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

                                    FORM 10-KSB

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

              For the Fiscal Year Ended: December 31, 1999
                                         -----------------

     [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
          OF THE SECURITIES EXCHANGE ACT OF 1934

              For the Transition Period From ____ to ____

                  ---------------------------------------------
                         Commission File Number: 0-24109


                        SYNTHONICS TECHNOLOGIES, INC.
             ------------------------------------------------------
             (Exact name of Registrant as specified in its charter)


    Delaware                                                  87-0302620
------------------------------                          -----------------------
State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                            Identification No.)

31324 Via Colinas, Suite 106, Westlake Village, CA             91362
----------------------------------------------------    ------------------------
(Address of principal executive offices)                      Zip Code)


                                 (818) 707-6000
              ----------------------------------------------------
              (Registrant's telephone number, including area code)

     Securities Registrant pursuant to Section 12(b) of the Act:   None

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

                          Common Stock, $0.01 Par Value
                          -----------------------------
                                (Title of Class)

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

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B is contained  in this form,  and no  disclosure  will be
contained  to the  best  of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

     The issuer's revenues for the year ended December 31, 1999 were $157,737.

     The aggregate market value of the voting stock held by non-affiliates as of
April 10, 2000 computed based on the average of the bid and ask prices  reported
on the OTC Bulletin Board, was $6,569,885.

     The number of shares  outstanding  of the  registrant's  common stock as of
April 10, 2000 was 28,421,679.

     Documents Incorporated by Reference:  See Exhibit Index.

     Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]

<PAGE>
                          SYNTHONICS TECHNOLOGIES, INC.

                                    FORM 10-KSB

                   For The Fiscal Year Ended December 31, 1999

                                      INDEX

                                                                          Page
                                     PART I

Item 1. Description of Business .........................................  1

Item 2. Description of Properties .......................................  10

Item 3. Legal Proceedings ...............................................  10

Item 4. Submission of Matters to a Vote of Security Holders .............  11


                                     PART II

Item 5. Market for Common Equity and Related
        Stockholder Matters .............................................. 11

Item 6. Management Discussion and Analysis or Plan of Operation .......... 12

Item 7. Financial Statements ............................................. 16

Item 8. Changes in and Disagreements With Accountants on Accounting
        and Financial Disclosures ........................................ 36

                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control
        Persons; Compliance with Section 16(a) of the Exchange Act ....... 36

Item 10. Executive Compensation .......................................... 40

Item 11. Security Ownership of Certain Beneficial Owners and Management .. 41

Item 12. Certain Relationships and Related Transactions .................. 43

Item 13. Exhibits and Reports on Form 8-K ................................ 45

Signatures ..............................................................  48

                                       2


<PAGE>
                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

     General
     -------

     Synthonics  Technologies,   Inc.  (the  "Company")  has  developed  a  core
technology,  called  Rapid  Virtual  Reality(TM)  that  enables the  creation of
accurate  photo-realistic,  affordable 3D graphical content that is comprised of
very small  computer file sizes.  Ideally suited for any  application  requiring
Internet  transfer of 3D content,  we believe that there are no other  solutions
available  that  provide a comparable  cost/benefit  ratio in meeting 3D content
requirements  for markets such as  E-Commerce,  Distance  Learning,  and Patient
Medical Consultation.

     The Company embarked on the commercialization of its proprietary technology
during 1998 and is now primarily focused on providing businesses with e-commerce
solutions  where the access to accurate 3D databases and graphics,  in real-time
by their consumers,  will positively  influence the purchase decision.  Prior to
that time,  all efforts  were  devoted to market  research,  technology  concept
definition, technology design, and technology validation.

     Synthonics Technologies, Inc., was organized under the laws of the State of
Utah on March 27, 1974, under the name "Columbine  Financial  Corporation."  The
Company  was  originally  incorporated  for the  purpose of engaging in the real
estate  development  business in the State of Utah. No business  activities were
engaged in and the company  became  inactive  and remained so until 1978 when it
was  reactivated  and  commenced  business  in the State of  California  for the
purpose of  originating  loans on  swimming  pools  construction,  primarily  in
Southern  California.  The loan origination  business operations ceased in 1991.
The Company was  reclassified  as a development  stage company and began seeking
new business opportunities believed to hold a potential profit.

     In  May,  1995  Synthonics  Incorporated,  a  California  Corporation,  was
acquired by the Company, then known as Columbine Financial Corporation by way of
a stock exchange  providing 4.5 shares of Columbine stock for every one share of
Synthonics  Incorporated  stock.  The  acquisition was completed in August 1995.
Columbine  Financial  Corporation was dormant,  but still fully  registered as a
public corporation at the time of the merger.  Synthonics  Incorporated  pursued
this merger as a method of  guaranteeing a means to enter into public trading of
its stock as soon as it was determined to be  strategically  desirable.  At this
time,  public  trading has  resumed.  A Form 211  pursuant  to Rule  15c-211 was
prepared and submitted by its market maker in order to resume trading.

     Synthonics  Incorporated,  a  California  Corporation  (now a wholly  owned
subsidiary  of the Company) was founded in August 1993.  Its primary focus since
its founding has been to develop technology that will have an extremely positive
impact on any industry  where  success can be enhanced by improving  measurement
accuracy,   eliminating   dangerous   environments,   extending   human   vision
capabilities,  or replacing  animation with realism.  Synthonics  Incorporated's
charter,  since its acquisition by the Company,  has been to continue to advance
the Company's core technology.

     On  September  16,  1996,  the  Company  changed  its  name to  "Synthonics
Technologies,  Inc".  On November 4, 1996,  the  Company  qualified  itself as a
foreign  corporation in the State of California.  On April 28, 1998, the Company
filed its Form 10SB12G with the SEC to become a fully reporting  public company.
On December 23, 1999, the Company  reincorporated under the laws of the State of
Delaware.

     Strategy
     --------

     Synthonics  has  determined  that  certain  vertical  markets  require more
sophisticated intelligence be made available to its consumers in order for those
markets to take advantage of the explosive  growth  associated  with  e-commerce
channels.  We  believe  that many  current  e-commerce  solutions  fall short in
providing  consumers  the comfort  level they are seeking in order to complete a
purchase  outside of the  in-store  environment.  Consequently,  many  potential
e-commerce consumers use on-line resources to sort and compare products but then
feel it necessary to visit a store to complete the purchase. We have developed a
strategy that addresses the concerns of these consumers.

                                       3
<PAGE>
     Through utilization of our own proprietary 3D technology,  along with other
third  party  technologies,  we have  developed a national  e-commerce  enabling
program that can dramatically improve the functionality of any online or offline
shopping  experience.  We are  concentrating our efforts on e-commerce where the
interface is with the business - a  business-to-business  solution. In doing so,
the customer  acquisition  is not a  requirement  of  Synthonics  but rather the
responsibility  of businesses  with sound marketing  infrastructures  already in
place.  We are targeting  businesses  that have products that meet the following
criteria:

     o    Items where the  probability  and ease of purchase  is  increased  and
          enhanced through the use of 3D modeling.

     o    Items  where  the  potential   markets  are  large  and  have  clearly
          identifiable product extensions.

     o    Higher  ticket items or large scale  programs  where  photographs  and
          standard spec sheets don't provide enough  information to make a final
          purchase decision.

     o    Items  that  are or can be  sold  through  multi-channel  distribution
          systems.

     Our  solution  is  expected  to provide  personalized  information  that we
believe will greatly enhance the consumer's  comfort level that the product they
order is going to meet  their  individual  needs  without  having to  physically
examine  the  product.  We  will  be able to  provide  this  service  due to our
proprietary 3D content creation technology.  Using our e-commerce solutions,  we
believe  consumers  will be able to match  sizes to their body  proportions,  to
compare  products or styles in side-by-side  comparisons,  to place accurate and
photo-realistic  models of the product into  personalized 3D environments and to
extract any measurement from the product that is important to their personal use
of the product.  Additionally, the consumer will be able to examine the product,
no matter how large, as if he or she were holding it in his or her hands.

     We have designed our  e-commerce  solutions to be very flexible so that our
business  customers will be able to take advantage of  multi-channel  approaches
for the marketing of their  products.  We envision our solutions being delivered
to consumers in the following manners:

     o    Digital  Catalogs - Catalogs are used  extensively in several vertical
          markets  as a  primary  method of  presenting  and  selling  products.
          Catalog  consumers  are those who have  limited  access to the store -
          either due to time constraints or physical location - and use catalogs
          due to the  convenience  they  provide.  Catalog  consumers  have also
          demonstrated  that  they  will  purchase  products  without  having to
          physically interact with them.

     o    Kiosks - A growing  trend at retail  locations  is to provide  product
          information  on  kiosks  for the  convenience  of the  consumer.  This
          approach  enables  consumers  to avoid  sales  personnel,  to  compare
          products, and to access products that may only be at other locations.

     o    Internet - Most  retailers  have now opened or are planning to open an
          Internet channel of  distribution.  These may take the form of its own
          website  or it may use a portal  site to  merchandise  their  products
          electronically.  Our Internet  solution is designed to run  seamlessly
          across the Internet as a totally  web-based  solution and to run as an
          application within any manufacturer's or retailer's website.

     We  believe  that  brand  awareness  and  enhancement  is a very  important
attribute required to support multi-channel marketing of one's products. We have
designed  our  e-commerce  solutions  to take on the  unique  identities  of our
business  customers  while, at the same time,  broadcasting our own brand as the
core technology within the solution.

                                       4
<PAGE>
     Products and Services
     ---------------------

     Current  Products - Synthonics  has two other  products  that are currently
available.  We published a CD-ROM for the  Smithsonian  Institution,  located in
Washington  D.C., that is currently sold through the Smithsonian  gift shops and
by  several  educational  products  distributors.  The  CD-ROM is  entitled  The
Smithsonian  Museum  Collection  and is a  virtual  3D tour  of the  Smithsonian
collections offering more than one hundred hours of edutainment.

     We have licensed our Picture  Modeler,  a 3D content creation  product,  to
Evans &  Sutherland,  located in Salt Lake  City,  UT, as a  component  in their
recently  released  RapidSITE  3D  visualization  product for the  architectural
market.  Picture  Modeler  enables  the easy and rapid  creation  of accurate 3D
models of building structures that are comprised of small file sizes.

     E-commerce  Solutions - Our  Digital  Double  program  has been  created to
address  the needs of  businesses  selling  many  types of  products.  The first
solution that will be available is the Digital Double for Apparel version. As is
the case with other vertical  markets,  most all retailers and  manufacturers of
apparel  have  launched  or are  launching  e-commerce  initiatives  in order to
attract and hold the rapidly  growing  number of  convenience  and value  driven
consumers.  The apparel market also  currently  contains a very large segment of
catalog users. We believe  consumers who have decided to shop by way of catalogs
are  ideal  candidates  for  conversion  to  e-commerce  shoppers  as  they  are
comfortable  "buying  without  touching"  and are used to the order  fulfillment
process.

     The Digital Double for Apparel product allows consumers to create their own
personal  3D  mannequin  that is shaped to their body  proportions  from  simple
measurements  that anyone can collect by them self in the  convenience  of their
home. Once the measurements are entered,  the mannequin  instantly morphs to the
new body  proportions.  As the  consumer  then views the many styles of clothing
available,  his or her correct  size is  determined  for each and every  garment
included in the inventory.  Details  concerning  specific fit are also available
enabling a consumer to  conclude  that the fit is okay as is, the garment can be
altered,  or the  particular  fit in this style isn't going to work - all before
making a  purchase,  paying  for  shipping  and then  having to return the item.
Finally,  the consumer can dress his or her personal mannequin with the garments
he or she is  interested  in and  then mix and  match  outfits  in  side-by-side
comparisons.

     The Digital  Double for Apparel  product  will be able to be  delivered  to
consumers as a mailed digital catalog,  at a kiosk or over the Internet.  In all
cases we believe it will positively  impact the number one problem  (returns for
wrong size or improper fit)  associated  with online and mail order purchases of
apparel.  We are not aware of any competitive  and practical "size  intelligent"
e-commerce solution available today within the Apparel industry.

     After securing  customers  within the apparel  market,  we intend to launch
e-commerce  solutions for other vertical markets such as furniture,  automotive,
real estate and others.

                                       5
<PAGE>
     Patents
     -------

     Synthonics  believes  its  technology  to be  unique  in its  approach  and
application.  We are dedicated to the protection of our trade secrets and source
code  through  tight  security,  the  advancement  of the  technology,  and  the
establishment  of  strong  patent  protection.  Therefore,  we have  retained  a
prominent  legal firm to develop  and submit  patent  applications  for  several
technologies that the Company views as patentable.  To date the Company has been
granted nine patents by the U.S. Patent & Trademark  Office. A brief description
of each patent issued to date is included below:

Patent 1.
--------
U.S. Patent:   #5,661,518

Title:         Methods and  apparatus  for the creation and  transmission  of 3D
               images.

Issue Date:    August 26, 1997

Description:   Anaglyph generating technique that minimizes eye strain and color
               loss. Technique for aligning two images for stereo viewing.

Patent 2.
--------
U.S. Patent:   #5,699,444

Title:         Methods and  apparatus  for using image data to determine  camera
               location and orientation.

Issue Date:    December 16, 1997

Description:   Able to  precisely  locate  camera  within six degrees of freedom
               (x-axis,  y-axis,  z-axis, tilt,  rotation,  and azimuth) in free
               space with only a 3 point calibration target and knowledge of the
               camera  focal  length.  Greatly  reduces  the cost of 3D  content
               generation.

Patent 3.
--------
U.S. Patent:   #5,742,291

Title:         Method and apparatus for creation of three-dimensional images.

Issue Date:    April 21, 1998

Description:   Technique for morphing a baseline 3D wireframe  into a new shape.
               Greatly  speeds  up the  process  of  generating  unique  3D wire
               frames.

Patent 4.
--------
U.S. Patent:   #5,742,330

Title:         Methods  and  apparatus  for the  creation  and  transmission  of
               3-dimensional images.

Issue Date:    April 21, 1998

Description:   Technique  for  minimizing  disturbances  and to  compensate  for
               underexposure when transmitting 3D color television images.  Will
               benefit high definition transmissions.

Patent 5.
--------
U.S. Patent:   #5,748,199

Title:         Method and  apparatus  for  converting a  two-dimensional  motion
               picture into a three-dimensional motion picture.

Issue Date:    May 5, 1998

Description:   Technique for  constructing  wire frames of object from frames of
               2D movie  film and then  photo-realistically  rendering.  Enables
               original  blockbuster  2D movies to be  converted  to 3D  virtual
               reality experiences without re-shooting movie.

                                       6
<PAGE>
Patent 6.
--------
U.S. Patent:   #5,793,372

Title:         Methods  and  apparatus  for  rapidly  rendering  photo-realistic
               surfaces on 3-dimensional  wire frames  automatically  using user
               defined points

Issue Date:    August 11, 1998

Description:   Technique that accurately and rapidly aligns the photo-texture on
               the 3D wire frame.  Enables  inexpensive,  realistic appearing 3D
               graphical content to be generated.

Patent 7.
--------
U.S. Patent:   #5,969,722

Title:         Methods and  apparatus  for  creation of  three-dimensional  wire
               frames and for three-dimensional stereo morphing.

Issue Date:    October 19, 1999.

Description:   Technique that  accurately  and rapidly  creates wire frames from
               standard shapes  (primitives) with the use of a light source that
               is  projected   onto  a  featureless   object  to  create  visual
               definition. Enables inexpensive, realistic appearing 3D graphical
               content to be generated.

Patent 8.
--------
U.S. Patent:   #6,037,971

Title:         Methods  and  apparatus  for the  creation  and  transmission  of
               3-dimensional images.

Issue Date:    March 14, 2000

Description:   Techniques  for  compensating  for  over  or  underexposure  in a
               particular  image plane are  deployed as well as  techniques  for
               minimizing  subjective  disturbance when viewing  relatively pure
               color regions of a  3-dimensional  image and for  transmission of
               3-dimensional color television images to users.  Optimizes stereo
               performance with red/blue glasses.

Patent 9.
--------
U.S. Patent:   #6,041,140

Title:         Apparatus for interactive image correlation for three dimensional
               image production.

Issue Date:    March 21, 2000

Description:   A hardware  accelerator  board utilizes field  programmable  gate
               arrays  that  can be  reprogrammed  on  the  fly  during  program
               execution to achieve  dedicated  hardware  processing  speeds and
               greater  flexibility  than  provided by  compiled or  interpreted
               software.  The  accelerator  board is used to permit  the user to
               interact with the computer system in which the board is installed
               to interactively  produce a correlation of two images of the same
               scene.  Correlated  images are used to determine depth of objects
               in  the  scene  shown  in the  correlated  images.  A  production
               automation   technique  for  hardware   accelerated  creation  of
               3-dimensional content.

     Several   additional   patent   applications  are  currently  pending  both
internationally  and in the United  States.  Although  the Company  believes its
patent  position to be strong,  the extent to which patents provide a commercial
advantage or inhibit the development of competing products varies.

                                       7
<PAGE>
     Employees
     ---------

     As of March 27,  2000,  the Company had seven  employees,  none of whom are
covered by a collective bargaining agreement.  We consider our relationship with
our employees to be good.

     Research and Development
     ------------------------

     The Company  invests  significantly  in the development of products for new
applications.  Only  patent  related  costs are  capitalized.  All other  costs,
including  salaries and wages of employees included in research and development,
are expensed as incurred. Most of the Company's research and development efforts
are in  connection  with  the  advancement  of  its  Rapid  Virtual  Reality(TM)
technology and how it applies to the needs of e-commerce consumers.

     Raw Materials
     -------------

     As a software development company, Synthonics has no significant dependence
on raw materials.  For the Smithsonian  CD-ROM, the product does include package
materials comprised of paper goods, red/blue glasses and a plastic disk. All are
standard materials readily available from multiple sources.

     Risk Factors
     ------------

     Several of the matters  discussed in this document contain  forward-looking
statements  that involve risks and  uncertainties.  Factors  associated with the
forward-looking  statements that could cause actual results to differ materially
from those projected or forecast appear in the statements  below. In addition to
other information contained in this document,  readers should carefully consider
the following cautionary statements and risk factors:

     IF WE ARE UNABLE TO RAISE  SUFFICIENT  CAPITAL.  Our future success depends
largely on the  ability to secure  outside  capital  funding.  Required  product
concept demos, product development, technology advancement, employee recruitment
and hiring,  and related essential  operating  expenses are all dependent on new
and  substantial  capital  funding  being  secured.  We cannot be  certain  that
additional  financing will be available at the time we need additional  funds or
that,  if  available,  it can be  obtained on terms that we deem  favorable.  If
adequate capital funding cannot be secured,  we will have to curtail  operations
and our business will be adversely affected.  Additionally, the sale of stock to
raise additional funds may dilute our stockholders.

     WE HAVE A LIMITED  RELEVANT  OPERATING  HISTORY  UPON WHICH TO EVALUATE THE
LIKELIHOOD OF OUR SUCCESS.  Factors such as the risks, expenses and difficulties
frequently  encountered  in the  operation  and  expansion of a  relatively  new
business and the development and marketing of new products must be considered in
evaluating the likelihood of success of our company.

     WE HAVE A HISTORY  OF LOSSES  AND  ACCUMULATED  DEFICIT  AND THIS  TREND OF
LOSSES MAY  CONTINUE IN THE FUTURE.  For the period  January 1, 1999 to December
31, 1999 we incurred a net loss of $983,277.  For the fiscal year ended December
31, 1998 we had a net loss of $1,664,670.  At December 31, 1999 our  accumulated
deficit was  $6,980,378.  Our ability to obtain and sustain  profitability  will
depend,  in part, upon the successful  development and marketing of our existing
products and  technologies  and the  successful and timely  introduction  of new
products.

                                       8
<PAGE>
     OUR PROPRIETARY  TECHNOLOGY MAY NOT BE ADEQUATELY PROTECTED FROM COPYING BY
OTHERS.  Our future  success  and  ability  to compete  depends in part upon our
proprietary  technology.  We rely on trademark,  trade secret,  patent laws, and
copyright  laws to  protect  our  technology,  and  require  all  employees  and
third-party developers to sign nondisclosure  agreements.  We cannot be certain,
however,   that  these  precautions  will  provide  meaningful  protection  from
competition or that  competitors will not be able to develop similar or superior
technology  independently.  We do not  copy-protect  our software,  so it may be
possible  for  unauthorized  third  parties to copy our  products  or to reverse
engineer or otherwise  obtain and use information that we regard as proprietary.
Our  customers  may take  inadequate  precautions  to  protect  our  proprietary
information.  If we  must  pursue  litigation  in  the  future  to  enforce  our
intellectual  property rights,  to protect our trade secrets or to determine the
validity and scope of the proprietary  rights of others,  we may not prevail and
will likely make  substantial  expenditures  and divert valuable  resources.  In
addition,  many foreign  countries' laws may not protect us from improper use of
our proprietary  technologies overseas. We may not have adequate remedies if our
proprietary rights are breached or our trade secrets are disclosed.

     IF WE DO NOT ACHIEVE  COMMERCIAL  ACCEPTANCE  OF OUR INTERNET 3D E-COMMERCE
SOLUTION  PRODUCTS.  We  are  currently  focusing  the  Company  to  provide  3D
e-commerce  solutions  for the Internet  that take  advantage of our patented 3D
technology.   We  believe  both  consumers  and  businesses,   participating  in
e-commerce on the Internet, will benefit substantially from the products that we
will develop therefore  creating market demand for these products.  In designing
our  products  for  e-commerce  on the  Internet,  we will have to make  certain
assumptions about consumer  preferences,  retailer's needs, and the availability
of anticipated Internet related technology advances.  Inaccurate  assumptions on
our behalf, for any of these categories, will likely downgrade market acceptance
of our Internet 3D e-commerce  solution products.  If market acceptance of these
products is less than we have forecasted,  future results of the company will be
adversely affected.

     IF EMERGING TECHNOLOGIES PROVIDE ALTERNATIVES WITH EQUAL OR BETTER BENEFITS
OF OUR  TECHNOLOGY.  We believe that our current level of 3D technology  for the
creation of 3D content provides  businesses and consumers with benefits that are
unavailable  from  competitive  technologies.  We can only make this  evaluation
against  other  products  that have  been  released  and  available  for  public
consumption.   Our  competitive  analysis  cannot  evaluate  products  that  are
currently  under  development  by  other  companies.  The  explosive  growth  of
e-commerce  over the  Internet is  sufficient  incentive  for many  companies to
invest in  technologies  that may provide  products that offer similar or better
consumer and business  benefits than will our products.  It is essential that we
execute our Internet  e-commerce solution strategy very quickly in order to stay
ahead of the competition's  product  offerings in this marketplace.  Our time to
market with our future  products is dependent  on our ability to raise  adequate
capital funding as described above.

     IF WE ARE UNABLE TO  IDENTIFY  AND SECURE  REQUIRED  RESOURCES.  Our future
results  depend  largely  on  our  ability  to  identify  and  secure  resources
including:

          * Technical staff
          * Business development staff
          * Strategic partners
          * Outside contractors

     We will have to rapidly expand our  capabilities,  once capital  funding is
secured, in order to successfully pursue our Internet e-commerce solution market
strategy.  Our capabilities will be expanded by combining internal staffing with
the  formation  of  strategic  partnerships  and with the  selection  of outside
contractors  such as software  program  developers.  If we are either  unable to
identify or to secure these  resources in a timely  fashion,  our future results
will be adversely affected.

                                       9
<PAGE>
     IF WE ARE UNABLE TO RETAIN AND  UTILIZE  KEY  PERSONNEL.  As an early stage
company,  we are  particularly  dependent on a limited  number of individuals to
execute our business plan. At present, all our officers and directors fall in to
the category of key individuals as each is counted upon for contributions to our
success.  We have  employment  contracts with our Chief  Executive  Officer,  F.
Michael Budd, and our Chief  Technical  Officer,  Charles S. Palm, our only full
time  officers.  We have  been  unable  to pay  either  of these  employees  the
compensation  amounts called for in their  employment  contracts during the past
several fiscal quarters.  Each employment contract can be terminated with thirty
days notice to the  Company.  If either of these  individuals  were to terminate
employment in the near future,  it will have an adverse  affect on our financial
performance.  Our  directors are all  individuals  who are employed full time by
other, non-competing,  companies. As such, involvement of these directors in the
day-to-day running of the business is not practical due to conflicts of interest
for their time. At any given time, any of our directors may be unavailable to us
due to the demands of their employers and this may have an adverse affect on the
financial results of the business.

     IF WE ARE UNABLE TO MANAGE OUR  EXPANSION  AND GROWTH.  We are  planning to
expand the  business  very  rapidly in order to entrench  ourselves  in, what we
believe  is a  very  lucrative  e-commerce  market.  Effectively  managing  this
expansion  will be very  complex  and require  the  addition  of key  management
personnel as well as the incorporation of management support systems. Either the
failure to identify  and attract key  managers or the delayed  incorporation  of
required  management  support systems will adversely affect our future financial
results. The successful  recruitment of key managers and the timely installation
of  management  support  systems are both  largely  dependent  on our efforts to
secure adequate capital funding that is discussed above.

     IF WE ARE UNABLE TO ADEQUATELY ADDRESS INTERNET DOWNLOAD ISSUES. We will be
supplying 3D e-commerce  solutions  over the Internet.  A major element of these
future product  solutions will be to require  downloads of several 3D data files
to consumers'  sites. In order to be successful in this regard,  we must be able
to offer download times that do not detract from the e-commerce  experience.  We
believe that our technology offers the best alternative available in terms of 3D
file sizes.  However, we have no assurances that this advantage will be adequate
in the eyes of a  consumer.  We have no  control  over the modem  type used by a
consumer,  the  time of day a  consumer  will be  accessing  the  Internet,  the
capacity of the consumer's Internet Service Provider (ISP), or the rate to which
expanded bandwidth solutions will be practically available to consumers. Each of
these can have a negative  affect on the  length of the  download  time.  We are
attempting  to  consider  all these  issues in the  design of our 3D  e-commerce
solution  products but we cannot assure that they will be adequately  addressed.
If consumers conclude that the download times are not sufficiently offset by the
benefits provided, our future financial results will be adversely affected.

     Impact of Year 2000
     -------------------

     During 1999 we completed our remediation and testing of management  support
systems. Because of those planning and implementation efforts, we experienced no
significant   disruptions  in  mission  critical   information   technology  and
non-information technology systems and those systems have successfully responded
to the Year 2000 date change.  We did not incur any significant  expenses during
1999 in  conjunction  with  remediating  our  systems.  We are not  aware of any
material  problems  resulting  from Year 2000 issues,  either with our products,
internal  systems,  or the  products  and  services  of third  parties.  We will
continue to monitor our mission critical computer  applications and those of our
suppliers  and vendors  throughout  the year 2000 to ensure any latent Year 2000
matters arising are addressed promptly.

ITEM 2. DESCRIPTION OF PROPERTY

     The Company does not own any real property.  The Company currently occupies
approximately  2,430 square feet of space where it maintains its  administrative
and  development  offices  that are  located  at 31324 Via  Colinas,  Suite 106,
Westlake  Village,  California  91362.  The space is in good  condition  and the
Company  leases  this space from  Westlake  Village  Industrial  Park.  Westlake
Village  Industrial  Park is not  affiliated in any way with the Company and the
terms of the lease were negotiated at arms-length.  The current lease expires on
August 31, 2000.

ITEM 3. LEGAL PROCEEDINGS

     The  Company  is not  involved  in any  pending,  nor  is it  aware  of any
threatened,  legal proceedings which it believes could reasonably be expected to
have a material adverse effect on its business,  operating  results or financial
condition.

                                       10
<PAGE>
ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     On  December  3, 1999 a Special  Meeting of  shareholders  was held for the
purpose of:

     1.   To consider and vote upon a proposed  change in the Company's state of
          incorporation from Utah to Delaware.

     2.   To approve a the 1999 stock  option plan  authorizing  the issuance of
          10,000,000 shares of Common Stock.

     (a)  Reincorporation in Delaware

     At the  Special  Meeting  of  shareholders,  the  shareholders  approved  a
reincorporation in Delaware through a merger of Synthonics Technologies, Inc., a
Utah  corporation (the  "Company"),  with and into its wholly owned  subsidiary,
Synthonics  Technologies   Mergercorp.,   a  Delaware  corporation  ("Synthonics
Delaware"). There were 28,421,679 shares entitled to vote with 18,743,742 voting
in favor of the proposal and 6,025 voting against the proposal.

     The   reincorporation   became   effective  on  December   23,  1999.   The
reincorporation  effects only a change in the legal domicile of the Company.  It
did not  result  in any  change of the name,  business,  management,  employees,
fiscal year,  assets or liabilities,  trading symbol ("SNNT") or location of any
of the  facilities of the Company.  Pursuant to the Agreement and Plan of Merger
between the Company and Synthonics Delaware,  each share of the Company's common
stock, par value $.01 per share, was  automatically  converted into one share of
Synthonics  Delaware common stock,  par value $.01 per share.  Each share of the
Company's  Class  A  Preferred  Stock  issued  and  outstanding   prior  to  the
reincorporation was automatically  converted into one share of Class A Preferred
Stock of Synthonics Delaware.

     (b)  Approval of 1999 Stock Option Plan

     At the Special Meeting,  shareholders also approved a new stock option plan
(the "1999 Plan")  authorizing the issuance of 10,000,000 shares of common stock
of the Company.  There were  28,421,679  shares entitled to vote with 17,170,151
voting in favor of the proposal and 593,616 voting against the proposal.

     The  reincorporation  and the  rights  and  terms of the 1999 Plan are more
fully  described in the Company's  proxy statement filed November 19, 1999 which
is incorporated herein by reference.

     No other matters were submitted to a vote of security holders,  through the
solicitation of proxies,  or otherwise,  during the fourth quarter of the fiscal
year covered by this report.
                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS

     The Company's  Common Stock is listed and traded on the OTC Bulletin  Board
under the symbol "SNNT".  There has been relatively  limited trading activity in
the Company's stock since inception. The following table represents the high and
low closing prices for the Company's Common Stock for each quarter of the fiscal
year ended December 31, 1999.

          Fiscal 1999              High           Low
          --------------           -------        ------
          First Quarter            $0.625         $0.250
          Second Quarter           $0.310         $0.130
          Third Quarter            $0.280         $0.070
          Fourth Quarter           $0.531         $0.070

     There were  approximately  600  holders of record of the  Company's  Common
Stock and one holder of record of the Company's  Preferred  Stock as of December
31, 1999.

     The Company has never  declared or paid any cash  dividend on its shares of
Common Stock.


                                       11
<PAGE>
     During the fiscal years ended December 31, 1997, 1998 and 1999,  Synthonics
issued shares of its Common Stock for the purpose of raising  operating  capital
and  repayment  of debt.  The Company  believes  all such sales were exempt from
registration  under the  Securities  Act of 1933 by reason of  Section 4 (2) and
Regulation D thereunder. The transactions for each year are described below:

     Year                Shares Issued          Proceeds
     ---------------------------------------------------------
     1999                8,470,400              $1,231,908
     1998                2,127,892              $1,143,280
     1997                1,921,354              $  889,615

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATION RESULTS

     Cautionary Forward-Looking Statement
     ------------------------------------

     Statements  included  in  this  Management's  Discussion  and  Analysis  of
Financial  Condition  and Results of  Operations,  and in future  filings by the
Company with the  Securities  and Exchange  Commission,  in the Company's  press
releases  and in  oral  statements  made  with  the  approval  of an  authorized
executive officer which are not historical or current facts are "forward-looking
statements"  made  pursuant  to  the  safe  harbor  provisions  of  the  Private
Securities  Litigation  Reform Act of 1995 and are subject to certain  risks and
uncertainties  that  could  cause  actual  results  to  differ  materially  from
historical  earnings and those presently  anticipated or projected.  The Company
wishes  to  caution   readers   not  to  place   undue   reliance  on  any  such
forward-looking statements,  which speak only as of the date made. The following
important  factors,  among others, in some cases have affected and in the future
could affect the Company's  actual results and could cause the Company's  actual
financial   performance  to  differ   materially  from  that  expressed  in  any
forward-looking   statement:  (i)  the  extremely  competitive  conditions  that
currently exist in the  three-dimensional  software development  marketplace are
expected to continue,  placing further pressure on pricing which could adversely
impact  sales  and  erode  profit  margins;  (ii)  many of the  Company's  major
competitors in its channels of distribution have significantly greater financial
resources  than the Company;  and (iii) the inability to carry out marketing and
sales plans would have a materially adverse impact on the Company's projections.
The  foregoing  list  should not be  construed  as  exhaustive  and the  Company
disclaims any obligation  subsequently to revise any forward-looking  statements
to  reflect  events or  circumstances  after the date of such  statements  or to
reflect the occurrence of anticipated or unanticipated events.

     The  following  discussion  and analysis  should be read  together with the
Annual Report of Synthonics, Consolidated Financial Statements of Synthonics and
the notes to the Consolidated  Financial  Statements  included elsewhere in this
Form 10-KSB.

     This   discussion   summarizes  the  significant   factors   affecting  the
consolidated operating results, financial condition and liquidity and cash flows
of  Synthonics  for the years ended  December  31, 1999 and  December  31, 1998.
Except for historical  information,  the matters  discussed in this Management's
Discussion  and Analysis of Financial  Condition and Results of  Operations  are
forward looking  statements that involve risks and  uncertainties  and are based
upon judgments  concerning  various factors that are beyond our control.  Actual
results  could differ  materially  from those  projected in the  forward-looking
Statements as a result of, among other things, the factors described below under
the caption "Cautionary Statements and Risk Factors."

     The Company has  formulated  its  business  plans and  strategies  based on
certain assumptions of the Company's management regarding the size of the market
for the  products  which  the  Company  will be able  to  offer,  the  Company's
anticipated share of the market,  and the estimated prices for and acceptance of
the Company's products.  The Company continues to believe its business plans and
the  assumptions  upon which they are based are valid.  Although these plans and
assumptions  are  based on the best  estimates  of  management,  there can be no
assurance  that these  assessments  will  prove to be  correct.  No  independent
marketing studies have been conducted on behalf of or otherwise  obtained by the
Company,  nor are any such studies planned.  Any future success that the Company
might enjoy will depend upon many factors, including factors which may be beyond

                                       12
<PAGE>
the  control of the Company or which  cannot be  predicted  at this time.  These
factors may  include  product  obsolescence,  increased  levels of  competition,
including the entry of additional  competitors and increased success by existing
competitors,  changes in general  economic  conditions,  increases  in operating
costs  including  cost of supplies,  personnel and  equipment,  reduced  margins
caused by competitive  pressures and other factors,  and changes in governmental
regulation imposed under federal, state or local laws.

     The Company's  operating results may vary significantly due to a variety of
factors including changing customers profiles,  the introduction of new products
by the Company or its competitors,  the timing of the Company's  advertising and
promotional  campaigns,   pricing  pressures,   general  economic  and  industry
conditions that affect customer demand, and other factors.

YEAR ENDED DECEMBER 31, 1999 COMPARED WITH YEAR ENDED DECEMBER 31, 1998.
-----------------------------------------------------------------------

     NET SALES  decreased 69.2% for the year ended December 31, 1999 to $157,737
from $512,217 for the year ended December 31, 1998. The majority of sales during
the year ended December 31, 1999 were from ongoing revenue  contracts.  Sales of
the Smithsonian CD-ROM were $91,971. In addition, $40,000 in sales was generated
during this  period from the  Company's  agreement  to license its new  software
product called Picture Modeler. The balance of sales during the twelve months of
fiscal 1999 was derived from 3D content creation services  rendered.  During the
twelve months of fiscal 1998, the Company  launched its sales of the Smithsonian
CD-ROM entitled The Smithsonian  Museum Collection and provided content creation
and software  development  services to two customers accounting for the majority
of its sales in that time period.

     GROSS PROFIT decreased 46.8% in the year ended December 31, 1999 to $64,968
from  $121,662 in the year ended  December 31, 1998.  This decrease in the gross
profit for fiscal 1999 can be  attributed to the reduction in sales for the same
time period. Gross profit as a percentage of sales increased to 41.2% for fiscal
1999 as compared to 23.7% for fiscal 1998.

     OPERATING  EXPENSES decreased to $1,008,522 for the year ended December 31,
1999 from  $1,733,919  for the year ended  December  31,  1998.  The decrease in
operating expense is primarily due to a decrease in staffing during fiscal 1999.
Overall,  the reduction in operating  expenses reflects the Company's efforts to
consolidate  and cut costs while it attempts  to redefine  its overall  strategy
from that of a 3D software  tools  provider to that of an Internet 3D e-commerce
solution provider.

     PRODUCTION COSTS for the year ended December 31, 1999 were $91,849 or 58.2%
of sales as compared  to $447,073 or 87.3% of sales for the year ended  December
31, 1998.  Production  costs  decreased  due to the fact that during  1998,  the
Company had  additional  costs  related to the  preparation  of the  Smithsonian
CD-ROM for its release in October  1998.  During  fiscal  year 1999,  production
costs  have been  primarily  associated  with the 3D content  creation  services
provided to the Smithsonian Institution and the development of the first product
for the Company's Internet solution initiative.

     GENERAL AND  ADMINISTRATIVE  EXPENSES totaled $498,719 and $716,365 for the
years ended  December 31, 1999 and 1998,  respectively.  The decrease in expense
reflects the cost reduction  effort underway with the re-focusing of the Company
to that of an Internet e-commerce solution provider.

     RESEARCH AND  DEVELOPMENT  EXPENSES  totaled  $320,754 and $432,858 for the
years ended December 31, 1999 and 1998, respectively.  The decrease is primarily
the  result of a  reduction  in  development  required  for the  products  being
prepared for the Company's joint venture affiliate, Acuscape International, Inc.
Expenditures  on research  and  development  are  expected to increase in future
periods,  particularly  in connection  with the  Company's  shift in strategy to
electronic  commerce  solutions  and the  investigation  and/or  development  of
additional product lines.

     We wrote off  $7,710 of  uncollectible  receivables  during  the year ended
December 31, 1999. A total of $2,060 of  uncollectible  receivables were written
off during the year ended December 31, 1998.

     As a result of the foregoing factors, we had a net loss of $983,277 for the
year ended  December  31, 1999 as compared to a net loss of  $1,664,270  for the
year ended December 31, 1998.

                                       13
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

     The  Company's  primary  needs  for funds are to  provide  working  capital
associated  with  forecasted  growth in sales  volume.  Specifically,  funds are
required  to  complete  the  products   necessary  for  the  Company's  Internet
initiative  and to  advance  its  core  technology  used in the  creation  of 3D
content.   Additionally,   funds  are  required  to  promote   future   business
development.  Working  capital for the year ended  December  31, 1999 was funded
primarily through the sale of equity,  the assumption of debt and the collection
of accounts receivable.

     Net cash used in operating  activities  during the year ended  December 31,
1999 was  primarily  attributable  to a net loss of  $983,277.  Net cash used in
investing  activities  in the year ended  December 31, 1999 was due primarily to
costs associated with patent filings.  Net cash provided by financing activities
for the year ended December 31, 1999 was $761,097  compared to $1,464,833 during
the year ended  December  31,  1998.  In May 1999 a warrant  was  exercised  for
120,000 shares of Common Stock at $0.20 per share providing $24,000 in cash, and
in June 1999,  we closed a private  placement of 2,535,000  shares of our Common
Stock,  which were  issued to three  investors.  The  private  placement  raised
aggregate  proceeds  of  $253,500,  offset by $13,692 of  selling  expenses  and
$12,000 for dividends  accrued to be paid to Preferred  Stock  shareholders.  In
October 1999 an option was exercised for $80,000. In December 1999 $500,000 came
into the Company via a convertible debt agreement.

     In May of 1999, we had notes payable in the amount of $850,000 come due. We
chose to exercise our option,  per the terms of the notes, to issue Common Stock
in lieu of  cash  in  order  to pay  off  the  principal  and  the  majority  of
outstanding interest associated with these notes. In doing so, we issued a total
of 5,005,000 shares of our Common Stock to the holders of these notes.

     At present,  our  anticipated  capital  commitments  are  primarily for the
expenditures associated with the overhauling of our infrastructure,  creating of
marketing  demonstrations,  pursuing strategic  alliances,  and pursuing capital
funding. We estimate that our current cash balance is not sufficient to meet our
needs through the first quarter of fiscal 2000.  Based on our current  operating
plan, we anticipate that further capital will be required during the next twelve
months to satisfy  our  expected  increased  working  capital and  research  and
development  requirements  for  the new  products.  We are  currently  exploring
alternatives  to fulfill our financing  requirements.  No assurance can be given
that  additional  financing will be available when needed or that, if available,
it will be on terms  favorable to our stock  holders and us. If needed funds are
not available, we may be required to curtail our operations,  which could have a
material  adverse  effect  on our  business,  operating  results  and  financial
condition.  There can be no  assurance  that our  working  capital  requirements
during this period will not exceed its  available  resources or that these funds
will be sufficient  to meet the  Company's  longer-term  cash  requirements  for
operations.

                                       14
<PAGE>
ITEM 7.   FINANCIAL STATEMENTS

                          SYNTHONICS TECHNOLOGIES, INC.

                          Audited Financial Statements
                     December 31, 1999 and December 31, 1998
<TABLE>
     <S>                                                                 <C>
     Independent Auditors' Report ...................................... 16
     Consolidated Balance Sheets ....................................... 17
     Consolidated Statements of Operations ............................. 18
     Consolidated Statements of Stockholders' Equity ................... 19
     Consolidated Statements of Cash Flows ............................. 21
     Notes to Consolidated the Financial Statements .................... 22
</TABLE>

                                     Page 15
<PAGE>
                     Report of Independent Auditors' Report

The Board of Directors and Stockholders
Synthonics Technologies, Inc.

We have  audited  the  accompanying  consolidated  balance  sheet of  Synthonics
Technologies,  Inc. and  subsidiaries  as of December 31, 1999,  and the related
consolidated statements of operations,  stockholders' equity (deficit), and cash
flows for the year 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 audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  consolidated  financial  position  of  Synthonics
Technologies,   Inc.  and   subsidiaries  as  of  December  31,  1999,  and  the
consolidated  results  of its  operations  and its cash flows for the year ended
December 31, 1999, in conformity with accounting  principles  generally accepted
in the United States.

The accompanying  consolidated  financial statements have been prepared assuming
the Company will continue as a going concern. As more fully described in Note 1,
the  Company  has a working  capital  deficiency  and has  incurred  significant
recurring losses, which have resulted in an accumulated deficit and a deficit in
stockholders'  equity.  These  conditions  raise  substantial  doubt  about  the
Company's ability to continue as a going concern.  Management's  plans in regard
to these matters are also  described in Note 1. The financial  statements do not
include  any   adjustments  to  reflect  the  possible  future  effects  on  the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.


                                                           /S/ Ernst & Young LLP
                                                               Ernst & Young LLP
                                                                  April 10, 2000
                                                         Los Angeles, California


                                       16
<PAGE>
                          Synthonics Technologies, Inc.
                           Consolidated Balance Sheets
<TABLE>
<CAPTION>


                                                                   December 31
                                                                1999           1998
                                                            ----------------------------
<S>                                                         <C>            <C>
Assets
Current assets:
   Cash and cash equivalents                                $    294,583   $     271,665
   Accounts receivable, net                                          302          15,117
   Accounts receivable, related                                   31,620          31,620
                                                            ----------------------------
Total current assets                                             326,505         318,402

Property and equipment, net                                       34,444          79,855

Intangibles, net                                                 181,314         188,348
Deferred financing costs                                          82,441             -
Deposits                                                           4,495          13,947
                                                            ----------------------------

Total assets                                                $    629,199       $ 600,552
                                                            ============================

Liabilities and stockholders' equity (deficit)
Current liabilities:
Accounts payable                                                 215,534         302,796
Accounts payable, related                                        195,661          47,366
Other accrued expenses                                            14,440          14,187
Notes payable                                                        -           850,000
                                                            ----------------------------
Total current liabilities                                        425,635       1,214,349

Convertible notes payable                                        500,000             -

Commitments and contingencies

Stockholders' equity (deficit):
   Preferred  stock;  550,000  Class A shares
    authorized  of $10.00  par value, 10,000
    sahres issued and outstanding;
    20,000,000 Class B Shares authorized $0.01 par value
    no shares issued and outstanding                             100,000         100,000
   Common Stock; 100,000,000 shares authorized of
    $0.01 par value, 28,421,679 and 19,951,279 shares
    issued and outstanding in 1999 and 1998, respectively        284,217         199,513
   Additional paid-in capital                                  6,299,725       5,083,791
   Accumulated deficit                                        (6,980,378)     (5,997,101)
                                                            ----------------------------
Total stockholders' equity (deficit)                            (296,436)       (613,797)
                                                            ----------------------------
Total liabilities and stockholders' equity (deficit)        $    629,199   $     600,552
                                                            ============================
</TABLE>

See accompanying notes.

                                       17
<PAGE>
                          Synthonics Technologies, Inc.
                      Consolidated Statements of Operations
<TABLE>
<CAPTION>

                                                                      Year ended December 31
                                                                1999           1998            1997
                                                            -------------------------------------------
<S>                                                         <C>            <C>             <C>
Net sales                                                   $    157,737   $     512,217   $    417,574
Cost of goods sold                                                92,769         390,555        264,850
                                                            -------------------------------------------
Gross profit                                                      64,968         121,662        152,724

Expenses:
   Research and development                                      320,754         432,858        753,014
   Production costs                                               91,849         447,073            -
   General and administrative                                    498,719         716,365        830,415
   Depreciation and amortization                                  89,490         135,563        110,979
   Bad debt expense                                                7,710           2,060         34,780
                                                            -------------------------------------------
Total expenses                                                 1,008,522       1,733,919      1,729,188
                                                            -------------------------------------------

Loss from operations                                            (943,554)     (1,612,257)    (1,576,464)

Other income (expense):
   Other income                                                    1,168             -            2,104
   Interest income                                                 2,424           9,446          6,603
   Interest expense                                              (36,650)        (59,459)        (9,142)
                                                            -------------------------------------------
Total other income (expense)                                     (33,058)        (50,013)          (435)
                                                            -------------------------------------------

Loss before provision for income taxes                          (976,612)     (1,662,270)    (1,576,899)

Provision for income taxes                                         6,665           2,400          1,700
                                                            -------------------------------------------
Net loss                                                        (983,277)     (1,664,670)    (1,578,599)
Dividends on preferred stock                                      12,000          24,000         15,000
                                                            -------------------------------------------
Net loss applicable to common shareholders                  $   (995,277)  $  (1,688,670)  $ (1,593,599)
                                                            ===========================================

Net loss per common share - basic and diluted
                                                            $      (0.04)  $       (0.09)  $      (0.10)
                                                            ===========================================

Weighted average number of shares
  outstanding - basic and diluted                             24,629,271      19,135,167     16,398,006
                                                            ===========================================
</TABLE>

See accompanying notes.


                                       18
<PAGE>
                          Synthonics Technologies, Inc.

            Consolidated Statements of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>

                                                 Preferred Stock           Common Stock        Additional
                                                --------------------------------------------    Paid-In    Accumulated
                                                Shares    Amount       Shares      Amount       Capital      Deficit     Total
                                                ------------------------------------------------------------------------------------
<S>                                             <C>       <C>         <C>         <C>         <C>           <C>           <C>
Balance at January 1, 1997                          -     $     -     15,902,033  $  159,020  $  3,091,389  $ (2,753,832) $ 496,577
 Common stock issued upon exercise of warrants      -           -        517,000       5,170       239,830           -      245,000
 Common stock issued upon exercise of options
   at $0.22 per share                               -           -        688,500       6,885       144,862           -      151,747
 Common stock issued to acquire Christopher
   Raphael, Inc. at $0.52 per share                 -           -         10,000         100         5,100           -        5,200
 Common stock issued to replace original shares
   Synthonics, Inc. recorded at predecessor cost    -           -        179,700       1,797        (1,797)          -           -
 Common stock issued for services rendered
   at $1.00 per share                               -           -         25,154         252        24,903           -       25,155
 Common stock issued in exchange for the
   forfeiture of 750,000 stock options              -           -        501,000       5,010       243,990           -      249,000
 Preferred stock issued for cash at $10.00 per
   share net of stock offering costs of $50,620  50,000     500,000          -           -         (50,620)          -      449,380
 Additional capital contributed                     -           -            -           -         279,133           -      279,133
 Dividends on preferred stock declared,
   $0.30 per share                                  -           -            -           -         (15,000)          -      (15,000)
 Net loss                                           -           -            -           -             -      (1,578,599)(1,578,599)
                                                ------------------------------------------------------------------------------------
Balance at December 31, 1997                     50,000     500,000   17,823,387     178,234     3,961,790    (4,332,431)   307,593
 Common stock issued for cash at
   $0.65 per share, net of stock offering
   costs of $30,176                                 -           -        550,002       5,500       321,824           -      327,324
 Common stock issued in lieu of debt                -           -         90,875         909        54,560           -       55,469
 Common stock issued for services rendered
   at $0.66 per share                               -           -         34,815         348        22,630           -       22,978
 Conversion of preferred shares to common
   shares                                       (40,000)   (400,000)     615,200       6,152       393,848           -          -
 Common stock issued upon exercise of warrants      -           -        837,000       8,370       263,130           -      271,500
 Dividends on preferred stock declared,
   $1.20 per share                                  -           -            -           -         (24,000)          -      (24,000)
 Additional capital contributed                     -           -            -           -          90,009           -       90,009
 Net loss                                           -           -            -           -             -      (1,664,670)(1,664,670)
                                                ------------------------------------------------------------------------------------
Balance at December 31, 1998                     10,000       100,000 19,951,279     199,513     5,083,791    (5,997,101)  (613,797)

</TABLE>
See accompanying notes.

                                       19
<PAGE>
                          Synthonics Technologies, Inc.

      Consolidated Statements of Stockholders' Equity (Deficit) (Continued)

<TABLE>
<CAPTION>

                                                 Preferred Stock           Common Stock        Additional
                                                ----------------------------------------------- Paid-In    Accumulated
                                                Shares    Amount       Shares      Amount       Capital      Deficit     Total
                                                ------------------------------------------------------------------------------------
<S>                                             <C>       <C>         <C>         <C>         <C>           <C>           <C>
Balance at December 31, 1998                     10,000   $ 100,000   19,951,279  $  199,513  $  5,083,791  $ (5,997,101) $(613,797)
 Common stock issued in lieu of debt                -           -      5,015,400      50,154       846,946           -      897,100
 Common stock issued for cash, net of
   stock offering costs of $13,692                  -           -      2,535,000      25,350       214,188           -      239,538
 Common stock issued upon exercise of stock
   options and warrants                             -           -        920,000       9,200        94,800           -      104,000
 Compensation expense for stock options
   issued for services rendered                     -           -            -           -          72,000           -       72,000
 Dividends on preferred stock declared,
   $1.20 per share                                  -           -            -           -         (12,000)          -      (12,000)
 Net loss                                           -           -            -           -             -        (983,277)  (983,277)
                                                ------------------------------------------------------------------------------------
Balance at December 31, 1999                     10,000   $ 100,000   28,421,679  $  284,217  $  6,299,725  $ (6,980,378) $(296,436)
                                                ====================================================================================
</TABLE>

See accompanying notes.


                                       20
<PAGE>
                          Synthonics Technologies, Inc.
                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>

                                                                      Year ended December 31
                                                                1999           1998            1997
                                                            -------------------------------------------
<S>                                                         <C>            <C>             <C>

Operating activities
Net loss                                                    $   (983,277)  $  (1,664,670)  $ (1,578,599)
Adjustments to reconcile net loss to net cash used by
   by operating activities:
     Depreciation and amortization                                89,490         135,563        110,979
     Stock and non-employee stock options issued for
      for services                                                76,389          22,978        274,155
     Changes in assets and liabilities:
       Accounts receivable and accounts
         receivable - related                                     14,815         (38,405)        (7,244)
       Prepaid expenses and deposits                               9,452           3,803          5,801
       Accounts payable and accounts payable - related           103,744         229,597        (39,327)
       Accrued expenses                                          (11,747)       (107,278)       (10,157)
                                                            -------------------------------------------
Net cash used in operating activities                           (701,134)     (1,418,412)    (1,244,392)

Investing activities
Proceeds from disposal of fixed assets                               -             3,605            -
Purchase of fixed assets                                          (3,531)         (7,562)       (18,530)
Patent costs                                                     (33,514)        (82,409)      (126,459)
                                                            -------------------------------------------
Net cash used in investing activities                            (37,045)        (86,366)      (144,989)

Financing activities
Payments on notes payable                                            -           (50,000)           -
Cash proceeds from the issuance of notes payable                 500,000         850,000         50,000
Deferred financing costs                                         (82,441)            -              -
Capital contributions                                                -            90,009        279,133
Dividends paid                                                       -           (24,000)           -
Issuance of common and preferred stock                           343,538         598,824        846,127
                                                            -------------------------------------------
Net cash provided by financing activities                        761,097       1,464,833      1,175,260
                                                            -------------------------------------------

Net increase (decrease) in cash                                   22,918         (39,945)      (214,121)
Cash at beginning of year                                        271,665         311,610        525,731
                                                            -------------------------------------------
Cash at end of year                                         $    294,583   $     271,665   $    311,610
                                                            ===========================================

Supplemental cash flow information
  Cash paid for:
   Interest                                                 $        503   $      47,709   $      9,142
   Income taxes                                             $      6,665   $       2,400   $        900

Noncash financing activities
Stock issued in conversion of debt to common stock          $    897,100   $      55,469   $        -
Stock issued for acquisition of subsidiary                  $        -     $         -     $      5,200

</TABLE>

See accompanying notes.

                                       21
<PAGE>
                          Synthonics Technologies, Inc.
                   Notes to Consolidated Financial Statements

                                December 31, 1999

1. Organization and Description of Operations

Synthonics Technologies, Inc. (STI) was incorporated on March 27, 1974 under the
state laws of Utah and was  reincorporated  in the state of Delaware in December
1999.   STI   engages   in   the   design,    development   and   marketing   of
computer-interactive and computer-automated image analysis software and hardware
products.  The consolidated  financial statements presented are those of STI and
its wholly-owned subsidiaries,  Synthonics Incorporated and Christopher Raphael,
Inc.  (CRI).  All  material  intercompany  accounts and  transactions  have been
eliminated.  Certain  reclassifications  have  been  made to the  1998  and 1997
consolidated financial statements to conform to the presentation in 1999.

On October 1, 1997,  STI  purchased  CRI, a general  design and print  brokerage
company, for $5,200 by issuing 10,000 shares of its common stock in exchange for
100% of the issued and  outstanding  stock of CRI.  The common  stock issued was
valued at its trading price on the date of acquisition  of $0.52 per share.  The
acquisition was accounted for as a purchase. The Company recorded $98,184 as the
excess of the purchase  price over the fair value of the net tangible  assets of
CRI. The excess was amortized over a two year period  resulting in  amortization
expense in the amounts of $0,  $48,092 and $48,092 for the years ended  December
31, 1999, 1998 and 1997, respectively.

Going Concern

The Company's  consolidated  financial  statements are prepared using  generally
accepted accounting  principles applicable to a going concern which contemplates
the realization of assets and liquidation of liabilities in the normal course of
business.  The Company has historically  incurred  significant losses which have
resulted in an  accumulated  deficit of  $6,980,378  at December  31, 1999 which
raises  substantial  doubt  about the  Company's  ability to continue as a going
concern. The accompanying  consolidated  financial statements do not include any
adjustments  relating to the recoverability and classification of asset carrying
amounts or the amount  and  classification  of  liabilities  resulting  from the
outcome of this uncertainty. It is the intent of management to create additional
revenues through the development and sales of its image analysis software and to
obtain additional equity or debt financing,  if required,  to sustain operations
until revenues are adequate to cover the costs.


                                       22
<PAGE>
                          Synthonics Technologies, Inc.

             Notes to Consolidated Financial Statements (continued)

2. Summary of Significant Accounting Policies

Estimates and Assumptions

The preparation of financial  statements in conformity  with generally  accepted
accounting  principles  requires  management to make  estimates and  assumptions
affecting  the reported  amounts of assets and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash equivalents include  short-term,  highly liquid investments with maturities
of three months or less at the time of  acquisition.  Cash and cash  equivalents
consist of cash on hand,  cash held in money  market  funds and  demand  deposit
accounts.  The carrying  amount reported in the  consolidated  balance sheet for
cash and cash equivalents approximates its fair value.

The Company  maintains its corporate cash balances at various  banks.  Corporate
cash  accounts at banks are insured by the FDIC for up to  $100,000.  Amounts in
excess of insured  limits were  approximately  $192,407 and $171,665 at December
31, 1999 and 1998, respectively.

Concentration of Credit Risk and Major Customers

Revenues  are derived from sales to  customers  primarily  located in the United
States. The Company had two significant customers, which accounted for 47.9% and
25.4% of total revenues, respectively,  during the year ended December 31, 1999.
The Company generally does not require collateral from customers.  Credit losses
have been within management's expectations.

Computer Software Development Costs

Costs  related to the research  and  development  of new  software  products and
enhancements  to existing  software  products  are  expensed  as incurred  until
technological  feasibility  of the product has been  established,  at which time
such costs are  capitalized,  subject to expected  recoverability.  To date, the
Company  has not  capitalized  any  development  costs  related to its  software
product since the time between technological  feasibility and general release of
a product is not  significant and related costs during that period have not been
significant. Costs to obtain or maintain patents for the Company's

                                       23
<PAGE>
                          Synthonics Technologies, Inc.

             Notes to Consolidated Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Computer Software Development Costs (continued)

3-D  software  technology  are  recorded  as  intangible  assets.  The costs are
principally outside legal costs and are amortized over 7 years.

Property and Equipment

Property  and  equipment  is  recorded at costs.  Depreciation  is computed on a
straight-line basis over a period of five years.

Investments in Affiliates

Investments  in affiliates  owned more than 20% but not in excess of 50%,  where
the Company is not deemed able to exercise controlling  influence,  are recorded
under the equity  method.  Under the equity method,  investments  are carried at
acquisition  costs and adjusted for the  proportionate  share of the affiliates'
earnings or losses.

In  1998,  the  Company  entered  into  a  joint  venture  agreement  with a few
individuals  to form  Acuscape.  Acuscape was formed to combine the  proprietary
technologies of the parties  involved to develop and offer software  products to
the medical and dental  professions.  Acuscape was started with capital obtained
from  outside  parties and  contributions  of  proprietary  technologies  by the
founding parties.  Synthonics obtained an approximately 25% interest in Acuscape
for its contributed  technologies,  which has not been valued by the Company due
to the uncertainty of future benefits. Additionally,  Synthonics is to receive a
3% royalty on gross revenues generated by Acuscape if and when such revenues are
generated.  The Company  has  recorded no losses  related to its  investment  in
Acuscape as the Company's  investment is already  recorded at zero and there are
no future funding requirements. At December 31, 1999 and 1998, the Company has a
receivable  recorded from Acuscape in the amount of $31,620  related to research
and  development  work performed for Acuscape.  Management  believes this amount
will be collected in fiscal 2000 when Acuscape receives further funding.

Long-Lived Assets

Long-lived  assets,  include,  among  others,  costs in excess of fair  value of
assets acquired,  intangible  assets,  investments in affiliates,  joint venture
investments  and  fixed  assets.  These  assets  are  reviewed  periodically  to
determine if the related carrying values are

                                       24
<PAGE>
                          Synthonics Technologies, Inc.

             Notes to Consolidated Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Long-Lived Assets (continued)

impaired.  The  Company  considers  the  future  undiscounted  cash flows of the
acquired   companies  in  assessing  the  recoverability  of  these  assets.  If
indicators of impairment are present, or if long-lived assets are expected to be
disposed  of,  impairment  losses are  recorded.  Any  impairment  is charged to
expense in the period in which the impairment is incurred.

Revenue Recognition

Revenues are derived primarily from the sale of packaged products  including the
Company's  software.  Revenues are recognized  when the products are shipped and
collectibility  is assured in these  instances,  as the  Company  has no further
commitments  to support or  upgrade  the  software  included  in these  packaged
products.

Revenues  are also  derived  from  software  licenses.  The  Company  recognizes
revenues from  software  licenses upon  persuasive  evidence of an  arrangement,
delivery of software to a customer,  determination that there are no significant
post-delivery obligations and collection of a fixed and determinable license fee
is considered probable.

Stock-Based Compensation and Other Equity Instruments

The Company  accounts for employee  and director  stock option  grants using the
intrinsic value method.  Generally, the exercise price of the Company's employee
and  director  stock  option  grants  equal or exceed  the  market  price of the
underlying stock on the date of grant and no compensation expense is recognized.
If the option price is less than fair value,  the Company  records  compensation
expense  over the  vesting  period of the option.  The Company has also  awarded
stock options vesting upon the achievement of certain  milestones.  Such options
are accounted for as variable stock options and as such deferred compensation is
recorded in an amount equal to the  difference  between the fair market value of
the common stock on the date of determination less the option exercise price and
is adjusted from period to period to reflect  changes in the market value of the
common stock until the milestone is achieved (but only after  achievement of the
milestone is  determined to be probable).  No deferred  compensation  amounts or
expense have been recorded for these  variable  stock options as of December 31,
1999 as the fair value of the common stock is not  significantly  different than
the exercise price.

                                       25
<PAGE>
                          Synthonics Technologies, Inc.

             Notes to Consolidated Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Stock-Based Compensation and Other Equity Instruments (continued)

The Company  also has granted and  continues  to grant  options and  warrants to
various consultants of the Company.  These options and warrants are generally in
lieu of cash compensation and, as such, compensation expense is recorded related
to these grants.  The  compensation for these options and warrants is determined
as the fair value of the consideration  received or the fair value of the equity
instrument issued, whichever is more reliably measured. The compensation expense
is recorded over the period the services are  performed,  which is generally the
vesting period.

Income Taxes

The Company uses the liability method to record income taxes.

Net Loss Per Common Share

Basic loss per share  excludes  any  dilutive  effects of options,  warrants and
convertible  securities.  Diluted loss per share reflects the potential dilution
that would occur if  securities  or other  contracts  to issue common stock were
exercised or converted to common stock.  Common stock equivalents from all stock
options,  warrants and convertible  securities for all years presented have been
excluded from this computation as their effect is anti-dilutive.

Basic loss per common share is computed by dividing the net loss by the weighted
average of shares outstanding during the periods presented.  Since the effect of
the assumed  exercise of common stock  options,  warrants and other  convertible
securities for all periods presented was  anti-dilutive,  basic and diluted loss
per common share as presented on the  consolidated  statements of operations are
the same. Dilutive securities amounted to 24,925,204 at December 31, 1999.

                                       26
<PAGE>
                          Synthonics Technologies, Inc.

             Notes to Consolidated Financial Statements (continued)

3. Property and Equipment

Property and equipment consists of the following at December 31:

                                             1999             1998
                                          -----------------------------------
Computer equipment                        $ 174,369         $ 171,742
Furniture and fixtures                       17,850            18,061
Photographic equipment                       56,237            55,122
                                          -----------------------------------
                                            248,456           244,925
Less accumulated depreciation              (214,012)         (165,070)
                                          -----------------------------------
Net property and equipment                $  34,444         $  79,855
                                          ===================================

4. Intangibles

Intangible costs incurred at December 31 are as follows:

                                             1999             1998
                                          -----------------------------------
Trademarks                                $   1,484         $   1,484
Patents                                     302,598           269,084
                                          -----------------------------------
                                            304,082           270,568
Less accumulated amortization              (122,768)          (82,220)
                                          -----------------------------------
Total                                     $ 181,314         $ 188,348
                                          ===================================

5. Commitments and Contingencies

Leases

The Company is party to leases and other operating commitments,  principally for
facilities and equipment.  Under the terms of certain of the leases, the Company
is required to pay additional  expenses such as maintenance,  taxes,  insurance,
and other operating  costs.  Certain leases contain renewal or purchase  options
and certain leases provide for rental increases based on defined formulas.  Rent
expense under operating leases was  approximately  $47,456,  $80,013 and $89,049
for the years ended December 31, 1999, 1998 and 1997, respectively.

Future minimum payments by year and in the aggregate for noncancelable operating
leases with  initial or  remaining  terms of one year or more  consisted  of the
following at December 31, 1999:

                                       27
<PAGE>
                          Synthonics Technologies, Inc.

             Notes to Consolidated Financial Statements (continued)

5. Commitments and Contingencies (continued)

Leases (continued)

          2000                                         $   29,980
          2001                                              3,739
                                                       ------------
          Total minimum lease payments                 $   33,719
                                                       ============

Employment Contracts

The Company has entered into employment  agreements with certain officers of the
Company.  The  Company has agreed to pay its Chief  Executive  Officer and Chief
Technical  Officer a base annual salary of $240,000  each,  beginning on July 1,
1996 and ending on  December  31,  2000.  The Company had also agreed to pay its
Vice-President of Marketing and Sales, who resigned in April 1999, a base annual
salary of $60,000 plus commissions. During 1999 and 1998, the Company's Board of
Directors  approved a reduction  in these  salaries for the entire 1999 and 1998
years  due to a cash  shortage.  The  Company's  Board  of  Directors  may  also
authorize bonuses on an-ad hoc basis.

Other matters

On January 8, 1998,  a default  judgment was granted in favor of the Company for
breach of a license agreement and misappropriation of trade secrets. The Company
was  awarded  damages  from the  defendant  in the  amount  of  $300,000.  It is
unlikely,  however, the Company will receive any amount from the judgment due to
the  poor  financial  condition  of the  other  party  and no  income  has  been
recognized for this judgment.

6. Related Party Transactions

As  of  December  31,  1999  and  1998,  the  Company  owed  $65,000  and  $-0-,
respectively,  to  certain  of its  officers  and  shareholders.  These  amounts
represent accrued wages. During 1998, $99,299 in debt was forgiven by an officer
and was recorded as  contributed  capital at December 31, 1998.  In addition,  a
previously  forgiven  debt of $9,290 was paid out  during  1998  resulting  in a
reduction of  contributed  capital at December  31, 1998.  The Company also owed
certain  related  parties  $68,968 and $47,366 as of December 31, 1999 and 1998,
respectively, for costs incurred on the Company's behalf.

                                       28
<PAGE>
                          Synthonics Technologies, Inc.

             Notes to Consolidated Financial Statements (continued)

6. Related Party Transactions (continued)

During  1998,  the  Company  obtained  operating  funds from a related  party in
exchange  for a $10.71  royalty  on  future  sales of up to 7,000  units on a CD
product.  As of December 31,  1999,  the Company had  completed  the sale of the
7,000 CD units and had paid the related  party a total of  $38,556.  At December
31,  1999,  the  Company  has  $36,444  in  accounts  payable - related  for the
remaining obligation under this agreement.

During 1998, the Company  entered into an agreement with a related party whereby
the related party funded the production of 50,000 CD's in exchange for a royalty
upon future sales of 28,000 CD's.  The agreement  provides for $3.455 to be paid
to the  related  party for every CD unit sold for up to 6,000 units and $6.91 to
be paid to the related  party for every CD unit for the remaining  units.  As of
December 31, 1999,  the Company had completed the sale of the 9,654 CD units and
had paid  the  related  party a total  of  $38,556,  with a  royalty  obligation
remaining on 18,346 units at $6.91 per unit.  At December 31, 1999,  the Company
has  $25,249 in  accounts  payable - related  for their  obligations  under this
agreement on units sold which had not been paid as of that date.

7. Convertible Notes Payable

In December 1999, the Company entered into a Convertible Subordinated Promissory
Note Agreement  (Convertible Note) with Future Media  Productions,  Inc. (Future
Media), a company owned by a related party, in the amount of $500,000.  Interest
accrues  beginning at the first annual  anniversary date of the Convertible Note
at Future Media's borrowing rate.  Future Media, at its option,  may convert the
Convertible  Note into  11,518,096  shares of the Company's  common stock within
twelve months of the issuance  date;  otherwise,  the  Convertible  Note and all
accrued and unpaid interest is due on December 22, 2001. The Convertible Note is
subordinated to any current or future  indebtedness,  or Senior  Indebtedness as
defined in the  agreement,  of the  Company.  The  Company  recorded  $82,441 as
deferred  financing  costs for amounts  paid,  or to be paid,  to an  investment
adviser who assisted in obtaining the financing.  These deferred financing costs
will be amortized into interest  expense over the term of the  Convertible  Note
or, upon conversion of the note, included as a reduction of paid-in capital.

The Convertible  Note agreement also provides the Company with up to 2.0 million
replicated and packaged CDs without charge from Future Media and requires Future
Media to establish, operate and fund a catalog subsidiary or division to develop
and produce 3D interactive digital catalogs licensing the Company's  technology.
The Company will retain  certain  rights from catalog  endeavors  whereas Future

                                       29
<PAGE>
                          Synthonics Technologies, Inc.

             Notes to Consolidated Financial Statements (continued)

7. Convertible Notes Payable (continued)

Media will retain  replication and packaging revenues from the catalog business.
The Company has not  recorded  any amounts for the  replication,  packaging  and
other  services  to be  performed,  and will not  record any  amounts  for these
services until such services are rendered or upon  conversion of the Convertible
Note. Upon  performance of the services or conversion of the  Convertible  Note,
the Company will account for such services as a contribution  to capital for the
fair market value of the services performed or to be performed.

8. Notes Payable

Notes payable consisted of the following at December 31:


                                                 1999             1998
                                             -----------------------------------

Notes payable to various individuals,
interest at 13% per annum,  principal and
interest  due May 1999  (payable  in
cash or stock at $0.20  per  share,  at the
option of the lender), unsecured             $     -             $ 300,000

Notes  payable  to  various  individuals,
interest  at 10%  due  semi-annually,
principal due in May 1999
(payable in cash or stock at
$0.20 per share,  at the
option of the Company), unsecured
                                                   -               550,000
                                             -----------------------------------
Total notes payable                                -               850,000
Less current portion                               -              (850,000)
                                             -----------------------------------
Long-term notes payable                      $     -             $     -
                                             ===================================

These notes and the related  accrued  interest  were settled in May 1999 through
the issuance of  5,005,000  shares of common stock at $0.20 per share in lieu of
cash repayment as provided for in the note agreements.

9. Stock Options, Warrants and Rights

Common Stock Options

The Company has two stock-based  compensation  plans, the 1998 Plan and the 1999
Plan. Under the Company's  stock-based  compensation plans,  employees,  outside
directors  and  consultants  are able to  participate  in the  Company's  future
performance through the

                                       30
<PAGE>
                          Synthonics Technologies, Inc.

             Notes to Consolidated Financial Statements (continued)

9. Stock Options, Warrants and Rights (continued)

Common Stock Options (continued)

awards of incentive and  nonqualified  stock options and stock purchase  rights.
The  total  number of  shares  reserved  and  available  for grant and  issuance
pursuant  to  the  1998  Plan  and  1999  Plan  is  2,500,000  and   10,000,000,
respectively.  Each stock option is exercisable pursuant to the vesting schedule
set forth in the stock option agreement  granting such stock option.  Unless the
Board of Directors or a stock option agreement  provides a shorter period,  each
stock option may be exercisable until December 31, 2009, the term of the option.
No stock option shall be  exercisable  after the  expiration of its option term.
The  exercise  price of the option  shall be 100% of the fair market  value of a
share of the  Company's  common  stock on the date the stock  option is granted,
provided  the  option  price  granted  to any  owner of 10% or more of the total
combined  voting power of the Company  shall be 110% of such fair market  value.
The aggregate  fair market value of the  Company's  common stock with respect to
which stock options are exercisable for the first time by an optionee during any
calendar year shall not exceed $100,000.

In June 1999,  in  accordance  with a private  placement  of common  stock to an
investor,  the Company granted the investor stock options to purchase  1,448,445
shares of common  stock at $0.10 per share.  At December  31,  1999,  800,000 of
these options had been exercised and 648,445 remain outstanding, which expire in
March 2000.

In September 1999, the Company issued 1,030,298 stock options, which immediately
vested, to certain former employees,  founders and officers at an exercise price
of $0.10 per share in  recognition  of past  services.  The fair  value of these
grants was determined to be $0.07 per share and as a result the Company recorded
compensation expense of $72,000 for the year ended December 31, 1999.

During 1997,  certain of the  Company's  officers  were granted stock options to
purchase 588,290 shares of restricted  common stock at $1.00 per share in return
for their  forgiveness of deferred  compensation debt owed to them in the amount
of $279,133.  The Company also issued 501,000 shares of common stock during 1997
in exchange for the  forfeiture of 750,000  common stock  options.  Of the stock
options forfeited,  450,000 were valued at $0.22 per option, the market value of
the  shares at that  time,  and the  remaining  300,000  were value at $0.50 per
option, the market value of the shares at that time. The amounts are recorded as
contributed capital at December 31, 1997.

                                       31
<PAGE>
                          Synthonics Technologies, Inc.

             Notes to Consolidated Financial Statements (continued)

9. Stock Options, Warrants and Rights (continued)

Common Stock Options (continued)

The following table summarizes all stock option activity:

<TABLE>
<CAPTION>

                                                                            Weighted-
                                                                             Average
                                         Number of         Price per        Exercise
                                           Shares            Share            Price
                                      ---------------------------------------------------
<S>                                        <C>           <C>               <C>
Balances at January 1, 1997                 8,332,355    $0.22 - 1.00      $  0.42
   Options granted                          2,486,290     0.75 - 1.00         0.90
   Options exercised                       (1,543,500)    0.22 - 0.50         0.45
   Options cancelled                       (2,939,000)    0.22 - 1.00         0.33
                                      ---------------------------------------------------
Balances at December 31, 1997               6,336,145     0.22 - 1.00         0.62
   Options granted                          1,253,885     0.53 - 0.66         0.53
   Options exercised                              -              -             -
   Options cancelled                         (155,000)    0.75 - 1.00         0.80
                                      ---------------------------------------------------
Balances at December 31, 1998               7,435,030     0.22 - 1.00         0.60
   Options granted                          6,023,960     0.07 - 0.20         0.13
   Options exercised                         (800,000)       0.10             0.10
   Options cancelled                       (2,687,855)    0.22 - 1.00         0.41
                                      ---------------------------------------------------
Balances at December 31, 1999               9,971,135    $0.07 - 1.00       $ 0.42
                                      ===================================================
</TABLE>

The  following  table   summarizes   information   concerning   outstanding  and
exercisable options as of December 31, 1999:
<TABLE>
<CAPTION>

                          Options Outstanding                                    Options Exercisable
-------------------------------------------------------------------------  --------------------------------
     <S>                 <C>                 <C>            <C>                 <C>            <C>

                              Number         Weighted-                          Number
                           Outstanding        Average        Weighted-        Exercisable      Weighted-
                              as of          Remaining        Average            as of          Average
      Range of             December 31,     Contractual      Exercise        December 31,      Exercise
   Exercise Price              1999       Life (in Years)      Price             1999            Price
----------------------   ------------------------------------------------  --------------------------------
    $0.07 - 0.10               3,328,020        3.4            $ 0.10          3,328,020         $ 0.10
     0.13 - 0.20               1,895,940        4.4              0.19          1,068,440           0.18
     0.50 - 0.66               2,453,885        5.2              0.52          2,153,885           0.52
     0.75 - 1.00               2,293,290        2.5              0.91          2,218,290           0.92
                         ------------------------------------------------  --------------------------------
                               9,971,135        3.8            $ 0.41          8,768,635         $ 0.42
                         ================================================  ================================
</TABLE>

The Company's  policy is to disclose the pro-forma effect on operations of using
the fair value method of valuing stock options. The fair value method of valuing
stock  options  is  based  on the use of an  option-pricing  model.  This  model
considers  volatility,  a risk free interest  rate and an estimated  life of the
option.  The Company used a zero expected  dividend yield,  expected stock price
volatility of 266%, a risk free interest rate of 5.5%

                                       32
<PAGE>
                          Synthonics Technologies, Inc.

             Notes to Consolidated Financial Statements (continued)

9. Stock Options, Warrants and Rights (continued)

Common Stock Options (continued)

and  estimated  lives of two to five  years.  These  assumptions  resulted  in a
weighted average fair value of $0.13 for stock options granted in the year ended
December 31, 1999. The pro-forma  effect of using the fair value method would be
to increase the consolidated net loss to $1,504,935,  or $0.06 per common share,
in the year ended December 31, 1999.

Stock "Rights" and Warrants

In connection with the Convertible Note placement and a private placement during
1999,  the Company  issued a financial  adviser  warrants to purchase  2,667,349
shares of common stock at $0.11 per share.  In accordance with an agreement with
this adviser,  the Company  committed to continue to issue  warrants to purchase
shares of the Company's common stock to this adviser at $0.11 per share to allow
the adviser to maintain a 5% equity  interest in the Company on a fully  diluted
basis.  Future  issuances  of these  warrants  are  contingent  upon the adviser
continuing to find funding for the Company.

In  connection  with its  acquisition  of a  predecessor  company,  the  Company
acquired from the predecessor company's  stockholders,  warrants and "rights" to
acquire 1,369,190 shares of the predecessor company's common stock. In exchange,
the  Company  granted  the  exchanging  stockholders  warrants  and  "rights" to
purchase  6,161,355 shares of the Company's common stock. Of the 2,124,000 stock
purchase  warrants  granted,  1,950,500  were  exercised  during  1996  and  the
remaining  173,500  warrants  expired  unexercised in 1996. There were 2,597,355
uncertificated "rights" with an exercise price of $0.11 per share outstanding at
December  31,  1997,  of which  562,500  expired  January 1, 1998 and  2,034,855
expired May 31, 1999.

During 1996,  337,000  warrants to purchase shares of the Company's common stock
were sold at $1.00 per warrant for  $337,000.  168,500 of the warrants  were "A"
warrants  and 168,500  were "B"  warrants.  They were  redeemable  at 50% of the
average  price of the  Company's  common  stock  during the month  before  being
exercised. The "A" warrants were exercised during June 1997 and the "B" warrants
were exercised during June 1998.

As of December 31, 1999, the total number of warrants  outstanding was 2,843,349
with exercise prices ranging from $0.11 to $2.00 per share and expiration  dates
from March 2000 through March 2004.

                                       33
<PAGE>
                          Synthonics Technologies, Inc.

             Notes to Consolidated Financial Statements (continued)

10. Provision for Income Taxes

The provision for income taxes for the years ended  December 31, 1999,  1998 and
1997, consists of the following:

                                    1999             1998          1997
                                  ----------------------------------------------
State Franchise Taxes             $ 6,665         $ 2,400        $ 1,700
                                  ==============================================

At December 31,  1999,  the Company has net  operating  loss  carryforwards  for
federal  income tax  purposes of  $5,705,869  which  expire in the years 2004 to
2019. The Company also has state net operating loss  carryforwards of $2,473,069
which expire in the years 2003 to 2004.  No tax benefit has been reported in the
consolidated financial statements because the Company does not have a history of
profitable  operations.  Accordingly,  the  potential  tax benefits of these net
operating loss  carryforwards  have been offset by a valuation  allowance of the
same amount.

11. Preferred Stock

At December  31,  1997,  the Company  had 50,000  outstanding  shares of Class A
cumulative  convertible  preferred stock. During 1998, 40,000 of the shares were
converted  early into 615,200 shares of common stock.  The early  conversion was
15.38 shares of common to 1 share of preferred  conversion rate, as an incentive
for the  preferred  shareholders  to give up  their  future  dividends  from the
preferred  stock.  Thus,  at December 31, 1999 and 1998,  the Company has 10,000
outstanding  shares  of Class A  cumulative  convertible  preferred  stock.  The
remaining  Class A preferred  stock is  convertible  at the option of the holder
into five  shares of the  Company's  common  stock for each  share of  preferred
stock, are non-voting,  and feature a 12% annual dividend,  paid quarterly.  The
Class A cumulative  convertible preferred stock may be redeemed at the option of
the Company after December 31, 1998 at $10.50 per share.  The accrued  dividends
unpaid as of December 31, 1999 and 1998 were $12,000 and $-0-, respectively.

                                       34
<PAGE>
                          Synthonics Technologies, Inc.

             Notes to Consolidated Financial Statements (continued)

12. Fair Value of Financial Instruments

The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments.

Cash and Cash Equivalents: the carrying amount approximates fair value.

Accounts Receivable and Accounts Payable:  the carrying amount approximates fair
value.

Debt:  The fair value of the  Company's  convertible  notes payable is estimated
using discounted cash flow analyses,  based on the Company's current incremental
borrowing  rates for similar  types of borrowing  arrangements.  At December 31,
1999, the fair value of the convertible notes payable was $450,000.


                                       35
<PAGE>
ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

     Not applicable.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16 (a) OF THE EXCHANGE ACT

     See Item 11 for  information on the  beneficial  ownership of the Company's
securities.

     The directors and executive officers of the Company are as follows:

     The directors and executive officers of the Company are as follows:

<TABLE>
<CAPTION>
Name                     Age       Position            Term      Served Since
--------------------------------------------------------------------------------
<S>                      <C>       <C>                 <C>       <C>
F. Michael Budd          53        President, CEO      3 Years   1995
                                   Director

Charles S. Palm          56        Chief Technology    3 Years   1995
                                   Officer, Secretary,
                                   Director

Diana Maranon ***        41        Director            1 Year    1999

Ronald S. Speirs         48        Director            2 Years   1996

Timothy G. Paulson       53        Director            2 Years   1997

Thomas K. Carpenter      58        Chairman of the     2 Years   1997
                                   Board

Vera Campbell****        52        EVP Apparel,        1 Year    1997
                                   Director

David L. Stewart*        57        Director            3 Years   1995

Alex Sandel**            56        Director            1 Year    1999
</TABLE>


     Each of the persons  listed in the above table  possesses  sole  investment
power and sole voting  power over the shares set forth in the table  included in
Item 11.

     There are no arrangements or understandings between any of the directors or
executive  officers,  or any other person or person  pursuant to which they were
selected as directors and/or officers.

     * David Stewart  resigned as a Director of the Company  effective  March 2,
2000. Mr. Stewart's  resignation was for personal reasons and was not due to any
disagreements  between himself and the management of the Company relating to the
Company's operations, policies and practices.

     ** Alex Sandel  resigned as a Director  of the Company  effective  March 1,
2000. Mr. Sandel's  resignation was for personal  reasons and was not due to any
disagreements  between himself and the management of the Company relating to the
Company's operations, policies and practices.

     *** Diana Maranon resigned as a Director of the Company  effective March 8,
2000. Ms. Maranon's  resignation was for personal reasons and was not due to any
disagreements  between herself and the management of the Company relating to the
Company's operations,  policies and practices. Ms. Maranon remains as an advisor
to the Company.

                                       36
<PAGE>
     **** Vera Campbell  resigned as a Director of the Company  effective  March
24, 2000. Ms. Cambell's  resignation was for personal reasons and was not due to
any disagreements  between herself and the management of the Company relating to
the Company's  operations,  policies and practices.  Ms. Campbell  remains as an
advisor to the Company.

     F. Michael Budd is a founder of Synthonics,  Incorporated. He holds a BS in
Industrial Engineering from the General Motors Institute in Flint, Michigan, and
an MBA from the  University  of  Detroit  in 1973.  Mr.  Budd has had a long and
distinguished  career in the  administration  of engineering  and  manufacturing
facilities,  including 30 years of  increasing  management  responsibility  with
General Motors Corporation,  Rockwell International, ITT Corporation, and Harman
International.  During his career, Mr. Budd has orchestrated successful mergers,
acquisitions,  divestitures,  expansions,  and start-ups for the companies  with
whom he has been  affiliated.  He has  successfully  managed business units with
revenues  up to $500  million,  more than 7,000  employees,  and with  locations
around  the world.  Mr.  Budd has been  associated  with the  Company  since its
inception as a director and shareholder.

     Dr. Charles S. Palm, the "father" of Synthonics'  technology,  is a founder
of Synthonics,  Incorporated.  He received a Ph.D. in Engineering  Sciences from
the University of Florida in 1975.  Prior to joining the Company,  he co-founded
Colorocs  Corporation  in Atlanta,  Georgia.  Colorocs  developed  and  marketed
full-color copier and full-color laser printers that were marketed under several
different  Brand names (such as Sharp and Savin)  worldwide.  Dr. Palm  received
nine patents  related to  electro-photographic  technologies  used in his copier
designs.  He was a member of the management  team that took Colorocs  through an
initial  public  offering in 1986.  Dr. Palm  supervised the Lunar Laser Ranging
Experiment at the  University  of Texas  McDonald  Observatory  between 1975 and
1977.  While in that  capacity,  he  modified a gigawatt  laser  system  used to
measure  the  distance  from the  Earth to the moon  within an  accuracy  of 1.5
inches.  Dr.  Palm  has led or been  part of  teams  that  have  developed  many
important  inventions  during his career.  Besides those mentioned above, he was
very  instrumental  in the  development  of a  device  that  was  used by the US
Department  of  Defense,  for nearly two  decades,  to track  submerged  Russian
submarines from satellite stereo photos of the ocean's surface.

     Diana  Maranon,  is owner and  President of Averil  Capital  Markets  Group
located in Century City,  California.  Prior to forming Averil,  Ms. Maranon was
Vice President with  Wasserstein  Perella & Co, Inc. and also practiced law with
Skadden Arps Slate  Meagher & Flom,  specializing  in mergers and  acquisitions.
During her career,  Ms. Maranon has been involved with transactions  totaling in
the  aggregate  in excess of $10  Billion.  Ms.  Maranon  received  her JD & MBA
degrees from UCLA.

     Ronald S.  Speirs,  was  awarded BS and MS degrees in  Computer  Integrated
Manufacturing by Brigham Young University in 1986/1987.  Mr. Speirs was a Senior
Industrial  Engineer in Advanced  Manufacturing  Technologies  for Allied Signal
Aerospace for five years,  and is currently an independent  computer  consultant
and project facilitator for various high-tech enterprises.

     David L.  Stewart,  Esq.,  is a patent  attorney and partner in the firm of
McDermott,  Will and  Emery in  Alexandria,  Virginia.  He holds a  Bachelor  of
Science degree in physics from California  State University at Los Angeles and a
Juris  Doctor  degree  from  George  Washington  University  in the  District of
Columbia.  Mr. Stewart was a Ph.D. candidate in information technology at George
Mason   University  in  Fairfax,   Virginia.   He  also  served  four  years  as
Administrative Patent Judge  (Examiner-in-Chief)  at the Board of Patent Appeals
and Interferences, United States Patent and Trademark Office.

     Vera Campbell,  is owner and President of Design Zone, which she founded 15
years ago and is located in Los  Angeles.  Design  Zone,  which  sells under the
Knitworks Label, caters to the junior and kids apparel market. Ms. Campbell is a
veteran of more than 30 years in the apparel, retail and Manufacturing business.
Ms. Campbell is a graduate of Ohio State University.

     Thomas  K.  Carpenter  is  an  experienced  executive  with  extensive  P&L
responsibility   and  a  heavy  involvement  in  operational,   technical,   and
marketing/sales responsibilities.  Mr. Carpenter has gained particular expertise
with software tools and  applications  within  industrial,  retail,  government,
distribution,  and  medical  marketplaces.  Known as a  persuasive,  high-energy
problem solver,  he has demonstrated  successes in both start-up and turn around
situations.  Mr. Carpenter, a veteran of the software industry, is playing a key
role for the Company in the formation  and execution of its operating  strategy.
Mr.  Carpenter  is  currently a member of the Board of Directors or the Board of
Advisors for three other companies all involved in the software industry.

                                       37
<PAGE>
     Timothy G. Paulson has been a Corporate Vice President and the Treasurer of
Litton Industries,  Inc. since 1994. With Litton since 1970, Mr. Paulson started
his career as a staff auditor and has  progressed  through  several senior level
management positions prior to being appointed its Treasurer.  He also earned his
Certified Public Accountant status in 1974. As a key member of management during
Litton's rise to prominence as a premier  defense  contractor,  Mr. Paulson will
provide expert oversight  guidance as Synthonics grows into a prominent software
tool provider.

     Alex Sandel is a  co-founder  of Future  Media  Productions,  Inc.  and has
served as its  Chairman of the Board,  CEO and  President  since June 1994.  Mr.
Sandel was one of the original  founders of Packard Bell Electronics  (1986), an
innovative PC manufacturer that was first to market PCs via traditional consumer
electronics  retail  outlets.  Mr.  Sandel  served as a director of Packard Bell
Electronics   since  its  inception  until  1999.  Mr.  Sandel  is  a  principal
shareholder in Argoquest, Inc., an incubator focused on investing in early stage
Israeli-based  Internet and Internet enabling technology  companies.  Mr. Sandel
has founded,  managed and held engineering positions with several companies over
the past thirty years.  He was educated in the Israeli  Institute of Technology,
Haifa,  Israel. While continuing his education in the United States, he received
his BSEE from California State College, Pomona,  California (1969) and MSOR from
the University of Southern California (1974).

     Louis Weiss acts as the Chief Financial  Advisor of the Company.  Mr. Weiss
is currently CFO of Future Media Productions,  Inc. A CD-ROM and DVD replication
company located in Valencia,  CA. and a strategic  partner with Synthonics.  Mr.
Weiss has a BA and MBA from the University of Wisconsin.

     Directorships
     -------------

     No  Director  of the  Company  or  person  nominated  or chosen to become a
Director holds any other  directorship in any company with a class of securities
registered  pursuant  to  section  12 of  the  Exchange  Act or  subject  to the
requirements of section 15(d) of such Act or any other company  registered as an
investment company under the Investment Company Act of 1940.

     Identity of Significant Employees
     ---------------------------------

     Amit Dembsky, VP of Product Development is considered a key employee within
the Company and we feel that his activities  will be material to our operational
results.  Born in Israel,  Mr. Dembsky has most recently directed NEC's Internet
software  engineering  organization  dedicated to Internet  applications for the
company's consumer and commercial  desktop PCs,  providing  long-term vision and
ongoing  enhancements  to the company's  e-Commerce and  self-healing  technical
support solutions.  Mr. Dembsky previously directed the Research and Development
department  at Packard Bell where he was  responsible  for software and hardware
planning,  software tools development,  and software  integration.  His previous
startup experience was with Iconet (ISRAEL Connection Network), where he founded
the first Hebrew  speaking WWW based  virtual  community in the US. Mr.  Dembsky
earned his Bachelor of Science in Architecture and Town Planning at the Technion
(Israel Institute of Technology in Haifa).

     Family Relationships
     --------------------

     David Stewart and Ronald Speirs are cousins.  Other than this relationship,
there are no family  relationships  that exist between any director or executive
officer of the Company.

     Involvement in Certain Legal Proceedings
     ----------------------------------------

     During  the past five  years,  no  present  or former  director,  executive
officer or person nominated to become a director or an executive  officer of the
Company:

          (1) was a general partner or executive officer of any business against
          which any  bankruptcy  petition  was filed,  either at the time of the
          bankruptcy or two years prior to that time;

                                       38
<PAGE>
          (2) was  convicted  in a  criminal  proceeding  or named  subject to a
          pending criminal  proceeding  (excluding  traffic violations and other
          minor offenses);

          (3) was  subject to any order,  judgment or decree,  not  subsequently
          reversed,   suspended   or   vacated,   of  any  court  of   competent
          jurisdiction,   permanently   or   temporarily   enjoining,   barring,
          suspending  or  otherwise  limiting  his  involvement  in any  type of
          business, securities or banking activities; or

          (4)  was  found  by a  court  of  competent  jurisdiction  (in a civil
          action),  the  Securities  and Exchange  Commission  or the  Commodity
          Futures  Trading  Commission  to have  violated  a  federal  or  state
          securities or commodities law, and the judgment has not been reversed,
          suspended or vacated.

     Section 16(a) Beneficial Ownership Reporting Compliance
     -------------------------------------------------------

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive  officers,  and persons who own more than ten percent of
the Company's Common Stock, to file with the Securities and Exchange  Commission
initial reports of ownership and reports of changes of ownership of Common Stock
of the Company.  Officers,  directors and greater than ten percent  stockholders
are required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.

     To the  Company's  knowledge,  with respect to the year ended  December 31,
1999,  all Section 16(a) filing  requirements  applicable to each person who, at
any time  during the fiscal  year  ended  December  31,  1999,  was an  officer,
director and greater than ten percent beneficial owner, were complied with.

                                       39
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION

     Annual Compensation
     -------------------

     The aggregate annual  remuneration,  during the fiscal year ending December
31, 1999,  of the three highest paid persons who are Officers of the Company was
as follows:

<TABLE>
<CAPTION>
                           SUMMARY COMPENSATION TABLE
                           ---------------------------

                                   ------------------------------------------------------------------------------
                                             Annual Compensation                Long Term Compensation
                                   ------------------------------------------------------------------------------
                                                                                Awards         Payouts
                                   ------------------------------------------------------------------------------
                                                                                Securities               All
                                                       Other                    Underlying               Other
Name and             Year or                           Annual    Restricted     Options/       LTIP      Compen-
Principal            Period   Salary         Bonus     Compen-   Stock          SAR's          Payouts   sation
Position             Ended    ($)            ($)       sation)   Awards         (#)            ($)       ($)
                                                       ($)       ($)
(a)                  (b)      (c)            (d)       (e)       (f)            (g)            (h)       (i)
-----------------------------------------------------------------------------------------------------------------
<S>                  <C>      <C>            <C>       <C>       <C>            <C>            <C>       <C>
F. Michael Budd      1999     $101,800(1)    $0        $0        $0             757,453        $0        $0
President & CEO      1998     $ 45,000       $0        $0        $0             720,465        $0        $0
                     1997     $ 90,000       $0        $0        $0             378,860        $0        $0

Charles S. Palm      1999     $103,000(2)    $0        $0        $0           1,583,349        $0        $0
Secretary & CTO      1998     $ 75,000       $0        $0        $0             385,142        $0        $0
                     1997     $150,000       $0        $0        $0             189,430        $0        $0

Joseph R. Maher      1999     $ 60,000(3)    $0        $6,641(3) $0              53,453        $0        $0
VP Marketing &       1998     $101,500       $0        $0        $0              78,195        $0        $0
Sales                1997     $ 36,000(4)    $0        $0        $0             750,000        $0        $0
</TABLE>

--------------------

     (1)  $32,500 of Mr. Budd's 1999 salary is deferred.

     (2)  $32,500 of Mr. Palm's 1999 salary is deferred

     (3)  Mr.  Maher's  agreement  with the  Company  pays him a base  salary of
          $60,000  per annum plus  commissions  on sales of product.  Mr.  Maher
          resigned from the Company on April 12, 1999.  Total salary paid to Mr.
          Maher in 1999 was $21,641 and total commissions paid to Mr. Maher were
          $6,641.

     (4)  Mr. Maher was hired by the Company on October 1, 1997

     Employment Contracts/Stock Incentive Plans
     ------------------------------------------

     F. Michael Budd the CEO and President of the Company and a director and Dr.
Charles S. Palm, the Chief Technical  Officer and a director of the Company each
have employment contracts with the Company.  Each of these employment agreements
provide for an annual base salary of $240,000 per year. Each of these employment
agreements  begin on July 1, 1996 and end on December 31,  2,000.  Each contract
contains an Incentive  Stock Option for 750,000 shares of common stock, of which
Mr. Budd has exercised  300,000 shares from the option that he holds. The option
price per share is $0.50 and the 750,000  shares  vest over a  four-year  period
with all shares being vested by July 1, 2000.

     In 1997,  1998 and 1999, the Directors of the Company  adopted  resolutions
for  each  fiscal  year to  reduce  the  compensation  of each of its  Executive
Officers in an effort to reduce cash needs during each specific fiscal year. The
totals in the table above reflect the reduced  compensation  amounts approved by
the Company's Directors.

                                       40
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Stock Options
     -------------

     At a Special Meeting of Shareholders on December 3, 1999, the  shareholders
approved the 1999 Stock Option Plan (the "1999 Plan").  The 1999 Plan allows the
Company to attract and retain  employees  and  directors  of the Company and its
subsidiaries  by providing such persons with  incentives and awards for superior
performance.  The 1999 Plan is  administered  by the Board of  Directors  of the
Company,  which has broad flexibility in designing stock-based  incentives.  The
Board of  Directors  determines  the  number of shares  granted  and the  option
exercise  price,  but such price may not be less than one hundred percent of the
fair market value of the Common Sock on the grant date.

     The following  tables  reflect  certain  information  with respect to stock
options granted to certain executive officers and directors during fiscal 1999.

                     OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
                    ---------------------------------------

<TABLE>
<CAPTION>
                                        NUMBER OF      % OF TOTAL
                                        SECURITIES     OPTIONS
                                        UNDERLYING     GRANTED TO     EXERCISE
                                        OPTIONS        EMPLOYEES      OR BASE
                                        GRANTED        IN FISCAL      PRICE               EXPIRATION
NAME                                       (#)         YEAR(%)        ($/SH)              DATE
-------------------------------         ----------     ----------     ---------           ----------
<S>                                     <C>            <C>            <C>                 <C>
F. Michael Budd                         757,453         15.2%         $0.07 to $0.20      9/30/03 to 9/30/04
Charles S. Palm                       1,583,349         31.7%         $0.07 to $0.20      9/30/03 to 9/30/04
Ronald G. Speirs                         29,846          0.6%         $0.10               9/30/03
Timothy G. Paulson                       13,431          0.3%         $0.10               9/30/03
Thomas K. Carpenter                      31,215          0.6%         $0.10               9/30/03
David L. Stewart                         14,293          0.3%         $0.10               9/30/03
Diana Maranon                                 0            0%         N/A                 N/A
Vera Campbell                         1,115,000         22.3%         $0.20               6/24/04
Argoquest 7
(Alex Sandel)                         1,448,445         29.0%         $0.10               (1)
</TABLE>

     (1) The option  expires  ninety  days after the  closing of a next round of
financing in excess in excess of $1,000,000.

                                       41
<PAGE>
     The  following  table  reflects  certain  information  with  respect to the
exercise of stock options by certain  executive  officers and  directors  during
fiscal 1999.


            AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND
                              FY-END OPTION VALUES
            -------------------------------------------------------
<TABLE>
<CAPTION>
                                                                      NUMBER OF
                                                                      SECURITIES          VALUE OF
                                                                      UNDERLYING          UNEXERCISED
                                                                      UNEXERCISED         IN-THE-MONEY
                                                                      OPTIONS AT          OPTIONS AT
                                                                      FY-END(#)           FY-END($)
                                        SHARES         VALUE          ---------------     -------------------
                                        ACQUIRED ON    REALIZED       EXERCISABLE/        EXERCISABLE/
NAME                                    EXERCISE(#)     ($)           UNEXERCISABLE       UNEXERCISABLE
-------------------------------         -----------    --------       ---------------     -------------------
<S>                                     <C>            <C>            <C>                 <C>
F. Michael Budd                         0              $0             2,156,778/150,000   $87,182/$0
Charles S. Palm                         0              $0             3,170,181/150,000   $211,813/$0
Ronald G. Speirs                        0              $0               229,846/0         $4,477/$0
Timothy G. Paulson                      0              $0                80,931/22,500    $2,015/$0
Thomas K. Carpenter                     0              $0               195,392/45,000    $4,683/$0
David L. Stewart                        0              $0               114,923/0         $2,239/$0
Diana Maranon                           0              $0                     0/0         $0/$0
Vera Campbell                           0              $0               317,500/797,500   $15,875/$39,875
Argoquest 7
(Alex Sandel)                      800,000             $0               648,445/0         $97,267/$0
</TABLE>

     Security Ownership of Certain Beneficial Owners
     -----------------------------------------------

     The following  table sets forth  ownership  information  as of December 31,
1999 with respect to all officers, directors and promoters, and each shareholder
who beneficially owns more than 5% of the outstanding shares:

<TABLE>
<CAPTION>

Title of            Name of                   Amount of          Percent of
Class               Beneficial Owner          Ownership          Class
-------------------------------------------------------------------------------
<S>                 <C>                       <C>                <C>
Common Stock        Argoquest 7
                    (Alex Sandel)            3,100,000(1)        10.9%
Common Stock        F. Michael Budd          1,735,750(2)         6.1%
Common Stock        Ryan Katz                1,512,000            5.3%

</TABLE>

     (1)  Argoquest 7 holds an option to purchase 648,445  additional  shares of
          the Company's Common Stock at a price of $0.10 per share.  This option
          expires 90 days after the  closing of the next round of  financing  by
          the Company in excess of $1.0 million.  Argoquest 7 holds an option to
          purchase additional Common Stock of the Company and to bring its total
          holdings  up to 10% on a fully  diluted  basis.  This  option  must be
          exercised  within  thirty  days of the  Company's  notification  of an
          intended financing transaction for a next round of financing in excess
          of $1.0 million and the price per share of the option is equivalent to
          the share  price in the next round of  financing.  In  addition,  Alex
          Sandel,  through another affiliate (Future Media  Productions,  Inc.),
          holds a note for debt that is convertible to equity in the form of the
          Company's  Common  Stock.  In  return  for  $500,000  cash and  future
          services (CD-ROM replication and digital catalog production  services)
          valued at $1.5 million, Future Media will receive 11,518,096 shares of
          the Company's Common Stock upon conversion of the note.

     (2)  F. Michael Budd holds options for 2,306,778  additional  shares of the
          Company's  Common Stock of which  2,156,778  are vested and  currently
          exerciseable.

     There are no other  shareholders  known to the Company who beneficially own
at least 5% of its stock.

                                       42
<PAGE>
     Security Ownership of Management
     --------------------------------

     The following  table sets forth  security  ownership  information as of the
close of business on December 31, 1999, for any director,  executive officer, or
group of the Company's voting securities.

<TABLE>
<CAPTION>
Title of            Name of                  Amount of           Percent of
Class               Beneficial Owner         Ownership           Class
-------------------------------------------------------------------------------
<S>                 <C>                      <C>                 <C>
Common Stock        F. Michael Budd(1)       1,735,750           6.1%
Common Stock        Charles S. Palm            428,751           1.5%
Common Stock        Ronald G. Speirs            50,000           0.2%
Common Stock        Timothy G. Paulson          20,000           0.1%
Common Stock        Thomas K. Carpenter              0           0.0%
Common Stock        David L. Stewart             8,892           0.0%
Common Stock        Diana Maranon(2)                 0           0.0%
Common Stock        Vera Campbell                    0           0.0%
Common Stock        Alex Sandel(3)                   0           0.0%
</TABLE>

     (1)  F. Michael Budd holds options for 2,306,778  additional  shares of the
          Company's  Common Stock of which  2,156,778  are vested and  currently
          exerciseable.

     (2)  Diana  Maranon is the owner of Chloe  Holdings.  Chloe  Holdings  owns
          35,000 shares of the Company's Common Stock. Chloe Holdings also holds
          a Warrant to purchase  2,667,349 shares of the Company's Common Stock.
          This Warrant expires during March 2004.

     (3)  Alex  Sandel  is a  Principal  in  both  Argoquest  and  Future  Media
          Productions. Argoquest 7 owns 3,100,000 shares of the Company's Common
          Stock.  Argoquest  7 holds an option to  purchase  648,445  additional
          shares of the  Company's  Common  Stock at a price of $0.10 per share.
          This  option  expires 90 days  after the  closing of the next round of
          financing by the Company in excess of $1.0 million.  Argoquest 7 holds
          an option to purchase  additional  Common  Stock of the Company and to
          bring its total  holdings  up to 10% on a fully  diluted  basis.  This
          option  must  be  exercised   within  thirty  days  of  the  Company's
          notification of an intended financing  transaction for a next round of
          financing  in  excess of $1.0  million  and the price per share of the
          option  is  equivalent  to the  share  price  in  the  next  round  of
          financing. In addition, Alex Sandel, through another affiliate (Future
          Media Productions, Inc.), holds a note for debt that is convertible to
          equity  in the form of the  Company's  Common  Stock.  In  return  for
          $500,000  cash and future  services  (CD-ROM  replication  and digital
          catalog production services) valued at $1.5 million, Future Media will
          receive  11,518,096  shares  of the  Company's  Common  Stock  when it
          converts the note.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     During  the  year  ended  1998,  the  Company  entered  into a  Reservation
Agreement with LeRoy Speirs, the father of director Ron Speirs.  Under the terms
of this  Agreement,  Mr.  Speirs  provided the Company with $50,000 in operating
funds  in  return  for the  receipt  of  $10.71  for  every  CD-ROM  sold to the
Smithsonian Institution up to 7,000 CDs total. As of the end of fiscal 1999, the
Company  had paid Mr.  Speirs a total of $38,556 and owed him a total of $36,444
and has completed the sale of 7,000 CDs to the Smithsonian.

     During  the  year  ended  1998,  the  Company  entered  into a  Reservation
Agreement with I&I  Investment,  the two  principals  being first cousins of the
spouse of F. Michael Budd.  Under the terms of this  Agreement,  I&I  Investment
provided  the  Company  $131,659  in cash  to  fund  the  production  of  50,000
Smithsonian  CD-ROMs.  In return  for the cash,  the  Company  agreed to pay I&I
Investment  $3.455 for every CD-ROM sold to the  Smithsonian  Institution  up to
6,000 CDs and $6.91 for every CD-ROM sold to the Smithsonian  Institution  after
the first 6,000 CDs and for the next  22,000 CDs. As of the end of fiscal  1999,
the  Company  had paid I&I  Investment  a total of  $20,730  and owed a total of
$25,249. The Company still has an obligation to pay I&I $6.91 per CD it sells to
the Smithsonian Institution for the next 18,346 CDs sold.

                                       43
<PAGE>
     During the year ended 1999,  the  Company  received a loan in the amount of
$100,000 from Future Media Productions, Inc. a company owned by Alex Sandel. The
principal  and  interest  associated  with this loan were paid in full to Future
Media Productions, Inc. by the Company prior to the end of 1999.

     During the year ended 1999,  the Company  entered into a  Convertible  Debt
Agreement  with Future Media  Productions,  Inc. a company owned by Alex Sandel.
Under the terms of this  Agreement,  Future Media  provides the Company cash and
future services in exchange for a conversion  right to 11,518,096  shares of the
Company's  Common Stock. The Convertible Note is unsecured by the Company and no
interest is due on the principal  ($500,000)  until after  December 23, 2000 and
only if the Note has not been converted by Future Media. To date the Company has
received  $500,000 cash and a commitment  towards future services  consisting of
the replication of 2,000,000 CD-ROMs and the establishment by Future Media of an
entity to  develop  and  produce 3D digital  catalogs  on behalf of  Synthonics.
Future Media has until  December 23, 2001 to convert the Note to equity.  If the
Note is not converted by Future Media on or before the above date, the principal
amount of $500,000  and any  outstanding  interest is due to Future Media by the
Company, by December 23, 2001.

                                       44
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

     (a) List of Exhibits  attached or  incorporated  by referenced  pursuant to
Item 601 of Regulation S-B.

               (3)  Article of Incorporation and By-Laws.

                    3.8   Certificate  of   Incorporation   of  the  Registrant.
                    (incorporated  by reference to Exhibit B of the Registrant's
                    Proxy  Statement  on Form 14A filed with the  Commission  on
                    NOvember 19, 1999).

                    3.9 By-Laws of the Registrant  (incorporated by reference to
                    Exhibit 2.1 of the  Registrant's  Current Report on Form 8-K
                    filed with the Comission on December 30, 1999.)

               (4)  Instruments defining the rights of holders.

                    4.1  Statement  of Rights,  Preferences  and  Privileges  of
                    Common and Preferred Stock of the Registrant as of September
                    6, 1997,  (incorporated  by  reference to Exhibit 4.1 of the
                    Registrant's  Registration  Statement  on Form  10-SB  dated
                    April 28, 1998; Commission File No. 0-24109).

               (10) Material Contracts

                    10.1  Management  Cash  Incentive  Plan   (incorporated   by
                    reference to Exhibit 10.1 of the  Registrant's  Registration
                    Statement  on Form 10-SB  dated April 28,  1998;  Commission
                    File No. 0-24109).

                    10.2 1998 Stock  Option Plan  (incorporated  by reference to
                    Exhibit 10.2 of the Registrant's  Registration  Statement on
                    Form  10-SB  dated  April  28,  1998;  Commission  File  No.
                    0-24109).

                    10.3 Acuscape License  Agreement  (incorporated by reference
                    to Exhibit 10.3 of the  Registrant's  Amendment No. 1 to the
                    Registration  Statement  on Form 10-SB  filed on November 6,
                    1998; Commission File No. 0-24109).

                    10.4  Smithsonian  License  Agreement  dated October 2, 1997
                    (incorporated   by   reference   to  Exhibit   10.4  of  the
                    Registrant's  Amendment No. 1 to the Registration  Statement
                    on Form 10-SB filed on November 6, 1998; Commission File No.
                    0-24109).

                    10.5  Amendment  No.  1  to  Smithsonian  License  Agreement
                    (incorporated   by   reference   to  Exhibit   10.5  of  the
                    Registrant's  Amendment No. 1 to the Registration  Statement
                    on Form 10-SB filed on November 6, 1998; Commission File No.
                    0-24109).

                    10.6 Centro Alameda Inc.  Contract  Agreement dated December
                    19, 1997  (incorporated  by reference to Exhibit 10.6 of the
                    Registrant's  Amendment No. 1 to the Registration  Statement
                    on Form 10-SB filed on November 6, 1998; Commission File No.
                    0-24109).

                    10.7   Knowledge   LINK   Strategic    Alliance    Agreement
                    (incorporated   by   reference   to  Exhibit   10.7  of  the
                    Registrant's  Amendment No. 1 to the Registration  Statement
                    on Form 10-SB filed on November 6, 1998; Commission File No.
                    0-24109).

                    10.8  Synthonics  Technologies - Industrial  Lease Agreement
                    (incorporated   by   reference   to  Exhibit   10.8  of  the
                    Registrant's  Amendment No. 1 to the Registration  Statement
                    on Form 10-SB filed on November 6, 1998; Commission File No.
                    0-24109).

                    10.9 Joseph Maher - Industrial Lease Agreement (incorporated
                    by reference to Exhibit 10.9 of the  Registrant's  Amendment
                    No. 1 to the  Registration  Statement on Form 10-SB filed on
                    November 6, 1998;  Commission File No. 0-24109).

                                       45
<PAGE>
                    10.10 Dell Financial Lease No.  004591649-001  (incorporated
                    by reference to Exhibit 10.10 of the Registrant's  Amendment
                    No. 1 to the  Registration  Statement on Form 10-SB filed on
                    November 6, 1998;  Commission File No. 0-24109).

                    10.11 Dell Financial Lease No.  004591649-002  (incorporated
                    by reference to Exhibit 10.11 of the Registrant's  Amendment
                    No. 1 to the  Registration  Statement on Form 10-SB filed on
                    November  6,  1998;  Commission  File  No.  0-24109).

                    10.12 Americorp Financial Inc. - Lease 6976-2  (incorporated
                    by reference to Exhibit 10.12 of the Registrant's  Amendment
                    No. 1 to the  Registration  Statement on Form 10-SB filed on
                    November 6, 1998; Commission File No. 0-24109).

                    10.13   Sanwa   Leasing   Corporation   -  Lease   Agreement
                    (incorporated   by  reference   to  Exhibit   10.13  of  the
                    Registrant's  Amendment No. 1 to the Registration  Statement
                    on Form 10-SB filed on November 6, 1998; Commission File No.
                    0-24109).

                    10.14 AT & T Equipment  Lease - 003866952  (incorporated  by
                    reference to Exhibit 10.14 of the Registrant's Amendment No.
                    1 to the  Registration  Statement  on Form  10-SB  filed  on
                    November 6, 1998; Commission File No. 0-24109).

                    10.15 AT & T Equipment  Lease - 003871854  (incorporated  by
                    reference to Exhibit 10.15 of the Registrant's Amendment No.
                    1 to the  Registration  Statement  on Form  10-SB  filed  on
                    November 6, 1998;  Commission  File No.  0-24109).

                    10.16 F. Michael Budd Employment Agreement  (incorporated by
                    reference to Exhibit 10.16 of the Registrant's Amendment No.
                    1 to the  Registration  Statement  on Form  10-SB  filed  on
                    November  6,  1998;  Commission  File  No.  0-24109).

                    10.17 Charles S. Palm Employment Agreement  (incorporated by
                    reference to Exhibit 10.3 of the Registrant's  Amendment No.
                    1 to the  Registration  Statement  on Form  10-SB  filed  on
                    November 6, 1998; Commission File No. 0-24109).

                    10.18 First Colony Life Insurance  Policy  (incorporated  by
                    reference to Exhibit 10.18 of the Registrant's Amendment No.
                    1 to the  Registration  Statement  on Form  10-SB  filed  on
                    November  6,  1998;  Commission  File  No.  0-24109).

                    10.19  Software  Remarketing   Agreement  between  Synhonics
                    Technologies,   Inc.   and  Evans  &   Sutherland   Computer
                    Corporation. (incorporated by reference to Registrant's Form
                    10-KSB for the year ended December 1998,  filed on March 11,
                    1999).

                    10.20  Engagement  Letter  between  the Company and Averil &
                    Associates  dated April 1, 1999,  (incorporated by reference
                    to  Exhibit  10.20 of the  Quarterly  Report on Form  10-QSB
                    filed on August 13, 1999.

                    10.21 Equity  Agreement  between the Company and Alex Sandel
                    dated  June  2,  1999,  attached  hereto.  (incorporated  by
                    reference to Exhibit 10.21 of the  Quarterly  Report on Form
                    10-QSB filed on August 13, 1999.

                    10.22   Subscription   Agreement  for  Convertible  Note  of
                    Synthonics Technologies, Inc., dated December 22, 1999.

                    10.23 Convertible Subordinated Promissory Note of Synthonics
                    Technologies, Inc., dated December 22, 1999.

               (27) Financial Data Schedule

                    27.1. Financial Data Schedule (submitted  electronically for
                    SEC information only).

                                       46
<PAGE>
     (b) The  Registrant  filed a Form 8-K on December 30,  1999.  Additionally,
subsequent to the quarter covered by this report, the Registrant file a Form 8-K
on February 1, 2000.  There were no other  reports on Form 8-K filed  during the
quarter of the period covered.

     The following Exhibit Index sets forth the Exhibit attached hereto

                                  EXHIBIT INDEX
<TABLE>
<CAPTION>
     Exhibit                  Description
     -------------------------------------------------------------------------
     <S>             <C>
     10.22          Subscription  Agreement for  Convertible  Note of Synthonics
                    Technologies, Inc., dated December 22, 1999.

     10.23          Convertible   Subordinated  Promissory  Note  of  Synthonics
                    Technologies, Inc., dated December 22, 1999.

</TABLE>

                                       47
<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.

                                             SYNTHONICS TECHNOLOGIES, INC.
                                                  A Utah Corporation



Dated: April 14, 2000                        /s/   F. Michael  Budd
                                             ---------------------------------
                                             By:  F. Michael Budd
                                             Its: President
                                                  Chief Executive Officer
                                                  and principal Financial
                                                  and Accounting Officer

                                       48