SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB/A


         Amendment to the Annual report pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

                  For the fiscal year ended December 31, 2000.
                         Commission file number 0-19409

                               SYNERGY BRANDS INC.

             (Exact name of registrant as specified in its charter)

                               DELAWARE 22-2993066
                    (State of incorporation) (I.R.S. Employer
                               Identification No.)

                               40 Underhill Blvd.
                                Syosset, NY 11791
                         (Address of corporate offices)

        Registrant's telephone number, including area code: 516-682-1980

             Securities registered pursuant to Section 12(b) of the
                                      Act:

                      Title of Each Class Name of Exchange

              Common Stock, $.001 par value NASDAQ/Small-Cap System
                            and Boston Stock Exchange


     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  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__

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K. [X]

     On March 31,  2001,  the  aggregate  market  value of the  voting  stock of
Synergy Brands Inc.,  held by  non-affiliates  of the  Registrant  (based on the
closing  price as  reported  on the  NASDAQ  for March 21,  2001)  approximately
$9,700,000.  This  determination  of  affiliate  status  is  not  necessarily  a
conclusive determination for other purposes. The number of outstanding shares of
the Registrant's Common Stock as of March 31, 2001 was 19,239,045.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Proxy  Statement for  Registrant's  2000 Annual  Meeting of
Stockholders to be held June 2000 are incorporated by reference in Part III (for
other documents incorporated by reference refer to Exhibit Index at page 48)

                                      -1-

<PAGE>

                                     PART I

     Other  than  historical  and  factual  statements,  the  matters  and items
discussed  in this report on Form 10-KSB are  forward-looking  information  that
involve  risks and  uncertainties.  The  Company's  actual  results  may  differ
materially from the results discussed in the forward-looking statements. Factors
that could contribute to such  differences are discussed in the  forward-looking
statements  and are  summarized  in  "Management's  Discussion  and  Analysis of
Financial Condition and Results of Operations - Forward-Looking  Information and
Cautionary Statements."

ITEM 1.  DESCRIPTION OF BUSINESS

A.       OVERVIEW

     Synergy  Brands  Inc.  (NASDAQ:  SYBR) and its  consolidated  subsidiaries,
("SYBR"  or  "the  Company")  have  developed,  operate  and  continue  to  seek
opportunities to establish,  Internet  Businesses directed at sale of variety of
products as well as  Partnering  and seeking to partner or invest with  advanced
technologies to enhance the Company's properties and participate in new ventures
synergistic with the other operations of the Company (Internet  Infrastructure),
including   establishment  of  strategic   contacts  and  alliances  with  other
companies.

     SYBR's Internet strategy includes the internal development and operation of
subsidiaries  as well as the taking of  strategic  positions  in other  Internet
companies  that have  demonstrated  synergies with SYBR's core  businesses.  The
Company's  strategy also envisions and promotes  opportunities  for  synergistic
business  relationships among the Internet companies within its portfolio.  SYBR
and its  consolidated  subsidiaries  have  developed  Internet  properties  that
facilitate  internet  product  sales and  procurement  as well as  strategically
partnering with off line and on- line media companies to build revenues.  SYBR's
business  strategies are focused on developing  business  opportunities in three
related  sectors  Business to  Consumer  (B2C)  Business  to Business  (B2B) and
Enterprise  Integration  (EI).  At March 31, 2001 SYBR's  Internet  subsidiaries
included BeautyBuys.com (100% voting interest through the Company's wholly owned
subsidiary SYBR.com Inc.) Netcigar.com (wholly owned by SYBR.com Inc.), SYBR.com
Inc. as well as PHS Group (a subsidiary of  BeautyBuys.com  Inc.).  Supply Chain
Supply Chain Technologies Inc. (wholly owned by SYBR.com) and Dealbynet.com Inc.
(wholly owned by Supply Chain  Technologies  Inc.)  BeautyBuys.com  is a leading
online Business to Consumer beauty  department  store consisting of thousands of
unique nationally branded beauty products. In addition the Company has developed
through   BeautyBuys.com  Inc.  Dealbynet.com  as  an  internet  domain  further
developed  independently  as  SYBR's  supply  chain  integration  model  for its
Business to Business  platform being developed in the Health and Beauty (HBC) as
well as grocery businesses. Netcigar.com is a leading online retailer of premium
cigars and other related luxury items. PHS is the Company's fulfillment platform
for its  Business to  Business  Internet  operations.  The  facility  allows for
automated order processing, inventory management and customer service. PHS Group
Inc. is a  subsidiary  of  BeautyBuys.com  Inc.  Supply Chain  Technologies  was
recently  formed to  utilize,  further  develop  and market a parallel  internet
platform  to  that  developed  by  SYBR's  subsidiary   Dealbynet   designed  to
accommodate   distribution   and  inventory   management   logistics  for  other
industries.

                                      -2-

<PAGE>

     SYBR over the last fiscal  year has also  established  strategic  alliances
with  media and  technology  partners  in a way that  minimizes  cash  outlay by
offering equity in SYBR for media and technology credits. With such transactions
not only does SYBR  conserve  its cash assets but also it gains the  interest of
important media partners.

     In November of 1999 SYBR sold a 50% voting  interest in  BeautyBuys.com  to
Sinclair Broadcast Group (NASDAQ: SBGI), the largest U.S. independent Television
broadcaster (see Form 8K filed 12/7/99). Sinclair owns 62 television stations in
40 U.S. markets reaching  approximately 25% of the U.S.  population.  As part of
the purchase Sinclair also acquired a 16.5% equity stake in SYBR, thereby making
Sinclair the largest  shareholder  of SYBR.  Subsequently  in December 2000 SYBR
made a strategic  sale of a portion of its television  advertising  credits from
Sinclair to ICON  International,  one of the largest media barter enterprises in
the United States, for a combination of cash and other trade credits. As part of
the sale Sinclair reconveyed to SYBR Sinclair's stock interest in BeautyBuys.com
making such again a wholly owned subsidiary of SYBR.

     The  Company has  adopted a strategy  of seeking  opportunities  to realize
gains through  investments or having separate  subsidiaries or affiliates buy or
sell minority  interests to outside  investors.  The Company  believes that this
strategy  provides the ability to increase  shareholder value as well as provide
capital to support the growth in the Company's subsidiaries and investments. The
Company  expects to continue to develop and refine the  products and services of
its  businesses  focusing on the internet as the primary  mode of  distribution,
with the goal of increasing revenue as new Products are commercially introduced,
and to continue to pursue the  acquisition of or the  investment in,  additional
Internet  companies.  The Company  will seek to continue to attract  traditional
media  investments,  partner with advanced value added technologies that will be
synergistic to its internet  platforms as well as partner with existing internet
companies  to achieve its goals of building a  strategic  portfolio  of internet
assets.

     The  present  focus of the  Company is on product  sales  through  internet
channels on a B2C and B2B basis and on the utilization of proprietary technology
to accomplish this objective.

     THE COMPANY'S  CORPORATE OFFICE IS LOCATED AT 40 UNDERHILL BLVD.,  SYOSSET,
NEW YORK  11791,  AND ITS  TELEPHONE  NUMBER  IS  (516)  682-1980.  THE  COMPANY
MAINTAINS A CORPORATE WEBSITE AT WWW.SYNERGYBRANDS.COM.

                                      -3-

<PAGE>

B.       INTERNET SALES

         1. DEALBYNET.COM.

     Dealbynet.Com  Inc. is a subsidiary  of Supply Chain  Technologies  (wholly
owned  subsidiary of Synergy Brands Inc.  through  SYBR.com Inc.) and was formed
and  functions as the Company's B2B platform for sale of HBC products as well as
other  grocery  products  marketed  and  sold  through  the  Company's  efforts.
Dealbynet has developed a sophisticated  state of the art B2B platform  designed
to streamline  supply chain  management and reduce  procurement and distribution
expenses   in   the   grocery   and   HBC   industry.    Their   internet   site
(www.dealbynet.com) is designed for the procurement  professional to access data
and manipulate its value across multiple logistical platforms.

     There are current internet based product exchanges  developed to accomodate
mainly the grocery  industry's needs to have prompt access to both  availability
of product and  pricing.  The two main  participants  in this area of  wholesale
product distribution assistance,  Uniform Code Council (UCCnet) and Transora, as
well as others, have recently announced an alliance,  each being backed by major
grocery product  manufacturers.  The internet product  exchanges and information
therefrom will be capable of integrating  through the Dealbynet  system which is
compatible  and  integrates  with such  product  exchange  so as to  access  the
information  supplied  therefrom and is to be utilized as an adjunct thereto and
is designed to customize  acquisition to product availability and pricing to the
individual  subscriber  to the  dealbynet  platform.  Accordingly  the dealbynet
system  is  designed  to offer  the  following  advantages  to its  subscribers,
regardless of size and market share:

         1. Provides  capacity for manufactures,  wholesalers,  distributors and
         retailers to real-time data via XML and EDI enterprise integration.

         2.  Facilitates  and  streamlines   sales,   procurement,   logistical,
         financial and merchandising activities.

         3. Automatically  presents  customized  offerings and pricing depending
         upon user profile.

         4. Enables users to process, track and manage orders.

     DealByNet has  developed  customer  profiling  database  relationships  for
streamlining web order management in the grocery industry.  Beta testing for the
P&G pilot web order system, which was initiated in 1998,  encouraged the company
to develop  DealByNet.com.  The  company has also taken the  necessary  steps to
build enterprise  integration (EI) connectivity  tools that allow key data files
to seamlessly flow through  DealByNet.  An alliance partner will be required for
EI and other connectivity applications.

     The DealByNet exchange enables customers to search and find items online by
replenishment   cost,  and  intends  to  provide   solutions  for  supply  chain
efficiencies  that  are  expected  to  reduce  purchasing  errors,  as  well  as
transportation  and storage costs,  while  increasing  flexibility and access to
real-time data via XML/EDI middleware. DealByNet is one of the first communities
that focus on the Costco,  Sam's and BJ's  Wholesale Club  streamline  logistics
models  to  drive  fast-moving,  nationally  branded  grocery  products  to  its
customer's docks via the internet.  DealByNet  focuses on selling the top moving
national  brands in the  Grocery  industry  by creating  direct  store  delivery
programs,  thus avoiding costly  warehousing and distribution  costs.  DealByNet
does not replace the full-line wholesaler, but supplements their efficiencies by
carefully  selecting and profiling the cost of delivery of each selected product
and creating a more effective supply chain for these items.

     To support this initiative,  DealByNet initiated a trade campaign to inform
suppliers,  manufacturers,  wholesalers,  shippers  and  distributors  on how to
change costly  distribution  habits through a streamline  logistics model. (SLM)
Dealbynet represents approximately 80% of the company's revenues and Fiscal 2000
and is  expected to be the  fastest  growing  business of the company for fiscal
2001.

         2. BEAUTYBUYS.COM.

     In the first quarter of 1999 the Company established through its subsidiary
BeautyBuys.Com Inc. an e-commerce website  (www.BeautyBuys.com)  to offer direct
to the consumer via internet sales on a non-exclusive  basis a popular selection
of nationally  branded beauty care products,  including salon hair and skin care
items,  designer  fragrances and cosmetics,  and consumer health and beauty care
products,  most being  previously sold by the Company as part of its traditional
distribution  business.  BeautyBuys.com  Inc. has further  expanded its internet
operations  into B2B sales of most products  offered through its retail internet
sales as well as adapting much of the  Company's  historical  wholesale  product
trade  outside  the  health  and  beauty  care  industry  to the  B2B  platform.
Advertising on radio,  television  and on-line  channels was an integral part of
the overall  traffic-building  plan for BeautyBuys.com.  To further this area of
expanded awareness of the BeautyBuys.com presence in the marketplace the Company
has  established  for  BeautyBuys.com  a  strategic  alliance  with  a  material
advertising  source in Sinclair  Broadcasting  Inc.,  and plans to partner  with
others.

                                      -4-

<PAGE>

     In November of 1999,  Sinclair Broadcast Group, Inc. (NASDAQ Symbol,  SBGI)
acquired a 50% voting  interest  in  BeautyBuys.com,  Inc.,  in  exchange  for a
significant  amount of advertising on television  within the Sinclair network of
62 television  stations,  in 40 markets and in-kind services.  Sinclair provided
production,  creative services,  media planning and exclusive placement in their
online  communities  through their  assistance and advertising  time by contract
devoted to  BeautyBuys.com.  The partnership with Sinclair Broadcast Group, Inc.
and the exchange of media for equity,  the Company believes was a milestone that
accelerated  the growth and development of  BeautyBuys.com,  Inc. In addition to
the considerable media resources that are now available to BeautyBuys.com,  Inc,
there is a wealth of advertising and media management expertise that Sinclair is
providing  to the  partnership.  Sinclair  owns and/or  programs  62  television
stations in the United  States that reach almost 25% of the  television  viewing
population  in 40 markets that focus on the  American  middle  market.  Sinclair
stations are affiliated  with the 4 major networks (ABC,  NBC, CBS, FOX) as well
as Warner  Bros.  and UPN.  The  Sinclair  partnership  affords the Company many
unique  opportunities,   in  television   advertising   (including   infomercial
production  and  broadcasting),  editorial and public  relations  coverage,  and
product  development.  The  financial  strength  and support of Sinclair is also
proving to be a major  benefit to  BeautyBuys.com,  Inc.,  and is excepted to be
leveraged by BeautyBuys to attract other media partners. Sinclair is the largest
FOX & WB affiliates  network in the US. (see 8-K filed December 7, 1999) SYBR in
December 2000 did in fact arrange for  strategic  sale of a portion of the media
credits from Sinclair Broadcasting,  such being sold to ICON International,  one
of the largest media barter  enterprises  in the United  States,  the sale being
made for a combination  of cash and trade  credits,  the trade  credits  further
allowing for SYBR to acquire product from  manufacturers  also bartering product
through ICON without any further cash outlay.  As part of the media credits sale
Sinclair   reconveyed   their   interest  in   BeautyBuys.com   to  SYBR  making
BeautyBuys.com again a wholly owned subsidiary of SYBR.

         BeautyBuys.com's  website design work is proprietary.  It was developed
to accommodate  the specific  marketing and record keeping  requirements  of the
Company.  State-of-the-art  technology  is  utilized  in site  design,  tracking
systems,  hosting  and  affiliated  programs.   BeautyBuys.com  strives  through
internal   development  efforts  on  creating  and  enhancing  the  specialized,
proprietary software that is unique to its Business.

         BeautyBuys.com  utilizes a proprietary  computerized web based database
management  system  that  collects,  integrates  and  allows  analysis  of  data
concerning   sales,   order   processing,   shipping,   purchasers,   receiving,
inventories,  and  financial  reporting.  At  any  given  time,  management  can
determine the quantity of product stored by item, cost by item,  aging and other
characteristics necessary for expeditious fulfillment and distribution.

                                      -5-

<PAGE>

         BeautyBuys.com  has  implemented  a broad array of services and systems
for site management, searching, customer interaction, transaction processing and
fulfillment.  BeautyBuys.com uses a set of software  applications for: Accepting
and validating customer orders;  Organizing,  placing,  and managing orders with
vendors and fulfillment partners; Receiving product and assigning it to customer
orders; and Managing shipment of products to customers based on various ordering
criteria.

     These services and systems use a combination of BeautyBuys' own proprietary
technologies and commercially available licensed technologies. Products acquired
for resale by BeautyBuys.com Inc. are shipped in bulk to the Company's warehouse
facility.  BeautyBuys  maintains  inventory  on  50%  of its  products  and  has
arrangements to purchase the balance of its needs on a "Just-in-time" basis. All
orders are  assembled in a single  facility for shipment to the customer via UPS
or confirmed priority mail.

     BeautyBuys'  website can be shopped 24 hours a day,  seven days a week from
anywhere  that a  consumer  has  Internet  access.  BeautyBuys  offers  a  large
selection of products and in addition provides various levels of product content
that  includes  wealth of  health-related  information,  buying guides and other
tools   designed  to  help  consumers   make  educated   purchasing   decisions.
Additionally  shopping list and e-mail  reminders are designed to make it easier
for customers to regularly purchase their preferred products.

     BeautyBuys  believes  that the breadth and depth of its product  selection,
together with the  flexibility  of its online store and its range of helpful and
useful product information and other shopping services,  enables  BeautyBuys.com
to provide a strong merchandising strategy.  BeautyBuys continues to develop its
web site through value added technologies,  strategic partnerships and marketing
programs.  To date it has developed  interest from in excess of 25,000  business
affiliates and over 100,000 on-line  customers.  The web site currently receives
in excess of 150,000 unique visitors per month with the average time visiting on
site in excess of 13  minutes.  BeautyBuys  uses  sophisticated  micro-marketing
techniques to increase its sales and enhance the customer shopping experience.

                                      -6-

<PAGE>

         BeautyBuys'  Marketing efforts are aimed at flexibility of presentation
to  attract  new and  repeat  customers  and  give  ease of  access  to  product
availability and information.  BeautyBuys' online store provides  flexibility to
change  featured  products or  promotions  without  having to alter the physical
layout of a store. BeautyBuys.com is also able to dynamically adjust its product
mix in response to changing customer demand, new seasons or holidays and special
promotions.

         BeautyBuys  has the ability to offer  products to individual  customers
based on their brand preferences. BeautyBuys also cross-sells its departments to
promote impulse buying by customers.

         BeautyBuys  has programs  that allow it to provide  samples of products
designed as personal  gifts.  BeautyBuys also plans to use sampling to work with
manufacturers to introduce new products.

     BeautyBuys competes with several online merchants including Perfumania.com,
Gloss.com,  Beauty.com,  Planet Rx,  Drugstore.com,  ibeauty.com and others.  In
addition,  BeautyBuys  competes with the traditional  $100 billion retail market
including  department stores,  chain stores and mass merchandisers.  BeautyBuys'
competitors  can be divided  into  several  groups:  chain  drugstores,  such as
Walgreen's,  CVS and Eckerd;  mass market retailers such as Wal-Mart,  Kmart and
Target; supermarkets,  such as Safeway, Albertson's and Kroger; warehouse clubs;
and mail  order and major  department  stores,  such as  Nordstrom,  Macy's  and
Bloomingdales.  Each of  these  competitors  offers  one or more of the  health,
beauty,  wellness and personal care product  categories as offered BeautyBuys on
and through its website.

     At this time there is no online vendor known to BeautyBuys  that  dominates
the beauty and health care  market.  BeautyBuys  believes  that with its quality
selection, competitive pricing, advertising,  customer profiling and technology,
it can become  dominant in this  industry.  The Company plans to focus on direct
consumer  marketing and horizontal  growth to expand its online beauty business.
To that end BeautyBuys has acquired an additional  site that  selectively  sells
beauty products labeled including frangrancesalon.com.

         Management  believes  that  the  following  are  principal  competitive
factors in the market place wherein it operates,  all of which are  acknowledged
to exist and are focused  upon in  BeautyBuys'  operations:  Brand  recognition,
Selection,  Convenience, Price, Website performance and accessibility,  Customer
service,  Quality  of  information  services,  Reliability  and  speed  of order
shipment.

                                      -7-

<PAGE>

         3. NETCIGAR.COM

     In July 1999, the Company launched through its subsidiary NetCigar.com Inc.
a web  site  (www.netcigar.com)  for sale of  premium  cigar  products.  Through
NetCigar.com  Inc.  the  Company  offers  information  and sales on a variety of
cigars and cigar related products and content,  including cigar news and events,
editorials, and an array of cigars and cigar products of both proprietary labels
and other  popular  brands.  The Company also markets  humidors,  and sells golf
oriented  gifts  and  apparatus.   The  Company  has  a  long  term  warehousing
arrangement  in Miami,  Florida  for storage of mainly its  proprietary  cigars.
There are no retail stores to upkeep.  NetCigar.com  Inc. is not locked into any
traditional  pricing mode for sale of its products so marketing quality products
at  significant  discounts  is  possible  and is a large  part of its  business.
NetCigar's web site adds convenience to customer and potential customer shopping
by being open and  available  24 hours a day,  seven days a week for access from
anywhere  that  a  consumer  has  internet  access.  A  significant  portion  of
NetCigar's web site design is proprietary and NetCigar has had the site designed
and has developed the site to accommodate  specific marketing and record keeping
requirements to enhance  customer  service.  NetCigar in October 2000 entered an
arrangement through SYBR for media coverage through Premiere Radio Networks Inc.
(Premiere"), a subsidiary of Clear Channel Communications  (NYSE:CCU).  Premiere
syndicates more than 60 radio programs to more than 7800 radio  affiliations and
reaches over 180 million listeners weekly. More particularly  Premiere exchanged
$1 million of Radio media credits for stock in SYBR and cash.

                                      -8-

<PAGE>

         Netcigar.com,   Inc.,  utilizes  a  proprietary  computerized  database
management  system  that  collects,  integrates  and  allows  analysis  of  data
concerning sales, order processing,  procurement, shipping, receiving, inventory
and financial reporting. At any given time, Company executives can determine the
quantity   of  product   stored  by  item,   cost  by  item,   aging  and  other
characteristics  necessary  for  expeditious  fulfillment  and  distribution.  A
network system of the Company's  office and  warehousing  facilities  allows for
online assessment and transactional reporting capabilities.  All consumer orders
are  shipped  from the  Company's  warehouse  within 3 days of order  placement.
Netcigar.com maintains an inventory on approximately 50% of its product mix; the
other 50% is purchased on a just-in-time  basis.  The  distribution  facility is
modular and  sufficient  space is available to handle the Company's  anticipated
growth in this area of product sales.  After an order is shipped,  customers can
view order-tracking information on NetCigar's web site.

         As  customers  use  NetCigar's  web site,  they provide  NetCigar  with
information  about their buying  preferences  and habits.  NetCigar then can use
this  information  to develop  personalized  communications  and deliver  useful
information,  special offers and new product announcements to its customers.  In
addition,  NetCigar uses e-mail to alert customers to important developments and
merchandising initiatives.

     NetCigar  competes with many and varied  sources for cigar products in a $1
billion market both large and highly fragmented.  No single traditional retailer
competes  against the Company in all of its product lines and there are an array
of recently developed e-commerce cigar sites. The largest competitor,  JR Cigars
has only recently  developed an e-commerce  web site for its product sales as an
adjunct to their traditional brick and mortar retail stores and catalogue sales.
It is estimated that JR Cigars has approximately at 14% present market share. No
other competitor is known to have more than 5% market share.

                                      -9-

<PAGE>

     Traditional pre-internet cigar sales has evolved through the following four
categories  of  retailing,  which  together  remain  the  main  source  of cigar
marketing:

     1. Mom and Pop brick and mortar tobacco shops that  typically  average 2500
     square feet and generate  average annual volume of  approximately  $250,000
     per store.

     2. Chain and franchise  brick and mortar  tobacco shops that average 12,000
     to 15,000  square  feet and  generate  approximately  $5,000,000  in annual
     volume per store.

     3. Catalog and mail order  vendors  that do monthly  mailings to as many as
     500,000 customers (in some instances as few as 25,000 customers),  which is
     the portion of the market that will be the easiest to convert to E-Commerce
     purchases, and

     4. Drug stores and mass market retailers  representing less than 10% of the
     market

         The Company  believes  that the  following  are  principal  competitive
factors present in its operations and product  presentation:  Brand recognition,
Selection, Convenience, Price, Web site performance and accessibility,  Customer
service,  Quality  of  information  serves  and  Reliability  and speed of order
shipment.

         Many of the Company's  store-based and online  competitors  have longer
operating  histories,  larger  customer  bases,  greater brand  recognition  and
significantly   greater   financial,   marketing   and  other   resources   than
Netcigar.com. Traditional store-based retailers also enable customers to see and
feel products in a manner that is not possible  over the  Internet.  Traditional
store-based  retailers can also sell products to address immediate needs,  which
the Company and other online sites cannot do.

                                       -10-

<PAGE>

         4. SUPPLY CHAIN TECHNOLOGIES INC.

         This recently formed  subsidiary was created to coordinate  development
of the B2B internet  platform  designed for and by  Dealbynet.com  (as discussed
under  Dealbynet.com  section  supra) and expand it to present the supply  chain
technology  to  industries  independent  of the sale of  grocery  and health and
beauty care products, marketing of which is handled by certain of the other SYBR
subsidiaries  as  previously   discussed.   The  Company  realized  through  its
experience  in  product  marketing,  procurement  and  supply,  that the cost of
getting  product  from the  manufacturing  facility  to the  retail  outlet  can
represent a significant  percentage  of  merchandise  cost.  Further the Company
realized that  inefficiencies in the distribution  system provides a significant
opportunity to introduce  substantial  savings in the distribution and inventory
management of manufactured products in a wide range of industries.

     In order to capitalize on these cost saving  opportunities  and utilize the
state of the art platform developed for the Company's  Dealbynet  subsidiary,  a
parallel  platform  was  designed  to  accommodate  distribution  and  inventory
management  logistics for other industries.  As an Applications Service Provider
(ASP),  Supply  Chain  Technologies  can offer  companies  outside  the  grocery
industry flexible  customization of the platform.  This provides Synergy Brands,
Inc., with the opportunity to generate  substantial  profits from the technology
expertise  it has  developed.  In addition  to  licensing  revenue,  Synergy can
benefit  from on going  maintenance  and up grade  revenue from  companies  that
utilize the Supply Chain Technologies platform.

         5. FUTURE INTERNET SITES.

         The Company plans to develop and/or  partner with new e-commerce  sites
that complement its strategy of branding through media partnerships.

C.   NON-INTERNET SALES.

     The  Company  services  on a direct  store  basis  through  its  subsidiary
BeautyBuys.com  Inc and affiliated  parties  several drug store and  supermarket
chains in the Northeast  United States and numerous other retail outlets for the
sale of hair and skin care products  available to the Company  through  contacts
made in the industry. Similar products are also made available to be sold direct
to the consumer via internet  sales (see "B.  Internet  Sales"  supra).  In this
product area Company  affiliated  sources stock the designated  store shelves on
the design of the  planogram  developed by Company  affiliates  which service is
offered at no additional  charge which aspect of sales helps maintain the client
as long as awareness is maintained of and remedies for  deficiencies are made in
product  shelf  storage  as it occurs.  This  aspect of the  Company's  business
presently  accounts for only a minority of its operations and products sales and
is operated also through the Company's  subsidiary  BeautyBuys.com  Inc. through
its subsidiary PHS Group Inc.

                                      -11-

<PAGE>

D.   COMPETITION

         The  Company is small in both  physical  and  financial  attributes  in
comparison to many of its  competitors  in the marketing of grocery,  health and
beauty  care  products  and  cigars,  and  other  business  areas  in  which  it
participates.  Such  differences  however do not act as a material  hindrance to
operations in e-commerce because where the traditional over the counter retailer
model of business was location  oriented,  internet  sales are not burdened with
such fixed  overhead.  Access to product  remains  important  but the Company is
confident of the continued  availability of product from it fulfillment  sources
with whom the Company has successfully  acquainted itself or developed in house.
For further discussion of particular competitive concerns in the e-commerce area
of the Company's  business  refer to the  particular  discussion of the internet
sales areas of business  operations of the Company  through its  subsidiaries as
heretofore-described  (see Internet  Sales,  supra) The Company's  knowledge and
experience in and devotion to its business,  receptiveness to general customers,
and  service,  should also  continue to benefit its  operations  and continue to
allow it to compete with its more financially endowed competitors.

                                      -12-

<PAGE>

     In the Salon and Skin  care  product  market  and that for  fragrances  and
cosmetics the primary thrust of the business, as the Company perceives it, is to
secure market share which once  established  can be maintained with good service
and maintenance of competitive pricing.  Once the particular stores are acquired
as clients and the service and price levels are  maintained,  it is difficult to
lose the account.  However,  special  circumstances beyond the Company's control
such as acquisitions, other financial events, among others may cause the Company
to lose customers.

     In  internet  sales  the  Company  competes  to  obtain  its  product  from
manufacturers also supplying competing distributors. The leveling factor appears
to be service and exposure on the internet. The Company is striving for expanded
internet  exposure and prides  itself in offering  good prices and service.  The
expanding  presence  of the  Company  on the  Internet  should  act as a further
balancing  factor  because of the  enhancement  of selling  efforts  such allows
without  the need for any  corresponding  expansion  of the  Company's  physical
business facilities and personnel.

E.   INFORMATION SYSTEMS

     The various web sites established for sale of the Company's products are of
multi-tier  construction to allow for ease of administration and record keeping.
Behind the screen  visible to the consumer when  visiting the Company's  various
product   category   websites  are  internet  based   marketing  and  accounting
information  programs  to allow  the  Company  to review  interest  shown in its
websites and account for sales made  therefrom.  The Company also  maintains its
own websites  regarding  information  on the Company as a public  entity and its
various business interests. Internet sites presently available regarding Company
business and product sales are:

                                 BeautyBuys.com
                                  NetCigar.com
                                SynergyBrands.Com
                                  DealbyNet.com
                              Frangrancesalon.com
                         SupplyChainTechnologies.com

                                      -13-

<PAGE>


F.   SEASONALITY

     The Company  generally  experiences lower sales volume in the first quarter
and a stronger fourth quarter in its B2B operation.

     Sales of beauty care products and fragrances increase over traditional gift
giving holidays such as Christmas,  Mother's Day,  Father's Day, and Valentine's
Day.

     Cigar  products  sales also  increase  during  holiday  periods  and summer
months, but also sales spurts occur during periods of special sporting events.

                                      -14-

<PAGE>

G.   SHIPPING AND HANDLING

     Products  sold on a B2B  basis by the  Company  are  shipped  in bulk  from
inventory  maintained  by the  Company  at its  warehouse  facilities  by common
carriers.   All  B2C  orders  are  consolidated  in  company  owned  fulfillment
facilities  then packed and shipped to the customer within 7 days mainly by UPS.
Approximately  50%  of  product  inventory  is in  warehouse  stock  and  50% is
purchased by the Company on an as needed "just in time" basis.  The Company does
not own its trucks and is dependent on common carriers in the trucking industry.
Although  the Company can call upon any of several  hundred  common  carriers to
distribute its products,  from time to time the trucking  industry is subject to
strikes or work  stoppages,  which could have a material  adverse  effect on the
Company's  operations if alternative  modes of shipping are not then  available.
Additionally,  the  trucking  industry is subject to various  natural  disasters
which can close  transportation lanes in any given region of the country. To the
extent  common  carriers  are  prevented  from or  delayed  in  utilizing  local
transportation  lanes, the Company will likely incur higher freight costs due to
the limited  availability  of trucks during any such period that  transportation
lanes are restricted.

     The Company  purchases Name Brand Grocery Products and HBA products for its
dealbynet.com  business to be sold B2B in truckload quantities to take advantage
of better  pricing from the supplier and lower freight  costs.  The Company does
not foresee  difficulty  in arranging  additional  trucking if it increases  its
business  volume.  The  Company  has  arranged  for  warehousing  when and where
necessary,  on a contract basis and has thereby  eliminated the existence of and
need for centralized warehousing.

H.   TRADEMARKS, LICENSES AND PATENTS

     The  Company  has  obtained  rights  to  various  copyrights,   trademarks,
tradenames,  and domain names in its internet business. The Company has obtained
a wholesale  pharmaceutical  license  through the New York State  Department  of
Education,  but to date has not utilized it. The Company has worldwide rights to
the   "Suarez   Gran    Reserva",    "Breton    Legend",    "Anduleros",    "Don
Otilio","Alminante"  "Nativo"  and various  other trade  names in  marketing  of
premium handmade cigars. The cigar tradenames are owned by Gran Reserve Corp. as
licensee,  an unaffiliated  entity.  Others are owned directly by the Company or
where applicable and appropriate by BeautyBuys.com Inc.

                                      -15-

<PAGE>

I.   EMPLOYEES

     The Company and its  subsidiaries  in the  aggregate as of the date of this
report  employ and contract 26 full  time/part  time persons all of whom work in
executive,  administrative,  marketing, data processing,  accounting or clerical
activities and certain work as Company employees that integrate with the various
warehouses where Company  products are stored.  The Company does lease and staff
its  warehouses  in New Jersey and Florida  from where it  facilitates  storage,
sorting,  packing and shipping of products sold in its  BeautyBuys.com web site.
Otherwise  warehousing is contracted on an as needed arrangement staffed through
the warehousing entity contracted with except for supervisory personnel hired by
the Company.

J.  GOVERNMENT REGULATION

         1. TOBACCO INDUSTRY REGULATION AND TOBACCO INDUSTRY LITIGATION

         Regulation.  The tobacco  industry is subject to regulation at federal,
state and local  levels.  Federal law has required  States,  in order to receive
full funding for federal  substance  abuse block grants,  to establish a minimum
age of 18 years for the sale of tobacco  products,  together with an appropriate
enforcement  program.  The recent trend is toward  increasing  regulation of the
tobacco  industry,  and the  increase in  popularity  of cigars could lead to an
increase in regulation of cigars.

         The  Food and Drug  Administration  (the  "FDA")  has  determined  that
nicotine is a drug and that it has  jurisdiction  over  cigarettes and smokeless
tobacco  products,  as  nicotine-delivering   medical  devices,  and  therefore,
promulgated  regulations  restricting  and limiting the sale,  distribution  and
advertising  of  cigarette  and  smokeless  tobacco  products.  Cigars  were not
included in the FDA's  regulations.  The  prohibition  on retailers from selling
cigarettes,  cigarette  tobacco or smokeless tobacco to persons under the age of
18 and requiring  retailers to check the  photographic  identification  of every
person under the age of 27 became effective on February 28, 1997.

     Additional  efforts by the FDA to  increase  regulation  over  tobacco  and
tobacco-related  products  have been  forestalled  by a recent  decision  in the
Fourth  Circuit of the U.S. Court of Appeals.  In August 1998,  that court ruled
that the FDA lacks jurisdiction to regulate tobacco products and struck down all
the provisions of the FDA's 1996  regulations.  Brown & Williams v FDA, 153 F.3d
155 (4th Cir.  1998).  The Fourth  Circuit  denied a U.S.  Department of Justice
petition for rehearing by the Panel or en banc.

     On January 19, 1999,  the Solicitor  General filed a petition for a writ of
certiorari  requesting the U.S. Supreme Court review the August 1998 decision of
the Fourth Circuit.  On March 21, 2000 the U.S. Supreme Court ruled that the FDA
lacks the power to regulate tobacco products. The U. S. Department of Health and
Human Services ( the "HHS") Inspector  General issued a report in February 1999,
urging the Federal Trade  Commission to require  cigars to carry warning  labels
similar to those  contained on cigarette  packages.  This report marks the first
time that cigars have  specifically  been  identified  for increased  regulatory
oversight by a federal health agency.

                                      -16-

<PAGE>

         While the cigar  industry  has not been  subject to federal  regulatory
efforts to date, there can be no assurance that there will not be an increase in
federal  regulation in the future against cigar  manufacturers  or distributors.
The HHS report  indicates that federal  regulatory  effort directed toward cigar
manufacturers  and  distributors  may be increasingly  likely.  The costs to the
Company of increased government regulations could have a material adverse effect
on the Company's business and results of operations.

         In  addition,  the majority of states  restrict or prohibit  smoking in
certain public places and restrict the sale of tobacco products to minors. Local
legislative  and  regulatory  bodies  have also  increasingly  moved to  curtail
smoking by  prohibiting  smoking in certain  buildings  or areas or by requiring
designated  "smoking" areas. Further restrictions of a similar nature could have
an adverse effect on the sales or operations of the Company.  Numerous proposals
also have been  considered at the state and local level  restricting  smoking in
certain  public  areas,  regulating  point of sale  placement  and promotion and
requiring warning labels.

         Federal law has required health  warnings on cigarettes  since 1965 and
on smokeless  tobacco  since 1986.  Although  there is no federal law  currently
requiring  that  cigars or pipe  tobacco  carry such  warnings,  California  has
enacted  legislation  commonly  referred to as  "Proposition  65" requiring that
"clear  and  reasonable"  warnings  be given to  consumers  who are  exposed  to
chemicals known to the State to cause cancer or reproductive toxicity, including
tobacco  smoke  and  several  of its  constituent  chemicals.  Although  similar
legislation has been introduced in other states, the Company is not aware of any
action  taken.  There can be no assurance  that such  legislation  introduced in
other  states  will not be passed in the  future or that other  states  will not
enact  similar  legislation.  Consideration  at both the federal and state level
also has been given to  consequences of tobacco on others that are not presently
smoking  (so-called  "second-hand"  smoke).  There  can  be  no  assurance  that
regulations  relating  to  second-hand  smoke  will not be  adopted or that such
regulations or related  litigation  would not have a material  adverse effect on
the Company's results of operations or financial condition.

     The U.S.  Environmental  Protection Agency (The"EPA") published a report in
January  1993 with  respect to the  respiratory  health  effects of  second-hand
smoke, which concluded that widespread  exposure to environmental  tobacco smoke
presents a serious  and  substantial  public  health  concern.  Issuance  of the
report,  which is based primarily on studies of passive cigarette smokers,  lead
to further legislation designed to protect  non-smokers.  Also, a study recently
published in the Journal of Science  reported that a chemical found in cigarette
smoke has been found to cause genetic  damage in lung cells that is identical to
damage  observed in many  malignant  tumors of the lung and,  thereby,  directly
links lung cancer to smoking.  The study and these reports could affect  pending
and future tobacco regulation and litigation.

         Increased  cigar  consumption  and the publicity that such increase has
received  may  increase  the  risk of  additional  regulation.  There  can be no
assurance  as to the  ultimate  content,  timing,  or effect  of any  additional
regulation of tobacco products by any federal,  state, local or regulatory body,
and there can be no assurance that any such  legislation or regulation would not
have a material adverse effect on the Company's business.

         Litigation.  Historically,  the cigar  industry  has  experienced  less
health-related  litigation than the cigarette and smokeless  tobacco  industries
have experienced.

                                      -17-

<PAGE>

         Litigation against the cigarette industry has historically been brought
by individual  cigarette smokers. The United States Supreme Court has ruled that
federal legislation relating to cigarette labeling  requirements preempts claims
based on failure to warn consumer about the health hazards of cigarette smoking,
but does not preempt claims based on express warranty, misrepresentation, fraud,
or  conspiracy.  To date,  individual  cigarette  smokers'  claims  against  the
cigarette  industry  appear to have been  generally  unsuccessful.  However,  in
February 1999, a jury in California awarded plaintiffs a total of $51,500,000 in
compensatory and puntive damages.

         Current  tobacco  litigation   generally  falls  within  one  of  three
categories:  class actions,  individual actions (which have been filed mainly in
the State of Florida)  or actions  brought by  individual  States  generally  to
recover Medicaid costs allegedly attributable to tobacco-related  illnesses. The
pending  actions  allege a broad  range of  injuries  resulting  from the use of
tobacco  products  or  exposure  to  tobacco  smoke and seek  various  remedies,
including  compensatory  and,  in some cases,  punitive  damages  together  with
certain  types  of  equitable  relief  such  as  the  establishment  of  medical
monitoring  funds and  restitution.  The major tobacco  companies are vigorously
defending these actions.

     In May 1996,  the Fifth  Circuit  Court of  Appeals  in  Castano v American
Tobacco,  et al.  reversed a  Louisianan  district  court's  certification  of a
nationwide class consisting essentially of nicotine dependent cigarette smokers.
Notwithstanding  the dismissal,  new class actions  asserting  claims similar to
those in  Castano  have  recently  been filed in certain  states.  To date,  two
pending class actions against major cigarette manufacturers have been certified.
The first  class is  limited  to  Florida  citizens  allegedly  injured by their
addiction to  cigarettes;  the other is limited to flight  attendants  allegedly
injured through exposure to second-hand  smoke.  The tobacco  industry  recently
negotiated  settlements  totaling more than $240 billion with the states seeking
reimbursement for expenditures by state-funded medical programs for treatment of
tobacco related illnesses.

                                      -18-

<PAGE>

         The  federal  government  has to  sued  the  tobacco  industry  seeking
reimbursement for billions of dollars spent by government held programs to treat
smoking-related  illnesses. This litigation could have a material adverse affect
on the profitability of tobacco and tobacco related products.

         While the cigar industry has not been subject to similar health-related
litigation to date, there can be no assurance that there will not be an increase
in  health-related  litigation  in the future  against  cigar  manufacturers  or
distributors.  The costs to the Company of defending  prolonged  litigation  and
settlement or successful prosecution of any health-related litigation could have
a material adverse effect on the Company's business and results of operation.

         Excise Tax.  Cigars long have been subject to federal,  state and local
excise taxes,  and such taxes  frequently  have been increased or proposed to be
increased, in some cases significantly, to fund various legislative initiatives.
The federal excise tax rate on large cigars (weighing more than three pounds per
thousand cigars) is 18.06% of the manufacturer's selling price, capped at $42.50
per thousand cigars.

         Based on scheduled  increases to the federal  excise tax on cigarettes,
which result in  proportionate  tax  increases to the federal  excise tax on all
other  tobacco  products,  the tax on large  cigars is scheduled to be raised to
20.71% and capped at $48.75 per thousand large cigars on January 1, 2002.

         The government has proposed additional  increases in the federal excise
tax on cigarettes which, if enacted as proposed,  would proportionately increase
the tax on large  cigars by over an  additional  60% over the already  scheduled
increases. In addition, proposed is an acceleration of the effective date of the
scheduled  January 1, 2002 increase to become  effective at a much earlier time.
The Company believes that the enactment of significantly  increased excise taxes
could have a material adverse effect on the business of the Company. The Company
is unable to predict the  likelihood  of the passage or the  enactment of future
increases in tobacco excise taxes as they relate to cigars.

         Tobacco  products also are subject to certain state and local taxes. As
evidenced by the passage of the Proposition 10 referendum in California,  an act
used to  fund  early  childhood  development  programs,  children's  health  and
development  concerns  at the state level  exert  pressure  to increase  tobacco
taxes. Proposition 10, which became effective on January 1, 1999, raised the tax
on cigars in  California  from  26.17% of the  manufacturer's  selling  price to
61.53%.

         The number of states that impose  excise  taxes on cigars is  currently
44. Of the states without tobacco taxes, a proposal to add such taxes is pending
in West Virgina. State cigar excise taxes are not subject to caps similar to the
federal  excise tax. From time to time,  the imposition of state and local taxes
has had some impact on sales regionally. The enactment of new state excise taxes
and the  increase in existing  state  excise taxes are likely to have an adverse
effect on regional sales as cigar consumption generally declines.

                                      -19-

<PAGE>

         2. MISCELLANEOUS GOVERNMENT REGULATION.

         The  United  States  Food and Drug  Administration  through  the United
States Food,  Drug and Cosmetic Act and the Fair  Packaging and Labeling Act and
other various rules and regulations regulate, among other things, the purity and
packaging  of HBA  products and  fragrances  and  cosmetic  products and various
aspects of the  manufacture  and  packaging of other  grocery  items sold by the
Company.  Similar  statutes are in effect in various states.  Manufacturers  and
distributors  of such  products  are also  subject  to the  jurisdiction  of the
Federal Trade Commission with respect to such matters as advertising content and
other  trade  practices.   To  the  Company's  knowledge,  it  only  deals  with
manufacturers  and  manufactured  products in a manner which  complies with such
regulations   and  who   periodically   submit  their  products  to  independent
laboratories for testing. However, the failure by the Company's manufacturers or
suppliers  to comply with  applicable  government  regulations  could  result in
product recalls that could adversely affect the Company's relationships with its
customers. In addition, the extent of potentially adverse government regulations
which might arise from future  legislation  or  administrative  action cannot be
predicted.

         The Company is not aware of any government  regulation directly related
to internet sales different from traditional  marketing but immense interest has
been  indicated on policing the internet  focusing on contact and access but the
nature of the products marketed by the Company over the internet does not appear
to involve any of such concerns beyond product labeling and advertising  content
which would apply regardless of the medium in which the products are sold.

                                      -20-

<PAGE>

ITEM 2:  DESCRIPTION OF PROPERTY

     The Company's corporate offices and administrative headquarters are located
in Syosset, New York.

     The  Company  maintains  satellite  offices in  Pennsylvania,  New  Jersey,
Florida.

     Warehousing   facilities   for   BeautyBuys  are  located  in  New  Jersey.
Warehousing  facilities  for  Netcigar  are  located  in  Florida.  The  Company
maintains  regular  warehousing  arrangement  on a contract  basis for Dealbynet
throughout the northern quadrant of the United States.

ITEM 3:  LEGAL PROCEEDINGS

     The Company is a party to a number of legal proceedings as either plaintiff
or defendant  in  connection  with claims made for goods sold and various  other
aspects  of its  business,  all  of  which  are  considered  routine  litigation
incidental to the business of the Company. The Company is not aware of any other
litigation  pending which might be  considered  material and not in the ordinary
course of business.

     No other legal  proceedings were terminated during the fiscal quarter ended
December 31, 2000 (other than routine  litigation  incidental to the business of
the Company).

ITEM 4:  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     During the fourth quarter of 2000 no matters were submitted for shareholder
approval.

                                      -21-

<PAGE>

                                     PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
         STOCKHOLDER MATTERS

     The  Company's  common  stock  trades on NASDAQ  Small Cap under the Symbol
"SYBR",  and on the Boston Stock  Exchange  under the Symbol  "SYN".  The NASDAQ
Stock Market,  which began  operation in 1971, is the world' . first  electronic
securities  market  and the  fastest  growing  stock  market in the U.S.  NASDAQ
utilizes today's information  technologies -computer and  telecommunications- to
unite its participants in a screen-based,  flowerless  market. It enables market
participants  to compete  with each  other for  investor  orders in each  NASDAQ
security  and   surveillance  of  thousands  of  securities.   This  competitive
marketplace,  along with the many products and services available to issuers and
their  shareholders,  attracts today's largest and fastest growing  companies to
NASDAQ.   These  include   industry   leaders  in   computers,   pharmaceutical,
telecommunications,  biotechnology,  and financial  services.  More domestic and
foreign  companies list on NASDAQ than on all other U.S. stock markets combined.
The high and low sales prices in the NASDAQ  Small Cap Market for the  Company's
Common  Stock,  as  reported  by the  NASDAQ  for  each of the  quarters  of the
Company's two most recent fiscal years are as follows:

COMMON STOCK

Quarter Ended               High              Low
-------------             -------           -------
March 31, 1999               6.47             2.19
June 30, 1999                4.13             1.79
September 30, 1999           2.10              .89
December 31, 1999            4.63             1.28
March 31, 2000               4.13             2.41
June 30, 2000                3.13              .81
September 30, 2000           1.41              .75
December 31, 2000            1.03              .56
March 31, 2001               1.09              .50

     On March 31,  2000,  the Company had  approximately  6500  shareholders  of
record,  with much of the  stock  being  held in street  name.  The  Company  is
currently listed on NASDAQ Small Cap.

     The Company has never paid any  dividends  on its Common Stock and does not
presently  intend to pay any  dividends on the Common  Stock in the  foreseeable
future.

         There is a  standing  order by NASDAQ to delist  the  Company's  common
stock from the NASDAQ  exchange issued October 2000 for failure of the Company's
stock to maintain the required $1 bid price as quoted on NASDAQ, which order has
been  stayed and the right of the  Company to attempt to bring the market  price
for its common stock back into  compliance  extended until April 20, 2001.  Also
see "Forward Looking  Statements and Contrary  Statements No. 7 Possible Loss of
NASDAQ Small Cap Listing" infra for further details.

     The Company has  proposed and  received  the minimum  shareholder  approval
necessary for a reverse split of the Company's stock in  denominations of from 1
for 2 up to 1 for 5 shares  subject to Board of  Directors  final  authority  to
determine,  as the Company's plan to satisfy NASDAQ  requirements  regarding the
market  price for the  Company's  stock to  enable  continued  NASDAQ  Small Cap
listing.  Provided  market  conditions  do not improve  sufficient  to bring the
market  price of the  Company's  stock  again  above $1 bid  without use of such
reverse  split it is the intent of the Company to go forward  with such  reverse
split in denominations yet to be determined.

     Refer to the Company's  Consolidated  Statements of Changes in Stockholders
Equity in the Company's audited financial statements included in this report for
information on transfers of equity securities during fiscal year 2000.

                                      -22-

<PAGE>


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
         OF OPERATIONS

OVERVIEW

     Synergy  Brands  Inc.  (NASDAQ:  SYBR) and its  consolidated  subsidiaries,
("SYBR"  or  "the  Company")  have  developed,  operate  and  continue  to  seek
opportunities to establish,  Internet  Businesses directed at sale of variety of
products as well as  Partnering  and seeking to partner or invest with  advanced
technologies to enhance the Company's properties and participate in new ventures
synergistic with the other operations of the Company (Internet  Infrastructure),
including   establishment  of  strategic   contacts  and  alliances  with  other
companies.

     SYBR's Internet strategy includes the internal development and operation of
subsidiaries  as well as the taking of  strategic  positions  in other  Internet
companies  that have  demonstrated  synergies with SYBR's core  businesses.  The
Company's  strategy also envisions and promotes  opportunities  for  synergistic
business  relationships among the Internet companies within its portfolio.  SYBR
and its  consolidated  subsidiaries  have  developed  Internet  properties  that
facilitate  internet  product  sales and  procurement  as well as  strategically
partnering with off line and on- line media companies to build revenues.  SYBR's
business  strategies are focused on developing  business  opportunities in three
related  sectors  Business to  Consumer  (B2C)  Business  to Business  (B2B) and
Enterprise  Integration  (EI).  At March 31, 2001 SYBR's  Internet  subsidiaries
included BeautyBuys.com (100% voting interest through the Company's wholly owned
subsidiary SYBR.com Inc.) Netcigar.com (wholly owned by SYBR.com Inc.), SYBR.com
Inc. as well as PHS Group (a subsidiary of  BeautyBuys.com  Inc.).  Supply Chain
Supply Chain Technologies Inc. (wholly owned by SYBR.com) and Dealbynet.com Inc.
(wholly owned by Supply Chain  Technologies  Inc.)  BeautyBuys.com  is a leading
online Business to Consumer beauty  department  store consisting of thousands of
unique nationally branded beauty products. In addition the Company has developed
through   BeautyBuys.com  Inc.  Dealbynet.com  as  an  internet  domain  further
developed  independently  as  SYBR's  supply  chain  integration  model  for its
Business to Business  platform being developed in the Health and Beauty (HBC) as
well as grocery businesses. Netcigar.com is a leading online retailer of premium
cigars and other related luxury items. PHS is the Company's fulfillment platform
for its  Business to  Business  Internet  operations.  The  facility  allows for
automated order processing, inventory management and customer service. PHS Group
Inc. is a  subsidiary  of  BeautyBuys.com  Inc.  Supply Chain  Technologies  was
recently  formed to  utilize,  further  develop  and market a parallel  internet
platform  to  that  developed  by  SYBR's  subsidiary   Dealbynet   designed  to
accommodate   distribution   and  inventory   management   logistics  for  other
industries.

                                      -23-

<PAGE>


     SYBR over the last fiscal  year has also  established  strategic  alliances
with media and  technology  partners in a way that  minimizes cash outlay for by
offering equity in SYBR for media and technology credits. With such transactions
not only does SYBR  conserve  its cash assets but also it gains the  interest of
important media partners.

     In November of 1999 SYBR sold a 50% voting  interest in  BeautyBuys.com  to
Sinclair Broadcast Group (NASDAQ: SBGI), the largest U.S. independent Television
broadcaster (See Form 8K filed 12/7/99). Sinclair owns 62 television stations in
40 U.S. markets reaching  approximately 25% of the U.S.  population.  As part of
the purchase Sinclair also acquired a 16.5% equity stake in SYBR, thereby making
Sinclair the largest  shareholder  of SYBR.  Subsequently  in December 2000 SYBR
made a strategic  sale of a portion of its television  advertising  credits from
Sinclair to ICON  International,  one of the largest media barter enterprises in
the United States, for a combination of cash and other trade credits. As part of
the sale Sinclair reconveyed to SYBR Sinclair's stock interest in BeautyBuys.com
making such again a wholly owned subsidiary of SYBR.

     The  Company has  adopted a strategy  of seeking  opportunities  to realize
gains through  investments or having separate  subsidiaries or affiliates buy or
sell minority  interests to outside  investors.  The Company  believes that this
strategy  provides the ability to increase  shareholder value as well as provide
capital to support the growth in the Company's subsidiaries and investments. The
Company  expects to continue to develop and refine the  products and services of
its  businesses  focusing on the internet as the primary  mode of  distribution,
with the goal of increasing revenue as new Products are commercially introduced,
and to continue to pursue the  acquisition of or the  investment in,  additional
Internet  companies.  The Company  will seek to continue to attract  traditional
media  investments,  partner with advanced value added technologies that will be
synergistic to its internet  platforms as well as partner with existing internet
companies  to achieve its goals of building a  strategic  portfolio  of internet
assets.

     The  present  focus of the  Company is on product  sales  through  internet
channels on a B2C and B2b basis and on the utilization of proprietary technology
to accomplish this objective.

                                      -24-

<PAGE>

RESULTS OF OPERATIONS

     YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999.

     Sales for fiscal year 2000 rose 57% to $20.7  million.  The  Company's  B2B
operation, Dealbynet,  represented approximately 80% of the total sales with the
balance attributable to Proset, BeautyBuys.com and NetCigar.com.  Since 1998 the
Company  has  experienced  a  compounded  sales  growth  greater  than 50%.  The
Company's cash flow from operations totaled $996,000, or $.06 per share, for the
4th quarter 2000 as compared to a loss from  operations  of $109,565,  or ($.01)
per share, for the same period in 1999.

     Operating  margins  were lower by $300,000  from the prior year.  In fiscal
1999 the  company's  gross  margin was  increased  by about  $800,000 due to the
acquisition  of the salon hair care  business in  connection  with the  Sinclair
transaction in November 1999. Adjusting for this transaction,  operating margins
in fiscal 2000 would have  increased by about  $500,000 as compared to 1999.  In
addition the sale of media by  BeautyBuys  to ICON was  classified  as a capital
transaction.  The net cash  proceeds  from the sale of media  totaled about $2.2
million.

     Operating  expenses  increased to $8.6 million from $7.8  million.  However
excluding  non-cash  charges  (including  minority  interests  and  discontinued
operations),  depreciation & amortization,  and the ICON  transaction,  net cash
used from  operations  totaled  $960,909  for fiscal  2000 as  compared  to $3.3
million  in  1999.  The  company's   operations  benefited  from  its  strategic
relationship  with its largest  shareholder,  Sinclair and its new  relationship
with ICON as well as the increase of its B2B revenue base.  The company  reduced
its  operating  cash flow  requirements  from $3.3 million to $960,909 in Fiscal
2000 while almost doubling its revenues for the same period. In fiscal 2000 $3.4
million of the total of $8.6 million were operating cash expenses. The company's
gross profit of $1.3 million  together  with its $2.2 million cash gain from the
sale of media to ICON allowed the company to increase its business and cover its
operating  requirements  internally.  Net loss  increased  to $7.8  million as a
result of the $8.6 million of operating expenses.  However, 58% of the loss were
non-cash charges.  Depreciation and amortization  amounted to 8% of the net loss
and the ICON  transaction  covered 26% of the net loss,  thus resulting in a Pro
Forma loss of less the $1 million for Fiscal 2000.  B2C sales  increased by 102%
to $1.5 million in Fiscal 2000 as compared to 1999. B2B sales  increased by 587%
to $16.5  million in 2001 as compared to $2.4 Million  from the prior year.  The
Company  continued its initial model of Leveraging its  non-Internet  operations
into  its  B2C  operations  by  maintaining  Internal  fulfillment  centers  for
BeautyBuys.com and NetCigar.com. The Company's strategy of using the Internet as
a low cost marketing  network has Enabled its warehousing  operations to capture
additional  gross profit while  Servicing its core salon hair care  distribution
business.  The same is expected to be applied to the  Company's  B2B  operations
except that multiple  logistical points will be developed as well as streamlined
Distribution that would utilize the internet as a tool.

                                      -25-

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

     As of December 31, 2000,  the Company's net tangible  assets have increased
from $2.9 million ($.16 per share) to $4.3 million ($.24 per share). As a result
of  exchanging  media assets  acquired from The Sinclair  Broadcast  Group in an
Equity  transaction,  the Company  received a cash infusion of $2.2 million from
ICON  International.  The  Company  attributes  these  favorable  results to its
strategic  relationships with ICON International and Sinclair Broadcast Group as
well as the development of dealbynet.com.

     The  Company's  liquidity  doubled  to $2.2  million  in fiscal  2000.  The
Company's internal resources and line of credit with GE together with developing
relationships with its primary vendors,  should allow the Company to achieve its
2001 results without raising external funds from the capital markets.

     The  Company's  operating  forecasts  should not require any major  capital
transactions,  including offerings and/or private placement transactions for the
remainder of fiscal 2001.  With the net tangible  assets  having grown to almost
$4.3 million,  the Company  increased  its cash flow from  operations in the 4th
quarter  of  2000 to a  record  level  and  expects  continued  cash  flow  from
operations  in  2001.   Sales  are  being  financed  by  GE  Capital  through  a
conventional  line of credit and the Company  maintains a  traditional  business
model  that  has  enabled  the  Company  to  grow  during  the  recent  dot  com
consolidation and correction.  Furthermore, all of the Company's businesses rely
on the marketing and merchandising of nationally  branded products together with
manufacturers  that already spend billions of dollars to build their brands. The
manufacturers of grocery products have encouraged  DealByNet to use its platform
to reduce product  distribution  costs through  logistics.  These potential cost
reductions could be very substantial and could result in the acceleration of the
usage of the DealByNet  grocery exchange by the 500  billion-dollar  Grocery and
Health and Beauty care industry.

         The  Company  plans to continue  to partner  with media and  technology
companies on a media for equity basis.  The Company  believes that this strategy
allows its operating subsidiaries to brand and expand their respective franchise
without causing  adverse  ramifications  on the Company's  working  capital.  In
addition the Company plans to leverage its media assets to acquire  interests in
related companies that would complement its expansion strategy

         In December 1999, the Securities and Exchange Commission staff released
Staff Accounting Bulletin No. 101, Revenue  Recognition in Financial  Statements
(SAB  101),  which  provides  guidance  on  the  recognition,  presentation  and
disclosure  of  revenue  in  financial  statements.  SAB 101  did not impact the
Company's revenue recognition  policies.  In June 1998, the Financial Accounting
Standards  Board  (FASB)  issued  Statement of  Financial  Accounting  Standards
No. 133   (SFAS 133),   Accounting  for  Derivative   Instruments   and  Hedging
Activities.  SFAS 133 is  effective  for fiscal years  beginning  after June 15,
2000, and requires all  derivative  instruments be recorded on the balance sheet
at fair value. Changes in the fair value of derivatives are recorded each period
in  current  earnings  or other  comprehensive  income,  depending  on whether a
derivative  is  designed as part of a hedge  transaction  and if so, the type of
hedge transaction. Management does not believe the adoption of SFAS No. 133 will
have a material effect on the consolidated  financial statements because it does
not currently hold any derivative instruments.

                                      -26-

<PAGE>

         In  March 2000,  the  Emerging  Issues  Task  Force  (EITF) of the FASB
reached a consensus on EITF  Issue 00-2,  "Accounting  for Web Site  Development
Costs."  This  consensus  provides  guidance on what types of costs  incurred to
develop a web site should be capitalized or expensed.  The Company  adopted this
consensus in the third  quarter of 2000.  The Company's web sites were ready for
application  in  2001,  and  the  Company  will  begin  to  amortize  using  the
straight-line  method over the estimated  useful lives of the web sites,  not to
exceed 3 years.

         In  May 2000,  the  EITF  reached  a  consensus  on  EITF  Issue 00-14,
"Accounting  for Certain Sales  Incentives,"  which  addresses the  recognition,
measurement and income  statement  classification  for sales incentives (such as
discounts,  coupons and rebates) that a company  offers to its customers for use
in a single  transaction.  The  Company's  current  accounting  policies  are in
accordance with EITF  Issue 00-14,  which does not have a material impact on the
Company's financial statements.

         In  July 2000,  the  EITF  reached  a  consensus  on EITF  Issue 99-19,
"Reporting  Revenue Gross as a Principal versus Net as an Agent." This consensus
provides guidance on whether a company should recognize revenue in the amount of
the gross amount billed to the customer  because it has earned  revenue from the
sale of the goods or services or whether it should  recognize  revenue  based on
the net amount retained because,  in substance,  it has earned a commission from
the  vendor-manufacturer  of the goods or  services on the sale.  The  Company's
current accounting policies are in accordance with EITF Issue 99-19,  which does
not impact the Company's financial statements.

         In  July 2000,  the  EITF  reached  a  consensus  on EITF  Issue 00-10,
"Accounting  for  Shipping and Handling  Fees and Costs."  This  indicates  that
amounts  billed to a customer in a sales  transaction  related to  shipping  and
handling,  if any,  represents revenue to the vendor and should be classified as
revenue. As the Company currently classifies shipping fees charged to a customer
in net sales,  this consensus did not have an impact on the Company's  financial
statements.

         In  September 2000,  the EITF reached a final consensus with respect to
the  classification  of costs  related to shipping and handling  incurred by the
seller.  The Task Force  determined  that the  classification  of  shipping  and
handling  costs is an accounting  policy  decision  that should be disclosed.  A
company may adopt a policy of including  shipping and handling  costs in cost of
sales,  or if shipping costs or handling costs are  significant and not included
in cost of sales,  a company  should  disclose all such costs and the respective
line items on the income statement in which they are included.

SEASONALITY

     The Company  generally  experiences lower sales volume in the first quarter
and a stronger fourth quarter in its BsB operation.

     Sales of beauty care products and fragrances increase over traditional gift
giving  holidays such as  Christmas,  Mother's  Day,  Father's Day, and
Valentine's Day.

     Cigar product sales also increase during holiday periods and summer months,
but also sales spurts occur during periods of special sporting events.

INFLATION

     The Company believes that inflation, under certain circumstances,  could be
beneficial to the Company's business.  When inflationary pressures drive product
costs up, the  Company's  customers  sometimes  purchase  greater  quantities of
product  to  expand  their   inventories  to  protect  against  further  pricing
increases.  This enables the Company to sell greater quantities of products that
are sensitive to inflationary pressures.

     However,  inflationary  pressures frequently increase interest rates. Since
the Company is  dependent  on  financing,  any  increase in interest  rates will
increase the Company's credit costs, thereby reducing its profits.

                                      -27-

<PAGE>

FORWARD LOOKING INFORMATION AND CAUTIONARY STATEMENTS

     Other than the factual matters set forth herein,  the matters and items set
forth in this  report are  forward-looking  statements  that  involve  risks and
uncertainties.  The  Company's  actual  results may differ  materially  from the
results discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, the following:

         In addition to the other information in this Form 10-KSB, the following
risk factors should be carefully  considered in evaluating the Company  business
because these factors may have a significant  impact on its business,  operating
results and financial condition. As a result of the risk factors discussed below
and elsewhere in this Form 10-KSB and the risks discussed in the Company's other
SEC filings,  actual results could differ materially from those projected in any
forward-looking statements.

         1. THE COMPANY HAS INCURRED SUBSTANTIAL OPERATING LOSSES.

         While it is the Company's  goal to achieve  operating cash flow profits
during 2001,  the Company has  experienced  losses and negative cash flow in the
past  and,  even if the  Company  achieves  profitability,  it may be  unable to
sustain or increase the  Company's  profitability  in the future The Company has
been able to sustain its losses  through  barter  transactions  in the media and
technology  industries.   These  transactions  have  afforded  the  Company  the
utilization  of  technology  and media  assets  that were  needed to develop the
Company's  Internet  properties.  The Company's  operating model relies on these
types of transactions for its expansion.  Failure to attract barter transactions
and  alliances  may cause the  company  to incur  operating  losses  beyond  its
available resources.  However, the Company plans to limit its expansion if these
resources  are not  availabe,  rather  then  incur a risk of  expansion  without
meaningful alliances.

         2. INTERNET

         The internet  environment is new to business and is subject to inherent
risks as in any new developing business including rapidly developing  technology
with which to attempt to keep pace and level of acceptance and level of consumer
knowledge regarding its use.

         3. DEPENDENCE ON PUBLIC TRENDS.

         The Company's  business is subject to the effects of changing  customer
preferences  and the  economy,  both of which are  difficult to predict and over
which the Company has no control.  A change in either consumer  preferences or a
down-turn in the economy may affect the Company's business prospects.

         4. POTENTIAL PRODUCT LIABILITY.

         As a participant in the distribution chain between the manufacturer and
consumer,  the  Company  would  likely be named as a  defendant  in any  product
liability  action  brought by a consumer.  To date, no claims have been asserted
against the Company for product liability;  there can be no assurance,  however,
that such claims will not arise in the future.  Currently,  the Company does not
carry  product  liability  insurance.  In the event that any products  liability
claim is not fully funded by insurance,  and if the Company is unable to recover
damages  from the  manufacturer  or  supplier  of the  product  that caused such
injury,  the  Company  may be required to pay some or all of such claim from its
own funds. Any such payment could have a material adverse impact on the Company.

         5. RELIANCE ON COMMON CARRIERS.

         The  Company  does not utilize  its own trucks in its  business  and is
dependent, for shipping of product purchases, on common carriers in the trucking
industry.  Although  the Company  uses  several  hundred  common  carriers,  the
trucking  industry  is subject to strikes  from time to time,  which  could have
material  adverse  effect on the Company's  operations if  alternative  modes of
shipping  are  not  then  available.   Additionally  the  trucking  industry  is
susceptible to various natural disasters which can close transportation lanes in
any given region of the country.  To the extent  common  carriers are  prevented
from or delayed in utilizing local transportation lanes, the Company will likely
incur higher freight costs due to the limited  availability of trucks during any
such period that transportation lanes are restricted.

                                      -28-

<PAGE>


         6. COMPETITION.

         The Company is subject to  competition  in all of its  various  product
sale businesses.  While these industries may be highly  fragmented,  with no one
distributor  dominating  the  industry,  the  Company is subject to  competitive
pressures from other distributors based on price and service and product quality
and origin.

         7. LITIGATION

         The Company is subject to legal  proceedings  and claims which arise in
the ordinary course of its business. In the opinion of management, the amount of
ultimate  liability with respect to these actions will not materially affect the
financial  position,  results of  operations  or cash flows of the Company,  but
there can be no assurance as to this.

         8. POSSIBLE LOSS OF NASDAQ SMALL CAP LISTING.

         Synergy's  qualification for trading on the Nasdaq Small Cap system has
recently been questioned, the focus being on the market quotes for the Company's
stock,  the current bid price being below the minimum NASDAQ  standard of $1 and
having  been  below  such level for an  appreciable  period of time.  Nasdaq has
adopted,  and the Commission has approved,  certain  changes to its  maintenance
requirements  which became  effective as of February  28,  1998,  including  the
requirement  that a stock listed in such market have a bid price greater than or
equal to $1.00. The bid price per share for the Common Stock of Synergy has been
below $1.00 in the past and the Common  Stock has  remained on the Nasdaq  Small
Cap System because Synergy has complied with alternative  criteria which are now
eliminated  under the new rules. If the bid price dips below $1.00 per share, as
at present,  and is not brought above such level for a sustained  period of time
the  Common  Stock  could be  delisted  from the  Nasdaq  Small Cap  System  and
thereafter  trading would be reported in the NASD's OTC Bulletin Board or in the
"pink sheets." In the event of delisting  from the Nasdaq Small Cap System,  the
Common Stock would become subject to rules adopted by the

                                      -29-

<PAGE>

Commission regulating broker-dealer practices in connection with transactions in
"penny  stocks." The  disclosure  rules  applicable  to penny  stocks  require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized  list disclosure  document  prepared by the
Commission that provides information about penny stocks and the nature and level
of risks in the penny stock market. In addition, the broker-dealer must identify
its role, if any, as a market maker in the particular stock, provide information
with respect to market prices of the Common Stock and the amount of compensation
that the broker-dealer will earn in the proposed transaction.  The broker-dealer
must also provide the customer  with certain other  information  and must make a
special written  determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's  written agreement to the transaction.
Further,   the  rules  require  that  following  the  proposed  transaction  the
broker-dealer  provide the customer with monthly account  statements  containing
market  information  about  the  prices  of  the  securities.  These  disclosure
requirements  may have the effect of reducing  the level of trading  activity in
the secondary  market for a stock that becomes subject to the penny stock rules.
If the Common Stock became subject to the penny stock rules, many broker-dealers
may be unwilling to engage in transactions in the Company's  securities  because
of the added  disclosure  requirements,  thereby  making it more  difficult  for
purchasers of the Common Stock to dispose of their shares.  The Company's common
stock has  historically  remained at NASDAQ trading levels above $1 bid and such
historical  stability combined with the Company's  increasing  business share in
the market and its continuing  establishment as a viable force in the industries
wherein it participates  gives the Company  confidence that its subceptibilty to
market  deficiencies  is in a much lessened  state then in years past.  However,
presently the Company's  stock bid price is below $1 and NASDAQ has ordered that
the Company's stock be delisted,  unless the Company  institutes NASDAQ approved
plan designed to have the Company's  stock price increase above the $1 bid price
level by April 20,  2001 or  otherwise  by such date the  Company's  stock price
shall have risen above such level and have been sustained at such level or above
for a minimum  of 10 days.  It is  uncertain  at the date of this  report if the
Company shall be able to meet such conditions, although the Company is confident
that they can.

                                      -30-

<PAGE>

         9. RISKS OF BUSINESS DEVELOPMENT.

         The  Company  has  ventured  into new  lines  of  product  and  product
distribution (Cigars) (1997) (salon HBA products - (1999) and internet sales-see
B (Internet Sales)- (1998) and such product and product  distribution  lines are
expected to continue to  constitute  a material  part of the  Company's  revenue
stream.  With the addition of these new product and product  distribution  lines
the Company is hopeful of reaching and hopefully exceeding prior historic levels
of product sales and sales have increased. Because of the newness of these lines
of products to the Company,  the  Company's  operations in these areas should be
considered  subject to all of the risks  inherent in a new business  enterprise,
including the absence of a appreciable  operating history and the expense of new
product development. Various problems, expenses, complications and delays may be
encountered in connection with the development of the Company's new products and
methods of product  distribution.  These expenses must either be paid out of the
proceeds of future  offerings or out of generated  revenues and Company profits.
There can be no assurance as to the continued  availability of funds from either
of these sources.

         10. RAPIDLY CHANGING MARKET MAY IMPACT OPERATIONS.

         The market for the Company's products is rapidly changing with evolving
industry standards and frequent new product introductions.  The Company's future
success will depend in part upon its  continued  ability to enhance its existing
products and to introduce  new products and features to meet  changing  customer
requirements and emerging  industry  standards and to continue to have access to
such products from their sources on a pricing schedule  conducive to the Company
operating  at a profit.  The  Company  will have to  develop  and  implement  an
appropriate  marketing  strategy  for  each  of its  products.  There  can be no
assurance that the Company will successfully  complete the development of future
products or that the Company's  current or future  products will achieve  market
acceptance levels and be made available for sale by the Company conducive to the
Company's fiscal needs. Any delay or failure of these products to achieve market
acceptance  or  limits  on  their  availability  for sale by the  Company  would
adversely affect the Company's business. In addition,  there can be no assurance
that the  products  or  technologies  developed  by others  will not  render the
Company's products or technologies non-competitive or obsolete.

         Management  believes actions  presently being taken to meet and enhance
upon the  Company's  operating  and financial  requirements  should  provide the
opportunity for the Company to continue as a going concern. However,  Management
cannot predict the outcome of future  operations  and no  adjustments  have been
made to offset the outcome of this uncertainty.

                                      -31-

<PAGE>

         11. DEPENDENCE UPON ATTRACTING AND HOLDING.

         The  Company's  future  success  depends in large part on the continued
service of its key technical,  marketing,  sales and management personnel and on
its  ability to  continue  to  attract,  motivate  and retain  highly  qualified
employees.  Although the  Company's key employees  have stock  options,  its key
employees,  except for Mair Faibish,  the Company's Chief Executive Officer,  do
not  have  long  term   employment   contracts   assuring  of  their   continued
participation  in the  operations of the Company and may  voluntarily  terminate
their employment with the Company at any time. Competition for such employees is
intense and the process of locating technical and management  personnel with the
combination of skills and attributes  required to execute the Company's strategy
is often lengthy.  Accordingly,  the loss of the services of key personnel could
have a material adverse effect upon the Company's  operating  efforts and on its
research  and  development  efforts.  The Company  does not have key person life
insurance covering its management personnel or other key employees.

         12.EXTENSIVE   AND  INCREASING   REGULATION  OF  TOBACCO  PRODUCTS  AND
            LITIGATION MAY IMPACT CIGAR INDUSTRY.

         The  tobacco   industry  in  general  has  been  subject  to  extensive
regulation at the federal,  state and local levels. Recent trends have increased
regulation of the tobacco  industry.  Although  regulation  initially focused on
cigarette  manufacturers,  it has begun to have a broader impact on the industry
as a whole and may focus more directly on cigars in the future.  The increase in
popularity  of cigars  could lead to an  increase  in  regulation  of cigars.  A
variety of bills  relating to tobacco  issues have been  introduced  in the U.S.
Congress,  including bills that would (i) prohibit the advertising and promotion
of all  tobacco  products or restrict or  eliminate  the  deductibility  of such
advertising expense,  (ii) increase labeling requirements on tobacco products to
include,  among others  things,  addiction  warnings and lists of additives  and
toxins,  (iii) shift  control of tobacco  products and  advertisements  from the
Federal Trade  Commission (the "FTC") to the Food and Drug  Administration  (the
"FDA"),  (iv) increase tobacco excise taxes and (v) require tobacco companies to
pay for health care costs incurred by the federal  government in connection with
tobacco related  diseases.  Future  enactment of such proposals or similar bills
may have an adverse  effect on the results of operations or financial  condition
of the Company.

         In  addition,  a majority of states  restrict  or  prohibit  smoking in
certain public places and restrict the sale of tobacco products to minors. Local
legislative  and  regulatory  bodies  also have  increasingly  moved to  curtail
smoking by prohibiting  smoking in certain  buildings or areas or by designating
"smoking" areas.  Further restrictions of a similar nature could have an adverse
effect on the Company's  sales or operations,  such as banning counter access to
or display of premium  handmade  cigars,  or decisions  by retailers  because of
public pressure to stop selling all tobacco  products.  Numerous  proposals also
have been considered at the state and local level restricting smoking in certain
public areas,  regulating  point of sale  placement and promotions and requiring
warning labels.

                                      -32-

<PAGE>

         Increased  cigar  consumption  and  the  publicity  such  increase  has
received may  increase the risk of  additional  regulation.  The Company  cannot
predict the ultimate content,  timing or effect of any additional  regulation of
tobacco products by any federal,  state, local or regulatory body, and there can
be no  assurance  that any  such  legislation  or  regulation  would  not have a
material adverse effect on the Company's business.

         In addition  numerous tobacco  litigation has been commenced and may in
the  future  be  instituted,  all  of  which  may  adversely  affect  the  cigar
consumption  and  sale  and  may  pressure  applicable  government  entities  to
institute  further and stricter  legislation  to restrict and possibly  prohibit
cigar sale and  consumption,  any and all of which may have an adverse affect on
Company business (see "Government  Regulation - Tobacco Industry  Regulation and
Tobacco Industry Litigation" supra).

         13. RISKS RELATING TO MARKETING OF CIGARS.

         The Company primarily will distribute premium handmade cigars which are
hand-rolled and use tobacco aged over one year. The Company  believes that there
is an abundant supply of tobacco available through its supplier in the Dominican
Republic for the types of premium  handmade  cigars the Company  primarily  will
sell.  However,  there can be no  assurance  that  increases in demand would not
adversely affect the Company's ability to acquire higher priced premium handmade
cigars.

         While the cigar industry has experienced  increasing  demand for cigars
during the last several  years,  there can be no  assurance  that the trend will
continue. If the industry does not continue as the Company anticipates or if the
Company  experiences  a reduction in demand for whatever  reason,  the Company's
supplier may temporarily accumulate excess inventory which could have an adverse
effect on the Company's business or results of operations.

                                      -33-

<PAGE>

         14. NO DIVIDENDS LIKELY.

         No dividends have been paid on the Common Stock since  inception,  nor,
by  reason  of its  current  financial  status  and its  contemplated  financial
requirements,  does Synergy  contemplate or anticipate paying any dividends upon
its Common Stock in the foreseeable future.

         15. POTENTIAL LIABILITY FOR CONTENT ON THE COMPANY'S WEB SITE.

         Because the Company posts product  information and other content on its
Web site,  the Company  faces  potential  liability for  negligence,  copyright,
patent,  trademark,  defamation,  indecency and other claims based on the nature
and  content of the  materials  that the  Company  posts.  Such claims have been
brought,   and  sometimes   successfully   pressed,   against  Internet  content
distributors.  In  addition,  the  Company  could be exposed to  liability  with
respect to the unauthroized  duplication of content or unauthroized use of other
parties'  proprietary  technology or infiltration  into the Company's  system by
unauthorized  personnel.   Although  the  Company  maintains  general  liability
insurance,  its insurance may not cover potential claims of this type or may not
be adequate to indemnify for all liability  that may be imposed.  Any imposition
of  liability  that is not  covered by  insurance  or is in excess of  insurance
coverage could harm the Company's business.

         16.  THE  COMPANY'S  NET  SALES  WOULD  BE  HARMED  IF  IT  EXPERIENCES
              SIGNIFICANT CREDIT CARD FRAUD.

         A failure to adequately  control  fraudulent  credit card  transactions
would harm the Company's net sales and results of operations because it does not
carry  insurance  against such risk.  Under current credit card  practices,  the
Company is liable for fraudulent  credit card  transactions  because it does not
obtain a cardholder's signature.

         17. THE COMPANY DEPENDS ON CONTINUED USE OF THE ITNTERNET AND GROWTH OF
             THE ONLINE PRODUCT PURCHASE MARKET.

         The Company's future revenues and profits, if any, substantially depend
upon the widespread acceptance and use of the internet as an effective medium of
business and  communication by the Company's target  customers.  Rapid growth in
the use of and interest in the Internet has occurred only recently. As a result,
acceptance  and use may not  continue  to develop  at  historical  rates,  and a
sufficiently  broad base of  consumers  may not adopt,  and continue to use, the
Internet and other online services as a medium of commerce.

                                      -34-

<PAGE>

         In addition,  the  Internet  may not be accepted as a viable  long-term
commercial marketplace for a number of reasons, including potentially inadequate
development of the necessary network  infrastructure  or delayed  development of
enabling technologies and performance  improvements.  The Company's success will
depend,   in  large  part,   upon  third   parties   maintaining   the  Internet
infrastructure  to  provide a reliable  network  backbone  with the speed,  data
capacity,  security and hardware  necessary  for  reliable  Internet  access and
services.

         18.IF THE COMPANY  DOES NOT RESPOND TO RAPID  TECHNOLOGY  CHANGES,  ITS
            SERVICES COULD BECOME OBSOLETE AND ITS BUSINESS WOULD BE SERIOUSLY
            HARMED.

         As the Internet and online commerce  industry evolve,  the Company must
license  leading  technologies  useful in its  business,  enhance  its  existing
services,  develop new services  and  technology  that address the  increasingly
sophisticated  and varied  needs of its  prospective  customers  and  respond to
technological  advances  and  emerging  industry  standards  and  practices on a
cost-effective  and timely  basis.  The Company may not be able to  successfully
implement   new   technologies   or  adapt  its   proprietary   technology   and
transaction-processing  systems to customer  requirements  or emerging  industry
standards.  If the  Company  is unable to do so, it could  adversely  impact its
ability to build on its varied businesses and attract and retain customers.

         19. GOVERNMENTAL  REGULATION OF THE INTERNET AND DATA TRANSMISSION OVER
             THE INTERNET COULD AFFECT THE COMPANY'S BUSINESS.

         Laws and regulations  directly applicable to communications or commerce
over the Internet are becoming more  prevalent.  The most recent  session of the
U.S.   Congress  resulted  in  Internet  laws  regarding   children's   privacy,
copyrights,  taxation and the transmission of sexually  explicit  material.  The
European Union recently enacted its own privacy regulations. In particular, many
government  agencies  and  consumers  are focused on the privacy and security of
personal records. The law of the Internet,  however,  remains largely unsettled,
even in areas where there has been some legislative action. It may take years to
determine whether and how existing laws such as those governing  privacy,  libel
and taxation  apply to Internet  transactions  such as practiced by the Company.
The rapid growth and  development  of the market for online  commerce may prompt
calls for more stringent consumer protection laws, both in the United States and
abroad,  that may impose  additional  burdens on companies  conducting  business
online. The adoption or modification of laws or regulations relating to Internet
businesses  could  adversely  affect the Company's  ability to attract and serve
customers.

                                      -35

<PAGE>

         20. POTENTIAL FUTURE SALES OF COMPANY STOCK.

         The majority of the shares of common  stock of the Company  outstanding
are  "restricted  securities"  as that term is defined  in Rule 144  promulgated
under the Securities Act of 1933. In general under Rule 144 a person (or persons
whose shares are  aggregated)  who has satisfied a one year holding  period may,
under  certain  circumstances,  sell within any three  month  period a number of
shares which does not exceed the greater of 1% of the then outstanding shares of
common stock or the average weekly trading volume during the four calendar weeks
prior to such sale. Rule 144 also permits, under certain circumstances, the sale
of  shares  by a  person  who is not an  affiliate  of the  Company  and who has
satisfied a two year  holding  period  without,  any  quantity  limitation.  The
holders of the shares of the  outstanding  common  stock of the  Company  deemed
"restricted  securities" have already  satisfied at least their one year holding
period  or will do so with the  next  fiscal  year,  and  such  stock is  either
presently  or within the next fiscal year will become  eligible  for sale in the
public market (subject to volume  limitations of Rule 144 when applicable).  The
Company is unable to predict  the effect  that sales of its common  stock  under
Rule 144, or  otherwise,  may have on the then  prevailing  market  price of the
common stock.  However,  the Company believes that the sales of such stock under
Rule 144 may have a depressive effect upon the market.

         21. THE COMPANY MAY NOT BE ABLE TO CONTINUE ATTRACTING NEW CUSTOMERS.

         The success of the  Company's  business  model depends in large part on
its continued  ability to increase its number of  customers.  The market for its
businesses  may grow more  slowly  than  anticipated  or become  saturated  with
competitors, many of which may offer lower prices or broader distribution.  Some
potential customers may not want to join the Company's networks because they are
concerned  about the  possibility of their  products being listed  together with
their  competitors'  products.  If the  Company  cannot  continue  to bring  new
customers to its sites or maintain its existing  customer  base, the Company may
be unable to offer the  benefits of the network  model at levels  sufficient  to
attract and retain customers and sustain its business.

                                      -36-

<PAGE>

         22. BECAUSE THE COMPANY'S  INDUSTRY IS HIGHLY  COMPETITIVE  AND HAS LOW
             BARRIERS TO ENTRY, THE COMPANY MAY NOT BE ABLE TO EFFECTIVELY
             COMPETE.

         The U.S. market for e-commerce services is extremely  competitive.  The
Company  expects  competition to intensify as current  competitors  expand their
product  offerings  and  new  competitors  enter  the  market,  in  addition  to
competition from internally developed solutions by individual organizations.

         The  principal  competitive  factors  are the  quality  and  breadth of
services  provided,  potential for  successful  transaction  activity and price.
E-commerce  markets  are  characterized  by rapidly  changing  technologies  and
frequent  new  product  and  service  introductions.  The  Company  may  fail to
introduce new online auction or other market  pricing  formats and features on a
timely  basis or at all. If its fails to introduce  new service  offerings or to
improve its existing service offerings in response to industry developments,  or
if its prices are not competitive, the Company could lose customers, which could
lead to a loss of revenues.

         Because there are  relatively  low barriers to entry in the  e-commerce
market, competition from other established and emerging companies may develop in
the future.  Many of the Company's  competitors  may also have  well-established
relationships with the Company's existing and prospective  customers.  Increased
competition is likely to result in fee reductions, reduced margins, longer sales
cycles for the  Company's  services and a decrease or loss of its market  share,
any of which could harm its business, operating results or financial condition.

         Many of the Company's  competitors have, and new potential  competitors
may have, more experience  developing  Internet-based  software applications and
integrated purchasing solutions, larger technical staffs, larger customer bases,
more established  distribution  channels,  greater brand recognition and greater
financial,  marketing  and other  resources  than the Company  has. In addition,
competitors  may be able to develop  products and services  that are superior to
those of the Company or that achieve greater customer  acceptance.  There can be
no assurance that the e-commerce solutions offered by the Company's  competitors
now or in the future will not be  perceived  as superior to those of the Company
by either businesses or consumers.

                                      -37-

<PAGE>

         23.  THE  COMPANY'S  BUSINESS  MAY  SUFFER IF IT IS NOT ABLE TO PROTECT
              IMPORTANT INTELLECTUAL PROPERTY.

         The Company's ability to compete effectively against other companies in
its industry  will depend,  in part,  on its ability to protect its  proprietary
technology and systems designs  relating to its  technologies.  The Company does
not know  whether  it has been or will be  completely  successful  in doing  so.
Further,  its competitors may independently  develop or patent technologies that
are substantially equivalent or superior to those of the Company.

         24. THE COMPANY MAY NOT BE ABLE TO MAINTAIN THE  CONFIDENTIALITY OF ITS
             PROPRIETARY KNOWLEDGE.

         The Company relies,  in part, on contractual  provisions to protect its
trade secrets and proprietary  knowledge.  These agreements may be breached, and
the Company may not have adequate remedies for any breach. Its trade secrets may
also  be  known  without  breach  of  such  agreements  or may be  independently
developed by competitors.  Its inability to maintain the  proprietary  nature of
its  technology  could harm its business,  results of  operations  and financial
condition by adversely affecting its ability to compete.

         25. OTHERS MAY ASSERT THAT THE  COMPANY'S  TECHNOLOGY  INFRINGES  THEIR
             INTELLECTUAL PROPERTY RIGHTS.

         The  Company  believes  that  its  technology  does  not  infringe  the
proprietary rights of others.  However, the e-commerce industry is characterized
by the existence of a large number of patents and frequent claims and litigation
based on allegations of patent  infringement and violation of other intellectual
property rights.  As the e-commerce  market and the functionality of products in
the  industry  continues  to grow and  overlap,  the Company  believes  that the
possibility of an  intellectual  property  claim against it will  increase.  For
example, the Company may inadvertently infringe a patent of which it is unaware,
or there may be patent  applications now pending of which it is unaware which it
may be infringing when they are issued in the future,  or the Company's  service
or  systems  may  incorporate   third  party   technologies  that  infringe  the
intellectual  property  rights of others.  The  Company  has been and expects to
continue to be subject to alleged infringement claims. The defense of any claims
of  infringement  made  against  the  Company by third  parties,  whether or not
meritorious,  could  involve  significant  legal costs and require The Company's
management  to  divert  time  from  its  business  operations.  Either  of these
consequences  of an infringement  claim could have a material  adverse effect on
the Company's operating results. If the Company is unsuccessful in defending any
claims of infringement,  it may be forced to obtain licenses or to pay royalties
to  continue  to use its  technology.  The Company may not be able to obtain any
necessary  licenses on commercially  reasonable  terms or at all. If the Company
fails to obtain  necessary  licenses or other rights,  or if these  licenses are
costly,  its  operating  results may suffer  either from  reductions in revenues
through our inability to serve  customers or from  increases in costs to license
third-party technologies.

                                      -38-

<PAGE>

         26. THE COMPANY'S BUSINESS MAY BE ADVERSELY AFFECTED IF IT IS UNABLE TO
             CONTINUE TO LICENSE SOFTWARE THAT IS NECESSARY FOR ITS SERVICE
             OFFERING.

         Through  distributors,  the Company  licenses a variety of commercially
available Internet  technologies,  which are used in its services and systems to
perform key functions. As a result, the Company is to a certain extent dependent
upon continuing to maintain these  technologies.  There can be no assurance that
the Company would be able to replace the  functionality  provided by the much of
its purchased Internet technologies on commercially  reasonable terms or at all.
The absence of or any significant delay in the replacement of that functionality
could  have a  material  adverse  effect on the  Company's  business,  financial
condition and results of operations.

         27. THE  COMPANY'S  SYSTEMS  INFRASTRUCTURE  MAY NOT KEEP PACE WITH THE
             DEMANDS OF ITS CUSTOMERS.

         Interruptions of service as a result of a high volume of traffic and/or
transactions could diminish the attractiveness of the Company's services and its
ability to attract  and retain  customers.  There can be no  assurance  that the
Company will be able to accurately  project the rate or timing of increases,  if
any,  in the use of its  service,  or that it will be able to expand and upgrade
its systems and infrastructure to accommodate such increases in a timely manner.
The Company  currently  maintains  systems in the U.S.  Any failure to expand or
upgrade  its  systems  could have a material  adverse  effect on its  results of
operations and financial condition by reducing or interrupting  revenue flow and
by limiting its ability to attract new  customers.  Any such failure  could also
have a material  adverse  effect on the business of its  customers,  which could
damage the Company  reputation and expose it to a risk of loss or litigation and
potential liability.

         28. A SYSTEM FAILURE COULD CAUSE DELAYS OR  INTERRUPTIONS OF SERVICE TO
             THE COMPANY'S CUSTOMERS.

         Service offerings  involving complex technology often contain errors or
performance  problems.  Many  serious  defects are  frequently  found during the
period  immediately  following  introduction and initial  implementation  of new
services or enhancements to existing services.  Although the Company attempts to
resolve all errors that it believes would be considered serious by its customers
before  implementation,  its systems are not  error-free.  Errors or performance
problems could result in lost revenues or  cancellation  of customer  agreements
and may expose the Company to litigation and potential  liability.  In the past,
the Company has  discovered  errors in  software  used in the Company  after its
incorporation  into Company  sites.  The Company  cannot assure that  undetected
errors or  performance  problems in its existing or future  services will not be
discovered  or that known errors  considered  minor by it will not be considered
serious by its  customers.  The Company has  experienced  periodic  minor system
interruptions, which may continue to occur from time to time.

                                      -39-

<PAGE>

         29. THE  FUNCTIONING  OF THE COMPANY'S  SYSTEMS OR THE SYSTEMS OF THIRD
             PARTIES ON WHICH IT RELIES COULD BE DISRUPTED BY FACTORS OUTSIDE
             THE COMPANY'S CONTROL.

         The  Company's  success  depends  on the  efficient  and  uninterrupted
operation of its computer and communications hardware systems. These systems are
vulnerable to damage or interruption from natural disasters,  fires, power loss,
telecommunication failures,  break-ins,  sabotage, computer viruses, intentional
acts of vandalism and similar events.  Despite any precautions the Company takes
or plans to take,  the occurrence of a natural  disaster or other  unanticipated
problems  could result in  interruptions  in its services.  In addition,  if any
hosting  service fails to provide the data  communications  capacity the Company
requires,  as a result of human  error,  natural  disaster or other  operational
disruption,  interruptions in the Company's services could result. Any damage to
or failure of its systems could result in reductions in, or terminations of, its
services, which could have a material adverse effect on its business, results of
operations and financial condition.

         30. THE COMPANY MAY ACQUIRE  OTHER  BUSINESSES OR  TECHNOLOGIES,  WHICH
             COULD RESULT IN DILUTION TO ITS  STOCKHOLDERS,  OR  OPERATIONAL
             OR  INTEGRATION DIFFICULTIES WHICH COULD IMPAIR ITS FINANCIAL
             PERFORMANCE.

         If  appropriate  opportunities  present  themselves,  the  Company  may
acquire businesses,  technologies, services or products that it believes will be
useful in the growth of its business.  The Company does not  currently  have any
commitments or agreements with respect to any acquisition.  They may not be able
to identify,  negotiate or finance any future acquisition successfully.  Even if
we do succeed in  acquiring a  business,  technology,  service or  product,  the
process  of  integration  may  produce  unforeseen  operating  difficulties  and
expenditures and may require significant attention from the Company's management
that would  otherwise be available for the ongoing  development of its business.
Moreover, the Company has not made any recent material acquisitions,  has little
experience in integrating an acquisition into our business and may never achieve
any of the benefits that it might anticipate from a future  acquisition.  If the
Company  makes  future  acquisitions,  it may issue  shares of stock that dilute
other  stockholders,   incur  debt,  assume  contingent  liabilities  or  create
additional  expenses related to amortizing goodwill and other intangible assets,
any of which  might  harm its  financial  results  and cause its stock  price to
decline.  Any financing that it might need for future  acquisitions  may only be
available  to it on terms that  restrict its business or that impose on it costs
that reduce its revenue.

         31.  THE  COMPANY'S  SUCCESS  DEPENDS  ON THE  CONTINUED  GROWTH OF THE
              INTERNET AND ONLINE COMMERCE.

         The Company's  future  revenues and profits  depend upon the widespread
acceptance  and use of the Internet  and other  online  services as a medium for
commerce by merchants and consumers.  The use of the Internet and e-commerce may
not continue to develop at past rates and a sufficiently  broad base of business
and  individual  customers  may not adopt or continue  to use the  Internet as a
medium of  commerce.  The  market  for the sale of goods and  services  over the
Internet is a new and emerging market. Demand and market acceptance for recently
introduced  services and products  over the Internet are subject to a high level
of uncertainty,  and there exist few proven services and products. Growth in the
Company's  customer base depends on obtaining  businesses and consumers who have
historically  used  traditional  means of commerce to  purchase  goods.  For the
Company to be successful,  these market  participants  must accept and use novel
ways of conducting business and exchanging information.

                                      -40-

<PAGE>

         E-commerce  may not prove to be a viable medium for  purchasing for the
following reasons, any of which could seriously harm the Company's business:

         - the  necessary  infrastructure  for Internet  communications  may not
           develop adequately;

         - the  Company's  potential  customers,  buyers and  suppliers may have
           security and confidentiality concerns;

         - complementary  products,  such as high-speed  modems and  high-speed
           communication lines, may not be developed;

         - alternative-purchasing solutions may be implemented;

         - buyers may dislike the  reduction  in the human  contact  inherent in
           traditional purchasing methods;

         - use of the  Internet  and other  online  services may not continue to
           increase or may increase more slowly than expected;

         - the development or adoption of new technology standards and protocols
           may be delayed or may not occur; and

         - new and burdensome governmental regulations may be imposed.

         32. THE COMPANY'S  SUCCESS DEPENDS ON THE CONTINUED  RELIABILITY OF THE
             INTERNET.

         The Internet  continues to experience  significant growth in the number
of users, frequency of use and bandwidth requirements. There can be no assurance
that the  infrastructure  of the Internet and other online services will be able
to  support  the  demands  placed  upon  them.  Furthermore,  the  Internet  has
experienced  a variety  of  outages  and  other  delays as a result of damage to
portions of its  infrastructure,  and could face such  outages and delays in the
future.  These outages and delays could  adversely  affect the level of Internet
usage and also the level of  traffic  and the  processing  of  transactions.  In
addition,  the Internet or other online  services could lose their viability due
to delays in the development or adoption of new standards and protocols required
to handle increased levels of Internet or other online service activity,  or due
to increased governmental regulation. Changes in or insufficient availability of
telecommunications  services or other Internet service  providers to support the
Internet or other online services also could result in slower response times and
adversely  affect usage of the Internet and other online services  generally and
the  Company's  service in  particular.  If use of the Internet and other online
services  does not continue to grow or grows more slowly than  expected,  if the
infrastructure  of the Internet and other online  services does not  effectively
support growth that may occur,  or if the Internet and other online  services do
not become a viable commercial  marketplace,  the Company will have to adapt its
business model to the new environment,  which would materially  adversely affect
its results of operations and financial condition.

                                      -41-

<PAGE>

         33.  GOVERNMENT  REGULATION  OF THE INTERNET  MAY IMPEDE THE  COMPANY'S
              GROWTH OR ADD TO ITS OPERATING COSTS.

         Like  many  Internet-based  businesses,  the  Company  operates  in  an
environment of tremendous uncertainty as to potential government regulation. The
Internet has rapidly emerged as a commerce  medium,  and  governmental  agencies
have not yet  been  able to  adapt  all  existing  regulations  to the  Internet
environment.   Laws  and   regulations   have  been   introduced  or  are  under
consideration  and court  decisions  have been or may be reached in the U.S. and
other  countries in which the Company does  business that affect the Internet or
other online services, covering issues such as pricing, user privacy, freedom of
expression,  access  charges,  content  and quality of  products  and  services,
advertising, intellectual property rights and information security. In addition,
it is uncertain how existing laws  governing  issues such as taxation,  property
ownership,  copyrights and other intellectual property issues, libel,  obscenity
and personal privacy will be applied to the Internet. The majority of these laws
were adopted prior to the introduction of the Internet and, as a result,  do not
address the unique  issues of the  Internet.  Recent laws that  contemplate  the
Internet, such as the Digital Millennium Copyright Act in the U.S., have not yet
been  fully  interpreted  by the  courts and their  applicability  is  therefore
uncertain.  The Digital Millennium Copyright Act provides certain "safe harbors"
that limit the risk of copyright  infringement  liability for service  providers
such as the Company with respect to infringing activities engaged in by users of
the service,  such as end-users of the Company's  customers'  auction sites. The
Company  has adopted and is further  refining  its  policies  and  practices  to
qualify  for one or more of these safe  harbors,  but there can be no  assurance
that its efforts will be successful since the Digital  Millennium  Copyright Act
has not been fully interpreted by the courts and its interpretation is therefore
uncertain.

         In the area of user privacy,  several states have proposed  legislation
that  would  limit the uses of  personal  user  information  gathered  online or
require  online  services to  establish  privacy  policies.  The  Federal  Trade
Commission  also has become  increasingly  involved in this area,  and  recently
settled an action with one online service regarding the manner in which personal
information is collected  from users and provided to third parties.  The Company
does not sell personal user information  from its customers'  auction sites. The
Company does use aggregated data for analysis regarding the Company network, and
does use personal user  information  in the  performance of its services for its
customers.  Since the Company  does not control  what its  customers do with the
personal  user  information  they  collect,  there can be no assurance  that its
customers' sites will be considered compliant.

                                      -42-

<PAGE>

         As online commerce evolves, the Company expects that federal,  state or
foreign  agencies  will  adopt  regulations  covering  issues  such as  pricing,
content,  user  privacy,  and  quality  of  products  and  services.  Any future
regulation may have a negative impact on its business by restricting its methods
of operation or imposing  additional  costs.  Although many of these regulations
may not  apply to its  business  directly,  the  Company  anticipates  that laws
regulating the  solicitation,  collection or processing of personal  information
could indirectly affect its business.

         Title  V  of  the   Telecommunications   Act  of  1996,  known  as  the
Communications  Decency Act of 1996,  prohibits the knowing  transmission of any
comment,  request,  suggestion,  proposal,  image or other communication that is
obscene or pornographic to any recipient under the age of 18. The  prohibition's
scope and the liability associated with a violation are currently unsettled.  In
addition,  although  substantial  portions of the Communications  Decency Act of
1996 have been held to be  unconstitutional,  the Company cannot be certain that
similar legislation will not be enacted and upheld in the future. It is possible
that such  legislation  could expose  companies  involved in online  commerce to
liability,   which  could  limit  the  growth  of  online  commerce   generally.
Legislation  like the  Communications  Decency  Act could  reduce  the growth in
Internet  usage and decrease its  acceptance  as a  communications  and commerce
medium.

         The worldwide availability of Internet web sites often results in sales
of goods  to  buyers  outside  the  jurisdiction  in which  the  Company  or its
customers are located,  and foreign  jurisdictions may claim that the Company or
its customers are required to comply with their laws. As an Internet company, it
is unclear which  jurisdictions may find that the Company is conducting business
therein.  Its failure to qualify to do business in a jurisdiction  that requires
it to do so could  subject the Company to fines or penalties and could result in
its inability to enforce contracts in that jurisdiction.

                                      -43-

<PAGE>

         34. NEW TAXES MAY BE IMPOSED ON INTERNET COMMERCE.

         In the U.S.,  the Company does not collect sales or other similar taxes
on goods sold by  customers  and users  through the  Company  network or service
taxes on fees paid by end-users of its customers'  auction  sites.  The Internet
Tax  Freedom  Act of 1998,  which  expires on October 21,  2001,  prohibits  the
imposition  of taxes on electronic  commerce by United States  federal and state
taxing  authorities.  However,  after the expiration of the Internet Tax Freedom
Act, one or more states may seek to impose sales tax  collection  obligations on
out-of-state  companies  which engage in or facilitate  online  commerce,  and a
number of  proposals  have been made at the  state and local  level  that  would
impose  additional taxes on the sale of goods and services through the Internet.
Such proposals,  if adopted, could substantially impair the growth of electronic
commerce, and could adversely affect its opportunity to derive financial benefit
from such activities. In addition, non-U.S. countries may seek to impose service
tax (such as value-added tax) collection obligations on companies that engage in
or facilitate Internet commerce. A successful assertion by one or more states or
any foreign  country that the Company or its customers  should  collect sales or
other taxes on the exchange of  merchandise  or, in the U.S.,  the exchange site
usage fees or that the Company or its customers  should  collect  Internet-based
taxes could impair our revenue and its ability to acquire and retain customers.

         35.  THERE  MAY BE  SIGNIFICANT  SECURITY  RISKS AND  PRIVACY  CONCERNS
              RELATING TO ONLINE COMMERCE.

         A  significant  barrier to online  commerce and  communications  is the
secure  transmission  of  confidential   information  over  public  networks.  A
compromise or breach of the technology used to protect the Company's  customers'
and their  end-users'  transaction  data could result from,  among other things,
advances in computer capabilities, new discoveries in the field of cryptography,
or other  events or  developments.  Any such  compromise  could  have a material
adverse  effect on the Company's  reputation  and,  therefore,  on its business,
results of operations and financial condition.  Furthermore, a party who is able
to circumvent the Company's security measures could  misappropriate  proprietary
information  or  cause  interruptions  in its  operations.  The  Company  may be
required to expend  significant  capital and other  resources to protect against
security  breaches or to alleviate  problems  caused by such breaches.  Concerns
over the  security of  transactions  conducted  on the Internet and other online
services  and the privacy of users may also  inhibit the growth of the  Internet
and  other  online  services  generally,  especially  as a means  of  conducting
commercial  transactions.  The Company currently has practices and procedures in
place to protect the  confidentiality  of its  customers'  and their  end-users'
information.  However,  its security  procedures to protect  against the risk of
inadvertent  disclosure  or  intentional  breaches  of  security  might  fail to
adequately  protect  information  that its obligated to keep  confidential.  The
Company may not be successful in adopting more effective systems for maintaining
confidential  information,  and its  exposure to the risk of  disclosure  of the
confidential  information  of others  may grow with  increases  in the amount of
information it possesses.  To the extent that the Company activities involve the
storage  and  transmission  of  proprietary  information,  such as  credit  card
numbers,  security  breaches could damage its reputation and expose it to a risk
of loss or litigation and possible  liability.  The Company's insurance policies
may not be adequate to reimburse it for losses caused by security breaches.

                                      -44-

<PAGE>

         36. THE COMPANY'S STOCK PRICE IS LIKELY TO BE HIGHLY VOLATILE.

         The stock  market,  and in particular  the market for  Internet-related
stocks,   has,  from  time  to  time,   experienced  extreme  price  and  volume
fluctuations.  Many factors may cause the market price for the Company's  common
stock to decline, perhaps substantially, including:

         - failure to meet our development plans;

         - the demand for our common stock;

         - downward  revision in  securities  analyst's  estimates or changes in
           general market conditions;

         -   technological   innovations   by   competitors   or  in   competing
             technologies; and

         - investor perception of the Company's industry or its prospects.

ITEM 7.  FINANCING STATEMENTS

     The following  financial  statements of the Company are contained in Item 8
of this Report on the pages indicated:

                                                            Page
                                                            ----

Independent Auditors Reports                                  F1

Balance Sheet -
December 31, 2000                                             F2

Statements of Operations -
Years ended December 31, 2000 and 1999                        F3

Statements of Changes in Stockholders'
Equity - Years ended December 31, 2000 and 1999            F4-F5

Statements of Cash Flows - Years
ended December 31, 2000 and 1999                           F6-F7

Notes to Financial Statements as of
December 31, 2000                                         F8-F19

                                      -45-

<PAGE>

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

                                 Not Applicable

                                    PART III

     The  information  required  by items 9-12 are  omitted  pursuant to general
instruction  G(3) to form 10K. The Company has included this  information in its
proxy  statement to be mailed and filed with the  Commission  on or before April
30,  2001.  The annual  meeting  is  scheduled  to be in June  2001.  Such Proxy
Statement  expected  to be  filed  with the  Commission  by  April  30,  2001 is
incorporated herein by reference.

ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K

1.       (a) Exhibits:

         See Index to Exhibits

2.       Reports on Form 8-K

          There were no reports on Form 8-K filed during the fourth quarter
         of 2000.

3.       Financial Statement Schedules
             none

                                      -46-

<PAGE>


                                   SIGNATURES


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

                               Synergy Brands Inc.



                               by /s/ Mair Faibish
                               --------------------------------
                                      Mair Faibish
                                      Chariman of the Board

Dated: March 30, 2001

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

                               by /s/ Mair Faibish
                               ----------------------------------
                                      Mair Faibish
                                      Chairman of the Board

Signed:  March 30, 2001


                               by /s/ Mitchell Gerstein
                               ----------------------------------
                                      Mitchell Gerstein, Director
                                      Cheif Financial Officer
Signed:  March 30, 2001

                                      -47-

<PAGE>

               REPORTS OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors
Synergy Brands, Inc.

We have audited the accompanying  consolidated  balance sheet of Synergy Brands,
Inc. and Subsidiaries  (collectively,  the Company) as of December 31, 2000, and
the related  consolidated  statements of  operations,  changes in  stockholders'
equity and cash flows for the year then ended.  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 audit.  The consolidated
financial statements of Synergy Brands, Inc. and Subsidiaries for the year ended
December 31,  1999,  were  audited by Belew  Averitt  LLP,  whose  practice  was
combined  with our Firm and whose  report  dated  April 12,  2000,  expressed an
unqualified opinion on those statements.

We conducted our audit 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  audit  provides  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 Synergy Brands, Inc.
and  Subsidiaries  as of December 31, 2000, and the results of their  operations
and their cash flows for the year then  ended,  in  conformity  with  accounting
principles generally accepted in the United States of America.

Dallas, Texas
February 28, 2001
                                   BDO SEIDMAN LLC

                                      F-1

<PAGE>

                      SYNERGY BRANDS, INC. AND SUBSIDIARIES

                           Consolidated Balance Sheet

                                December 31, 2000

<TABLE>
<CAPTION>
<S>                                                                                                <C>

                                                                ASSETS
CURRENT ASSETS
   Cashand cash equivalents                                                                        $      2,234,113
   Accounts receivable, less allowance for doubtful accounts of $69,965                                     920,878
   Inventory                                                                                              1,187,783
   Prepaid assets                                                                                           502,930
                                                                                                    ---------------
       Total current assets                                                                               4,845,704

COLLATERAL SECURITY AND DEPOSITS                                                                            365,606

Property and equipment, net                                                                                 621,055

WEB SITE DEVELOPMENT COSTS                                                                                  897,313

TRADE NAMES AND CUSTOMER LIST,
 net of accumulated amortization of $583,752                                                              2,110,537
                                                                                                    ---------------
                                                                                                   $      8,840,215
                                                                                                    ===============
                                                 LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
   Line-of-credit                                                                                  $        663,999
   Note payable to Stockholder                                                                              555,763
   Accounts payable                                                                                       2,483,528
   Accrued expenses                                                                                         672,927
                                                                                                    ---------------
       Total current liabilities                                                                          4,376,217

Commitments and contingencies (Note 9)

PREFERRED STOCK OF SUBSIDIARY                                                                               184,625

Stockholders' equity
   Class A preferred stock - $.001 par value; 100,000 shares authorized and outstanding                         100
   Class B preferred stock - $.001 par value; 10,000,000 shares authorized,
    and no shares outstanding                                                                                     -
   Common stock - $.001 par value; 49,900,000 shares authorized                                              17,627
    17,627,421 shares outstanding
   Additional paid-in capital                                                                            32,261,608
   Deficit                                                                                              (26,309,398)
   Stockholders' notes receivable                                                                          (115,629)
   Stockholder's advertising and in-kind services receivable                                             (1,407,435)
                                                                                                    ---------------
                                                                                                          4,446,873

   Less treasury stock, at cost, 1,400 shares                                                              (167,500)
                                                                                                    ---------------
       Total stockholders' equity                                                                         4,279,373
                                                                                                    ---------------
                                                                                                   $      8,840,215
                                                                                                    ===============

</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-2

<PAGE>

                      SYNERGY BRANDS, INC. AND SUBSIDIARIES

                      Consolidated Statements of Operations

                     Years ended December 31, 2000 and 1999

<TABLE>
<CAPTION>
<S>                                                                   <C>            <C>

                                                                         2000           1999
                                                                     -----------    -----------
SALES                                                                $20,665,018    $13,181,239

COST OF SALES                                                         19,390,166     11,631,343
                                                                     -----------    -----------
GROSS PROFIT                                                           1,274,852      1,549,896

OPERATING EXPENSES
   Advertising and promotional                                         2,547,891      3,428,849
   Development costs                                                     632,696      1,037,587
   Impairment of goodwill                                                      -      1,153,597
   General and administrative                                          4,754,276      2,075,880
   Depreciation and amortization                                         663,146         69,617
                                                                     -----------    -----------
                                                                       8,598,009      7,765,530
                                                                     -----------    -----------
OPERATING LOSS                                                        (7,323,157)   (6,215,634)

OTHER INCOME (EXPENSE)
   Interest income                                                        66,183         78,473
   Miscellaneous                                                         (55,676)       (4,505)
   Interest and financing expenses                                      (178,964)     (258,122)
   Dividends on preferred stock of subsidiary                            (24,500)      (24,500)
                                                                     -----------    -----------
                                                                        (192,957)     (208,654)
                                                                     -----------    -----------
LOSS FROM CONTINUING OPERATIONS BEFORE MINORITY
   INTEREST AND INCOME TAXES                                          (7,516,114)   (6,424,288)

MINORITY INTEREST IN lOSS                                                266,258         82,606
                                                                     -----------    -----------
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX                     (7,249,856)   (6,341,682)

INCOME TAX EXPENSE                                                        21,433              -
                                                                     -----------    -----------
LOSS FROM CONTINUING OPERATIONS                                       (7,271,289)   (6,341,682)

DISCONTINUED OPERATIONS
   Loss on discontinued operations of PCW, net of applicable
    income tax benefit of $0                                            (495,534)             -
                                                                     -----------    -----------
NET LOSS                                                             $(7,766,823)  $(6,341,682)
                                                                     ===========    ===========
BASIC AND DILUTED LOSS PER COMMON SHARE
   Loss from continuing operations                                  $       (.46)   $     (.67)
   Discontinued operations                                                  (.03)             -
                                                                     -----------    -----------
NET LOSS PER COMMON SHARE                                           $       (.49)   $     (.67)
                                                                     ===========    ===========

</TABLE>

          See accompanying notes to consolidated financial statements

                                      F-3

<PAGE>

                      SYNERGY BRANDS, INC. AND SUBSIDIARIES

           Consolidated Statements of Changes in Stockholders' Equity

                     Years ended December 31, 2000 and 1999

<TABLE>
<CAPTION>
<S>                           <C>               <C>              <C>      <C>        <C>       <C>           <C>          <C>

                                                                                                            Stockholder's
                                                                                                            Advertising   Total
                                  Class A                     Additional                      Stockholders' and In-kind   Stock
                             Preferred Stock   Common Stock   Paid-in                Treasury Notes         Services      holders'
                             Shares Amount   Shares   Amount  Capital   Deficit       Stock   Receivables   Receivables   Equity
                             ------ ------   ------   ------  -------  ------------  --------- -----------   ------------- --------
Balance at
December 31, 1998            100,000 $100  6,327,086 $6,327 $15,724,196 $(12,200,893)$(167,500)$   -         $  -      $ 3,362,230
Issuance of common stock         -     -     660,686    661    468,089        -                    -            -          468,750
Common stock issued in
connection with
compensation plan                -     -   2,877,353  2,878  3,698,986        -        -           -            -        3,701,864
Conversion of subordinated
debentures                       -     -     600,000    600    599,400        -        -           -            -          600,000
Common stock issued in
connection with
compensation plan
for notes receivable from
stockholders                     -     -     790,385    790    330,960        -        -        (331,750)       -              -
Common stock issued in
connection with stockholder
receivables                      -     -   2,200,000  2,200  4,397,800        -        -            -      (3,000,000)   1,400,000
Net loss                         -     -      -       -        -        (6,341,682)    -            -           -      (6,341,682)
                             ------ ------ --------- ------  -------  ------------  --------- -----------   ------------- --------
Balance at
December 31, 1999           100,000   100 13,455,510 13,456 25,219,431 (18,542,575)  (167,500)  (331,750)    (3,000,000)  3,191,162

</TABLE>

                                      F-4

<PAGE>

                      SYNERGY BRANDS, INC. AND SUBSIDIARIES

       Consolidated Statements of Changes in Stockholders' Equity (Cont.)

                     Years ended December 31, 2000 and 1999

<TABLE>
<CAPTION>
<S>                            <C>                <C>              <C>       <C>     <C>        <C>            <C>          <C>

                                                                                                               Stockholder's
                                                                                                               Advertising Total
                                Class A                           Additional                    Stockholders'  and In-kind Stock
                              Preferred Stock    Common Stock     Paid-in             Treasury  Notes          Services    holders'
                              Shares Amount    Shares    Amount   Capital    Deficit  Stock     Receivables    Receivables Equity
                             ----------------  -----------------  ---------- -------  --------- -----------   ------------ --------

Issuance of common stock         -   $   -     1,536,600 $1,536   $1,668,439 $ -      $    -     $   -       $   -      $  1,669,975
Common stock issued
in connection with
compensation plan                -       -     1,769,386  1,769    2,659,133   -           -         -           -         2,660,902
Common stock issued in
connection with compensation
plan and cashless stock
exchange                         -        -    155,925   156      97,673       -           -         -           -            97,829
Common stock and warrants
issued in exchange for minority
interest of subsidiary and
advertising credits, net of
commissions                      -        -    500,000   500      2,514,642    -           -         -        (2,660,000)  (144,858)
Advertising credits sold,
net of commissions               -        -        -        -        -         -           -         -        2,660,000    2,660,000
Common stock issued in
connection with
compensation plan for
notes receivable from
stockholders                     -        -    210,000   210      102,290      -           -         (102,500)  -              -
Proceeds from stockholder
receivables                      -        -        -        -       -          -           -         318,621    -          318,621

Advertising credits utilized     -        -        -        -       -          -           -          -         1,592,565  1,592,565
Net loss                         -        -        -        -       -          (7,766,823) -          -          -       (7,766,823)
                            ------- --------  ----------- ------- ----------- ----------- --------- --------- ----------- ----------
Balance at
December 31, 2000           100,000 $100       17,627,421$ 17,627 $32,261,608$(26,309,398)$(167,500)$(115,629)$(1,407,435)$4,279,373
                            ======= ========  =========== ======= =========== =========== ========= ========= =========== ==========

</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-5

<PAGE>

                      SYNERGY BRANDS, INC. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

                     Years ended December 31, 2000 and 1999


<TABLE>
<CAPTION>
<S>                                                                          <C>                 <C>

                                                                                    2000              1999
                                                                             -------------      --------------
Cash flows from operating activities
Net loss                                                                     $  (7,766,823)     $  (6,341,682)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization                                                      663,146              69,617
Amortization of loan fees                                                                -              54,116
Utilization of advertising credits                                               1,592,565                   -
Impairment of assets                                                                     -           1,153,597
Dividends on preferred stock of subsidiary                                          24,500              24,500
Operating expenses paid with common stock                                        2,353,431           2,062,008
Minority interest in loss                                                         (266,258)            (82,606)
Changes in operating assets and liabilities, net of business acquisition:
Net (increase) decrease in:
Accounts receivable                                                              (132,801)         (1,862,958)
Inventory                                                                         680,789             109,797
Trade credits receivable                                                        2,660,000                   -
Prepaid and other assets                                                          (43,425)             47,145
Net increase (decrease) in
accounts payable and accrued expenses                                            (726,033)          1,431,520
                                                                            -------------      --------------
Net cash used in operating activities                                            (960,909)         (3,334,946)

Cash flows from investing activities
Purchase of property and equipment                                                (52,580)            (47,427)
Payment of collateral security deposit                                                  -            (400,900)
Refund of collateral security deposit                                               38,069                   -
Purchase of web site                                                              (405,157)                  -
Proceeds of note receivable from shareholders                                      318,621                   -
                                                                             -------------      --------------
Net cash used in investing activities                                             (101,047)           (448,327)

Cash flows from financing activities
Proceeds from debt issuance                                                      3,517,288             865,000
Payment of debt                                                                 (2,912,526)           (525,000)
Proceeds from issuance of common stock                                           1,535,275           3,508,606
Proceeds from issuance of common stock of subsidiary                                     -             765,000
                                                                             -------------      --------------
Net cash provided by financing activities                                        2,140,037           4,613,606
                                                                             -------------      --------------
Net increase in cash                                                             1,078,081             830,333

CASH AND CASH EQUIVALENTS, beginning of year                                     1,156,032             325,699
                                                                             -------------      --------------
CASH AND CASH EQUIVALENTS, end of year                                     $     2,234,113    $      1,156,032
                                                                             =============      ==============

</TABLE>

                                      F-6

<PAGE>

                      SYNERGY BRANDS, INC. AND SUBSIDIARIES

                  Consolidated Statements of Cash Flows (Cont.)

                     Years ended December 31, 2000 and 1999

<TABLE>
<CAPTION>
<S>                                                                  <C>           <C>

                                                                        2000        1999
                                                                    ---------   -----------
Supplemental disclosure of cash flow information
   Interest paid                                                    $ 190,000   $  190,500
                                                                    =========   ===========
   Income taxes paid                                                $  22,000   $    8,000
                                                                    =========   ===========

Supplemental disclosure of non-cash operating,
 investing and financing activities
   Conversion of subordinated debentures                            $       -   $  600,000
   Common stock issued for notes receivable                           102,500      331,750
   Note payable offset against accounts receivable                          -    1,000,000
   Stock issued for advertising and in-kind services receivable             -    3,000,000
   Purchase of Proset and Gran Reserve assets applied against
    collateral security deposit and accounts receivable                     -    5,421,814
   Common stock issued for prepaid assets and web site
    development                                                       540,000            -
   Common stock issued in exchange for minority interest
    of subsidiary, web site development, and advertising
    credits, net of commissions                                     2,515,142            -

</TABLE>


          See accompanying notes to consolidated financial statements.

                                       F-7

<PAGE>

                      SYNERGY BRANDS, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 2000 and 1999

1.       ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         ORGANIZATION

         Synergy Brands, Inc. (Synergy) and its subsidiaries develop and operate
         Internet platform operations and Internet-based  businesses designed to
         sell a variety  of  products,  including  health  and  beauty  aids and
         premium handmade cigars,  directly to consumers  (business to consumer)
         and to businesses  (business to business).  Synergy was incorporated on
         September  26, 1988 in the state of Delaware.  A summary of the related
         organizations and operations is provided below.

         In September 1996,  Synergy formed a wholly-owned  subsidiary,  New Era
         Foods,  Inc.  (NEF),  which  represented  manufacturers,  retailers and
         wholesalers in connection with distribution of frozen seafood,  grocery
         and general merchandise products.

         In October 1997, NEF formed a subsidiary,  Premium Cigar Wrappers, Inc.
         (PCW),  for the  purpose of  producing  premium  cigar  wrappers in the
         Dominican Republic.  NEF owns 66% of the common stock and approximately
         22% of the preferred stock of PCW.

         In October 1998, NEF formed a wholly-owned subsidiary,  PHS Group, Inc.
         (PHS),  which  is a  wholesale  distributor  of  premium  beauty  salon
         products.

         In January 1999,  Synergy formed a wholly-owned  subsidiary,  Sybr.com,
         Inc.  (Sybr),  which is engaged in the  development  of  Internet-based
         business to consumer and business to business  opportunities focused on
         beauty,  personal care,  cigars and other consumer products through its
         subsidiaries, BB and NetCigar.com, Inc.

         In May 1999, Sybr formed a wholly-owned subsidiary,  NetCigar.com, Inc.
         (NetCigar),  which is  engaged  in the  development  of  Internet-based
         business  to  consumer  opportunities  focused  on cigars  and  related
         products.

         In June 1999,  Sybr formed a wholly-owned  subsidiary,  BeautyBuys.com,
         Inc.  (BB),  which is  engaged  in the  development  of  Internet-based
         business to consumer and business to business  opportunities focused on
         beauty, personal care and other consumer products.

         In November 1999, NEF acquired all of the outstanding common stock (100
         shares at $.001 par value) of Gran Reserve Corp. (GR), a distributor of
         handmade  cigars,  (formerly  GR Cigars, Inc.)  from  Tenda  Foods Inc.
         (Tenda), a wholly-owned  subsidiary of Asia Legend Trading Co. (ALT), a
         Chinese  trading  company,  for  $1,066,840  in a business  combination
         accounted  for  as  a  purchase.   NEF  then  transferred  all  of  the
         outstanding common stock of GR to NetCigar.  If GR had been acquired at
         January 1, 1999, on a pro-forma basis the Company's  consolidated  1999
         revenue would have increased by $76,590 and the consolidated results of
         operations would have increased by $15,841.

         Also in November  1999, NEF sold 100% of the  outstanding  stock of PHS
         Group, Inc. to BB for $750,000. Further, Sinclair Broadcast Group (SBG)
         acquired  2,200,000 shares of Synergy common stock in accordance with a
         stock  purchase  agreement and 900,000  shares of  outstanding  Class B
         common  stock  (constituting  50% of the voting power of all issued and
         outstanding  common  stock)  of BB for  $765,000,  all of which is more
         fully described in Note 7.

                                      F-8

<PAGE>

         In addition,  in November  1999,  NEF acquired  certain  infrastructure
         assets related to the  distribution  agreement  described in Note 9 for
         $3,201,397, including leasehold improvements and equipment amounting to
         $350,000,  accounts  receivable totaling $520,000 and use of the Proset
         trade  name for  $2,331,397.  Such  assets  were  transferred  to BB in
         connection  with the stock purchase  agreement more fully  described in
         Note 7.

         In April 2000,  Sybr formed a wholly-owned  subsidiary,  DealByNet.com,
         Inc. to engage in Internet-based  business to business (B2B) activities
         in the grocery industry,  designed to create an integrated supply chain
         from manufacturers of a variety of products to business customers.

         In  December 2000,  Synergy,  BB and SBG  entered  into a  modification
         agreement  pursuant to which SBG  transferred to Synergy 900,000 shares
         of BB's Class B  common stock in exchange for Synergy  issuing  500,000
         shares of common stock to SBG and options to acquire 500,000 additional
         shares of Synergy common stock, all of which is more fully described in
         Note 7.

         PRINCIPLES OF CONSOLIDATION

         The consolidated  financial statements include the accounts of Synergy,
         its  wholly-owned   subsidiaries  and  its  majority-owned   subsidiary
         (collectively,  the Company). All significant intercompany accounts and
         transactions have been eliminated in consolidation.

         CASH AND CASH EQUIVALENTS

         The Company  considers time deposits with maturities of three months or
         less when purchased to be components of cash.

         CONCENTRATIONS OF CREDIT RISK

         Financial   instruments  that   potentially   subject  the  Company  to
         concentrations  of credit  risk  consist  principally  of cash and cash
         equivalents  and accounts  receivable.  The Company places its cash and
         cash equivalents with financial  institutions it believes to be of high
         credit quality.  Cash balances in excess of Federally insured limits at
         December 31, 2000 totaled approximately $2,000,000.

         The  concentration of credit risk with respect to accounts  receivables
         is mitigated by the credit worthiness of the Company's major customers.
         The Company  maintains an allowance  for losses based upon the expected
         collectibility  of  all  such  receivables.   Fair  value  approximates
         carrying value for all financial instruments.

         CONCENTRATION OF BUSINESS RISK

         In  2000,  the  Company  purchased  over 71% of its  products  from one
         supplier.  If the Company were unable to maintain this  relationship it
         might have a material impact on future operations.

         INVENTORY

         Inventory  is stated at the lower of cost or market.  The Company  uses
         the first-in, first-out (FIFO) cost method of valuing its inventory.

         PROPERTY AND EQUIPMENT

         Property and equipment are stated at cost. Depreciation of property and
         equipment is computed using the  straight-line  method over the asset's
         estimated  useful  lives,  ranging  from  3  to  10  years.   Leasehold
         improvements  are amortized over the shorter of their estimated  useful
         lives or the lease term.

                                      F-9

<PAGE>

         Maintenance  and repairs of a routine  nature are charged to operations
         as incurred.  Betterments and major renewals that substantially  extend
         the useful life of an existing asset are  capitalized  and  depreciated
         over the asset's  estimated  useful life. Upon retirement or sale of an
         asset, the cost of the asset and the related  accumulated  depreciation
         or amortization are removed from the accounts and any resulting gain or
         loss is credited or charged to income.

         TRADE NAMES AND CUSTOMER LIST

         Trade names consist of the "Proset" and "Gran  Reserve" trade names and
         customer list acquired in November 1999, which are being amortized over
         their expected useful lives not to exceed 5 years.

         LONG-LIVED ASSETS

         Long-lived  assets and  intangible  assets are reviewed for  impairment
         whenever events or changes in circumstances indicate the carrying value
         may  not be  recoverable.  Impairment  is  measured  by  comparing  the
         carrying value of the long-lived  assets to the estimated  undiscounted
         future  cash flows  expected to result from use of the assets and their
         ultimate  disposition.  In instances where  impairment is determined to
         exist, the Company writes down the asset to its fair value based on the
         present value of estimated future cash flows.

         REVENUE RECOGNITION

         The Company  recognizes  revenue at the time  merchandise is shipped to
         the  customer.  The  Company  issues  credits to the  customer  for any
         returned  items at the time the  returned  products are  received.  Net
         sales  includes  gross revenue from product sales and related  shipping
         fees,  net of discounts and provision  for sales  returns,  third-party
         reimbursement and other allowances. Cost of sales consists primarily of
         costs of products  sold to  customers,  including  outbound and inbound
         shipping costs.

         ADVERTISING

         The Company expenses advertising and promotional costs as incurred.

         INCOME TAXES

         The Company uses the asset and liability  method of computing  deferred
         income taxes. In the event differences  between the financial reporting
         bases  and the tax  bases of an  enterprise's  assets  and  liabilities
         result in deferred tax assets,  an  evaluation  of the  probability  of
         being able to realize the future  benefits  indicated by such assets is
         required. A valuation allowance is provided for a portion or all of the
         deferred tax assets when it is more likely than not that such  portion,
         or all of such deferred tax assets, will not be realized.

         EARNINGS (LOSS) PER SHARE

         The Company  calculates  earnings  per share  pursuant to  Statement of
         Financial   Accounting   Standards   No. 128,   "Earnings   per  Share"
         (SFAS 128).  SFAS 128  requires dual  presentation of basic and diluted
         earnings  (loss) per share (EPS) on the face of the statement of income
         for all  entities  with  complex  capital  structures,  and  requires a
         reconciliation  of the  numerator  and  denominator  of the  basic  EPS
         computation  to  the  numerator  and  denominator  of the  diluted  EPS
         computation.  Basic EPS calculations are based on the  weighted-average
         number of common shares  outstanding  during the period,  while diluted
         EPS calculations are based on the weighted-average of common shares and
         dilutive  common  share  equivalents  outstanding  during each  period.
         Outstanding  stock options and warrants  issued by the Company were not
         included  in  diluted  weighted-average  shares  as  their  effect  was
         antidilutive for all periods.

                                      F-10

<PAGE>

         STOCK-BASED COMPENSATION PLANS

         Statement of Financial  Accounting  Standards No. 123,  "Accounting for
         Stock-Based Compensation" (SFAS 123), encourages, but does not require,
         companies  to  record   compensation  cost  for  stock-based   employee
         compensation  plans at fair value.  The Company has elected to continue
         to account  for  stock-based  compensation  using the  intrinsic  value
         method  prescribed  in  Accounting  Principles  Board  Opinion  No. 25,
         "Accounting  for  Stock  Issued  to  Employees"  (APB 25)  and  related
         interpretations.  Accordingly,  compensation  cost for stock options is
         measured  as the  excess,  if any,  of the  fair  market  value  of the
         Company's  stock at the date of the grant over the amount the employees
         or non-employees  must pay to acquire the stock. For the Cashless Stock
         Option Plan the company uses variable plan accounting.

         NEW ACCOUNTING PRONOUNCEMENTS

         In December 1999, the Securities and Exchange Commission staff released
         Staff  Accounting  Bulletin No. 101,  Revenue  Recognition in Financial
         Statements  (SAB 101),  which  provides  guidance  on the  recognition,
         presentation and disclosure of revenue in financial statements. SAB 101
         did not impact the  Company's  revenue  recognition  policies.  In June
         1998, the Financial  Accounting Standards Board (FASB) issued Statement
         of Financial  Accounting  Standards No. 133 (SFAS 133),  Accounting for
         Derivative  Instruments and Hedging  Activities.  SFAS 133 is effective
         for fiscal  years  beginning  after June 15,  2000,  and  requires  all
         derivative  instruments be recorded on the balance sheet at fair value.
         Changes in the fair value of  derivatives  are recorded  each period in
         current earnings or other comprehensive income,  depending on whether a
         derivative  is designed as part of a hedge  transaction  and if so, the
         type of hedge transaction.  Management does not believe the adoption of
         SFAS No. 133 will have a material effect on the consolidated  financial
         statements   because  it  does  not  currently   hold  any   derivative
         instruments.

         In  March 2000,  the  Emerging  Issues  Task  Force  (EITF) of the FASB
         reached  a  consensus  on EITF  Issue 00-2,  "Accounting  for Web  Site
         Development  Costs." This consensus  provides guidance on what types of
         costs incurred to develop a web site should be capitalized or expensed.
         The Company  adopted this  consensus in the third quarter of 2000.  The
         Company's web sites were ready for application in 2001, and the Company
         will  begin  to  amortize  using  the  straight-line  method  over  the
         estimated useful lives of the web sites, not to exceed 3 years.

         In  May 2000,  the  EITF  reached  a  consensus  on  EITF  Issue 00-14,
         "Accounting  for  Certain  Sales   Incentives,"   which  addresses  the
         recognition,  measurement and income statement classification for sales
         incentives  (such as  discounts,  coupons and  rebates)  that a company
         offers to its customers for use in a single transaction.  The Company's
         current  accounting  policies are in accordance with EITF  Issue 00-14,
         which  does not  have a  material  impact  on the  Company's  financial
         statements.

         In  July 2000,  the  EITF  reached  a  consensus  on EITF  Issue 99-19,
         "Reporting  Revenue Gross as a Principal  versus Net as an Agent." This
         consensus  provides  guidance  on  whether a company  should  recognize
         revenue  in the  amount of the  gross  amount  billed  to the  customer
         because it has earned revenue from the sale of the goods or services or
         whether it should  recognize  revenue based on the net amount  retained
         because,   in   substance,   it  has  earned  a  commission   from  the
         vendor-manufacturer of the goods or services on the sale. The Company's
         current  accounting  policies are in accordance with EITF  Issue 99-19,
         which does not impact the Company's financial statements.

         In  July 2000,  the  EITF  reached  a  consensus  on EITF  Issue 00-10,
         "Accounting  for Shipping and Handling Fees and Costs." This  indicates
         that  amounts  billed to a customer in a sales  transaction  related to
         shipping and  handling,  if any,  represents  revenue to the vendor and
         should be classified as revenue.  As the Company  currently  classifies
         shipping  fees charged to a customer in net sales,  this  consensus did
         not have an impact on the Company's financial statements.

                                      F-11

<PAGE>

         In  September 2000,  the EITF reached a final consensus with respect to
         the  classification  of costs related to shipping and handling incurred
         by the seller.  The Task Force  determined that the  classification  of
         shipping and  handling  costs is an  accounting  policy  decision  that
         should be disclosed. A company may adopt a policy of including shipping
         and handling  costs in cost of sales,  or if shipping costs or handling
         costs are  significant  and not  included  in cost of sales,  a company
         should  disclose  all such costs and the  respective  line items on the
         income  statement  in which they are  included.  The  Company  included
         shipping and handling  costs of  approximately  $297,000 and $82,000 in
         2000 and 1999, respectively, in general and administrative expenses.

         MANAGEMENT ESTIMATES

         In preparing financial statements in conformity with generally accepted
         accounting  principles,  management  is required to make  estimates and
         assumptions  that affect the reported  amounts of assets,  liabilities,
         revenues and expenses during the reporting  period.  Actual results may
         vary from management's estimates.

         RECLASSIFICATIONS

         Certain  1999  amounts  have been  reclassified  to conform to the 2000
         presentation.


2.       COLLATERAL SECURITY

         At December 31, 2000, the Company had approximately a $359,000 security
         deposit with a major  supplier,  which serves as collateral  for credit
         purchases made by the Company from the supplier.


3.       PROPERTY AND EQUIPMENT

         Property  and  equipment  as of  December  31,  2000  consisted  of the
         following:

         Office equipment                                 $ 99,647
         Machinery and equipment                            48,825
         Furniture and fixtures                            231,265
         Leasehold improvements                            416,996
                                                          --------
                                                           796,733

         Less accumulated depreciation and amortization    175,678
                                                          --------
                                                          $621,055
                                                          ========

4.       INVENTORY

         Inventory as of December 31, 2000 consisted of the following:

         Beauty products                $  598,124
         Tobacco finished goods            589,659
                                        ----------
                                        $1,187,783
                                        ==========

                                      F-12

<PAGE>


5.       LINE-OF-CREDIT AND NOTE PAYABLE

         Line-of-credit with interest at prime (9.5% at December 31, 2000)
         plus 2%; due on demand: cancelable upon 60-day notice of any
         party; available balance up to 90% of qualified receivables
         ($284,420 additional balance was available at
         December 31, 2000); collateralized by accounts receivable  $663,999
                                                                    ========

         Unsecured note payable to stockholder, with interest at 7.5%;
         maturing on December 31, 2001                              $555,763
                                                                    ========

6.       MINORITY INTEREST

         PCW was  incorporated  in October 1997 with 7,750 shares of  authorized
         $.001 par value  common  stock.  At December  31,  1998,  PCW had 1,000
         shares of common stock outstanding, which were issued at par value. The
         Company owns 66% of the common stock and an outside  investor  owns the
         minority  interest.  For  financial  reporting  purposes,  the  assets,
         liabilities,  results of operations  and cash flows of PCW are included
         in the  Company's  consolidated  financial  statements  and the outside
         investor's interest is reflected in the preferred stock of subsidiary.

         PCW had 2,250  shares of  authorized  $.001 par value  preferred  stock
         issued and outstanding at December 31, 1998. PCW issued 1,750 shares of
         preferred  stock at inception to two unrelated  individuals  at $60 per
         share, and 500 shares to the Company for a 22% minority interest in the
         preferred  stock.  The holders of PCW  preferred  stock are entitled to
         receive  cumulative  dividends  at the rate of $14 per share before any
         dividends on the common stock are paid.  Included in preferred stock of
         subsidiary is $79,625 of preferred stock dividends  payable at December
         31, 2000. The Company's  portion of the dividend has been eliminated in
         consolidation.  In the event of  dissolution of PCW, the holders of the
         preferred  shares are entitled to receive $60 per share  together  with
         all accumulated dividends, before any amounts can be distributed to the
         common  stockholders.  The shares are convertible only at the option of
         PCW at $120 per share.

         BB was formed in June 1999 and in November 1999 was authorized to issue
         50,000,000  shares of $.001 par value common stock, of which 49,100,000
         shares are Class A common  stock and 900,000  shares are Class B common
         stock. At December 31, 2000 and 1999, BB had 9,000,000  shares of Class
         A common stock and 900,000 shares of Class B common stock  outstanding.
         The Company owns all of the Class A common stock and the Class B common
         stock was formerly  owned by the minority  interest (see  Note 7).  For
         financial  reporting  purposes,  the  assets,  liabilities,  results of
         operations  and  cash  flows  of  BB  are  included  in  the  Company's
         consolidated financial statements,  and the outside investor's interest
         in BB was reflected in the minority  interest  liability until December
         2000 when the minority  interest was  exchanged  for Synergy stock (see
         Note 7).


7.       STOCKHOLDERS' EQUITY

         The Company has 100,000  authorized and outstanding shares of preferred
         stock A with a par value of $.001; 13 to one voting rights;  cumulative
         dividends at $2.20 per annum per share before common stock; liquidation
         of $10.50 per share and before common stock and redemption at option of
         company at $10.50 per share.

         At December 31, 2000, Synergy had issued outstanding warrants to SBG to
         purchase  500,000  shares  of  common  stock at $0.70  per  share.  The
         warrants become  exercisable  when the shares are registered and expire
         in December 2010.  At December 31, 2000, Synergy had issued outstanding
         restricted cashless warrants to purchase 450,000 shares of common stock
         ranging from $1 and $2 per share.

                                      F-13

<PAGE>


         In 1994, Synergy adopted the 1994 Services and Consulting  Compensation
         Plan (the Plan). Under the Plan, as amended, 8,400,000 shares of common
         stock have been reserved for issuance. Since the inception of the Plan,
         Synergy  has  issued  6,408,999  shares  for  payment  of  services  to
         employees and professional service providers such as legal,  marketing,
         promotional and investment consultants.  Synergy had oversubscribed the
         Plan by 30,174  shares at  December 31,  2000.  Common  stock issued in
         connection  with the Plan was  valued at the fair  value of the  common
         stock  at the  date of  issuance  at an  amount  equal  to the  service
         provider's  invoice amount.  Under the Plan, Synergy granted options to
         selected employees and professional service providers.

         In November  1999, BB acquired all of the  outstanding  $.001 par value
         common stock of PHS from NEF for an 8%  convertible  subordinated  note
         payable  of  $750,000.   Simultaneously  with  the  transaction,  PHS's
         convertible subordinated debentures were converted to 600,000 shares of
         Synergy common stock.

         In November 1999,  Synergy entered into a stock purchase agreement with
         SBG whereby SBG purchased 2,200,000 share of Synergy's restricted $.001
         par value common stock for $4,400,000.  The purchase price consisted of
         $1,400,000  cash,  a  credit  for a  minimum  of  $2,000,000  of  radio
         advertising and a credit for a minimum of $1,000,000 of certain in-kind
         services, as defined.

         In November 1999, BB entered into a stock purchase  agreement with SBG,
         whereby SBG purchased  900,000 shares of $.001 par value Class B common
         stock in BB for $765,000 cash. The Class B common shares constitute 50%
         of the voting  power of the common  stock  issued and  outstanding.  At
         December 31, 1999, Sybr owned 9,000,000  shares of Class A common stock
         and SBG owned 900,000 shares of Class B common stock of BB.

         Simultaneously  with the  purchase  of the Class B  shares,  BB and SBG
         entered into a Class A Common Stock Option  Agreement  providing  for a
         grant by BB to SBG of the  right to  purchase  8,100,000  shares of its
         Class A common stock.  In  consideration  for the grant,  SBG agreed to
         provide   $50,000,000  of  radio  and/or  television   advertising  and
         promotional  support, as defined, to be used from November 1999 through
         December 31, 2004.

         In  December  2000,  Synergy,  BB and SBG entered  into a  modification
         agreement to which SBG  transferred  to Synergy  900,000 shares of BB's
         Class B common stock,  $7,000,000 of transferable  advertising credits,
         web site  developements  costs  previously  provided  in  exchange  for
         Synergy  issuing  500,000  shares of common stock to SBG and options to
         acquire   500,000   additional   shares  of   Synergy   common   stock.
         Concurrently,  Synergy  sold the  $7,000,000  advertising  credits to a
         third party for  $2,660,000 in cash and  $4,340,000  in trade  credits.
         Synergy  paid a broker  $375,000 in cash and the  remaining  balance in
         accrued  expenses of $591,150  with stock valued at $591,150 on January
         2, 2001.  The Company  accounted  for the  acquisition  of the minority
         interest  from SBG based on the value of the equity  securities  issued
         net of commissions  and the cash received from the third party.  As the
         value to be realized  from the  remaining  $4,340,000  im barter  trade
         credits is currently indeterminable, no value has been assigned to such
         credits. As these credits are used in the future, the goods or services
         received will be brought into the Company's books at no basis.

         Previously  issued  financial  statements  reflected  the estimated net
         present  value of the trade  credits of  $3,439,000  as an asset on the
         Company's books. Due to the indeterminable  value associated with these
         barter credits,  the Company has restated its December 31, 2000 balance
         sheet to remove the  asset.  This  restatment  had no net effect on the
         Company's previously reported net loss or net loss per share.

         In November  1999,  ALT,  Tenda,  GR and NEF entered  into an agreement
         whereby NEF purchased the infrastructure assets and the common stock of
         GR and the U.S.  distribution  network  established  by NEF for ALT, as
         defined,  for  $4,268,237.   Simultaneously  with  the  purchase,   the
         distribution agreement between ALT, Tenda and NEF, described in Note 9,
         was terminated.

         On January 2, 2001,  Synergy issued 500,000 restricted shares of common
         stock for future services and warrants to purchase  200,000  restricted
         shares of common stock at $2.50 per share.

                                      F-14

<PAGE>

         The  following is a summary of such stock option  transactions  for the
         years ended December 31, 2000 and 1999 in accordance  with the Plan and
         other restricted stock option agreements:

<TABLE>
<CAPTION>
            <S>                                                          <C>          <C>

                                                                                      Weighted
                                                                                       average
                                                                         Number of    exercise
                                                                           shares      price
                                                                       -----------   ---------
         Outstanding at December 31, 1998 (2,210,030 exercisable):      3,985,500    $    .60
           Granted                                                      3,604,600    $   1.62
           Exercised                                                   (2,996,500)   $    .70
           Expired                                                        (28,000)   $   1.50
                                                                       -----------   ---------
         Outstanding at December 31, 1999:                              4,565,600    $   1.36
           Granted                                                        675,000    $   2.90
           Exercised                                                     (744,980)   $    .78
           Forfeited                                                      (20,000)   $   2.00
                                                                       -----------
         Outstanding at December 31, 2000                               4,475,620    $   1.70
                                                                       ===========
         Option price                                                $ .40 - 3.50
                                                                       ===========
         Available for grant:
           December 31, 1999                                                    -
                                                                       ===========
           December 31, 2000                                                    -
                                                                       ===========

</TABLE>

         The  Company  applies  APB 25 in  accounting  for  its  stock  options.
         Compensation  costs related to options and charged to  operations  were
         $212,650 and $256,130 in 2000 and 1999, respectively.  Had compensation
         costs for the stock options been determined  based on the fair value at
         the grant date  consistent  with the method of SFAS 123,  the Company's
         net loss and per  share  would  have  been  increased  to the pro forma
         amounts indicated below:

                                                    2000             1999
                                                ------------   -------------
         Net loss:
           As reported                         $ (7,766,823)   $ (6,341,682)
                                                ============   =============
           Pro forma                           $ (7,916,423)   $ (7,641,148)
                                                ============   =============
         Net loss per common share:
           As reported                         $       (.49)   $       (.67)
                                                ============   =============
           Pro forma                           $       (.50)   $       (.81)
                                                ============   =============

         The  weighted-average  fair value at date of grant for options  granted
         during 2000 and 1999 was $1.012 and $.358 per option, respectively. The
         weighted-average  contractual  life of options  outstanding at December
         31,  2000 was  approximately  3.5 years.  The fair value of each option
         grant is estimated using the  Black-Scholes  option-pricing  model with
         the following weighted-average assumptions used:

                                                 2000                1999
                                             ------------        ------------
         Dividend yield                                0%                  0%
         Expected volatility                          25%                  5%
         Risk-free rate of return            6.17 - 6.72%        6.17 - 6.74%
         Expected life                       1 to 5 years        1 to 5 years

                                      F-15

<PAGE>

         The Company has also  reserved  100,000  shares for a stock option plan
         (Option Plan) for non-employee,  independent directors,  which entitles
         each  non-employee,  independent  director an option to purchase 10,000
         shares of the Company's stock  immediately upon election or re-election
         to the Board of Directors.  Options  granted under the Option Plan will
         be at  the  fair  market  value  on  the  date  of  grant,  immediately
         exercisable,  and have a term of ten years.  The Company had no options
         outstanding and  exercisable  and 70,000 shares  available for grant at
         December 31, 2000 at an option price of $.25 per share.

8.       INCOME TAXES

         At December 31, 2000, the Company had a net operating loss carryforward
         of  approximately  $22,500,000,  which,  if not  utilized,  will  begin
         expiring in 2011.

         The  components  of the  deferred  tax asset at December  31, 2000 were
         approximately as follows:

         Net operating loss carryover         $ 7,650,000
         Deferred compensation                    105,000
         Allowance for doubtful accounts           24,000
         Inventory                                 21,000
         Capital losses                            13,000
         Valuation allowance                  (7,813,000)
                                              -----------
                                              $         -
                                              ===========

         There was no income tax expense for the year ended  December 31,  1999.
         Taxes for the year ended December 31, 2000 consisted of the following:

                                                 2000       1999
                                              --------   -------
         Income tax expense - Federal:
           Current                            $     -    $     -
           State and local                     21,433          -
                                              ========   =======
         Total                                 21,433    $     -
                                              ========   =======

         A  reconciliation  of income tax expense  computed at the U.S.  Federal
         statutory  rate of 34% and the  Company's  effective  tax  rate for the
         years ended December 31, 2000 and 1999 are as follows:

                                                                   2000   1999
                                                                  -----  -----
         Federal income tax expense at statutory rate             (34%)  (34%)

         Increase (decrease) resulting from:
           Increase in valuation allowance                         34%    34%
           State and local income taxes, net of federal benefit    .3%      -
                                                                  -----  -----
                                                                   .3%      -
                                                                  =====  =====

9.       COMMITMENTS AND CONTINGENCIES

         LEASE COMMITMENTS

         The Company leases office and warehouse space in Wexford, Pennsylvania,
         Syosset,  New York, and Miami,  Florida under operating leases expiring
         in July 2002, April 2001, and January 2001,  respectively.  The Company
         is also  leasing  vehicles  under  operating  leases  expiring in 2005.
         Future minimum lease payments under non-cancelable  operating leases as
         of December 31, 2000 were as follows:

                                      F-16

<PAGE>

         Year ending
         December 31,
         ------------
              2001                   $197,000
              2002                    101,000
              2003                     54,000
              2004                     14,000
              2005                      5,000
                                     --------
                                     $371,000
                                     ========

         Lease  expense  for the  years  ended  December  31,  2000 and 1999 was
         approximately $213,000 and $88,900, respectively.

         SERVICE AGREEMENT

         BB's inventory is maintained in a public  warehouse.  BB is required to
         make rental  payments based on 4% of BB's sales of inventory  stored in
         the  warehouse.  The  agreement  expires  in  October  2018  and may be
         cancelled under certain circumstances, as defined, by either party with
         a 90-day written notice.

         DISTRIBUTION AGREEMENTS

         In 1996,  the Company  entered into a 10-year  agreement with a Chinese
         trading company (ALT) to distribute frozen seafood in the United States
         under a licensing  arrangement.  The Company acted as an agent for ALT.
         Additionally,  the  Company  sold  promotional  grocery  products  to a
         subsidiary of ALT, for which ALT provided  funding.  In November  1999,
         the  agreement  was  terminated  and  the  Company   acquired   certain
         infrastructure  and intangible assets from ALT for $4,268,237 (see Note
         7).

         NEF  maintains a 25-year  exclusive  worldwide  distribution  agreement
         expiring in December 2022, with a Dominican  Republic  corporation (DR)
         for the sale and distribution of premium  handmade cigars  manufactured
         in the Dominican Republic. There is an option to extend the term of the
         distribution agreement up to an additional 25 years.

         LITIGATION

         The Company is subject to legal  proceedings  and claims which arise in
         the ordinary course of its business. In the opinion of management,  the
         amount of ultimate liability if any, with respect to these actions will
         not  materially  affect the Company's  financial  position,  results of
         operations or cash flows.

         GUARANTEE

         The  Company  guarantees  a  $1,000,000  line-of-credit  facility  to a
         Dominican cigar manufacturer,  owned by a PCW stockholder.  The purpose
         of the line-of-credit is to provide financing to the cigar manufacturer
         to which PCW will supply cigar wrappers.

         DELISTING NOTICE FROM NASDAQ

         The Company  received a delisting  notice from  NASDAQ.  The Company is
         continuing efforts to meet NASDAQ's  requirements of which there can be
         no assurance.

                                      F-17

<PAGE>

10.      MAJOR CUSTOMERS

         The Company had one customer,  the U.S. agent of ALT,  which  accounted
         for 54% of total 1999 sales.  The  Company  had no accounts  receivable
         from this customer at December 31, 2000.


11.      DISCONTINUED OPERATIONS

         In 2000, the Company abandoned the operations of PCW. Accordingly,  PCW
         is accounted for as a discontinued  operation in the accompanying  2000
         consolidated  financial  statements  and had no  revenues  in 2000  and
         operations  in 1999 were not material to the financial  statements  The
         assets and liabilities of PCW included in the accompanying consolidated
         balance sheet as of December 31, 2000  consisted of  approximately  the
         following:

         Fixed assets, net of accumulated depreciation at $57,300  $  52,900
         Preferred stock of subsidiary                              (184,625)
                                                                   ----------
                                                                   $(131,725)
                                                                   ==========

         The  preferred  stock of  subsidiary  liability  may only be  funded by
         available funds within PCW.

12.      SEGMENT AND GEOGRAPHICAL INFORMATION

         The  Company  offers a broad  range of  Internet  access  services  and
         related  products to  businesses  and consumers  throughout  the United
         States and Canada. All of the Company's identifiable assets and results
         of operations  are located in the United States.  Management  evaluates
         the  various  segments  of the  Company  based on the types of products
         being distributed which were, as of December 31, 2000, as shown below:

<TABLE>
<CAPTION>
         <S>             <C>       <C>           <C>               <C>              <C>               <C>


                                                   Grocery,
                                     Salon         Health &
                                   Products         Beauty              B2B              B2C              Total
                                --------------  ---------------  ----------------  --------------  ----------------
         Revenue         1999   $  2,823,572    $    7,199,922   $     2,444,216   $      713,529   $    13,181,239
                         2000   $  2,719,525    $            -   $    16,495,662   $    1,449,831   $    20,665,018

         Net             1999   $ (1,245,252)   $      442,224   $       179,632   $   (5,718,286)  $    (6,341,682)
         earnings        2000   $ (1,445,049)   $            -   $       (10,624)  $   (6,311,150)  $    (7,766,823)

         Identifiable
         assets          1999   $3,948,392      $    40,537      $   761,368       $   2,814,722    $     7,565,019
                         2000   $3,041,326      $         -      $ 2,089,808       $   3,709,081    $     8,840,215

         Interest
         expense         1999   $     59,966    $      188,556   $             -   $        9,600   $       258,122
                         2000   $     48,337    $            -   $        17,363   $      113,264   $       178,964

         Depreciation and
         Amortization
                         1999   $     43,791    $       23,476   $            83   $        2,267   $        69,617
                         2000   $    525,784    $            -   $         1,605   $      135,757   $       663,146

</TABLE>

                                      F-18

<PAGE>

13.      FOURTH QUARTER ADJUSTMENTS

         The Company made fourth quarter  adjustments to record  advertising and
         promotional   expenses  of  approximately   $500,000  and  discontinued
         operations adjustments of approximately $495,600.


14.      EARNINGS PER SHARE

         The  following  data  shows the  amounts  used in  computing  basic and
         dilutive earnings per share:


<TABLE>
<CAPTION>
          <S>                                                            <C>           <C>

                                                                            2000       1999
                                                                        ------------   ------------
         Net loss applicable to common stock                            $(7,766,823)   $(6,341,682)
                                                                        ============   ============
         Weighted-average number of shares in basic and dilutive EPS     15,943,859      9,434,993
                                                                        ============   ============

</TABLE>


                                      F-19

<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors
Synergy Brands, Inc.


We have audited the accompanying consolidated statements of operations,  changes
in stockholders'  equity and cash flows of Synergy Brands, Inc. and Subsidiaries
(collectively,  the  Company) for the year then ended  December 31, 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 audit.

We conducted our audit 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  audit  provides  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the results of their operations and their cash
flows of Synergy  Brands,  Inc.  and  Subsidiaries  for the year then ended,  in
conformity with accounting principles generally accepted in the United States of
America.

Dallas, Texas
April 12, 2000

                                   BELEW, AVERITT, LLP



<PAGE>

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
<S>                <C>                                                              <C>

Exhibit No.      Description                                                        Page
-----------      -----------                                                        ----
3.1              Certificate of Incorporation and amendments thereto (1)             --

3.2              By-Laws (2)                                                         --

4                Warrants and debentures  defining  rights of security  holders      --
                 (3)

10.3             Synergy Brands Inc. 1994 Services and Consulting  Compensation  EX-3.1
                 Plan, as amended (4)

10.4             Stock Purchase Agreement dated November 23, 1999 by and between     --
                 the Company and Sinclair Broadcast Group Inc. (5)

10.5             Stock  Purchase  Agreement  dated  November  23,  1999  between     --
                 BeautyBuys.com Inc., and Sinclair Broadcast Group Inc. (5)

21               Listing of Company Subsidiaries                                  EX-21

99               Listing of Company Intellectual Properties                       EX-99

</TABLE>

(1)      Only a copy of the amendment to the Certificate of Incorporation  filed
         July 2000 is included in the Exhibits. The amendments to Certificate of
         Incorporation  filed  7/29/96  and filed  6/24/98  and  Certificate  of
         Designation  regarding Preferred Stock filed 6/24/98,  are incorporated
         by  reference  to the  exhibits  filed to the Form 10K/A of the Company
         filed  9/3/98.  The original  Certificate  of  Incorporation  and other
         amendments  thereto are incorporated by reference to the exhibits filed
         to the  registration  statement  of the  Company  on Form S-1 (File No.
         33-83226) filed by the Company with the Commission on August 24, 1994.

(2)      The  amendment  to the  By-Laws  approved  by the  Company's  Board  of
         Directors  on  March 7,  1997  are  incorporated  by  reference  to the
         exhibits  filed to the Form  10K/A of the  Company  filed  9/3/98.  The
         original By-Laws are incorporated by reference to the exhibits filed to
         the  registration  statement  of the  Company  on Form  S-1  (File  No.
         33-83226) filed by the Company with the Commission on August 24, 1994

(3)      Copies of  outstanding  warrants and  debentures  are  incorporated  by
         reference to the exhibits  filed to the Form 8-K/A of the Company filed
         with the Commission (File No. 0-19409) on 2/3/98. Description of rights
         of Preferred Stock are included in Certificate of Designation regarding
         Preferred Stock, as amended,  and included as exhibit to the Form 10K/A
         of the Company filed 9/3/98.  Description of the Company's Common Stock
         is  incorporated  by  reference  to the  description  contained  in the
         Company's  Registration  Statement on Form 8-A (File No. 0-19409) filed
         with the  Commission  pursuant to Section  12(b) of the Exchange Act on
         July 16, 1991,  including any amendment or report filed for the purpose
         of updating such description.

(4)      Incorporated by reference to the Registration  Statement of the Company
         on Form S-8 (File No. 333-92243) filed with the Commission on 12/17/99.

(5)      incorporated  by  reference  to  exhibits  filed to the form 8-k of the
         company filed with the commission (file no. 0-19409) on 12/7/99.

                                      -48-