<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

         (Mark One)

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

For the fiscal year ended DECEMBER 31, 1999

                                       or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
    EXCHANGE ACT OF 1934 ( NO FEE REQUIRED)

         For the transition period from __________________________

                          COMMISSION FILE NUMBER 0-2401

                              E-SYNC NETWORKS, INC.
                 (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)

                         DELAWARE                     06-0625999
         (STATE OR OTHER JURISDICTION OF           (I.R.S. EMPLOYER
         INCORPORATION OR ORGANIZATION)           IDENTIFICATION NO.)

             35 NUTMEG DRIVE, TRUMBULL, CT               06611
      (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)          (ZIP CODE)

                                 (203) 601-3600
                         (REGISTRANT'S TELEPHONE NUMBER)
                 SECURITIES REGISTERED PURSUANT TO SECTION 12(B)
                                   OF THE ACT:

                                                   NAME OF EACH EXCHANGE ON
    TITLE OF EACH CLASS                                WHICH REGISTERED
    -------------------                            -------------------------
         NONE                                                NONE
    -------------------                            -------------------------
    -------------------                            -------------------------


           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                          COMMON STOCK, PAR VALUE $0.01
                                (TITLE OF CLASS)

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

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. ( )

      The issuer's revenue for its most recent fiscal year was $7,490,000.


The aggregate market value of the voting stock held by non-affiliates
                  of the registrant as of March 20, 2000 was:
                                   $53,696,526
                                   -----------

                    THE ISSUER WAS NOT INVOLVED IN BANKRUPTCY
                     PROCEEDINGS DURING THE PAST FIVE YEARS

        As of March 20, there were 6,727,976 shares of Common Stock,
                         Par Value $0.01, outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

   Information with respect to Directors, Management Remuneration and Security
    Ownership of Certain Beneficial Owners and  Management are contained in
   the Company's Proxy Statement for the 2000 Annual Meeting of Stockholders
                   and incorporated by reference in Part III.




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                                     PART I


ITEM 1.  BUSINESS

BACKGROUND

E-Sync Networks, Inc. ("E-Sync" or the "Company"), is a Delaware corporation
which was incorporated in 1999. The Company's principal offices are located at
35 Nutmeg Drive, Trumbull, CT 06611. E-Sync Networks (UK) Ltd. ("E-Sync U.K.")
is a wholly owned subsidiary of the Company, and was organized in England in
1983 to provide E-Sync's services to international users. E-Sync U.K. is located
at 2 Apple Walk, Swindon, England. Braincraft Learning Technologies, Inc.
("Braincraft"), also a wholly-owned subsidiary of the Company, was acquired by
E-Sync on November 8, 1999. Braincraft is located at 627 Broadway, New York, New
York 10012.

Effective as of the open of business on July 28, 1999, Wiltek, Inc., a
Connecticut corporation ("Wiltek"), was merged with and into its wholly-owned
subsidiary, E-Sync Networks, Inc., a Delaware corporation, pursuant to an
Agreement and Plan of Merger dated as of July 15, 1999, by and between Wiltek
and E-Sync (the "Merger Agreement"). Pursuant to the terms of the Merger
Agreement, E-Sync is the surviving corporation (the "Surviving Corporation").
Pursuant to the Merger Agreement, each share of Wiltek common stock, no par
value per share, was converted into one fully paid and nonassessable share of
common stock of the Surviving Corporation, $.01 par value per share, and each
share of Wiltek Series A Preferred Stock, no par value per share (the only
Series of Preferred Stock then outstanding), was converted into one fully paid
and nonassessable share of the Surviving Corporation's Series A Preferred Stock,
$.01 par value per share. The Certificate of Incorporation of E-Sync became the
Certificate of Incorporation of the Surviving Corporation, and the By-laws of
E-Sync became the By-laws of the Surviving Corporation.


OVERVIEW

E-Sync is a global provider of managed business-to-business e-commerce
applications and solutions that help medium and large businesses, including
Fortune 1000 companies, reinvent their businesses, interact more efficiently
with business partners, and web-enable their existing infrastructure. Through
these offerings, E-Sync provides comprehensive capabilities that provide secure
communication, information exchange and web-based transactions. The Company has
historically provided reliable, high-quality messaging and hosting services to
its customers, which are critical components that can serve as the backbone of
supply chain management solutions. In addition, the Company offers professional
services, primarily to large corporations, including systems integration,
technology planning and information technology (IT) support.

Within the last year, the primary focus of the Company has been re-directed
toward offering powerful supply chain management solutions, consisting of secure
links between buyers and suppliers of goods and services, to its target market.
The Company's implementation strategy being deployed for the development and
delivery of these offerings combines XML-based, open standards with security
embedded directly into the applications, a predominantly modular architectural
design and core messaging capabilities, to create end-to-end solutions allowing
the web-enablement of legacy systems. Deep and trustworthy relationships with
its existing Fortune 1000 customer base will provide the Company with
opportunities to migrate customers from current activities to higher-value web
supply chain offerings.

In addition to the new strategy of the Company to develop and provide an
end-to-end web supply chain solution, the Company will continue to offer its
existing services on a modular basis to customers. These services include web
design consulting, secure online messaging, outsourced e-mail services,
directory and fax services, hosted communications, network design and
integration, messaging integration and message platform migration.


INDUSTRY BACKGROUND

NEW MARKETS

Today's increasingly competitive business environment has forced many companies
to increase efficiency while improving their flexibility and responsiveness to
changing market conditions. In addition to facing stronger competition regarding
product


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quality, variety and price, businesses must shorten lead times, adjust
production for frequent changes in customer requirements and quote more accurate
and reliable delivery dates. Furthermore, a company's supply chain may span
multiple continents, tying suppliers in one part of the world with a plant in
another to serve customers in yet a third location. These forces are prompting
companies to collaborate with a broad range of suppliers and customers to
improve efficiencies across multi-enterprise supply chains. The growth of the
Internet and intranets and the proliferation of middleware applications and
integration expertise are accelerating these changes by enabling a ubiquitous,
platform-independent communications network. The combination of these forces has
created a dynamic, complex and highly interdependent business environment. In
response to these evolving market forces, many companies have sought to
reengineer their business processes to reduce manufacturing cycle times, shift
from mass-production to order-driven manufacturing, increase use of outsourcing
and share information with vendors and customers. The implementation of software
solutions to efficiently integrate business processes has become a key component
of these reengineering initiatives. E-Sync believes that companies are
increasingly recognizing efficient business process integration as a critical
source of competitive advantage in this rapidly changing business environment.

Over the past 30 years, information technologies have brought automation to
departmental operations such as manufacturing resource planning, financial
management, sales force automation and human resource management. However, the
information technology platforms that made departmental automation possible did
not provide enterprise-wide connectivity within organizations or connectivity
between organizations. The diversity of computing environments and the inability
to share information across those environments have been major impediments to
realizing significant benefits from investments in legacy systems. Many
organizations' applications, particularly their enterprise resource planning, or
ERP, systems, were not designed to communicate outside of an enterprise, making
business-to-business communication difficult. Achieving integration often
requires significant re-keying of data from at least one, if not both, parties
to a transaction, increasing costs and data errors. A comprehensive end-to-end
solution must provide companies with integrated direct links to their major
customers and suppliers, while also facilitating participation in B2B
marketplaces to leverage their networks of buyers and suppliers. It should also
allow companies to offer their business partners the ability to exchange
information and conduct transactions across the Internet securely, reliably, and
in real time, regardless of installed technology infrastructure. This solution
must be flexible enough to meet the unique business process requirements of
large, multinational organizations and must be highly scalable, reliable and
rapidly deployable. It must take advantage of an organization's existing
investments in information technologies by working with and connecting to
multiple financial, human resource and enterprise resource planning systems.

STRATEGY

E-Sync's objective is to develop a leadership position in providing solutions to
coordinate the disparate elements of web-enabled Supply Chain Management (SCM).
The Company's strategy for achieving these objectives is comprised of the
following elements:

EXPAND TOTALCHAIN(TM) SCM PRODUCT OFFERINGS. In the first quarter of 2000,
E-Sync introduced TotalChain(TM) as a beta offering to the marketplace.
TotalChain(TM) assists organizations in implementing cross-corporate application
integration. E-Sync's Hub and Spoke model provides tools and runtime services
that overcome the current impediments to B2B e-commerce on the Internet. E-Sync
will also expand its offerings to include additional functionality as "spokes"
off this central hub. These offerings will include, among others, Warehousing
Management Systems (WMS), Transportation and Logistics.

DEVELOP STRONG SUPPORT CAPABILITIES FOR CUSTOMERS. To succeed in the
marketplace, E-Sync will need a full suite of support services for its
customers. These capabilities will include analysis, implementation, training
and customer service.

EXPAND EXPERTISE IN TARGETED VERTICAL MARKETS. The Company is currently focusing
on providing a horizontal solution that provides value to a broad range of
industries. Its TotalChain(TM) hub is applicable to any industry that needs to
provide integration between its supply chain elements. At the same time, the
Company understands that each industry faces unique problems and issues that
must be addressed by focused inter-enterprise SCM applications. As additional
market share is achieved, the Company intends to develop and maintain templates
that address the particular requirements of targeted vertical markets.

INVEST AGGRESSIVELY TO BUILD MARKET SHARE. E-Sync will make substantial
investments to expand its sales and marketing, research and development,
consulting and administrative infrastructure. The Company's management believes
that such investments are necessary to increase market share and to capitalize
on the growth opportunities in the emerging inter-enterprise SCM market. These
investments will also include expanding the Company's world class hosting
capabilities.

ACQUIRE OR INVEST IN COMPLEMENTARY BUSINESSES, PRODUCTS AND TECHNOLOGIES. E-Sync
intends to make targeted acquisitions or investments to broaden its product
offerings, capabilities and technologies for eBusiness. For example, the
recently completed acquisition of Braincraft enhanced the Company's capabilities
by providing advanced user interface capabilities.


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BUILD A NETWORK OF STRATEGIC ALLIANCES. The Company intends to expand and seek
additional strategic relationships with leading enterprise software and
eBusiness vendors to integrate the TotalChain(TM) into their software products
and to create joint marketing opportunities. In addition, the Company intends to
augment its sales efforts by establishing and expanding relationships with other
complementary eBusiness vendors and systems consulting and integration firms to
more rapidly penetrate its targeted markets.

EXPAND GLOBAL OPERATIONS. The Company intends to aggressively grow its global
presence by expanding its worldwide field sales, marketing and services
organizations. To complement this strategy, management intends to continue to
globalize operations and expand the Company's corporate and administrative
organizations and systems.


PRODUCTS AND SERVICES

MANAGED SERVICES

E-Sync has developed a range of services, which allow customers to:

o    Connect dissimilar computer-based electronic mail -- generally these
     systems operate within different divisions of the same company or in the
     customers' trading partner facilities;

o    Communicate with public email services to allow users of host-based and
     client/server systems to correspond with e-mail users outside of their
     company; and

o    Send to facsimile devices located throughout the world utilizing the
     Company's broadcast and customized facsimile delivery service based in the
     U.S. and U.K.


Within the realm of messaging based technologies, use of messaging (e-mail, fax
and directory services) has become a standard operating procedure for successful
large and medium organizations. This trend should continue during 2000 as
technology costs continue to decline and technology ease-of-use increases. This
will lead to use and acceptance of collaborative computing technologies across a
much wider business market. E-Sync, by way of its experience and expertise, is
positioned solidly in the middle of these growth markets.

TOTALMAIL
TotalMail is E-Sync's complete messaging solution for Information Exchange
Service. TotalMail offers a range of available options, outsourced and
web-based, including the integration of e-mail with voice mail, paging,
telephony, calendaring, public and private folders, directory services,
distribution lists, and virus scanning. With the addition of SmartCard,
TotalMail provides portable access and security with unique cardholder data to
Information Exchange Services.

HOSTING SERVICES

WEB HOSTING SERVICES. E-Sync can design and implement a customized web
infrastructure to host a site that can be expanded into a high quality,
sophisticated Internet presence. This removes the requirement of a client to
purchase, configure, maintain or administer hardware, software, and Internet
connectivity.

APPLICATION HOSTING SERVICES. This service provides the ability for clients to
rent applications via an online link to E-Sync's Information Exchange Data
Center. The benefits to the client are fixed predictable costs, no upgrading
because the latest version is always available, and no file exchange. The
Company's Information Exchange Data Center maintains server hardware, security,
redundancy, and data backup to ensure that applications run efficiently and
effectively with 100% uptime. The Company also provides administrative services
and remote access to the applications via its Internet connections using
integrated digital certificate security.

MAILCONNECT
MailConnect increases clients' productivity by providing a common set of tools
and interfaces to create, send, and manage messages such as e-mail, fax, voice
mail, and pages. Through the MailConnect service, E-Sync leverages its
specialized


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expertise in legacy, LAN, and client/server-based mail systems to standardize an
organization's messaging infrastructure. This allows users of any of a client's
systems to send messages and attachments and to reply to messages sent from any
messaging platform within or outside that organization.

FAX SERVICES
Any organization that regularly faxes information such as purchase orders,
billing invoices, order acknowledgments, newsletters, marketing updates, and
product promotions is ideally suited to E-Sync's Fax Service. Customers can
easily send faxes from any e-mail client or host application. With unlimited
scalability and numerous custom features, E-Sync's automated fax services
eliminate the need for manual faxes, saving time and money while increasing
productivity. The Company's Help Desk is available 24/7, as is the Company's
Data Center that provides extensive redundancy and proactive monitoring of
system-level events. Fax Services include conversion, encryption and delivery of
faxes to e-mail or e-mail to faxes without any additional hardware or software
required.

o        APPLICATION TO FAX.
         Application to Fax is a flexible, low-cost way to deliver a high volume
         of system-generated files from computer applications to any fax device
         worldwide. Application to Fax can be customized to meet an
         organization's requirements and supports mainframe, minicomputer, and
         personal computer-based applications over a number of protocols,
         including TCP/IP and SNA.

o        MAILFAX.
         MailFax is an enterprise service that allows clients with e-mail
         capability to send domestic and international faxes automatically from
         their desktop without additional hardware or software. As an optional
         feature of MailFax, the Company offers Inbound Fax, which allows
         customers to receive faxes as e-mail messages. The Secure Fax option
         can be added to ensure that fax messages are not intercepted during
         transmission across public networks and to verify the identity of the
         sender.


DIRECTORY SERVICES
E-Sync's directory synchronization services enable customers' multiple-messaging
systems to have all user address information presented in a complete, native
format to all participating systems. This service feature also allows external
trading partner systems to participate in the directory synchronization process.
As an enhancement, messaging integration, which connects users of disparate
messaging applications (Lotus Notes, cc:Mail, Profs, etc.) within an
organization can be implemented over intranets, extranets, and virtual private
networks (VPNs). E-Sync offers outsourced Directory Services in the following
areas:

o        DIRECTORY SYNCHRONIZATION.
         Directory Synchronization provides full directory synchronization
         between disparate systems and standards, enabling the communication of
         e-mail and directory information among various incompatible
         standards-based systems. For separate lists of users in e-mail,
         file-server, human resources, accounting, sales, and other databases,
         Directory Synchronization assures that all changes, such as adding a
         user, in the directory service flow to all other resources.

o        METADIRECTORY SERVICES.
         When different parts of an organization have different naming schemes,
         a metadirectory can synchronize two or more directory services,
         allowing a single entry point for information to be shared by multiple
         platforms. E-Sync's Metadirectory Services will review an
         organization's information holdings and determine the requirements of a
         client's metadirectory. The Company can then develop a customized
         metadirectory or work with the client's staff to develop, enhance, or
         maintain an existing metadirectory.

o        ACTIVE DIRECTORY IMPLEMENTATION.
         As a Microsoft Solutions Provider Partner, E-Sync can implement Windows
         2000 Active Directory, Microsoft's answer to unite and organize diverse
         server hierarchies. Active Directory provides a unified view of
         networks, uniting and organizing diverse server hierarchies, thereby
         significantly reducing the number of directories with which network
         administrators and users must manage.

SECURITY
E-Sync uses its relationship with E-Certify, a leading provider of PKI-based
Internet security and encryption technology, to ensure that its clients can
exchange sensitive documents and private information with improved confidence
and reliability. The Company first analyzes the existing network infrastructure
and its security components and then makes recommendations that will provide the
client with the appropriate level of security for the network. Clients using any
of the Company's Managed



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Services can benefit from E-Certify's expertise. By adding PKI encryption to
TotalMail, a message is signed with a digital certificate and encrypted before
it is transmitted, thereby enhancing the security of electronic communications.
The recipient can identify the sender of the message and ensure that the message
has not been intercepted, viewed, or altered. TotalMail Smart Card provides the
added security of a smart card, containing a digital ID, which is issued to
authorized users only. Directory Synchronization can be implemented with full
PKI security, and smart cards and other hardware tokens can also be installed
for an additional level of security. The Company also offers Secure Messaging, a
cryptographic solution for secure communications, and Secure Fax, an enhancement
to the Company's Fax Services which offers greater security when sending and
receiving faxes using e-mail. As part of the Company's Hosting Services, it
provides administration services and remote access to applications via Internet
connections using integrated digital certificate security. E-Sync's anti-virus
protection can be developed and adapted to specific network configuration,
operating systems, and resources. In addition, E-Sync can filter suspect e-mail
messages and automatically scan messages and their attachments for viruses. The
Company offers a total, fully-integrated solution that will protect
applications, data, messaging, and user systems and that can be deployed
enterprise-wide without disrupting day-to-day operations.


PROFESSIONAL SERVICES

A key element in supporting E-Sync's clients is a full set of professional
services. These services include not only TotalChain(TM) planning and
implementation, but also a broad range of additional services including web
design, security planning, and network design and integration.

BUSINESS PROCESS ASSESSMENT
E-Sync's professionals assist clients in evaluating their IT needs, from
specialized applications to database and web servers, hardware, networks,
switches, firewalls, security, and storage technology. The Company also assesses
applicable business rules and processes for clients' supply chain and related
messaging infrastructure needs.

WEB DEVELOPMENT SERVICES
Through its Braincraft subsidiary, the Company offers web site design services
and web-based corporate communications and training tools across internal and
external settings. E-Sync's designers, producers, programmers, and project
managers can rapidly create and launch a web site that provides clients with a
quality "user experience." Through Braincraft, E-Sync offers organizations an
opportunity to create a more captivating, understandable, and easy-to-navigate
web site that will maximize user satisfaction, information retention, return
visits, sales, and brand recognition. After the site is created, E-Sync's Web
Hosting Services can design and implement a customized web infrastructure to
host the site. Recognized in the industry as a leader in "outside-the-box"
creative work, Braincraft received two Creative Summit Awards in 1999 for its
work in the Consumer Web Site and Self-Promotion Web Site categories. Braincraft
is also the developer of choice for Macromedia, Inc.'s Flash and Generator, two
products used in creating high-impact web sites for clients who require a
distinctive communications strategy.

NET SOLUTIONS
A major problem that many organizations face today is the incompatibility of
their current systems with new technologies employed by the Internet. E-Sync's
Net Solutions leverages a client's investment in the Internet, intranet, and
extranet by integrating existing platforms with new standards and technologies,
such as XML and Java, to provide a practical and secure front-end for users and
clients. The result is optimum performance with minimal disruption during
transition. The Company can also build custom applications to integrate Lotus
Notes, Microsoft Exchange, or other messaging systems with an existing network
infrastructure.

SECURITY SOLUTIONS
E-Sync's SECURITY SOLUTIONS area provides the ability to exchange sensitive
documents and private information securely with confidence and reliability.
E-Sync uses public key infrastructure (PKI) technology to deliver digital
certificates, encryption keys, and SmartCards for optimum secure messaging. With
large-scale anti-virus protection capabilities and e-mail anti-virus filtering,
E-Sync can provide full protection for applications, data, messaging, and user
systems across entire networks. E-Sync's Security Solutions evaluates the costs
and benefits of ID/password pairs, challenge/response tokens, smart cards,
biometrics, or other devices that provide unique profiles. Once a user's
identity is established, PKI can confirm that identity to all available
resources. E-Sync can also provide recognized digital certificates to
authenticate business documents, place orders, transfer funds, and perform other
e-business transactions.

NETWORK DESIGN AND INTEGRATION
In the NETWORK DESIGN AND INTEGRATION area, the Company provides expert
resources for all network design and integration needs. E-Sync assesses
information, messaging, and connectivity needs, evaluates existing
infrastructure architecture for



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adaptability to change, defines and tests migration processes, executes and
documents phased migration procedures for disparate messaging platforms, and
prepares enterprise-wide implementation plans. E-Sync also offers numerous
services in application development and support and in workflow automation.
E-Sync can install a Virtual Private Network (VPN) to ensure that only
authorized users can access a client's network and that data cannot be
intercepted.

MICROSOFT BACKOFFICE(R) CONSULTING
E-Sync is a unique Microsoft Solutions Provider Partner that specializes in
Microsoft BackOffice(R) architecture, design, and implementation services. Its
knowledge of electronic messaging infrastructure, application developments, and
project management techniques provides clients with customized, efficient
solutions that work. The Company's Microsoft Certified Professionals, Systems
Engineers, and Trainers offer a complete BackOffice(R) solution, including
assessing system requirements, installing, configuring, and training.

EXECUTIVE BRIEFING CENTER
E-Sync opened its Executive Briefing Center in May, 1999. Sponsored in part by
Compaq Computers, this state-of-the art facility showcases Microsoft's latest
technology offerings in a simulated working environment as presented by E-Sync's
team of professional services representatives.

NEW PRODUCT DEVELOPMENT

E-Sync is developing TotalChain(TM), a product and solution suite using a
"hub-and-spoke" Supply Chain Management approach to e-business that is
specifically designed to assist organizations in implementing intra- and
inter-corporate application integration. TotalChain(TM) provides tools and
runtime services that overcome the current impediments to B2B e-commerce on the
Internet. TotalChain(TM), supports the exchange of data over the Internet
between inter-corporate applications and intra-company applications using XML
standards. E-Sync introduced a beta version of TotalChain(TM) in March 2000.

The TotalChain(TM) suite includes a powerful document routing engine, providing
interfaces for ERP, Web Servers, Mail Servers, Directory and Fulfillment
systems. In addition to the core tool set, E-Sync will provide a comprehensive
workflow engine at the business application layer, allowing corporations and
their partners to model and dynamically change their business supply chain. The
Company believes that another important element of TotalChain(TM)'s competitive
advantage is that it offers a unique single platform for coordinating multiple
web supply chains.

While several companies offer leading edge point solutions for Supply Chain
Management, the Company believes that an enterprise cannot realize the full
potential of these solutions without a way to integrate the various levels and
tiers of their supply chain in a manner that allows consistent content and
document flow. The Company's TotalChain(TM) Integration Manager serves as
the foundation for that integration. TotalChain(TM) Integration Manager is a
secure and open web-based platform bringing together clients' internal supply
chain applications, as well as coordinating their applications with those of
their customers and suppliers.

E-Sync's Supply Chain Management elements will include Trading Markets, Order
Processing, Warehousing, Logistics, Scheduling and Workflow. TotalChain(TM) is
scalable, modular, and can be implemented in 30 to 90 days for a large part of
the Company's target market. TotalChain(TM) is fully compatible with TRW's
premier MARC(TM) warehouse management system, as well as with other systems.

The critical needs of supply chain solutions require not only consistent
document content across the enterprise, but also security. As part of the
Company's product offering, E-Sync's EAI solutions will include attribute
security certificates and key management solutions. This enhanced capability
will provide the only business-to-business security mechanism available on the
market today. Unlike traditional business-to-business service offerings that
protect from server to client, E-Sync's solution provides a means of protecting
each document transaction across the Internet, providing a truly secure supply
chain solution.

TOTALCHAIN(TM) BUSINESS PORTAL
TotalChain(TM) Business Portal serves as an electronic entry point into
TotalChain(TM) and any other business application. Through TotalChain(TM)
Business Portal, users can access TotalChain(TM) Order Processing Manager to
create purchase orders or other procurement-related documents. Systems
Administrators can access TotalChain(TM) Workflow Manager to configure or update
business rules and workflow assignments. Users signing on to a TotalChain(TM)
system can work securely, knowing that every communication, end-to-end,
throughout the supply chain is not only encrypted but also digitally
authenticated and certified. To define the entry point into the Internet and
enhance the user experience, the award-winning design and production teams at
E-Sync's Braincraft subsidiary can rapidly create the look, feel, and
functionality of the client's TotalChain(TM) Business Portal.


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TOTALCHAIN(TM) ORDER PROCESSING MANAGER
This offering is a complete e-procurement package providing Order Entry,
Purchase Order, Accounts Payable, Accounts Receivable, General Ledger, and
Materials Management modules. TotalChain(TM) Order Processing Manager validates
and completes transactions, scheduling transportation and delivery and
generating critical management reports.

TOTALCHAIN(TM) WORKFLOW MANAGER
TotalChain(TM) Workflow Manager is the core of the TotalChain(TM) System. It
allows the mapping and application of business rules and processes in the
client's supply chain system. Based upon the business rules and processes that
are defined, TotalChain(TM) Workflow Manager then controls the document workflow
throughout the client's supply chain and enforces security throughout the
communication process, using digital certificate PKI technology and encryption
for every communication sent and received using the Internet. XML translation
and the Company's TotalChain(TM) Integration Manager Series of translators allow
communication among many types of e-procurement and ERP systems, including
Commerce One, Ariba, SAP, Baan, and PeopleSoft.

TOTALCHAIN(TM) INTEGRATION MANAGER SERIES
TotalChain(TM) Integration Manager is a universal translator between different
platforms and applications, sitting between a TotalChain(TM) Workflow Manager
and its connected applications. TotalChain(TM) Integration Managers are
Java-based, making them platform and operating system independent. Platform
independence allows simple and easy implementations to get a client's supply
chain web-enabled quickly without requiring system or application changes.
E-Sync's pre-packaged ERP Series of TotalChain(TM) Integration Managers will
include support of Baan, Oracle, PeopleSoft, and SAP systems. Customized
translators can also be designed to connect with existing proprietary systems.
E-Sync's Communications Series of TotalChain(TM) Integration Managers allows
clients to quickly interface with companies whose primary means of communication
involve less sophisticated systems, such as fax, e-mail, and web servers.

TOTALCHAIN(TM) OUTSOURCING SERVICES.
E-Sync offers a totally outsourced, web-based supply chain solution that
integrates and maintains dynamic connections with clients' suppliers, partners
and customers. Every communication throughout a client's supply chain can be
encrypted and digitally authenticated and certified. The Company's Information
Exchange Data Center maintains server hardware, security, redundancy and data
backup to ensure that applications run efficiently and effectively with 100%
uptime and access to a 24/7 help desk.


SALES AND MARKETING

The Company focuses its marketing efforts toward educating its target market,
generating new sales opportunities, and creating awareness for its
business-to-business electronic commerce solutions. E-Sync conducts a variety of
marketing programs to educate its target market. The Company has engaged in
marketing activities such as business seminars, trade shows, press relations and
industry analyst programs and advisory councils.

E-Sync's marketing organization also serves an integral role in acquiring,
organizing and prioritizing customer and industry feedback in order to help
provide product direction to the Company's development organizations. The
Company has traditionally targeted large multi-national companies that are
likely to have dissimilar computer systems and applications in multiple
locations. Such companies have been plagued with inter-divisional communication
problems because their computing strategies often differed from division to
division, resulting in computing systems that communicate ineffectively with
each other. E-Sync's customer list contains over 50 large corporations, most of
which are Fortune 500 companies.


CUSTOMERS

E-Sync provides Fortune 1000 clients with secure web-based, business-to-business
solutions and services. E-Sync's customers include the following:

o     American Standard, Inc.
o     Ameritech
o     AT&T
o     Briggs & Stratton Corporation
o     Compaq
o     Crum & Forster Insurance


                                       -8-

<PAGE>   9




o     ESPN
o     DaimlerChrysler
o     First Data Resources
o     Ford Motor Company
o     GE Capital
o     Instinet
o     IVANS, Inc.
o     Johnson & Johnson
o     Metromedia International Telecommunications, Inc.
o     Otis Elevator
o     Pepsi Cola
o     Ralston Purina
o     St. Paul Fire & Marine Insurance Company
o     Travelers Insurance
o     USABancShares

PARTNERS

E-Sync has a variety of relationships with leading information technology
providers, enabling it to offer its clients a choice of the best technologies
not offered by a sole technology source.

E-CERTIFY is a leading provider of PKI-based Internet security and encryption
technology. With this technology, E-Sync's clients can take advantage of a new
level of secure B2B e-commerce. Many of E-Sync's Managed Services, including
Total Mail, Fax Services, MailConnect, Directory Services, and Hosting Services,
benefit from E-Certify's expertise.

MICROSOFT
E-Sync is a Microsoft Solutions Provider Partner, uniquely qualifying the
Company to conduct application analysis and to develop migration planning and
implementation. The Company also provides support for Windows 2000 Active
Directory, Windows NT, MS Exchange, Systems Management Server (SMS), SNA Server,
and Internet/intranet deployment.

IVANS, INC. uses E-Sync to provide messaging and fax services to the insurance
and healthcare industry.

TRW
E-Sync integrates advanced TRW technologies into its service and product
offerings.

In addition, the Company's products and services leverage off of the products
and services of the following companies:

COMPAQ sponsors E-Sync's Information Exchange Data Center and its Executive
Briefing Center.

ISOCOR is E-Sync's partner for messaging platforms, providing messaging
integration for disparate mail systems, as well as technology for Directory
Synchronization.

EASTMAN SOFTWARE, a Kodak business, provides E-Sync with enterprise work
management technology. Eastman Software's portfolio of products includes
award-winning software for imaging, workflow, computer output to laser disk
(COLD), and document management.

NETIQ CORPORATION provides technology for E-Sync's Remote Management Services.

CISCO SYSTEMS, INC. provides E-Sync with network solutions to enhance its
product and service offerings.

MAJOR VENDORS

The Company relies on various suppliers for equipment and services to provide
its services to its customers. Among them are standard computer servers and
hardware, standard telecom services, and proprietary software. While the Company
currently relies on Compaq and Cisco equipment purchased through resellers for
its computer hardware, and Qwest and AT&T for its telecom services, the Company
believes that alternate suppliers would be readily available should one of its
current suppliers become unavailable.




                                       -9-

<PAGE>   10




The Company currently uses proprietary software, requiring proprietary hardware,
to provide its Managed Services offerings. While there are several sources of
this hardware, there is currently only one manufacturer. Should this hardware
become unavailable, the Company believes it could find alternate solutions to
enable it to continue to provide its services. However, identifying and
implementing alternate solutions could take an undetermined amount of time and
could have a negative impact on the Company's service offerings. In addition,
there are no guarantees that if an alternate solution is found, that it could be
implemented in a cost-effective manner, or provide the same functionality as the
Company's current system.

NET SALES BACKLOG

Management believes that sales backlog is not a meaningful indication of future
revenue because most of its revenue is derived from short-term contracts for
both Managed Services and Professional Services which are generally initiated
within 90 days of receipt of an order.

PRODUCT DEVELOPMENT

Management believes that its proprietary product development efforts provide the
Company with a competitive advantage by defining the needs for new products,
guiding future enhancements and testing new implementations. The Company's
research and development activities are principally directed toward the
development of web supply chain system integration technology and software as
well as enhancing existing services. During fiscal years 1999 and 1998 E-Sync
spent $1.3 million and $0.5 million, respectively, on research and development.

EMPLOYEES

As of December 31, 1999, the Company had 94 full-time employees, including 9
primarily engaged in research and development activities and 11 engaged in sales
and marketing activities. The Company's future success depends in significant
part upon the continued service of its key technical and senior management
personnel and its continuing ability to attract and retain highly qualified
technical and managerial personnel. Competition for such personnel is intense
and there can be no assurance that the Company can retain its key managerial and
technical employees or that it can attract, assimilate or retain other highly
qualified technical and managerial personnel in the future. None of the
Company's employees are represented by collective bargaining units and the
Company has never experienced a work stoppage. The Company believes that its
employee relations are good.

COMPETITION

The market for the Company's Managed Services and Professional Services
offerings is intensely competitive, evolving and subject to rapid technological
change. The Company has encountered competition with respect to different
aspects of its existing offerings from a variety of vendors including Critical
Path and ICG for its Managed Services, and Andersen Consulting, IBM and others
for our Professional Services.

While none of the Company's competitors or potential competitors currently
produces an identical web supply chain end-to-end solution, the Company is
subject to current or potential competition from large software vendors; systems
integrators; B2B marketplaces that develop their own B2B integration solutions;
certain EDI vendors; and vendors of proprietary EAI and application server
products, who have added XML capabilities to their products.

Many of the Company's competitors have longer operating histories, significantly
greater financial, technical, marketing and other resources, greater name
recognition, a broader range of products to offer and a larger installed base of
customers than the Company, each of which could provide them with a significant
competitive advantage over the Company. In addition, the Company expects to
experience increasing price competition as the Company and its competitors
compete for market share. There can be no assurance that the Company will be
able to compete successfully with existing or new competitors or that
competition will not have a material adverse effect on the Company's business,
operating results and financial condition.

INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS

The Company anticipates that its future success will be heavily dependent upon
its proprietary technology. To protect its proprietary rights, the Company
relies on a combination of copyright, trade secret and trademark laws, and
nondisclosure and other contractual restrictions. As part of its confidentiality
procedures, the Company generally enters into nondisclosure agreements with its
employees, consultants, and strategic partners and limits access to and
distribution of its designs, software and other proprietary as it deems
appropriate.



                                      -10-

<PAGE>   11



ITEM 2.  PROPERTIES

The Company's headquarters, which includes executive management, operations,
sales, marketing, research and development, and administration, are located in
Trumbull, Connecticut. At the same location is the Company's state-of-the-art
high security data center enabling E-Sync to offer clients reliable, cost
effective and efficient services such as network monitoring, applications
support, and a help desk. The Company also has sales and development offices in
New York City and a secure data center located in the United Kingdom. E-Sync
currently has 94 employees serving clients around the globe.

The Company occupies a portion of a three-story building at 35 Nutmeg Drive,
Trumbull, Connecticut, as a tenant under a lease expiring December 31, 2014. The
space consists of approximately 20,555 rentable square feet and is utilized for
offices and a computer center. The Company also has 1,200 square feet at
Building 101, Merritt 7 Corporate Park, Norwalk, Connecticut, under a lease
expiring July 23, 2001 and 2,500 rentable square feet at 627 Broadway, New York,
New York under a lease expiring October 31, 2001. Additionally, the Company is
leasing approximately 3,500 square feet in Swindon, England for the E-Sync U.K.
computer center under a lease which expires February 1, 2004.

ITEM 3.  LEGAL PROCEEDINGS

On November 9, 1999 Systems Research Applications Corporation ("SRA") of
Fairfax, VA commenced an action against E- Sync in the Circuit Court for Fairfax
County. There are no other parties to the suit. The complaint alleges that
E-Sync breached a written agreement whereby SRA was to provide for the
documentation and migration of E-Sync's computer systems to a new location. The
complaint seeks money damages in the principal amount of $327,371.86, sounding
in three counts alleging breach of contract and anticipatory breach of contract.
E-Sync removed the case to the United States District Court for the Eastern
District of Virginia, where the case is currently pending. Systems Research and
Applications Corp. v. E-Sync Networks, Inc., Civ. No. 00-39-A. By its answer
dated January 12, 2000, E-Sync denied all material allegations of the complaint,
set forth affirmative defenses and counterclaimed against SRA for money damages
and attorneys' fees based upon breach of contract and breach of warranty. The
action remains pending and the parties are exchanging discovery.

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

There were no matters submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report through the solicitation of
proxies or otherwise.



                                      -11-

<PAGE>   12





                                     PART II


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

(a) The Company's Common Stock is traded on the OTC Bulletin Board (through
which various market dealers make the market of the Company's Common Stock and
trades are reported through what is commonly known as the "pink sheets") under
the symbol ESNI. The following table shows the range of closing bid prices for
the Common Stock, in the over-the-counter market for the fiscal quarters
indicated, as reported by the NASD. The quotations represent prices in the
over-the-counter market between dealers in securities, do not include retail
mark-up, mark-down or commission and do not necessarily represent actual
transactions:

<TABLE>
<CAPTION>
                                                Bid Prices
                                           -----------------------
         1999                              High            Low
-------------                              -------       ---------
<S>                                        <C>           <C>
First Quarter                               2 7/16            9/16
Second Quarter                              5 31/32         2 9/16
Third Quarter                               6 1/16          3 3/16
Fourth Quarter                             14 1/4           4


         1998                              High            Low
-------------                              -------       ---------
First Quarter                              27/32              7/16
Second Quarter                             3/4                1/2
Third Quarter                              7/8                5/8
Fourth Quarter                             23/32              3/8
</TABLE>

(b)  Approximate number of holders of the Company's common equity:

<TABLE>
<CAPTION>
                                                     Approximate Number of
                                                     Record Holders as of
           Title of Class                               March 28, 2000
           --------------                            -----------------------
<S>                                                  <C>
Common Stock, par value $0.01                           585

Series A Preferred Stock, par value $0.01                 2

Series B Preferred Stock, par value $0.01                15
</TABLE>


(c)  Dividends

Under a credit facility expiring in August, 2001, the Company is prohibited from
paying cash dividends.

The Company has never paid cash dividends on its Common Stock. The Company plans
to reinvest its cash flow in its business and does not anticipate payment of
cash dividends in the foreseeable future.

(d) Issuances of Securities

On November 1, 1999, the Company issued an aggregate of 1,590,909 shares of
Series B Convertible Preferred Stock at $4.40 per share to fifteen accredited
investors, and, shortly thereafter, the Company's U.K. subsidiary issued
3,000,000 preference shares, which shares are exchangeable at the option of the
holder thereof, at any time, for 681,818 additional shares of the Company'
Series B Preferred Stock, to one accredited investor. The Company (including its
U.K. subsidiary) received cash proceeds of $10.0 million from such sales, net
of offering costs. The Company believes that such issuances were exempt from


                                      -12-

<PAGE>   13




the registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), by virtue of the exemptions set forth in Section 4(2) thereof
and Rule 506 of Regulation D thereunder.

On November 8, 1999, the Company issued 680,256 shares of its common stock, and
paid $250,000 in cash, to the two stockholders of Braincraft in exchange for all
of Braincraft's issued and outstanding capital stock. The common stock issued by
the Company was valued at $2.9 million. The Company believes that such issuance
was exempt from the registration requirements of the Securities Act by virtue of
the exemption contained in Section 4(2) thereof.

On December 8, 1999, the Company issued options to purchase 40,000 shares of its
common stock at an exercise price of $4.20 per share to Dr. David Gray, a
consultant in connection with Dr. Gray acting as a technical advisor for E-Sync
U.K. for three years. These options are exercisable for a period of ten years
and vest ratably over three years. The value of the option given in return for
the services was $519,000. The Company believes that such issuance was exempt
from the registration requirements of the Securities Act by virtue of Section
4(2) thereof.

On December 14, 1999, the Company issued 32,523 shares of its common stock
valued at $154,000 to Commercial Electronics, LLC, a shareholder of the Company,
for services performed relating to an executive search. Also on such date, the
Company issued 75,000 non-refundable shares of its common stock to Greenhill &
Co. LLC, a financial advisor, for services to be performed over three years. The
value of these services and the shares was $422,000. The Company believes that
such issuances were exempt from the registration requirements of the Securities
Act by virtue of Section 4(2) thereof.



                                      -13-

<PAGE>   14




ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW
E-Sync is a global provider of managed business-to-business e-commerce
applications and solutions that help medium and large businesses, including
Fortune 1000 companies, reinvent their businesses, interact more efficiently
with business partners, and web-enable their existing infrastructure. Through
these offerings, E-Sync provides comprehensive capabilities that provide secure
communication, information exchange and Web-based transactions. The Company has
historically provided reliable, high-quality messaging and hosting services to
its customers, which are critical components that can serve as the backbone of
supply chain management solutions. In addition, the Company offers professional
services, primarily to large corporations, including systems integration,
technology planning and information technology (IT) support.

Within the last year, the primary focus of the Company has been re-directed
toward offering powerful supply chain management solutions, consisting of secure
links between buyers and suppliers of goods and services, to its target market.
The Company's implementation strategy being deployed for the development and
delivery of these offerings combines XML-based, open standards with security
embedded directly into the applications, a predominantly modular architectural
design and core messaging capabilities, to create end-to-end solutions allowing
the web-enablement of legacy systems. Deep and trustworthy relationships with
the Company's existing Fortune 1000 customer base will provide the Company with
opportunities to migrate customers from current activities to higher-value web
supply chain offerings.

In addition to the Company's new strategy to develop and provide an end-to-end
web supply chain solution, the Company will continue to offer its existing
services on a modular basis to customers. These services include web design
consulting, secure online messaging, outsourced e-mail services, directory and
fax services, hosted communications, network design and integration, messaging
integration and message platform migration.


TWELVE MONTHS ENDED DECEMBER 31, 1999 COMPARED TO THE TWELVE MONTHS ENDED
OCTOBER 31, 1998

The Company's revenues consist of fees for Professional Services provided to its
customers in the form of web development, messaging infrastructure and other
consulting services, and Managed Services in the form of hosting and messaging
services. Professional Services, including services provided by the Company's
Braincraft subsidiary, are normally billed on a time and material basis with
contracts typically ranging from 1 to 12 months. Managed Services consist of
both fixed charges, billed in advance, and usage based charges billed at the end
of the month. Contracts for Managed Services are typically for a one-year
period. The Company recognizes revenue in the period the services are performed.

Managed Services revenues decreased by 19.2% and Professional Services revenues
increased by 24.7% in the year ended December 31, 1999. Managed Services
revenues decreased primarily due to the decision to end support for older
technology platforms that are no longer part of the Company's strategic focus as
well as price reductions for certain messaging services in response to
competitive conditions. The increase in Professional Services revenue is
primarily due to the acquisition and consolidation of Braincraft Learning
Technologies, Inc. ("Braincraft") in November of 1999. Net of the effect of the
consolidation of Braincraft, Professional Services revenue increased by 8.3%
over the periods principally due to an increase in the volume of professional
services provided.

Gross margin for Managed Services decreased to negative 0.2% in the year ended
December 31, 1999 (expenses exceeded revenues), compared to 45.8% for the year
ended October 31, 1998, mainly due to the lower revenues discussed above and
increased costs associated with expanded capacity to support future growth in
new products. Gross margin for Professional Services decreased to 19.6% in the
year ended December 31, 1999, from 28.9% for the twelve months ended October 31,
1998, principally due to increased costs associated with the recruiting and
training of additional consulting personnel to support anticipated growth,
partially offset by a reduction in the use of higher cost subcontract
consultants and increased revenue from higher margin projects.

Sales and marketing expenses increased $1,552,000, or 150.5%, in the current
year, and as a percent of total revenues increased from 13.6% in the year ended
October 31, 1998, to 34.5% for the year ended December 31, 1999. The increase is
a result of the hiring of additional sales and sales support personnel as well
as higher advertising and promotion expenses related to increasing the Company's
visibility with current and potential customers.

The Company's general and administrative expenses were $2,581,000 or 298.4%
higher for the year ended December 31, 1999, then for the fiscal year ended
October 31, 1998. As a percent of total revenues, general & administrative
expenses increased


                                      -14-

<PAGE>   15




from 14.0% to 52.6% over the periods. The increase is primarily attributable to
the Company's change in strategy to offering supply chain management solutions,
which resulted in significant increases in general, sales and operations
management personnel and capabilities, relocation and expansion of the Company's
headquarters and data center, and increased professional and consulting fees.

Research and development expenditures were $1,291,000 and $491,900 for the years
ended December 31, 1999 and October 31, 1998, respectively. The 182.4% increase
in expense for the year ended December 31, 1999 was mainly due to the increase
in the number of research and development personnel as well as the increased use
of outside consultants. To date, all development costs have been expensed in the
period incurred.

Interest income, net of interest expense, was $5,700 in the year ended December
31, 1999, as compared to an expense of $48,300 in the year ended October 31,
1998. The change was mainly due to the investment of funds received through the
issuance of preferred stock prior to their use.

In December 1999, the Company issued options to purchase 40,000 shares of its
common stock at an exercise price of $4.20 per share to a consultant in
connection with the consultant acting as a technical advisor for E-Sync's U.K.
operations for three years. These options are exercisable for a period of ten
years and vest ratably over three years. The Company accounts for these options
in accordance with Emerging Issues Task Force Abstract No. 96-18, "Accounting
for Equity Instruments That are Issued to Other Than Employees for Acquiring, or
in Conjunction with Selling Goods or Services." Pursuant to EITF 96-18, the
Company has valued the options using a Black-Scholes pricing model. The $519,000
ascribed to the options reflects the market value as of December 31, 1999 and
has been recorded as deferred compensation. This cost is being amortized over
the applicable vesting periods. The value ascribed to the options will be
adjusted at each intervening balance sheet date to bring the total charge up to
the then current market value. The Company has amortized $14,000 of the deferred
compensation as of December 31, 1999. Such amount is included within non-cash
compensation in the statement of operations.

In the fourth quarter of 1999, the Company issued 32,523 shares of its common
stock valued at $154,000 to an advisor for services performed, which were
expensed immediately. In 1999, the Company issued 75,000 non-refundable shares
of its common stock to an advisor for services to be performed over three years.
The $422,000 value ascribed to the 75,000 shares is recorded as an other asset
and is being ratably amortized over three years, with $141,000 of such
amortization expensed in 1999. The issuance of the shares is non-refundable.


TWO MONTHS ENDED DECEMBER 31, 1998

Revenue for the two months ended December 31, 1998 was $1.2 million. For the
period, approximately $650,000, or approximately 54.1% of the Company's revenue,
was derived from Managed Services revenue, with the balance being derived from
Professional Services.

Cost of sales, as a percent of total revenue, was approximately 58.3% for the
two month period. This ratio was essentially unchanged when compared to the 12
months ended October 31, 1998.

Sales and marketing expenses for the period represented approximately 16.6% of
total revenue. The major components of sales and marketing expenses were
salaries and benefits, and advertising, comprising 64.3% and 10.3% of total
sales and marketing expenses, respectively.

General and administrative expenses for the period were $218,000, approximately
18.3% of revenue. The primary components of general and administrative expenses
in the period were salaries and benefits, and professional fees, comprising
55.6% and 14.8% of total general and administrative expenses respectively.

Research and development expenses were approximately 6.8% of total revenue, or
$81,500 for the period. As a percent of revenue, these expenses were comparable
to research and development expenses incurred in the previous twelve months. The
primary component of research and development expense for the two-month period
was salaries and benefits, representing 74.5% of total research and development
expense for the period.

Interest expense for the two-month period was approximately $5,100 or 0.4% of
revenue. This represented interest paid to a bank with whom the Company had
executed a financing agreement.





                                      -15-

<PAGE>   16





LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents increased during the twelve months ended December 31,
1999, by $6.4 million from $796,800 at December 31, 1998. The Company raised
$15.4 million through financing activities, primarily from the issuance of
preferred stock. Of that amount, the Company invested approximately $3.0 million
in capital purchases related to the relocation and expansion of the Company's
headquarters and data center, and used an additional $0.5 million to acquire
Braincraft. Operations of the Company used approximately $5.5 million. At
December 31, 1999, the Company had working capital (current assets minus current
liabilities) of approximately $4.9 million.

Net cash used in operating activities was $4.9 million for the year ended
December 31, 1999. Net cash flows used in operating activities in the period
reflect increased net losses of $7.2 million, offset in part by an increase of
$1.6 million in accounts payable and accrued expenses primarily related to the
completion of the relocation of the Company's principal offices to Trumbull,
Connecticut.

Net cash used in investing activities was $3.5 million for the year ended
December 31, 1999. Cash used in investing activities primarily reflects
purchases of property and equipment for the installation of new computer
equipment, purchases of furniture and equipment for employees, and leasehold
improvements related to the expansion of data center capacity and the relocation
of the Company's principal office to Trumbull, Connecticut. Investing activities
during the period also reflected cash used to acquire Braincraft, net of the
cash acquired.

Net cash provided by financing activities was $15.4 million for the year ended
December 31, 1999, primarily from the net proceeds of the Series B Convertible
Preferred Stock financing through the issuance of approximately 2.3 million
shares for gross proceeds of $10.0 million. In January 1999, the Company sold
1.0 million shares of Series A Preferred Stock for gross proceeds of $3.0
million. Also, in August 1999, warrants to purchase 1.5 million shares of common
stock were exercised for gross proceeds of $1.5 million.

Capital expenditures, including capital leases, were $3.0 million for the year
ended December 31, 1999. E-Sync's capital expenditures principally consisted of
purchases of hardware and software, office furniture and equipment, and
leasehold improvements. Management expects that the Company's capital
expenditures will continue to increase in the future. During this period,
management expects to fund capital expenditures either through the use of
working capital or with capital leases.

As of December 31, 1999 the Company had $7.2 million of cash and cash
equivalents. The Company expects to experience significant growth in its
operating expenses, particularly research and development and sales and
marketing expenses for the foreseeable future in order to execute its business
plan. As a result, the Company anticipates that such operating expenses, as well
as planned capital expenditures, will constitute a material use of cash
resources. In addition, the Company may utilize cash resources to fund
acquisitions or investments in complementary businesses, technologies or product
lines. Thereafter, the Company may find it necessary to obtain additional equity
or debt financing. In the event additional financing is required, the Company
may not be able to raise funds on acceptable terms or at all.

YEAR 2000

The Company established a Year 2000 (Y2K) executive oversight committee in 1998
to review all of the Company's computer systems and programs as well as those of
third parties whose data the Company relies on in any material respect. The
objective of the review was to assess the ability of the computer systems and
programs to process transactions in the year 2000 and to implement remedial
solutions to preclude interruption of the Company's business operations and
services to its supplier and customers. Part of the remediation process included
transitioning customers from and retirement of Y2K non-compliant legacy systems.
The legacy system transitioning process, including final verification and
testing, was complete during the third quarter of 1999. The Company does not
believe that any material problems to its hardware and software, or its
products, arose or were discovered at the commencement of the year 2000. The
Company does not believe that it will incur any future material Y2K expenses.

FORWARD LOOKING STATEMENTS

The statements in this annual report on Form 10-KSB that are not historical fact
constitute "forward-looking statements." Said forward-looking statements involve
risks and uncertainties that may cause the actual results, performance or
achievements of the Company and its subsidiaries to be materially different from
any future results, performance or achievements, express or implied by such
forward-looking statements. These forward-looking statements are identified by
their use of forms of such terms and phrases as "expects", "intends", "goals",
"estimates", "projects", "plans", "anticipates", "should", "future", "believes",
and

                                      -16-

<PAGE>   17




"scheduled".

The variables which may cause differences include, but are not limited to, the
following general economic and business conditions: competition; success of
operating initiatives; operating costs; advertising and promotional efforts; the
existence or absence of adverse publicity; changes in business strategy or
development plans; the ability to retain management; availability, terms and
deployment of capital; business abilities and judgment of personnel;
availability of qualified personnel; labor and employee benefit costs;
availability and cost of raw materials and supplies; and changes in, or failure
to comply with, government regulations. Although the Company believes that the
assumptions underlying the forward-looking statements contained herein are
reasonable, any of the assumptions could be inaccurate, and therefore, there can
be no assurance that the forward-looking statements included in this filing will
prove to be accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives and exceptions of the Company will be achieved.

In addition, there can be no assurance that the Company will be successful in
further developing any of its new products, that the Company will not experience
difficulties that could delay or prevent successful development, introduction
and sales of these products, or that its new products and enhancements will
adequately meet the requirements of the marketplace and achieve market
acceptance. Although the Company expects to derive a substantial portion of its
revenue from the TotalChain(TM) offerings in the future, it is still developing
its pricing, expense and revenue model for the services associated with such
offerings. If the Company is unable to successfully establish a pricing, expense
and revenue model acceptable to its customers, the TotalChain(TM) offerings may
not be commercially successful. Management cannot be sure that existing and
future development efforts will be completed within the anticipated schedules or
that, if completed, they will have the features or quality necessary to make
them successful in the marketplace. Further, despite testing by the Company and
by current and potential customers, errors could be found in the Company's
products. E-Sync may not be able to successfully correct these errors in a
timely and cost effective manner. If the Company is not able to develop new
products or enhancements to existing products or corrections on a timely and
cost-effective basis, or if these new products or enhancements do not have the
features or quality necessary to make them successful in the marketplace, the
Company's business will be seriously harmed.

Management expects that most of the Company's enhancements to existing and
future products will be developed internally. However, the Company currently
licenses certain externally developed technologies and will continue to evaluate
externally developed technologies to integrate with its solutions. These
externally developed technologies, if suffering from defects, quality issues or
the lack of product functionality required to make the Company's solutions
successful in the marketplace, may seriously impact and harm the Company's
business. In addition, the Company must attract and retain highly qualified
employees to further its research and development efforts. The Company's
business could be seriously harmed if it is not able to hire and retain a
sufficient number of these individuals.




                                      -17-

<PAGE>   18





ITEM 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



                              E-Sync Networks, Inc.


                          INDEX TO FINANCIAL STATEMENTS




<TABLE>
<S>                                                                                                              <C>
Independent Auditors' Report                                                                                      F-1

Report of Independent Certified Public Accountants                                                                F-2

Consolidated Balance Sheet at December 31, 1999                                                                   F-3

Consolidated Statements of Operations for each of the years ended December 31, 1999, and
October 31, 1998, and the two months ended December 31, 1998                                                      F-4

Consolidated Statements of Stockholders Equity for each of the years ended December 31, 1999,
and October 31, 1998, and the two months ended December 31, 1998                                                  F-5

Consolidated Statements of Cash Flows for each of the years ended December 31, 1999, and
October 31, 1998, and the two months ended December 31, 1998                                                      F-7

Notes to Consolidated Financial Statements                                                                        F-8
</TABLE>







                                      -18-

<PAGE>   19





                          INDEPENDENT AUDITORS' REPORT


The Board of Directors and
Stockholders of
E-Sync Networks, Inc.:


     We have audited the accompanying consolidated balance sheet of E-Sync
Networks, Inc. and subsidiaries (the "Company") as of December 31, 1999, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the transition period from November 1, 1998 to December 31, 1998 and
for the year ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

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

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of E-Sync
Networks, Inc. and subsidiaries as of December 31, 1999, and the results of
their operations and their cash flows for the transition period from November 1,
1998 to December 31, 1998 and for the year ended December 31, 1999, in
conformity with generally accepted accounting principles.




                                  /s/ KPMG LLP
New York, New York
March 5, 2000


                                       F-1

<PAGE>   20











Report of Independent Certified Public Accountants




To the Board of Directors and Shareholders of E-Sync Networks, Inc.

We have audited the consolidated statements of operations, stockholders' equity,
and cash flows of E-Sync Networks, Inc. (formerly known as Wiltek, Inc. and its
Subsidiary) (the "Company") for the fiscal year ended October 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated results of operations and consolidated
cash flows of the Company for the fiscal year ended October 31, 1998, in
conformity with accounting principles generally accepted in the United States.



GRANT THORNTON LLP
NEW YORK, NEW YORK
DECEMBER 29, 1998






                                       F-2

<PAGE>   21







                             E-SYNC NETWORKS, INC.
                          CONSOLIDATED BALANCE SHEETS
                 (in thousands, except share and per share data)

<TABLE>
<CAPTION>
                                                                                       DECEMBER 31,
                                                                                           1999
                                                                                   ---------------------
                                          ASSETS

<S>                                                                                        <C>
Current Assets:
     Cash and cash equivalents .........................................................   $  7,182
     Accounts receivable, less allowance for doubtful accounts of $124,000, and
         $35,000 as of December 31, 1999 and 1998 respectively .........................      1,148
     Other current assets...............................................................        382
                                                                                           --------

          Total current assets .........................................................      8,712

    Equipment, net .....................................................................      3,620
    Goodwill and other intangible assets, net ..........................................      4,419
    Other assets .......................................................................        250
                                                                                           --------

          Total assets .................................................................   $ 17,001
                                                                                           ========


                            LIABILITIES AND STOCKHOLDERS' EQUITY


Current Liabilities:
    Term loans payable, current portion ...............................................    $    105
    Obligations under capital leases, current portion .................................         102
    Accounts payable ..................................................................       1,465
    Accrued expenses ..................................................................       1,941
    Medical benefits obligation, current portion ......................................          28
    Deferred revenue ..................................................................         171
                                                                                           --------
       Total current liabilities ......................................................       3,812

Term loans payable, less current portion ..............................................           6
Obligations under capital leases, less current portion ................................          60
Medical benefits obligation, less current portion .....................................         210
                                                                                           --------
Total liabilities .....................................................................       4,088

Stockholders' equity:
Convertible Preferred Stock, par value $.01 per share, 10,000,000 shares
  authorized
Series A Convertible Preferred Stock, par value $.01 per share, 1,000,000 shares
  issued and outstanding, with an aggregate liquidation preference of $2,985 ...........         10
Series B Convertible Preferred Stock, par value $.01 per share,  2,272,727 shares
  issued and outstanding, with an aggregate liquidation preference of $10,000 ..........         23
Common Stock, stated value $.01 per share,  50,000,000 shares authorized,
  7,607,692 shares issued and outstanding at December 31,1999 ..........................         76
Additional paid in capital .............................................................     26,248
Accumulated deficit ....................................................................    (11,723)
Deferred compensation ..................................................................       (505)
Less treasury stock at cost, 992,565 shares ............................................     (1,216)
                                                                                           --------
       Total Stockholders' Equity ......................................................     12,913
                                                                                           --------

Commitments and Contingencies

       Total liabilities and stockholders' equity ......................................    $ 17,001
                                                                                            ========
</TABLE>

          See Accompanying Notes to Consolidated Financial Statements.


                                       F-3
<PAGE>   22




                              E-SYNC NETWORKS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      -------------------------------------
             (in thousands, except share and per share information)

<TABLE>
<CAPTION>
                                                                       TWELVE MONTHS ENDED
                                                            ----------------------------------------      TWO MONTHS ENDED
                                                            DECEMBER 31, 1999       OCTOBER 31, 1998      DECEMBER 31, 1998
                                                            -----------------       ----------------      -----------------
<S>                                                         <C>                     <C>                   <C>
REVENUES:
    Managed services .....................................      $     3,620            $     4,480           $       647
    Professional services ................................            3,870                  3,104                   548
                                                                -----------            -----------           -----------
         Total revenues ..................................            7,490                  7,584                 1,195

COSTS AND EXPENSES:
    Cost of managed services .............................            3,626                  2,429                   363
    Cost of professional services ........................            3,110                  2,208                   334
    Sales and marketing ..................................            2,583                  1,031                   199
    General and administrative ...........................            3,643                  1,069                   219
    Research and development .............................            1,291                    492                    81
    Non-cash compensation ................................              309                     --                    --
                                                                -----------            -----------           -----------
    Total operating expenses .............................           14,562                  7,229                 1,196
                                                                -----------            -----------           -----------
    Income (loss) from operations ........................           (7,072)                   355                    (1)

OTHER INCOME (EXPENSE):
     Other expense, net ..................................              (97)                    --                    (1)
     Interest expense ....................................              (56)                   (48)                   (5)
     Interest income .....................................               62                     --                    --
                                                                -----------            -----------           -----------
     Total other (expense)................................              (91)                   (48)                   (6)
                                                                -----------            -----------           -----------
Net earnings (loss) ......................................      $    (7,163)           $       307           $        (7)
                                                                ===========            ===========           ===========


Earnings (loss) per common share:
     Basic ...............................................      $     (1.51)           $       .08           $       .00
                                                                ===========            ===========           ===========
     Diluted .............................................      $     (1.51)           $       .07           $       .00
                                                                ===========            ===========           ===========


Weighted average number of shares
used in per share calculation:
     Basic ...............................................        4,752,629              3,838,483             3,892,128
                                                                ===========            ===========           ===========
     Diluted .............................................        4,752,629              4,140,364             3,892,128
                                                                ===========            ===========           ===========
</TABLE>




           See accompanying notes to consolidated financial statements



                                       F-4

<PAGE>   23





                                     E-SYNC NETWORKS, INC.
                               STATEMENT OF STOCKHOLDERS' EQUITY
                               (IN THOUSANDS, EXCEPT SHARE DATA)


<TABLE>
<CAPTION>
                                        Series A Preferred Stock    Series B Preferred Stock          Common Stock

                                           Shares        Amount       Shares         Amount       Shares         Amount

<S>                                      <C>            <C>       <C>                <C>        <C>           <C>
Balance at October 31, 1997                     --       --               --          --         4,836,693      $ 1,612

Exercise of options                             --       --               --          --            48,000           16

 Issuance of treasury stock as
     bonus                                      --       --               --          --                --           --

    Net income                                  --       --               --          --                --           --


                                         ---------       --       ----------          --         ---------      -------
   Balance at October 31, 1998                  --       --               --          --         4,884,693        1,628

 Net loss                                       --       --               --          --                --           --


                                         ---------       --       ----------          --         ---------      -------
   Balance at December 31, 1998                 --       --               --          --         4,884,693        1,628

 Par value adjustment                           --       --               --          --                --       (1,579)

Exercise of options                             --       --               --          --           443,800            4

   Exercise of warrants                         --       --               --          --          1,500,00           15

 Issuance of Series A Preferred
     Stock                               1,000,000       10               --          --                --           --

 Issuance of Series B Preferred
     Stock                                      --       --        2,272,727          23                --           --

 Issuance of stock in lieu of
     payment for services                       --       --               --          --            75,000            1
   Issuance of stock to an advisor              --       --               --          --            32,523           --
</TABLE>



                                     E-SYNC NETWORKS, INC.
                               STATEMENT OF STOCKHOLDERS' EQUITY
                               (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                      Additional                                                                     Total
                                       Paid-In-        Deferred        Accumulated                               Stockholders'
                                       Capital      Compensation        Deficit              Treasury Stock         Equity
                                                                                         Shares          Amount
 <S>                                 <C>                <C>            <C>             <C>              <C>        <C>
Balance at October 31, 1997          $    5,611          --            $   (4,860)     (1,035,637)      (1,269)    $    1,094

Exercise of options                          (4)         --                    --              --           --             12

 Issuance of treasury stock as
     bonus                                  (15)         --                    --          43,072           53             38

    Net income                               --          --                   307              --           --            307
                                     ----------          --            -----------     ----------       ------     ----------

   Balance at October 31, 1998            5,592          --                (4,553)       (992,565)      (1,216)         1,451

 Net loss                                    --          --                    (7)             --           --             (7)
                                     ----------          --            -----------     ----------       ------     ----------

   Balance at December 31, 1998           5,592          --                (4,560)       (992,565)      (1,216)         1,444

 Par value adjustment                     1,579          --                    --              --           --             --

Exercise of options                         188          --                    --              --           --            192

   Exercise of warrants                   1,485          --                    --              --           --          1,500

 Issuance of Series A Preferred
     Stock                                2,958          --                    --              --           --          2,968

 Issuance of Series B Preferred
     Stock                                9,962          --                    --              --           --          9,985

 Issuance of stock in lieu of
     payment for services                   421          --                    --              --           --            422
   Issuance of stock to an advisor          154          --                    --              --           --            154
</TABLE>








                                       F-5

<PAGE>   24






<TABLE>
<S>                                   <C>        <C>    <C>  <C>         <C>        <C>         <C>
Issuance of stock options in
  lieu of payment for services               --          --          --          --          --          --

Amortization of deferred
  compensation                               --          --          --          --          --          --

Issuance of common stock in
  connection with acquisition
  of Braincraft                         671,676           7          --          --          --          --

Net loss                                     --          --          --          --          --          --
                                   -------------------------------------------------------------------------------------------------
Balance at December 31, 1999          7,607,692   $      76   1,000,000   $      10   2,272,727   $      23
                                   =================================================================================================
</TABLE>



          See accompanying notes to consolidated financial statements.








<TABLE>

<S>                                       <C>           <C>             <C>               <C>            <C>              <C>
Issuance of stock options in
  lieu of payment for services            519           (519)              --              --              --               --

Amortization of deferred
  compensation                                            14               --              --              --                14

Issuance of Common Stock in
  connection with acquisition
  of Braincraft                         3,390            --                --              --              --             3,397

 Net loss                                --              --              (7,163)           --              --            (7,163)
                                   -----------------------------------------------------------------------------------------------
 Balance at December 31, 1999         $26,248          $(505)          $(11,723)       (992,565)        $(1,216)        $12,913
                                   ===============================================================================================
</TABLE>




          See accompanying notes to consolidated financial statements.


                                       F-6

<PAGE>   25

                              E-SYNC NETWORKS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 (in thousands, except share and per share data)
<TABLE>
<CAPTION>

                                                                         TWELVE MONTHS ENDED                TWO MONTHS ENDED
                                                               DECEMBER 31, 1999       OCTOBER 31, 1998     DECEMBER 31, 1998
                                                             -------------------       -----------------   -------------------
<S>                                                          <C>                       <C>                 <C>

Cash flows from operating activities:
  Net earnings (loss)......................................          $ (7,163)               $   307                $   (7)
  Adjustments to reconcile net earnings (loss) to net cash
      provided by operating activities
      Depreciation and amortization........................               528                    218                    44
      Provision for doubtful accounts......................                77                     --                    --
      Loss on disposal of fixed assets.....................                99                     --                    --
      Non-cash compensation................................               309                     --                    --
      Issuance of treasury stock as bonus..................                --                     37                    --
      Changes in operating assets and liabilities:
         Accounts receivable...............................              (138)                    26                   141
         Other current assets..............................              (204)                     6                    (9)
         Accounts payable and accrued expenses.............             1,639                    (37)                   30
         Deferred Revenue..................................               (53)                    --                    --
                                                                     --------                -------               -------
  Net cash (used in) provided by operating activities......            (4,906)                   557                   199
Cash flows from investing activities:
  Acquisition of Braincraft, net of cash acquired..........              (518)                    --                    --
  Capital expenditures.....................................            (2,952)                  (279)                  (60)
                                                                     --------                -------               -------
Net cash used in investing activities......................            (3,470)                  (279)                  (60)
                                                                     --------                -------               -------
Cash flows from financing activities:
  Payments on bank loans...................................              (764)                    --                    --
  Proceeds from bank loans.................................               750                     --                    32
  Proceeds from exercise of stock options and warrants.....             1,692                     12                    --
  Proceeds from issuance of preferred stock................            12,953                     --
  Advance payments on Series B preferred stock.............               352                     --                    --
  Payments under capital lease obligations, net............              (222)                  (149)                  (42)
                                                                     --------                -------               -------
Net cash provided by (used in) financing activities........            14,761                   (137)                  (10)
                                                                     --------                -------               -------
Net increase in cash and cash equivalents..................             6,385                    141                   129

Cash and cash equivalents at beginning of period...........               797                    527                   668
                                                                     --------                -------               -------
Cash and cash equivalents at end of period.................          $  7,182                $   668               $   797
                                                                     ========                =======               =======
Supplemental disclosure of cash flow information:
  Cash paid during the period for:
  Interest.................................................          $     67                $    56               $     6
                                                                     ========                =======               =======
  Income Taxes.............................................          $      7                $     5               $     1
                                                                     ========                =======               =======
  Non-cash investing activities:
  Capital lease obligations incurred for fixed asset
     acquisitions..........................................          $     74                $   165               $    15
                                                                     ========                =======               =======
</TABLE>

                                      F-7
<PAGE>   26



                             E-SYNC NETWORKS, INC.
                         NOTES TO FINANCIAL STATEMENTS
                               December 31, 1999
         (All information subsequent to December 31, 1999 is unaudited)

(1)  SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

         (A) SUMMARY OF OPERATIONS.

         The Company provides outsourced solutions for the development and
hosting of Web-based Extranet initiatives. Serving its Fortune 1000 customer
base, the Company offers secure online messaging, directory and fax services,
legacy-to-Web application development services, hosted communications, and
infrastructure support solutions that link business partners via the Web. The
operations of the Company are conducted through two business segments primarily
within the continental United States and the United Kingdom.

         The Company's wholly owned subsidiary, Braincraft Learning
Technologies, Inc. ("Braincraft") provides the design and development of web
sites to various companies. Braincraft was incorporated in the State of New York
in 1995 and acquired by the Company in November, 1999.

         The Company's Board of Directors decided on February 23, 1999 to change
the date on which the Company's fiscal year ends from October 31 to December 31.
The financial results for the two-month transition period commencing on November
1, 1998, and terminating on December 31, 1998 are reported on this Form 10-KSB.

         (B)  USE OF ESTIMATES

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

         (C)  PRINCIPLES OF CONSOLIDATION

         The accompanying consolidated financial statements include the accounts
of the Company, its subsidiary, E- Sync Networks (U.K.) Ltd., and, from its
acquisition by the Company on November 8, 1999, the Company's subsidiary
Braincraft Learning Technologies, Inc. All significant intercompany transactions
have been eliminated in consolidation.

         (D)  CASH EQUIVALENTS

         For purposes of the statement of cash flows, the Company considers all
highly liquid instruments including money market funds and certificates of
deposit with original maturities of three months or less to be cash equivalents.

         (E)  REVENUE RECOGNITION

         Revenue from managed services and professional services, excluding the
design and development of Internet Websites, is recognized when services are
performed. Revenues from the design and development of Internet web sites are
recognized using the percentage-of-completion method. Deferred revenue
represents amounts billed in excess of costs incurred, and is recorded as a
liability. To the extent costs incurred and anticipated costs incurred and
anticipated costs to complete projects in progress exceed anticipated billings,
a loss is recognized in the period such determination is made for the excess.



                                       F-8

<PAGE>   27



                             E-SYNC NETWORKS, INC.
                         NOTES TO FINANCIAL STATEMENTS
                               December 31, 1999
         (All information subsequent to December 31, 1999 is unaudited)

         (F)  EQUIPMENT

         Equipment is stated at cost less accumulated depreciation. Depreciation
is calculated using the straight line method over the estimated useful lives of
the related assets, generally ranging from three to seven years. Equipment under
capital lease obligations are depreciated over the lesser of the useful life or
the term of the lease.

         (G)  PRODUCT DEVELOPMENT

         Product development expenses include personnel and consulting costs
associated with the design, development and testing of the Company's systems
and are expensed as incurred.

         (H)  TAXES

         Income taxes are accounted for under the asset and liability method.
Under this method, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in results of operations in
the period that the tax change occurs. Valuation allowances are established,
when necessary, to reduce deferred tax assets to the amount expected to be
realized.

         (I)  EARNINGS (LOSS) PER SHARE

         Earnings (loss) per share is presented in accordance with the
provisions of SFAS No. 128, Earnings Per Share, and the Securities and Exchange
Commission Staff Accounting Bulletin No. 98. Under SFAS No. 128, basic EPS is
computed by dividing income or loss available to common stockholders by the
weighted average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock
and resulted in the issuance of common stock. As a result of the Company's net
loss, diluted net loss per share was the same as basic net loss per share for
the year ended December 31 ,1999 and the two months ended December 31, 1998,
since the effect of any potentially dilutive securities would be anti-dilutive.

         Diluted net loss per common share for the year ended December 31, 1999,
and the two months ended December 31, 1998, does not include the effects of (i)
options to purchase 1,002,105, and 760,300 shares of common stock, respectively,
nor (ii) the issuance of 4,772,727, and 0, shares of common stock issuable upon
the conversion of Series A, and B preferred stock on an "as if" converted basis,
respectively, as the effect of their inclusion is anti-dilutive for each period.

         Excluded in the computation of diluted earnings per share for the
twelve months ended October 31, 1998, were options to purchase 171,500 shares of
common stock because the option's exercise price was greater than the average
market price for the common shares.

          (J)  ADVERTISING COSTS

         Advertising and promotion costs are expensed as incurred. These costs
were $333,800 for the twelve months ended December 31, 1999 and $106,000 for the
twelve months ended October 31, 1998.




                                      F-9

<PAGE>   28



                             E-SYNC NETWORKS, INC.
                         NOTES TO FINANCIAL STATEMENTS
                               December 31, 1999
         (All information subsequent to December 31, 1999 is unaudited)

         (K)  FAIR VALUE OF FINANCIAL INSTRUMENTS; RISK CONCENTRATION

         Based on borrowing rates currently available to the Company for capital
leases with similar terms and maturities, the fair value of the Company's
capital leases approximates the carrying value. The carrying values of all other
financial instruments potentially subject to valuation risk, principally cash,
accounts receivable and accounts payable, also approximate fair value because of
their short-term maturities.

         During the fiscal year ended December 31, 1999, two customers accounted
for more than 10% of the Company's total revenues. One customer's accounts
receivable balance exceeded 10% of the outstanding accounts receivable. During
the fiscal year ended October 31, 1998, two customers accounted for more than
10% of the Company's total revenues.

         (L)  GOODWILL AND OTHER INTANGIBLE ASSETS

         Goodwill and other intangible assets are stated net of accumulated
amortization. Goodwill and other intangible assets are being amortized on a
straight line basis over their expected period of benefit of five years.

         (M)  IMPAIRMENT OF LONG-LIVED ASSETS

         Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed of"
("SFAS No. 121") establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets. Under provisions of SFAS No. 121, impairment losses are recognized
when expected future cash flows are less than the assets' carrying value.
Accordingly, when indicators of impairment are present, the Company will
evaluate the carrying value of equipment in relation to the operating
performance and future undiscounted cash flows of the underlying business. SFAS
No. 121 requires analysis of each item on an individual asset-by-asset basis,
where applicable. The amount of the impairment loss is the excess of the
carrying amount of the impaired asset over the fair value of the asset.
Generally, fair value represents the expected future cash flows from the use of
the asset or group of assets, discounted at an interest rate commensurate with
the risks involved.

         (N) ACCOUNTING FOR STOCK-BASED COMPENSATION

         The Company has adopted SFAS No. 123, Accounting or Stock-Based
Compensation. As permitted by SFAS No. 123, the Company has elected to follow
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees ("APB No. 25"), and related interpretations, in accounting for
employee stock options. As opposed to SFAS No. 123, which is a fair value based
method, APB No. 25 provides that compensation expense related to the Company's
employee stock options be measured based on the intrinsic value of the stock
option. SFAS No. 123 requires companies that elect to follow APB No. 25 to
provide pro forma disclosure of the impact of applying the fair value method of
SFAS No. 123.





                                      F-10

<PAGE>   29



                             E-SYNC NETWORKS, INC.
                         NOTES TO FINANCIAL STATEMENTS
                               December 31, 1999
         (All information subsequent to December 31, 1999 is unaudited)

         (O)  401(K) PLAN

         The Company established a 401(k) defined contribution plan covering
substantially all eligible employees. An eligible employee may elect to reduce
his taxable compensation and have the amount of any such reduction contributed
to the Plan on the employee's behalf. The Company may also make a discretionary
matching contribution to the Plan. During the years ended December 31, 1999 and
October 31, 1998, the Company's matching contribution was 15% of employee
contributions up to the applicable limit.

         An eligible employee may elect to reduce his taxable compensation by
15% (but not more than $10,500 per year or such greater amount as may be set by
the Internal Revenue Service). The amount of the reduction is called elective
deferral. The Company will then contribute the elective deferral to the Plan on
the employee's behalf. The Company's contributions to the plan for the years
ended December 31, 1999 and October 31, 1998 and the two months ended December
31, 1998, were $37,000, $34,700, and $4,400 respectively.

         (P)  NEW ACCOUNTING PRONOUNCEMENTS

         In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including derivative instruments
embedded in other contracts, and for hedging activities. Subsequently, the FASB
issued SFAS No. 137 which deferred the effective date of SFAS No. 133. SFAS No.
137 is effective for all fiscal quarters of fiscal years beginning after June
15, 2000. The Company has not yet analyzed the impact of this pronouncement on
its financial statements.

         (Q)  REORGANIZATION

         At the Company's annual shareholders' meeting held on July 15, 1999,
the shareholders approved the formation of E-Sync Networks, Inc., a Delaware
corporation and (at the time) a wholly-owned subsidiary of Wiltek Inc., and the
merger of Wiltek Inc. with and into E-Sync Networks, Inc., with the effect of
(i) changing the name of the Company, (ii) changing the state of incorporation
of the Company, and (iii) amending the Certificate of Incorporation and By-laws
of the Company (such events, collectively, the "Reorganization") The
Reorganization was consummated on July 28, 1999. The financial statements
discussed above for all periods prior to the Reorganization, represent the
balance sheets, consolidated statements of operations and cash flows of Wiltek,
Inc.; however, such financial statements have been renamed to E-Sync Networks,
Inc. to reflect the current name of the Company.






                                      F-11

<PAGE>   30


                             E-SYNC NETWORKS, INC.
                         NOTES TO FINANCIAL STATEMENTS
                               December 31, 1999
         (All information subsequent to December 31, 1999 is unaudited)


(2) BALANCE SHEET COMPONENTS

<TABLE>
<CAPTION>
Property and Equipment
                                                             December 31, 1999
                                                             -----------------
<S>                                                               <C>
                                                                  ($000's)
Computer equipment                                                 $3,241
Equipment acquired under capital leases                               633
Furniture and fixtures                                                234
Leasehold improvements                                                883
                                                                   ------
                                                                    4,991
Less: accumulated depreciation and amortization,
including $411 on equipment under capital lease                     1,371
                                                                   ------

Equipment, net                                                     $3,620
                                                                   ======

Accrued Expenses
                                                             December 31, 1999
                                                             -----------------
                                                                   ($000)
Salary and related benefits                                        $  672

Deferred rent                                                         220
Professional fees                                                     135
Accrued acquisition costs                                             127
Severance                                                             126
Other accrued expenses                                                661
                                                                   ------

         Total accounts payable and accrued expenses               $1,941
                                                                   ======
</TABLE>

(3)      ACQUISITION

         On November 8, 1999, the Company acquired 100% of the outstanding stock
of Braincraft Learning Technologies, Inc. ("Braincraft") for a total purchase
price of $3.8 million. The purchase price includes (i) $250,000 of cash, (ii)
680,256 shares of E-Sync common stock valued at $2.9 million (iii) acquisition
costs of $225,000 and (iv) options valued at $542,000. The Company assigned a
value of $4.6 million to goodwill and other intangible assets, of which $132,000
was amortized during 1999. The acquisition of Braincraft was accounted for as a
purchase business combination.

         The following unaudited pro-forma consolidated amounts give effect to
the acquisition of Braincraft as if it had occurred on November 1, 1997, by
consolidating Braincraft's results of operations with the results of E-Sync for
the years ended December 31, 1999 and October 31, 1998 and the two months ended
December 31, 1998. The unaudited pro-forma consolidated results are not
necessarily indicative of the operating results that would have been achieved
had the transaction been in effect as of the beginning of the periods presented
and should not be construed as being representative of future operating results.
The pro-forma basic and diluted net earnings (loss) per common share is computed
by dividing the net loss attributable to common stockholders by the
weighted-average number of common shares outstanding. The calculation of the
weighted average number of shares outstanding assumes that 680,256 shares of
E-Sync common stock issued in connection with its acquisition of Braincraft were
outstanding for the entire period.



                                      F-12

<PAGE>   31


                             E-SYNC NETWORKS, INC.
                         NOTES TO FINANCIAL STATEMENTS
                               December 31, 1999
         (All information subsequent to December 31, 1999 is unaudited)



<TABLE>
<CAPTION>

                                                                      YEAR ENDED
                                                       ---------------------------------------       TWO MONTHS ENDED
                                                       DECEMBER 31, 1999      OCTOBER 31, 1998       DECEMBER 31, 1998
                                                       -----------------      ----------------       -----------------
<S>                                                    <C>                    <C>                    <C>
Revenue                                                   $    8,377             $    8,503             $    1,412
Net income (loss) attributable to common
stockholders                                                  (7,704)                   302                     84

Earnings (loss) per share
   Basic                                                  $    (1.44)            $     0.07             $    (0.02)
   Diluted                                                $    (1.44)            $     0.06             $    (0.02)

Weighted average shares used in net loss per
share calculation
   Basic                                                   5,332,133              4,518,339              4,572,384
   Diluted                                                 5,332,133              4,820,620              4,572,384
</TABLE>



(4)  CAPITALIZATION

         Common Stock

         In 1999, the Company issued 1,943,800 shares upon the exercise of
common stock warrants and options and received net proceeds of $1,692,000. In
the fourth quarter of 1999, the Company issued 32,523 shares of common stock
valued at $154,000 to an advisor for services performed which was expensed
immediately. Also in 1999, the Company issued 75,000 shares of common stock to
an advisor for services to be performed over three years. The $422,000 value
ascribed to the 75,000 shares is recorded as other assets and is being ratably
amortized over three years, of which $141,000 has been amortized in 1999. The
issuance of the shares is non-refundable.

         Series A Convertible Preferred Stock

         On January 28, 1999, Commercial Electronics Capital Partnership, L.P.
("CECAP"), and a related entity, Commercial Electronics, L.L.C. (collectively,
"Purchaser"), purchased 732,160 shares of common stock from three retiring
directors of the Company at $.85 per share. In connection therewith, the
Purchaser also purchased (i) 1,000,000 shares of Series A convertible preferred
stock, and (ii) a warrant to purchase up to 1,500,000 shares of the Company's
common stock for 18 months at a price of $1.00 per share, for an aggregate cash
consideration paid to the Company of $3,000,000. The Purchaser exercised the
warrants during 1999. The Series A convertible preferred stock is convertible
into common stock at any time at the option of the holder on the basis of 2.5
shares of common stock for each share of Series A Preferred Stock.

         In connection with the aforementioned transaction, the Purchaser became
the beneficial owner of 4,732,160 shares of the Company's authorized common
stock, representing (at the time) approximately 59% of the Company's outstanding
common stock (assuming the conversion of Purchaser's preferred stock into common
stock and the full exercise of the Purchaser's warrant to purchase common
stock). Such beneficial ownership, along with the fact that the Purchaser's
designees currently constitute a majority of the Company's Board of Directors,
and the fact that Purchaser has the contractual right to retain control of the
Company's Board of Directors, constituted a change in control of the Company
from the retiring directors to the Purchaser and their director nominees.
Utilization of the Company's net tax loss carry forwards will be significantly
limited as a result of the change in control of the Company.


         Pursuant to the Purchase Agreement, the Company signed a "Medical
Benefit Letter" which obligates the Company to provide medical benefits to the
three retiring directors and their spouses until they reach age 65 (dates
ranging from September 12, 2004 to December 29, 2009). The Company's maximum
obligation under the Medical Benefit Letter is $400,000. The Company initially
recorded a liability approximating $260,000 representing the net present value
of the maximum $400,000 medical benefit obligation. The Company was also
required to deposit $250,000 in a Medical Escrow Fund to secure a portion of the
Company's obligation under the Medical Benefit Letter. The Company has


                                      F-13

<PAGE>   32




classified the deposit of $250,000 as "other assets" in the accompanying balance
sheet. The Company is entitled to withdraw from the medical escrow fund medical
benefits paid pursuant to the Medical Benefit Letter on a quarterly basis. Such
payments totaled $21,775 during the twelve months ended December 31, 1999, and
were charged against the medical benefit obligation liability.

         Series B Convertible Preferred Stock

         In the fourth quarter of 1999, the Company issued 1,590,909 shares of
Series B Convertible Preferred Stock at $4.40 per share, and the Company's U.K.
subsidiary issued 3,000,000 preference shares, which preference shares are
exchangeable at the option of the holder thereof, at any time, for 681,818
additional shares of the Company's Series B Preferred Stock. The Company
(including its U.K. subsidiary) received aggregate cash proceeds of $9.985
million from such sales, net of offering costs ($10 million of gross proceeds).
For presentation purposes, these sales have been consolidated as if the 681,818
shares of Series B Preferred Stock underlying the preference shares were sold in
lieu of the preference shares.

         Any holder of Series B Preferred Stock shall have the right, at its
option, at any time and from time to time, to convert any or all of such
holder's shares of Series B Preferred Stock into shares of Common Stock. Upon
the third anniversary of the Issue Date, each outstanding share of Series B
Preferred Stock, or if earlier, the transfer of any shares of Series B Preferred
Stock by an initial holder to any person other than an affiliate of such initial
holder, such shares shall automatically be converted into shares of Common
Stock.

         Each share of Series B Preferred Stock entitles the holder thereof to
vote on each of the matters entitled to be voted on by holders of common stock,
voting together as a single class with other shares entitled to vote thereon.
Unless the consent or approval of a greater number of shares shall then be
required by law, the affirmative vote of the holders of at least a majority of
the outstanding shares of Series B Preferred Stock, voting as a single class,
shall be necessary to (i) authorize, increase the authorized number of shares
of, or issue any shares of any class of Senior Stock, (ii) amend, alter or
repeal the Certificate of Incorporation so as to affect the shares of Series B
Preferred Stock adversely, (iii) authorize or issue any security convertible
into Senior Stock or (iv) effect an Extraordinary Event (as defined therein).

         The preference shares issued by E-Sync U.K. (i) have no voting rights
(other than with respect to the winding up of E-Sync U.K. and altering the
rights of such shares), (ii) have a priority in payment on a winding up of
E-Sync U.K., (iii) are not entitled to dividends, (iv) are non-transferable, and
(v) are redeemable on November 5, 2009.

         Liquidation Preference

         In the event of any liquidation or winding up of the Company, holders
of Series A and B convertible preferred stock will be entitled to an amount
equal to the applicable purchase price per share, plus any accrued but unpaid
dividends, before any amounts are paid on behalf of the Company's Common Stock.

         (5)  STOCK OPTIONS

         In December 1999, the Company issued options to purchase 40,000 shares
of common stock at an exercise price of $4.20 per share to a consultant in
connection with acting as a technical advisor for the Company's U.K. operations
for three years. These options are exercisable for a period of 10 years. These
options vest ratably over three years. The Company accounts for these options in
accordance with Emerging Issues Task Force Abstract No. 96-18, "Accounting for
Equity Instruments That are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling Goods or Services." Pursuant to EITF 96-18, the Company
valued the options using a Black-Scholes pricing model. The $519,000 ascribed to
the options reflects their market value as of December 31, 1999, and has been
recorded as deferred compensation. This cost is being amortized over the
applicable vesting periods. The value ascribed to these options will be adjusted
at each intervening balance sheet date to bring the total charge up to the
then-current market value. The Company has amortized $14,000 of the deferred
compensation as of December 31, 1999. Such amount is included within non-cash
compensation in the statement of operations.



                                      F-14

<PAGE>   33




         In July 1999, the Shareholders of the Company approved the Company's
1999 incentive compensation plan. The plan consists of a total of 750,000 shares
issuable upon exercise of the underlying options or grants. At December 31,
1999, 49,395 shares were available for future grants. The maximum number of
shares which may have been awarded under the 1983 and 1988 stock option plans to
employees was 500,000 and 400,000, respectively. No shares are available for
future grants under these plans at December 31, 1999. An aggregate of 850,000
shares were authorized under the Company's 1994 stock option plan. No shares are
available for future grants under this plan at December 31, 1999. None of the
above option prices were less then fair market value at the date of grant.
Options issued under plans other than the 1999 plan are fully exercisable.
Vesting under the 1999 plan ranges from immediate to three years from the
employee's start date. The maximum term of the grant is ten years.

The following table summarizes the options granted under the various plans for
the period from November 1, 1997 through December 31, 1999:

<TABLE>
<CAPTION>
                                                                WEIGHTED AVERAGE
                                                   SHARES        EXERCISE PRICE
                                                 ---------      ----------------
<S>                                              <C>                  <C>
Outstanding at 10/31/97..................          779,300             $.52
  Granted................................          195,000             $.81
  Exercised..............................          (48,000)            $.25
  Expired / Canceled.....................         (238,000)           $1.38
                                                 ---------
  Outstanding at 10/31/98................          688,300             $.47

Granted..................................           72,000             $.56
  Exercised..............................               --               --
  Expired / Canceled.....................               --               --
                                                 ---------
  Outstanding at 12/31/98................          760,300             $.48

Granted..................................          700,605            $4.02
  Exercised..............................         (443,800)            $.43
  Expired / Canceled.....................          (15,000)            $.70
                                                 ---------
  Outstanding at 12/31/99................        1,002,105            $2.97
                                                 =========
</TABLE>



                                      F-15

<PAGE>   34





          The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." The Company accounts for its option plan under APB Opinion No.
25, "Accounting for Stock Issued to Employees," and related interpretations and,
accordingly, no compensation cost has been recognized for the employee stock
option plan. Had compensation cost for the Company's employee stock option plan
been determined based on the fair value at the grant date for awards, net
earnings and earnings per share would have increased as follows:


<TABLE>
<CAPTION>
                                                      Twelve Months Ended                        Two Months Ended
                                         December 31, 1999           October 31, 1998            December 31, 1998
                                         -----------------           ----------------            -----------------
<S>                                       <C>                          <C>                         <C>
NET EARNINGS
As reported                               $      (7,163)               $         307               $          (7)
Pro Forma                                 $      (9,791)               $         195               $         (46)

EARNINGS PER SHARE
As reported
       Basic                              $      (1.51)                $        0.08               $        0.00
       Diluted                            $      (1.51)                $        0.07               $        0.00

Pro Forma
       Basic                              $      (2.06)                $        0.05               $        0.00
       Diluted                            $      (2.06)                $        0.05               $        0.00
</TABLE>


          The resulting effect on the pro forma net loss per common share for
the years ended December 31, 1999 and October 31, 1998, and for the two months
ended December 31, 1998, is not likely to be representative of the effects on
the net loss on a pro forma basis in future years, because the pro forma results
include the impact of only two years, one year, and fourteen months ,
respectively, of grants and related vesting, while subsequent years will include
additional grants and vesting.

          The following table summarizes information about the stock options at
December 31, 1999.

<TABLE>
<CAPTION>
                                Options Outstanding                                               Options Exercisable
-----------------------------------------------------------------------------------   -------------------------------------------

     Range of             Number           Weighted Average         Weighted                  Number               Weighted
     Exercise         Outstanding at          Remaining             Average               Exercisable at           Average
      Prices             12/31/99          Contractual Life      Exercise Price              12/31/99           Exercise Price
------------------ -------------------- ------------------------------------------    ---------------------- --------------------

  <S>                  <C>                      <C>                  <C>                     <C>                       <C>
  $0.00 - $0.25          141,000                4.85                 $0.25                   141,000                   $0.25
  $0.50 - $0.56           70,000                6.93                 $0.55                    70,000                   $0.55
  $0.87 - $1.28           85,000                7.99                 $0.87                    85,000                   $0.87
  $2.94 - $2.98          124,213                8.82                 $2.98                    27,189                   $2.97
  $4.13 - $5.02          581,892                9.88                 $4.23                      --                       --
                       ---------                                                             -------
                       1,002,105                8.67                 $2.97                   323,189                   $0.71
                       =========                                                             =======
</TABLE>





                                      F-16

<PAGE>   35




(6)  EARNINGS PER SHARE

For the periods presented in the Consolidated Statement of Operations, the
calculations of basic EPS and EPS assuming dilution vary in that the weighted
average shares outstanding assuming dilution include the incremental effect of
stock options. The following table shows the reconciliation of Basic and Diluted
EPS computations:

<TABLE>
<CAPTION>
                                                                Twelve Months Ended
                                                                 October 31, 1998
                                                     -----------------------------------------
                                                     Earnings         Shares         Per Share
                                                    ---------        ---------       ---------
<S>                                                 <C>              <C>             <C>
Basic EPS
Earnings                                             $ 307,400       3,838,083            $.08

Diluted Effect of Securities:
Stock Options                                               --         302,281            (.01)
                                                     ---------       ---------           ------

Diluted EPS
Earnings plus assumed conversions                    $ 307,400       4,140,364           $ .07
                                                     =========       =========           ======
</TABLE>




         Excluded in the October 31,1998 computation of Diluted EPS were options
to purchase 171,500 shares of common stock at prices ranging from $0.81 to $2.94
because the options' exercise price was greater than the average market price of
the common shares. These options, which expire March 21, 1999 to December 15,
2007, included 160,000 options issued during the twelve months ended October 31,
1998. All options and warrants have been excluded from the earnings per share
calculation for the two months ended December 31, 1998 and the twelve months
ended December 31, 1999, as the Company recorded a loss for those periods, and
inclusion of such options and warrants would have had an anti-dilutive effect.

(7)  INCOME TAXES

         For the year ended December 31, 1999 and the two months ended
December 31, 1998, there is no provision for federal, state or local income
taxes since the Company incurred losses during those periods.

         Significant components of the Company's deferred tax assets as of
December 31, 1999 are as follows:

         Deferred tax assets:

                NET OPERATING LOSS CARRY-FORWARD               $  3,883,000
                Investment tax credit carry-forward                  18,000
                Other, net                                          117,000
                                                               ------------

                Deferred tax asset                                4,018,000
                     Less valuation allowance                     4,018,000
                                                               ------------

                Net deferred tax assets                        $          0
                                                               =          =



                                      F-17

<PAGE>   36


         At December 31, 1999, the Company's U.S. operating loss carry-forwards
for Federal tax purposes approximated $9,017,000 and $7,973,000 for state tax
purposes. The Company's U.K. operating loss carry-forwards are approximately
$1,129,000 for tax purposes as of December 31, 1999. The expected Federal
Statutory rate is 34%. The Company has established a valuation allowance to
reduce its net deferred tax asset to zero at December 31, 1999 because current
evidence indicates that it is more likely than not that the deferred tax asset
will not be realized. The valuation reserve was increased by $2,725,000 in the
year ended December 31, 1999 as a result of utilization and expiration of net
operating loss carry-forwards. The Company accounts for the investment tax
credit by the flow-through method.

The Tax Reform Act of 1986 enacted a complex set of rules (Internal Revenue Code
Section 382) limiting the utilization of net operating loss carry-forwards to
offset future taxable income following a corporate "ownership change."
Generally, this occurs when there is a greater than 50% change in ownership.

(8)  COMMITMENTS AND CONTINGENCIES

         During the years ended December 31, 1999 and October 31, 1998, the
Company entered into various capital lease agreements for new computer equipment
totaling $73,619 and $164,600, respectively. The lease terms vary from 36 to 39
months, with interest rates between ranging from 8.77% and 35.08%.

         The related future lease minimum payments as of December 31, 1999 are
as follows:

<TABLE>
<CAPTION>
Year Ending December 31                                                       Capital Leases
-----------------------                                                       --------------
<S>         <C>                                                             <C>
            2000                                                            $        129,000
            2001                                                                      49,000
            2002                                                                      11,000
                                                                                      ------
Net minimum lease payment                                                   $        189,000
Amount representing interest (weighted average interest rate of 13.0%)                27,000
                                                                                      ------
Present value of net minimum capital lease payments                         $        162,000
Less current portion                                                                 102,000
                                                                                     -------
Obligations under capital leases, excluding current portion                 $         60,000
                                                                            =         ======
</TABLE>


         Annual employment agreements are in effect with two officers of the
Company which call for a base compensation to be mutually agreed upon at renewal
and upon failure to reach agreement will terminate, with the officer, in certain
circumstances, being entitled to a severance payment in an amount equal to
one-half to one and one-half of his then


                                      F-18

<PAGE>   37
                             E-SYNC NETWORKS, INC.
                         NOTES TO FINANCIAL STATEMENTS
                               December 31, 1999
         (All information subsequent to December 31, 1999 is unaudited)


current annual base compensation. Assuming that the severance arrangements under
such agreements become operative, the minimum aggregate payoffs under such
contracts would approximate $268,000.

         Total rental expenses for office space, equipment and automobiles
included in the results of operations for fiscal years ended December 31, 1999
and October 31, 1998, were $720,000 and $291,000 respectively. Minimum rental
commitments under non-cancelable operating leases covering space and equipment
are as follows:

<TABLE>
<CAPTION>

                  Year                               Rental Commitments
                  ----                               ------------------
<S>                                                  <C>
                  2000                                        $  415,410
                  2001                                           405,410
                  2002                                           355,410
                  2003                                           355,410
                  2004                                           274,565
                                                              ----------
                                                              $1,806,205
                                                              ==========
</TABLE>

LEGAL PROCEEDINGS

        The Company is involved in claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material effect on the Company's
financial position, results of operation or liquidity.

(9)  BUSINESS SEGMENT INFORMATION

The FASB issued Statement of Financial Accounting Standards No. 131, Disclosures
about Segments of an Enterprise and Related Information ("SFAS No. 131") in June
1997. SFAS 131 supersedes FASB Statement No. 14, Financial Reporting for
Segments of a Business Enterprise, but retains the requirement to report
information about major customers. SFAS 131 replaces the "industry segment'
concept of Statement 14 with a "management approach" concept as the basis for
identifying reportable segments. The management approach is based on the way
that management organizes the segments within the enterprise for making
operating decisions and assessing performance. Consequently, the segments are
evident from the structure of the enterprise's internal organization. It focuses
on financial information that an enterprise's decision makers use to make
decisions about the enterprise's operating matters. The Company adopted SFAS 131
in 1999.

The Company began foreign operations in 1983 when it established its computer
center in London, England. During 1999, the U.K. operation's total revenues were
$705,500 with a net loss of $401,200. Included in the above were $282,200 in
U.S. management costs allocated to U.K. operations and inter-company net
interest expense charged to E-Sync U.K. for $45,500. Identifiable total assets
amounted to $333,600. The U.S. dollar is the functional currency of the U.K.
operation.

During fiscal year 1998, the U.K. operation's total revenues were $923,900 with
a net loss of $116,300. Included in the above were $253,500 in U.S. management
costs allocated to U.K. operations and inter-company net interest expense
charged to E-Sync U.K. in the amount of $41,900. Identifiable total assets were
$424,600.

The Company provides outsourced solutions for the development and hosting of
web-based Extranet initiatives. Serving its Fortune 1000 customer base, the
Company offers secure online messaging, directory and fax services,
legacy-to-web application development services, hosted communications, and
infrastructure support solutions that link business partners via the web. The
operations of the Company are conducted through two business segments primarily
within the continental United States and the United Kingdom. Descriptions of the
business segments' services and operations are as follows:


Managed Services

Managed services provides customers with hosted global messaging services for
e-mail, fax, directory services, and remote management services supported by a
Company owned and operated, 24-hours-a-day, 7-days-a-week data center and help
desk that assures reliable and safe electronic communications. Messaging
services includes (i) TotalMail that provides user access to e-mail, shared
calendar scheduling, distribution lists and folders, and (ii) Hosting Services,
whereby the Company will maintain customers' mail servers and run the e-mail
function remotely at one of its sites. Fax services includes (i) Application to
Fax which simultaneously delivers computer generated files from mainframe or PC-
based applications to one or many facsimile devices worldwide, (ii) MailFax,
which sends faxes and attachments via e-mail, and (iii) Inbound Fax, which
allows receipt of inbound faxes at the desktop via e-mail. Directory Services
allows customers to outsource the management of their corporate data directories
via the Company's custom-designed directory solutions products. The Company also
offers secure e-mail and fax messaging services through public key
infrastructure (PKI), digital certificates, and SmartCard authentication
products.



                                      F-19

<PAGE>   38


                             E-SYNC NETWORKS, INC.
                         NOTES TO FINANCIAL STATEMENTS
                               December 31, 1999
         (All information subsequent to December 31, 1999 is unaudited)



Professional Services

Professional Services is a consulting systems design and integration services
organization that provides legacy-to-web application development and migration.
As a Microsoft Solution Provider Partner, certified system engineers and
Microsoft product specialists assist customers in designing and developing
migration strategies to Microsoft BackOffice(R) products. The Company's system
engineers also provide network design and integration services, whereby they
assess customers' web design, messaging, and connectivity needs, evaluate
existing infrastructure architecture, define and test migration processes, and
prepare enterprise-wide implementation plans. They also develop tools, utilities
and conversion software for directory support as well as design workflow
automation solutions.

Identifiable assets by segment are those assets that are used in the operations
of each segment as well as the accounts receivable generated by each segment.
Corporate assets consist primarily of cash and cash equivalents, short term
investments, prepaid expenses, and corporate furniture, fixtures, and equipment.
Capital expenditures are comprised primarily of additions to data processing
equipment, furniture and fixtures, and leasehold improvements.

The following table presents the Company's business segment financial
information (in thousands):


<TABLE>
<CAPTION>

                                                      TWELVE MONTHS ENDED               TWO MONTHS ENDED
                                          ------------------------------------------- ---------------------
                                            DECEMBER 31, 1999     OCTOBER 31, 1998      DECEMBER 31, 1998
                                          --------------------- --------------------- ---------------------
<S>                                       <C>                   <C>                   <C>

REVENUE:
 Managed services                                $    3,620           $     4,480           $       647
 Professional services                                3,870                 3,104                   548
                                                 ----------           -----------           -----------
    Total revenues                               $    7,490           $     7,584           $     1,195
                                                 ==========           ===========           ===========

OPERATING INCOME (LOSS):
 Managed services                                $   (3,788)          $       801           $        13
 Professional services                               (3,284)                 (440)                  (15)
                                                 ----------           -----------           -----------
Operating income (loss) from segments                (7,072)                  361                    (2)
 Corporate expenses, net                                (97)                   (6)                   (1)
 Interest expense (income), net                           6                   (48)                   (4)
                                                 ----------           -----------           -----------
    Net earnings (loss)                          $   (7,163)          $       307           $        (7)
                                                 ==========           ===========           ===========
DEPRECIATION AND AMORTIZATION:
 Managed services                                $      202           $       135           $         5
 Professional services                                   34                    22                    29
 Corporate                                              292                    61                    10
                                                 ----------           -----------           -----------
    Total depreciation and amortization          $      528           $       218           $        44
                                                 ==========           ===========           ===========

CAPITAL EXPENDITURES:
 Managed services                                $      927           $        84           $        59
 Professional services                                   70                    17                    --
 Corporate                                            1,955                    13                     1
                                                 ----------           -----------           -----------
    Total capital expenditures                   $    2,952           $       114           $        60
                                                 ==========           ===========           ===========
</TABLE>



                                      F-20

<PAGE>   39
<TABLE>
<CAPTION>
IDENTIFIABLE ASSETS AT:                     DECEMBER 31, 1999
                                          ---------------------
<S>                                       <C>
Managed services                                 $   2,071
Professional services                                  708
                                                ----------
   Total assets for reportable segments              2,779
Corporate                                           14,222
                                                ----------
   Total assets                                 $   17,001
                                                ==========
</TABLE>




                                      F-21
<PAGE>   40





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

In connection with the change in control reported on a Form 8-K filed with the
Securities and Exchange Commission on February 12, 1999, the Company, effective
March 5, 1999, terminated the Company's previous accountants, Grant Thornton LLP
("Grant Thornton"), and appointed the firm of KPMG LLP ("KPMG") as the Company's
new independent accountants. The decision to change accountants was approved by
the Company's Board of Directors. Grant Thornton's report on the Company's
financial statements for the years ended October 31, 1998 and 1997 did not
contain an adverse opinion or disclaimer of opinion and was not qualified as to
uncertainty, audit scope or accounting principles. During these two fiscal years
and any subsequent interim period preceding this dismissal, there were no
disagreements between the Company and Grant Thornton that, if not resolved to
Grant Thornton's satisfaction, would have caused Grant Thornton to make a
reference to the subject matter of the disagreement in connection with its
report. Neither the Company nor anyone acting on the Company's behalf consulted
KPMG regarding the application of accounting principles to a specific completed
or contemplated transaction, or the type of audit opinion that might be rendered
on the Company's financial statements, nor did the Company or anyone acting on
the Company's behalf receive written or oral advice from KPMG that was an
important factor considered by the Company in reaching a decision on any such
matter.


                                    PART III


ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information required by this Item 9 is incorporated herein by reference to the
definitive proxy statement of E-Sync Networks, Inc. to be filed with the
Securities and Exchange Commission ("SEC") within 120 days following the end of
the Company's fiscal year ended December 31, 1999, relating to its 2000 Annual
Meeting of Stockholders.

ITEM 10.  MANAGEMENT REMUNERATION AND TRANSACTIONS

Information required by this Item 10 is incorporated herein by reference to the
definitive proxy statement of E-Sync to be filed with the SEC within 120 days
following the end of the Company's fiscal year ended December 31, 1999, relating
to its 2000 Annual Meeting of Stockholders.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information required by this Item 11 is incorporated herein by reference to the
definitive proxy statement of E-Sync to be filed with the SEC within 120 days
following the end of the Company's fiscal year ended December 31, 1999, relating
to its 2000 Annual Meeting of Stockholders.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information required by this Item 12 is incorporated herein by reference to the
definitive proxy statement of E-Sync to be filed with the SEC within 120 days
following the end of the Company's fiscal year ended December 31, 1999, relating
to its 2000 Annual Meeting of Stockholders.



                                      -19-

<PAGE>   41




                                     PART IV


ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  The following documents are filed as part of this report:

<TABLE>
<CAPTION>

                                                  Exhibit Index
-------------------------------------------------------------------------------------------------------------------------
   Exhibit                                                                        Location of exhibit in sequential
    Number                              Description                                       numbering system
-------------------------------------------------------------------------------------------------------------------------
<S>             <C>                                                           <C>
2.1             Agreement and Plan of Merger, dated as of September           Incorporated by reference to Exhibit
                27, 1999, by and among E-Sync Networks, Inc.,                 2.1 of Registrant's Form 8-K dated
                Braincraft Learning Technologies, Inc., BLT Acquisition       November 8, 1999
                Corp., Dan Stechow and Kevin Marth.
-------------------------------------------------------------------------------------------------------------------------
2.2             Amendment No. 1 to the Agreement and Plan of Merger,          Incorporated by reference to Exhibit
                dated as of November 8, 1999, by and among E-Sync             2.2 of Registrant's Form 8-K dated
                Networks, Inc., Braincraft Learning Technologies, Inc.,       November 8, 1999
                BLT Acquisition Corp., Dan Stechow and Kevin Marth.
-------------------------------------------------------------------------------------------------------------------------
2.3             Securities Purchase Agreement, dated as of January 28,        Incorporated by reference to Exhibit
                1999, by and among Wiltek, Inc., Commercial                   2.1 of Registrant's Form 8-K dated
                Electronics Capital Partnership, L.P., and Commercial         January 28, 1999
                Electronics, L.L.C.
-------------------------------------------------------------------------------------------------------------------------
2.4             Stock Purchase Agreement, dated as of January 28, 1999,       Incorporated by reference to Exhibit
                by and among Jay Fitzpatrick, Boris Frenkel, F. Spencer       2.2 of Registrant's Form 8-K dated
                Pooley, Commercial Electronics Capital Partnership,           January 28, 1999
                L.P. and Commercial Electronics, L.L.C.
-------------------------------------------------------------------------------------------------------------------------
3.1             Articles of Incorporation                                     Incorporated by reference to
                                                                              Registrant's Definitive Proxy
                                                                              Statement dated June 23, 1999
-------------------------------------------------------------------------------------------------------------------------
3.2             Certificate of Amendment of Certificate of Incorporation      Incorporated by reference to Exhibit
                setting forth the terms of the "Senior Convertible Series     3.2 of Registrant's Form 8-K dated
                A Preferred Stock," as filed with the Secretary of the        January 28, 1999
                State of the State of Connecticut on January 26, 1999.
-------------------------------------------------------------------------------------------------------------------------
4.1             Certificate of Designations, Preferences and Rights of        Filed herewith
                Senior Convertible Series B Preferred Stock of E-Sync
                Networks, Inc.
-------------------------------------------------------------------------------------------------------------------------
4.2             Amended and Restated Registration Rights Agreement,           Filed herewith
                dated as of November 1, 1999, among Commercial
                Electronics Capital Partnership, L.P., Commercial
                Electronics, L.L.C., the New Purchasers listed therein,
                and E-Sync Networks, Inc.
-------------------------------------------------------------------------------------------------------------------------
10.1            Form of Employment Agreement between the Registrant           Filed herewith
                and David S. Teitelman
-------------------------------------------------------------------------------------------------------------------------
10.2            Form of Employment Agreement between the Registrant           Filed herewith
                and Frank J. Connolly, Jr.
-------------------------------------------------------------------------------------------------------------------------
10.3            Office Lease, dated as of March 25, 1999, between             Filed herewith
                Fairhaven Investors Limited Partnership and Wiltek, Inc.
-------------------------------------------------------------------------------------------------------------------------
21              List of the Registrant's subsidiaries                         Filed herewith
-------------------------------------------------------------------------------------------------------------------------
23.1            Consent of Grant Thornton LLP                                 Filed herewith
-------------------------------------------------------------------------------------------------------------------------
23.2            Consent of KPMG LLP                                           Filed herewith
-------------------------------------------------------------------------------------------------------------------------

27              Financial Data Schedule                                       Filed herewith
-------------------------------------------------------------------------------------------------------------------------

</TABLE>



                                      -20-

<PAGE>   42





(b)  Reports on Form 8-K

     1. On February 12, 1999, the Company filed a report on Form 8-K announcing
the change in control of the Company.

     2. On March 10, 1999, the Company filed a report on Form 8-K announcing the
appointment of KPMG, LLP as the Company's new auditors, and the changing of the
Company's fiscal year end from October 31 to December 31.

     3. On July 30, 1999, the Company filed a report on Form 8-K announcing
the creation of and merger into E-Sync Networks, Inc. effectively changing its
name from Wiltek, Inc. to E-Sync Networks, Inc. and changing its state of
incorporation from Connecticut to Delaware.

     4. On November 23, 1999, the Company filed a report on Form 8-K announcing
the acquisition of Braincraft Learning Technologies, Inc.

     5. On January 24, 2000, the Company filed a report on Form 8-K/A (as an
amendment to the Form 8-K filed on November 23, 1999) to report the financial
information required in connection with its acquisition of Braincraft Learning
Technologies, Inc.








                                      -21-

<PAGE>   43





                                   Signatures


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


                                     E-Sync Networks, Inc.

                                     By:


                                     /s/ Jonathan S. Rubin
                                     ----------------------
                                     Jonathan S. Rubin, CEO


                                     /s/ Frank J. Connolly, Jr.
                                     ---------------------------
                                     Frank J. Connolly, Jr., CFO

Date:  March 31, 2000



                                      -22-

<PAGE>   44







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


/s/ John C. Maxwell, III
-------------------------            Date: March 31, 2000
John C. Maxwell, III
Chairman



-------------------------            Date: March 31, 2000
Peter J. Boni
Director


/s/ Nathan Gantcher
-------------------------            Date: March 31, 2000
Nathan Gantcher
Director


/s/ Stephen D. Grubbs
-------------------------            Date: March 31, 2000
Stephen D. Grubbs
Director


/s/ Jonathan S. Rubin
-------------------------            Date: March 31, 2000
Jonathan S. Rubin
Director


                                      -23-

<PAGE>   45




                                                     EXHIBIT INDEX

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
   Exhibit                                                                        Location of exhibit in sequential
    Number                              Description                                       numbering system
-------------------------------------------------------------------------------------------------------------------------
<S>             <C>                                                           <C>
2.1             Agreement and Plan of Merger, dated as of September           Incorporated by reference to Exhibit
                27, 1999, by and among E-Sync Networks, Inc.,                 2.1 of Registrant's Form 8-K dated
                Braincraft Learning Technologies, Inc., BLT Acquisition       November 8, 1999
                Corp., Dan Stechow and Kevin Marth.
-------------------------------------------------------------------------------------------------------------------------
2.2             Amendment No. 1 to the Agreement and Plan of Merger,          Incorporated by reference to Exhibit
                dated as of November 8, 1999, by and among E-Sync             2.2 of Registrant's Form 8-K dated
                Networks, Inc., Braincraft Learning Technologies, Inc.,       November 8, 1999
                BLT Acquisition Corp., Dan Stechow and Kevin Marth.
-------------------------------------------------------------------------------------------------------------------------
2.3             Securities Purchase Agreement, dated as of January 28,        Incorporated by reference to Exhibit
                1999, by and among Wiltek, Inc., Commercial                   2.1 of Registrant's Form 8-K dated
                Electronics Capital Partnership, L.P., and Commercial         January 28, 1999
                Electronics, L.L.C.
-------------------------------------------------------------------------------------------------------------------------
2.4             Stock Purchase Agreement, dated as of January 28, 1999,       Incorporated by reference to Exhibit
                by and among Jay Fitzpatrick, Boris Frenkel, F. Spencer       2.2 of Registrant's Form 8-K dated
                Pooley, Commercial Electronics Capital Partnership,           January 28, 1999
                L.P. and Commercial Electronics, L.L.C.
-------------------------------------------------------------------------------------------------------------------------
3.1             Articles of Incorporation                                     Incorporated by reference to
                                                                              Registrant's Definitive Proxy
                                                                              Statement dated June 23, 1999
-------------------------------------------------------------------------------------------------------------------------
3.2             Certificate of Amendment of Certificate of Incorporation      Incorporated by reference to Exhibit
                setting forth the terms of the "Senior Convertible Series     3.2 of Registrant's Form 8-K dated
                A Preferred Stock," as filed with the Secretary of the        January 28, 1999
                State of the State of Connecticut on January 26, 1999.
-------------------------------------------------------------------------------------------------------------------------
4.1             Certificate of Designations, Preferences and Rights of        Filed herewith
                Senior Convertible Series B Preferred Stock of E-Sync
                Networks, Inc.
-------------------------------------------------------------------------------------------------------------------------
4.2             Amended and Restated Registration Rights Agreement,           Filed herewith
                dated as of November 1, 1999, among Commercial
                Electronics Capital Partnership, L.P., Commercial
                Electronics, L.L.C., the New Purchasers listed therein,
                and E-Sync Networks, Inc.
-------------------------------------------------------------------------------------------------------------------------
10.1            Form of Employment Agreement between the Registrant           Filed herewith
                and David S. Teitelman
-------------------------------------------------------------------------------------------------------------------------
10.2            Form of Employment Agreement between the Registrant           Filed herewith
                and Frank J. Connolly, Jr.
-------------------------------------------------------------------------------------------------------------------------
10.3            Office Lease, dated as of March 25, 1999, between             Filed herewith
                Fairhaven Investors Limited Partnership and Wiltek, Inc.
-------------------------------------------------------------------------------------------------------------------------
21              List of the Registrant's subsidiaries                         Filed herewith
-------------------------------------------------------------------------------------------------------------------------
23.1            Consent of Grant Thornton LLP                                 Filed herewith
-------------------------------------------------------------------------------------------------------------------------
23.2            Consent of KPMG LLP                                           Filed herewith
-------------------------------------------------------------------------------------------------------------------------
27              Financial Data Schedule                                       Filed herewith
-------------------------------------------------------------------------------------------------------------------------
</TABLE>



                                      -24-