loan ("1997
loan") which bears interest at 6% and provides for monthly installments in the
amount of $1,461 through October 1, 2004. On December 28, 1999 the Paterson
Restoration Corporation provided us with an additional $100,000 term loan ("1999
loan") which bears interest at 6% and provides for monthly installments of
$1,461 through December 1, 2006. As of December 31, 2000 $59,986 and $81,302
were outstanding under the 1997 loan and 1999 loan, respectively.

As of May 11, 2001, the outstanding balance under the Revolving Line of Credit
was $4,152,082 and under the term loans, including the Paterson Restoration
Corporation was $1,462,603.

Pursuant to the terms of the term loans, we made principal payments of $262,733
during the year ended December 31, 2000.

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

--------------------------------------------------------------------------------
                                                                         Page 14
<PAGE>


or if the Company's Facility is not extended on satisfactory terms, the Company
could be required to seek financing sooner than currently anticipated. Except
for the Facility, which expires on May 15, 2001, and the term loans under the
Facility, 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 could 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. The Company believes that it will be able to extend
the current Facility, although there can be no assurance of such.

The year 2000 issue did not pose significant operational problems to the
Company. The costs of our year 2000 assessment were not significant.

Cautionary Statement

This Annual Report on Form 10-KSB contains certain forward-looking statements,
including statements concerning the adequacy of the Company's sources of cash to
finance its current and future operations. Actual results could differ
materially from those projected as a result of various factors, including but
not limited to general trends in the retail industry, consumer acceptance of any
products developed and sold by the Company, and the ability of the Company to
develop its "celebrity" product business.

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

     The information set forth below, furnished to the Board of Directors by the
respective individuals, shows as to each director of the Company (i) his name
and age, (ii) his principal position with the Company, (iii) his principal
occupation or employment, if different, and (iv) the month and year in which he
began to serve as a director.


NAME AND AGE                        PRINCIPAL OCCUPATION          DIRECTOR SINCE
------------                           OR EMPLOYMENT              --------------
                                    --------------------


Harold Markowitz (60)     Chairman of the Board of the Company    September 1993

--------------------------------------------------------------------------------
                                                                         Page 15
<PAGE>


NAME AND AGE                        PRINCIPAL OCCUPATION          DIRECTOR SINCE
------------                           OR EMPLOYMENT              --------------
                                    --------------------

Paul Sharp (51)           President and Chief Executive           December 1994
                          Officer of the Company

Jan S. Mirsky (60)        Executive Vice President - Finance       December 1994
                          of the Company


Jorge Lazaro (52)         Executive Vice President and            September 1993
                          Secretary of the Company

Jack Koegel (49)          Vice Chairman of the Board and Chief    December 1994
                          Operating Officer of the Company

Stanley R. Goodman (71)   Partner, Goodman & Saperstein
                          (law firm)                              December 1994

Edward C. Ross (57)       Partner, Finkle, Ross & Rost            December 1994
                          (accounting firm)

L. Douglas Bailey (59)    President, Bailey & Associates, Inc.    March 1996
                          (consulting firm); President and
                          Chief Executive Officer, Precision
                          Fixtures and Graphics (manufacturing
                          company)

Biographical Information Regarding Directors

     HAROLD MARKOWITZ, a co-founder of the Company, has been Chairman of the
Board of the Company since December 1994. Prior to such time, he served as
President and a director of the Company from its inception in September 1993 to
December 1994. Mr. Markowitz was also a co-founder of Linette Cosmetics, Inc.
("Linette Cosmetics") and served as a director of Linette Cosmetics from its
inception in 1985 until the May 1995 merger of Linette Cosmetics with and into
the Company (the "Linette Merger"). In 1986, Mr. Markowitz co-founded Beauty
Labs, Inc. ("Beauty Labs"), a publicly-held company which marketed cosmetics and
other accessories to mass merchandisers, and served as the Chairman of the Board
and a director of Beauty Labs from 1987 to 1991.

     PAUL SHARP has served as Chief Executive Officer of the Company since May
1995 and as President and a director of the Company since December 1994. Mr.
Sharp also served as Secretary and Treasurer and a director of Linette Cosmetics
from 1990 to December 1994. From 1987 to 1989, Mr. Sharp served as Corporate
Vice President of Zayre Corporation, a mass merchandising retailer, where he was
responsible for the fragrance, cosmetic and health and beauty product lines.
Prior to 1987, Mr. Sharp served in various other capacities at Zayre Corporation
and on the Retail Advisory Board of The Gillette Company, a manufacturer of
personal care products, and was engaged as a retail marketing

--------------------------------------------------------------------------------
                                                                         Page 16
<PAGE>


consultant for Smith-Kline Beecham Company, a manufacturer of health and beauty
aids and pharmaceuticals.

     JAN MIRSKY has served as Executive Vice President-Finance of the Company
since January 1995 and as a director of the Company since December 1994 and,
from January 1995 to June 1997 served as the Chief Operating Officer of the
Company. In addition, he acted as a marketing consultant to the Company from
January 1994 to January 1995, at which time he became an employee of the
Company. From 1991 to January 1995, Mr. Mirsky was engaged as an independent
management, marketing and financial consultant.

     JORGE LAZARO, a co-founder of the Company, has been Executive Vice
President of the Company since May 1995 and the Secretary and a director of the
Company since its inception in September 1993. Mr. Lazaro also served as the
President of the Company from December 1994 to May 1995 and as Treasurer of the
Company from its inception to December 1994. Mr. Lazaro was also a co-founder of
Linette Cosmetics and served as President and a director of Linette Cosmetics
from its inception in 1985 until the Linette Merger, and has served as the
Secretary and Treasurer and as a director of Lea Cosmetics, Inc. ("Lea
Cosmetics") from its inception in October 1992 until the merger of Lea Cosmetics
with and into the Company in August 1995.

     JACK KOEGEL has served as the Vice Chairman of the Company since September
1995, as the Chief Operating Officer of the Company since June 1997 and as a
director of the Company since December 1994. From 1993 until September 1995, Mr.
Koegel served as President of Retail Concepts 2000, Inc., a retail consulting
company founded by him. Mr. Koegel served as President of Twin Valu Stores (a
division of Super Valu Inc.) from 1991 to 1993 and as Executive Vice President
of ShopKo Stores/Twin Valu Stores (a division of Super Valu Inc.) from 1989 to
1991.

     STANLEY R. GOODMAN has served as Assistant Secretary of the Company since
May 1995 and as a director of the Company since December 1994. Since 1989, Mr.
Goodman has been a partner at Goodman & Saperstein, a law firm specializing in
statutory and regulatory issues concerning pharmaceuticals, cosmetics and
related consumer products. He also served as a director and General Counsel of
Beauty Labs from 1987 until the time of its merger with Robern Industries, Inc.
in 1992.

     EDWARD C. ROSS has served as a director of the Company since December 1994.
Mr. Ross has been a partner in the accounting firm of Finkle, Ross & Rost since
1975. He has also been involved as a principal in various start-up companies as
well as established operating businesses, ranging in type from manufacturing to
real estate to financial consulting. Mr. Ross is a Certified Public Accountant
in New York and New Jersey, and is a member of the American Institute of
Certified Public Accountants.

     L. DOUGLAS BAILEY has served as a director of the Company since March 1996.
Beginning in 1996, Mr. Bailey became the President and Chief Executive Officer
of Precision Fixtures and Graphics, a manufacturer of store fixtures, and since
1995 he has served as President of Bailey & Associates, Inc., a consulting firm
for the retail industry. Mr. Bailey also serves as a developer for Regent
Properties, an industrial property development and management company founded
and operated by Mr. Bailey and his wife. From 1993 to 1995, Mr. Bailey served as
President of Home Shopping Club, Inc., a subsidiary of Home Shopping Network,
Inc. and the operator of Home Shopping

--------------------------------------------------------------------------------
                                                                         Page 17
<PAGE>


Network, a live, customer-interactive retail sales television network, and from
1970 to 1992 served as the Senior Vice President of Eckerd Drug Company, a
retail drug store chain. Mr. Bailey also serves as a director of 800 Travel
Systems, Inc., a publicly-held discount travel reservations company.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

     Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires officers and directors of the Company and holders of
more than 10% of the Common Stock (collectively, "Reporting Persons") to file
reports of ownership and changes in ownership of the Common Stock with the
Securities and Exchange Commission within certain time periods and to furnish
the Company with copies of all such reports. Based solely on its review of the
copies of such reports furnished to the Company by such Reporting Persons or on
the written representations of such Reporting Persons that no reports on Form 5
were required, the Company believes that during the year ended December 31,
2000, all of the Reporting Persons complied with their Section 16(a) filing
requirements.

Item 10.  Executive Compensation

Summary Compensation Table

     The following table sets forth certain information regarding the
compensation in each of the last three fiscal years of the person who served as
the Company's Chief Executive Officer during the fiscal year ended December 31,
2000, and the Company's four most highly compensated officers (other than the
Chief Executive Officer) who were serving as officers at December 31, 2000
(collectively, the "Named Executive Officers").

<TABLE>
<CAPTION>
                                                                                    LONG TERM COMPENSATION
                                                                            --------------------------------------
                                              ANNUAL COMPENSATION                    AWARDS                PAYOUTS
                                     -------------------------------------  ------------------------       -------
                                                                            RESTRICTED    SECURITIES
                                                             OTHER ANNUAL   STOCK         UNDERLYING       LTIP        ALL OTHER
       NAME AND            FISCAL                            COMPENSATION   AWARD(S)      OPTIONS/         PAYOUTS     COMPENSATION
  PRINCIPAL POSITION        YEAR      SALARY ($)   BONUS ($)  ($)              ($)         SARS(#)          ($)         ($)
-------------------------  ------    ---------    --------   -------------  ----------    ----------       -------     ----------
<S>                         <C>      <C>            <C>        <C>              <C>        <C>               <C>           <C>
Paul Sharp                  2000     125,000        7,500      16,910(1)       -0-             -0-           -0-           -0-
President and Chief         1999     127,404         -0-       17,665(1)       -0-          27,000(2)        -0-           -0-
Executive Officer           1998     101,202         -0-        6,104(1)       -0-          30,626(3)        -0-           -0-


Harold Markowitz            2000     125,000        7,500      13,234(4)       -0-             -0-           -0-           -0-
Chairman of the  Board      1999     127,404         -0-       13,153(4)       -0-          27,000(2)        -0-           -0-
                            1998     101,202         -0-       13,085(4)       -0-          30,626(3)        -0-           -0-


Jan S. Mirsky               2000     115,000        6,900       7,200(5)       -0-             -0-           -0-           -0-
Executive Vice President    1999     117,212         -0-        7,200(5)       -0-          54,000(6)        -0-           -0-
- Finance                   1998      93,106         -0-        6,926(5)       -0-         123,500(7)        -0-           -0-
</TABLE>
--------------------------------------------------------------------------------

                                                                         Page 18
<PAGE>


<TABLE>
<CAPTION>
                                                                                    LONG TERM COMPENSATION
                                                                            --------------------------------------
                                              ANNUAL COMPENSATION                    AWARDS                PAYOUTS
                                     -------------------------------------  ------------------------       -------
                                                                            RESTRICTED    SECURITIES
                                                             OTHER ANNUAL   STOCK         UNDERLYING       LTIP        ALL OTHER
      NAME AND             FISCAL                            COMPENSATION   AWARD(S)      OPTIONS/         PAYOUTS     COMPENSATION
 PRINCIPAL POSITION         YEAR      SALARY ($)   BONUS ($)  ($)              ($)         SARS(#)          ($)         ($)
-------------------------  ------    ---------    --------   -------------  ----------    ----------       -------     ----------
<S>                         <C>      <C>            <C>        <C>              <C>        <C>               <C>           <C>
Jorge Lazaro                2000     125,000        7,500      11,358(8)       -0-             -0-           -0-           -0-
Executive Vice              1999     127,404         -0-       11,358(8)       -0-          27,000(2)        -0-           -0-
President and Secretary     1998     101,202         -0-       11,358(8)       -0-          30,626(3)        -0-           -0-


Jack Koegel                 2000     100,000        6,000      14,400(9)       -0-            -0-            -0-           -0-
Vice Chairman of The        1999     101,923         -0-       14,400(9)       -0-         69,500(10)        -0-           -0-
Board and Chief             1998      80,962         -0-       14,400(9)       -0-         75,500(11)        -0-           -0-
Operating Officer
</TABLE>

----------

(1)  Includes (i) for 2000, 1999, and 1998, $10,892, $10,892, and $6,104,
     respectively, paid by the Company with respect to an automobile for use by
     Mr. Sharp in connection with his services to the Company, and (ii) for
     1999, $6,018 and $6,774, respectively, paid by the Company to Mr. Sharp
     with respect to medical insurance purchased directly by him.

(2)  Reflects (i) the January 6, 1999 grant by the Company to Messrs. Sharp,
     Markowitz and Lazaro of 10,000 options, each with an exercise price of
     $1.25, (ii) the April 1, 1999 grant by the Company to Messrs. Sharp,
     Markowitz and Lazaro of 15,000 options, each with an exercise price of
     $2.375, and (iii) the August 2, 1999 grant by the Company to Messrs. Sharp,
     Markowitz and Lazaro of 2,000 options, each with an exercise price of
     $2.50.

(3)  On October 8, 1998, (i) the Company granted to each of Messrs. Sharp,
     Markowitz and Lazaro 25,000 options with an exercise price of $.4375 (the
     fair market value of the Common Stock on October 8, 1998), and (ii) the
     Company adjusted the exercise price of 5,626 outstanding options originally
     granted to each of Messrs. Sharp, Markowitz and Lazaro on December 26,
     1996. In connection with such repricing, the Company cancelled the
     outstanding options, each with an exercise price of $4.00, and granted a
     corresponding number of new options, each with an exercise price of $.4375.

(4)  Includes for 2000, 1999 and 1998 (i) $11,069, $10,988, and $10,800,
     respectively, paid by the Company with respect to an automobile for use by
     Mr. Markowitz in connection with his services to the Company and (ii)
     $2,165, $2,165, and $2,285, respectively, for certain membership fees paid
     by the Company on behalf of Mr. Markowitz.

(5)  Represents amounts paid by the Company with respect to an automobile for
     use by Mr. Mirsky in connection with his services to the Company.

(6)  Reflects (i) the January 6, 1999 grant by the Company to Mr. Mirsky of
     10,000 options, with an exercise price of $1.25, (ii) the April 1, 1999

--------------------------------------------------------------------------------
                                                                         Page 19
<PAGE>


     grant by the Company to Mr. Mirsky of 15,000 options, with an exercise
     price of $2.375, and (iii) the April 1, 1999 and August 2, 1999 adjustments
     of the exercise price of an aggregate of 29,000 options held by Mr. Mirsky,
     in connection with which, in each case, the Company cancelled the
     outstanding options and granted a corresponding number of new options. See
     "-- Repricing of Certain Options During Fiscal 1999."

(7)  On October 8, 1998, the Company granted to Mr. Mirsky 25,000 options each
     with an exercise price of $.4375 (the fair market value of the Common Stock
     on October 8, 1998). On October 8, 1998 and November 4, 1998, the Company
     adjusted the exercise price of an aggregate of 123,500 outstanding options
     originally granted to Mr. Mirsky. In connection with such repricing, in
     each case, the Company cancelled the outstanding options and granted a
     corresponding number of new options.

(8)  Represents amounts paid by the Company with respect to an automobile for
     use by Mr. Lazaro in connection with his services to the Company.

(9)  Includes for 1999, 1998 and 1997 (i) $4,800, $4,800 and $4,800,
     respectively, paid by the Company to Mr. Koegel with respect to medical
     insurance purchased directly by him and (ii) $9,600, $9,600 and $9,600,
     respectively, paid by the Company with respect to an automobile for use by
     Mr. Koegel in connection with his services to the Company.

(10) Reflects (i) the January 6, 1999 grant by the Company to Mr. Koegel of
     10,000 options, with an exercise price of $1.25, (ii) the April 1, 1999
     grant by the Company to Mr. Koegel of 15,000 options, each with an exercise
     price of $2.375, (iii) the August 2, 1999 grant by the Company to Mr.
     Koegel of 2,000 options, each with an exercise price of $2.50, and (iv) the
     March 2, 1999 and August 2, 1999 adjustments of the exercise price of an
     aggregate of 42,500 options held by Mr. Koegel, in connection with which,
     in each case, the Company cancelled the outstanding options and granted a
     corresponding number of new options. See "-- Repricing of Certain Options
     During Fiscal 1999."

(11) On October 8, 1998, the Company granted to Mr. Koegel 25,000 options each
     with an exercise price of $.4375 (the fair market value of the Common Stock
     on October 8, 1998). On June 4, 1998 and November 4, 1998, the Company
     adjusted the exercise price of an aggregate of 81,750 outstanding options
     originally granted to Mr. Koegel. In connection with such repricing, in
     each case, the Company cancelled the outstanding options and granted a
     corresponding number of new options.

Option/SAR Grants During Fiscal 2000

     No stock options or stock appreciation rights were granted or issued by the
Company during fiscal 2000 to the Named Executive Officers.

--------------------------------------------------------------------------------
                                                                         Page 20
<PAGE>


Aggregated Option/SAR Exercises During Fiscal 2000 and Year End Option/SAR
Values

     The following table provides information related to options exercised by
the Named Executive Officers during fiscal 2000 and the number and value of
options and stock appreciation rights held at fiscal year end which are
currently exercisable. No stock appreciation rights were exercised during fiscal
2000.

<TABLE>
<CAPTION>
                                                                NUMBER OF SECURITIES UNDERLYING           VALUE OF UNEXERCISED
                                                                          UNEXERCISED                   IN-THE-MONEY OPTIONS/SARS
                      SHARES ACQUIRED     VALUE REALIZED            OPTIONS/SARS AT FY-END                  AT FY-END ($)(1)
       NAME           ON EXERCISE (#)           ($)             EXERCISABLE       UNEXERCISABLE      EXERCISABLE      UNEXERCISABLE
       ----           ---------------     --------------        -----------       -------------      -----------      -------------
<S>                         <C>                 <C>               <C>                <C>                <C>               <C>
Paul Sharp                  -0-                 -0-                33,470            11,354             $8,701            $2,636

Harold Markowitz            -0-                 -0-                33,470            11,354             $8,701            $2,636

Jan S. Mirsky(2)            -0-                 -0-               151,252            10,312             $8,509            $2,636

Jorge Lazaro                -0-                 -0-                33,470            11,354             $8,701            $2,636

Jack Koegel                 -0-                 -0-               115,563            11,937             $7,910            $2,636
</TABLE>

----------

(1)  The values of Unexercised In-the-Money Options/SARs represents the
     aggregate amount of the excess of $1.00, the closing sales price for a
     share of Common Stock on December 29, 2000, over the relevant exercise
     price of all "in-the-money" options.

(2)  The values listed do not take into account the warrants held by Mr. Mirsky.


Directors' Compensation

     Each director who is not an employee of the Company was paid $500 for each
meeting of the Board of Directors attended by such director during 2000. The
Company also reimbursed each such director for all reasonable expenses incurred
by him in attending meetings. In addition, non-employee directors of the Company
are eligible to participate in the Nonemployee Director's Plan, pursuant to
which an aggregate of 75,000 shares of Common Stock may be

--------------------------------------------------------------------------------
                                                                         Page 21
<PAGE>


granted to non-employee directors. Pursuant to such Plan, each non-employee
director is automatically granted (i) upon becoming a director of the Company,
an option to purchase 1,250 shares of Common Stock and (ii) each year, on the
day of the Company's annual meeting of shareholders, an option to purchase 1,250
shares of Common Stock. To date, the Company has granted to Messrs. Bailey,
Goodman and Ross, pursuant to the Nonemployee Directors' Plan, options to
purchase 7,500 shares, 10,000 shares and 5,000 shares, respectively.

Description of Employment Agreements, Severance Arrangements and Change of
Control Arrangements

     EMPLOYMENT AGREEMENTS WITH MESSRS. MARKOWITZ, SHARP AND LAZARO. On June 30,
1995, the Company entered into identical employment agreements with each of
Messrs. Markowitz, Sharp and Lazaro. Pursuant to such agreements, Messrs.
Markowitz, Sharp and Lazaro are employed as the Chairman of the Board, the
President and Chief Executive Officer, and an Executive Vice President,
respectively, of the Company. The agreements provide that such individuals shall
devote substantially all of their working time and attention to the business of
the Company. Each such agreement has an initial term of five years commencing
July 20, 1995, and shall be automatically renewable for successive one-year
periods unless either the Company or the employee elects not to renew his
employment. Pursuant to the employment agreements, as amended, Messrs.
Markowitz, Sharp and Lazaro each received a base salary in 2000 of $125,000, and
are each entitled to receive an annual base salary of $125,000 in each year
during the remainder of the term of his respective agreement, subject to such
increases as shall be approved by the Board of Directors of the Company. The
employment agreements also provide that each of Messrs. Markowitz, Sharp and
Lazaro will be eligible to participate in any medical insurance, pension, profit
sharing or other employment benefit programs generally made available to senior
executives of the Company.

     EMPLOYMENT AGREEMENT WITH JAN MIRSKY. On June 30, 1995, the Company entered
into an employment agreement with Mr. Mirsky, pursuant to which Mr. Mirsky is
employed as the Executive Vice President - Finance of the Company and is to
devote substantially all of his working time and attention to the business of
the Company. Such agreement, which became effective July 13, 1995, had an
initial term of eighteen months, and is automatically renewable for successive
one-year periods beginning on January 13th of each year unless either the
Company or Mr. Mirsky elects not to renew his employment. The Company renewed
the agreement again on January 13, 2000. Pursuant to the employment agreement,
as amended, Mr. Mirsky received a base salary in 2000 of $115,000, and is
entitled to receive an annual base salary of $115,000 in each year during the
remainder of the term of the agreement, subject to such increases as shall be
approved by the Board of Directors of the Company. The agreement further
provides that Mr. Mirsky will be eligible to participate in any medical
insurance, pension, profit sharing or other employment benefit programs
generally made available to senior executives of the Company.

     EMPLOYMENT AGREEMENT WITH JACK KOEGEL. Pursuant to the Company's employment
agreement with Mr. Koegel, which became effective September 27, 1995, Mr. Koegel
is employed by the Company as the Vice Chairman of the Company and, since June
1997, has been employed as the Chief Operating Officer of the Company. The
agreement provides that Mr. Koegel is to devote

--------------------------------------------------------------------------------
                                                                         Page 22
<PAGE>


substantially all of his working time and attention to the business of the
Company. The agreement provides that services performed by Mr. Koegel shall be
rendered in the St. Paul, Minnesota metropolitan area; however, Mr. Koegel and
the Company have subsequently mutually agreed that his services shall be
performed at the Company's executive offices in Paterson, New Jersey. Such
agreement had an initial term of thirty-six months, and is automatically
renewable for successive one-year periods beginning on September 23 of each year
unless either the Company or Mr. Koegel elects not to renew his employment. The
Company renewed the agreement on September 23, 1999. Pursuant to the employment
agreement, as amended, Mr. Koegel received a base salary of $100,000 in 2000,
and is entitled to receive an annual base salary of $100,000 in each year during
the remainder of the term of the agreement, subject to such increases as shall
be approved by the Board of Directors of the Company. The agreement further
provides that Mr. Koegel will be eligible to participate in any pension, profit
sharing or other employment benefit programs generally made available to senior
executives of the Company other than medical insurance benefits. However, the
agreement provides that the Company will pay Mr. Koegel $400 per month to cover
costs incurred by him in purchasing medical insurance directly. In addition,
pursuant to the agreement, the Company provides Mr. Koegel with a monthly
automobile allowance of $800.

     Pursuant to the employment agreement, Mr. Koegel was granted an option in
September 1995 to purchase an aggregate of 93,750 shares of Common Stock at an
exercise price of $11.00 per share. On July 15, 1997, the Company adjusted the
exercise price of 12,500 of such options to $6.50 per share. On June 4, 1998,
the Company adjusted the exercise price of an additional 6,250 of such options
to $2.00 per share, and on November 4, 1998, the Company adjusted the exercise
price of 63,000 of such options to $3.75 per share. In addition, on November 4,
1998, the Company also adjusted to $3.25 per share the exercise price of the
12,500 options which had been repriced in July 1997 and, subsequent to the end
of fiscal 1998, the Company adjusted the exercise price of such options to $2.00
per share. Mr. Koegel's agreement provides that, in the event the Company grants
options, either under the Stock Option Plan or any other stock option plan
adopted by the Company, to Messrs. Markowitz, Sharp, Mirsky and Lazaro during
the term of Mr. Koegel's employment, Mr. Koegel shall be entitled to receive a
proportionate amount of additional options on such terms as may be established
by the Board of Directors.

     SEVERANCE ARRANGEMENTS. Each of the employment agreements with Messrs.
Markowitz, Sharp, Lazaro, Mirsky and Koegel provides that the employee's
employment shall terminate (i) for "cause" (as defined in each of the respective
agreements), (ii) by reason of the employee's disability, resignation or death,
(iii) upon the expiration of the employment agreement in accordance with its
terms or (iv) in the event the employee is no longer employed by the Company
after a "Change of Control" (as defined below). Each of the agreements further
provides that, in the event the employee's employment terminates for any reason
(other than termination without cause or in connection with a Change of
Control), the employee shall be entitled to receive his annual base salary, and
any expense reimbursements, due and owing to him at the time of such
termination. In the event the employee is terminated without cause, the employee
shall be entitled to receive annual base salary and expense reimbursements then
due and owing to him, as well as a lump-sum severance payment in an amount equal
to his then annual base salary for the balance of the term of the employment
agreement.

--------------------------------------------------------------------------------
                                                                         Page 23
<PAGE>


     CHANGE OF CONTROL ARRANGEMENTS. Each of the employment agreements with
Messrs. Markowitz, Sharp, Lazaro, Mirsky and Koegel provides that, in the event
of a Change of Control of the Company, each such employee will be entitled to
receive a lump-sum severance payment equal to three times his then annual base
salary if he is discharged for any reason (other than for cause) or terminates
his employment for "Good Reason" prior to the first anniversary of such Change
of Control, and shall be entitled to receive a lump-sum payment equal to his
then annual base salary if he voluntarily leaves the employ of the Company for
reasons other than discharge or for Good Reason prior to the first anniversary
of such Change of Control. As used in the employment agreements, the term
"Change of Control" means (a) any transaction or series of transactions
(including, without limitation, a tender offer, merger or consolidation) the
result of which is that any "person" or "group" (within the meaning of Sections
13(d) and 14(d)(2) of the Exchange Act), other than Messrs. Markowitz, Sharp,
Mirsky and Lazaro (and, in the case of Mr. Koegel's employment agreement, Mr.
Koegel) or certain related parties and any "person" or "group" solicited by any
of such persons or their related parties, (i) becomes the beneficial owner of
more than 50% of the total aggregate voting power of all classes of the voting
stock of the Company and/or warrants or options to acquire such voting stock,
calculated on a fully diluted basis, (ii) acquires all or substantially all of
the assets of the Company or (iii) enters into a contract with respect to any of
the foregoing, or (b) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Company's Board of Directors
cease for any reason to constitute a majority of the directors then in office,
unless such majority of the directors then in office has been elected or
nominated by Messrs. Markowitz, Sharp, Mirsky and Lazaro (and, in the case of
Mr. Koegel's employment agreement, Mr. Koegel) or certain related parties. In
addition, as used in the agreements, the term "Good Reason" means (i) a change
in the status or position of the employee which reflects a change from the
status and position(s) as were in effect immediately prior to a Change of
Control, (ii) the assignment to the employee of any duties or responsibilities
which, in the employee's reasonable judgment, are inconsistent with his status
or position(s), (iii) the removal of the employee from his current position or
reduction in his pay or requiring him to relocate or (iv) the removal of the
employee, without his consent, to any location outside of the New York/New
Jersey metropolitan area (or, in the case of Mr. Koegel, the St. Paul, Minnesota
metropolitan area) for a continuous period of more than 30 days.

Repricing of Certain Options During Fiscal 1999

     In March 1999, the Company repriced 12,500 options that had originally been
granted in July 1997 to Mr. Koegel, the Vice Chairman of the Board and Chief
Operating Officer of the Company. Pursuant to such repricing, the Company
cancelled the outstanding options, each with an exercise price of $3.25 per
share, and granted a corresponding number of new shares, each with an exercise
price of $2.00 per share. In April 1999, the Company repriced 8,000 options that
had originally been granted in July 1995 to Mr. Mirsky, the Executive Vice
President - Finance of the Company. Pursuant to such repricing, the Company
cancelled the outstanding options, each with an exercise price of $3.25 per
share, and granted a corresponding number of new shares, each with an exercise
price of $2.375 per share. In August 1999, the Company repriced 30,000 and
50,000 options that had originally been granted to Mr. Koegel in September 1995
and to Mr. Mirsky in July 1995, respectively. Pursuant to such repricing, the
Company cancelled the outstanding options, each with an exercise price of $3.75
and $3.25 per share, respectively, and

--------------------------------------------------------------------------------
                                                                         Page 24
<PAGE>


granted a corresponding number of new shares, each with an exercise price of
$2.50 per share. On the date of the August 1999 option repricings, the closing
sale price of the Common Stock was $2.50. The Board of Directors decided to
reprice the foregoing options as a result of a long-term decline in the market
price of the Company's Common Stock which the Board believed would make it
unlikely that any holder would exercise the options at the then existing
exercise price. The Board also believed that the purpose behind its grant of
such options -- I.E., to act as additional motivation for the Company's officers
-- would be undermined by the decline in the price of the Common Stock to a
level substantially below the exercise price of the options.

Description of Stock Option Plan

     Pursuant to the Stock Option Plan, as amended, stock options covering an
aggregate of 713,250 shares of the Company's Common Stock may be granted to
employees (including officers), directors, consultants and other persons who
perform substantial services for or on behalf of the Company. The Stock Option
Plan is administered by the Stock Option Committee (the "Committee"), which is
vested with complete authority to administer and interpret the Stock Option
Plan, to determine the terms upon which options may be granted, to prescribe,
amend and rescind such interpretations and determinations and to grant options.
Under the Stock Option Plan, "incentive stock options" ("Incentive Options")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), may be granted to employees (including officers), and
non-incentive stock options ("Non-incentive Options") may be granted to
employees and to other persons (including directors) who perform substantial
services for or on behalf of the Company. Incentive Options and Non-incentive
Options are collectively referred to herein as "Options."

     The price at which shares covered by an Option granted under the Stock
Option Plan may be purchased pursuant thereto shall be determined by the
Committee, but shall be no less than the par value of such shares and no less
than the Fair Market Value (as hereinafter defined) of such shares on the date
of grant; provided, however, that in the case of Incentive Options, if the
optionee directly or indirectly beneficially owns more than 10% of the total
combined voting power of all of the outstanding voting stock of the Company (a
"10% Holder"), the purchase price shall not be less than 110% of the Fair Market
Value on the date of grant. As used herein, the term "Fair Market Value" means
the last sale price of a share of Common Stock as reported by the principal
quotation service on which the Common Stock is listed for the date of grant, if
available, or, if the last sale prices are not reported, the mean of the high
bid and low asked prices of a share of Common Stock as reported by such
principal quotation service for the date of grant; provided, however, that if no
such report is available for the date of grant, the Fair Market Value shall be
the last sale price or the mean of the high bid and low asked prices, as the
case may be, on the day next preceding such day for which there was a report;
and provided further, however, that if no such representative quotes are
available, the Fair Market Value shall mean the amount determined by the
Committee to be the fair market value pursuant to any reasonable method in
accordance with applicable regulations of the Internal Revenue Service.

     The purchase price of shares issuable upon exercise of an Option granted
under the Stock Option Plan may be paid in cash or by delivery of

--------------------------------------------------------------------------------
                                                                         Page 25
<PAGE>


shares of Common Stock having an aggregate Fair Market Value on the date of
exercise equal to the exercise price of the option. The Company may also loan
the purchase price to the optionee, or guarantee third-party loans to the
optionee, on terms and conditions acceptable to the Committee.

     Under the Stock Option Plan, the total number of shares for Common Stock
for which options may be granted to any one person in any given calendar year
may not exceed 37,500. The Stock Option Plan also provides that the aggregate
fair market value of the stock with respect to which Incentive Options are first
exercisable by any employee during any calendar year under the Stock Option Plan
and all other stock option plans of the Company shall not exceed $100,000. To
the extent that the Fair Market Value of the stock with respect to which
Incentive Options are first exercisable by any employee during any calendar year
(under all plans of the Company) exceeds $100,000, such Options shall be treated
as Options which are not Incentive Options. The number of shares covered by an
Option is subject to adjustment for stock dividends, stock splits, mergers,
consolidations, combinations of shares, reorganizations and recapitalizations.

     The Stock Option Plan provides that Options may be exercised within a
period not exceeding ten years after the date of grant, except that the term of
any Incentive Options granted to a 10% Holder may not exceed five years from the
date of grant. Options are generally non-transferable except by will or by the
laws of descent and distribution, and during a participant's lifetime are
exercisable only by him or her. In addition, pursuant to the Stock Option Plan,
various limitations may apply to the exercise of Options by optionees whose
employment is terminated on retirement, disability or otherwise.

     As of December 31, 2000, of the 923,134 shares of Common Stock available
for issuance under the Stock Option Plan, 545,758 of such shares are reserved
for issuance upon exercise of currently outstanding options. Accordingly, only
377,376 shares of Common Stock are available for future awards under the Stock
Option Plan.

Extension of Certain Warrants

     In March 2000, the Company amended the Warrant and Registration Agreement
between Mr. Mirsky and the Company, extending the expiration date of 86,622
warrants from March 31, 2000 to April 15, 2001. On April 9, 2001, the expiration
date of the warrants was extended to April 15, 2002. The warrants have an
exercise price of $1.25 per share after giving effect to the a two-for-one stock
split effected by the Company in December 1999.

Item 11.  Security Ownership of Certain Beneficial Owners and Management

     (a)  Security Ownership of Certain Beneficial Owners

          None.

     (b)  Security Ownership of Directors and Officers

     The following table sets forth, as of May 10, 2001, the beneficial
ownership of shares of Common Stock by (i) each director of the Company, each
nominee for election as a director of the Company and each executive officer

--------------------------------------------------------------------------------
                                                                         Page 26
<PAGE>


of the Company listed in the Summary Compensation Table and (ii) all of the
Company's officers and directors as a group:

                                           AMOUNT AND NATURE OF       PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER(1)   BENEFICIAL OWNERSHIP(2)      OWNED
---------------------------------------   -----------------------     --------
Harold Markowitz                                379,120(3)              16.5%
Paul Sharp                                      379,224(4)              16.5%
Jorge Lazaro                                    379,120(5)              16.5%
Jan Mirsky                                      238,460(6)               9.5%
Jack Koegel                                     115,563(7)               4.9%
Stanley R. Goodman                               10,000(8)                *
Edward C. Ross                                    5,000(9)                *
L. Douglas Bailey                                 7,500(10)               *
All officers and directors
  as a group (8 persons)                      1,513,987(3-10)           55.3%


----------

*    Less than 1%

(1)  The address for each such person is c/o Sel-Leb Marketing, Inc., 495 River
     Street, Paterson, New Jersey 07524.

(2)  A person is deemed to be the beneficial owner of securities that can be
     acquired by such person within 60 days from the date of this Proxy
     Statement upon the exercise of options or warrants. Each beneficial owner's
     percentage ownership is determined by assuming that options or warrants
     that are held by such person (but not those held by any other person) and
     which are exercisable within 60 days from the date of this Proxy Statement
     have been exercised. Unless otherwise noted, the Company believes that all
     persons named in the table have sole voting and investment power with
     respect to all shares of Common Stock beneficially owned by them.

(3)  Includes 33,470 shares of Common Stock issuable upon exercise of options
     granted to Mr. Markowitz under the Stock Option Plan. Does not include
     11,354 shares of Common Stock issuable upon exercise of options granted to
     Mr. Markowitz under the Stock Option Plan which are not exercisable within
     60 days of the date of this Proxy Statement.

(4)  Includes 33,470 shares of Common Stock issuable upon exercise of options
     granted to Mr. Sharp under the Stock Option Plan. Does not include 11,354
     shares of Common Stock issuable upon exercise of options granted to Mr.
     Sharp under the Stock Option Plan which are not exercisable within 60 days
     of the date of this Proxy Statement.

--------------------------------------------------------------------------------
                                                                         Page 27
<PAGE>


(5)  Includes 33,470 shares of Common Stock issuable upon exercise of options
     granted to Mr. Lazaro under the Stock Option Plan. Does not include 11,354
     shares of Common Stock issuable upon exercise of options granted to Mr.
     Lazaro under the Stock Option Plan which are not exercisable within 60 days
     of the date of this Proxy Statement.

(6)  Includes (i) 86,622 shares of Common Stock issuable upon exercise of a
     warrant granted to Mr. Mirsky by the Company and (II) 151,252 shares of
     Common Stock issuable upon exercise of options granted to Mr. Mirsky under
     the Stock Option Plan. Does not include 10,312 shares of Common Stock
     issuable upon exercise of options granted to Mr. Mirsky under the Stock
     Option Plan which are not exercisable within 60 days of the date of this
     Proxy Statement.

(7)  Includes 115,563 shares of Common Stock issuable upon the exercise of
     options granted to Mr. Koegel under the Stock Option Plan. Does not include
     11,937 shares of Common Stock issuable upon exercise of options granted to
     Mr. Koegel under the Stock Option Plan which are not exercisable within 60
     days of the date of this Proxy Statement.

(8)  Includes 10,000 shares of Common Stock issuable upon exercise of options
     granted to Mr. Goodman under the Company's 1995 Nonemployee Directors'
     Stock Option Plan (the "Nonemployee Directors' Plan").

(9)  Includes 5,000 shares of Common Stock issuable upon exercise of options
     granted to Mr. Ross under the Nonemployee Directors' Plan.

(10) Includes 7,500 shares of Common Stock issuable upon exercise of options
     granted to Mr. Bailey under the Nonemployee Directors' Plan.

          (c)  Changes in Control

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

Item 12.  Certain Relationships and Related Transactions

From time-to-time, the Company transacts business with parties related to the
minority stockholders of Ales. During 2000 and 1999, the Company purchased
inventories at a total cost of approximately $1,440,000 and $1,505,000,
respectively, from affiliated with the minority stockholders. At December 31,
2000, accounts payable included a total of approximately $17,000 that was
related primarily to the purchases of inventories. In addition, during 2000, the
Company sold merchandise to companies affiliated with minority stockholders
aggregating approximately $606,000. At December 31, 2000, accounts receivable
includes approximately $121,000 due from these related parties. Sales to such
companies were not significant in 1999.

Item 13.  Exhibits 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 on
          Form 10-KSB:

          1.1  Underwriting Agreement dated July 13, 1995 between the and Duke &
               Co., Inc. (incorporated by reference to 10.1 to the Company's
               Quarterly Report on Form -QSB for the quarterly period ended
               September 30, 1995).

--------------------------------------------------------------------------------
                                                                         Page 28
<PAGE>


          2.1  Agreement and Plan of Merger of Lea Cosmetics, Inc. into the
               dated July 31, 1995, together with Certificate of Merger filed
               with the Secretary of State of the State of 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.

          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).

          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 Employment Agreement dated as of June 30, 1995 between the
               Company and Harold Markowitz (incorporated by reference to
               Exhibit 10.7 to the Company's Quarterly Report on Form 10-QSB for
               the quarterly period ended June 30, 1995).

          10.2 Employment Agreement dated as of June 30, 1995 between the
               Company and Paul Sharp (incorporated by reference to

--------------------------------------------------------------------------------
                                                                         Page 29
<PAGE>


               Exhibit 10.8 to the Company's Quarterly Report on Form 10-QSB for
               the quarterly period ended June 30, 1995).

         10.3  Employment Agreement dated as of June 30, 1995 between the
               Company and Jan Mirsky (incorporated by reference to Exhibit 10.9
               to the Company's Quarterly Report on Form 10-QSB for the
               quarterly period ended June 30, 1995).

         10.4  Employment Agreement dated as of June 30, 1995 between the
               Company and Jorge Lazaro (incorporated by reference to Exhibit
               10.10 to the Company's Quarterly Report on Form 10-QSB for the
               quarterly period ended June 30, 1995).

         10.5  Employment Agreement dated as of September 27, 1995 between the
               Company and Jack Koegel (incorporated by reference to Exhibit
               10.19 to the Company's Annual Report on Form 10-KSB for the
               fiscal year ended December 31, 1995).

         10.6  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).

         10.7  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).

         10.8  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).

         10.9  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).

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

--------------------------------------------------------------------------------
                                                                         Page 30
<PAGE>


         10.11 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).

         10.12 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).

         10.13 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).

         10.14 Asset Purchase Agreement dated as of September 15, 1997 between
               SBC Corporation, Inc. and Ales (incorporated by reference to
               Exhibit 10.6 to the Company's Quarterly Report on Form 10-QSB for
               the quarterly period ended September 30, 1997).

         10.15 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).

         10.16 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 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).

         10.18 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).

         10.19 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).

--------------------------------------------------------------------------------
                                                                         Page 31
<PAGE>


         10.20 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).

         10.21 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).

         10.22 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).

         10.23 Extension of WCMA Line of Credit and Temporary Increase of Line
               of Credit.

         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, 2000. On May 2, 2001, the Company
filed with the Securities and Exchange Commission a Current Report on Form 8-K
reporting the Company's issuance of a press release announcing the potential
delisting of the company's securities from Nasdaq.

--------------------------------------------------------------------------------
                                                                         Page 32
<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:  May 11, 2001

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
May 11, 2001    /s/ Harold Markowitz     Chairman of the Board and Director
                --------------------
                Harold Markowitz

May 11, 2001    /s/ Paul Sharp           President, Chief Executive Officer and
                --------------           Director (principal executive officer)
                Paul Sharp

May 11, 2001    /s/ Jan S. Mirsky        Executive Vice President - Finance and
                -----------------        Director (principal financial and
                Jan S. Mirsky            accounting officer)

May 11, 2001    /s/ Jack Koegel          Vice Chairman of the Board,
                ---------------          Chief Operating Officer and Director
                Jack Koegel

May 11, 2001    /s/ Jorge Lazaro         Executive Vice President, Secretary
                ----------------         and Director
                Jorge Lazaro

May 11, 2001    /s/ Stanley R. Goodman   Director
                ----------------------
                Stanley R. Goodman

May 11, 2001    /s/ Edward C. Ross       Director
                ------------------
                Edward C. Ross

May 11, 2001    /s/ L. Douglas Bailey    Director
                ---------------------
                L. Douglas Bailey

--------------------------------------------------------------------------------
                                                                         Page 33
<PAGE>

                     SEL-LEB MARKETING, INC. AND SUBSIDIARY


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


                                                                           PAGE

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                                   F-2

CONSOLIDATED BALANCE SHEET
     DECEMBER 31, 2000                                                     F-3

CONSOLIDATED STATEMENTS OF INCOME
     YEARS ENDED DECEMBER 31, 2000 AND 1999                                F-4

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
     YEARS ENDED DECEMBER 31, 2000 AND 1999                                F-5

CONSOLIDATED STATEMENTS OF CASH FLOWS
     YEARS ENDED DECEMBER 31, 2000 AND 1999                                F-6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                F-7/19



                                      * * *
<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,  2000,  and the  related
consolidated  statements  of income,  changes in  stockholders'  equity and cash
flows for the years ended December 31, 2000 and 1999. 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, 2000, and their results of operations and
cash flows for the years ended  December 31, 2000 and 1999, in  conformity  with
accounting principles generally accepted in the United States of America.



                                                 J.H. COHN LLP

Roseland, New Jersey
May 10, 2001

                                      F-2
<PAGE>


                     SEL-LEB MARKETING, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2000


                                     ASSETS

Current assets:
  Cash and cash equivalents                                         $   213,920
  Accounts receivable, less allowance for doubtful accounts
    of $195,274                                                       4,951,151
  Inventories                                                         9,798,856
  Deferred tax assets, net                                              296,875
  Prepaid expenses and other current assets                             618,676
                                                                    -----------
           Total current assets                                      15,879,478
Property and equipment, at cost, net of accumulated
  depreciation and amortization of $1,123,601                           328,634
Goodwill, net of accumulated amortization of $164,136                   181,632
Other assets                                                            131,182
                                                                    -----------

              Total                                                 $16,520,926
                                                                    ===========

                               LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Note payable under line of credit                                 $ 3,404,505
  Current portion of long-term debt                                     859,949
  Accounts payable                                                    2,598,964
  Accrued expenses and other liabilities                                472,804
                                                                    -----------
           Total current liabilities                                  7,336,222
Long-term debt, net of current portion                                  928,307
                                                                    -----------
           Total liabilities                                          8,264,529
                                                                    -----------

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                                                   1,779,427
  Less receivable in connection with equity transactions                (42,000)
                                                                    -----------
           Total stockholders' equity                                 8,256,397
                                                                    -----------

           Total                                                    $16,520,926
                                                                    ===========


See Notes to Consolidated Financial Statements.

                                      F-3
<PAGE>


                     SEL-LEB MARKETING, INC. AND SUBSIDIARY

                        CONSOLIDATED STATEMENTS OF INCOME
                     YEARS ENDED DECEMBER 31, 2000 AND 1999





                                                      2000            1999
                                                 ------------    ------------

Net sales                                        $ 20,707,269    $ 21,427,530
                                                 ------------    ------------

Operating expenses:
  Cost of sales                                    15,814,333      15,418,254
  Selling, general and administrative expenses      4,273,466       4,247,550
                                                 ------------    ------------
           Totals                                  20,087,799      19,665,804
                                                 ------------    ------------

Operating income                                      619,470       1,761,726
                                                 ------------    ------------

Other income (expense):
  Interest expense, net of interest income
    of $18,176 and $1,862                            (449,791)       (320,522)
  Other                                                                 2,929
                                                 ------------    ------------
           Totals                                    (449,791)       (317,593)
                                                 ------------    ------------

Income before provision for income taxes              169,679       1,444,133

Provision for income taxes                             75,318         525,853
                                                 ------------    ------------

Net income                                       $     94,361    $    918,280
                                                 ============    ============

Net earnings per share:
  Basic                                          $        .04    $        .41
                                                 ============    ============

  Diluted                                        $        .04    $        .37
                                                 ============    ============

Weighted average shares outstanding:
  Basic                                             2,261,018       2,235,751
                                                 ============    ============

  Diluted                                           2,397,501       2,459,029
                                                 ============    ============


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, 2000 AND 1999

<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, 1999                      1,089,083     $ 10,891     $ 6,440,095      $  766,786     $(45,000)     $7,172,772

Net proceeds from exercise
  of warrants                                     8,800           88          10,912                                       11,000

Net proceeds from exercise of
  stock options                                  74,052          741          56,243                                       56,984

Effect of 2-for-1 stock split                 1,089,083       10,891         (10,891)

Net income                                                                                   918,280                      918,280
                                              ---------     --------     -----------      ----------     --------      ----------

Balance, December 31, 1999                    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
                                              =========     ========     ===========      ==========     ========      ==========
</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, 2000 AND 1999

                                                         2000          1999
                                                      -----------   -----------

Operating activities:
  Net income                                          $    94,361   $   918,280
  Adjustments to reconcile net income to net
    cash used in operating activities:
    Depreciation and amortization                         299,179       302,954
    Provision (credit) for doubtful accounts              (35,644)      154,804
    Deferred income taxes                                  (8,680)      (34,100)
    Changes in operating assets and liabilities:
      Accounts receivable                                 786,836    (2,326,835)
      Inventories                                      (1,467,018)   (1,835,540)
      Prepaid expenses and other current assets           (84,367)      162,546
      Other assets                                        (17,684)       48,342
      Accounts payable, accrued expenses and
        other liabilities                                (261,534)    1,402,935
                                                      -----------   -----------
          Net cash used in operating activities          (694,551)   (1,206,614)
                                                      -----------   -----------

Investing activities - purchases of property
  and equipment                                           (45,977)     (208,240)
                                                      -----------   -----------

Financing activities:
  Proceeds from note payable under line of
    credit, net of repayments                             456,149     1,120,115
  Proceeds from long-term debt                            600,000       100,000
  Repayments of long-term debt                           (262,733)     (158,916)
  Loan financing costs                                                  (60,357)
  Net proceeds from exercise of warrants and
    stock options                                                        67,984
  Decrease in receivable in connection with
    equity transactions                                     3,000
                                                      -----------   -----------
          Net cash provided by financing activities       796,416     1,068,826
                                                      -----------   -----------

Net increase (decrease) in cash and cash equivalents       55,888      (346,028)

Cash and cash equivalents, beginning of year              158,032       504,060
                                                      -----------   -----------

Cash and cash equivalents, end of year                $   213,920   $   158,032
                                                      ===========   ===========

Supplemental disclosure of cash flow information:
  Interest paid                                       $   467,967   $   316,439
                                                      ===========   ===========

  Income taxes paid                                   $   352,502   $   346,856
                                                      ===========   ===========


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  manufacturing,
             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, 2000 and the minority interest in
             the results of its operations in 2000 and 1999 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 upon the shipment of the related product.

           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.

           Goodwill:
             Goodwill is  comprised of costs in excess of net assets of acquired
             businesses that are being  amortized on a straight-line  basis over
             periods not exceeding ten years. The Company periodically evaluates
             the  recoverability  of its  goodwill  and  measures  the amount of
             impairment,  if any, by assessing,  among other things,  the market
             and economic  conditions  related to, and the current and estimated
             future  levels of income  and cash  flows to be  generated  by, the
             acquired businesses.

                                      F-7
<PAGE>


                     SEL-LEB MARKETING, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 1 - Organization and summary of significant accounting
         policies (continued):
           Product development costs:
             The Company expenses product development costs as incurred. Product
             development  costs charged to operations  amounted to approximately
             $72,000 and $79,000 in 2000 and 1999, respectively.

           Advertising:
             The Company  expenses the cost of  advertising  and  promotions  as
             incurred.  Advertising  costs  charged to  operations  amounted  to
             approximately $105,000 and $151,000 in 2000 and 1999, respectively.

           Common stock split:
             The  numbers of common  shares  and the per share  amounts in these
             notes and the accompanying  consolidated  financial statements have
             been retroactively adjusted, where appropriate, for a 2-for-1 split
             effected on December 7, 1999.

           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.

           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.

                                      F-8
<PAGE>


                     SEL-LEB MARKETING, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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

                                                             2000       1999
                                                          ---------  ---------
             Basic weighted average shares outstanding    2,261,018  2,235,751
             Shares arising from assumed exercise of:
                Stock options                               106,849    174,157
                Warrants                                     29,634     49,121
                                                          ---------  ---------
             Diluted weighted average shares outstanding  2,397,501  2,459,029
                                                          =========  =========

           Recent accounting pronouncements:
             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, 2000
             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  2000 and 1999 or that they will have a  significant
             affect 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,  2000  consisted  of  the
             following:

                                                  Estimated
                                                    Useful
                                                    Lives       Amount
                                                ------------  ----------

             Machinery and equipment            2 to 7 years  $  884,739
             Display fixtures                        3 years     353,950
             Computer equipment                 3 to 5 years     149,068
             Leasehold improvements                 10 years      64,478
                                                              ----------
                                                               1,452,235
             Less accumulated depreciation and
                 amortization                                  1,123,601
                                                              ----------

                      Total                                   $  328,634
                                                              ==========

             Depreciation  expense aggregated  $264,719 and $268,514 in 2000 and
             1999, 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,  2000,  the  Facility  consists  of a
           revolving  line of credit,  with  maximum  borrowings  of  $4,350,000
           against the Company's  eligible  accounts  receivable and inventories
           through May 15, 2001,  and three term loans (see Note 4).  Borrowings
           under the  revolving  line of credit,  which  totaled  $3,404,505  at
           December 31, 2000, bear interest,  which is payable monthly, at 2.65%
           above the 30-day  commercial paper rate (an effective rate of 9.2% as
           of December 31, 2000).  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, 2000, 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 in December 2001                $600,000
                 Due in monthly installments of $8,333
                   and a final payment in November 2004                 391,667
                 Due in monthly installments of $10,714
                   and a final payment in January 2006                  642,857
               Loans payable to Paterson Restoration
               Corporation (B):
                 Due in monthly installments of $1,461
                   and a final payment in October 2004                   59,986
                 Due in monthly installments of $1,461
                   and a final payment in January 2007                   89,302
               Other                                                      4,444
                                                                     ----------
                                                                      1,788,256
               Less current portion                                     859,949
                                                                     ----------

               Long-term debt                                          $928,307
                                                                     ==========

              (A)   Interest  is  payable  monthly  at 2.65%  above  the  30-day
                    commercial   paper   rate.   The   loans  are   secured   by
                    substantially all of the assets of the Company (see Note 3).

              (B)   Interest  is payable 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,  2000  are as
           follows:

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

                    2001                                    $859,949
                    2002                                     257,080
                    2003                                     258,839
                    2004                                     249,542
                    2005                                     144,491

                                      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,
             2000.

           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, 2000 and 1999 and changes  during the years then
             ended is presented below:

                                                2000                1999
                                         -----------------   -------------------
                                                  Weighted              Weighted
                                          Shares   Average   Shares      Average
                                            or    Exercise     or       Exercise
                                           Price    Price     Price      Price
                                         --------   ------   --------   --------
             Outstanding, at beginning
               of year                    563,910   $ 2.44    414,812   $   2.47
             Granted (A)                    8,750     2.36    343,902       2.29
             Canceled (A)                 (26,902)   (3.17)  (120,752)      3.15
             Exercised                                        (74,052)       .77
                                         --------            --------

             Outstanding, at end of year  545,758   $ 2.40    563,910   $   2.44
                                         ========   ======   ========   ========

             Options exercisable, at
                end of year               423,306             326,394
                                         ========            ========

             Weighted average fair
                value of options
                granted during
                the year                 $   2.11            $   2.17
                                         ========            ========

             (A)  Options granted and canceled include shares subject to options
                  for which the exercise  price was reduced in 1999 as set forth
                  below:

                                    Original    Adjusted
                                    Exercise    Exercise
                         Shares       Price       Price
                        -------      ------      ------

                         12,500      $ 3.25      $ 2.00
                          8,000        3.25        2.38
                         80,000        3.25        2.50
                            126        5.25        2.50
                            750        6.50        2.50
                            250       21.00        2.50
                            126       21.50        2.50
                        -------

                 Total  101,752
                        =======

                                      F-13
<PAGE>


                     SEL-LEB MARKETING, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 5 - Preferred stock, stock options and warrants (continued):
           Stock options (concluded):
             The  following  table  summarizes  information  about  fixed  stock
             options outstanding at December 31, 1999:

                          Options Outstanding               Options Exercisable
             ---------------------------------------------- --------------------
                                        Weighted
                                         Average
                                        Years  of  Weighted             Weighted
                                        Remaining  Average              Average
                 Exercise    Number    Contractual Exercise   Number    Exercise
                 Prices    Outstanding    Life      Price   Exercisable  Price
             ------------- ----------- ----------- -------- ----------- --------
             $      .4375    105,689      7.76     $  .4375    81,318   $  .4375
               .578-2.125    107,255      7.14       1.49      73,175     1.56
              2.375-2.719    199,126      6.76       2.44     144,000     2.45
               3.00-6.67     123,688      5.30       3.60     114,813     3.57
               8.00-27.00     10,000      5.98      17.38      10,000    17.38
                             -------                          -------

             $.4375-$27.00   545,758      6.68     $ 2.40     423,306   $ 2.57
             =============   =======      ====     ========   =======   ========

           Shares  subject to  warrants:
             At January 1, 1999,  the Company had warrants  outstanding  for the
             purchase of 773,207  shares of common stock which were  exercisable
             at prices  ranging from $1.25 to $8.00 per share.  During 1999, the
             Company received  proceeds of $11,000 upon the exercise of warrants
             to purchase  8,800 shares of common  stock at an exercise  price of
             $1.25 per share,  and warrants to purchase  677,785 shares that had
             an exercise price of $8.00 per share  expired.  There were no other
             changes in outstanding  warrants during 2000 and 1999. As a result,
             the Company had warrants  outstanding at December 31, 2000 and 1999
             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, 2000,  shares of common stock were reserved for the
             following:

             Exercise of outstanding stock options                 545,758
                                                                 ---------

             Exercise of stock options available for grant:
                Option Plan                                        339,876
                Directors' Plan                                     37,500
                                                                 ---------
                   Total                                           377,376
                                                                 ---------

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

                   Total                                         1,009,756
                                                                 =========

                                      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):
             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 2000 and 1999
             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:

                                                             2000        1999
                                                            -------    --------

                Net income - as reported                    $94,361    $918,280
                                                            =======    ========
                Net income - pro forma                      $18,754    $493,507
                                                            =======    ========
                Basic earnings per share - as reported         $.04        $.41
                                                               ====        ====
                Basic earnings per share - pro forma           $.01        $.22
                                                               ====        ====
                Diluted earnings per share - as reported       $.04        $.37
                                                               ====        ====
                Diluted earnings per share - pro forma         $.01        $.20
                                                               ====        ====

             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 2000 and 1999:

                                                               2000        1999
                                                               ---         ---

               Expected volatility                             100%        162%
               Risk-free interest rate                         6.0%        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 $75,607 and $424,773
             (net of tax effects) in 2000 and 1999, respectively.  Substantially
             all  of the  pro  forma  charges  for  compensation  in  1999  were
             attributable  to the  effects  of the  options  that were  repriced
             during that year.

                                      F-15
<PAGE>


                     SEL-LEB MARKETING, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 6 - Income taxes:
             Deferred  tax assets at  December  31,  2000 were  attributable  to
             temporary differences related to the following:

               Inventories                                             $184,110
               Allowance for bad debts                                   72,540
               Other                                                     40,225
                                                                       --------

                    Net deferred tax assets                            $296,875
                                                                       ========

             The net  provision  for income taxes in 2000 and 1999  consisted of
             the following provisions (credits):


                                                         2000            1999
                                                       --------       ---------

               Federal:
                 Current                                $50,509        $483,238
                 Deferred                                (5,741)        (32,720)
                                                       --------       ---------
                        Totals                           44,768         450,518
                                                       --------       ---------

               State:
                 Current                                 33,489          76,715
                 Deferred                                (2,939)         (1,380)
                                                       --------       ---------
                        Totals                           30,550          75,335
                                                       --------       ---------

                        Totals                          $75,318        $525,853
                                                       ========       =========

             The  provision  for income  taxes in 2000 and 1999 differs from the
             amount  computed  using  the  Federal  statutory  rate  of 34% as a
             result of the following:


                                                                2000       1999
                                                                ----       ----

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

                        Totals                                    44%        36%
                                                                 ===        ===

                                      F-16
<PAGE>


                     SEL-LEB MARKETING, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 7 - Related party transactions:
           From time-to-time, the Company transacts business with parties
           related to the minority stockholders of Ales. During 2000 and 1999,
           the Company purchased inventories at a total cost of approximately
           $1,440,000 and $1,505,000, respectively, from companies affiliated
           with the minority stockholders. At December 31, 2000, accounts
           payable included a total of approximately $17,000 that was related
           primarily to the purchases of inventories. In addition, during 2000,
           the Company sold merchandise to companies affiliated with minority
           stockholders aggregating approximately $606,000. At December 31,
           2000, accounts receivable includes approximately $121,000 due from
           these related parties. Sales to such companies were not significant
           in 1999.


Note 8 - Commitments and contingencies:
           Leases:
             The  Company  has a  noncancelable  operating  lease for office and
             warehouse  facilities  which commenced on April 7, 1997 and expires
             on March 31, 2002. In addition to base rentals,  the lease requires
             payments for real estate taxes and other operating costs.

             The future minimum rental  payments under the leases as of December
             31, 2000 were as follows:

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

                      2001                                 $203,537
                      2002                                   50,884
                                                           --------

               Total                                       $254,421
                                                           ========

             Rent  expense  amounted to  approximately  $291,000 and $238,000 in
             2000 and 1999, respectively.

           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  $390,000  and
             $346,000 in 2000 and 1999, 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.

                                      F-17
<PAGE>


                     SEL-LEB MARKETING, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 8 - Commitments and contingencies (concluded):
           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.  At December 31, 2000,  cash
             balances   exceeded  Federal   insurance  limits  by  approximately
             $85,000.  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  37% and 32% of the  Company's net sales were derived
             from its two major  customers  during 2000 and 1999,  respectively.
             The two customers  also accounted for  approximately  $2,109,000 of
             the Company's accounts receivable balance at December 31, 2000. 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, 2000.


Note 9 - Fair value of financial instruments:
           The Company's material financial instruments at December 31, 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
           they had interest rates equivalent to those currently  prevailing for
           financial instruments with similar characteristics.


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.

                                      F-18
<PAGE>


                     SEL-LEB MARKETING, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 10- Segment information (concluded):

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

                                                      2000             1999
                                                   -----------      -----------

               Net sales:
                 Opportunity                        $8,832,579      $10,600,996
                 Cosmetics                          11,874,690       10,826,534
                                                   -----------      -----------
                        Total net sales             20,707,269       21,427,530
                                                   -----------      -----------

               Cost of sales:
                 Opportunity                         6,458,829        8,948,368
                 Cosmetics                           9,355,504        6,469,886
                                                   -----------      -----------
                        Total cost of sales         15,814,333       15,418,254

               Selling, general and
                 administrative expenses             4,273,466        4,247,550
                                                   -----------      -----------
                        Total operating expenses    20,087,799       19,665,804
                                                   -----------      -----------

               Operating income                        619,470        1,761,726
                                                   -----------      -----------

               Other income (expense):
                 Interest expense, net                (449,791)        (320,522)
                 Other                                                    2,929
                                                   -----------      -----------
                        Totals                        (449,791)        (317,593)
                                                   -----------      -----------

               Income before provision for
                 income taxes                         $169,679       $1,444,133
                                                   ===========      ===========

               Segment assets:
                 Inventories:
                   Opportunity                      $2,465,454       $1,129,320
                   Cosmetics                         7,333,402        7,202,518
                                                   -----------      -----------
                        Totals                       9,798,856        8,331,838

                 Other assets                        6,722,070        7,559,845
                                                   -----------      -----------

                        Total assets               $16,520,926      $15,891,683
                                                   ===========      ===========


                                      F-19