<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K

                   FOR ANNUAL AND TRANSITION REPORTS PURSUANT
         TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)

   [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
                                       OR

   [   ]  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 000-23121

                          U.S.A. FLORAL PRODUCTS, INC.
             (Exact Name of Registrant as Specified in Its Charter)

                                    Delaware
         (State or Other Jurisdiction of Incorporation or Organization)

                      1025 Thomas Jefferson Street, N.W.,
                        Suite 300 East, Washington, D.C.
                    (Address of Principal Executive Offices)

                                   52-2030697
                      (I.R.S. Employer Identification No.)

                                     20007
                                   (Zip Code)

Registrant's telephone number, including area code: (202) 333-0800

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

<TABLE>
<CAPTION>
   Title of Each Class            Name of Each Exchange on Which Registered
--------------------------  -----------------------------------------------------
<S>                         <C>
           None                                Not applicable
</TABLE>

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

                    Common Stock, par value $.001 per share
                                (Title of Class)

  Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.   Yes     No
                                               ----   ----

  Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [   ]

  As of March 29, 2000, the aggregate market value of voting common stock held
by non-affiliates of the registrant, based upon the last reported sale price for
the registrant's Common Stock on the Nasdaq National Market on such date, was
$ 24,390,473 (calculated by excluding shares owned beneficially by directors
and executive officers as a group from total outstanding shares solely for the
purpose of this response).

  The number of shares of the registrant's Common Stock outstanding as of the
close of business on March 30, 2000 was 16,443,614.

                      DOCUMENTS INCORPORATED BY REFERENCE

  Certain portions of the definitive Proxy Statement of U.S.A. Floral Products,
Inc. to be used in connection with the 2000 Annual Meeting of Stockholders (the
"Proxy Statement") are incorporated by reference into Part III of this Annual
Report on Form 10-K to the extent provided herein. Except as specifically
incorporated by reference herein, the Proxy Statement is not to be deemed filed
as part of this Annual Report on Form 10-K.
<PAGE>

                                     PART I


Item 1.   Business

  In this Annual Report on Form 10-K ("Form 10-K"), "USA Floral," "we,"
"us," and "our" refer to U.S.A. Floral Products, Inc. and its subsidiaries,
unless the context otherwise requires. This Form 10-K contains (or incorporates
by reference) certain "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements generally can
be identified by the use of forward-looking terminology such as "may,"
"will," "intend," "estimate," "anticipate," "believe," "expect," or
"continue" or variations thereon or similar terminology. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties and assumptions about USA Floral, including among other things:

  .   general economic and business conditions;

  .   changes in, or failure to maintain, current pricing levels;

  .   changes in political, social and economic conditions and local
      regulations, particularly in Central America and South America;

  .   currency and interest rate exposure;

  .   changes in, or failure to comply with, government regulations;

  .   demographic changes;

  .   change in our sales mix;

  .   our ability to obtain floral products during periods of peak demand;

  .   any reduction in sales to or loss of any significant customers;

  .   competition;

  .   changes in our business strategy or development;

  .   availability of sufficient capital to meet our needs or on terms or at
      times acceptable to us; and

  .   availability of qualified personnel.

  We undertake no obligation to update publicly or to revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
Because of these risks, uncertainties and assumptions, the forward-looking
events discussed in this Form 10-K might not occur.


Overview

  USA Floral is the largest integrated distributor of floral products in the
world. We are organized into two divisions, an International Division and a
North American Division. Within each of these divisions, we have three
reportable operating segments: Importing/Exporting, Wholesale Distribution and
Bouquet Manufacturing. For revenue, income and asset information about each of
these segments, see our Consolidated Financial Statements included elsewhere in
this Form 10-K.

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  Through these divisions, we:

  .   import, export and distribute floral products and floral-related
      hardgoods;

  .   engage in brokerage and shipping services for wholesale distributors of
      both international and domestic cut flowers;

  .   provide traditional and Internet floral fulfillment services to non-store
      retailers; and

  .   provide in-store merchandising services to certain supermarkets and mass-
      market retailers.

  Increasingly, we provide higher value-added services including bouquet and
arrangement making, product branding, marketing support to retailers and
freshness dating. Our customers are retail florists, supermarkets, other mass-
market retailers and Internet and catalog retailers, as well as wholesale
distributors and bouquet and arrangement makers. We do not own or operate
growing operations or retail florists. We operate from 102 facilities in 18
countries located on five continents.  Our revenues for the year ended December
31, 1999 were approximately $924.8 million, and our operating income was
approximately $13.8 million.


Industry Overview

  The worldwide floriculture industry, which, according to industry statistics,
had total revenues at the retail level of approximately $60.0 billion in 1998
(compared to less than $45.0 billion in 1990), produces, distributes and markets
fresh-cut flowers and greens, potted plants and floral-related hardgoods, such
as vases, glassware, foam and other supplies. Industry participants include
growers, retailers and distributors. Distributors include importers, exporters,
wholesale distributors and bouquet companies. Distributors move flowers from
growing regions throughout the United States and in countries around the world
to retail florists, supermarkets, discount stores and other mass-market
retailers, and Internet and catalog retailers; USA Floral is a distributor.

  World per-capita consumption of fresh-cut flowers varies widely by country,
according to statistics published by the Flower Council of Holland. In 1998,
Switzerland's per-capita consumption of flowers was $85, the highest in the
world. While the United States per-capita consumption grew from $20 in 1990 to
$25 in 1998, U.S. consumption is significantly lower than that of most European
and developed Asian countries. We believe that the shorter distribution
channels, especially in Europe, results in fresher, longer-lasting products,
which in turn significantly contributes to the higher per-capita consumption.

  Fresh flowers are grown commercially at farms in most countries around the
world. The three primary consumption markets for floral products in the world
are Europe, North America and Japan. Principal sources of worldwide supply are
growers in Colombia and Ecuador in South America, Holland in Europe, Africa, the
Middle East, and to a lesser extent Australia and New Zealand in the Pacific
Rim. Holland, however, is by far the largest supplier of floral products in the
world. South America is the predominant source of supply for flowers imported
into the United States. Domestic sources of supply include growing operations in
Florida, California and the Pacific Northwest, as well as Hawaii for tropical
varieties. The principal international source of supply is flower auctions which
are located primarily in Holland. The majority of flowers sold at the flower
auctions are grown in Holland by small, family-owned businesses. While a limited
number of growers operate large, integrated growing operations, both
international and domestic growers are typically small businesses operating in a
highly fragmented environment. USA Floral is not a grower.


Distribution Channels

  In the North American market, flowers grown abroad arrive at United States
ports of entry, principally Miami, Florida, by air each day. Flowers imported
into the United States including all types, but primarily consist of roses,
carnations and chrysanthemums, each of which is imported in a number of
varieties. Importers of floral products,

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including USA Floral, receive these flowers, generally on consignment, and
facilitate their passage through United States customs inspection and clearance
procedures. Typically, flowers spend one or two days in customs clearance.

  Importers match the available flower supply with demand from wholesale
distributors and bouquet companies, break down shipments into lots sized to meet
customer requirements, and then ship the flowers primarily in refrigerated
trucks. The flowers are shipped from importers' facilities at ports of entry,
most of which are located in Miami, or from domestic growers on refrigerated
trucks, usually arriving at the wholesale distributor, including USA Floral,
within one to three days from the date of order. The wholesale distributors then
market and supply fresh flowers and floral-related hardgoods to traditional
retail florists and mass-market retailers, as well as to bouquet companies.

  Bouquet companies employ mass-production techniques in order to replicate
cost-effectively a particular floral arrangement for widespread distribution.
They wrap cut flowers in plastic sleeves and produce floral arrangements, which
are packaged in shipping containers, for sale through mass-market retailers such
as supermarkets, discount retailers and chain stores.

  Floral products are generally sold at retail to consumers through traditional
retail florists which are typically small, family-owned businesses, supermarkets
and other mass-market retailers. According to statistics published by the
Society of American Florists, there are approximately 40,000 traditional retail
florists, with average annual revenues of $250,000. Wire services such as
Florists' Transworld Delivery Association ("FTD") and order aggregators such
as 1-800-FLOWERS rely upon traditional retail florists to fulfill their orders.
Increasingly, Internet and catalog retailers are selling floral products to
retail consumers. The Internet and catalog retailers generally rely upon
wholesale distributors and bouquet companies to fulfill their orders.

  The distribution channel for our international operations and our North
American operations are similar, except that our international operations:

  .   rely upon the flower auctions for supply rather than direct relationships
      with growers; and

  .   include export companies.

  Exporters purchase the majority of their flowers on a daily basis from flower
auctions located primarily in Holland. Our exporters also purchase a small
percentage of their flowers directly from growers. After purchasing flowers,
exporters process the flowers (i.e., cut, hydrate, re-bunch and package for
shipment). Exporters then sell the flowers and arrange and coordinate outbound
freight to ship the flowers to importers throughout Europe and Asia. The
European and Asian importers and wholesale distributors purchase the flowers
upon physical receipt, rather than take the flowers on consignment as is typical
for our North American importers.

  The distribution channel in the floriculture industry is highly fragmented and
consists mainly of small, family-owned firms that operate from a single location
or from a small number of outlets in a single region. While floral products have
historically been sold at retail through a large number of traditional florists,
who continue to serve the majority of consumers, we believe, based upon the
experience of our management, that changes in consumer buying habits are causing
more consumers to seek floral products from mass-market retailers such as
supermarkets, discount retailers and chain stores. We believe that sales in the
United States retail segment of the floriculture industry exceeded $15 billion
in 1998, and that almost half of retail sales in the United States and 15% of
international retail sales were generated by mass-market retailers. We believe
that the growing consumer preference for more convenient floral products
retailers, together with the potential efficiencies to be achieved from
operating floral products businesses on a large scale, provide an attractive
opportunity for us to continue to build an integrated floral products
distributor that can serve the growing mass-market while continuing to meet the
needs of the traditional florists for high quality products and services.

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Competitive Strengths

  Market Leader.   We should be able to leverage our position as the largest
integrated distributor of floral products in the world to increase revenues and
achieve cost savings. We have hundreds of sources of supply located throughout
the world and more points of distribution than any of our competitors. Our size
and international presence allow us to better serve large mass-market retailers
with diverse geographic locations. In addition, we believe that our size gives
us significant buying power with growers and hardgoods suppliers and allows us
to realize savings on transportation and handling costs of fresh flowers as
compared to some of our competitors.

  Ability to Manage National and International Account Fulfillment Programs.
Our size and multiple sources of supply and distribution give us the unique
ability to enter into and service national and international floral account
programs with large mass-marketers and Internet and catalog retailers.

  Experienced Management.   Our senior management team has extensive experience
in the floral distribution industry, the integration of businesses and the
distribution of products to retailers.  Our new Chief Executive Officer, Michael
Broomfield, was hired January 3, 2000 and was previously the Chief Operating
Officer for Giant Foods Inc., a supermarket distribution company owned by
Koninklijke Ahold NV. Dwight Ferguson, our President and Chief Operating
Officer, was formerly the President and Chief Operating Officer of Florimex
Worldwide Inc.  ("Florimex"), an international importer, exporter and
wholesale distributor of fresh-cut flowers which we acquired on September 30,
1998. Prior to joining Florimex, Mr. Ferguson was a division vice president at
Chiquita Brands International with responsibility for sales, marketing and
operations in the southern United States.  Mr. Robert Poirier, our former
Chairman, President and Chief Executive Officer, resigned on March 1, 2000.

  International Presence. We operate as importers, exporters, wholesale
distributors and bouquet companies throughout Europe and Asia. We have sourcing
and export facilities in Holland, Colombia, Ecuador and South Africa. Our
significant international presence gives us access to the worldwide production
of flowers and floral products and the opportunity for our domestic operations
to purchase flowers from our international operations.


Business Strategy

  Streamline Distribution Channel.   The traditional North American distribution
channel can take from eight to seventeen days to move flowers from growers to
consumers and requires that the flowers are handled numerous times during that
period. At each stage of the distribution chain, the pricing of cut flowers
varies with quality and freshness. As days pass from the time of first cutting,
fresh products that remain unsold decline in price, until they are ultimately
sold or discarded. Because the freshest, highest-quality flowers command the
highest prices, the distribution system effectively rewards the growers that
produce the best flowers, the importers and brokers that clear and match flowers
with buyers most efficiently, and the wholesale distributors and bouquet
companies that store and preserve flowers most effectively and bring the best
products to market most quickly.

  This traditional North American distribution channel is slow and inefficient.
The international distribution channel is much shorter; it moves flowers from
growers to consumers in three to fourteen days. We believe that there are
several reasons for the more efficient international distribution channel.
First, the majority of flowers sold at the auctions are grown locally in
Holland. Second, floral products are not stored at the growers or exporters as
is often the case with flowers exported from South America into the United
States. Finally, there are not the customs clearance delays associated with
importing flowers into the United States. Because some of these differences in
the marketplace are beyond our control, we cannot replicate the international
distribution channel in North America. However, we believe that we can reduce
the time that fresh flowers are in the North American distribution channel by up
to 75% and thereby provide higher quality, fresher products and increase
consumer demand. We believe that we are well-positioned to accomplish this goal
because of our size, relationships with growers and our numerous sourcing and
distribution facilities located throughout the world. In addition to reducing
the time that flowers are in the distribution channel, we believe that we can
reduce the number of times that flowers are handled while in that channel.  We
believe that, because of our size and infrastructure, we are the first floral
distributor to be in a position to re-engineer the distribution channel in North
America.

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  Focus on Mass-Market Opportunities.   The growth in flower sales by mass-
market retailers and supermarkets has significantly exceeded the growth of
flower sales generally. Mass-market flower sales have increased to almost 50% of
total flower sales in the United States in 1998 from 31% in the mid 1980s. We
believe that our national presence will increase our opportunities to be the
distributor of choice for national mass-market retailers. We plan to leverage
our national presence and our local distribution capabilities, in-store floral
management initiatives and customer service to become the preferred provider of
floral products to mass-market retailers, discount stores and supermarkets. With
our acquisition of Florimex and its operating subsidiary, Sierafor B.V., we have
expanded our international bouquet and arrangement making and distribution
business, and we believe we are well-positioned to participate in the
anticipated growth of European and Asian mass-market flower sales. Although per-
capita consumption of floral products in Europe and Asia is greater than per-
capita consumption in the United States, at present, approximately 15% of total
flower sales in Europe and less than 10% of total flower sales in Asia are sold
through the mass market.

  Pursue Internet Fulfillment Initiative.   Through our Internet Fulfillment
Department, we will offer expanded Internet-based services to our traditional
and non-traditional customers. We plan to offer a comprehensive line of bulk
floral products from our International and North American Divisions, utilizing
the Internet and e-commerce to streamline the distribution channel and provide
better customer service. We also plan to offer non-traditional customers that
choose to ship direct to consumers via next day delivery services a complete
line of floral products, packaging, shipping and fulfillment services. As more
consumers turn to the Internet for retail and gift purchases, we believe we are
well-positioned to provide fulfillment services to a wide range of on-line
retailers that service this demand.

  Improve Operating Margins.   As we seek to streamline the distribution
channel, we plan to continue to integrate our operations and eliminate costs.
Our North American operations attempt to minimize the risk of spoilage at the
import level, and thereby improve operating margins, by purchasing the majority
of floral products from growers on a consignment basis. We believe that over
time we will be able to develop and market high value-added products and
services, such as branded bouquets specifically identified with quality and
consistency. To a limited extent, our subsidiary companies have been suppliers
to and customers of each other. We expect these relationships to continue to
increase as our domestic operations now have the opportunity to purchase flowers
from our international operations as well. We expect intercompany purchases to
improve our operating margins.

International Operations

  Our International division, commonly referred to as Florimex, operates through
approximately 47 offices located in countries throughout the world, including
Austria, China, Colombia, the Czech Republic, Ecuador, France, Germany, Holland,
Italy, Japan, Poland, South Africa, Spain, Sweden, Switzerland, and the United
Kingdom. Florimex buys flowers from sources throughout the world and transports
them, typically by air, to distribution facilities for resale to wholesale
distributors and retailers. Florimex imports flowers through 47 locations
covering all major floral consumption markets. Florimex conducts export
operations primarily through one of its operating subsidiaries, Baardse B.V.,
which is Holland's third largest cut flower export company. Baardse B.V. is
headquartered in Aalsmeer, Holland, at the site of the world's largest flower
auction facilities. In addition to the Aalsmeer auction, Florimex routinely
acquires flowers from all principal Dutch flower auctions. Florimex's exporting
operations sell and ship products directly to other USA Floral subsidiaries as
well as to other wholesale distributors and bouquet companies. Florimex conducts
wholesale operations throughout Europe from its headquarters in Nuremberg,
Germany and Prague, Czech Republic.

  Florimex provides the Company with certain strategic benefits, including:

  .   a significant international presence in the floral products industry;

  .   multiple sourcing operations located throughout the world;

  .   opportunities to capitalize on the anticipated growth in flower sales by
      the mass-market segment in Europe and Asia;

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  .   intercompany opportunities for sourcing floral products as well as
      opportunities to source and service our domestic operations;

  .   an ability to leverage intercompany opportunities to improve our operating
      margins;

  .   an opportunity to be on the leading edge of e-commerce and Internet-based
      sales initiatives throughout Europe and Asia;

  .   opportunities to capitalize on the existence of international flower-
      giving holidays such as All Saint's Day that fall in the fourth quarter
      and thereby decrease our reliance upon sales of floral products in the
      first and second quarter; and

  .   a significant presence at the world's largest flower auctions.

Distribution

  The majority of floral products distributed throughout the United States are
distributed through facilities located in Miami, Florida. We are the leading
distributor of floral products out of Miami.

  Most of the floral products that we distribute throughout Europe and Asia are
distributed through facilities located in Holland in close proximity to the
flower auctions which provide the majority of our international supply.


Company Products and Services

  Our company is organized primarily on a geographic basis with an International
Division and a North American Division and secondarily based upon products and
services that we offer. Each division operates in three segments: import/export;
wholesale; and bouquet companies.

  Importing.   We import a large array of fresh flowers, including roses,
carnations and chrysanthemums, from abroad, principally from Colombia and
Ecuador in South America, Holland in Europe, Africa, the Middle East, and to a
lesser extent Australia and New Zealand in the Pacific Rim. Most of the flowers
we import into the United States arrive at the U.S. port of entry in Miami,
Florida. Our domestic importers assist in clearing shipments through United
States customs, transferring the flowers to our facilities for pre-cooling and
then acting as intermediaries to link the available flowers with the needs of
wholesale distributors and bouquet companies throughout the country.

  Exporting.   Through our international operations, we export fresh flowers.
Our exporters purchase the majority of their flowers on a daily basis from
flower auctions located principally in Holland. Our exporters also purchase a
small percentage of their flowers directly from growers. After purchasing
flowers, exporters process the flowers (i.e., cut, hydrate, re-bunch and package
for shipment), then sell the flowers and arrange and coordinate outbound freight
to ship the flowers to importers throughout Europe and Asia. The European and
Asian importers and wholesale distributors purchase the flowers upon physical
receipt, rather than take the flowers on consignment as is typical for our North
American importers.

  Wholesale Distribution.   We sell imported and domestic perishable floral
products and floral-related hardgoods directly to thousands of retail florists
and mass-market retailers. We have wholesale operations throughout much of the
United States, Germany, the Czech Republic and in the Western Provinces of
Canada. Our wholesale distributors process incoming flowers (i.e., break bulk,
hydrate, re-cut stems and re-package to suit customer demand) to facilitate
further distribution to retail florists and mass-market retailers. Our wholesale
distributors make deliveries to retailers on a daily basis, assist mass-market
retailers with the presentation of floral products and prepare specific
arrangements to meet customer needs. We also serve as a broker for domestic
flowers, linking flowers grown primarily in California with wholesale
distributors and bouquet companies throughout the United States.

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  Bouquet Making, Distribution and Other Value-Added Activities.   We take fresh
flowers obtained from growers or importers and create pre-packaged bouquets and
arrangements which are sold by mass-market retailers, discount chains, and
supermarkets throughout the United States, Europe and Japan. We also have
programs with mass-market retailers where we provide marketing materials and
maintain floral displays for these retailers to ensure attractive presentation
and maintenance of high-quality flowers and arrangements.


Sales and Marketing

  We have an international sales force to market floral products directly to
entities at the next level of the distribution chain. Sales and marketing are
conducted primarily on a one-to-one basis by telephone calls to established
accounts. Our salespeople are generally compensated on a commission basis or
through other incentive-based compensation programs that encourage employees to
build existing business as well as generate new customer relationships. In
addition, our wholesale distributors typically maintain limited "showroom"
space for walk-in business from trade customers in which hardgoods, such as
vases and ribbons, are displayed for sale. Trade customers can also examine and
select fresh flowers from on-site coolers.

  We have also established programs with mass-market retailers where our
personnel maintain floral displays for these retailers, to ensure attractive
presentation and maintenance of high-quality flowers.

  We believe that our size and international presence will create opportunities
to promote other high-quality, brand-name products, principally through direct
sales techniques and retail promotions. In addition, we intend to seek corporate
account opportunities to market products to selected audiences of employees and
corporate purchasing personnel. We also have the ability to privately label,
repackage and distribute floral products, along with other giftable products, on
behalf of Internet and other retailers.


Internet Commerce

  We believe we are well-positioned to provide fulfillment services to on-line
retailers of floral products with our bouquet making operations in Miami, FL.
Internet retailers, who have the capacity to market flowers directly to
customers, do not have the capabilities necessary to buy the flowers and
distribute them to the consumer. We, however, have the ability to privately
label, repackage and distribute floral products, along with other giftable
products, on behalf of these Internet retailers.  Through our Internet
Fulfillment department, we offer a comprehensive line of floral products,
packaging, shipping and fulfillment services to a wide range of on-line
retailers. We also have the ability to work with and assist on-line retailers in
implementing electronic data interchange transaction sets to enable us to
accept, process and distribute orders in an efficient manner.


Sources of Supply

  Principal sources of our supply are growers in Colombia and Ecuador in South
America, Holland in Europe, Africa, Israel, and to a lesser extent Australia and
New Zealand in the Pacific Rim. We have had increased access to flowers grown
throughout the world through our acquisition of Florimex. The International
division has created an opportunity for our domestic importers and wholesale
distributors to buy flowers from our own exporters and preferred suppliers
around the world. Such intercompany purchases should improve our operating
margins.

  Although we do not generally enter into contracts with our suppliers, we
actively manage relationships with a large number of growers, importers and
brokers to obtain high-quality flowers in amounts and at times needed. In
addition, when appropriate, we enter into standing order arrangements with
certain importers, which provide for fixed quantity purchases on a fixed price
basis throughout the year with higher quantities at that price during peak
demand periods, to ensure an adequate supply of flowers during periods of peak
demand. We buy our hardgood products from a number of suppliers. We believe that
we have good relationships with our suppliers and that alternative sources of
supply are readily available if necessary.

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Customers

  We have thousands of customers, consisting of other wholesale distributors and
bouquet companies, traditional florists, mass-market retailers and Internet and
catalog retailers. Certain other participants in the floriculture industry,
including wire services such as FTD and order aggregators such as 1-800-FLOWERS
(both of which rely upon traditional retail florists to fulfill their orders),
are also indirect customers for our products through the demand that their
orders generate at retail florists. We generally do not enter into long-term
sales contracts with our customers. We typically use purchase orders and other
sales documentation that apply only to the specific sale. No single customer
accounted for more than 5% of our actual 1999 revenues. To a limited extent, our
subsidiary companies have historically been suppliers to and customers of each
other; we expect that these relationships will continue in the future and may
expand.


Competition

  The distribution segment of the floriculture industry is highly competitive,
with numerous distributors in each market. We, however, are the only company
presently engaged in the vertical integration of floral products distribution on
an international scale. We compete regionally with other importers, exporters,
brokers, wholesale distributors and bouquet companies based upon price, credit
terms, breadth of product offerings, product quality, customer service and
location.


Employees

  As of March 30, 2000, we employed approximately 3,700 people. We believe that
our relations with our employees are satisfactory.


Factors Affecting Our Prospects

  Our prospects may be affected by a number of factors, including the matters
discussed below:


 Risks Related to Our Internal Growth Strategy

  Key elements of our growth strategy is to be more profitable and to continue
to expand our net revenues. Our ability to increase net revenues will be
affected by many factors, including:

  .   demand for, and pricing and availability of, floral products;

  .   prices and demand for our floral products;

  .   our ability to expand the range of products and services offered;

  .   the continued growth in flower sales by mass-market retailers and
      supermarkets;

  .   implementation of our Internet fulfillment initiative;

  .   our ability to successfully enter new markets; and

  .   availability of sufficient capital to meet our internal growth strategy.

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  Some of these factors are beyond our control, and our strategies may not be
successful, or we may be unable to generate cash flows adequate for our
operations and to support internal growth.  Our Internet fulfillment initiative
is still in its infancy. Our programs with Internet retailers may not be
successful for several reasons, including:

  .   quality control and return/refund issues;

  .   problems associated with direct shipping;

  .   risks related specifically to individual website providers such as
      inadequate or ineffective advertising on their websites; and

  .   our inability to implement, and technical problems with, computer hardware
      and software that is required for us to accept, process and distribute
      electronic orders for products.


 Risks Associated with Our International Sales and Operations

  We operate as importers, exporters, wholesale distributors and bouquet
companies throughout Europe and Asia. International operations are subject to
certain inherent risks, including:

  .   impact of recessions in economies outside the United States;

  .   prices and demand for our floral products;

  .   cost of enforcement of contractual obligations;

  .   difficulties and costs of managing international and decentralized
      operations;

  .   limited protection for intellectual property rights in some countries;

  .   currency exchange rate fluctuations;

  .   political and economic instability;

  .   availability of sufficient capital; and

  .   potentially adverse tax consequences.

  In addition to dollars, our international revenues are denominated in local
currencies, predominately the Euro. We currently engage in limited currency
hedging activities for the purpose of hedging payments and receipts of foreign
currencies related to the purchase and sale of goods overseas. Future
fluctuations in currency exchange rates may adversely affect our revenues and
operating income from international sales.


 Risks Related to Operating Strategies

  We have experienced extremely rapid growth. We believe that in order for us to
integrate effectively our acquired companies we must implement uniform company-
wide accounting and management information systems. Our implementation of such
systems is not yet complete. If we do not implement proper overall business
controls, our operating strategy could result in inconsistent, inadequate or
incorrect operating and financial practices at our current and subsequently
acquired operating subsidiaries, which could materially and adversely affect our
business, financial condition, results of operations and cash flows.

                                       10
<PAGE>

 Competition

  The distribution segment of the floriculture industry is highly competitive,
with numerous distributors in each market. We compete with other importers,
exporters, brokers, wholesale distributors and bouquet companies, based upon
price, credit terms, breadth of product offerings, product quality, customer
service and location. To the extent that we are unable to compete successfully
against our existing and future competitors, our business, operating results,
financial condition and cash flows will be materially adversely affected. While
we believe that we compete effectively within our industry, additional
competitors with greater resources may enter the industry and compete
effectively against us. Also, if our customers do not accept our vertical
integration strategy, they have numerous alternative sources of supply.

  We have several large competitors both in the United States and
internationally, and we may not be able to compete effectively with one or more
of our competitors. In addition, although in most regions throughout the world
the floriculture industry is highly fragmented and consists mainly of small,
family-owned firms, the industry has been changing and in certain regions some
of our large competitors have already established dominant market share. For
example, one of our competitors, an exporter/bouquet maker based in Holland,
presently provides the majority of the flowers to the supermarkets in the United
Kingdom. We may not be able to penetrate certain markets and, if we are able to
do so, we may not be able to compete effectively against our established
competitors.

 Seasonality

  Our business is seasonal, with peak sales concentrated in the first and second
calendar quarters as a result of holidays such as Valentine's Day and Mother's
Day. In particular, a large portion of our annual revenues is derived from sales
of floral products for Valentine's Day, one of the largest flower-giving
holidays in the world. Historically, Valentine's Day sales have been relatively
lower in years in which the holiday falls on a Saturday or Sunday. The past two
years' Valentine's Day has fallen on the weekend.

 Weather and Other Factors

  The supply of perishable floral products is significantly dependent on weather
conditions where the products are grown.

  .   Severe weather, including unexpected cold weather, may affect the
      available supply of flowers at times of peak demand. For example, in order
      for a sufficient supply of roses to be available for sale on Valentine's
      Day, rose-growing regions must not suffer freezes or other harsh
      conditions in the weeks leading up to the holiday.

  .   Aberrations in weather patterns, such as those attributed to El Nino may
      also affect the available supply of flowers.

  In addition to weather conditions, other factors, such as widespread disease
affecting plants, may also impact the available supply of flowers. Shortages or
disruptions in the supply of fresh flowers or our inability to purchase such
materials from alternate sources at acceptable prices in a timely manner could
lead to the loss of customers, which in turn could result in a material adverse
effect on our business, financial condition, results of operations and cash
flows.


 Cyclicality

  We believe that the floriculture industry is influenced by general economic
conditions and particularly by the level of personal discretionary spending, and
thus that the industry tends to experience periods of decline and recession
during economic downturns. The industry may experience sustained periods of
sales declines in the future, and any such decline may have a material adverse
effect on USA Floral.

  We have in the past experienced quarterly variations in revenues, operating
income (including operating

                                       11
<PAGE>

losses), net income (including net losses) and cash flows. Certain of our
operating subsidiaries have experienced net losses, and negative fluctuations
have been particularly pronounced in the third and fourth calendar quarters. We
expect to continue to experience such quarterly fluctuations in operating
results (including possible net losses). We believe that, in addition to the
factors mentioned above, such fluctuations may be due to:

  .   an oversupply, or reduced price, of commodity floral products;

  .   the loss of a major customer; and

  .   additional selling, general and administrative expenses to acquire and
      support new business and the timing and magnitude of required capital
      expenditures.

  We plan our operating expenditures based on revenue forecasts, and a revenue
shortfall below such forecasts in any quarter would likely adversely affect our
operating results for that quarter.


 Dependence on Key Personnel

  We believe our success will depend upon the efforts and abilities of Michael
W. Broomfield, our Chief Executive Officer, Dwight Ferguson, our President,
Chief Operating Officer and President of the International Division, the other
members of our management team and senior management of our operating
subsidiaries. While we have entered into employment agreements with Mr.
Broomfield, Mr. Ferguson, other executive officers and senior management of our
operating subsidiaries, we cannot assure that such individuals will remain with
us throughout the terms of the agreements or thereafter. If we lose the services
of one or more of these key employees before we are able to attract and retain
qualified replacement personnel, our business could be adversely affected.


 Amortization of Intangible Assets

  Approximately $267.6 million, or 55.0%, of our total assets as of December 31,
1999 consists of goodwill. Goodwill is an intangible asset that represents the
difference between the aggregate purchase price for the net assets we have
acquired and the fair value of such assets. We are required to amortize the
goodwill from our acquisitions of our operating subsidiaries over a period of
time, with the amount amortized in a particular period constituting an expense
that reduces our net income for that period. In most cases, however, the amount
amortized will not give rise to a deduction for tax purposes. In addition, we
will be required to amortize the goodwill, if any, from any future acquisitions.
A reduction in net income resulting from the amortization of goodwill may have
an adverse impact upon the market price of our common stock.


 Risks Associated with Imported Products; Anti-dumping Liability

  The majority of the perishable floral products that we distribute are of
foreign origin. These products are imported from suppliers located in more than
60 countries on five continents. We import fresh flowers, including roses,
carnations and chrysanthemums, from abroad, principally from Colombia and
Ecuador in South America, Holland in Europe, Africa, Israel, and to a lesser
extent Australia and New Zealand in the Pacific Rim. Civil or political unrest
in any of these countries could impact our ability to obtain floral products at
periods of peak demand or to obtain products at favorable prices. We are subject
to foreign currency exchange rate risk to the extent that our purchases are
denominated in currencies other than the currency in which the products will be
resold. We are also subject to the import and export restrictions of various
jurisdictions and are dependent to some extent upon general economic conditions
in and political relations with a number of foreign countries. Although such
restrictions and conditions have not had a material impact on our operations to
date, there can be no assurance that such restrictions and conditions will not
have a material adverse effect on our business, financial condition, results of
operations and cash flows.

                                       12
<PAGE>

  As importers of perishable floral products, we were previously subject to the
imposition of anti-dumping duties. "Dumping" occured when importers sold
flowers in the United States at prices below the flowers' home market value. The
U.S. Commerce Department ("DOC") investigated claims of dumping made by domestic
growers and if the DOC determined that a farm sold flowers to a U.S. importer
for a price less than the home market value, it imposed an anti-dumping duty
upon the importer. The DOC previously conducted anti-dumping reviews related to
the sales of certain flowers imported from South America. The DOC has undertaken
eleven reviews, the most recent being for the period ended February 28, 1998.
On May 20, 1999, a settlement was reached whereby all open review periods
through February 28, 1997 (periods 5, 6, 7, 9 and 10) were finalized at the cash
deposit rate.  That is, the Company did not owe any additional antidumping
duties ("ADD") for those periods.  On July 20, 1999, the DOC revoked the
Antidumping Order on fresh cut flowers from Colombia retroactive to March 1,
1997, the beginning of period 11.  Further, the DOC stated that, as a result of
the retroactive revocation, the DOC has terminated its reviews of periods 11 and
12 and that the DOC intends to refund any ADD collected on or after March 1,
1997.  Therefore, as a result of the final determinations by the DOC regarding
open review periods and the DOC's retroactive revocation of the Antidumping
Order, the Company  has no liability for antidumping at the end of 1999.  The
U.S. Commerce Department may initiate additional reviews at any time, and duties
may be imposed on sales of flowers for which our importers have not maintained
accruals.


 Absence of Contractual Relationships with Our Customers

  Companies in the floral products industry generally do not enter into sales
contracts that require customers to make purchases over any specific term.
Instead, sales are generally evidenced by purchase orders or similar
documentation limited to specific sales. As a result of these practices, our
customers generally have the right to terminate their relationships with us
without penalty and with little or no notice. Accordingly, a customer from which
we generate substantial revenue in one period may not be a substantial source of
revenue in a subsequent period. If our customers elect to reduce or discontinue
purchases from us, our business, financial condition, results of operations and
cash flows would be materially and adversely affected.


 Potential Conflicts of Interest

  We are subject to risks associated with potential conflicts of interest that
may arise out of the interrelationships among certain of our directors or
officers of our operating subsidiaries and related third-party entities with
which the operating subsidiaries conduct business transactions. John T.
Dickinson, former president of our American Florist Supply, Inc. operating
subsidiary ("American Florist"), current president of our North American
Wholesale division,  and a former director, has an ownership interest in a rose
farm, Meadow Flowers, located in Ecuador, from which American Florist purchases
roses. Jeffrey E. Brothers, former president of our Monterey Bay Bouquet, Inc.
operating subsidiary ("Monterey Bay"), former president of our West Coast
Bouquet operations in North America, and a former director, has a 50% interest
in Brothers Floral Associates, a vendor to Monterey Bay. Mr. Brothers resigned
from the Company effective February 29, 2000.  Other such ownership interests
and potential conflicts may arise.

  While we intend to conduct all related-party transactions on terms no less
favorable than those that we could negotiate with an unrelated third party, the
interests of such persons in their capacities with related third-party entities
may come into conflict with the interests of such persons in their capacities
with USA Floral. We believe that additional related-party transactions may arise
in connection with any future acquisitions.


 Potential Influence of Executive Officers and Directors

  As of March 30, 2000, our executive officers and directors beneficially owned
an aggregate of approximately 19.5% of the outstanding shares of our common
stock. Accordingly, if our executive officers and directors act together, they
may be able to exercise significant control over the election of directors and
matters requiring the approval of our stockholders. This concentration of
ownership may also have the effect of delaying or preventing a

                                       13
<PAGE>

change in control of our company and thus adversely affect the market price of
our common stock.


 Shares Eligible for Future Sale

  As of March 30, 2000, 16,443,614 shares of our common stock were outstanding.
The 5,750,000 shares we sold in our initial public offering ("IPO") are freely
tradeable without restriction or further registration under the Securities Act
of 1933, as amended (the "Securities Act"), unless acquired by an
"affiliate" of ours, as that term is defined in Rule 144 promulgated under the
Securities Act ("Rule 144"); shares held by affiliates will be subject to
resale limitations of Rule 144. Further, all of the 4,162,984 shares of common
stock issued to our co-founders and initial investors and to the stockholders of
our founding operating subsidiaries are currently available for resale, subject
to compliance with Rule 144. Of such 4,162,984 shares, 2,100,000 may be included
in certain registration statements that may be filed by us, in accordance with
piggyback registration rights granted to Messrs. Ledecky and Poirier, our co-
founders. Further, 2,083,590 shares of our common stock are issuable upon the
exercise of stock options that have been granted as of the date of this Form 10-
K, of which options to purchase 715,265 shares are currently exercisable. We
have filed a registration statement on Form S-8 to register the issuance of our
shares of common stock issuable upon the exercise of certain of such options. In
addition, we have filed a registration statement on Form S-1 to register the
issuance of 12,500,000 shares from time to time in connection with merger or
acquisition transactions entered into by us; since our IPO, we have issued
approximately 6,953,140 of these shares to non-affiliates in connection with
the acquisitions of our operating subsidiaries. These shares may be sold in
accordance with the provisions of Rule 145 promulgated under the Securities Act
subject to contractual lock-up periods contained in the acquisition agreements
for the acquisitions of our operating subsidiaries subsequent to our IPO. The
5,546,860 shares of common stock which remain available to be offered under that
registration statement generally will be freely tradeable after their issuance
by persons not affiliated with USA Floral, subject to compliance with Rule 145
under the Securities Act and any contractual lock-up restrictions. Sales, or the
availability for sale, of substantial amounts of our common stock in the public
market could adversely affect prevailing market prices and our ability to raise
equity capital and to complete acquisitions in which all or a portion of the
consideration is our common stock.


 Possible Volatility of Our Stock Price

  The trading price of our common stock could be subject to significant
fluctuations in response to several factors, including our activities or our
competitors' activities, variations in our quarterly operating results, changes
in market conditions and other events or factors. Such other factors may
include, without limitation, the public markets' reaction (favorable or
unfavorable) to our announcements of a proposed acquisition or series of
acquisitions. Moreover, the stock market in the past has experienced significant
price and value fluctuations. The volatility of the market could adversely
affect the market price of our common stock and our ability to raise equity in
the public markets.


 Certain Antitakeover Provisions

  Certain provisions of our certificate of incorporation and bylaws and Delaware
law may make a change in the control of our company more difficult to effect,
even if a change in control were in our stockholders' interest. Under our
certificate of incorporation and bylaws, our board of directors is divided into
three classes of directors elected for staggered three-year terms. In addition,
we are subject to the anti-takeover provisions of Section 203 of the Delaware
General Corporation Law, which prohibit us from engaging in a "business
combination" with an "interested stockholder" for a period of three years
after the date of the transaction in which the person became an "interested
stockholder," unless the business combination is approved in a prescribed
manner.

                                       14
<PAGE>

 Year 2000 Issue

  The Year 2000 Issue arises because certain computer programs were written
using two digits rather than four digits to define the applicable year. These
programs may not be able to process date information from and after January 1,
2000, or between years ending prior to December 31, 1999 and years commencing on
or after January 1, 2000. For example, date-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in system failures or miscalculations causing disruptions of operations,
including, among others, a temporary inability to process transactions, send
invoices or engage in similar ordinary business activities. We determined that
we were required to modify or replace significant portions of our software and
certain hardware so that those systems will properly utilize dates beyond
December 31, 1999. We believed that with these modifications or replacements of
existing software and certain hardware, we mitigated the Year 2000 Issue.
However, even if our plan to address the Year 2000 Issue is fully implemented,
known or unknown Year 2000 Issues may have a material adverse effect on our
business, financial condition, results of operations and cash flows.  To date,
USAFP achieved the rollover to the new millennium without experiencing any
significant Year 2000 related issues.


Executive Officers of the Registrant

  The following table sets forth certain information concerning each of the
executive officers of the Company as of March 30, 2000:

<TABLE>
<CAPTION>
Name                         Age   Position with the Company
----                         ---   -------------------------
<S>                         <C>    <C>
Michael W. Broomfield.....     58  Chief Executive Officer
Dwight Ferguson...........     43  President / Chief Operating Officer/President of International Division
G. Andrew Cooke..........      37  Interim Chief Financial Officer / Vice President of Finance and Controller
</TABLE>

  Michael W. Broomfield was hired as the Chief Executive Officer on January 3,
2000, and was previously the Chief Operating Officer for Giant Foods Inc., a
supermarket distribution company owned by Koninklijke Ahold NV.

  Dwight Ferguson has been appointed as the President and Chief Operating
Officer on March 24, 2000.  He also serves as our President of our International
Division effective October 1, 1998, the date we acquired Florimex. For five
years prior to joining USA Floral, Mr. Ferguson was employed with Florimex
Worldwide GmbH, most recently as President and Chief Operating Officer.

  G. Andrew Cooke is our interim Chief Financial Officer and has been our Vice
President of Finance and Controller since January, 1998.  For 12 years prior to
January, 1998, Mr. Cooke was an employee of Price Waterhouse, most recently as a
senior manager in the Washington, D.C. office.


Item 2.   Properties

  Our corporate offices are located in leased space in Washington, D.C. at 1025
Thomas Jefferson Street, N.W., Suite 300 East, Washington, D.C. 20007. The
telephone number of our principal executive offices is (202) 333-0800.

  In addition to our corporate offices, we either lease or own distribution,
sales and bouquet making facilities in 26 states and 18 countries.

  We believe that our facilities are adequate for our current operations.

                                       15
<PAGE>

Item 3.   Legal Proceedings

  USA Floral and its subsidiaries are from time to time parties to lawsuits
arising out of our respective operations. We believe that any pending litigation
to which we or our subsidiaries are parties will not have a material adverse
effect upon our consolidated financial position or results of operations.


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

  Not applicable.

                                       16
<PAGE>

                                    PART II


Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters


Market for Our Common Stock

  Our common stock has been trading publicly on the Nasdaq National Market under
the symbol "ROSI" since October 10, 1997. On March 29, 2000, the last sale
price of our common stock was $1.531 per share. As of March 30, 2000, there
were approximately 543 holders of record of our common stock. The following
table sets forth the range of high and low bid prices for our common stock for
the periods indicated. Such over-the-counter market quotations reflect inter-
dealer prices, without retail mark-up, mark-down or commission, and may not
necessarily represent actual transactions.

<TABLE>
<CAPTION>
                                                                     High        Low
                                                                   ---------  ---------
<S>                                                                <C>        <C>
1997
  Fourth Quarter (October 10, 1997 to December 31, 1997).........    $21.000    $13.000
1998
  First Quarter..................................................    $24.563    $15.125
  Second Quarter.................................................    $23.813    $15.125
  Third Quarter..................................................    $19.313    $ 5.813
  Fourth Quarter.................................................    $12.563    $ 4.875
1999
  First Quarter..................................................    $17.625    $ 5.500
  Second Quarter.................................................    $ 8.063    $ 6.125
  Third Quarter..................................................    $ 7.500    $ 1.438
  Fourth Quarter.................................................    $ 4.375    $ 1.938
2000
  First Quarter (January 1, 2000 to March 29, 2000)..............    $ 3.031    $ 0.750
</TABLE>

  We have never paid cash dividends on our common stock, nor do we anticipate
doing so in the foreseeable future because we intend to retain any earnings to
finance the expansion of our business and for general corporate purposes. Any
payment of future dividends will be at the discretion of our board of directors
and will depend upon, among other factors, our earnings, financial condition,
capital requirements, level of indebtedness, contractual restrictions with
respect to the payment of dividends and other considerations that our board of
directors deems relevant. In addition, our credit agreement includes
restrictions on our ability to pay dividends without the consent of Bankers
Trust Company, the agent for the various lenders under our credit facility.


Recent Sales of Unregistered Securities

  None

                                       17
<PAGE>

Item 6.   Selected Financial Data

     We acquired eight U.S. businesses in the floral industry (the "Founding
Companies") simultaneously with our IPO in October 1997. Since that time, we
acquired six U.S. businesses in January 1998 (the "January 1998 Class"), eight
businesses in April 1998 (the "April 1998 Class") and nine businesses in July
1998 (the "July 1998 Class"), and on October 1, 1998 acquired the businesses of
Florimex (the acquisitions of the Founding Companies, the January 1998 Class,
the April 1998, the July 1998 Class and Florimex are referred to collectively as
the "Acquisitions"). The selected data (actual) include the results of
operations of USA Floral and the Founding Companies, the January 1998 Class, the
April 1998 Class, the July 1998 Class and Florimex subsequent to their
acquisitions. The 1998 pro forma data presents our combined results of
operations as if the 1998 acquisitions had occured on January 1, 1998. The pro
forma amounts give effect to certain adjustments, including amortization of
intangible assets, interest expense on incremental financing, reduction in
salary, bonuses and benefits in connection with the 1998 acquisitions.




<TABLE>
<CAPTION>
                                             April 22, 1997            Year                   Year
                                                 Through               Ended                 Ended                Year Ended
                                             December 31, 1997    December 31, 1998    December 31, 1998      December 31, 1999
                                                 (Actual)             (Actual)             (Pro Forma)              (Actual)
                                          ---------------------  -------------------  --------------------    -------------------
                                                                                (in thousands except per share data)
Statement of Operations:
<S>                                        <C>              <C>          <C>         <C>          <C>         <C>        <C>
Net revenue..............................  $37,380     100.0%   $589,034      100.0%   $999,793      100.0%  $924,847        100.0%
Cost of sales............................   26,685      71.4%    429,012       72.8%    758,744       75.9%   686,659         74.2%
                                           -------     -----    --------      -----    --------      -----   --------        -----
Gross margin.............................   10,695      28.6%    160,022       27.2%    241,049       24.1%   238,188         25.8%
Selling, general and administrative
  expenses...............................    9,791      26.2%    129,551       22.0%    198,157       19.8%   218,058         23.6%
Goodwill amortization....................      275       0.7%      4,768        0.8%      6,755        0.7%     7,086          0.8%
Integration charges (credits)............       --       0.0%      3,361        0.6%      6,333        0.6%      (712)       (0.1)%
Write-off of deferred financing fees.....       --       0.0%      1,606        0.3%         --        0.0%        --          0.0%
                                           -------     -----    --------      -----    --------      -----   --------        -----
Income from operations...................      629       1.7%     20,736        3.5%     29,804        3.0%    13,756          1.5%
Interest expense.........................       (8)      0.0%     (8,040)     (1.4)%    (16,054)     (1.6)%   (16,088)       (1.7)%
Interest income..........................      248       0.7%      1,883        0.3%      2,627        0.2%     1,922          0.2%
Other income.............................       37       0.0%        449        0.1%        988        0.1%       375          0.0%
                                           -------     -----    --------      -----    --------      -----   --------        -----
Income (loss) before income taxes
  and minority interest..................      906       2.4%     15,028        2.5%     17,365        1.7%       (35)         0.0%
Provision for income taxes...............      490       1.3%      7,255        1.2%      8,095        0.8%     3,013          0.3%
                                           -------     -----    --------      -----    --------      -----   --------        -----
Income (loss) before minority interest...      416       1.1%      7,773        1.3%      9,270        0.9%    (3,048)       (0.3)%
Minority interest........................       --       0.0%        (30)       0.0%        (78)       0.0%       (18)         0.0%
                                           -------     -----    --------      -----    --------      -----   --------        -----
Net (loss) income........................  $   416       1.1%   $  7,743        1.3%   $  9,192        0.9%  $ (3,066)       (0.3)%
                                           -------     -----    --------      -----    --------      -----   --------        -----
Net income (loss) per share:
  Basic..................................  $  0.09              $   0.54               $   0.58              $  (0.19)
  Diluted................................  $  0.09              $   0.52               $   0.56              $  (0.19)
Shares used in computing net income
 (loss) per share:
  Basic..................................    4,734                14,376                 15,919                16,349
  Diluted................................    4,824                14,789                 16,395                16,509
</TABLE>
<TABLE>
<CAPTION>
                                     December 31,     December 31,  December 31,
                                         1997            1998           1999
                                     ------------     -----------   ------------
                                                   (in thousands)
Balance Sheet Data:
<S>                                    <C>            <C>       <C>
Working Capital..............         $ 21,454         $ 40,643      $ 68,647
Total assets.................          107,248          494,034       486,810
Short-term debt..............              290            5,005         4,919
Total long-term debt.........              309          194,668       195,914
Stockholders' equity.........           86,165          185,625       200,577

</TABLE>

                                      18
<PAGE>

Item 7.   Management's Discussion and Analysis of Financial Condition and
Results of Operations


General

  USA Floral is the largest integrated distributor of floral products in the
world. We:

  .   import, export and distribute floral products and floral-related
      hardgoods;

  .   engage in brokerage and shipping services for wholesale distributors of
      both international and domestic cut flowers;

  .   provide traditional floral and Internet fulfillment services to non-store
      retailers; and

  .   provide in-store merchandising services to certain supermarkets and mass-
      market retailers.

  Increasingly, we provide higher value-added services including bouquet and
arrangement making and marketing support to retailers. Our customers are retail
florists, supermarkets, other mass-market retailers and Internet and catalog
retailers, as well as wholesale distributors and bouquet and arrangement makers.
We do not own or operate growing operations or retail florists. We operate from
102 facilities in 18 countries located on five continents. Our revenues for the
year ended December 31, 1999 were approximately $924.8 million, and our
operating income was approximately $13.8 million.

  We derive our revenues from the sale of perishable floral products and floral-
related hardgoods. Sales of perishable products, which include cut flowers,
bouquets and potted plants, accounted for approximately 95% of our actual
revenues in 1999. Sales of floral-related hardgoods, which include vases and
glassware, foam for flower arranging, tools and other supplies, accounted for
approximately 5% of our actual revenues in 1999.

  We recognize net revenues upon the shipment of products to our customers. Cost
of sales generally includes the cost of perishable products and floral-related
hardgoods plus the cost of in-bound freight. In addition, the cost of sales for
bouquet companies also includes production costs. Although we generally do not
enter into long-term contracts with our suppliers, we do conduct business on a
fixed-price "standing order" basis with certain importers in order to insure
an adequate supply of flowers during periods of peak demand. In general, our
operating subsidiaries have been able to pass on most of their direct price
increases to customers, however, this may not be the case in the future. Our
selling, general and administrative expenses include warehouse and customer
delivery expenses, employee salaries and benefits, telephone expenses,
advertising and promotional expenses, depreciation and occupancy costs.


Results of Operations (in thousands)

  The following discussion should be read in conjunction with Item 6--Selected
Financial Data and our Consolidated Financial Statements and the related notes
thereto appearing elsewhere in this Form 10-K.

  From our inception on April 22, 1997 until our IPO and the acquisition of our
Founding Companies on October 16, 1997, we had minimal corporate activity. Thus,
our 1997 results of operations only contain two and one half months of activity
in a quarter with historically low revenues due to lack of flower giving
holidays in that period. In 1998, we acquired 24 additional businesses with
worldwide operations in 18 countries. Consequently, comparisons between actual
1998 and actual 1997 results would not be meaningful and therefore are not
discussed below as typically provided in the MD&A. Instead, we discuss the major
components of our operations that have been significantly impacted by our
acquisition and integration strategy.

                                       19
<PAGE>

  We acquired Florimex, a company with full year pro forma 1998 revenues of
approximately $412 million, on September 30, 1998. The acquisition was accounted
for using the purchase method of accounting and therefore Florimex's results
from operations are only included in our 1998 actual results from October 1,
1998 to December 31, 1998. As a result, it would not be meaningful to compare
pro forma 1998 and actual 1998 results. With the Florimex acquisition, we
established an International Division and organized USA Floral into two major
segments: the International Division and the North America Division. Since the
Florimex acquisition did not occur until 1998 there were no International
Division operations in 1997. As such, comparisons on a segment basis would not
be meaningful between years.


For the period April 22, 1997 (inception) to December 31, 1997 (Actual)

  Net Revenues.   Net revenues for the period from inception (April 22, 1997)
through December 31, 1997 were $37.4 million. The Company had no significant
revenues until October 16, 1997, the date of the Founding Company mergers.

  Cost of Sales.   Cost of sales for the period ended December 31, 1997 was
$26.7 million. Cost of sales as a percentage of net revenues was 71.4%,
resulting in a gross profit margin of 28.6%.

  Selling, General and Administrative.   Selling, general and administrative
expenses were $9.8 million for the period ended December 31, 1997. Selling,
general and administrative expenses for the period were 26.2% as a percentage of
net revenues.

  Income from Operations.   Income from operations was $0.6 million for the
period from inception through December 31, 1997. Income from operations was
negatively impacted by the additional expense of being a public company.

  Interest Expense.   Substantially all lines of credit and other bank debt
assumed by the Company in connection with the acquisition of the Founding
Companies were repaid in full concurrent with the IPO. As a result, the Company
incurred only minimal interest expense for the period ended December 31, 1997.

  Provision for Income Taxes.   The provision of for income taxes was $0.5
million for the period ended December 31, 1997 on pre-tax income of $0.9 million
for the period. The 1997 effective income rate of 54% is higher than the
statutory primarily due to the non-deductibility of goodwill amortization.

  Net Income.   The Company had net income of $0.5 million for the period from
inception to December 31, 1997, or $0.09 per share based upon 4,734 weighted
average shares (basic) outstanding and $0.09 per share based upon 4,824 weighted
average shares (diluted) outstanding. The Company believes that net income for
the period is not meaningful because the Company had no significant revenues
until October 16, 1997. The Company believes that net income per share data for
the period is also not meaningful as it reflects a weighted average of shares
outstanding over the period which is significantly less than the number of
shares outstanding on December 31, 1997.


For the year ended December 31, 1998 (Actual)

  Net Revenues.   Net revenues for the year ended December 31, 1998 were $589.0
million. Revenues increased from $37.4 million in 1997. This increase was
primarily due to the acquisition of 24 floral businesses completed during 1998,
all of which were accounted for under the purchase method of accounting, coupled
with the impact of a full year of operations of the Founding Companies. Revenues
for the North America Division were $480.9 million, or 81.6%, of the
consolidated revenues and revenues for the International Division were $108.1
million, or 18.4%. Revenues for the International Division consisted primarily
of revenues from Germany, the Netherlands, Italy and Japan.

  Cost of Sales.   Cost of sales for the year ended December 31, 1998 was $429
million. Cost of sales as a

                                       20
<PAGE>

percentage of net revenues was 72.8%, resulting in a gross profit margin of
27.2%.

  Selling, General and Administrative.   Selling, general and administrative
expenses were $130 million for the year ended December 31, 1998. Selling,
general and administrative expenses for the period were 22% as a percentage of
net revenues.

  Integration charge.   As part of our increased focus on operational matters,
we are pursuing cost reduction measures including the elimination of duplicative
facilities, the consolidation of certain operating functions and the deployment
of common information systems. In implementing these cost reduction measures, we
have incurred, and may incur in the future, certain integration charges
associated with such cost reduction measures.

  In the fourth quarter of 1998, we recorded an integration charge of
approximately $3.4 million (see Note 12 of the Notes to the Consolidated
Financial Statements). During the fourth quarter, we initiated an integration
plan to integrate certain warehouse and distribution facilities principally
associated with our import and bouquet operations in Miami, Florida. This charge
principally relates to the write-down to fair value of equipment made obsolete
or redundant, severance, and lease termination costs due to the decision to
merge certain facilities. The severance cost relates to employees who were
notified during the fourth quarter that their positions were being eliminated.
The integration of the warehouses and distribution facilities began in November
1998 and is expected to be completed by September 30, 1999. We expect to realize
annualized cost savings of approximately $7.0 million, of which $5.5 million
will be realized in 1999, principally in the third and fourth quarters.

  Write-off of deferred financing fees.   We recorded a charge of approximately
$1.6 million in the fourth quarter of 1998 to write-off the unamortized portion
of the financing fee related to our original credit agreement, which was amended
and restated in October 1998.

  Income from operations.   Income from operations was $20.7 million, or 3.5% of
net revenues, for the year ended December 31, 1998. Income from operations
before integration charges and the write-off of deferred financing fees was
$25.7 million, or 4.4% of net revenues, for the year ended December 31, 1998.

  Interest Expense.   Substantially all lines of credit and other bank debt
assumed by us in connection with the acquisitions consummated in 1998 were paid
in full. Our outstanding debt primarily relates to our amended and restated
credit agreement. For the year ended December 31, 1998, interest expense was
$8.0 million. The amount of interest expense is consistent with the timing of
the draw downs on the credit facility to facilitate our acquisition strategy.

  Provision for Income Taxes.   The provision for income taxes was $7.2 million
for the year ended December 31, 1998 on pre-tax income of $15.0 million for the
period. The 1998 effective income rate of 48% is higher than the statutory rate
primarily due to the non-deductibility of goodwill amortization.

  Net Income.   We had net income of $7.7 million for the year ended December
31, 1998, or $0.54 per share based upon weighted average shares (basic)
outstanding and $0.52 per share based upon weighted average shares (diluted)
outstanding.


For the year ended December 31, 1999 (Actual) versus December 31, 1998 (Pro
Forma)

  During 1998, we consummated the acquisitions of 24 floral businesses,
including the acquisition of Florimex.

  The following discusses the 1998 pro forma information of our combined results
of operations as if the 1998 acquisitions had occurred on January 1, 1998. The
pro forma amounts give effect to certain adjustments, including amortization of
intangible assets, interest expense on incremental financing, reduction in
salary, bonuses and benefits in connection with the 1998 acquisitions.

  Net Revenues.  Net revenues for the year ended December 31, 1999 were $924.8
million.  Revenues decreased

                                       21
<PAGE>

from $999.8 million for the year ended December 31, 1998. Revenues for the North
America Division were $567.5 million, or 61.4% of the consolidated revenues and
revenues for the International Division were $357.4 million, or 38.6% of the
consolidated revenues. Revenues for the International Division consisted
primarily of revenues from Germany, the Netherlands, Italy and Japan. In 1998,
62.2% of the revenues were generated by the North America Division and the 37.8%
were generated by the International Division. The Company experienced a
reduction in revenues for the year ended December 31, 1999, when compared to the
1998 revenues due primarily to the following: Industry wide North American
import demand from South America was weak for the first two months of 1999 as
compared to the same period in 1998, particularly since Valentine's Day fell on
a Sunday of a Holiday weekend. Industry wide Dutch exports were down
approximately 10% for the first two months of 1999, as compared to the same
period in 1998 and average unit sales prices fell approximately 10% from the
prior year. The Company derives nearly 40% of its revenue internationally,
primarily from Europe, and estimates that the stronger U.S. dollar versus the
Euro negatively impacted reported international revenues by approximately 5%.

  Gross Margin.  Gross margin for the years ended December 31, 1999 and 1998
were $238.2 million (including approximately $2.2 million from the final
determination of  antidumping duties) and $241.0 million, respectively.  Gross
margin as a percentage of net revenues was 25.8% (25.6% excluding the effect of
the final determination of antidumping duties), for the year ended December 31,
1999 and 24.1% for the year ended December 31, 1998.  The increase in the gross
margin is mainly attributable to improved intercompany sales in the North
American division and stronger margin performance in the International division.
The International Division historically operates at a lower gross margin and
therefore, reduces the consolidated gross margin of the Company.  For the year
ended December 31, 1999, the gross margin of the International Division was
22.3% as compared to 18.9% for the year ended December 31, 1998.  The North
America Division gross margin was 27.9% (27.5%, excluding the effect of the
final determination of antidumping duties) for the year ended December 31, 1999
as compared to 28.1% for the year ended December 31, 1998.

  Selling, General and Administrative.  Selling, general and administrative
expenses were $218.1 million for the year ended December 31, 1999, or 23.6% of
net revenues and $198.2 million in the year ended December 31, 1998, or 19.8% of
net revenues.  The increase in the 1999 selling, general and administrative
expense is primarily the result an increase in selling expenses associated with
higher revenues in the North America West Coast Bouquet operations; an increase
in expense associated with building an infrastructure for a publicly held multi-
national corporation; start-up cost associated with the Company's Blytheville,
Arkansas operations and Internet fulfillment department; and Year 2000
remediation and system conversion costs.

  Integration charge.  As part of our increased focus on operational matters, we
have pursued cost reduction measures including the elimination of duplicative
facilities, the consolidation of certain operating functions and the deployment
of common information systems.  In implementing these cost reduction measures,
we have incurred, and may incur in the future, certain integration charges
associated with such cost reduction measures.

  In the fourth quarter of 1998, we recorded an integration charge of
approximately $3.4 million related to an integration plan to integrate certain
warehouse and distribution facilities principally associated with our import and
bouquet operations in Miami, Florida.  This charge principally related to the
write-down to fair value of equipment made obsolete or redundant, severance, and
lease termination costs due to the decision to merge certain facilities.  The
severance cost related to employees who were notified during the fourth quarter
of 1998 that their positions were being eliminated.  The integration of the
warehouses and distribution facilities began in November 1998 and was
substantially completed by December 31, 1999.  The cost of implementing the
November 1998 integration plan was less than anticipated and accordingly $0.7
million was reversed into income in the fourth quarter of 1999.  During 1999,
the Company experienced approximately $5.0 million of cost savings, principally
in the third and fourth quarters and expects to realize annual costs savings of
approximately $8.0 million.

                                       22
<PAGE>

  In June 1998, prior to our acquisition of Florimex, the management of Florimex
put into place an integration plan to integrate certain operations, warehouse
and distribution facilities.  The integration plan principally involved certain
operations, warehouse and distribution facilities associated with Florimex's
operations in Germany and the Netherlands.  Florimex incurred approximately a
$3.0 million pre-tax charge principally related to severance costs due to the
decision to merge and integrate certain facilities.  The integration of the
operations, warehouses and distribution facilities was completed by December 31,
1999.

  Income from operations.  Income from operations was $13.8 million, or 1.5% of
net revenues, for the year ended December 31, 1999 and $29.8 million or 3.0% of
net revenues for the year ended December 31, 1998.

  Interest expense.  For the year ended December 31, 1999, interest expense was
approximately $16.1 million as compared to $16.1 million for the year ended
December 31, 1998.  Our outstanding debt primarily relates to our amended and
restated credit agreement.  The Company's average borrowing rate for the years
ended December 31, 1999 and 1998 was 8.1% and 8.0% respectively, based on the
Company's weighted average outstanding debt balance.

  Provision for income taxes.  The provision for income taxes as $3.0 million
for the year ended December 31, 1999 on a pre-tax loss of $35 and $8.1 million
for the year ended December 31, 1998 on pre-tax income of $17.4 million.  The
effective income tax rate is higher than the statutory rate primarily due to the
non-deductibility of certain goodwill amortization.  The effective tax rate for
1999 is not a meaningful calculation, as there is a pre-tax loss of $35, and the
effective tax rate for 1998 is 46.6%.  The effect of the non-deductibility of
certain goodwill amortization is much more pronounced with the lower base of
income before provision for taxes.

  Net income or loss.  As a result of the factors discussed above, the Company
had net loss of $3.1 million for the year ended December 31, 1999, or $0.19 per
basic and diluted share.  The Company had net income of $9.2 million for the
year ended December 31, 1998, or $0.58 per basic share and $0.56 per diluted
share.


For the year ended December 31, 1999 (Actual)  versus December 31, 1998 (Actual)

  Net Revenues.  Net revenues for the year ended December 31, 1999 were $924.8
million.  Revenues increased from $589.0 million for the year ended December 31,
1998.  This increase was primarily due to the acquisition of the International
Division which was completed during the fourth quarter of 1998 coupled with the
impact in 1999 of a full nine months of operations of the January 1998 Class,
and April 1998 Class, and July 1998 Class of acquisitions.  Revenues for the
North America Division were $567.5 million, or 61.4% of the consolidated
revenues and revenues for the International Division were $357.4 million, or
38.6% of the consolidated revenues.  Revenues for the International Division
consisted primarily of revenues from Germany, the Netherlands, Italy and Japan.
In 1998, 81.6% of the revenues were generated by the North America Division
since there was no International Division during the first nine months of 1998.
The Company experienced a reduction in revenues for the year ended December 31,
1999, due primarily to the following:  Industry wide North American import
demand from South America was weak for the first two months of 1999 as compared
to the same period in 1998, particularly since Valentine's Day fell on a Sunday
of a Holiday weekend.  Industry wide Dutch exports were down approximately 10%
for the first two months of 1999, as compared to the same period in 1998 and
average unit sales prices fell approximately 10% from the prior year.  The
Company derives nearly 40% of its revenue internationally, primarily from
Europe, and estimates that the stronger U.S. dollar versus the Euro negatively
impacted reported international revenues by approximately 5%.

  Gross Margin.  Gross margin for the year ended December 31, 1999 and 1998 were
$238.2 million (including approximately $2.2 million from the final
determination of antidumping duties) and $160.0 million, respectively.  Gross
margin as a percentage of net revenue were 25.8% (25.6% excluding the effect of
the final determination of antidumping duties), for the year ended December 31,
1999 and 27.2% for the year ended December 31, 1998.  The decline in the gross
margin is mainly attributable to the inclusion of the International Division for
a full year in 1999.  The International Division historically operates at a
lower gross margin and therefore, reduces the consolidated gross margin of the
Company.  For the year ended December 31, 1999, the gross margin of the

                                       23
<PAGE>

International Division was 22.3%.  The North America Division gross margin was
27.9% (27.5%, excluding the effect of the final determination of antidumping
duties) for the year ended December 31, 1999 as compared to 28.1% for the year
ended December 31, 1998.

  Selling, General and Administrative.  Selling, general and administrative
expenses were $218.1 million for the year ended December 31, 1999, or 23.6% of
net revenues and $129.6 million in the year ended December 31, 1998, or 22.0% of
net revenues.  The increase in the 1999 selling, general and administrative
expense is primarily the result of the acquisition of 18 floral businesses in
1998 and an increase in selling expenses associated with higher revenues in the
North America West Coast Bouquet operations; an increase in expense associated
with building an infrastructure for a publicly held multi-national corporation;
start-up cost associated with the Company's Blytheville, Arkansas operations and
Internet fulfillment department; and Year 2000 remediation and system conversion
costs.

  Integration charge.  As part of our increased focus on operational matters, we
have pursued cost reduction measures including the elimination of duplicative
facilities, the consolidation of certain operating functions and the deployment
of common information systems.  In implementing these cost reduction measures,
we have incurred, and may incur in the future, certain integration charges
associated with such cost reduction measures.

  In the fourth quarter of 1998, we recorded an integration charge of
approximately $3.4 million related to an integration plan to integrate certain
warehouse and distribution facilities principally associated with our import and
bouquet operations in Miami, Florida.  This charge principally related to the
write-down to fair value of equipment made obsolete or redundant, severance, and
lease termination costs due to the decision to merge certain facilities.  The
severance cost related to employees who were notified during the fourth quarter
of 1998 that their positions were being eliminated.  The integration of the
warehouses and distribution facilities began in November 1998 and was
substantially completed by December 31, 1999.  The cost of implementing the
November 1998 integration plan was less than anticipated and accordingly $0.7
million was reversed into income in the fourth quarter of 1999.  During 1999,
the Company experienced approximately $5.0 million of cost savings, principally
in the third and fourth quarters and expects to realize annual costs savings of
approximately $8.0 million.

  Income from operations.  Income from operations was $13.8 million, or 1.5% of
net revenues, for the year ended December 31, 1999 and $20.7 million or 3.5% of
net revenues for the year ended December 31, 1998.

  Interest expense.  For the year ended December 31, 1999, interest expense was
approximately $16.1 million as compared to $8.0 million for the year ended
December 31, 1998 an increase of $8.1 million.  The increase in interest expense
is primarily the result of borrowings used to fund the cash portion of the total
consideration for the acquisition of the 18 floral businesses completed during
1998.  Our outstanding debt primarily relates to our amended and restated credit
agreement.  The Company's average borrowing rate for the year ended December 31,
1999 was 8.1%, based on the Company's weighted average outstanding debt balance.

  Provision for income taxes.  The provision for income taxes as $3.0 million
for the year ended December 31, 1999 on a pre-tax loss of $35 and $7.3 million
for the year ended December 31, 1998 on pre-tax income of $15.0 million.  The
effective income tax rate is higher than the statutory rate primarily due to the
non-deductibility of certain goodwill amortization.  The effective tax rate for
1999 is not a meaningful calculation, as there is a pre-tax loss of $35, and the
effective tax rate for 1998 is 48.3%.  The effect of the non-deductibility of
certain goodwill amortization is much more pronounced with the lower base of
income before provision for taxes.

  Net income.  As a result of the factors discussed above, the Company had net
loss of $3.1 million for the year ended December 31, 1999, or $0.19 per basic
and diluted share.  The Company has net income of $7.7 million for the year
ended December 31, 1998, or $0.54 per basic share and $0.52 per diluted share.

                                       24
<PAGE>

Liquidity and Capital Resources

  Historical.  Historically, the Company's primary sources of liquidity have
been cash from operations and borrowings under our credit facility. The
Company's principal uses of liquidity will be to provide working capital, to
meet debt service requirements and finance the Company's strategic plans.  For
fiscal 1999, quarterly net revenues as a percentage of total revenues were
approximately 29%, 26%, 21%, and 24%, respectively, for the first through fourth
quarters of the fiscal year.  In addition, for fiscal 1999 quarterly income from
operations as a percentage of revenue for the fiscal year 1999 were
approximately 4%, 3%, (2)%, and (1)%, respectively for the first through fourth
quarters of the fiscal year.  The Company's need for cash has historically been
greater in its first and second quarters when cash generated from operating
activities coupled with draw-downs from bank lines have been invested in
receivables and to a lesser extent inventories.  The Company experiences higher
levels of sales in the first two quarters of the year due to the traditional
flower giving holidays, Valentine's Day in February and Mother's Day in May.
For the year ended December 31, 1999 the Company used $10.1 million cash on hand
and $8.2 million in proceeds from borrowings to invest $11.4 million in capital
expenditures, pay $7.5 million in earnout arrangements, and fund working capital
for operating activities.

  In the year ended December 31, 1999, operating activities used $1.4 million of
net cash compared to $2.4 million of cash provided from operations in the same
period last year. The decrease is principally attributable to $10.8 million
lower net income partially offset by $9.4 million increase in non-cash expenses
(such as depreciation and goodwill amortization) and $2.4 million decrease in
the use of cash for working capital and other assets and liabilities.  The use
of cash for working capital purposes in the 1999 compared unfavorably to 1998
due principally to the acquisition of 18 floral business.  As a result of the
acquisition of 18 floral businesses the Company's investment in working capital,
particularly accounts payable, accrued expenses, and inventory at December 31,
1999 increased significantly over the same period last year.

  Our capital expenditures for the year ended December 31, 1999 were
approximately $11.4 million. These capital expenditures were primarily for
vehicles, machinery, office equipment and computer equipment and software,
building additions, facility upgrades and our Year 2000 project (see below) to
remediate existing systems and replace non-compliant systems.  Although we
currently do not have any commitments to make significant capital expenditures,
we expect to expend approximately $6.0 million for capital expenditures in the
next twelve months in the normal course of business.

  Financing.  Our existing credit agreement is with a syndicate of lenders for
which Bankers Trust Company serves as agent (the "Credit Agreement").  Pursuant
to the terms of the Credit Agreement as of October 2, 1998, the amount of our
revolving credit facility was increased to $200 million, of which the sub-limit
for permitted acquisitions is $180 million and the sub-limit for working capital
purposes and letters of credit is $20 million.  In addition, of the $200 million
in revolving credit facilities, up to $15 million has been designated to be a
revolving loan which is available to certain of our foreign subsidiaries in
either Deutsche Marks or Guilders. Further, a new $50 million, Deutsche Mark
denominated term loan was created as an additional source of borrowings in
excess of the $200 million revolving credit facility. Borrowings under the
revolving credit facility bear interest, at our option, at (a) Bankers Trust
Company's base rate plus an applicable margin of up to 1.25% or (b) a Eurodollar
rate plus an applicable margin of up to 2.50%. Borrowings under the term loan
bear interest at the inter-bank rate for Deutsche Marks plus an applicable
margin of up to 2.50%.  For the execution of the Amended Credit Agreement the
Company paid aggregate financing fees of approximately $3.9 million, which has
been deferred and is being amortized over the term of the Credit Agreement. In
addition, a commitment fee of up to 0.50% is being charged on the unused portion
of the revolving credit facility on a quarterly basis. Both the revolving credit
facilities and the term loan mature five years from the closing date.  At
December 31, 1999 outstanding borrowings under our Credit Agreement aggregated
$197.9 million.  The Company does not have any required repayments of term loans
until December 31, 2000.

  As of December 31, 1999, the Company was not in compliance with applicable
financial covenants, including the leverage ratio. Pursuant to the terms of the
Credit Agreement, non-compliance with one or more financial covenants permits
for the lenders to terminate the commitment and declare the principal balance
and any accrued interest on all loans and obligations immediately due

                                       25
<PAGE>

and payable. The Company obtained a waiver on all financial covenants at
December 31, 1999 and on March 24, 2000, the financial covenants, including the
leverage ratio and consolidated interest coverage ratio, were amended under the
Amended Credit Agreement. Further, the Company is required to maintain minimum
EBITDA levels, as defined in the Amended Credit Agreement. Additionally, the
amendment limits the level of the Company's total outstanding borrowings to
$224.0 million and at March 24, 2000, the aggregate outstanding borrowings were
approximately $208.5 million. In consideration for the amendment, the Company
agreed to pay a financing fee of $1.75 million on March 31, 2001 and issue
approximately 820,000 warrants to purchase common stock of the Company at an
exercise price of $0.25 per share. The warrants issued are exercisable anytime
after March 31, 2001 and expire March 31, 2010. Both the financing fee and the
fair value of the warrants issued will be deferred and amortized over the
remaining term of the Amended Credit Agreement.

  The Company is subject to the risk that it will not achieve the objectives of
its 2000 operating plan and therefore, not comply with the amended covenants of
its credit facility.  If the Company is unable to comply with the amended
covenants, obtain waivers or obtain adequate alternative sources of financing,
it will have a material adverse effect on the Company.

  Excluding capital requirements for future acquisitions, if any, which we
cannot currently predict, we believe that funds generated from operations,
together with borrowings under the Amended Credit Agreement, should be
sufficient to finance our current operations and planned capital expenditure
requirements for at least the next twelve months; thereafter, we do not
currently perceive needs for cash (other than future acquisitions, if any, that
we may choose to finance in whole or in part with cash) that would exceed
anticipated sources of cash from operations and amounts available under credit
facilities currently in place. To the extent that we are successful in
consummating future acquisitions, if any, it may be necessary to finance such
acquisitions through the issuance of additional equity securities, incurrence of
indebtedness, or a combination of both. Such additional equity issuances or
incurrences of indebtedness may not be possible, or if possible may not be
available on terms acceptable to us.


Year 2000

  USAFP achieved the rollover to the new millennium without experiencing any
significant Year 2000 related issues.  Essential IT and non-IT systems Company-
wide have functioned normally since January 1, 2000.  Only a handful of very
minor isolated Year 2000 issues occurred, and these were all remedied promptly
without any impact to the business.  At the present time, no significant Year
2000 issues with any vendor or customer are known.

  The total cost of USAFP's Year 2000 effort was $2.5 million.  This cost
excludes the cost of implementing and converting a number of systems at
individual companies since, despite being a critical component of the USAFP Year
2000 remediation effort, these projects were already planned and was not
accelerated due to Year 2000 issues.  This amount also excludes internal costs,
principally the payroll costs, of IT personnel not solely devoted to the Year
2000 remediation effort.  No material IT or non-IT projects were delayed due to
the USAFP Year 2000 remediation effort.


Seasonality and Cyclicality; Fluctuations in Quarterly Operating Results

  Unit sales of floral products have historically been seasonal, concentrated
primarily in the first and second calendar quarters as a result of holidays such
as Valentine's Day and Mother's Day. In particular, a significant portion of our
annual revenues is derived from sales of floral products for Valentine's Day,
one of the largest flower-giving holidays in the world.

  We believe that the floriculture industry is influenced by general economic
conditions and particularly by the level of personal discretionary spending and
that the industry tends to experience periods of decline and recession during
economic downturns. The industry may experience sustained periods of sales
declines in the future, and any such decline may have a material adverse effect
on us.

                                       26
<PAGE>

  Our operating subsidiaries have historically experienced quarterly variations
in revenues, operating income (including operating losses), net income
(including net losses) and cash flows. Certain of our operating subsidiaries
have experienced net losses and negative fluctuations have been particularly
pronounced in the third and fourth calendar quarters. We expect to continue to
experience such quarterly fluctuations in operating results (including possible
net losses) due to the factors discussed above, and we may also experience
quarterly fluctuations as a result of other factors, including an oversupply of,
or diminishing sales price of, commodity floral products, the loss of a major
customer, additional selling, general and administrative expenses to acquire and
support new business and the timing and magnitude of required capital
expenditures. Our operating expenditures are planned based on revenue forecasts,
and a revenue shortfall below such forecasts in any quarter would likely
adversely affect our operating results for that quarter.

  The following table sets forth selected pro forma combined results of
operations for the year ended December 31, 1998 and our actual results of
operations on a quarterly basis for the years ended December 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                                                           1999 Quarter
                                                       -----------------------------------------------------
Consolidated--Actual                                     First     Second      Third     Fourth      Total
                                                       ---------  ---------  ---------  ---------  ---------
                                                                          (in thousands)
<S>                                                    <C>        <C>        <C>        <C>        <C>
Net revenues.........................................  $271,343   $239,041   $189,402   $225,061   $924,847
Percentage of annual revenues........................      29.3%      25.8%      20.6%      24.3%     100.0%
Operating income (loss)..............................  $ 10,831   $  8,328   $ (3,389)  $ (2,014)  $ 13,756

<CAPTION>
                                                                           1998 Quarter
                                                       -----------------------------------------------------
Consolidated--Pro Forma (1)                              First     Second      Third     Fourth      Total
                                                       ---------  ---------  ---------  ---------  ---------
                                                                          (in thousands)
<S>                                                    <C>        <C>        <C>        <C>        <C>
Net revenues.........................................  $288,966   $268,359   $198,528   $243,940   $999,793
Percentage of annual revenues........................      28.9%      26.8%      19.9%      24.4%     100.0%
Operating income (loss) before integration charges...  $ 14,875   $ 14,093   $   (186)  $  7,355   $ 36,137
Operating income (loss)..............................  $ 14,875   $ 11,121   $   (186)  $  3,994   $ 29,804

<CAPTION>
                                                                           1998 Quarter
                                                       -----------------------------------------------------
Consolidated--Actual (2)                                First      Second     Third      Fourth     Total
                                                       --------   --------   --------   --------   --------
                                                                          (in thousands)
<S>                                                    <C>        <C>        <C>        <C>        <C>
Net revenues.........................................  $100,520   $133,775   $110,799   $243,940   $589,034
Percentage of annual revenues........................      17.1%      22.7%      18.8%      41.4%     100.0%
Operating income before integration charges and
 Write-off of deferred financing fees................  $  7,178   $  9,955   $  1,215   $  7,355   $ 25,703
Operating Income.....................................  $  7,178   $  9,955   $  1,215   $  2,388   $ 20,736
</TABLE>
----------------
(1)  The 1998 pro forma data presents our combined results of operations as if
     the 1998 acquisitions had occurred on January 1, 1998. The pro forma
     amounts give effect to certain adjustments, including amortization of
     intangible assets, interest expense on incremental financing, reduction in
     salary, bonuses and benefits in connection with the 1998 acquisitions.

(2)  The selected data (actual) include the results of operations of USA Floral,
     the Founding Companies, the January 1998 Class, the April 1998 Class, the
     July 1998 Class and Florimex subsequent to their acquisitions.


Item 7A.   Quantitative and Qualitative Disclosures About Market Risk

  We use derivative financial instruments for the purpose of reducing our
exposure to adverse fluctuations in interest and foreign exchange rates. While
these hedging instruments are subject to fluctuations in value, such
fluctuations are generally offset by the value of the underlying exposures being
hedged. We are not a party to leveraged derivatives and do not hold or issue
financial instruments for speculative purposes.

                                       27
<PAGE>

  We utilize interest rate swaps to reduce the impact on interest expense of
fluctuating interest rates on our variable rate debt. Under our interest rate
swap agreement, we agreed with the counterparty to exchange, at quarterly
intervals, the difference between our fixed pay rate and the counterparty's
variable pay rate of three-month LIBOR.

  We use foreign currency forwards and options, which typically expire within 30
days, to hedge payments and receipts of foreign currencies related to the
purchase and sale of goods overseas. Realized gains and losses on these
contracts are recognized in the same period as the hedged transactions.

  The Company is exposed to foreign exchange rate fluctuations as the financial
results of foreign subsidiaries are translated into U.S. dollars in
consolidation.  As exchange rates vary, those results, when translated, may vary
from expectations and adversely impact overall expected profitability.  The
cumulative translation effects for subsidiaries using functional currencies
other than the U.S. dollar are included in the cumulative translation adjustment
in stockholders' equity.

Item 8.   Financial Statements and Supplementary Data

  The information set forth under the caption "Financial Statements and
Supplementary Data" under Item 14 of Part IV of this Annual Report on Form 10-K
is incorporated herein by reference in response to this Item 8.


Item 9.   Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

  Not applicable.

                                       28
<PAGE>

                                    PART III


Item 10.   Directors and Executive Officers of the Registrant

  The information set forth under the captions "Election of Directors" and
"Other Matters" in the Proxy Statement, and the information set forth in Item
1, "Business--Executive Officers of the Registrant" is incorporated herein by
reference in response to this Item 10.


Item 11.   Executive Compensation

  The information set forth under the caption "Executive Compensation,"
"Compensation Committee Report on Executive Compensation," and "Performance
Graph" in the Proxy Statement is incorporated herein by reference in response
to this Item 11.


Item 12.   Security Ownership of Certain Beneficial Owners and Management

  The information set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the Proxy Statement is incorporated herein
by reference in response to this Item 12.


Item 13.   Certain Relationships and Related Transactions

  The information set forth under the subcaption "Executive Compensation--
Compensation Committee Interlocks and Insider Participation" and "Certain
Relationships and Related Party Transactions" in the Proxy Statement is
incorporated herein by reference in response to this Item 13.

                                       29
<PAGE>

                                    PART IV


Item 14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)(1)  Financial Statements and Supplementary Data.   The following Financial
        Statements of the Company are filed with this Form 10-K:

        Report of Independent Accountants;

        Consolidated Balance Sheet at December 31, 1999 and 1998;

        Consolidated Statement of Operations for the years ended December 31,
        1999 and 1998 and for the period April 22, 1997 (inception) to December
        31, 1997;

        Consolidated Statement of Cash Flows for the years ended December 31,
        1999 and 1998 and for the period April 22, 1997 (inception) to December
        31, 1997; and

        Consolidated Statement of Stockholder's equity at December 31, 1999,
        1998 and 1997.

(a)(2)  Financial Statement Schedules. All financial statement schedules are
        omitted because they are not applicable or the required information is
        shown in the financial statements or notes thereto listed above in Item
        14(a)(1).

(a)(3)  Exhibits. The Exhibits listed below are filed or incorporated by
        reference as part of this Form 10-K. Where so indicated by footnote,
        exhibits which were previously filed are incorporated by reference. For
        exhibits incorporated by reference, the location of the exhibit in the
        previous filing is indicated parenthetically.


<TABLE>
<CAPTION>
Exhibit
--------
 Number                                                  Description
--------  ---------------------------------------------------------------------------------------------------------
<S>       <C>
2.01      Purchase Agreement by and among U.S.A. Floral Products, Inc., CFL Acquisition Corp., ABCL
          Acquisition Corp., Continental Farms Limited, Atlantic Bouquet Company Limited, Continental Farms
          Management, Inc. and the Limited Partners named therein made effective as of January 20, 1998.
          (Exhibit 2.1)/1/


2.02      Agreement and Plan of Reorganization by and among U.S.A. Floral Products, Inc., XLG Acquisition
          Corp., XL Group, Inc. and Peter F. Ullrich dated as of January 20, 1998. (Exhibit 2.2)/1/


2.03      Agreement and Plan of Reorganization by and among U.S.A. Floral Products, Inc., EFI Acquisition
          Corp., EFM Acquisition Corp., Everflora, Inc., Everflora Miami, Inc. and the Stockholder named
          Therein dated January 16, 1998. (Exhibit 2.11)/2/


2.04      Agreement and Plan of Reorganization by and among U.S.A. Floral Products, Inc., LF Acquisition
          Corp., H&H Flowers, Inc. and the Stockholders named therein made effective as of January 16, 1998.
          (Exhibit 2.12)/2/


2.05      Agreement and Plan or Reorganization by and among U.S.A. Floral Products, Inc., UF Acquisition
          Corp., UltraFlora Corporation and the Stockholders named therein made effective as of January 16,
          1998. (Exhibit 2.13)/2/

</TABLE>


                                       30
<PAGE>

<TABLE>
<S>       <C>
2.06      Agreement and Plan or Reorganization by and among U.S.A. Floral Products, Inc., KDI Acquisition
          Corp., Koehler & Dramm, Inc. and the Stockholders named therein made effective as of January 16,
          1998. (Exhibit 2.14)/2/


2.07      Stock Purchase Agreement by and among U.S.A. Floral Products, Inc., Maxima Farms, Inc., Maxima
          Farms, Ltd. and the principal beneficial owner of Maxima Farms, Ltd. made effective as of April 3,
          1998. (Exhibit 2.15)/3/


2.08      Share Purchase Agreement by and among U.S.A. Floral Products, Inc., David L. Jones Wholesale,
          Ltd. and the Shareholders named therein made effective as of April 3, 1998. (Exhibit 2.16)/3/


2.09      Agreement and Plan of Reorganization by and among U.S.A. Floral Products, Inc., EFTA Acquisition
          Corp., Elite Farms, Talent, Inc., Anvacu, Inc., the Stockholders named therein and the beneficial
          owners named therein made effective as of April 3, 1998. (Exhibit 2.17)/3/


2.10      Stock Purchase Agreement by and among U.S.A. Floral Products, Inc., Selecta Farms, Inc., Saint Ann
          Trading Corporation, Juecla Investment Corporation and persons named therein made effective as of
          April 3, 1998. (Exhibit 2.18)/3/


2.11      Agreement and Plan of Reorganization by and among U.S.A. Floral Products, Inc., SAB Acquisition
          Corp., Master Flowers Inc. and the Stockholders named therein made effective April 3, 1998. (Exhibit
          2.19)/3/


2.12      Agreement and Plan of Reorganization by and among U.S.A. Floral Products, Inc., FFI Acquisition
          Corp., Edfrancar, Inc. and the Stockholders named therein made effective as of April 3, 1998. (Exhibit
          2.20)/3/


2.13      Agreement and Plan of Reorganization by and among U.S.A. Floral Products, Inc., ASG Acquisition
          Corp., AFB Marketing, Inc. and the Stockholders named therein made effective as of April 3, 1998.
          (Exhibit 2.21)/3/


2.14      Agreement and Plan of Reorganization by and among U.S.A. Floral Products, Inc., PFW Acquisition
          Corp., RCF Acquisition Corp., Pacific Floral Wholesale, Inc., Rose City Floral, Inc. and the
          Stockholder named therein made effective as of April 3, 1998. (Exhibit 2.22)/3/


2.15      Stock and Asset Purchase Agreement by and between DIMON Incorporated and Florimex Worldwide
          GmbH, and U.S.A. Floral Products, Inc. (Exhibit 2.1)/4/


2.16      Purchase and Sale Agreement by and between Atlantic Bouquet Company, Limited and Atlas Flowers, Inc.
          d/b/a Golden Flowers, dated September 29, 1999./6/
</TABLE>


                                       31
<PAGE>

<TABLE>
<S>       <C>
3.01      Certificate of Incorporation of U.S.A. Floral Products, Inc., as amended. (Exhibit 3.01)/5/


3.02      Second Amended Bylaws of U.S.A. Floral Products, Inc. /6/

4.01      Credit Agreement among U.S.A. Floral Products, Inc., U.S.A. Floral Products Germany GmbH & Co.
          KG, Florimex Worldwide B.V., Various Lending Institutions, Bayerische Hypo-Und Vereinsbank AG,
          as Syndication Agent, BankBoston, N.A., as Documentation Agent, and Bankers Trust Company, as
          Arranger and Administrative Agent, dated as of October 16, 1997 and Amended and Restated as of
          October 2, 1998. (Exhibit 4.1)/4/


4.01(a)   Consent to Credit Agreement among U.S.A. Floral Products, Inc., various Lending Institutions and
          Bankers Trust Company, as Agent, dated as of January 26, 1998. (Exhibit 4.01(a))/2/

4.01(b)   First Amendment to Credit Agreement, dated as of November 2, 1998, among U.S.A. Floral Products,
          Inc., U.S.A. Floral Products GmbH & Co. KG, Florimex Worldwide B.V., the lenders party to the
          Credit Agreement, Bayerische Hypo-Und Vereinsbank AG, as Syndication Agent, BankBoston, N.A.,
          as Documentation Agent, and Bankers Trust Company as Arranger and Administrative Agent./5/


4.01(c)   Second Amendment and consent, dated as of December 29, 1998, among U.S.A. Floral Products, Inc.,
          U.S.A. Floral Products GmbH & Co. KG, Florimex Worldwide B.V., the lenders party to the Credit
          Agreement, Bayerische Hypo-Und Vereinsbank AG, as Syndication Agent, BankBoston, N.A. as
          Documentation Agent, and Bankers Trust Company, as Arranger and Administrative Agent./6/


4.01(d)   Third Amendment among U.S.A. Floral Products, Inc., U.S.A. Floral Products GmbH & Co. KG, Florimex
          Worldwide B.V., the lenders party to the Credit Agreement, Bayerische Hypo-Und Vereinsbank AG, as
          Syndication Agent, BankBoston, N.A. as Documentation Agent, and Bankers Trust Company, as Arranger and
          Administrative Agent dated March 30, 1999./6/


4.01(e)   Fourth Amendment among U.S.A. Floral Products, Inc., U.S.A. Floral Products GmbH & Co. KG, Florimex
          Worldwide B.V., the lenders party to the Credit Agreement, Bayerische Hypo-Und Vereinsbank AG, as
          Syndication Agent, BankBoston, N.A. as Documentation Agent, and Bankers Trust Company, as Arranger and
          Administrative Agent dated March 24, 2000./6/


4.01(f)   Waiver among U.S.A. Floral Products, Inc., U.S.A. Floral Products GmbH & Co. KG, Florimex Worldwide
          B.V., the lenders party to the Credit Agreement, Bayerische Hypo-Und Vereinsbank AG, as Syndication
          Agent, BankBoston, N.A. as Documentation Agent, and Bankers Trust Company, as Arranger and
          Administrative Agent dated October 7, 1999./6/


4.01(g)   Waiver among U.S.A. Floral Products, Inc., U.S.A. Floral Products GmbH & Co. KG, Florimex Worldwide
          B.V., the lenders party to the Credit Agreement, Bayerische Hypo-Und Vereinsbank AG, as Syndication
          Agent, BankBoston, N.A. as Documentation Agent, and Bankers Trust Company, as Arranger and
          Administrative Agent dated as of November 9, 1999./6/
</TABLE>

                                       32
<PAGE>

<TABLE>
<S>       <C>
4.01(h)   Waiver among USA Floral Products, Inc., USA Floral Products GmbH and Co. KG., Florimex Worldwide B.V.,
          the lenders party to the Credit Agreement, Bayerische Hypo-Und Vereinsbank AG, as Syndication Agent,
          BankBoston, N.A. as Documentation Agent, and Bankers Trust Company, as Arranger and Administrative Agent,
          dated December 23, 1999./6/


10.01     U.S.A. Floral Products, Inc. 1997 Long-Term Incentive Plan. (Exhibit 10.10)/5/*


10.02     U.S.A. Floral Products, Inc. 1997 Non-Employee Directors' Stock Plan. (Exhibit 10.11)/5/*


10.03     U.S.A. Floral Products, Inc. 1997 Employee Stock Purchase Plan. (Exhibit 10.12)/5/


10.04     Employment Agreement between U.S.A. Floral Products, Inc. and Robert Poirier, dated as of
          December 1, 1998/6/*


10.05     Employment Agreement between Alpine Gem Flower Shippers, Inc. and John Q. Graham, Jr., dated October 16,
          1997./5/*


10.06     Employment Agreement between USA Floral Products, Inc. and Dwight Ferguson, dated August 12, 1998./6/*


10.11     Sublease Agreement by and between Blytheville-Gosnell Regional Airport Authority and Floral
          Distributors, Inc., dated December 16, 1998./5/*


10.12     Registration Rights Agreement, dated as of July 25, 1997, among U.S.A. Floral Products, Inc. and
          certain stockholders named therein. (Exhibit 10.22)/5/


10.19     Employment Agreement between USA Floral Products, Inc. and John T. Dickinson, dated
          February 1, 1999./6/*


10.20     Employment Agreement between USA Floral Products, Inc. and Michael W. Broomfield, dated November 24,
          1999./6/*


10.22     Separation Agreement between USA Floral Products, Inc. and Robert J. Poirier, dated February 13,
          2000./6/*


21.01     Subsidiaries of the Registrant/6/


23.01     Consent of PricewaterhouseCoopers LLP/6/


27.01     Financial Data Schedule/6/
</TABLE>

                                       33
<PAGE>

----------------
 *  Management contract or compensatory plan or arrangement.

(1)  Incorporated by reference. Previously filed as an exhibit to the Company's
     Current Report on Form 8-K filed with the Commission on February 9, 1998.

(2)  Incorporated by reference. Previously filed as an exhibit to the Company's
     Post-Effective Amendment No. 1 to the Registration Statement on Form S-1
     (Registration Statement No. 333-39969) filed with the Commission on
     March 6, 1998.

(3)  Incorporated by reference. Previously filed as an Exhibit to the Company's
     Post-Effective Amendment No. 2 to the Registration Statement on Form S-1
     (Registration Statement No. 333-39969) filed with the Commission on May 8,
     1998.

(4)  Incorporated by reference. Previously filed as an Exhibit to the Company's
     Current Report on Form 8-K filed with the Commission on October 15, 1998.

(5)  Previously filed as an exhibit to the Company's Annual Report on Form 10-K
     filed with the Commission on March 31, 1999.

(6)  Filed herewith.


(b)  Reports on Form 8-K

     During the quarter ended December 31, 1999, USA Floral filed the following
     Report on Form 8-K:

       None.

                                  * * * * * *

                                       34
<PAGE>

                          U.S.A. FLORAL PRODUCTS, INC.
                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
U.S.A. FLORAL PRODUCTS, INC.                                           Page
----------------------------                                          -------
<S>                                                                   <C>
 Report of Independent Accountants..................................    36
 Consolidated Balance Sheet.........................................    37
 Consolidated Statement of Operations...............................    38
 Consolidated Statement of Stockholders' Equity.....................    39
 Consolidated Statement of Cash Flows...............................    40
 Notes to Consolidated Financial Statements.........................    41
</TABLE>

                                       35
<PAGE>

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
 and Stockholders of
 U.S.A. Floral Products, Inc.

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of U.S.A.
Floral Products, Inc. and subsidiaries (the "Company") at December 31, 1999
and 1998, and the results of their operations and their cash flows for the years
ended December 31, 1999 and 1998 and the period April 22, 1997 (inception)
through December 31, 1997, in conformity with accounting principles generally
accepted in the United States. 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 of these
statements in accordance with auditing standards generally accepted in the
United States which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.


/s/ PricewaterhouseCoopers LLP


Washington, D.C.
March 20, 2000, except for Note 7
as to which the date is March 24, 2000

                                       36
<PAGE>

                          U.S.A. FLORAL PRODUCTS, INC.

                           CONSOLIDATED BALANCE SHEET
                        (in thousands, except par value)

<TABLE>
<CAPTION>
                                              December 31, 1999     December 31, 1998
                                              -----------------     -----------------
<S>                                               <C>                   <C>
ASSETS
Current assets:
  Cash and cash equivalents                       $  10,048             $  20,196
  Accounts receivable, net                          102,524                97,769
  Inventory                                          24,569                18,577
  Prepaid expenses and other assets                  14,444                12,259
  Deferred income tax assets                          2,931                 3,376
                                                  ----------            ---------
     Total current assets                           154,516               152,177
Property and equipment, net                          53,357                59,636
Goodwill, net                                       267,590               267,763
Restricted cash                                       3,834                 3,672
Deferred financing costs                              2,971                 3,477
Other assets                                          4,542                 7,309
                                                  ----------            ---------
      Total assets                                $ 486,810             $ 494,034
                                                  ==========            =========

LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
  Short-term debt                                 $   4,919             $   5,005
  Accounts payable                                   60,574                58,033
  Accrued expenses                                   15,770                29,919
  Due to stockholders                                 2,278                15,350
  Income taxes payable                                2,328                 3,227
                                                  ----------            ---------
    Total current liabilities                        85,869               111,534
Long-term debt                                      195,914               194,668
Deferred income tax liabilities                       3,469                 1,784
Other liabilities                                       618                     -
                                                  ----------            ---------
    Total liabilities                               285,870               307,986
                                                  ----------            ---------

Minority interests in subsidiaries                      363                   423
                                                  ----------            ---------

Commitments and contingencies

Stockholders' equity:
  Common stock, $0.001 par value; 100,000 shares
    authorized; 16,266 and 14,850 shares issued,
    respectively                                         16                    15
  Treasury stock (14 shares)                           (287)                 (287)
  Additional paid-in capital                        193,477               178,130
  Retained earnings                                   5,093                 8,159
  Accumulated other comprehensive income (loss)       2,278                  (392)
                                                  ----------            ---------
    Total stockholders' equity                      200,577               185,625
                                                  ----------            ---------

    Total liabilities and stockholders' equity    $ 486,810             $ 494,034
                                                  ==========            =========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                      37
<PAGE>

                          U.S.A. FLORAL PRODUCTS, INC.

                      CONSOLIDATED STATEMENT OF OPERATIONS
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                                           Period April 22, 1997
                                                               Year Ended               Year Ended            (inception) to
                                                             December 31, 1999       December 31, 1998       December 31, 1997
                                                             -----------------       -----------------       -----------------
<S>                                                              <C>                     <C>                     <C>
Net revenues                                                     $ 924,847               $ 589,034               $  37,380
Cost of sales                                                      686,659                 429,012                  26,685
                                                                 ----------              ----------              ---------
  Gross margin                                                     238,188                 160,022                  10,695

Selling, general and administrative expenses                       218,058                 129,551                   9,791
Goodwill amortization                                                7,086                   4,768                     275
Integration charges (credits)                                         (712)                  3,361                       -
Write-off of deferred financing fees                                     -                   1,606                       -
                                                                 ----------              ----------              ---------

  Income from operations                                            13,756                  20,736                     629

Other income (expense):
  Interest expense                                                 (16,088)                 (8,040)                     (8)
  Interest income                                                    1,922                   1,883                     248
  Other                                                                375                     449                      37
                                                                 ----------              ----------              ---------
Income (loss) before income taxes and minority interests               (35)                 15,028                     906
Provision for income taxes                                           3,013                   7,255                     490
                                                                 ----------              ----------              ---------
Income (loss) before minority interests                             (3,048)                  7,773                     416
Minority interests                                                     (18)                    (30)                      -
                                                                 ----------              ----------              ---------
Net income (loss)                                                $  (3,066)              $   7,743               $     416
                                                                 ==========              ==========              =========


Net income (loss) per share:
   Basic                                                         $   (0.19)              $    0.54               $    0.09

   Diluted                                                       $   (0.19)              $    0.52               $    0.09

Weighted average shares outstanding:
    Basic                                                           16,349                  14,376                   4,734

    Diluted                                                         16,509                  14,789                   4,824
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                      38
<PAGE>

                          U.S.A. FLORAL PRODUCTS, INC.

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                 (in thousands)
<TABLE>
<CAPTION>
                                              Common Stock                                              Accumulated
                                        ----------------------------             Additional                Other         Total
                                                                      Treasury    Paid-in    Retained   Comprehensive  Stockholders'
                                            Shares         Amount       Stock     Capital    Earnings   Income (loss)    Equity
                                            ------         ------       -----     -------    --------   -------------    ------
<S>                                        <C>           <C>           <C>       <C>         <C>         <C>           <C>
Issuance of common stock for initial
     capitalization of the Company              2,400    $      2         $ -    $    398        $ -        $ -        $    400

Issuance of common stock in initial
     public offering                            5,750           6                  66,571                                66,577

Issuance of common stock for
     business acquisitions                      1,334           1                  17,341                                17,342

Exercise of stock options                         110           -                   1,430                                 1,430

Net income                                                                                       416                        416
                                             ----------------------------------------------------------------------------------

Balances at December 31, 1997                   9,594           9                  85,740        416          -          86,165

Issuance of common stock for
     business acquisitions                      5,256           6                  92,390                                92,396

Treasury stock acquired                           (14)                   (287)                                             (287)

Net income                                                                                     7,743

Foreign currency adjustment                                                                                (392)

Total comprehensive income                                                                                                7,351
                                             ----------------------------------------------------------------------------------

Balances at December 31, 1998                  14,836          15        (287)    178,130      8,159       (392)        185,625

Exercise of stock options                           7                                  87                                    87

Issuance of common stock for
     business acquisitions                      1,277           1                  14,937                                14,938

Issuance of common stock                          132                                 323                                   323

Net loss                                                                                      (3,066)

Foreign currency adjustment                                                                               2,670

Total comprehensive loss                                                                                                   (396)
                                             ----------------------------------------------------------------------------------
Balances at December 31, 1999                  16,252    $     16    $   (287)   $193,477   $  5,093   $  2,278        $200,577
                                             ==================================================================================
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                      39
<PAGE>

                          U.S.A. FLORAL PRODUCTS, INC.

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                                              Period April 22, 1997
                                                                          Year Ended          Year Ended         (inception) to
                                                                        December 31, 1999   December 31, 1998   December 31, 1997
                                                                        ----------------    ----------------- ----------------------
<S>                                                                            <C>                  <C>                  <C>
Cash flows from operating activities:
     Net income (loss)                                                         $  (3,066)           $   7,743            $     416
     Adjustments to reconcile net income(loss) to cash
         provided by (used in) operating activities:
         Depreciation                                                              9,748                5,660                  290
         Amortization of goodwill                                                  7,086                4,768                  275
         Amortization of deferred financing costs                                    773                  468                   73
         Gain (loss) on disposal of property and equipment                          (452)                  15                   (9)
         Write-off of deferred financing fees                                          -                1,606                    -
         Income applicable to minority interests                                      18                   30                    -
         Deferred income taxes                                                     2,555               (2,205)                  43
         Changes in operating assets and liabilities,
         exclusive of acquired companies:
             Accounts receivable                                                  (7,563)              10,522                 (214)
             Inventory                                                            (6,550)               1,700                1,299
             Due from related parties                                                  -                5,747                  781
             Prepaid expenses and other current assets                              (293)                (709)                (112)
             Other assets                                                            324                 (650)                 238
             Income taxes payable                                                   (898)              (2,360)                (312)
             Accounts payable                                                      7,320              (26,096)                   -
             Accrued expenses                                                     (6,427)              (5,202)              (3,495)
             Other liabilities                                                    (2,283)              (1,577)                 (53)
             Integration reserve                                                  (1,714)               2,924                    -
                                                                               ---------            ---------           ----------

                Net cash provided by (used in) operating activities               (1,422)               2,384                 (780)

     Cash flows from investing activities:
         Purchases of property and equipment                                     (11,383)              (5,861)                (543)
         Proceeds from sale of property and equipment                              3,975                    -                    -
         Payment for business acquisitions, net of cash acquired                    (813)            (139,943)             (39,819)
         Payments to stockholders                                                 (7,500)                   -                    -
         Increase in restricted cash                                                (162)              (3,599)                   -
         Deferred acquisition costs                                                    -                    -                 (647)
                                                                               ---------            ---------           ----------

                Net cash used in investing activities                            (15,883)            (149,403)             (41,009)

     Cash flows from financing activities:
         Proceeds from and repayments of debt                                      8,164              155,620               (5,700)
         Increase in deferred financing costs                                       (267)              (3,855)              (1,769)
         Proceeds from issuance of common stock                                      323                  131                  400
         Proceeds from exercise of stock options                                      87                    -                1,430
         Return of capital                                                             -                  656                    -
         Stock issuance costs                                                          -                 (956)                   -
         Payments to stockholders                                                      -                    -               (3,679)
         Increase in due to stockholders                                               -                    -                  659
         Repayments of notes payable                                                   -                    -                 (547)
         Proceeds from initial public offering, net                                    -                    -               66,577
                                                                               ---------            ---------           ----------

                Net cash provided by financing activities                          8,307              151,596               57,371

     Effect of exchange rates on cash                                             (1,150)                  37                    -
                                                                               ---------            ---------           ----------

     Net increase (decrease) in cash and cash equivalents                        (10,148)               4,614               15,582
     Cash and cash equivalents  - beginning of the period                         20,196               15,582                    -
                                                                               ---------            ---------           ----------

     Cash and cash equivalents - end of the period                             $  10,048            $  20,196            $  15,582
                                                                               =========            =========           ==========

</TABLE>

     See Note 16 for supplemental cash flow information

The accompanying notes are an integral part of these consolidated financial
statements.
                                      40

<PAGE>

                         U.S.A. FLORAL PRODUCTS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       (in thousands, except share data)

NOTE 1 - BUSINESS  AND ORGANIZATION

  U.S.A. Floral Products, Inc., a Delaware corporation ("USA Floral" or the
"Company"), was founded in April 1997 and since then has grown to become a
worldwide distributor of floral products. USA Floral acquired eight U.S.
businesses in the floral industry (the "Founding Companies") simultaneously
with the initial public offering ("IPO") of its Common Stock in October 1997,
acquired six U.S. businesses in the floral industry in January 1998 (the
"January 1998 Class"), acquired eight businesses in the floral industry in April
1998 (the "April 1998 Class"), acquired nine businesses in the floral industry
in July 1998 (the "July 1998 Class"), and on October 1, 1998 acquired the
business of Florimex Worldwide GmbH and related entities ("Florimex"), an
international distributor of floral products headquartered in Nuremberg, Germany
(together, the "Acquisitions").  These financial statements include the results
of operations of USA Floral and the Founding Companies, the January 1998 Class,
the April 1998 Class, the July 1998 Class and Florimex subsequent to their
acquisitions.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of USA Floral and its
subsidiary companies, all of which are substantially wholly owned.  Minority
interest represents minority stockholders' proportionate share of the equity in
certain foreign subsidiaries.  All significant intercompany profits,
transactions and balances have been eliminated in consolidation.

Use of Estimates

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

Revenue Recognition

Revenue is recognized upon shipment of product.

Cash and Cash Equivalents

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

Restricted Cash

Restricted cash comprises cash pledged as collateral in the closing of a
business acquisition and is classified as restricted cash on the balance sheet.

                                       41
<PAGE>

                         U.S.A. FLORAL PRODUCTS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       (in thousands, except share data)

Inventory

Inventory is stated at the lower of cost or market. Cost is determined on a
first-in, first-out basis.

Property and Equipment

Property and equipment are carried at cost. Depreciation is provided for using
straight-line and accelerated methods over the estimated useful lives of the
related assets.  Leasehold improvements are amortized over the shorter of their
respective lease terms or estimated useful lives.  The useful lives, based on
the Company's estimate of service life of the classes of property, are as
follows:

  Buildings and improvements                   30 years
  Furniture fixtures and office equipment      3 to 7 years
  Vehicles                                     5 years
  Machinery and equipment                      5 to 7 years

Goodwill

Goodwill, which represents costs in excess of the fair value of net assets of
businesses acquired, is being amortized over forty years using the straight-line
method.  The Company continually reviews goodwill to assess recoverability from
estimated future results of operations, using estimates of undiscounted cash
flows of the acquired businesses.  Any required provisions for impairment would
be made in the period the impairment is first determined, and would be based on
the fair value of the related businesses.  Accumulated amortization at December
31, 1999 and 1998 was $12,129 and $5,043, respectively.

Deferred Financing Costs

Financing fees associated with the credit facility and the amendment thereof are
amortized over the term of the related credit facility.

Fair Value of Financial Instruments

The carrying amount of cash and cash equivalents, accounts receivable/payable
and short-term debt approximates fair value because of the short-term nature of
these instruments. The estimated fair value of non-current debt approximates its
carrying value due to its stated interest rate approximating market rates for
debt with similar terms and maturities.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of trade accounts receivable. Receivables are
not collateralized and accordingly, the Company performs ongoing credit
evaluations of its customers to reduce the risk of loss.

Concentration of Supply Risk

The supply of perishable floral products is significantly dependent on weather
conditions where the products are grown.  The Company currently purchases the
majority of its perishable floral products from farms located in South America,
principally Colombia and Ecuador, Africa, principally Kenya and Morocco, and the
Netherlands.  Shortages or disruptions in the supply of fresh flowers or the
inability of the Company to procure such material from alternative sources at
acceptable prices in a timely manner could lead to loss of customers.

                                       42
<PAGE>

                         U.S.A. FLORAL PRODUCTS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       (in thousands, except share data)

Income Taxes

The Company accounts for income taxes under the liability method.  Certain
expenses are recognized in different periods for financial reporting than for
Federal income tax purposes.  The Company and its eligible subsidiaries file a
consolidated U.S. federal income tax return.  Certain subsidiaries which are
consolidated for financial reporting are not eligible to be included in the
consolidated U.S. federal income tax return and separate provisions for income
taxes have been determined for these entities.

Stock-based Compensation

The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations in accounting for its employee stock options. Under APB 25, if
the exercise price of employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recorded.   In
the event that stock options are issued at an exercise price below the market
price, compensation expense is recorded ratably over the vesting period for the
options issued at a discount.   Statement of Financial Accounting Standards No.
123, "Accounting for Stock-based Compensation", requires the Company to make
certain disclosures as if the fair value based method of accounting had been
applied to the Company's stock option grants (see Note 14).

Earnings Per Share

Basic earnings per share is determined by dividing income available to common
stockholders by the weighted average number of common shares outstanding during
the period.  Diluted earnings per share is determined by dividing income (loss)
available to common stockholders by the weighted average number of common shares
outstanding during the period plus the incremental shares that would have been
outstanding upon the assumed exercise of dilutive stock options and an estimate
of contingent consideration payable under earn-out agreements as if the earn-out
period had ended as of the date of the financial statements.

Foreign Currency Translation

Assets and liabilities of the Company's international subsidiaries are
translated using the exchange rate in effect at the balance sheet date.  Revenue
and expense accounts for these subsidiaries are translated using the average
exchange rate during the period.  Foreign currency translation adjustments are
reported as other comprehensive income (loss) in a separate component of
stockholders' equity.

Internal Use Software Costs

External direct costs of materials and services consumed in developing internal-
use computer software, payroll and related costs and interest cost are
capitalized as a long-lived asset and amortized over the useful life of the
software.  Overhead costs, including general and administrative costs and
training costs, are expensed as incurred.

                                       43
<PAGE>

                         U.S.A. FLORAL PRODUCTS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       (in thousands, except share data)

Derivatives

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement establishes accounting and
reporting standards for derivative instruments. It requires an entity to
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value.  In June 1999,
the Financial Accounting Standards Board issued SFAS No. 137 which deferred the
effective date for SFAS No. 133 to all fiscal years beginning after June 15,
2000.  Therefore, SFAS No. 133 will be effective for the Company on January 1,
2001, the beginning of fiscal year 2001.  Due to the Company's minimal use of
derivatives, the Company does not expect that the adoption of the new standard
will have a material impact on the results of operations or financial condition
of the Company.


NOTE 3 - ACQUISITIONS

  In October 1997, USA Floral acquired The Roy Houff Company ("Roy Houff"), CFX,
Inc. ("CFX"), Bay State Florist Supply, Inc. ("Bay State"), Flower Trading
Corporation ("Flower Trading"), United Wholesale Florist, Inc. and United
Wholesale Florists of America, Inc. ("United Wholesale"), American Florist
Supply, Inc. ("American Florist"), Monterey Bay Bouquet, Inc. and Bay Area
Bouquets, Inc. ("Monterey Bay") and Alpine Gem Flower Shippers, Inc. (Alpine
Gem").  In January 1998, USA Floral acquired Continental Farms Limited and
Atlantic Bouquet Company Limited ("Continental"), XL Group, Inc. ("XL Group"),
Koehler & Dramm, Inc. ("Koehler & Dramm"), Everflora, Inc. and Everflora Miami,
Inc. ("Everflora"), H&H Flowers, Inc. d/b/a La Fleurette ("H&H Flowers") and
UltraFlora Corporation ("UltraFlora").  In April 1998, USA Floral acquired Elite
Farms ("Elite"), David L. Jones Wholesale, Ltd. ("DL Jones"), Edfrancar, Inc.
d/b/a Florafresh International ("Florafresh"), Master Flowers, Inc. d/b/a Sabana
Farms ("Sabana"), Maxima Farms, Inc. ("Maxima"), Selecta Farms, Inc. and Saint
Ann Trading Corporation ("Selecta"), Pacific Floral Wholesale, Inc. and Rose
City Floral, Inc. ("Rose City") and AFB Marketing, Inc. d/b/a Allan Stanley
Greenhouses ("Allan Stanley").  In July 1998, USA Floral acquired Channel
Islands Floral ("Channel Islands"), Petals Distributing Company, Inc.
("Petals"), AlphaFlora Imports, Inc. ("AlphaFlora"), Sandlake Farms, Inc. and
affiliated companies, Sabal International, Inc. and Continental Artistry, Inc.
("Sandlake"), Floramark, Inc. ("Floramark"), Evergreen Wholesale Florist, Inc.
("Evergreen"), Tommy's Wholesale Florist, Inc. ("Tommy's"), First Distributors,
Inc. ("First Distributors"), and Southern Rainbow Corporation ("Southern
Rainbow").  In October 1998, USA Floral acquired Florimex GmbH, Florimex USA,
Inc. and Florimex Canada, Inc. ("Florimex").  All of the above business
combinations were accounted for under the purchase method of accounting.

  The following table sets forth the consideration paid in cash and in shares of
Common Stock to the former owners of each of these businesses, the allocation of
the total purchase consideration to net assets acquired and the resulting
goodwill.

  The purchase price includes contingent consideration of (a) $2,400 in shares
of Common Stock related to an earn-out arrangement for American Florist, which
was based on adjusted earnings before interest and taxes, as defined, for the
twelve month period ended December 31, 1997, (b) $500 in cash and $3,000 in
shares of Common Stock related to an earn-out arrangement for Monterey Bay,
which was based on adjusted earnings before interest and taxes, as defined, for
the twelve month period ended December 31, 1997, (c) $5,892 in shares of Common
Stock related to an earn-out arrangement for UltraFlora, which was based on
adjusted earnings before interest and taxes, as defined, for the twelve month
period ended December 31, 1997, (d) $1,465 in shares of Common Stock related to
an earn-out arrangement for Sabana, which was based on adjusted earnings before
interest and taxes, as defined, for the twelve months ended May 31, 1998, (e)
$1,204 in shares of Common Stock related to an earn-out arrangement for XL
Group,

                                       44
<PAGE>

                         U.S.A. FLORAL PRODUCTS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       (in thousands, except share data)

which was based on adjusted earnings before interest and taxes, as defined, for
the twelve months ended December 31, 1998, (f) $4,304 in shares of Common Stock
related to an earn-out arrangement for Maxima, which was based on adjusted
earnings before interest and taxes, as defined, for the twelve months ended
December 31, 1998, (g) $4,658 in cash and $3,135 in shares of Common Stock
related to an earn-out arrangement for Southern Rainbow, which was based on
adjusted earnings before interest and taxes, as defined, for the twelve months
ended December 31, 1998, (h) $1,550 in shares of Common Stock related to an
earn-out arrangement for Tommy's, which was based on adjusted earnings before
interest and taxes, as defined, for the twelve months ended December 31, 1998,
(i) $187 in shares of Common Stock related to an earn-out arrangement for
AlphaFlora, which was based on adjusted earnings before interest and taxes, as
defined, for the twelve months ended December 31, 1998, (j) $1,468 in shares of
Common Stock related to an earn-out arrangement for DL Jones, which was based on
adjusted earnings before interest and taxes, as defined, for the twelve months
ended February 28, 1999, (k) $2,702 in cash and $2,702 in shares of Common Stock
related to an earn-out arrangement for Allan Stanley, which was based on
adjusted earnings before interest and taxes, as defined, for the twelve months
ended March 31, 1999, and (l) $1,061 in shares of Common Stock related to an
earn-out arrangement for Channel Islands, which was based on adjusted earnings
before interest and taxes, as defined, for the eighteen months ended December
31, 1999. The contingent consideration related to earn-out arrangements included
in the definitive agreements for H&H Flowers, Rose City and Sandlake has not
been included in the purchase consideration since these companies did not
achieve sufficient adjusted earnings before interest and taxes, as defined, to
warrant additional earn-out consideration.

  A number of the earn-out arrangements are contingent on the acquired company
maintaining the same adjusted earnings before interest and taxes, as defined in
the agreement, for the same period subsequent to the earn-out period. The earn-
out consideration is adjusted down to the consideration calculated using the
subsequent period's adjusted earnings before interest and taxes if lower than
the adjusted earnings before interest and taxes used in calculating the earn-out
arrangement.  Pursuant to the terms of the purchase agreement, contingent
consideration in the amount of $4,304, originally paid to the former
shareholders of Maxima will be returned to the Company as a result of their 1999
adjusted earnings before interest and taxes being lower than the 1998 adjusted
earnings before interest and taxes.  This reduction is reflected in the purchase
price in the accompanying table.  The subsequent period's adjusted earnings
before interest and taxes for all other acquired companies with earn-out
arrangements were in excess of the initial earnings before interest used to
calculate the earn-out consideration and therefore there is no adjustment to
their earn-out consideration.

                                       45
<PAGE>

                         U.S.A. FLORAL PRODUCTS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       (in thousands, except share data)

<TABLE>
<CAPTION>

                                           Shares of        Value of        Total        Net Assets
Acquisitions                     Cash      Common Stock      Shares      Consideration    Acquired     Goodwill
----------------------------  -----------  ------------     --------     -------------   ----------  ------------

<S>                           <C>          <C>           <C>          <C>              <C>           <C>
Roy Houff...................    $  11,006           ---    $    ---          $ 11,006      $ 3,454      $  7,552
CFX.........................        6,521       250,000        3,250            9,771        1,229         8,542
Bay State...................        6,045       481,531        6,155           12,200        4,156         8,044
Flower Trading..............        5,920       160,000        2,080            8,000        1,273         6,727
United Wholesale............        4,788       268,500        3,491            8,279        2,298         5,981
American Florist1...........        4,800       141,749        2,400            7,200          249         6,951
Monterey Bay1...............        3,000       177,188        3,000            6,000          705         5,295
Alpine Gem..................        1,600       160,000        2,080            3,680          215         3,465
                                 --------     ---------     --------         --------      -------      --------
Total 1997 Acquisitions          $ 43,680     1,638,968     $ 22,456         $ 66,136      $13,579      $ 52,557
                                 --------     ---------     --------         --------      -------      --------

Continental Farms...........     $ 27,500     1,642,672     $ 27,500         $ 55,000      $ 4,806      $ 50,194
XL Group1...................       11,250       773,817       12,204           23,454        5,611        17,843
Koehler & Dramm.............        5,000       298,596        5,000           10,000        3,544         6,456
Everflora...................        4,000       246,654        4,000            8,000        2,889         5,111
H&H Flowers.................        1,600           ---          ---            1,600         (710)        2,310
UltraFlora1.................        2,750       522,768        8,642           11,392        1,557         9,835
Elite.......................        3,700       184,907        3,700            7,400          796         6,604
DL Jones1...................        2,183       282,014        5,444            7,627        1,275         6,352
Florafresh..................        3,945       172,928        3,945            7,890       (1,069)        8,959
Sabana1.....................          659       164,784        3,453            4,112          949         3,163
Maxima1.....................        5,300       233,419        5,300           10,600        2,677         7,923
Selecta.....................        2,500       112,007        2,500            5,000          308         4,692
Rose City...................          133        10,634          240              373         (156)          529
Allan Stanley1..............        4,627       321,116        4,627            9,254          (59)        9,313
Channel Islands1............        1,550       503,833        2,611            4,161          467         3,694
Petals......................           50         6,204          100              150         (441)          591
AlphaFlora1.................           --        49,167          758              758         (194)          952
Sandlake....................        1,104        72,315        1,375            2,479         (182)        2,661
Floramark...................           --        56,211        1,000            1,000         (213)        1,213
Evergreen...................        5,899        30,739          500            6,399          179         6,220
Tommy's1....................          789       222,879        2,825            3,614          726         2,888
First Distributors..........          400        24,323          400              800          218           582
Southern Rainbow1...........        6,201       399,927        4,537           10,738          808         9,930
Florimex....................       66,072           ---          ---           66,072        6,925        59,147
                                 --------     ---------     --------         --------      -------      --------
     Total 1998 Acquisitions     $157,212     6,331,914     $100,661         $257,873      $30,711      $227,162
                                 --------     ---------     --------         --------      -------      --------

Grand Total                      $200,892     7,970,882     $123,117         $324,009      $44,290      $279,719
                                 ========     =========     ========         ========      =======      ========
</TABLE>

1The purchase price includes consideration related to earn-out arrangement
described above.

  The following unaudited pro forma summary presents the combined results of
operations of the Company as if the acquisitions and USA Floral's IPO occurred
on January 1, 1998.  The pro forma amounts give effect to certain adjustments
including amortization of intangibles, interest expense on incremental
financing, reductions in salary, bonuses and benefits in connection with the
transactions, anticipated compensation of USA Floral's management, associated
costs of being a public company and income taxes.  The pro forma summary does
not purport to represent what USA Floral's results of

                                       46
<PAGE>

                         U.S.A. FLORAL PRODUCTS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       (in thousands, except share data)

operations would actually have been if such transactions had occurred on January
1, 1998 and are not necessarily representative of USA Floral's results of
operations for any future period. Since the acquired businesses were not under
common control or management, historical combined results may not be comparable
to, or indicative of, future performance.

<TABLE>
<CAPTION>
                                                           Year ended (1)
                                                         December 31, 1998
                                                         -----------------
                                                            (unaudited)
<S>                                                      <C>
Net revenue.......................................            $999,793
Operating income..................................              29,804
Net income........................................               9,192
Net income per share - basic......................                0.58
Net income per share - diluted....................                0.56
</TABLE>

(1)  The pro forma 1998 results of operations include integration charges of
     $6,333.


NOTE 4 - ALLOWANCE FOR DOUBTFUL ACCOUNTS

<TABLE>
<CAPTION>
                                                                1999               1998              1997
                                                          -------------       ------------      ------------
<S>                                                         <C>                 <C>               <C>
Balance at beginning of period                                  $ 7,944            $   599             $   -
Balances acquired through business acquisitions                       -              7,043               711
Charged to costs and expenses                                     2,948              1,309                49
Write-offs                                                       (2,490)            (1,007)             (161)
Currency conversion                                                (628)                 -                 -
                                                          -------------       ------------      ------------
Balance at December 31                                          $ 7,774            $ 7,944             $ 599
                                                          =============       ============      ============
</TABLE>


NOTE 5 - INVENTORY

Inventory consists of the following finished goods at December 31:

<TABLE>
<CAPTION>
                                                               1999              1998
                                                          ------------      ------------
<S>                                                         <C>               <C>
Perishables                                                    $ 4,781           $ 3,003
Hardgoods, net of allowance                                     19,788            15,574
                                                          ------------      ------------
                                                               $24,569           $18,577
                                                          ============      ============
</TABLE>


<TABLE>
<CAPTION>
Hardgoods inventory allowance:                                  1999               1998              1997
                                                          -------------       ------------       -----------
<S>                                                         <C>                 <C>                <C>
Balance at beginning of period                                    $ 376              $ 149             $   -
Balances acquired through business acquisitions                       -                178               149
Charged to costs and expenses                                       458                126                 -
Write-offs                                                         (192)               (77)                -
                                                          -------------       ------------       -----------
Ending balance                                                    $ 642              $ 376             $ 149
                                                          =============       ============       ===========
</TABLE>

                                       47
<PAGE>

                         U.S.A. FLORAL PRODUCTS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       (in thousands, except share data)

NOTE 6 - PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31:

<TABLE>
<CAPTION>
                                                              1999               1998
                                                         -------------       ------------
<S>                                                        <C>                 <C>
Buildings                                                      $19,507            $21,392
Leasehold improvements                                           4,130              4,196
Furniture, fixtures, and office equipment                       10,260              8,961
Vehicles                                                         3,926              7,081
Machinery & equipment                                            7,419             11,941
                                                         -------------       ------------
                                                                45,242             53,571
Accumulated depreciation and amortization                       (1,255)            (5,951)
                                                         -------------       ------------
                                                                43,987             47,620
Land                                                             9,370             12,016
                                                         -------------       ------------
                                                               $53,357            $59,636
                                                         =============       ============
</TABLE>

  Depreciation and amortization expense for the years ended December 31, 1999
and 1998 and for the period April 22, 1997 to December 31, 1997 was $9,748,
$5,660, and $290 respectively.


NOTE 7 - CREDIT FACILITY

  Effective October 2, 1998, the Company amended and restated its existing
credit agreement with a syndicate of lenders for which Bankers Trust Company
serves as agent (the "Amended Credit Agreement"). Pursuant to the terms of the
Amended Credit Agreement, the amount of the Company's revolving credit
facilities was increased to $200 million, of which the sub-limit for permitted
acquisitions is $180 million and the sub-limit for working capital purposes and
letters of credit is $20 million.  In addition, of the $200 million in revolving
credit facilities, up to $15 million has been designated to be a revolving loan,
which is available to certain foreign subsidiaries of USA Floral in either
Deutsche Marks or Guilders. Further, a new $50 million, Deutsche Mark
denominated term loan was created as an additional source of borrowings in
excess of the $200 million revolving credit facilities.  Borrowings under the
revolving credit facilities bear interest, at the Company's option, at (a)
Bankers Trust Company's base rate plus an applicable margin of up to 1.25% or
(b) a Eurodollar rate plus an applicable margin of up to 2.50%. Borrowings under
the term loan bear interest at the interbank rate for Deutsche Marks plus an
applicable margin of up to 2.50%. The Company paid aggregate financing fees of
approximately $3.9 million, which has been deferred and will be amortized over
the term of the Amended Credit Agreement.  In addition, a commitment fee of
0.50% will be charged on the unused portion of the revolving credit facilities
on a quarterly basis.  Both the revolving credit facilities and the term loan
mature five years from the closing date.  The installments of the term loan in
the next four years are:  2000 - $2.5 million, 2001 - $12.5 million, 2002 - $20
million and 2003 - $15 million. At December 31, 1999, the aggregate outstanding
indebtedness under both the revolving credit facilities and the term loan was
approximately $197.9 million and the effective interest rate was approximately
6.58% on the revolving credit facility and approximately 8.88% on the term loan.

  The entire $50 million proceeds of the new term loan and $54.1 million of the
borrowings available under the revolving credit facilities were used to finance
the aggregate purchase price of approximately $90 million (including the
repayment of indebtedness) and related transactional expenses for the purchase
of the business of Florimex and a working capital infusion for the Company.  In
addition, on October 2, 1998, the Company rolled over approximately $86.5
million in outstanding borrowings, accrued interest

                                       48
<PAGE>

                         U.S.A. FLORAL PRODUCTS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       (in thousands, except share data)

and related fees under its existing revolving credit facility. The proceeds of
the outstanding borrowings under the revolving credit facility prior to its
amendment on October 2, 1998, were used to finance acquisitions and fund related
working capital requirements.

  As a result of the amendment and restatement of the credit facility and
termination of the original credit agreement, the Company recorded a charge
before income taxes of $1,606 in October 1998, to write off the unamortized
portion of the deferred financing fees related to the original credit agreement.

  Borrowings under the Amended Credit Agreement are collateralized by
receivables, inventories, equipment and certain real property. Under the terms
of the Amended Credit Agreement, the Company is required to maintain certain
financial ratios and other financial and non-financial conditions.  The Amended
Credit Agreement prohibits the Company from incurring additional indebtedness,
limits certain investments, advances or loans and restricts substantial asset
sales, capital expenditures and cash dividends.

  As of December 31, 1999, the Company was not in compliance with applicable
financial covenants, including the leverage ratio. Pursuant to the terms of the
Credit Agreement, non-compliance with one or more financial covenants permits
for the lenders to terminate the commitment and declare the principal balance
and any accrued interest on all loans and obligations immediately due and
payable. The Company obtained a waiver on all financial covenants at December
31, 1999 and on March 24, 2000, the financial covenants, including the leverage
ratio and consolidated interest coverage ratio, were amended under the Amended
Credit Agreement. Further, the Company is required to achieve minimum EBITDA
levels, as defined in the Amended Credit Agreement. Additionally, the amendment
limits the level of the Company's total outstanding borrowings to $224.0 million
and at March 24, 2000, the aggregate outstanding borrowings were approximately
$208.5 million. In consideration for the amendment, the Company agreed to pay a
financing fee of $1.75 million on March 31, 2001 and issue approximately 820,000
warrants to purchase common stock of the Company at an exercise price of $0.25
per share. The warrants issued are exercisable anytime after March 31, 2001 and
expire March 31, 2010. Both the financing fee and the fair value of the warrants
issued will be deferred and amortized over the remaining term of the Amended
Credit Agreement.

NOTE 8 - FINANCIAL INSTRUMENTS

  The Company uses derivative financial instruments for the purpose of reducing
its exposure to adverse fluctuations in interest and foreign exchange rates.
While these hedging instruments are subject to fluctuations in value, such
fluctuations are generally offset by the value of the underlying exposures being
hedged.  The Company is not a party to leveraged derivatives and does not hold
or issue financial instruments for speculative purposes.

  The Company utilizes interest rate swaps to reduce the impact on interest
expense of fluctuating interest rates on its variable rate debt.  Under the
Company's interest rate swap agreement, the Company agreed with the counterparty
to exchange, at quarterly intervals, the difference between the Company's fixed
pay rate and the counterparty's variable pay rate of three-month LIBOR.  At
December 31, 1999, the Company was a fixed rate payor of 5.89% and received a
variable rate of 6.12% on notional amounts of $10,000.   The fair values at
December 31, 1999, as estimated by a dealer, were favorable $66.

  The Company uses foreign currency forwards and options, which typically expire
within 30 days, to hedge payments and receipts of foreign currencies related to
the purchase and sale of goods overseas.  Realized gains and losses on these
contracts are recognized in the same period as the hedged transactions.  The
Company had open foreign exchange forward contracts at December 31, 1999 in the
aggregate of $4.5 million.  Such contracts had an unrealized loss of $29 at
December 31, 1999.

                                       49
<PAGE>

                         U.S.A. FLORAL PRODUCTS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       (in thousands, except share data)

  The Company is exposed to foreign exchange rate fluctuations as the financial
results of foreign subsidiaries are translated into U.S. dollars in
consolidation.  As exchange rates vary, those results, when translated, may vary
from expectations and adversely impact overall expected profitability.  The
cumulative translation effects for subsidiaries using functional currencies
other than the U.S. dollar are included in the cumulative translation adjustment
in stockholders' equity.


NOTE 9 - INCOME TAXES

The components of income (loss) before income taxes were as follows:

<TABLE>
<CAPTION>
                               For the year         For the year          For the period
                                   ended               ended            April 22, 1997 to
                               December 31,         December 31,           December 31,
                                   1999                 1998                   1997
                                  -------              -------                 -----
<S>                    <C>                  <C>                 <C>
Domestic                          $(3,298)             $12,915                 $ 906
Foreign                             3,263                2,113                   ---
                                  -------              -------                 -----
                                  $   (35)             $15,028                 $ 906
                                  =======              =======                 =====
</TABLE>


The components of income tax expense (benefit) are:
<TABLE>
<CAPTION>
                                                                       For the period April
                                                                           22, 1997  to
                               December 31,         December 31,           December 31,
                                   1999                 1998                   1997
                                  -------              -------                 -----
<S>                    <C>                  <C>                  <C>
Current:
    Federal                       $(2,257)             $ 7,588                  $ 450
    State                             827                1,576                     80
    Foreign                         1,888                  296                      -
                     ----------------------------------------------------------------
                                      458                9,460                    530
                     ----------------------------------------------------------------
 Deferred:
    Federal                         2,310               (1,939)                   (34)
    State                             262                 (774)                    (6)
    Foreign                           (17)                 508                      -
                     ----------------------------------------------------------------
                                    2,555               (2,205)                   (40)
                     ----------------------------------------------------------------
Total provision                   $ 3,013              $ 7,255                  $ 490
                     ================================================================
</TABLE>

                                       50
<PAGE>

                         U.S.A. FLORAL PRODUCTS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     (in thousands, except share data)

  Deferred income tax assets and liabilities reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred income tax assets and
liabilities as of December 31 are as follows:

<TABLE>
<CAPTION>
                                                           1999                                1998
                                               -----------------------------       -----------------------------
                                                Short-term      Long-term           Short-term      Long-term
                                               -------------  --------------       -------------  --------------
<S>                                            <C>            <C>                  <C>            <C>
Deferred income tax assets:
     Allowance for doubtful accounts                  $  913        $     -               $  567        $     -
     Inventory capitalization                            436              -                  130              -
     Anti-dumping accrual                                 25              -                1,177              -
     Restructuring reserves                              239              -                1,364              -
     Inventory reserves                                  159              -                  138              -
     Accrued compensation and pension                    697            884                    -          1,152
     Deferred financing cost                               -            505                    -            610
     State tax net operating losses                        -          2,014                    -            534
     Foreign net operating losses                          -          3,498                    -          3,410
     Other                                               462              -                    -          1,219
                                             ------------------------------      ------------------------------
          Total deferred income tax assets             2,931          6,901                3,376          6,925
          Less: valuation allowance                        -         (4,901)                   -         (3,410)
                                             ------------------------------      ------------------------------
             Net deferred income tax assets            2,931          2,000                3,376          3,515
                                             ------------------------------      ------------------------------
Deferred income tax liabilities:
     Accumulated depreciation                              -          2,609                    -          3,660
     Accumulated amortization on goodwill
       related to acquisition of partnership
       interests                                           -          2,000                    -            939


     Other                                                 -            860                    -            700
                                             ------------------------------      ------------------------------
          Total deferred income tax
            liabilities                                    -          5,469                    -          5,299
                                             ------------------------------      ------------------------------
Net deferred income tax assets (liabilities)          $2,931        $(3,469)              $3,376        $(1,784)
                                             ==============================      ==============================
</TABLE>

  At December 31, 1999 the Company has state net operating losses of
approximately $25.0 million to offset future years state taxable income in
certain states.  A valuation allowance has been recorded against the majority of
the state net operating losses because, in management's opinion, realization of
these tax benefits was not "more likely than not".  These state net operating
loss carryforwards begin to expire starting 2003.  In addition, the Company also
has foreign net operating losses of $10.2 million from 5 different countries.
These foreign losses can be carried forward and used to offset future year's
foreign taxable income.  Of the total $10.2 million of foreign net operating
loss, $7.2 million can be carried forward indefinitely and $3.0 million will
begin to expire starting in 2000.  A full valuation allowance for the entire tax
benefit relating to the foreign net operating loss has been provided.  A
valuation allowance was established for the tax benefits attributable to foreign
net operating losses because, in management's opinion, realization of these tax
benefits was not "more than likely than not".  If and when realized, such tax
benefits will be recorded as a reduction of goodwill on the related acquistion.

                                       51
<PAGE>

                         U.S.A. FLORAL PRODUCTS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     (in thousands, except share data)

A reconciliation between the statutory federal income tax rate and the effective
rate of income tax expense follows:
<TABLE>
<CAPTION>
                                                             1999              1998             1997
                                                          ---------         ----------       ----------

<S>                                                        <C>               <C>              <C>
Pre-tax income (loss)                                         $  (35)           $15,028            $ 906
                                                         -----------       ------------     ------------

 Federal tax at statutory rate                                   (12)             5,260              308
 State tax (net of federal benefit)                              708                601               54
 Goodwill amortization                                         1,942              1,202              109
 Other                                                           375                192               19
                                                         -----------       ------------     ------------
Provision for income taxes                                    $3,013            $ 7,255            $ 490
                                                         ===========       ============     ============
</TABLE>

  The effective income tax rate for 1999 is not a meaningful calculation, as
there is a pre-tax loss of $35.  The effective tax rate for 1998 and 1997 is 48%
and 54%, respectively.

  Retained earnings at December 31, 1999 includes undistributed earnings of
$15.4 million of certain foreign subsidiaries which are not subject to
additional foreign income tax nor considered to be subject to United States
income taxes unless remitted as dividends.  The Company intends to permanently
reinvest these undistributed earnings; accordingly, no provision has been made
for United States taxes on such earnings.


NOTE 10 - RELATED PARTY TRANSACTIONS

  The Company receives and purchases flowers from farms owned or partially owned
by, and/or persons related to, directors and senior management of USA Floral and
its subsidiaries. Approximately 4% and 25% of the cost of sales in 1999 and
1998, respectively, represented purchases from related entities intended by the
parties to be representative of market rates.  Included in the cost of sales are
representative fees to related entities for flowers shipped from Colombia. These
related entities ensure that the Company has a reliable source of fresh-cut
flowers in Colombia. The entities also provide each of the Company's suppliers
with technical expertise to improve and maintain the yield, quality and
durability of fresh-cut flowers. In addition, due to the large number of
suppliers in Colombia, the Company requires the service of the entities to
consolidate the shipments of flowers with a common carrier, and generate the
paperwork necessary to complete the shipment of flowers.

  The Company leases offices and warehouse facilities from entities owned and/or
related to directors and senior management of USA Floral and its subsidiaries.
All such transactions are conducted at rates intended by the parties to be
representative of market rates. Rent under such leases for the years ended
December 31, 1999 and 1998 and for the period April 22, 1997 to December 31,
1997 was approximately $1,158, $4,159 and $219, respectively.

                                       52
<PAGE>

                         U.S.A. FLORAL PRODUCTS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     (in thousands, except share data)

NOTE 11 - COMMITMENTS AND CONTINGENCIES

Lease Commitments

  The Company leases warehouse and office facilities in a number of locations
under non-cancelable operating leases.  The aggregate future minimum rentals
(exclusive of real estate taxes and expenses) are as follows:

<TABLE>
<CAPTION>
Year ending December 31,                                                Related             Other
                                                                        Parties            Parties
                                                                    --------------     --------------
<S>                                                                   <C>                <C>
2000                                                                          $419            $ 7,784
2001                                                                           265              5,118
2002                                                                           260              6,361
2003                                                                             3              3,147
2004                                                                             -              2,258
Thereafter                                                                       -              6,156
                                                                    --------------     --------------
                                                                              $947            $30,824
                                                                    ==============     ==============
</TABLE>

   Rent expense for the years ended December 31, 1999, 1998 and for the period
April 22, 1997 to December 31, 1997 was $14,851, $10,429, and $417 respectively.

Legal Matters

  The Company is involved in various legal matters in the normal course of
business. In the opinion of the Company's management, these matters are not
anticipated to have a material adverse effect on the financial position or
results of operations of the Company.

Anti-Dumping

  Beginning in 1986, the U.S. Department of Commerce (the "DOC") imposed an
anti-dumping duty deposit ("ADD") on the importation of certain flowers (the
"Anti-dumping Order") from Colombia.  Such anti-dumping duty is subject to
change based upon annual reviews of the flower growers' margins.  On May 20,
1999, a settlement was reached whereby all open review periods through February
28, 1997 (periods 5, 6, 7, 9 and 10) were finalized at the cash deposit rate.
That is, the Company does not owe any additional anti-dumping duties for those
periods.  On July 20, 1999, the DOC revoked the Anti-dumping Order on fresh cut
flowers from Colombia retroactive to March 1, 1997, the beginning of period 11.
Further, the DOC stated that, as a result of the retroactive revocation, the DOC
has terminated its reviews of periods 11 and 12 and that the DOC intends to
refund any ADD collected on or after March 1, 1997.  Therefore, as a result of
the final determinations by the DOC regarding open review periods and the DOC's
retroactive revocation of the Anti-dumping Order, the Company released
approximately $2.2 million in anti-dumping reserves during the second quarter of
1999.  The release of the reserves was recorded as a reduction to cost of sales.
Further, due to the uncertainty of the amount and the timing of the ADD refunds
related to periods subsequent to March 1, 1997, such refunds, if any, will be
recorded as a reduction to cost of sales at the time of the receipt of such
refunds.

                                       53
<PAGE>

                         U.S.A. FLORAL PRODUCTS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     (in thousands, except share data)

NOTE 12 - INTEGRATION PLANS

  In November 1998, in connection with management's plan to reduce costs and
improve operating efficiencies, the Company announced an integration plan that
was expected to result in a charge of approximately $3.8 million.  Approximately
$3.4 million of the charge was recorded in the fourth quarter of 1998 and an
additional $40 was recorded in the first quarter of 1999.  As a result of the
finalization of estimated amounts and changes in the original plan, the Company
has recorded $752 as an integration credit in the quarter ended December 31,
1999.

  In connection with the integration plan, the Company integrated certain
warehouse and distribution facilities, principally those associated with the
Company's import and bouquet manufacturing operations in Miami, Florida. The
integration charge principally relates to the write-down to fair value of
equipment made obsolete or redundant, severance related to the termination of
180 employees, and lease termination costs due to the decision to merge certain
facilities.  The integration of the warehouses and distribution facilities began
in November 1998 and was completed in December 1999.

The major components of the integration charge as originally estimated are as
follows:

<TABLE>
<CAPTION>

<S>                                               <C>
Severance and related costs                            $  800
Write down of property and equipment                    2,100
Lease termination costs                                   400
Professional fees and other costs                         500
                                                  -----------
                                                       $3,800
                                                  ===========
</TABLE>

  During the integration plan a total of 179 employees were terminated resulting
in severance payments of $922.   Approximately $1.4 million of property and
equipment were written down.  The realized losses on the sale of property and
equipment and actual lease termination costs were less than the estimated amount
originally included in the integration charge.

  As of December 31, 1999, this plan has been substantially completed with only
two entities not fully implemented.  A restructuring reserve of $269 remains at
December 31, 1999 for severance, write-down assets and other cash outflows.

                                       54
<PAGE>

                         U.S.A. FLORAL PRODUCTS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       (in thousands, except share data)

A summary of the integration plan activity is presented below:

<TABLE>
<S>                                      <C>
Balance established on November 3, 1998      $3,361
1998 Activity:
        Non cash write-down of property
          and equipment                        (247)
        Lease-termination cash payments         (20)
        Reduction in workforce and other
          cash outflows                        (170)
                                         ----------
Balance at December 31, 1998                  2,924
1999 Activity:
        Increase in accrual                      40
        Non cash write-down of property
          and equipment                        (941)
        Lease-termination cash payments        (250)
        Reduction in workforce and
          other cash outflows                  (752)
        Integration credit                     (752)
                                         ----------
Balance at December 31, 1999                 $  269
                                         ==========
</TABLE>

  In connection with the Company's acquisition of Florimex, the Company assumed
approximately $2.7 million in reserves for a restructuring of the German
Wholesale Operation and a plan to integrate certain operations, warehouses and
distribution facilities, principally those associated with the International
Division of the Company's operations in the Netherlands.  Of the reserves,
approximately $2.6 million related to severance payments for 25 employees and
the balance of approximately $125 relates to the write down of assets.  The
integration of the operations, warehouses and distribution facilities was
completed in December of 1999.

  During the integration plan a total of 21 employees were terminated resulting
in a severance payment of $1,986.  During the year ended December 31, 1999, the
Company recorded a credit adjustment to goodwill in the amount of $259
representing the difference between the actual restructuring costs incurred and
the original restructuring amount recorded at the date of the Florimex
acquisition.  A summary of the integration plan activity is presented below:


<TABLE>
<S>                                                    <C>
Date of Florimex acquisition (October 1, 1998)            $2,700
Integration Activity:
  Reduction in workforce cash outflows                     1,986
  Goodwill adjustment                                        259
  Other cash outflows                                        455
                                                     ------------
Balance at December 31, 1999                              $    -
                                                     ============
</TABLE>

                                       55
<PAGE>

                         U.S.A. FLORAL PRODUCTS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       (in thousands, except share data)

NOTE 13  - GEOGRAPHIC REGION AND BUSINESS SEGMENT INFORMATION

  Segment information has been provided for each of the years presented in the
Company's statement of operations.  The Company is organized primarily on a
geographic basis with an International Division and a North America Division and
secondarily based on the products and services that it offers.  Each division
has three segments: import/export, wholesale distribution and bouquet
manufacturers.  The import/export segment purchases flowers from farms located
primarily in South America, Africa and Europe and sells them to wholesalers and
bouquet manufacturers.  The wholesale distribution segment purchases perishable
flowers and floral related hardgoods from growers, importer/exporters and
brokers and sells them to retail florists and mass marketers.  The bouquet
manufacturers segment procures and produces fresh cut floral bouquets for
distribution primarily to mass markets, broadly defined as supermarkets and
discount retailers.  The Company's reportable divisions and segments are
strategic business units that offer different floral related products and
services.  They are managed separately because each business division and
segment requires different marketing and management strategies. The Company
evaluates segment performance and allocates resources to them based on gross
margin, income from operations, and return on assets employed.

  The accounting policies of the segments are the same as those described in
Note 1, "Summary of Significant Accounting Policies".  Segment data includes
intersegment sales and transfers which the Company accounts for as if the sales
or transfers were to third parties, that is, at current market prices.

The following tables present information about reported segments:

<TABLE>
<CAPTION>
                                                                          For the period
                                        Year Ended        Year Ended      April 22, 1997
Revenues - external customers          December 31,      December 31,    to December 31,
                                           1999              1998              1997
<S>                                  <C>               <C>               <C>
-----------------------------------------------------------------------------------------
North America Division
        Import/Export                        $208,567          $189,034           $13,398
        Wholesale Distribution                190,601           166,217            21,240
        Bouquet Manufacturers                 168,293           125,625             2,742
-----------------------------------------------------------------------------------------
        Total North America Division          567,461           480,876            37,380
-----------------------------------------------------------------------------------------
International Division
        Import/Export                         238,141            73,166                 -
        Wholesale Distribution                 66,311            19,085                 -
        Bouquet Manufacturers                  52,934            15,907                 -
-----------------------------------------------------------------------------------------
        Total International Division          357,386           108,158                 -
-----------------------------------------------------------------------------------------
Consolidated
        Import/Export                         446,708           262,200            13,398
        Wholesale Distribution                256,912           185,302            21,240
        Bouquet Manufacturers                 221,227           141,532             2,742
-----------------------------------------------------------------------------------------
        Total Consolidated                   $924,847          $589,034           $37,380
-----------------------------------------------------------------------------------------
</TABLE>

                                       56
<PAGE>

                         U.S.A. FLORAL PRODUCTS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       (in thousands, except share data)

<TABLE>
<CAPTION>
                                                                          For the period
                                        Year Ended        Year Ended      April 22, 1997
Revenues - intercompany                December 31,      December 31,    to December 31,
                                           1999              1998              1997
<S>                                   <C>               <C>               <C>
------------------------------------------------------------------------------------------
North America Division
        Import/Export                        $ 43,076           $28,198         $       -
        Wholesale Distribution                  3,422                 -                 -
        Bouquet Manufacturers                   7,509                 -                 -
------------------------------------------------------------------------------------------
        Total North America Division           54,007            28,198                 -
------------------------------------------------------------------------------------------
International Division
        Import/Export                          72,002            23,503                 -
        Wholesale Distribution                    137                38                 -
        Bouquet Manufacturers                     665               154                 -
------------------------------------------------------------------------------------------
        Total International Division           72,804            23,695                 -
------------------------------------------------------------------------------------------
Consolidated
        Import/Export                         115,078            51,701                 -
        Wholesale Distribution                  3,559                38                 -
        Bouquet Manufacturers                   8,174               154                 -
------------------------------------------------------------------------------------------
        Total Consolidated                   $126,811           $51,893         $       -
------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                          For the period
                                        Year Ended        Year Ended      April 22, 1997
Gross Margin                           December 31,      December 31,    to December 31,
                                           1999              1998              1997
<S>                                   <C>               <C>               <C>
-----------------------------------------------------------------------------------------
North America Division
        Import/Export                        $ 64,357          $ 56,913           $ 3,086
        Wholesale Distribution                 60,520            53,844             7,146
        Bouquet Manufacturers                  33,493            24,540               463
-----------------------------------------------------------------------------------------
        Total North America Divsion           158,370           135,297            10,695
-----------------------------------------------------------------------------------------
International Division
        Import/Export                          52,848            16,337                 -
        Wholesale Distribution                 16,807             4,953                 -
        Bouquet Manufacturers                  10,163             3,435                 -
-----------------------------------------------------------------------------------------
        Total International Divsion            79,818            24,725                 -
-----------------------------------------------------------------------------------------
Consolidated
        Import/Export                         117,205            73,250             3,086
        Wholesale Distribution                 77,327            58,797             7,146
        Bouquet Manufacturers                  43,656            27,975               463
-----------------------------------------------------------------------------------------
        Total Consolidated                   $238,188          $160,022           $10,695
-----------------------------------------------------------------------------------------
</TABLE>

                                       57
<PAGE>

                         U.S.A. FLORAL PRODUCTS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       (in thousands, except share data)

<TABLE>
<CAPTION>
                                                                          For the period
                                        Year Ended        Year Ended      April 22, 1997
Depreciation and Amortization          December 31,      December 31,    to December 31,
                                           1999              1998              1997
<S>                                  <C>               <C>               <C>
-----------------------------------------------------------------------------------------
North America Division
        Import/Export                         $ 4,726            $4,093              $188
        Wholesale Distribution                  3,161             2,527               334
        Bouquet Manufacturers                   2,306             1,884                44
-----------------------------------------------------------------------------------------
        Total North America Division           10,193             8,504               566
-----------------------------------------------------------------------------------------
International Division
        Import/Export                           2,150               609                 -
        Wholesale Distribution                  1,710               521                 -
        Bouquet Manufacturers                     979               315                 -
-----------------------------------------------------------------------------------------
        Total International Division            4,839             1,445                 -
-----------------------------------------------------------------------------------------
Consolidated
        Import/Export                           6,876             4,702               188
        Wholesale Distribution                  4,871             3,048               334
        Bouquet Manufacturers                   3,285             2,199                44
-----------------------------------------------------------------------------------------
        Total Consolidated                    $15,032            $9,949              $566
-----------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                           For the period
                                        Year Ended         Year Ended      April 22, 1997
Integration Charge                      December 31,       December 31,    to December 31,
                                           1999                1998              1997
<S>                                  <C>                <C>               <C>
------------------------------------------------------------------------------------------
North America Division
        Import/Export                           $(712)            $1,658                $-
        Wholesale Distribution                     40                558                 -
        Bouquet Manufacturers                     (40)             1,145                 -
------------------------------------------------------------------------------------------
        Total North America Division             (712)             3,361                 -
------------------------------------------------------------------------------------------
International Division
        Import/Export                               -                  -                 -
        Wholesale Distribution                      -                  -                 -
        Bouquet Manufacturers                       -                  -                 -
------------------------------------------------------------------------------------------
        Total International Division                -                  -                 -
------------------------------------------------------------------------------------------
Consolidated
        Import/Export                            (712)             1,658                 -
        Wholesale Distribution                     40                558                 -
        Bouquet Manufacturers                     (40)             1,145                 -
------------------------------------------------------------------------------------------
        Total Consolidated                      $(712)            $3,361                $-
------------------------------------------------------------------------------------------
</TABLE>

                                       58
<PAGE>

                         U.S.A. FLORAL PRODUCTS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       (in thousands, except share data)

<TABLE>
<CAPTION>
                                                                           For the period
                                        Year Ended         Year Ended      April 22, 1997
Income from Operations                 December 31,       December 31,    to December 31,
                                           1999               1998              1997
------------------------------------------------------------------------------------------
<S>                                  <C>                  <C>             <C>
North America Division
        Import/Export                         $16,899            $18,127            $  514
        Wholesale Distribution                  2,092              5,746               789
        Bouquet Manufacturers                   1,056              1,187                28
------------------------------------------------------------------------------------------
        Total North America                    20,047             25,060             1,332
        Division
------------------------------------------------------------------------------------------
International Division
        Import/Export                           6,214              2,229                 -
        Wholesale Distribution                   (184)               398                 -
        Bouquet Manufacturers                   1,415                231                 -
------------------------------------------------------------------------------------------
        Total International                     7,445              2,858                 -
        Division
------------------------------------------------------------------------------------------
Consolidated
        Import/Export                          23,113             20,356               514
        Wholesale Distribution                  1,908              6,144               789
        Bouquet Manufacturers                   2,471              1,418                28
------------------------------------------------------------------------------------------
        Total Consolidated                    $27,492            $27,918            $1,332
------------------------------------------------------------------------------------------

<CAPTION>
                                                                          For the period
                                        Year Ended        Year Ended      April 22, 1997
Total Assets                           December 31,      December 31,    to December 31,
                                           1999              1998              1997
-----------------------------------------------------------------------------------------
<S>                                  <C>                  <C>             <C>
North America Division
        Import/Export                        $158,870          $143,171           $31,687
        Wholesale Distribution                102,306            95,167            54,098
        Bouquet Manufacturers                  71,896            69,780             7,080
------------------------------------------------------------------------------------------
        Total North America                   333,072           308,118            92,865
        Division
-----------------------------------------------------------------------------------------
International Division
        Import/Export                          61,634            65,010                 -
        Wholesale Distribution                 17,431            21,298                 -
        Bouquet Manufacturers                  12,225            18,653                 -
------------------------------------------------------------------------------------------
        Total International                    91,290           104,961                 -
        Division
-----------------------------------------------------------------------------------------
Consolidated
        Import/Export                         220,504           208,181            31,687
        Wholesale Distribution                119,737           116,465            54,098
        Bouquet Manufacturers                  84,121            88,433             7,080
------------------------------------------------------------------------------------------
        Total Consolidated Division          $424,362          $413,079           $92,865
-----------------------------------------------------------------------------------------
</TABLE>

                                       59
<PAGE>

                         U.S.A. FLORAL PRODUCTS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       (in thousands, except share data)

<TABLE>
<CAPTION>
                                                                          For the period
                                        Year Ended        Year Ended      April 22, 1997
Capital Expenditures                   December 31,      December 31,    to December 31,
                                           1999              1998              1997
-----------------------------------------------------------------------------------------
<S>                                    <C>               <C>             <C>
North America Division
        Import/Export                         $ 4,779            $1,041              $129
        Wholesale Distribution                  2,653             2,058                96
        Bouquet Manufacturers                   1,850               871                71
-----------------------------------------------------------------------------------------
        Total North America Division            9,282             3,970               296
-----------------------------------------------------------------------------------------
International Division
        Import/Export                             853             1,067                 -
        Wholesale Distribution                    812               367                 -
        Bouquet Manufacturers                     651               313                 -
-----------------------------------------------------------------------------------------
        Total International Division            2,316             1,747                 -
-----------------------------------------------------------------------------------------
Consolidated
        Import/Export                           5,632             2,108               129
        Wholesale Distribution                  3,465             2,425                96
        Bouquet Manufacturers                   2,501             1,184                71
-----------------------------------------------------------------------------------------
        Total Consolidated                    $11,598            $5,717              $296
-----------------------------------------------------------------------------------------
</TABLE>

  A reconciliation of total segment sales to total consolidated sales and total
segment income from operations to total consolidated income before income is as
follows:

<TABLE>
<CAPTION>
                                                                                           For the period
                                                       Year Ended        Year Ended      April 22, 1997 to
Income from Operations                                December 31,      December 31,         December 31,
                                                          1999              1998                 1997
----------------------------------------------------------------------------------------------------------
<S>                                                 <C>               <C>                <C>
Total segment income from operations                       $ 27,492            $27,918              $1,332
Interest income                                               1,922              1,883                 248
Interest expense                                            (16,088)            (8,040)                 (8)
Other income                                                    375                449                  37
Write-off of deferred financing fees                              -             (1,606)                  -
Unallocated corporate S,G&A expenses                        (12,247)            (5,211)               (703)
Unallocated goodwill amortization                            (1,489)              (365)                  -
                                                  --------------------------------------------------------
 Total consolidated income (loss) before
 Income taxes                                              $    (35)           $15,028              $  906
                                                  ========================================================
</TABLE>

  A reconciliation of total segment assets to consolidated total assets is as
follows:

<TABLE>
<CAPTION>
                                                              Year Ended          Year Ended
Total Assets                                               December 31, 1999   December 31, 1998
------------------------------------------------------------------------------------------------
<S>                                                        <C>                <C>
Total segment assets                                               $424,362             $413,079
Elimination of intercompany receivable                                 (592)              (6,464)
Goodwill not allocated to segments                                   54,200               70,462
Other assets                                                          8,840               16,957
                                                         ---------------------------------------
   Total consolidated assets                                       $486,810             $494,034
                                                         =======================================
</TABLE>

                                       60
<PAGE>

                         U.S.A. FLORAL PRODUCTS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       (in thousands, except share data)


The following table presents sales information by geographic area.  Sales are
based on the country in which the sale originates (i.e., where the legal
subsidiary is domiciled) and does not include intercompany sales.

<TABLE>
<CAPTION>
                                                                                   For the period
                                    Year Ended December   Year Ended December    April 22, 1997 to
Sales                                     31, 1999              31, 1998         December 31, 1997
----------------------------------------------------------------------------------------------------
<S>                                 <C>                   <C>                   <C>
United States                                  $534,039              $470,312              $37,380
Germany                                         110,681                30,768                    -
Netherlands                                     135,472                32,064                    -
Other foreign countries                         144,655                55,890                    -
                                  ------------------------------------------------------------------
     Total                                     $924,847              $589,034              $37,380
                                  ==================================================================
</TABLE>

The following table presents long-lived assets information by geographic area:

                                    Year Ended December   Year Ended December
Long-lived assets                         31, 1999              31, 1998

------------------------------------------------------------------------------
United States                                   $230,503              $240,425
Germany                                           72,734                61,488
Netherlands                                        7,681                17,419
Other foreign countries                           21,376                22,525
                                  --------------------------------------------
     Total                                      $332,294              $341,857
                                  ============================================


NOTE 14 - STOCK OPTION PLANS

Stock Option Plans

  The Company's Board of Directors has adopted and the Company's stockholders
have approved the Company's 1997 Long-Term Incentive Plan (the "Incentive
Plan"). The maximum number of shares of common stock that may be subject to
outstanding awards may not be greater than that number of shares equal to
fifteen percent (15%) of the outstanding shares from time to time, which number
of shares is reserved for issuance. The terms of the option awards were
established by the Compensation Committee of the Company's Board of Directors
(the "Committee") and awards may be settled in cash, shares, other awards or
other property, as determined by the Committee.

  Under the Incentive Plan, the Company granted stock options to purchase
approximately 875,000 shares of common stock to key employees of the Company at
the initial public offering price upon consummation of the IPO and options to
purchase 125,000 shares of common stock to other key employees at the greater of
$8.00 per share or 60% of the initial public offering price.  During 1999, two
key employees with options resigned.  These options were terminated and 100,000
were removed from the dilutive shares calculation.  Compensation expense is
being recorded over the four year vesting period for the options issued at a
discount.

                                       61
<PAGE>

                         U.S.A. FLORAL PRODUCTS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       (in thousands, except share data)


  The Company's Board of Directors has adopted and the Company's stockholders
have approved the 1997 Non-Employee Directors' Stock Plan (the "Directors'
Plan"), which provides for the automatic grant to each nonemployee director of
an option to purchase 21,000 shares on the date elected or on the effective date
of the IPO. Thereafter nonemployee directors will receive an option to purchase
6,000 shares on the day after each annual meeting of the Company's stockholders.
A total of 300,000 shares are reserved for issuance under the Directors' Plan.
During the year ended December 31, 1999, options to purchase 625,000 shares were
issued, including 30,000 options issued to directors after the annual meeting of
the Company's stockholders in May 1999.  During the year ended December 31,
1998, options to purchase 102,000 shares were issued; 18,000 options issued
after the annual meeting of the Company's stockholders in May 1998 and 84,000
options issued to new non-employee directors elected to the board of directors
in December 1998.  Also during 1998, 3,000 options to purchase shares were
terminated as a result of a non-employee director resignation from the Board of
Directors.

  Options granted under the Directors' Plan will have an exercise price per
share equal to the fair market value of a share at the date of grant. Options
will expire at the earlier of 10 years from the date of grant or one year after
termination of service as a director.  Options will vest and become exercisable
in two equal installments.  The first installment shall become exercisable six
months from the date the option is granted and the second installment shall
become exercisable one year from the date the option is granted.  In the event
of a change in control of the Company or death of a participant prior to normal
vesting, all options not already exercisable would become fully vested and
exercisable.

  The Incentive Plan and the Directors' Plan provide for the granting of either
incentive stock options or nonqualified stock options to purchase shares of the
Company's Common Stock and for other stock-based awards to officers, directors
and key employees responsible for the direction and management of the Company
and to non-employee consultants and independent contractors.

Information relating to stock options during 1997, 1998 and 1999 follows:

<TABLE>
<CAPTION>
                                                                                Weighted
                                                             Options            average             Total
                                                          (in thousands)     exercise price     Consideration
                                                      --------------------------------------------------------
<S>                                                     <C>                 <C>               <C>
Granted                                                             1,225             $12.68          $ 15,538
Exercised                                                            (110)             13.00            (1,430)
Forfeited                                                              (3)             13.00               (38)
--------------------------------------------------------------------------------------------------------------
Shares under option at December 31, 1997                            1,112              12.65            14,070
Granted                                                             1,669              15.75            26,298
Exercised                                                               -                  -                 -
Forfeited                                                            (116)             17.39            (2,021)
--------------------------------------------------------------------------------------------------------------
Shares under option at December 31, 1998                            2,665              14.39            38,347
Granted                                                               625               8.76             5,474
Exercised                                                              (7)             16.35              (109)
Forfeited                                                            (734)             13.94           (10,243)
--------------------------------------------------------------------------------------------------------------
Shares under option at December 31, 1999                            2,549             $13.13          $ 33,469
==============================================================================================================
</TABLE>

  Approximately 715,000 and 486,000 outstanding options were exercisable at
December 31, 1999, and 1998, respectively.  No options were exercisable at
December 31, 1997.

  All outstanding options are qualified options with the exception of 200,000
granted to the Company's new Chief Executive Officer. Compensation expense of
$94, $156, $36 for the years ended December 31, 1999, 1998 and 1997,
respectively, were recognized related to stock options issued below the market
price

                                       62
<PAGE>

                         U.S.A. FLORAL PRODUCTS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       (in thousands, except share data)

on the date of the grant.  Generally, the Company issues stock options at
exercise prices equal to fair market value of the common stock on the date of
grant.

Summary information about the Company's stock options outstanding and
exercisable as of December 31, 1999:

<TABLE>
<CAPTION>

                                Options Outstanding                                Options Exercisable
                  ----------------------------------------------------   --------------------------------------
                                                           Weighted
                       Number         Weighted Average      Average
    Range of      Outstanding (in       Contractual        Exercise      Number Exercisable   Weighted Average
 Exercise Price      thousands)       Period in Years        Price         (in thousands)      Exercise Price
---------------------------------------------------------------------------------------------------------------
<S>               <C>                <C>                 <C>            <C>                   <C>
    $2 - $5                     200                 9.1         $ 2.68                    -              $    -
     5 - 7                      210                 8.3           6.08                   45                5.85
     7 - 10                      50                 7.8           7.66                   19                7.77
    10 - 14                   1,114                 7.9          12.68                  398               12.91
    14 - 19                     659                 8.8          18.12                  174               18.09
    19 - 23                     316                 8.9          19.79                   79               19.79
---------------------------------------------------------------------------------------------------------------
    $2 - $23                  2,549                 8.4         $13.13                  715              $14.35
---------------------------------------------------------------------------------------------------------------
</TABLE>

  Subsequent to December 31, 1999, options to purchase 150,000 shares were
granted to the Company's new Chief Executive Officer at $2.50 per share, the
market price prevailing at the date of grant.  In addition, options to purchase
345,000 shares were granted to the Company's management at prices ranging from
$1.56 to $2.89 per share, the market prices prevailing at the date of the grant.

  At December 31, 1999 and 1998 approximately 2,548,590 and 2,205,000,
respectively, options to purchase shares that could potentially dilute future
earnings per share were not included in the computation of diluted earnings per
share because to do so would have been anti-dilutive for the periods presented.

  The shares used in computing net income (loss) per share are as follows:

<TABLE>
<CAPTION>
                                                    Year ended       Year ended       Period ended
(in thousands)                                    December 31,     December 31,     April 22, 1997 to
                                                       1999             1998        December 31, 1997
                                                  ---------------  ---------------  --------------------
<S>                                               <C>              <C>              <C>
Weighted average shares outstanding - basic               $16,349          $14,376                $4,734
Dilution attributable to option                                75              392                    90
Dilution attributable to earnouts                              85               21                   ---
                                                          -------          -------                ------
Weighted average shares outstanding - diluted             $16,509          $14,789                $4,824
                                                          =======          =======                ======
</TABLE>

  Pro forma information regarding net income (loss) and earnings per share is
required by Statement 123, and has been determined as if the Company accounted
for its employee stock options under the fair value method of Statement 123. The
fair value for these options was estimated at the date of grant using a Black-
Scholes option pricing model with the following weighted average assumptions
follows:

<TABLE>
<CAPTION>
                                                        1999              1998              1997
                                                        ----              ----              ----
<S>                                                    <C>               <C>               <C>
Risk-free interest rate                                      6.00%             5.00%             6.00%
Dividend yield                                               0.00%             0.00%             0.00%
Volatility factor                                              89%             82.0%             40.0%
Weighted average expected life                          7.5 Years         7.5 years         7.5 years
</TABLE>

  The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models

                                       63
<PAGE>

                         U.S.A. FLORAL PRODUCTS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       (in thousands, except share data)

require the input of highly subjective assumptions including the expected stock
price volatility. Because the Company's employee stock options have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee
stock options.

  For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma net income (loss) and income (loss) per share under Statement 123 for the
years ended December 31, 1999 and 1998 and the period April 22, 1997 to December
31, 1997 are shown below.  These pro forma disclosures are not representative of
the effects on reported net income (loss) and net income (loss) per share for
future years, because the Company's first option grants were made in the fourth
quarter of 1997, the options vest over four years and additional awards may be
granted in future years.

<TABLE>
<CAPTION>
                                                                    1999          1998        1997
                                                                    ----          ----        ----
<S>                                                                 <C>           <C>         <C>
Net income (loss) - as reported                                      ($3,066)      $7,743        $ 416
Net income (loss) - pro forma                                        ($3,649)      $4,262        $  95
Income (loss) per share - as reported, basic                           ($.19)      $ 0.54        $0.09
Income (loss) per share - pro forma, basic                             ($.22)      $ 0.30        $0.02
Income (loss) per share - as reported, diluted                         ($.19)      $ 0.52        $0.09
Income (loss) per share - pro forma, diluted                           ($.22)      $ 0.29        $0.02
Weighted average fair value of options granted during the year      $   1.52       $ 8.71        $9.55
</TABLE>


NOTE 15 - PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS

  Due to the acquisition of Florimex on October 1, 1998, the Company assumed and
maintains several unfunded defined benefit plans in Austria, Germany, and Italy
(the "Plan"), which cover substantially all full-time employees of the Company
employed in these countries.  The Plan provides for benefits to be paid to
eligible employees at retirement based primarily upon years of service or career
average pay.  Annual provisions for accrued pension cost are based upon
independent actuarial valuations.

The change in benefit obligation is presented in the following tables.

<TABLE>
<CAPTION>
                                                                              For the period
Change in benefit obligation:                      Year Ended December      October 1, 1998 to
                                                         31, 1999           December 31, 1998
-----------------------------------------------------------------------------------------------
<S>                                               <C>                     <C>
Benefit obligation beginning of period                           $2,872                  $2,822
Service cost                                                         86                      26
Interest cost                                                       117                      44
Plan participants' contributions                                      -                       -
Plan amendments                                                       -                       -
Actuarial gain                                                     (781)                      -
Foreign currency exchange rate changes                             (368)                      -
Acquisition                                                           -                       -
Benefits paid                                                       (91)                    (20)
                                                -----------------------------------------------
Benefit obligation at end of period                              $1,835                  $2,872
                                                ===============================================
</TABLE>

                                       64
<PAGE>

                         U.S.A. FLORAL PRODUCTS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       (in thousands, except share data)

The following tables set forth the Plan's fair value, funded status and weighted
average assumptions.

<TABLE>
<CAPTION>
                                                                             For the period
                                                   Year Ended December     October 1, 1998 to
Change in Plan assets:                                   31, 1999           December 31, 1998
                                                -----------------------------------------------
<S>                                               <C>                     <C>
Fair value of Plan at beginning of period                       $     -                 $     -
Actual return on plan assets                                          -                       -
Employer contribution                                                91                      19
Acquisition                                                           -                     (19)
Plan participants' contributions                                      -                       -
Benefits paid                                                       (91)                      -
                                                -----------------------------------------------
Fair value of Plan assets at end of period                      $     -                 $     -

Funded Status of Plan:
Funded status of Plan                                           $(1,835)                $(2,872)
Unrecognized actuarial gain                                        (729)                      -
Foreign currency translation                                         41                       -
Unrecognized prior service cost                                       -                       -
Unrecognized net transition obligation                                -                       -
                                                -----------------------------------------------
Accrued benefit cost                                            $(2,523)                $(2,872)
                                                ===============================================

Amounts recognized in the statement of
 financial position consist of:
Prepaid benefit cost                                            $     -                 $     -
Accrued benefit liability                                        (2,603)                 (2,872)
Intangible asset                                                      -                       -
Accumulated other comprehensive income                               80                       -
                                                -----------------------------------------------
Net amount recognized                                           $(2,523)                $(2,872)
                                                ===============================================

<CAPTION>
Weighted Average Assumptions                         1999                                   1998
                                        ---------------------------------     ----------------------------------
                                        Austria      Germany       Italy      Austria       Germany       Italy
<S>                                    <C>         <C>           <C>         <C>         <C>            <C>
Discount rate                            6.00%        6.00%        6.50%       6.00%         6.00%        6.50%
Expected return on assets                 n/a          n/a          n/a         n/a           n/a          n/a
Rate of compensation increase            4.00%         n/a         3.50%       4.00%          n/a         3.50%
</TABLE>


  The components of net periodic benefit cost included in net income for the
year ended December 31, 1999 and 1998, are as follows:

<TABLE>
<CAPTION>
                                                                             For the period
                                                   Year Ended December     October 1, 1998 to
Components of net periodic benefit:                      31, 1999           December 31, 1998
                                                -----------------------------------------------
<S>                                               <C>                     <C>
Service cost                                                       $ 86                     $26
Interest cost                                                       117                      44
Expected return on Plan assets                                        -                       -
Amortization of prior service cost                                    -                       -
Actuarial gain amortization                                         (52)                      -
Transition amount amortization                                        -                       -
                                                -----------------------------------------------
Net periodic benefit cost                                          $151                     $70
                                                ===============================================
</TABLE>

                                       65
<PAGE>

                         U.S.A. FLORAL PRODUCTS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       (in thousands, except share data)

401 (k) Plan

Effective January 1, 1999, the Company offered its qualified employees the
opportunity to participate in its defined contribution retirement plan
qualifying under the provision of Section 401(k) of the Internal Revenue Code
("IRS").  Each employee may contribute on a tax deferred basis a portion of
annual earnings not to exceed IRS limits.  Employees' eligible contributions are
matched by the Company at established rates.  Expenses recorded by the Company
relating to its 401 (k) plan were $621 in 1999.


NOTE 16 - SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental disclosure of cash flow information:
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                                    For the period
                                                             Year  ended         Year  ended      April 22, 1997 to
                                                          December 31, 1999   December 31, 1998   December 31, 1997
                                                        ------------------------------------------------------------
<S>                                                       <C>                 <C>                 <C>
   Cash paid during the period for interest                          $18,328            $  5,863             $   100
                                                                     =======            ========             =======
   Cash paid during the period for income taxes                      $ 6,443            $ 10,155             $   225
                                                                     =======            ========             =======

Supplemental disclosure of non-cash transactions:
  Business acquisitions:
    Cash paid for business acquisitions                              $     -            $153,189             $43,679
    Less:  cash acquired                                                   -              10,536               3,861
                                                                     -------            --------             -------
    Cash paid for business acquisitions, net                               -             142,653              39,818
    Issuance of common stock for business acquisitions                     -              99,461              22,743
                                                                     -------            --------             -------
                                                                           -             242,114              62,561
    Fair value of net assets acquired, net of cash                         -              22,154               9,717
                                                                     -------            --------             -------
                                                                     $                  $219,960             $52,844
                                                                     =======            ========             =======
</TABLE>

 During the year ended December 31, 1999, the Company satisfied its obligations
under certain earn-out arrangements through aggregate cash payments of $7,500
and through the issuance of common stock in the aggregate amount of $14,938.


NOTE 17 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

  The following is a summary of the unaudited quarterly financial data for the
quarters ended after the Company's IPO on October 15, 1997:

<TABLE>
<CAPTION>
                                                1997                                  1998
                                             -----------     ---------------------------------------------------------
                                              Fourth            First         Second           Third          Fourth
                                              Quarter          Quarter        Quarter         Quarter        Quarter
----------------------------------------------------------------------------------------------------------------------
<S>                                           <C>              <C>            <C>            <C>            <C>
Net revenues                                     $37,380         $100,520       $133,775       $110,799       $243,940
Gross margin                                      10,695           26,464         37,109         31,518         64,931
Net income (loss)  (1)                               526            3,952          4,963             81         (1,253)
Net income (loss) per share, basic  (2)             0.06             0.32           0.35           0.01          (0.08)
Net income (loss) per share, diluted  (2)           0.06             0.31           0.34           0.01          (0.08)
</TABLE>

                                       66
<PAGE>

                         U.S.A. FLORAL PRODUCTS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       (in thousands, except share data)


<TABLE>
<CAPTION>
                                                                                               1999
                                                           -------------------------------------------------------------
                                                                First         Second           Third          Fourth
                                                               Quarter        Quarter         Quarter         Quarter
------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>            <C>            <C>             <C>
Net revenues                                                     $271,343       $239,041       $189,402        $225,061
Gross margin                                                       66,574         63,194         51,027          57,393
Net income (loss)                                                   4,012          1,734         (5,478)         (3,334)
Net income (loss) per share, basic  (2)                              0.25           0.11          (0.33)          (0.20)
Net income (loss) per share, diluted  (2)                            0.24           0.11          (0.33)          (0.20)
</TABLE>

(1)  The results for the fourth quarter of 1998 are after pre-tax charges
     aggregating $5 million (after-tax of approximately $0.19 per diluted share)
     and the results of the fourth quarter of 1999 are after pre-tax income
     aggregating $0.7 million  (after tax of approximately $0.03 per diluted
     share) relating to the cost of the November 1998 Integration Plan being
     less than anticipated.

(2)  Earnings per share are computed independently for each of the quarters
     presented.  Therefore, the sum of the quarterly earnings per share in may
     not equal the total computed for the year.


NOTE 18 -  SUBSEQUENT EVENT

Restructuring Plan

  In March 2000, the Company recorded a restructuring charge of approximately
$11.0 million before income taxes ($6.6 million after income taxes). The Company
will discontinue several strategic initiatives, close under performing and
unprofitable business locations and re-focus on the core business operations.
The charge principally relates to the write-down of assets, including property
and equipment, goodwill, severance payments and lease termination costs
associated with the discontinuance of strategic initiatives, the closure of two
wholesale companies and the closure of two branch locations of two other
wholesale companies. The closure of the unprofitable locations has begun and is
expected to be completed by June 30, 2000. The Company will reduce the number of
employees by 85 or approximately 3% of the North American workforce.

                                       67
<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 in the City of Washington,
District of Columbia on March 30, 2000.

                                          U.S.A. FLORAL PRODUCTS, INC.


                                          By:  /s/ Michael W. Broomfield
                                               ------------------------------
                                               Michael W. Broomfield
                                               Chief Executive Officer

  Each person whose signature appears below hereby appoints Michael W.
Broomfield and G. Andrew Cooke, and both of them, either of whom may act without
the joinder of the other, as his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments to
this Annual Report on Form 10-K, and to file the same, with all exhibits thereto
and all other documents in connection herewith, with the Commission, granting
unto said attorneys-in-fact and agents full power and authority to perform each
and every act and thing appropriate or necessary to be done, as fully and for
all intents purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or their substitutes may
lawfully do or cause to be done by virtue hereof.

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

<TABLE>
<CAPTION>
        Signature                         Capacity                                     Date
        ---------                         --------                                     ----
<S>                               <C>                                             <C>


/s/ Michael W. Broomfield         Chief Executive Officer                         March 30, 2000
------------------------------
  Michael W. Broomfield           (Principal Executive Officer)


/s/ G. Andrew Cooke               Interim Chief Financial Officer,                March 30, 2000
------------------------------
  G. Andrew Cooke                 Vice President of Finance and Controller
                                  (Principal Financial and Accounting Officer)

/s/ Vincent W. Eades              Director                                        March 30, 2000
------------------------------
  Vincent W. Eades

/s/ Aaron J. Gellman              Director                                        March 30, 2000
------------------------------
  Aaron J. Gellman

/s/ Ann Torre Grant               Director                                        March 30, 2000
------------------------------
  Ann Torre Grant

/s/ Edward J. Mathias             Director                                        March 30, 2000
------------------------------
  Edward J. Mathias

/s/ Peter Roy                     Director                                        March 30, 2000
------------------------------
  Peter Roy
</TABLE>

                                       68