<PAGE>
                                                                  EXHIBIT 13.1

Selected Financial Information

<TABLE>
<CAPTION>
                                                December 31,      December 31,      December 31,     December 31,      January 1,
                                                       1995              1996              1997             1998            2000
------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except share data)

<S>                                                <C>             <C>               <C>               <C>               <C>
Statement of Operations Data:
Net sales                                          $    134        $    922          $  2,634          $  6,946          $ 15,380
Loss from continuing operations                      (1,030)         (1,889)           (8,500)          (10,437)          (20,653)
Loss attributable to common
   stockholders before extraordinary item            (1,050)         (2,049)           (8,471)          (10,958)          (20,046)
Net loss attributable
   to common stockholders                            (1,050)         (2,049)           (8,471)          (11,702)          (20,046)
Loss from continuing operations
   per common share                                   (0.34)          (0.64)            (2.53)            (3.06)            (1.84)
Loss attributable to common stockholders
   before extraordinary item
   per common share                                   (0.34)          (0.62)            (2.47)            (3.11)            (1.74)
Net loss attributable to common
   stockholders per common share                   $  (0.34)       $  (0.62)         $  (2.47)         $  (3.32)         $  (1.74)

Balance Sheet Data:
Total assets                                       $    289        $  3,618          $  7,897          $ 20,066          $ 50,914
Capital lease obligations, net of
   current portion                                       64             325               334               381             2,075
Redeemable, convertible,
   preferred stock                                       --           5,203            14,000            37,186                --
</TABLE>


                                       12
<PAGE>

Management's Discussion and Analysis of Financial
Condition and Results of Operations

Overview

Streamline.com simplifies the lives of busy suburban families by providing
Internet-based ordering and home delivery of a wide range of consumer goods and
services such as groceries, household goods, health and beauty care items,
dry-cleaning, video rentals and film processing. Streamline.com's typical
customer tends to be a dual income household with at least one child and access
to the Internet. Streamline.com also provides consumer packaged goods companies
insight into consumer Internet purchasing behavior to help facilitate the
development of their Internet merchandising capabilities and to broaden other
research and marketing programs.

Streamline.com has grown rapidly, with revenue increasing to $15.4 million in
1999 from $2.6 million in 1997. During this same period, Streamline.com's net
loss increased to $19.5 million in 1999 from $8.3 million in 1997.
Streamline.com expects to continue to incur losses as it increases expenditures
in all areas of operations in order to execute its business plan. In particular,
Streamline.com expects to incur costs related to: expanding into new markets,
increasing sales and marketing efforts and continuing to invest in technology
systems and development.

Due to our history of net operating losses, we currently pay no federal or state
income tax. As of January 1, 2000, we had federal and state net operating loss
carryforwards of approximately $40.0 million and $39.8 million, respectively.
These net operating losses are available to offset future income tax obligations
unless federal or state tax law restrictions, such as those related to an
ownership change as defined in the Internal Revenue Code, limit us from doing
so.

Components of Revenue

Streamline.com has three primary sources of revenue. The majority of
Streamline.com's revenue is generated by the sale of consumer products and
services that Streamline.com aggregates in its fulfillment center and delivers
to its customers' homes on a weekly basis. Streamline.com's product and service
revenue is comprised of the retail prices Streamline.com charges its customers
for these products and services. The wholesale prices Streamline.com pays its
distributors and suppliers for such products and services are included as a cost
of revenue. Streamline.com's customers also pay a monthly subscription fee of
$30. In addition, Streamline.com receives advertising, research and marketing
fees through arrangements with consumer packaged goods companies and e-commerce
companies. Revenue from products and services is recognized upon delivery to the
customer; subscription fees are recognized monthly; and advertising, research
and marketing fees are recognized over the life of the applicable arrangement or
as services are performed.

Results of Operations
Comparison of Fiscal Years ended January 1, 2000, December 31, 1998 and December
31, 1997:

Total Revenue

Total revenue increased 121.4% to $15.4 million in the twelve months ended
January 1, 2000 from $6.9 million in the comparable period ended December 31,
1998. Total revenue increased 163.7% to $6.9 million in 1998 from $2.6 million
in 1997. The increase in each year was primarily due to the continuing expansion
of Streamline.com's customer base, a corresponding increase in subscription
fees, and an increase in fees derived from advertising, research and marketing.

Product and Service Revenue, Net

Product and service revenue, net of returns increased 118.4% to $13.2 million in
the twelve months ended January 1, 2000 from $6.0 million in the comparable
period ended December 31, 1998. Product and service revenue, net of returns
increased 232.0% to $6.0 million in 1998 from $1.8 million in 1997. The increase
in revenue was the result of increases in Streamline.com's customer base and
corresponding increases in the number of invoices for product and service
revenue. The number of invoices increased 123.5% to approximately 132,000 in the
twelve months ended January 1, 2000 from approximately 59,000 in the comparable
period ended December 31, 1998. Average product and service revenue per invoice
decreased slightly, to approximately $100 in the twelve months ended January 1,
2000 from approximately $102 in the comparable period ended December 31, 1998.
In 1998, the number of


                                       13
<PAGE>

Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)

invoices increased 217.3% from approximately 18,000 in the period ended December
31, 1997. Average product and service revenue per invoice increased slightly, to
approximately $102 in the twelve months ended December 31,1998 from
approximately $101 in the comparable period ended December 31, 1997. Product and
service revenue, net as a percentage of total revenue decreased to 85.6% in the
twelve months ended January 1, 2000 from 86.7% in the comparable period ended
December 31, 1998. Product and service revenue, net increased as a percentage of
revenue to 86.7% in the period ended December 31, 1998 from 68.9% in the period
ended December 31, 1997 as a result of an increased customer base and a decline
in advertising, marketing and research fees as a percentage of total revenue.

Subscription Fees

Revenue from subscription fees increased 159.7% to $1.0 million in the twelve
months ended January 1, 2000 from $391,000 in the comparable period ended
December 31, 1998. Revenue from subscription fees increased 297.3% to $391,000
in 1998 from $98,000 in 1997. The increases were primarily due to an increase in
the customer base to approximately 4,500 at January 1, 2000 from approximately
2,000 at December 31, 1998 and 900 at December 31, 1997.

Advertising, Research and Marketing Fees

Advertising, research and marketing fees increased 126.9% to $1.2 million in the
twelve months ended January 1, 2000 from $529,000 in the comparable period ended
December 31, 1998. These fees as a percentage of total revenue increased to 7.8%
in the twelve months ended January 1, 2000 from 7.6% in the comparable period
ended December 31, 1998. The increase in advertising, research and marketing
fees is primarily due to an increase in the number of consumer packaged goods
companies that became members of the Consumer Learning Center, a
Streamline-sponsored research center focused on better understanding the
Consumer Direct industry. Fees from advertising, research and marketing services
decreased 26.6% to $529,000 in 1998 from $721,000 in 1997. Advertising, research
and marketing fees as a percentage of total revenue decreased to 7.6% in 1998
from 27.4% in 1997. The decrease is primarily due to a reduction in the average
amount paid by participants resulting from shorter membership periods.

Total Operating Expenses

Total operating expenses increased 107.3% to $36.0 million, or 234.3% of total
revenues, in the twelve months ended January 1, 2000 from $17.4 million, or
250.3% of total revenues, in the comparable period ended December 31, 1998.
Total operating expenses increased 56.1% to $17.4 million, or 250.3% of total
revenue, in 1998 from $11.1 million, or 422.6% of total revenue, in 1997. The
increase in operating expenses is a result of an increase in order volume, and
an increase in infrastructure and general and administrative costs incurred to
support Streamline.com's continued expansion. In 1999, these expenses further
increased due to the opening of Streamline.com's second facility in the
Washington, D.C. market in the fourth quarter. Total expenses decreased as a
percentage of total revenues due to achieving operational efficiencies,
offsetting fixed costs with higher order volumes, and increased advertising and
marketing fee revenue.

Cost of Revenue

The cost of revenue increased to $10.6 million, or 69.1% of total revenues, in
the twelve months ended January 1, 2000 from $5.0 million, or 71.9% of total
revenues in the comparable period ended December 31, 1998. The cost of revenue
increased to $5.0 million, or 71.9% of total revenue, in 1998 from $2.1 million,
or 79.6% of total revenue, in 1997. The declines in cost of revenue as a
percentage of total revenues are primarily a result of improved purchasing and
inventory management in the product and service category, and a higher
percentage of subscription fees as a percentage of total revenue.

Fulfillment Center Operations

Expenses attributable to fulfillment center operations increased 125.7% to $9.1
million, or 58.9% of total revenue, in the twelve months ended January 1, 2000
from $4.0 million, or 57.8% of total revenue, in the comparable period ended
December 31, 1998. Expenses attributable to fulfillment center operations
increased 44.9% to $4.0 million, or 57.8% of total revenue, in 1998 from $2.8
million, or 105.1% of total revenue, in 1997. These costs increased primarily as
a result of increased order volume. In 1999, these costs


                                       14
<PAGE>

Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)

further increased as a result of the opening of Streamline.com's second facility
in the Washington, D.C. area, and a partnership with Genco, a third party
warehouse management company. Genco assumed the warehouse management functions
in our facilities under a test outsourcing arrangement. The costs incurred under
this agreement were higher than expected and as a result the agreement was
terminated in the fourth quarter 1999.

Sales and Marketing

Sales and marketing expenses increased 237.2% to $5.0 million, or 32.4% of total
revenue, for the twelve months ended January 1, 2000 from $1.5 million, or 21.3%
of total revenue, for the comparable period ended December 31, 1998. Sales and
marketing expenses increased 3.6% to $1.5 million, or 21.3% of total revenue, in
1998 from $1.4 million, or 54.2% of total revenue, in 1997. The increases were
due to additional advertising and promotional activities undertaken to acquire
new customers in the Boston market. Expenses further increased in 1999 as a
result of the expansion into the Washington, D.C. market.

Technology Systems and Development

Expenses attributable to technology systems and development increased 25.4% to
$3.8 million, or 24.5% of total revenue, for the twelve months ended January 1,
2000 from $3.0 million, or 43.2% of total revenue, for the comparable period
ended December 31, 1998. Expenses attributable to technology systems and
development increased 79.5% to $3.0 million, or 43.2% of total revenue, in 1998
from $1.7 million, or 63.5% of total revenue, in 1997. These costs increased
primarily due to the costs associated with maintaining, enhancing and
integrating Streamline.com's technology systems.

General and Administrative

General and administrative costs increased 95.0% to $7.6 million, or 49.4% of
total revenues, for the twelve months ended January 1, 2000 from $3.9 million,
or 56.1% of total revenues, for the comparable period ended December 31, 1998.
General and administrative costs increased 23.1% to $3.9 million, or 56.1% of
total revenue, in 1998 from $3.2 million, or 120.2% of total revenue, in 1997.
These costs increased primarily due to the addition of necessary infrastructure
and corporate staff to support continued corporate growth and expansion into new
markets.

Other Income (Expense), Net

Other income (expense), net increased to income of $1.2 million in the twelve
months ended January 1, 2000 from an expense of $(330,000) in the comparable
period ended December 31, 1998 primarily due to increased interest income from
higher cash balances from Streamline.com's initial public offering in June 1999,
and reduced interest costs associated with the pay down of debt.

Other income (expense), net increased 311.0% to $(330,000) in 1998 from
$(79,000) in 1997, largely due to a $519,000 increase in net interest expense
resulting from Streamline.com's issuance of senior discount notes in 1998. This
was offset by $182,000 of interest income Streamline.com received primarily from
investing the proceeds of debt and equity financings completed during the year.
Other expense in 1997 included losses incurred on the disposal of fixed assets.

Minority Interest

At December 31, 1997, Streamline.com held a majority interest in Streamline
Mid-Atlantic, Inc. Portions of Streamline Mid-Atlantic's net losses were
allocated to the minority interest. The allocation of the net losses of
Streamline.com's subsidiary, Streamline Mid-Atlantic, Inc., to the minority
interest decreased to $138,000 in 1998 from $265,000 in 1997. In 1998,
Streamline.com was allocated a per centage of net losses in excess of its
ownership percentage due to the minority interest being allocated all of its
allowable losses. In November 1998, Streamline.com acquired the remaining
minority interest and now reports 100% of the income or loss of this subsidiary
in its results of operations.

Extraordinary Loss

On September 18, 1998, Streamline.com redeemed all of its outstanding discount
notes issued in April 1998 at a price of $7.0 million with the proceeds from the
issuance of Streamline.com's Series D Preferred Stock. The redemption resulted
in Streamline.com


                                       15
<PAGE>

Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)

recording an extraordinary loss on the extinguishment of debt of approximately
$744,000. This loss included approximately $257,000 for a call premium, and
$452,000 for the unamortized discount value associated with the warrants to
purchase common stock issued in connection with the senior discount notes and
$35,000 for the issuance of common shares and remaining deferred financing
costs.

Liquidity and Capital Resources

For the twelve months ended January 1, 2000 operating activities used cash of
$16.1 million, primarily attributable to the net loss incurred in the period, as
compared to $9.4 million for the twelve months ended December 31, 1998.
Investing activities used cash of $26.8 million in the twelve months ended
January 1, 2000, as compared to $2.1 million for the twelve months ended
December 31, 1998, primarily due to the purchase of marketable securities from
capital raised by the initial public offering, the purchase of property and
equipment to support the expansion of Streamline.com's operations, and costs
associated with purchased and capitalized software for Streamline.com's customer
ordering, warehouse management and financial systems.

Financing activities provided cash of $44.6 million in the twelve months ended
January 1, 2000, as compared to $22.7 million in the twelve months ended
December 31, 1998. Net proceeds from Streamline.com's initial public offering
including the exercise of the underwriters' over-allotment, net of underwriting
discounts and offering expenses, were approximately $45.0 million. Prior to its
initial public offering, Streamline.com financed its operations and capital
requirements primarily through the sale of redeemable convertible preferred
stock and the issuance of senior discount notes.

The Company has incurred cumulative losses through January 1, 2000 of
approximately $42.9 million and continues to have recurring operating losses and
negative cash flows from operating activities. The Company expects to incur
additional losses and will require additional financing as it expands its
service into new and existing markets.

The Company's plans for 2000 are based upon an aggressive expansion strategy
including the introduction of several new facilities and the acquisition of a
significant number of new customers by year end. In addition, the 2000 plan
includes funding the operating losses of a Chicago fulfillment center which was
acquired in connection with the Company's merger with Beacon Home Direct, Inc.,
d/b/a Scotty's Home Market, on January 5, 2000. In order to implement the 2000
plan, the Company will need additional financing, and has engaged an investment
banker to assist in securing additional private funding which the Company
expects to receive by the end of the second fiscal quarter.

In the event the Company is unable to secure additional financing, an
alternative plan has been developed to significantly reduce cash expenditures
including delaying the capital expenditure costs and pre-opening expenses for
the planned new facilities. In addition, the Company would significantly reduce
marketing expenditures, reduce corporate headcount costs including all incentive
compensation and reduce consulting and other miscellaneous spending.
Furthermore, most corporate capital projects would be postponed until additional
financing was obtained and the Company would pursue financing for certain asset
purchases which were not originally anticipated to be financed.

The Company believes that its current cash, cash equivalents and marketable
securities, along with either obtaining additional amounts from financing
activities or implementing the initiatives described above, will allow the
Company to fund its operations through the end of the first quarter of 2001. The
Company also believes that access to capital in 2001 and future periods will be
necessary to continue further expansion into additional markets. The Company's
future financing requirements will depend upon many factors, including the
successful acceptance of its products and services into new markets, expansion
of its marketing efforts, the Company's results of operations and the status of
its competitor's success in new markets. The Company believes that it will
require substantial amounts of additional capital over the next several years
and anticipates that this capital will be derived from a mix of strategic
partnering arrangements or public offerings and private placements of debt or
equity securities or both. There can be no assurance, however, that the Company
will obtain additional funding to fund its operations and capital expenditures.

Market and Interest Rate Risk

To date, Streamline.com has not utilized derivative financial instruments or
derivative commodity instruments. Streamline.com invests its cash in high
quality (i.e.-A1/P1), short term commercial paper, corporate bonds, money market
funds and United States government


                                       16
<PAGE>

Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)

securities, which are subject to minimal credit, market, and interest rate risk,
and have no debt. Due to its short-term duration, the fair value of the
Company's cash and investment portfolio at January 1, 2000 approximated carrying
value. Interest rate risk was estimated as the potential decrease in fair value
resulting from a hypothetical 10% increase in interest rates for issues
contained in the investment portfolio. The resulting hypothetical fair value was
not materially different from the year-end carrying value. Therefore,
Streamline.com believes the market and interest rate risks associated with these
financial instruments are not material.

Acquisitions

In 1996, Streamline.com incorporated its subsidiary Streamline Mid-Atlantic,
Inc., for the purpose of acquiring substantially all of the assets of Shopping
Alternatives, Inc., a consumer direct company based in the Washington, D.C.
area. In 1997 Streamline Mid-Atlantic sold approximately 45% of its common stock
to third parties. In November 1998, Streamline.com acquired the outstanding
minority interest in Streamline Mid-Atlantic and it once again became a wholly
owned subsidiary. In connection with these transactions, Streamline.com recorded
$1.3 million of goodwill which is being amortized on a straight-line basis over
a five-year term.

On October 18, 1999, Streamline.com entered into a definitive agreement to
acquire Beacon Home Direct, Inc. d/b/a Scotty's Home Market, a grocery home
delivery company located in the Chicago, Illinois area. The company completed
the transaction, which has been accounted for as a pooling of interests, on
January 5, 2000. The Company issued approximately 3.7 million shares of its
common stock in exchange for all outstanding shares of Scotty's. Additionally,
outstanding warrants and options to acquire Scotty's common stock were converted
into warrants and options to acquire a total of approximately 598,000 shares of
Streamline.com common stock. Approximately $1.3 million of merger-related costs
will be expensed in the first quarter of 2000.

Year 2000 Compliance

Streamline.com has experienced no year 2000 adverse effects on its internal
systems or any involved in its supply chain, including purchasing, distribution,
sales and accounting. Also, no errors were found related to date processing
before or after January 1, 2000, including treatment of year 2000 as a leap
year. Streamline.com will continue to monitor its hardware, software and
imbedded systems as they are added or modified.

Inflation and Seasonality

While inflation or deflation has not had, and Streamline.com does not expect it
to have, a material impact upon operating results, there can be no assurance
that Streamline.com.'s business will not be affected by inflation or deflation
in the future. Streamline.com experiences seasonal fluctuations due to various
market conditions with average revenue per order declining slightly in the
second and third quarters.

Factors that May Affect Future Results

This annual report contains forward-looking statements that involve risks and
uncertainties. Any statement (including statements to the effect that
Streamline.com "believes", "expects", "anticipates", "plans" and similar
expressions) that are not statements relating to historical matters should be
considered forward-looking statements. Our actual results may differ materially
from the results discussed in the forward looking statements as a result of
numerous important factors, including those discussed below.

Streamline.com Operates in a Highly Competitive Market Streamline.com competes
in a highly competitive marketplace with a variety of traditional retailers,
consumer direct companies and other delivery services. In the geographic markets
we are in or expect to be in within the next 12 to 18 months we compete or
expect to compete directly with other consumer direct retailers that have
similar services, pricing strategies and product selections. Some of our current
and potential competitors are larger than we are and have substantially greater
financial resources. It is possible that increased competition or improved
performance by our competitors may reduce our market share or adversely affect
our business and financial performance in other ways.

Our Success Depends on Our Ability to Open New Consumer Resource Centers An
important part of our business strategy is to aggressively increase the number
of CRC's and the number of customers served out of new and existing CRC's. For
this strategy to be


                                       17
<PAGE>

Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)

successful we need to successfully market to and acquire customers, identify and
lease new sites for CRC's, hire and train employees and adapt our management and
operational systems to meet the needs of our expanded operations. These tasks
may be difficult to accomplish and if we are unable to accomplish any of these
tasks our future revenue could be materially adversely affected.

Our Operating Results May Vary from Quarter to Quarter Our operating results
have fluctuated from quarter to quarter in the past, and we expect that they
will continue to do so in the future. Our revenues may not continue at rates
similar to the rates reported in recent periods, and our operating results may
fall short of either a prior fiscal period or investor's expectations. Factors
that could cause these quarterly fluctuations include the following:

      o     customer demand being lower than anticipated;

      o     seasonality (we typically experience lower average order sizes in
            the second and third quarters);

      o     one-time charges associated with acquisitions;

      o     the level of marketing and advertising expenses associated with
            acquiring new customers; and

      o     the number of new CRCs opened (pre-opening expenses are expensed as
            incurred and newer CRCs have higher operating losses than more
            mature CRCs).

A significant portion of our operating expenses, such as rent expense and
employee salaries, does not vary directly with revenue and is difficult to
adjust in the short term. As a result, if sales in a particular quarter are
below our expectations for that quarter, Streamline.com could not
proportionately reduce operating expenses for that quarter, and therefore a
revenue shortfall would have a disproportionate effect on our expected net loss
for the quarter.

The market price of our common stock is based in large part on professional
securities analysts' expectations that our business will continue to grow and
that Streamline.com will achieve certain revenue levels. If our financial
performance in a particular quarter does not meet the expectations of securities
analysts, this may adversely affect the views of those securities analysts
concerning our growth potential and future financial performance. If the
securities analysts that regularly follow us lower their ratings or lower their
projections for our future growth and financial performance, the market price of
our stock is likely to drop significantly. In addition, in those circumstances
the decrease in the stock price would probably be disproportionate to the
shortfall in our financial performance.

Rapid Growth Could Strain Our Operations Streamline.com has experienced rapid
growth in orders, revenues, and number of employees in the past several years.
This growth has placed significant demands on our management and operational
systems. If we are not successful in continually upgrading our operational and
financial systems, expanding our management team and increasing and effectively
managing our employee bases this growth is likely to result in operational
inefficiencies and ineffective management of our business and employees, which
in turn will adversely affect our business and financial performance.

The Terms and Timing of Future Financings are Uncertain In order to continue an
aggressive expansion plan, Streamline.com will require additional sources of
financing. Also, it is possible that Streamline.com will require additional
sources of financing earlier than anticipated as a result of unexpected cash
needs or opportunities, expanded growth strategy or disappointing operating
results. Additional funds may not be available on satisfactory terms when
needed, whether in the next twelve months or thereafter. If funds are not
available on a timely basis, the company will have to slow its planned expansion
and customer growth which in turn would negatively impact our ability to meet
the financial projections of securities analysts and could result in a negative
impact to our stock price.


                                       18
<PAGE>

Report of Independent Accountants

To the Board of Directors and Stockholders of Streamline.com, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' equity (deficit) and
comprehensive loss and of cash flows present fairly, in all material respects,
the financial position of Streamline.com, Inc. and its subsidiary at December
31, 1998 and January 1, 2000, and the results of their operations and their cash
flows for each of the three years in the period ended January 1, 2000, 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

Boston, Massachusetts

February 9, 2000


                                       19
<PAGE>

Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                                                         December 31,    January 1,
                                                                                                                 1998          2000
------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except share and per share data)

<S>                                                                                                          <C>           <C>
Assets
Current assets:
   Cash and cash equivalents                                                                                 $ 12,593      $ 14,323
   Marketable securities                                                                                           --        20,746
   Accounts receivable, net of allowance for doubtful accounts of none
     at December 31, 1998 and $88 at January 1, 2000                                                               88           424
   Inventory                                                                                                      324           811
   Prepaid expenses and other current assets                                                                      149         1,148
                                                                                                         ---------------------------
       Total current assets                                                                                    13,154        37,452

Property and equipment, net                                                                                     3,663         8,775
Purchased and capitalized software, net                                                                         2,025         3,226
Goodwill, net of accumulated amortization                                                                         992           732
Other assets, net                                                                                                 232           729
                                                                                                         ---------------------------
       Total assets                                                                                          $ 20,066      $ 50,914
                                                                                                         ===========================

Liabilities, Redeemable Convertible Preferred Stock and Stockholders' (Deficit) Equity
Current liabilities:
   Capital lease obligations                                                                                 $    236      $    957
   Accounts payable                                                                                               447         2,812
   Accrued expenses                                                                                               409           754
                                                                                                         ---------------------------
       Total current liabilities                                                                                1,092         4,523
                                                                                                         ---------------------------
Long-term portion of capital lease obligations                                                                    381         2,075

Commitments and contingencies (Note 12)

Redeemable convertible preferred stock, ($1.00 par value);
   Authorized:  680,000 at December 31, 1998 and January 1, 2000                                                   --            --
   Issued and outstanding: 368,570 shares issued and outstanding at December 31,1998
     and none issued and outstanding at January 1, 2000                                                        37,186            --

Stockholders' (deficit) equity:
   Preferred stock, $.01 par value; none authorized or outstanding at December 31, 1998
     and 5,000,000 authorized and none outstanding at January 1, 2000                                              --            --
   Common stock, $.01 par value; authorized: 22,700,000 at December 31, 1998
     and 50,000,000 at January 1, 2000                                                                             --            --
     Issued and outstanding; 3,699,539 shares issued and 3,665,539 outstanding
       at December 31, 1998 and 18,432,796 issued 18,398,796 outstanding
       at January 1, 2000                                                                                          37           184
   Additional paid-in capital                                                                                   5,060        87,327
   Treasury stock, at cost:  34,000 shares at December 31, 1998 and January 1, 2000                              (238)         (238)
   Accumulated other comprehensive loss                                                                            --            (8)
   Accumulated deficit                                                                                        (23,452)      (42,949)
                                                                                                         ---------------------------
       Total stockholders' (deficit) equity                                                                   (18,593)       44,316
                                                                                                         ---------------------------
       Total liabilities, redeemable convertible preferred stock and stockholders' (deficit) equity          $ 20,066      $ 50,914
                                                                                                         ===========================
</TABLE>

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


                                       20
<PAGE>

Consolidated Statements of Operations
For the Years Ended December 31, 1997 and 1998 and January 1, 2000

<TABLE>
<CAPTION>
                                                                                 1997                1998                 1999
------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except share and per share data)

Revenue:
<S>                                                                          <C>                  <C>                  <C>
   Product and service revenue, net                                          $      1,815         $      6,026         $     13,162
   Subscription fees                                                                   98                  391                1,017
   Advertising, research and marketing fees                                           721                  529                1,201
                                                                        ------------------------------------------------------------
       Total revenue                                                                2,634                6,946               15,380
                                                                        ------------------------------------------------------------

Operating expenses:
   Cost of revenue                                                                  2,098                4,992               10,624
   Fulfillment center operations                                                    2,769                4,013                9,058
   Sales and marketing                                                              1,428                1,479                4,987
   Technology systems and development                                               1,673                3,002                3,765
   General and administrative                                                       3,166                3,897                7,599
                                                                        ------------------------------------------------------------
       Total operating expenses                                                    11,134               17,383               36,033
                                                                        ------------------------------------------------------------
Loss from operations                                                               (8,500)             (10,437)             (20,653)

Other income (expense):
   Interest income                                                                     58                  240                1,352
   Interest expense                                                                   (50)                (569)                (113)
   Other                                                                              (87)                  (1)                 (83)
                                                                        ------------------------------------------------------------
       Total other income (expense), net                                              (79)                (330)               1,156
                                                                        ------------------------------------------------------------
Loss before minority interest and extraordinary item                               (8,579)             (10,767)             (19,497)
Minority interest in net loss of consolidated subsidiary                              265                  138                   --
                                                                        ------------------------------------------------------------
Loss before extraordinary item                                                     (8,314)             (10,629)             (19,497)
Extraordinary item - loss on early redemption of debt                                  --                  744                   --
                                                                        ------------------------------------------------------------
Net loss                                                                     $     (8,314)        $    (11,373)        $    (19,497)
                                                                        ============================================================
Dividends on preferred stock                                                          157                  329                  549

Net loss attributable to common stockholders                                 $     (8,471)        $    (11,702)        $    (20,046)
                                                                        ============================================================
Basic and diluted net loss per common share                                  $      (2.47)        $      (3.32)        $      (1.74)
Shares used in computing basic and diluted net loss
   per common share                                                             3,424,035            3,522,458           11,545,102
</TABLE>

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


                                       21
<PAGE>

Consolidated Statements of Stockholders' Equity (Deficit)
and Comprehensive Loss
For the Years Ended December 31, 1997 and 1998 and January 1, 2000

<TABLE>
<CAPTION>
                                                                                            Accumulated
                                                                                                  Other
                                                                                          Comprehensive
                                                                                                   Loss                        Total
                                                Common Stock     Additional             Unrealized loss                stockholders'
                                                     $0.01 par      paid-in   Treasury    on Marketable   Accumulated         equity
                                               Shares    value      capital      stock       Securities       deficit      (deficit)
------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except share and per share data)

<S>                                         <C>           <C>       <C>          <C>                <C>      <C>          <C>
Balance, December 31, 1996                   3,284,625    $ 33      $ 1,553                                  $ (3,765)    $ (2,179)
Sale of common stock                           163,857       1        1,146                                                  1,147
Dividends on preferred stock                                           (157)                                                  (157)
Issuance of warrants for the purchase of
  common stock in exchange for goods
  and services                                                          738                                                    738
Options exercised                               77,550       1           89                                                     90
Repurchase of common stock
  (29,000 shares)                                                                $(203)                                       (203)
Change in interest in consolidated
  subsidiary                                                            480                                                    480
Net loss                                                                                                       (8,314)      (8,314)
                                         -------------------------------------------------------------------------------------------

Balance, December 31, 1997                   3,526,032      35        3,849       (203)                       (12,079)      (8,398)
Dividends on preferred stock                                           (329)                                                  (329)
Issuance of warrants in connection
  with notes payable                                                    525                                                    525
Reduction in value of warrants granted in
  1997 in exchange for goods and services                               (67)                                                   (67)
Issuance of common stock and warrants for
   the purchase of common stock in
  exchange for goods and services               12,500      --          516                                                    516
Options exercised                               34,583       1           61                                                     62
Common stock issued to acquire
  minority interest                            126,424       1          505                                                    506
Treasury stock acquired in connection
  with forgiveness of notes receivable
  (5,000 shares)                                                                   (35)                                        (35)
Net loss                                                                                                      (11,373)     (11,373)
                                         -------------------------------------------------------------------------------------------

Balance, December 31, 1998                   3,699,539      37        5,060       (238)                       (23,452)     (18,593)
Dividends on preferred stock                                           (549)                                                  (549)
Issuance of warrants in connection
  with financing commitment                                             472                                                    472
Reduction in deferred financing costs
  related to recission of warrants in
  connection with financing commitment                                 (387)                                                  (387)
Issuance of common stock                     4,998,482      50       49,934                                                 49,984
Stock issuance costs                                                 (4,992)                                                (4,992)
Conversion of preferred stock                9,673,109      97       37,638                                                 37,735
Options and warrants exercised                  61,666      --          151                                                    151
Comprehensive loss:
  Unrealized loss on marketable securities                                                          $(8)
  Net loss                                                                                                    (19,497)
  Total comprehensive loss                                                                                                 (19,505)
                                         -------------------------------------------------------------------------------------------
Balance, January 1, 2000                    18,432,796    $184      $87,327      $(238)             $(8)     $(42,949)    $ 44,316
                                         ===========================================================================================
</TABLE>

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


                                       22
<PAGE>

Consolidated Statements of Cash Flows
For the Years Ended December 31, 1997 and 1998 and January 1, 2000

<TABLE>
<CAPTION>
                                                                                                 1997          1998          1999
------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except share and per share data)

<S>                                                                                            <C>           <C>           <C>
Cash flows from operating activities:
   Net loss                                                                                    $ (8,314)     $(11,373)     $(19,497)
   Adjustments to reconcile net loss to net cash used in operating activities
     Depreciation and amortization                                                                  674         1,532         2,700
     Amortization of discount on notes payable                                                       --           525            --
     Loss on disposal of fixed assets                                                                86           120            --
     Amortization of goodwill and other assets                                                      152           257           345
     Bad debt expense                                                                                --             7           142
     Issuance of warrants for the purchase of common stock in
        exchange for consulting services                                                            330           447            --
     Minority interest in net loss of consolidated subsidiary                                      (265)         (138)           --
     Changes in assets and liabilities:
       Accounts receivable                                                                          (68)          (18)         (478)
       Inventory                                                                                    (79)          (69)         (487)
       Prepaid expenses and other current assets                                                   (236)          226          (999)
       Other assets                                                                                  --          (183)         (497)
       Accounts payable                                                                             600          (684)        2,365
       Accrued expenses                                                                             429           (86)          345
                                                                                             ---------------------------------------
Net cash used in operating activities                                                            (6,691)       (9,437)      (16,061)
                                                                                             ---------------------------------------

Cash flows from investing activities:
   Purchases of marketable securities                                                                --            --       (29,867)
   Proceeds from sale of marketable securities                                                       --            --         9,113
   Purchases of property and equipment                                                           (1,450)         (833)       (3,596)
   Additions to purchased and capitalized software                                               (1,386)       (1,238)       (2,491)
                                                                                             ---------------------------------------
Net cash used in investing activities                                                            (2,836)       (2,071)      (26,841)
                                                                                             ---------------------------------------

Cash flows from financing activities:
   Proceeds from sale of common stock                                                             1,147            --        49,984
   Proceeds from sale of common stock of subsidiary                                                 400            --            --
   Proceeds from sale of preferred stock                                                          9,000        22,857            --
   Proceeds from the exercise of stock options and warrants                                          90            62           151
   Stock issuance costs                                                                              --            --        (4,992)
   Purchases of treasury stock                                                                     (203)           --            --
   Dividend payments on preferred stock                                                            (360)           --            --
   Issuance of notes receivable                                                                      --           (35)           --
   Proceeds from notes payable-related party                                                         --           600            --
   Payments on notes payable-related party                                                           --          (600)           --
   Proceeds from notes payable                                                                       --         7,000            --
   Payments on notes payable                                                                         --        (7,000)           --
   Principal payments on capital lease obligations                                                 (106)         (229)         (511)
                                                                                             ---------------------------------------
Net cash provided by financing activities                                                         9,968        22,655        44,632
                                                                                             ---------------------------------------
Net increase in cash and cash equivalents                                                      $    441      $ 11,147      $  1,730
Cash and cash equivalents, beginning of year                                                      1,005         1,446        12,593
                                                                                             ---------------------------------------
Cash and cash equivalents, end of year                                                         $  1,446      $ 12,593      $ 14,323
                                                                                             =======================================

Supplemental information:
   Cash paid for interest                                                                      $     47      $    495      $    113

Non-cash financing and investing transactions:
   Assets acquired with capital lease obligations                                              $    267      $    315      $  2,926
   Issuance of subsidiary's stock and warrants in connection with acquisition (Note 4)              485            --            --
   Assumption of liabilities in connection with acquisition (Note 4)                                370            --            --
   Issuance of common stock in connection with purchase of minority interest (Note 4)                --           506            --
   Issuance and measurement of warrants in connection with capitalized assets (Note 10)             408           (34)           --
   Issuance of warrants in connection with debt (Note 6)                                             --           525            --
   Issuance of common stock for services provided                                                    --            35            --
   Common stock received in consideration of note receivable (Note 6)                                --            35            --
   Dividends accrued on preferred stock (Note 9)                                                    157           329           549
   Conversion of preferred stock into common stock                                                   --            --        37,735
   Issuance of warrants in connection with financing commitment                                      --            --           472
   Reduction in deferred financing costs related to recission of warrants in
     connection with financing commitment                                                            --            --          (387)
   Unrealized loss on marketable securities                                                          --            --            (8)
</TABLE>

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


                                       23
<PAGE>

Notes to Consolidated Financial Statements
In thousands, except share and per share data

1. Description of Business

Streamline.com, Inc. ("Streamline.com" or the "Company") was incorporated in the
state of Delaware in 1993 and provides Internet-based ordering and home delivery
of a wide range of goods and services to consumers. The Company seeks to
simplify the shopping chores of busy suburban families who place a high value on
their time and demand service excellence. The Company consolidates products and
services currently offered by various suppliers into a single weekly delivery to
its consumers, thus minimizing their need to make frequent trips to multiple
physical stores. During 1999, the Company provided its products and services
from two service centers in the greater Boston and Washington, DC suburbs that
it intends to replicate in other markets nationwide.
Additionally, the Company has working relationships with various consumer
packaged goods companies to perform market research on consumer purchasing
behavior.

The Company has incurred cumulative losses through January 1, 2000 of
approximately $42.9 million and continues to have recurring operating losses and
negative cash flows from operating activities. The Company expects to incur
additional losses and will require additional financing as it expands its
service into new and existing markets.

The Company's plans for 2000 are based upon an aggressive expansion strategy
including the introduction of several new facilities and the acquisition of a
significant number of new customers by year end. In addition, the 2000 plan
includes funding the operating losses of a Chicago fulfillment center which was
acquired in connection with the Company's merger with Beacon Home Direct, Inc.,
d/b/a "Scotty's" Home Market, on January 5, 2000. In order to implement the 2000
plan, the Company will need additional financing and has engaged an investment
banker to assist in securing additional private funding which the Company
expects to receive by the end of the second fiscal quarter.

In the event the Company is unable to secure additional financing, an
alternative plan has been developed to significantly reduce cash expenditures
including delaying the capital expenditure costs and pre-opening expenses for
the planned new facilities. In addition, the Company would significantly reduce
marketing expenditures, reduce corporate headcount costs including all incentive
compensation and reduce consulting and other miscellaneous spending.
Furthermore, most corporate capital projects would be postponed until additional
financing was obtained and the Company would pursue financing for certain asset
purchases which were not originally anticipated to be financed.

The Company believes that its current cash, cash equivalents and marketable
securities, along with either obtaining additional amounts from financing
activities or implementing the initiatives described above, will allow the
Company to fund its operations through the end of the first quarter of 2001. The
Company also believes that access to capital in 2001 and future periods will be
necessary to continue further expansion into additional markets. The Company's
future financing requirements will depend upon many factors, including the
successful acceptance of its products and services into new markets, expansion
of its marketing efforts, the Company's results of operations and the status of
its competitor's success in new markets. The Company believes that it will
require substantial amounts of additional capital over the next several years
and anticipates that this capital will be derived from a mix of strategic
partnering arrangements or public offering and private placements of debt or
equity securities or both. There can be no assurance, however, that the Company
will obtain additional funding to fund its operations and capital expenditures.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary. In 1998, the Company purchased the remaining
minority interest in its subsidiary (see Note 4). All significant intercompany
transactions have been eliminated.

Change in Year-End

As of October 2, 1999, the Company began reporting its earnings on a retail
calendar, using four 13-week quarters. The Company's year-end will be on the
Saturday closest to the 31st day of December. This change would not have had a
material impact on prior reported results.


                                       24
<PAGE>

Notes to Consolidated Financial Statements (continued)
In thousands, except share and per share data

Revenue Recognition

Product and service revenue is recognized upon delivery of goods and services to
the customer. Advertising, research and marketing fees are recognized over the
life of the contract or as the services are performed. Subscription revenues are
billed and recognized monthly.

Customer Acquisition Costs and Pre-opening Costs

Customer acquisition costs and pre-opening costs are expensed as incurred.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original
maturity of three months or less at the time of purchase to be cash equivalents.
The Company invests its excess cash in money market funds and marketable
securities that are subject to minimal credit and market risk. Cash equivalents
at December 31, 1998 and January 1, 2000 included approximately $12,256 and
$1,636, respectively, in money market funds.

Marketable Securities

Marketable securities include high-grade commercial paper and corporate bonds.
Debt and equity securities are classified as available-for-sale to support
current operations or to take advantage of other investment opportunities. These
securities are stated at cost plus accrued interest which approximates fair
market value and all mature within one year. The amortized cost of debt
securities is adjusted for amortization of premiums and accretion of discounts
to maturity. Such amortization and accretion as well as interest are included in
interest income. The Company's investments in debt and equity securities are
diversified among high-credit quality securities in accordance with the
Company's investment policy. Securities available-for-sale are carried at fair
value, with the unrealized gains and losses reported as a separate component of
stockholders' equity and comprehensive loss. The Company has had no investments
that qualify as trading. For the purpose of computing realized gains and losses,
cost is identified on a specific identification basis.

Property and Equipment

Property and equipment are recorded at cost and are depreciated over their
estimated useful lives of three to seven years using the straight-line method.
Assets held under capital leases are amortized over the shorter of the lease
life or the estimated useful life of the asset. Repairs and maintenance costs
are expensed as incurred. Upon retirement or sale, the cost of the assets
disposed and the related accumulated depreciation are removed from the accounts
and any resulting gain or loss is included in the results of operations.

Purchased Software, Capitalized Software and Technology Systems and Development

Purchased third party software and related implementation costs are recorded at
cost and are amortized over their estimated useful lives, typically three years
using the straight-line method. Internal and external costs incurred related to
the application development stage of internal use software are capitalized and
amortized over their estimated useful lives, typically three years using the
straight-line method. Amortization expense related to purchased and capitalized
software is included in technology systems and development expense.

Technology development costs are charged to technology systems and development
expense as incurred. Technology development costs include internal and external
costs incurred in the development and enhancement of software used internally or
used in connection with services provided by the Company that do not otherwise
qualify for capitalization, the costs of maintenance and minor enhancements and
the costs associated with maintaining and supporting internal information
systems.

The Company capitalized approximately $1,238 and $2,491 for purchased and
capitalized software for the years ended December 31, 1998 and January 1, 2000,
respectively. Amortization expense for purchased and capitalized software was
approximately $189, $708, and $1,290 for years ended December 31, 1997 and 1998,
and January 1, 2000, respectively.


                                       25
<PAGE>

Notes to Consolidated Financial Statements (continued)
In thousands, except share and per share data

Goodwill

Goodwill is being amortized on a straight-line basis over a five-year term. The
Company periodically evaluates the possible impairment of long-lived assets,
including goodwill, whenever events or changes in circumstances indicate that
the carrying value of the assets may not be recoverable. If such an event
occurred, the Company would project the future undiscounted cash flows expected
to result from the asset. If such projections indicated that the carrying value
would not be recoverable, the Company would reduce the carrying value of the
asset by the estimated excess of such value over future projected discounted
cash flows. Accumulated amortization of goodwill as of December 31, 1998 and
January 1, 2000 was approximately $308 and $569, respectively.

Year 2000 Costs

Costs of modifying computer software to ensure Year 2000 compliance are expensed
as incurred.

Advertising

The Company expenses costs related to advertising as incurred. Advertising
expense was approximately $389, $557 and $2,998, for the years ended December
31, 1997 and 1998, and January 1, 2000, respectively.

Inventory

The Company values all of its inventories at the lower of cost or market value.
Cost is determined on an average cost basis. All inventory items represent
finished goods.

Income Taxes

The Company provides for income taxes under the liability method that requires
recognition of deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Deferred tax liabilities and assets are determined based on the
difference between financial statement and tax bases of assets and liabilities,
as measured by the current tax rates. Under this method, a valuation allowance
is required against net deferred tax assets if, based upon the available
evidence, it is more likely than not that some or all of the deferred tax assets
will not be realized.

Management periodically evaluates the recoverability of deferred tax assets and
the level of the adequacy of the valuation allowance. At such time as it is
determined that it is more likely than not that deferred tax assets are
realizable, the valuation allowance will be appropriately reduced.

Accounting for Stock-Based Compensation

The Company accounts for stock-based awards to employees using the intrinsic
value method as prescribed by Accounting Principles Board ("APB") Opinion No.
25, "Accounting for Stock Issued to Employees," and related interpretations.
Accordingly, no compensation expense is recorded for options issued to employees
in fixed amounts with fixed exercise prices at least equal to the fair market
value of the Company's common stock at the date of grant. The Company has
adopted the disclosure only provisions of Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," (Note
10). Stock-based awards, including warrants to non-employees, are accounted for
at their fair value.

Risks and Uncertainties and 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 liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.

The Company has a limited operating history (also see Note 1), has never
achieved profitability and is therefore subject to risks and uncertainties such
as the uncertain nature of the markets in which the Company competes and the
risk that the Company may be unable to manage any future growth successfully.


                                       26
<PAGE>

Notes to Consolidated Financial Statements (continued)
In thousands, except share and per share data

In addition, the Company is subject to the risks encountered by companies
relying on the continued growth of on-line commerce and Internet infrastructure.
The risks include the use of the Internet as viable commercial marketplace and
the potentially inadequate development of the necessary network infrastructure.

Fair Value of Financial Instruments and Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of cash, cash equivalents, and marketable
securities. As of December 31, 1998 and January 1, 2000, these financial
instruments carrying values approximated fair value. The Company primarily
invests its excess cash with high credit quality financial institutions
including primarily commercial paper and corporate bonds. The Company has not
experienced any significant losses on its cash, cash equivalents or marketable
securities.

Net Loss Per Share

The Company computes basic and diluted net loss per share in accordance with
SFAS No. 128, "Earnings Per Share." Basic net loss per share is computed by
dividing net loss attributable to common stockholders by the weighted average
number of shares of common stock outstanding for the period. Diluted loss per
share does not differ from basic loss per share since potential common shares
from conversion of preferred stock, stock options and warrants are antidilutive
for all periods presented.

Basic and diluted loss per share were calculated as follows:

<TABLE>
<CAPTION>
                                                                             1997                   1998                   1999
------------------------------------------------------------------------------------------------------------------------------------

<S>                                                                      <C>                    <C>                    <C>
Numerator:
   Loss before extraordinary item                                        $     (8,314)          $    (10,629)          $    (19,497)
   Dividends on preferred stock                                                   157                    329                    549
                                                                     ---------------------------------------------------------------

   Loss attributable to common stockholders
     before extraordinary item                                                 (8,471)               (10,958)               (20,046)
   Extraordinary item                                                              --                    744                     --
                                                                     ---------------------------------------------------------------
   Net loss attributable to common stockholders                          $     (8,471)          $    (11,702)          $    (20,046)
                                                                     ===============================================================
Denominator:
   Weighted average common shares
     outstanding                                                            3,424,035              3,522,458             11,545,102

Basic and diluted net loss per common share:
   Loss per common share before extraordinary item                       $      (2.47)          $      (3.11)          $      (1.74)
   Extraordinary item                                                              --                  (0.21)                    --
                                                                     ---------------------------------------------------------------
   Net loss per common share                                             $      (2.47)          $      (3.32)          $      (1.74)
                                                                     ===============================================================
</TABLE>

Outstanding options of 726,750, 593,000 and 2,132,746, as of December 31, 1997
and 1998 and January 1, 2000, respectively, were not included in the diluted
loss per share computation because their effect would be antidilutive.
Outstanding warrants of 435,714, 788,714 and 753,714 as of December 31, 1997 and
1998 and January 1, 2000, respectively, were not included in the diluted loss
per share calculation because their effect would be antidilutive. Through
February 9, 2000, the company granted 377,300 options under the company stock
option plans. All grants were issued at exercise prices equal to the fair market
value of the common stock.

Comprehensive Income (Loss)

The Company's comprehensive loss is the same as the net loss presented for the
years ended December 31, 1997 and 1998. The comprehensive loss for the year
ended January 1, 2000 has been disclosed on the statement of stockholders'
equity and comprehensive loss.


                                       27
<PAGE>

Notes to Consolidated Financial Statements (continued)
In thousands, except share and per share data


3. Marketable Securities

The following is a summary of the marketable securities at January 1, 2000
classified as current assets (in thousands):

<TABLE>
<CAPTION>
                                                Unrealized     Unrealized    Fair market
                                        Cost         gains         losses          value
----------------------------------------------------------------------------------------
<S>                                 <C>                <C>           <C>        <C>
Available for sale securities:
  Corporate bonds                   $ 11,505           $--           $(10)      $ 11,495
  Commercial paper                     9,249             2             --          9,251
                                    ----------------------------------------------------
                                    $ 20,754           $ 2           $(10)      $ 20,746
                                    ----------------------------------------------------
</TABLE>

Gross realized gains and losses on marketable securities were not significant.
The Company did not have any marketable securities at December 31, 1998.

4. Subsidiary and Minority Interest

The Company established Streamline Mid-Atlantic, Inc. ("Mid-Atlantic") as a
wholly owned subsidiary in February 1997, receiving 2.2 million common shares of
Mid-Atlantic in exchange for $22 cash.

In February 1997, Mid-Atlantic issued 800,000 shares of common stock in a
private offering to third parties, in exchange for net proceeds of $400.
Mid-Atlantic acquired substantially all of the assets and liabilities of
Shopping Alternatives, Inc., a provider of home grocery services. In the same
month, stockholders of Shopping Alternatives received 970,000 shares of
Mid-Atlantic common stock plus warrants to purchase 30,000 shares of
Mid-Atlantic common stock. The value ascribed to the warrants was nominal. In
accordance with the purchase method of accounting, the purchase price of
approximately $855, which includes approximately $370 of liabilities assumed,
was allocated first to the fair value of the net assets acquired from Shopping
Alternatives. The excess of the purchase price over the fair value of the
acquired assets of approximately $794 was recorded by Mid-Atlantic as acquired
goodwill, in the absence of other intangibles, to be amortized on a
straight-line basis over a period of five years. The accompanying financial
statements for the year ended December 31, 1997 reflect the resultant change in
interest of the Company's ownership of Mid-Atlantic from 100% to approximately
55%.

In November 1998, the Company acquired the outstanding minority ownership
interest of Mid-Atlantic in a single transaction in which minority stockholders
of Mid-Atlantic received 126,424 shares of the Company's common stock, $0.01 par
value, having a fair value of approximately $506 at the date of acquisition. In
accordance with the purchase method of accounting, the Company allocated the
purchase price first to the fair value of the net assets of Mid-Atlantic, as of
the date of the transaction. The resulting total goodwill associated with
Mid-Atlantic, representing the excess of the purchase price over the fair value
of the acquired assets of approximately $1,300 at December 31, 1998, is being
amortized on a straight-line basis over a period of five years. Unaudited pro
forma combined results as if the acquisition had occurred at the beginning of
either of the fiscal years are not materially different than the results
presented.


                                       28
<PAGE>

Notes to Consolidated Financial Statements (continued)
In thousands, except share and per share data


5. Property and Equipment
Property and equipment consists of the following:

<TABLE>
<CAPTION>
                                               Useful lives
                                                 in years        1998          1999
-------------------------------------------------------------------------------------
<S>                                                <C>         <C>            <C>
Computer equipment                                  3-5        $   822        $ 1,681
Equipment, furniture and fixtures                  5-10          2,071          4,621
Vehicles                                              5            589          1,633
Leasehold improvements                             5-10          1,631          3,700
                                                               ----------------------
                                                                 5,113         11,635
Accumulated depreciation and amortization                       (1,450)        (2,860)
                                                               ----------------------
                                                               $ 3,663        $ 8,775
                                                               ======================
</TABLE>

At December 31, 1998 and January 1, 2000, the costs of fixed assets held under
capital leases and included above amounted to approximately $1,029 and $3,918,
respectively, and accumulated amortization related to such assets amounted to
approximately $338 and $423, respectively.

6. Debt

In April 1998, the Company received proceeds of $7,000 in connection with the
issuance of Senior Discount Notes ("Discount Notes"). The Company issued 777
units each consisting of a $10 aggregate principal amount of Discount Notes and
546.88 warrants to purchase common stock. The $7,770 face amount of the Discount
Notes is due April 15, 2001. The Discount Notes bear interest initially in the
form of accretion in the principal amount outstanding up to the face amount at
the rate of 11% per annum until April 15, 1999. Thereafter, the Discount Notes
bear interest on the face amount at the rate of 12% per annum with interest
payable semiannually until maturity.

In conjunction with the issuance of the Discount Notes, the Company also issued
warrants for the purchase of up to a total of 425,000 shares of the Company's
common stock. Warrants to purchase 225,000 shares of common stock at $7.00 per
share vested immediately. The remaining 200,000 warrants vest periodically at
varying exercise prices until 2001 based upon the Company obtaining certain
amounts of financing. All of these warrants expire upon the earlier of April 15,
2005 or five years after a public offering by the Company raising at least
$25,000. The Company recorded approximately $525 of additional paid-in capital
for the fair value of the warrants on the issuance date as an additional
discount associated with the Discount Notes.

On September 18, 1998, the Company redeemed all of the Discount Notes at a price
of $7,000 plus approximately $334 of interest and $257 for a call premium with
the proceeds from the issuance of the Company's Series D Preferred Stock (Note
8). In addition, the Company modified the terms of the warrants issued in
connection with this debt such that the remaining unvested warrants to purchase
200,000 shares of the common stock expired immediately in exchange for the
issuance of 5,000 shares of common stock for $0.1. The redemption resulted in
the Company recording an extraordinary loss on the extinguishment of debt of
approximately $744 including approximately $257 for the call premium,
approximately $452 for the unamortized discount value associated with the
warrants and approximately $35 for the issuance of the common shares and the
remaining deferred financing costs.

7. Related Party Transactions

During 1997, the Company paid consulting fees under an agreement with a
marketing firm, the Chief Executive Officer of which is a director of the
Company. Total fees paid under this agreement during 1997 were approximately
$338. Additionally during 1997, the Company issued warrants valued at $25 to
this firm for the purchase of 50,000 shares of the Company's common stock at an
exercise price of $2.04 per share with an expiration date in 2001.


                                       29
<PAGE>

Notes to Consolidated Financial Statements (continued)
In thousands, except share and per share data


During 1997, the Company repurchased 11,500 shares of its common stock from its
Chairman and Chief Executive Officer at a purchase price of $7.00 per share,
which the Company's Board of Directors determined to be the fair value of those
shares at the date of repurchase.

During 1997, 1998, and 1999, the Company paid fees for technology development
and consulting under an agreement with a firm, the Chief Executive Officer of
which is a current director and former officer of the Company. Fees paid by the
Company under this agreement totaled approximately $1,250, $1,676, and $1,218 in
1997, 1998, and 1999, respectively. In addition, during 1997 the Company issued
warrants valued at approximately $330 to this firm for the purchase of 50,000
shares of the Company's common stock at an exercise price of $2.04 per share
with an expiration date in 2007. During 1998, the Company issued additional
warrants valued at approximately $447 to this firm for the purchase of 100,000
shares of its common stock at an exercise price of $4.00 per share with an
expiration date in 2003. Costs associated with these transactions have been
recorded as additions to capitalized software of approximately $683 and $468 for
the years ended December 31, 1998 and January 1, 2000, respectively, and as
technology systems and development expense of $1,440 and $750 for the years
ended December 31, 1998 and January 1, 2000, respectively.

During 1998, the Company issued convertible subordinated notes payable in the
amount of $200 to two directors of the Company, and $400 to five stockholders of
the Company, which were redeemed during 1998 at par value plus accrued interest.

On April 13, 1999, the Company issued warrants valued at approximately $472 to a
significant investor for the purchase of 75,000 shares of the Company's common
stock at an exercise price of $7.00 per share, in connection with a financing
commitment. In June 1999, the stockholder agreed to rescind all of its rights
pursuant to this warrant, effective as of the closing of the initial public
offering. In connection with this recission, the Company reversed the remaining
unamortized deferred financing costs of approximately $387 at the time of the
initial public offering.

During 1999, the Company paid fees to a technology firm, which is also an
investor. Fees paid by the Company totaled approximately $77.

The Company has capital equipment lease arrangements with one of its
stockholders and its affiliated entities. The Company paid approximately $69,
$198 and $561 in the years ended December 31, 1997 and 1998, and January 1,
2000, respectively under these capital lease arrangements. As of December 31,
1998 and January 1, 2000, amounts due to these related parties are $458 and
$716, respectively and have been included as capital lease obligations on the
balance sheet.

All warrant activity described in Note 11 during the years ended December 31,
1997 and 1998, and January 1, 2000 was with stockholders of the Company.


                                       30
<PAGE>

Notes to Consolidated Financial Statements (continued)
In thousands, except share and per share data


8. Redeemable Convertible Preferred Stock

The following table reflects redeemable convertible preferred stock activity
from December 31, 1996 through January 1, 2000:

<TABLE>
<CAPTION>
                                     Series A            Series B            Series C
                                 ----------------    ----------------    -----------------
                                 Shares    Amount    Shares    Amount    Shares     Amount
-------------------------------------------------------------------------------------------
<S>                              <C>      <C>         <C>      <C>         <C>       <C>
Balance at December 31, 1996     50,000   $ 5,203        --   $    --        --    $    --

Shares of Series B issued            --        --    80,000     8,000        --         --
Shares of Series C issued            --        --        --        --    10,000      1,000
Accrual of Series A dividends        --       157        --        --        --         --

Payment of Series A dividends        --      (360)       --        --        --         --
                              -------------------------------------------------------------
Balance at December 31, 1997     50,000     5,000    80,000     8,000    10,000      1,000

Shares of Series D issued            --        --        --        --        --         --
Accrual of Series D dividends        --        --        --        --        --         --
                              -------------------------------------------------------------
Balance at December 31, 1998     50,000     5,000    80,000     8,000    10,000      1,000

Accrual of Series D dividends        --        --        --        --        --         --
Conversion to common stock
  in connection with initial
  public offering               (50,000)   (5,000)  (80,000)   (8,000)  (10,000)    (1,000)
                              -------------------------------------------------------------
Balance at January 1, 2000           --   $    --        --   $    --        --    $    --
                              =============================================================


<CAPTION>
                                      Series D                Total
                                  -----------------      -----------------
                                  Shares     Amount      Shares     Amount
--------------------------------------------------------------------------
<S>                                <C>         <C>        <C>        <C>
Balance at December 31, 1996          --    $     --     50,000   $  5,203

Shares of Series B issued             --          --     80,000      8,000
Shares of Series C issued             --          --     10,000      1,000
Accrual of Series A dividends         --          --         --        157

Payment of Series A dividends         --          --         --       (360)
                              --------------------------------------------
Balance at December 31, 1997          --          --    140,000     14,000

Shares of Series D issued        228,570      22,857    228,570     22,857
Accrual of Series D dividends         --         329         --        329
                              --------------------------------------------
Balance at December 31, 1998     228,570      23,186    368,570     37,186

Accrual of Series D dividends         --         549         --        549
Conversion to common stock
  in connection with initial
  public offering               (228,570)    (23,735)  (368,570)   (37,735)
                              --------------------------------------------
Balance at January 1, 2000            --    $     --         --   $     --
                              ============================================
</TABLE>

During 1997, the Company amended its certificate of incorporation to amend the
rights of the Series A redeemable cumulative convertible preferred stock
("Series A") and to create two new series of redeemable convertible preferred
stock, designated as Series B (the "Series B") and Series C (the "Series C").
The Company is authorized to issue up to 100,000 shares of each of these series
of preferred stock, and each series has a par value of $1.00 per share. These
series of preferred stock are not cumulative as to dividends. In connection with
the amendment, the Company made a cash payment of approximately $360
representing the total accrued dividends due to the holders of the Series A. In
addition, the Company issued 80,000 and 10,000 shares of Series B and Series C,
respectively, for gross proceeds of $8,000 and $1,000, respectively.

During 1998, the Company amended its certificate of incorporation to amend
certain terms of Series A, Series B and Series C and authorize the issuance of
up to 380,000 shares of preferred stock designated as Series D. In September
1998, the Company issued 228,570 shares of Series D at $100 per share resulting
in gross proceeds of $22,857.

All outstanding shares of redeemable convertible preferred stock were converted
into common stock upon the closing of the Company's initial public offering on
June 17, 1999. Shares of redeemable convertible preferred stock for all Series,
while outstanding, were subject to the following rights and privileges:

Redemption

The Company was required to redeem each series of preferred stock in the amount
of $100 per share plus accumulated and unpaid dividends in two equal annual
installments commencing on the fifth anniversary upon request by holders of at
least two-thirds of such series of preferred stock. Each holder of preferred
stock could elect immediate redemption upon the sale of substantially all of the
Company's capital stock or assets to a third party. Additionally, a holder of
Series D could elect redemption if the Company has violated certain covenants.
However, stockholders were not entitled to elect redemption if that holder or a
Director nominated by the holder voted its shares in favor of the sale. As of
December 31, 1998, future redemption requirements for the preferred stock were
$2,500, $7,000, $16,093, and $11,593 in the years ended December 31, 2001, 2002,
2003 and 2004 respectively, plus additional accrued dividends.



                                       31
<PAGE>

Notes to Consolidated Financial Statements (continued)
In thousands, except share and per share data



Liquidation

In the event of any liquidation, dissolution, or winding-up of the Company, the
holders of the Series D were entitled to a liquidation preference of up to $100
per share plus all accrued but unpaid dividends before any payments are made to
the holders of the Series A, Series B or Series C. After payments to the Series
D stockholders, the holders of the Series A, Series B or Series C were entitled
to receive a liquidation payment of $100 per share and any accumulated and
unpaid dividends. Any assets remaining after such liquidation payment to the
preferred stockholders would be available for distribution ratably to common
stockholders.

Dividends

The holders of Series D were entitled to cumulative dividend rights at a rate of
5% per annum of the Series D liquidation preference. The dividend rights would
be payable in cash, as an addition to the liquidation preference or an issuance
of Series D shares at the discretion of the Company or any combination of the
foregoing. Series D accumulated dividends were to be paid before dividends or
distributions were made to the holders of the Series A, Series B or Series C.
The Company would pay a dividend or distribution on the same terms and at the
same or equivalent rate on each share of Series A, Series B, Series C and Series
D whenever a dividend or distribution was declared or paid on any shares of the
common stock. At December 31, 1998, Series D stockholders were entitled to
cumulative dividends in arrears of approximately $329. Accrued dividends of $878
were converted to 218,387 shares of common stock in June 1999 in connection with
the Company's initial public offering.

Conversion

The number of shares of common stock into which the Series A, Series B, Series C
and Series D were convertible was determined by multiplying each share by the
quotient of $100 divided by the conversion price as follows: Series
A--approximately $2.04 per share; Series B and C--$7.00 per share; Series
D--$4.00 share. All unpaid dividends were to be paid upon conversion.

Each share of Series A, Series B and Series C was convertible into the Company's
common stock at the option of the holder at any time prior to redemption, or
would be automatically converted upon the closing of a public offering of the
Company's common stock resulting in a price of at least $8.00 per share and
gross proceeds of at least $25,000, subject to anti-dilution provisions.

Each share of Series D was convertible into the Company's common stock at the
option of the holder at any time after the earlier of a conversion event or
March 18, 2000. A conversion event includes any transaction that would be deemed
a liquidation, Mr. DeMello's ceasing to be an officer, director or consultant of
the Company, certain actions by the Company without a prior affirmative vote by
a majority of the Series D stockholders, a change in persons constituting the
majority of the board of directors or a material adverse change in the Company's
business. Each Series D share would be automatically converted upon the closing
of the first sale of a public offering resulting in at least $25,000 of gross
proceeds for at least $8.00 per share provided that an investment banker
delivers an opinion that deems the conversion is necessary to facilitate a
successful public offering, or upon a sale the shares of Series A, Series B,
Series C and Series D redeemable convertible preferred stock ("Preferred Stock")
and accrued dividends on the Series D Preferred Stock were converted into
9,673,109 shares of common stock.

Voting

Holders of Series A, Series B, Series C and Series D did not have voting rights
but holders of Series A and Series C, voting together, and holders of Series B,
voting separately, have the right to elect one director of the Company, or in
lieu thereof, one individual as an observer at all meetings of the Company's
board of directors. Holders of Series D had the right to elect one director of
the Company and one individual as an observer at all meetings of the Company's
board of directors. The Company was required to request the consent of the
Series D stockholders before engaging in certain activities such as the
modification of the rights of the Series D stockholders, a merger or
acquisition, the declaration of dividends for all capital stock and the issuance
of common stock at a price less than $7.00 per share and more than $4.00 per
share.


                                       32
<PAGE>

Notes to Consolidated Financial Statements (continued)
In thousands, except share and per share data


9. Stockholders' Equity

Common Stock and Preferred Stock

The holders of common stock are entitled to one vote for each share held at all
meetings of the stockholders. Dividends on common stock may be paid out of
lawfully available funds as and when determined by the board of directors,
subject to any preferential dividend rights of preferred shareholders. In April
1999, the Company's board of directors adopted, and the stockholders approved,
effective upon the closing of an initial public offering, an increase in the
authorized capital stock of the Company to 50,000,000 shares of common stock and
5,000,000 shares of preferred stock, each having a par value of $0.01 per share.
The board of directors is authorized, without further stockholder approval, to
fix or alter the relative rights, preferences, qualifications, limitations or
restrictions thereof, including any dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting any series or the designation
of such series.

Treasury Stock

During 1997, the Company repurchased 29,000 shares of its common stock from
certain employees and directors of the Company for a total of approximately
$203. During 1998, the Company received 5,000 shares of common stock as
consideration for payment of a $35 employee note receivable.

Stock Split

On April 8, 1999, the board of directors declared a 1-for-2 reverse stock split
of common stock. All common shares and per share amounts in the consolidated
financial statements and related footnotes have been restated to reflect the
effect of the reverse stock split for all periods presented.

Initial Public Offering

In June 1999, the Company completed an initial public offering of its common
stock (the "IPO"). A total of 4,998,482 shares of the Company's common stock
were sold at a price of $10.00 per share, including the exercise of the
underwriter's over allotment option in July 1999, generating gross offering
proceeds of approximately $50,000. After deducting approximately $5,000 in
underwriting discounts and other related expenses, the net proceeds to the
Company were approximately $45,000. Concurrent with the IPO, all of the shares
of Series A, Series B, Series C and Series D redeemable convertible preferred
stock ("Preferred Stock") and accrued dividends on the Series D Preferred Stock
were converted into 9,673,109 shares of Streamline's common stock.

10. Stock Option Plan and Employee Stock Purchase Plan

Stock Option Plans

On June 10, 1993, the Company adopted two stock option plans. The 1993 Employee
Option Plan ("Employee Plan") initially allowed for the granting of 202,750
shares of either statutory or non-statutory options as defined by Section 422 of
the Internal Revenue Code. As of December 31, 1998, the Company had authorized
1,500,000 shares to be issued in connection with the Employee Plan. In April
1999, the Company increased the number of authorized shares to be issued under
this plan to 2,500,000. As of December 31, 1998 and January 1, 2000, there were
approximately 882,500 and 316,000 shares available for future grants under the
Employee Plan, respectively.

The Director Option Plan ("Director Option Plan") allows for the granting of
shares of non-statutory options and is not intended to meet the requirements of
Internal Revenue Code Section 422. As of December 31, 1998, an aggregate of
125,000 shares of common stock had been reserved for issuance upon the exercise
of options available under the Director Option Plan. During 1999, the Company
increased the number of authorized shares to be issued under this plan to
400,000. As of December 31, 1998 and January 1, 2000, there were approximately
37,500 and 312,500 shares available for future grants under the Director Option
Plan, respectively.


                                       33
<PAGE>

Notes to Consolidated Financial Statements (continued)
In thousands, except share and per share data


Options are generally granted at a price established by the board of directors
to be not less than the fair market value of the stock on the date of grant. The
options vest at various rates over periods up to four years and expire up to ten
years from the grant date for the Employee Option Plan and five years from the
grant date for the Director Option Plan.

The Company has adopted the disclosure only provisions of SFAS No. 123.
Accordingly, no compensation cost has been recognized for stock options granted
at or above fair value. Had compensation cost been determined based on the fair
value at the grant dates for awards in 1997, 1998 and 1999 consistent with the
provisions of SFAS No. 123, the Company's pro forma net loss attributable to
common stockholders and pro forma basic and diluted net loss per common share
for fiscal 1997, 1998 and 1999 would have been as follows:

<TABLE>
<CAPTION>
                                                1997       1998        1999
------------------------------------------------------------------------------
<S>                                           <C>        <C>         <C>
Net loss attributable to common stockholder
  As reported                                 $(8,471)   $(11,702)   $(20,046)
  Pro forma                                    (8,554)    (11,783)    (21,261)
Basic and diluted net loss per common share
  As reported                                 $(2.47)    $  (3.32)   $  (1.74)
  Pro forma                                    (2.50)       (3.35)      (1.84)
</TABLE>


The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model. The following assumptions were used for
grants through the date of the initial public offering June 18, 1999; no
volatility, no dividend yield, and risk free interest rate of 5.6% for 1997,
5.3% for 1998 and 5.1% for 1999. The following assumptions were used for grants
subsequent to the initial public offering; 90% volatility, no dividend yield,
and risk free interest rate of 6.0%. The expected lives for grants in 1997 and
1998 of the Employee and Directors' Plan were five and three years,
respectively. The expected lives for grants in 1999 of the plans are three
years. The weighted average fair value of options granted was $0.45, $0.14, and
$4.23 per share for the years ended December 31, 1997 and 1998 and January 1,
2000, respectively. All options granted during the years ended December 31, 1997
and 1998 were issued at exercise prices in excess of the fair market value of
the common stock. All options granted during the year ended January 1, 2000 were
issued at exercise prices equal to the fair market value of the common stock.

Because the determination of the fair value of all options granted includes
vesting periods over several years and additional option grants may be made each
year, future effects on reported pro forma net income or net loss may differ
from the above pro forma disclosures.

The following table summarizes the activity in the Company's option plans at
December 31, 1997 and 1998 and January 1, 2000, and changes during the periods
then ended:

<TABLE>
<CAPTION>
                                                1997                   1998                 1999
                                         --------------------  ---------------------  --------------------
                                                     Weighted               Weighted               Weighted
                                                      average                average                average
                                                     exercise               exercise               exercise
                                         Shares        price    Shares        price   Shares         price
-------------------------------------------------------------  -------------------------------------------
<S>                                      <C>           <C>     <C>            <C>    <C>             <C>
Outstanding at beginning of period       450,500       $1.76    726,750       $2.84    593,000       $3.88
Granted                                  398,750        3.62    119,750        6.76  1,732,245        8.74
Exercised                                (77,550)       1.16    (34,583)       1.80    (26,667)       3.10
Forfeited                                (44,950)       1.80   (218,917)       2.30   (165,832)       8.71
                                       -------------------------------------------------------------------
Outstanding at end of period             726,750       $2.84    593,000       $3.88  2,132,746       $7.46
                                       ===================================================================
Options exercisable at end
   of period                             162,250       $1.84    307,415       $2.80    564,620       $3.98
                                       ===================================================================
</TABLE>


                                       34
<PAGE>

Notes to Consolidated Financial Statements (continued)
In thousands, except share and per share data


The following table summarizes information about stock options outstanding at
January 1, 2000:

<TABLE>
<CAPTION>
                          Total           Weighted
                         number            average        Number
Range of             of options          remaining    of options
Exercise Price      outstanding   contractual life   exercisable
----------------------------------------------------------------
<S>     <C>          <C>                       <C>       <C>
$1.00 -  4.00          343,334                 6.1       337,168
 6.50 -  7.00        1,048,162                 9.1       227,452
 7.63 -  9.56           20,750                 9.6            --
10.00 - 12.81          719,500                 9.5            --
                    ============================================
                     2,132,746                 8.8       564,620
                    ============================================
</TABLE>

Employee Stock Purchase Plan

In April 1999, the Company's board of directors and stockholders approved the
1999 Employee Stock Purchase Plan (the "1999 Purchase Plan"). The Company has
reserved 250,000 shares of common stock for issuance under the 1999 Purchase
Plan. No shares were issued in 1999.

11. Common Stock Warrants

The following table summarizes the activity related to warrants at December 31,
1997 and 1998, and January 1, 2000 and changes during the periods then ended:

<TABLE>
<CAPTION>
                                              1997                    1998                 1999
                                        ---------------------------------------------------------------
                                                  Weighted                Weighted             Weighted
                                                   average                 average              average
                                                  exercise                exercise             exercise
                                         Shares      price       Shares      price    Shares      price
-------------------------------------------------------------------------------------------------------
<S>                                     <C>          <C>      <C>            <C>     <C>          <C>
Outstanding at beginning of period       50,000      $1.93     435,714       $5.28   788,714      $5.67
Granted                                 385,714       5.72     553,000        6.46    75,000       7.00
Exercised                                    --         --          --          --   (35,000)      1.99
Forfeited                                    --         --    (200,000)       7.00   (75,000)      7.00
                                      -----------------------------------------------------------------
Outstanding at end of period            435,714      $5.28     788,714       $5.67   753,714      $5.67
                                      =================================================================
Warrants exercisable at end
   of period                            193,929      $3.84     681,571       $5.46   753,714      $5.67
                                      =================================================================
</TABLE>

The weighted average fair value of warrants granted during 1997, 1998, and 1999
estimated on the date of grant using the Black-Scholes option-pricing model was
$2.74, $1.82 and $6.29, respectively. The fair value was estimated using an
expected volatility of 50% in 1997 and 80% in 1998 and 1999, risk free rates of
5.8% to 6.3% in 1997, 4.1% to 5.5% in 1998, and 4.5% to 6.2% in 1999 and the
contractual term of the warrant.


                                       35
<PAGE>

Notes to Consolidated Financial Statements (continued)
In thousands, except share and per share data


The following table summarizes information about warrants outstanding at January
1, 2000:

<TABLE>
<CAPTION>
                             Total number          Weighted
                              of warrants           average
                              outstanding         remaining
Exercise Price            and exercisable  contractual life
------------------------------------------------------------------
<S>                              <C>                     <C>
   $1.80                          15,000                 1.0
    2.04                         100,000                 4.6
    4.00                         100,000                 4.0
    7.00                         538,714                 3.1
                               -----------------------------------
                                 753,714                 3.4 years
                               -----------------------------------
</TABLE>

During 1997, the Company issued warrants for the purchase of a total of 385,714
shares of its common stock at exercise prices ranging from $2.04 - $7.00 per
share and expiration dates from 2001 through 2007. These warrants were
principally issued in lieu of cash consideration for services provided to the
Company. Certain of these warrants were issued with immediate vesting while some
of the warrants had vesting that was contingent on additional services being
provided. In 1997, in connection with the issuance of these warrants, the
Company recorded $330 of technology systems and development costs, $281 of
capitalized software and $77 of deferred financing costs based upon the
appraised value of the warrants at the date of grant. As of December 31, 1997,
approximately 214,500 of these warrants were subject to vesting upon certain
conditions and are subject to adjustment until the measurement date is reached.
In 1998, the remeasurement of these warrants results in the Company reducing
capitalized software recorded in 1997 by approximately $67. As of December 31,
1998 and January 1, 2000, 107,143 warrants granted in 1997 were subject to
vesting upon certain future events and no significant value has been ascribed to
these unvested warrants.

During 1998, the Company issued warrants for the purchase of a total of 553,000
shares of its common stock at exercise prices ranging from $4.00 - $7.00 per
share as described below.

Warrants for the purchase of 425,000 common shares were issued in connection
with the Discount Notes at an exercise price of $7.00 per share. These warrants
expire upon the earlier of April 15, 2005 or five years after a public offering
by the Company raising at least $25,000. In connection with the repayment of the
Discount Notes, the Company notified the terms of the warrants issued in
association with this debt such that the remaining unvested warrants to purchase
200,000 shares of the common stock expired immediately in exchange for the
issuance of 5,000 shares of common stock for $0.1. (See Note 6.)

In addition, the Company issued warrants for the purchase of a total of 100,000
shares of its common stock at an exercise price of $4.00 per share with an
expiration date in 2003 in exchange for services provided to the Company. (See
Note 7.)

The Company issued warrants for the purchase of 28,000 shares of common stock at
an exercise price of $7.00 per share which are all vested as of December 31,
1998. These warrants expire in 2001. These warrants were principally issued in
lieu of cash consideration for services provided to the Company. The Company
recorded approximately $33 to capitalized software for the fair value of the
warrants.

In April 1999, the Company issued warrants for the purchase of 75,000 shares of
common stock at an exercise price of $7.00 per share in connection with a
financing commitment by a current stockholder. The Company recorded
approximately $472 of deferred financing costs for the estimated fair value of
the warrant. In June 1999, the stockholder agreed to rescind all of its rights
pursuant to this warrant, effective as of the closing of the initial public
offering. In connection with this recission, the Company reversed the remaining
unamortized deferred financing costs of approximately $387 at the time of the
initial public offering.


                                       36
<PAGE>

Notes to Consolidated Financial Statements (continued)
In thousands, except share and per share data


12. Commitments and Contingencies

Lease Obligations
The Company leases its facilities and certain equipment under noncancelable
leases. Future minimum lease obligations at January 1, 2000 are as follows:

<TABLE>
<CAPTION>
                                         Operating         Capital
                                            leases          leases
------------------------------------------------------------------
<S>                                        <C>              <C>
2001                                       $ 1,930          $1,160
2002                                         1,963           1,049
2003                                         1,539             802
2004                                         1,515             269
2005                                         1,437             155
Thereafter                                   7,284             116
                                           -------          ------
Total future payments                      $15,668           3,551
                                           =======          ======
Less: amount representing interest                             519
                                                            ------
Present value of capital leases                             $3,032
                                                            ======
</TABLE>

All capital lease obligations are fully collateralized by the equipment and are
at interest rates ranging from 4% to 20%.

Total rent expense for the years ended December 31, 1997 and 1998 and January 1,
2000 was approximately $639, $948, and $1,307, respectively.


13. Income Taxes

The components of the income tax provision (benefit) are as follows:

<TABLE>
<CAPTION>
                                       1997          1998          1999
                                     -----------------------------------
<S>                                  <C>           <C>           <C>
Deferred provision
  Federal                            $(2,827)      $(3,867)      $(5,317)
  State                                 (521)         (713)       (1,644)
  Change in valuation allowance        3,348         4,396         6,961
  Other                                   --           184            --
                                     -----------------------------------
   Total provision                   $    --       $    --       $    --
                                     ===================================
</TABLE>

Deferred income taxes 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. Deferred tax assets are
approximately $9,205 and $16,165 as full amount of its deferred tax assets.

As of January 1, 2000, the Company had federal net operating loss carryforwards
of approximately $39,994 and state net operating losses of approximately
$39,814. The federal and state net operating loss carryforwards begin to expire
in 2008 and 2000, respectively.

Under the provisions of the Internal Revenue Code, certain substantial changes
in the Company's ownership may have limited, or may limit in the future, the
amount of net operating loss carryforwards which could be utilized annually to
offset future taxable income and income tax liability. The amount of any annual
limitation is determined based upon the Company's value prior to an ownership
change.


                                       37
<PAGE>

Notes to Consolidated Financial Statements (continued)
In thousands, except share and per share data


14. Retirement Savings Plan

In 1997, the Company adopted the Streamline 401(k) Plan (the "Plan") for its
employees, which has been qualified under Section 401(k) of the Internal Revenue
Code. Eligible employees are permitted to contribute to the Plan through payroll
deductions within statutory limitations and subject to any limitations included
in the Plan. To date, the Company has made no contributions to the Plan.


15. Acquisition of Beacon Home Direct d/b/a Scotty's Home Market

On October 18, 1999, the Company signed a merger agreement with Beacon Home
Direct, Inc., d/b/a Scotty's Home Market. On January 5, 2000, the Company
acquired Scotty's, by merging it into the Company pursuant to the Agreement and
Plan of Merger and Reorganization, dated as of October 18, 1999 (the "Merger
Agreement"). The transaction was accounted for as a pooling of interests. The
Company issued approximately 3,710,000 shares of its common stock in exchange
for all of the common stock of Scotty's. Additionally, outstanding warrants and
options to acquire Scotty's common stock were converted into warrants and
options to acquire a total of approximately 598,000 shares of Streamline common
stock.

The following pro forma summary presents the consolidated results of operations
of the Company as if the acquisition of Scotty's had occurred during 1999 and as
of the beginning of the periods presented, after giving effect to certain
adjustments. These pro forma results are as of the beginning of the periods
presented.

<TABLE>
<CAPTION>
                                                    1997           1998           1999
------------------------------------------------------------------------------------------
(In thousands, except per share data, unaudited)

<S>                                               <C>            <C>            <C>
Revenue                                           $  6,514       $ 12,528       $ 22,862
Net loss attributable to common shareholders       (10,411)       (15,462)       (26,862)
Net loss per share                                $  (2.10)      $  (2.69)      $  (1.76)
</TABLE>

16. Subsequent Events

On January 5, 2000, the Company's shareholders approved an increase in the
number of authorized shares under the Employee Plan from 2,500,000 to 3,000,000
shares.


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<PAGE>

Directors and Officers


Board of Directors

Timothy A. DeMello
Chairman of the Board and Chief Executive Officer
Streamline.com

Edward Albertian
President and Chief Operating Officer
Streamline.com

Mark Cohn
Chairman and Chief Executive Officer
Damark International

Charles C. Conaway
President and Chief Operating Officer
CVS Corporation

John P. Fitzsimons
Senior Vice President
Reliance Insurance Company

Daniel J. Nordstrom
Chief Executive Officer
Nordstrom.com

Michael A. Stein
Chief Financial Officer
Nordstrom, Inc.

Thomas Jones
President
Elm Square Technologies, Inc.


Officers


Timothy A. DeMello
Chairman and Chief Executive Officer

Edward Albertian
President and Chief Operating Officer

J. Gregory Ambro
Senior Vice President and Chief Financial Officer

Lawrence P. Anderson
Vice President, Control and Accounting

John T. Burns
Vice President and General Manager, Boston Market

John Cagno
Vice President, Information Technology

Scott DeGraeve
Vice President and General Manager, Chicago Market

William P. Paul
Vice President, Merchandising

Kevin M. Sheehan
Vice President and General Manager,
Washington D.C. Market

Rod Sturchio
Vice President and General Manager,
New York/New Jersey Market

James Thompson
Vice President, Development

Mary E. Wadlinger
Vice President, Customer Quality

Gina L. Wilcox
Vice President, Sales & Marketing


                                       39
<PAGE>

Shareholder Information


Annual Meeting
The Annual Meeting of Shareholders will be held at 10:00 am on Thursday, May 25,
2000 at the offices of the Company, 27 Dartmouth Street, Westwood, MA 02090

Transfer Agent
BankBoston, N.A.
c/o Equiserve
150 Royall St.
Canton, MA 02021
Phone 781.575.3400

Corporate Counsel
Bingham Dana LLP
150 Federal Street
Boston, MA 02110
Phone 617.951.8000

Independent Accountants
PricewaterhouseCoopers LLP
One International Place
Boston, MA 02110
Phone 617.478.5000

Financial Information
To obtain our Annual Report or Form 10-K, free of charge,
or other financial publications, visit our Web site or contact:
Streamline.com Investor Relations
ir@streamline.com

Corporate Offices
Streamline.com, Inc.
27 Dartmouth Street
Westwood, MA 02090
781.407.1900
781.407.1946 fax
www.streamline.com


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