SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-K

              Annual Report Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934

   For the fiscal year ended December 31, 1995 Commission file number 0-15584

                            Alpine Lace Brands, Inc.
             (Exact name of registrant as specified in its charter)

 Delaware                                                  22-2717823
(State or other jurisdiction of                        (I.R.S. employer
 incorporation or organization)                         Identification No.)

111 Dunnell Road, Maplewood, NJ                                 07040
(Address of principal executive office)                      (Zip Code)

(Registrant's telephone number, including area code)     201-378-8600

Securities registered pursuant to Section 12(b) of the Act:  NONE

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

                     Common Stock, par value $.01 per share

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

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

State the aggregate  market value of the voting stock held by  nonaffiliates  of
the registrant as of February 27, 1996:
                    Common stock, $.01 par value: $27,369,347

Indicate the number of shares  outstanding  of each of  registrant's  classes of
common stock, as of the close of the period covered by this report:
                                5,050,136 shares

DOCUMENTS INCORPORATED BY REFERENCE:

Portions  of the proxy  statement  to be prepared  in  connection  with the 1996
annual meeting of shareholders are incorporated by reference into Part III.

<PAGE>

                                     PART I
ITEM 1.  BUSINESS

General

     Alpine Lace Brands, Inc. (the "Company") has two principal businesses.  The
Company's   branded  cheese   business:   develops,   markets  and   distributes
nutritionally  oriented  cheeses  under its own labels and operates a converting
and packaging  facility through a wholly-owned  subsidiary,  Marolf Dakota Farms
Cheese, Inc. ("MDFC"), a Delaware corporation located in Sturgis,  South Dakota.
Through  February 17, 1994,  the Company  packaged  and  converted  cheese under
private labels (through the Company's wholly-owned  subsidiary,  Mountain Farms,
Inc.  ("MFI"),  a Utah  corporation),  in which a 65%  interest was sold on that
date.  The  Company's  cheese and dairy  products  trading  business is operated
through MCT Dairies,  Inc. ("MCT"),  a New Jersey corporation and a wholly-owned
subsidiary of the Company.

         The Company was incorporated in Delaware on February 14, 1986.

Branded Cheese Business

     The principal  branded  cheeses  currently  marketed by the Company are the
Alpine Lace (R) brand line of cheeses,  which are generally  lower in sodium and
lower in fat and  cholesterol  than cheeses made from whole milk, and the Alpine
Lace (R) fat free brand line of fat free cheese products.  The Company generally
purchases these cheeses from independent manufacturers who utilize the Company's
proprietary  recipes and markets them throughout the United States under its own
trademarks.  MDFC  converts  and  packages  Alpine  Lace brand dairy case sliced
cheeses for retail and club store sales. As a result of a  restructuring  of the
Company's  operations (See Note G to the Consolidated  Financial  Statements) in
December of 1994, MDFC ceased producing skim milk cheese used by the Company and
terminated its MDFC product line of MDFC brand Colby, Cheddar, and Monterey Jack
cheeses marketed by the Company.

     The Company's branded cheese business (excluding MDFC and MFI) had revenues
before  intercompany  eliminations  in 1995,  1994,  and  1993 of  $124,933,243,
$117,258,595  and  $112,063,210,  respectively.  MFI had revenues in 1993 before
intercompany  eliminations  of  $57,902,040.  In 1995,  1994,  and 1993 MDFC had
revenues  before  intercompany  eliminations of  $14,353,026,  $14,152,399,  and
14,848,147, respectively.



                                        2

<PAGE>

Alpine Lace (R) Reduced Fat and Reduced Sodium Swiss Cheese

     Alpine Lace (R) reduced fat and reduced sodium Swiss cheese,  a pasteurized
part- skim milk cheese,  is the Company's  largest selling product  constituting
approximately  50% of own-label branded cheese sales. The product is offered for
sale to consumers in supermarkets, delicatessens, club stores and specialty food
stores, with most sales made in the delicatessen sections of supermarkets. It is
primarily  sold in bulk  quantities  by the  Company  and is  sliced or cut into
chunks for  consumers at the retail  store,  and in retail  packages sold in the
dairy case section of supermarkets, warehouse club stores and grocery stores.

     Sales of this product commenced in January, 1984, and the Company currently
sells  Alpine  Lace  (R)  reduced  fat  and  reduced   sodium  Swiss  cheese  to
approximately 1,000 customers,  primarily  supermarket chains,  supermarket food
distributors,  warehouse club stores and specialty food store distributors.  The
Company's  products are  available  for purchase in virtually all markets in the
United States.

Alpine Lace (R) Reduced Fat and Reduced Sodium American Flavor  Pasteurized
Process  Cheese  Product,   Reduced  Sodium  Muenster  Cheese,   Reduced  Sodium
Mozzarella  Cheese,  Reduced Fat and Reduced Sodium Cheddar Cheese,  Reduced Fat
and Reduced Sodium  Provolone  Cheese,  and Reduced Fat and Reduced Sodium Colby
Cheese.

     These products (aside from the American Flavor  Pasteurized  Process Cheese
Product) are natural cheese products which have up to 50% less sodium than their
typical cheese  counterparts.  Aside from the Reduced Sodium Muenster Cheese and
Reduced Sodium Mozzarella Cheese, all of these products are lower in cholesterol
and lower in fat and calories than their typical counterparts.

Alpine Lace (R) Fat Free Cheese Products

     The Company  introduced  Alpine Lace (R) fat free cheese  products  for the
retail  dairy case in the Summer of 1990,  and  currently  sells the  product to
about 75% of all major  supermarket  chains in the U.S.  and to a lesser  extent
into other trade channels.

Other Products

Alpine Lace (R) Fat Free Turkey Breast

     Alpine Lace (R) Fat Free Turkey  Breast was  introduced  in May,  1995 in a
test  market and is now  available  in about 25% of the  nation's  supermarkets.
Besides the fat free  benefit,  this product also  contains 63% less sodium than
regular turkey breast.

                                        3

<PAGE>

Alpine Lace (R) Deli Hams

     The Company now offers two ham products  which are sold in the  supermarket
deli:  Alpine Lace (R) Boneless  Cooked Ham and Alpine Lace (R) Honey Ham, which
was  introduced  in August of 1995.  Both products are high quality hams and are
97% Fat Free and offer sodium reductions of 45% and 33%, respectively.

     Other products  introduced in late 1995 include Alpine Lace (R) Reduced Fat
Feta Cheese which  contains 33% less fat than regular Feta,  Alpine Lace (R) Fat
Free Shredded Parmesan,  which features 60% less calories,  88% less cholesterol
and 25% less sodium than regular Parmesan cheese, and a Swiss flavor addition to

the line of Alpine Lace (R) Fat Free Cheese Singles.

     The Company has been actively  selling its products to the food service and
club store industries. Where appropriate, special sized packs of Alpine Lace (R)
brand cheese products have been developed.

Manufacturing

     Beginning in 1995, the Company no longer  manufactures any of its supply of
branded  cheeses.  The  Company  either  owns or has  significant  rights to the
respective  recipes or manufacturing  processes for most of those products which
are manufactured by independent cheese manufacturers,  including Alpine Lace (R)
reduced fat and reduced sodium Swiss cheese.

     Alpine Lace (R) reduced fat and reduced sodium Swiss cheese is manufactured
in a  privately  owned  facility  under a  contract  granting  the  Company  the
exclusive right to purchase the product (with a minor exception).  The agreement
requires the  manufacturer  to supply the Company's  requirements  of the cheese
through  December,  2000, with successive five year renewal periods  thereafter,
unless terminated by either party. The Company may purchase, with the reasonable
consent of the manufacturer,  up to 10% of its requirements for the product from
another source. As part of the agreement with the primary manufacturer,  entered
into in July,  1988,  the  Company  obtained  an  exclusive  license to use such
manufacturer's  Alpine  Lace (R) reduced fat and  reduced  sodium  Swiss  cheese
recipe for the  production of this cheese  (subject to paying license fees based
on volume  produced)  if the  manufacturer  elects  not to renew the  agreement,
breaches the agreement, or undergoes a change in control. The Company also has a
limited exclusive license to produce this cheese to cover certain  shortfalls in
the manufacturer's production.

     At present,  there are adequate supplies of raw materials,  primarily milk,
used by the Company's  suppliers in manufacturing  the Company's  products.  The
average commodity market prices met the Company's expectation for all of 1995.

                                        4

<PAGE>

Gamay Technology Acquisition

     In May, 1990, the Company  acquired all patents  pending and technology for
fat free and low fat  cheese  and  cultured  dairy  products  as well as certain
assets,  rights and technologies from Gamay Foods, Inc. for approximately  $1.85
million  in cash and the  issuance  of  restricted  special  stock  warrants  to
purchase  75,000 shares of the Company's  common stock at the stock market price
at the time of the warrants' issuance.  Additionally,  the Company has agreed to
pay a  royalty  to  Gamay  on  future  sales  of  products  associated  with the
acquisition.  On February 24, 1995, the Company and Gamay modified their royalty
agreement (See Note K to the Consolidated Financial Statements). The Company has
applied this technology to create its Alpine Lace (R) fat free line of cheeses.

Marketing and Advertising

     Alpine Lace (R) reduced fat and reduced sodium Swiss cheese was sold in all
70 U.S.  geographic  markets at the end of 1995 and was available,  according to
the Company's estimates, in approximately 45,000 retail stores in those markets.
Other Alpine Lace (R) brand  cheeses were sold in  approximately  30,000  stores
nationwide.  The Company's  marketing program places  substantial  emphasis upon
advertising and promotion, primarily television advertising, as well as point of
sale merchandising and cooperative retailer promotions and advertisements.

     Alpine Lace received  Kosher  certification  for its line of fat free cream
cheeses and spreads and three of its deli  cheeses,  which  represent 70% of the
Company's delicatessen business.  Packages bearing the kosher symbol in the deli
case  include:  Alpine Lace (R) Reduced Fat and  Reduced  Sodium  Swiss  Cheese,
Reduced Sodium Mozzarella  Cheese,  Reduced Fat Provolone Cheese, Fat Free Cream
Cheese with Garden  Vegetables,  Fat Free Cream Cheese with Garlic and Herbs and
Fat Free Mexican Nacho Cheese Spread.

     Alpine Lace also received Kosher approval from the Union of Orthodox Jewish
Congregations  of  America  for  industrial  use of its  full  line of Fat  Free
Cheeses.  These products  bearing the "O-U" label  include:  Alpine Lace (R) Fat
Free Cheddar, Mozzarella, Swiss and Parmesan flavor skim milk cheeses.

Distribution

     The largest  single  customer of the  Company's  own-label  branded  cheese
business  (which excludes MFI) accounted for  approximately  5% of the 1995 own-
label branded cheese sales revenues,  and the eight largest customers  accounted
for  approximately  25% of such sales  revenues.  Sales,  whether to supermarket
chains,  distributors,  or others, are typically made through  independent sales
agency firms (food  brokers),  which may also deal with cheeses  manufactured or
distributed  by other  companies.  These sales agency firms also  participate in
local  promotional  activities  and  in-store  merchandising  for the  Company's
products.

                                        5

<PAGE>

Cheese Converting, Packaging and Manufacturing Operations

     On February 17, 1994,  the Company  sold 65% of the  outstanding  shares of
common  stock of its then  wholly  owned MFI  cheese  converting  and  packaging
subsidiary. At December 31, 1994, the Company recorded a charge of $1,517,757 to
write-down to zero the carrying  value of its  investment and related assets and
expenses  in MFI.  In  addition,  the  Company  recorded a charge of  $1,070,700
relating to the  cancellation of its supply  agreement with MFI which is payable
over twenty-six monthly installments  beginning January, 1995. In February 1995,
the Company replaced MFI's converting and packaging requirements with that of an
outside supplier (See Note F to the Consolidated Financial Statements).

     In connection  with the Company's  restructuring  plan approved in December
1994,  the Company  closed its skim milk cheese  production  facility at MDFC in
January 1995. In addition,  MDFC cheese products  converted and packaged at MDFC
were  discontinued  in December 1994.  MDFC continues to convert and package the
Company's  warehouse  club store and dairy case  sliced  cheeses  sold under the
Alpine Lace (R) brand.

Cheese and Dairy Products Trading Business

     The Company's cheese and dairy products trading activities are performed by
its wholly owned subsidiary,  MCT Dairies,  Inc. This business  purchases almost
always as principal,  bulk packaged  quantities of domestic and imported  cheese
and dairy products.  The size of purchases ranges generally from 3,000 to 42,000
pounds.  Substantially  all of the  products  purchased  and then sold are whey,
nonfat dry milk powder,  animal feed, dairy  flavorings,  casein and caseinates,
and buttermilk as well as bulk cheese. MCT generally  purchases cheese and dairy
products to fill purchase orders  received from its customers,  although it will
buy limited amounts of product without specific sales commitments, to be held in
inventory for future sale (and stored in public warehouses, if necessary).

     MCT also exports  cheese and dairy  products  either  directly or under the
auspices of various  U.S.  government  assisted  programs.  In 1992,  MCT became
active in world market trading of non-cheese  dairy products.  From time to time
MCT will act as a broker and receive a commission,  although to date commissions
have not been significant.

     In  1995,  MCT  sold  to  approximately  46  manufacturers/processors,   75
distributors,  and approximately 31 cheese and dairy products trading firms. The
largest two customers  accounted for  approximately  11% and 4% of the Company's
cheese and dairy products trading revenues in 1995.

                                        6

<PAGE>

Government Regulation

     The  Company  and its  suppliers  are subject to  extensive  regulation  by
various government agencies which, pursuant to statutes,  rules and regulations,

prescribe quality, purity, manufacturing, advertising and labeling requirements.
Food products are often subject to "standard of identity" requirements which are
promulgated  at both the Federal and state level to  determine  the  permissible
qualitative and quantitative  ingredient  content of foods, and information that
must  be  provided  on  food   product   labels.   The  Federal  Food  and  Drug
Administration  ("FDA"),  United  States  Department  of  Agriculture  ("USDA"),
Federal Trade Commission and many states review product labels and advertising.

     The Company's  branded  cheese  products meet the current  applicable  FDA,
USDA, and state requirements and its advertising and labels accurately  describe
its products.  The Company has made changes in its  advertising  and labeling in
response to the new labeling  laws which are in effect and complies with the new
labeling laws.

     Food manufacturing,  processing and packaging facilities of the Company and
its suppliers are subject to inspection by various Federal and state  regulatory
authorities, and must comply with various health and safety regulations.

Trademarks and Patents

     The Company or its  subsidiaries  owns registered  trademarks for PRE MONDE
(and  Design) (R), PRE MONDE ALPINE LACE (and Design) (R), PRE MONDE ALPINE LACE
FREE *** N' LEAN (and  Design)  (R), PRE MONDE ALPINE LACE FREE *** N' LEAN (R),
PRE MONDE (R), CHOOSE (R), CHEESE SMART (and Design) (R), and ALPINE LACE (R).

     The Company was issued one U.S.  patent in January of 1992, one U.S. patent
in July of 1993,  and another in March of 1995 for the  manufacture  of fat free
and low fat cheese and cheese products which are being sold by the Company.  The
Company  has also  obtained  similar  patent  protection  in  Argentina  and New
Zealand.  Additionally, the Company either owns or has significant rights to the
recipes and  manufacturing  processes  of  substantially  all of its Alpine Lace
(R)and fat free products.

Competition

     The Company's Alpine Lace Branded  products  compete  intensively with many
established domestic and foreign brands which are, in many cases, less expensive
than the Company's  products.  Many of these  products are marketed by companies
with  greater  financial  and other  resources  than those of the  Company.  The
Company  believes  that Alpine  Lace (R) is  currently  one of the five  largest
advertised  brands  of  cheese  in  measured  media in the  United  States.  The
Company's  primary cheese products have certain  health-related  characteristics
that  the  Company  believes   differentiate   them  from  many  other  cheeses;
nevertheless,  the Company faces  significant  competition  from cheese products
with similar  characteristics.  The  principal  competitors  with the  Company's
products in the reduced sodium, fat free

                                        7

<PAGE>

and/or  reduced fat cheese  fields are Lorraine  (R) cheese,  a cheese which the
Company believes  resembles Swiss cheese in some respects,  which is produced by
Stella Cheese Co., Inc., Kraft Healthy Favorites (R) Naturals and Kraft Free (R)
marketed  by Kraft  General  Foods,  Inc.  and  Healthy  Choice (R)  marketed by
Beatrice Cheese Co., Inc., a division of Con Agra.

     The  Company's  cheese and dairy  products  trading  business is subject to
intense competition from cheese and dairy products  importers,  distributors and
manufacturers,  as well as, from other cheese  trading  companies.  In addition,
potential  purchasers' internal buyers can serve many of the functions for which
a cheese and dairy  products  purchaser  might  otherwise use a cheese and dairy
products trading company.  However,  cheese and dairy products trading companies
like the  Company's  offer the advantage of  specialization,  with its resulting
efficiencies.

Employees

         The Company and its subsidiaries currently have 127 employees.

Business Segment Information

     The Company's  operations  consist of two segments:  (1) The branded cheese
business which develops,  markets,  distributes,  packages and converts  branded
cheeses and other specialty food products; and (2) the cheese and dairy products
trading business.

     Information about the Company's  operations in different  industry segments
for the years ended December 31, 1995,  1994, and 1993 is disclosed in Note O to
the Consolidated Financial Statements.

ITEM 2.  PROPERTIES

     The Company's 6,400 gross square foot administrative offices,  located in a
modern office building in Maplewood,  New Jersey, are under two leases providing
for annual rentals of $42,750 and $96,200,  respectively and both expiring April
30, 2000.  The Company  believes that this present  space is sufficient  for its
present business operations (excluding MDFC) for the foreseeable future.

     MDFC's  facilities are located within the  incorporated  limits of Sturgis,
South  Dakota.  MDFC owns 2.25 acres of land and two  buildings.  The  buildings
consist of a 1,440 square foot truck garage and a 16,940  square foot  packaging
and warehousing building where cheese is cut into consumer packaged products. An
administrative  office was built atop of the packaging and warehousing  building
due to the sale of the 2,812 square foot administrative office building in 1995.
The 9,370 square foot  production  building was also sold during 1995 due to the
closing of the skim milk cheese operation.

                                        8

<PAGE>

ITEM 3.  LEGAL PROCEEDINGS

     Except for that described in the next paragraph, the Company is not a party
to, nor is any of its property the subject of, any material legal proceedings.

     On March 7, 1995,  the  Company  announced  that it had  received a process
patent  for  manufacturing  low fat and fat free  cheese  and has  filed  for an
injunction  against  Kraft,  Inc.,  Borden,  Inc.,  Beatrice  Cheese,  Inc.  and
Schreiber Foods, Inc., citing patent  infringement.  In papers filed on March 7,
1995, in the United States District Court,  District of New Jersey,  the Company
asked the court to enjoin the  manufacturers  from continuing to manufacture and
sell  fat  free  American  singles  that are  produced  by use of the  Company's
patented process.  The Company has also sought unspecified damages. On March 21,
1996, a federal court sitting in Newark  granted a motion for summary  judgement
in favor of Kraft,  Inc. and against Alpine Lace Brands,  Inc. The basis for the
judgement was that Alpine Lace had not demonstrated that Kraft,  Inc.  infringed
its patent.  Alpine Lace's counsel has  recommended  that Alpine Lace appeal the
decision to the U.S.  Court of Appeals for the  Federal  Circuit in  Washington,
D.C.  The Company is considering this recommendation.

     There can be no assurance  that the Company will be  successful in pursuing
this claim.

                                        9

<PAGE>

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

         None.
                                                      PART II

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

     The  Company's  common  stock  trades on the NASDAQ  stock market under the
symbol: LACE.

     The  NASDAQ  stock  market  quotations  set  forth  in  the  table  reflect
inter-dealer prices, without retail mark-up, mark-down or commission,  which may
not necessarily represent actual transactions.

                                                  COMMON
                                          HIGH               LOW

First Quarter, 1994                       6.25              3.75
Second Quarter, 1994                      5.75              3.38
Third Quarter, 1994                       5.50              3.75
Fourth Quarter, 1994                      4.75              3.06

First Quarter, 1995                       7.63              3.50
Second Quarter, 1995                      9.31              6.50
Third Quarter, 1995                      11.50              7.63
Fourth Quarter, 1995                     12.13              9.50

First Quarter, 1996                      10.63              7.50
 (through March 13, 1996)

     As of the close of business on March 13,  1996,  there were 233  registered
holders of record of the Company's  common  stock.  The Company  estimates  that
there are over 2,863 beneficial owners of its common stock.

     The Company has never  declared cash  dividends on its common stock and has
no present intention of declaring such cash dividends in the foreseeable future.
Cash dividends are restricted by the Company's bank credit  facility  agreement;
see Note H to the Consolidated Financial Statements.

                                       10

<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA1

                          Dec. 31,   Dec. 31,   Dec 31,    Dec 31,     Dec 31,
                            1995       1994       1993       1992       1991

Selected Data from
   Statement
   of Operations:
   Net sales             $145043395 $132354808 $180745614 $167306297 $156139241
   Earnings (Loss)
     before
     cumulative effect
     of an accounting
     change &
     extraordinary
     item                   3912028   (3122989)  (4040254)     8723     782634
   Extraordinary item2       103760          -          -         -          -
   Cumulative effect of
     an
     accounting change3           -          -          -    (49000)         -
   Net earnings (loss)      4015788   (3122989)  (4040254)   (40277)    782634
   Preferred stock
   dividend                  121513          -          -         -          -
   Net earnings (loss)
     applicable to common
     shareholders           3894275   (3122989)  (4040254)   (40277)    782634
   Net earnings (loss) per
     share
     of common stock:
        Earnings (Loss)
        before cumulative
        effect of an
        accounting
        change &
        extraordinary item      .72       (.62)      (.81)       --4       0.16
        Extraordinary item      .02          -          -         -           -
        Cumulative effect of an
        accounting change3        -          -          -      (.01)          -
   Net earnings (loss)
        per share               .74       (.62)      (.81)     (.01)       0.16

   Selected
     Balance Sheet Data5:
     Current assets        20422667    22916704  28619853  24008873    22014987
     Current liabilities   15363586    18751765  18949907  13401972    14398837
     Working capital        5059081     4164939   9669946  10606901     7616150
     Total assets          26276701    28936515  38056602  35896521    32742207
     Long-term obligations
        (less current
            maturities)     5817868    10716233  16515189  15843190    11772243
     Stockholders' equity
        (deficiency)        5095247     (531483)  2591506   6651359     6571127

NOTES TO SELECTED FINANCIAL DATA

1 The comparability of the selected  financial data is affected by the Company's
sale of 65% of MFI on February 17, 1994. The operations of MFI were consolidated
with that of the Company through December 31, 1993.

2 On March 27, 1995,  the Company  redeemed  its  $3,000,000  subordinated  note
payable and common stock purchase  warrants for $3,000,150 plus accrued interest
of $42,750.  The redemption  resulted in a net extraordinary gain of $103,760 to
the Company.

3 Effective  January 1, 1992, the Company adopted the provisions of Statement of
Financial  Accounting Standards No. 109, "Accounting for Income Taxes." See Note
I.

4 Rounds to less than one cent earnings per share.

5 The  comparability  of the  selected  balance  sheet data is  affected  by the
reclassification of net assets of MFI to Investment in and advances to MFI as of
December 31,1993. See "Business - Cheese Converting, Packaging and Manufacturing
Operations."

                                       11

<PAGE>

ITEM 7.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  CONDITION AND RESULTS OF OPERATIONS

Results of Operations

1995 versus 1994

     The Company's sales  increased by $12,688,587 or 9.6% from  $132,354,808 in
1994 to  $145,043,395  in 1995.  Sales in the Branded cheese  segment  increased
$4,748,681  or 4.6%  from  $104,004,173  in 1994 to  $108,752,854  in 1995.  The
increase in Branded  business  resulted from increased  sales in the Alpine Lace
Branded  Division  offset by a slight decrease in sales from MDFC. The Company's
cheese and dairy products trading business sales for 1995 were  $36,290,541,  an
increase  of  $7,939,906  or 28.0% from  $28,350,635  in 1994  primarily  due to
increased sales of commodity cheddar cheese.

     As a  percentage  of sales,  gross profit  decreased  from 24.8% in 1994 to
24.7% in 1995.  Gross profit as a percent of sales  decreased  principally  as a
result of the 28% sales  increase  in the  cheese  and  dairy  products  trading
business which has lower gross profit margins than the Branded  division.  Gross
profit  increased by $2,988,544 or 9.1% from  $32,834,857 in 1994 to $35,823,401
in 1995  primarily due to the 9.6% increase in sales,  along with the lower cost
to  purchase  cheese  resulting  from  lower  commodity  prices  and  continuing
manufacturing efficiencies.

     Operating  expenses  decreased by $3,850,358  from  $34,321,206  in 1994 to
$30,470,848  in 1995  representing  a decrease of 11.2%.  The operating  expense
decrease is due to the 1994 restructuring charge of $2,640,238 associated with a
plan to cease  production  of skim milk  cheese at its MDFC  subsidiary  and the
termination of its supply agreement with MFI. In addition,  in 1994, the Company
recorded  a charge  of  $1,517,757  to  write  down  the  carrying  value of its
investment  and related  assets in MFI and related  expenses  (See Note F to the
Consolidated Financial  Statements).  Selling expenses remained the same in 1995
and 1994 at $25,600,000.

     Administrative  expenses  increased by $308,049 or 6.8% from  $4,546,505 in
1994 to $4,854,554 in 1995.

     Interest  expense (net)  decreased by $587,391 or 37.1% from  $1,583,040 in
1994 to  $995,649 in 1995,  as a result of the  Company's  decreased  use of its
working  capital  credit line and the  redemption of the Company's  subordinated
note payable, partially offset by higher interest rates.

     On March 27, 1995, the Company  redeemed its $3,000,000  subordinated  note
payable and common stock purchase  warrants for $3,000,150 plus accrued interest
of $42,750.  The redemption  resulted in a net extraordinary gain of $103,760 to
the Company.

                                       12

<PAGE>

     The provision for income taxes  increased  $391,276 from $53,600 in 1994 to
$444,876 in 1995.  The 1994 tax provision  included  minimal state taxes for MCT
Dairies,  Inc. due to the pre-tax loss of $3,069,389.  The 1995 tax provision is
due to federal net operating loss carry-forwards utilized in 1995.

1994 versus 1993

     The Company's sales (net of MFI sales of $50,924,327 in 1993, which 65% was
sold on February 17, 1994) increased by $2,533,521 or 2.0% from  $129,821,287 in
1993 to  $132,354,808  in 1994.  Sales in the Branded cheese segment (net of MFI
sales of $50,924,327 in 1993, which 65% was sold on February 17, 1994) increased
$7,774,493  or 8.1%  from  $96,229,680  in 1993 to  $104,004,173  in  1994.  The
increase in Branded  business  resulted from increased  sales in the Alpine Lace
Branded  Division  offset by a slight decrease in sales from MDFC. The Company's
cheese and dairy products  trading business sales for 1994 were  $28,350,635,  a
decrease of $5,240,972 or 15.6% from  $33,591,607  in 1993 primarily due to weak
demand for commodity  products due to large inventories held by the market place
in the third quarter of 1994.

     As a  percentage  of sales,  gross profit  increased  from 20.0% in 1993 to
24.8% in 1994.  Gross profit as a percent of sales  increased  principally  as a
result of the exclusion of MFI gross profit in 1994, which had a gross profit of
approximately 7.4% in 1993 and therefore, the gross profit as a percent of sales
for 1993  excluding  MFI would have been 24.9%.  In  addition,  gross profit was
impacted by a change in product mix towards  greater sales of the Company's deli
case  products at the Company's  Alpine Lace Branded  Division and reduced gross
profit  of  $516,142  from MCT due to weak  demand  for  commodity  products  as
discussed  above.  Gross profit decreased by $3,264,977 or 9.0% from $36,099,834
in 1993 to $32,834,857 in 1994 primarily due to the sale of MFI.

     Operating  expenses  decreased by $5,208,899  from  $39,530,105  in 1993 to
$34,321,206  in  1994,  representing  a  decrease  of  13.2%.  Selling  expenses
decreased by $7,610,522 or 22.9% from 1993 to 1994. The major contributor to the
decrease  was the MFI  selling  expenses  for 1993 of  $2,789,000,  which are no
longer included as discussed previously.  In connection with the Company's first
quarter  1993  restructuring,  the Company  altered its  marketing  strategy for
coupons which  resulted in a decrease in 1994 of  $1,693,000 in coupon  expense.
Another  factor  was the  decrease  in other  selling  expenses  during  1994 of
$1,273,000  due  principally  to greater  accruals  of  $1,280,000  for  product
discounts in response to more  aggressive  pricing  approaches  taken by grocery
retailers, in the first quarter of 1993. Additional factors include the decrease
in advertising expense including co-op advertising,  which decreased by $531,000
from  $5,720,000  in 1993 to  $5,189,000  in 1994 and the  decrease  in slotting
expenses of $856,000.

                                       13

<PAGE>

     Administrative expenses decreased by $1,756,372 or 27.9% from $6,302,877 in
1993 to  $4,546,505  in  1994.  The  decrease  in  administrative  expenses  was
primarily attributable to the MFI administrative expenses for 1993 of $1,734,000
which are no longer included, as discussed previously.

     The Company incurred a restructuring charge of $2,640,238 associated with a
plan to cease  production  of skim milk  cheese at its MDFC  subsidiary  and the
termination  of  its  supply   agreement  with  MFI  and  as  a  result  of  the
restructuring,  all cheese production will be performed at outside suppliers. In
addition, based on an evaluation of the recoverability of its investment in MFI,
the Company  recorded a charge of  $1,517,757 to write-down to zero the carrying
value of its investment and related assets in MFI and related expenses.

     Interest  expense  (net)  decreased by $149,837 or 8.6% from  $1,732,877 in
1993 to $1,583,040 in 1994, as a result of the MFI interest  expense for 1993 of
$200,000,  which is no longer included,  and the Company's  decreased use of its
working capital credit line, partially offset by higher interest rates.

     In 1994 the Company recorded  $53,600 for income tax expense  primarily due
to state taxes for MCT Dairies. As a result of the pre-tax loss of $5,163,148 in
1993, an income tax benefit of $1,122,894  in 1993 was  generated,  comprised of
federal and state tax refunds.

     In 1994,  the Company had a pre-tax  loss of  $3,069,389  and a net loss of
$3,122,989  compared  with a  pre-tax  loss  of  $5,163,148  and a net  loss  of
$4,040,254 in 1993 as a result of the factors  discussed  above.  As of December
31, 1994, the Company had available  federal net operating  loss  carry-forwards
for income tax  purposes of  approximately  $800,000,  which  expire in the year
2008.

Impact of New Accounting Standards

     In 1995,  the  Financial  Accounting  Standards  Board issued  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"),
which  provides  guidance  on when to assess  and how to measure  impairment  of
long-lived assets,  certain  intangibles and goodwill related to those assets to
be held and used, and for long-lived assets and certain identifiable intangibles
to be  disposed  of.  The  Financial  Accounting  Standards  Board  also  issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation"  ("SFAS No. 123"), which gives companies a choice of the method of
accounting used to determine stock-based compensation. Companies may account for
such compensation  either by using the intrinsic  value-based method provided in
APB Opinion 25, "Accounting for Stock Issued to Employees" ("APB No. 25") or the
fair market  value-based  method provided in SFAS No. 123. These  statements are
effective for financial statements for fiscal years beginning after December 15,
1995.  The Company  believes  that the impact of adopting  SFAS No. 121 will not
have a material effect on the Company.  The Company intends to use the intrinsic
value-based method provided in APB No. 25,

                                       14

<PAGE>

to determine stock-based  compensation.  The sole effect of the adoption of SFAS
No.  123 is the  obligation  imposed  on the  Company  to  comply  with  the new
disclosure requirements provided thereunder.

Inflation

     The Company believes that in 1996 it will be able to pass raw material cost
increases  of  approximately  up to  10%  on  to  its  customers,  as  will  its
competitors.  However,  the Company believes that substantial price increases of
over 10% might have a negative  impact on demand  for all  cheese  purchases  by
consumers and may be borne in part by the Company, thereby reducing earnings.

Liquidity; Capital Resources

     The  major  providers  of cash for 1995  came  from  net  earnings  and the
decrease in accounts  receivable.  On March 27, 1995,  the Company  redeemed its
subordinated  note payable and common stock purchase warrants for $3,000,150 and
accrued  interest of $42,750.  The majority of the funds for the redemption came
from the issuance of $2,250,000 of 7.5% cumulative  preferred stock on March 22,
1995, which resulted in net proceeds of approximately $2,000,000. The securities
are convertible into common stock of the Company at a conversion price of $7 3/8
for five years,  at which time the Company  must either  force a  conversion  at
market price of the common  stock or redeem the  preferred  stock.  On March 27,
1995, the Company used the proceeds (along with cash made available  through the
Company's  revolving  credit  facility) to repurchase $3 million in subordinated
debt and 353,895 warrants.

     Fixed asset  acquisitions for 1995 were $995,196 mainly due to the purchase
of a high-speed slicer at the Company's MDFC facility. Proceeds from the sale of
fixed assets were  $452,812 due to the sale of  equipment  and  buildings at the
MDFC facility in connection with the closing of the skim milk cheese operation.

     As of February 28, 1996 the Company had approximately  $5,200,000 available
on its $15,500,000  revolving  credit  facility and $3,500,000  available on its
equipment  credit  facility which both expire in 1998. The Company  expects that
this  credit  facility  will  give  the  Company  sufficient  means  to  finance
anticipated  working  capital  and  equipment  requirements  (See  Note H to the
Consolidated Financial  Statements.) As a result of the Company's  restructuring
announced  in December,  1994,  the Company was in default  under the  revolving
credit  facility.  The lender  waived the default as of December 31,  1994,  and
modified  those  covenants  as of  January  1,  1995.  The  Company  has been in
compliance since January 1, 1995.

     The  consolidated  statement of cash flows for the year ended  December 31,
1994 is not comparable to prior years due to the sale of 65% of MFI.

     The major  providers of cash for 1994 were from the sale of MFI,  decreased
inventory, and income tax refunds. On February 17, 1994, the Company sold

                                       15

<PAGE>

common stock  representing 65% of the outstanding shares of MFI resulting in net
cash received of  $3,530,013.  The Company's  inventory  decreased by $2,105,000
primarily  due to tighter  control of  inventory  levels.  The Company  received
income tax  refunds of  approximately  $1,015,000  due to the  federal and state
carry-back  claims  associated  with the 1993 pre-tax loss of  $5,163,148.  Cash
provided  during 1994 decreased the  borrowings of the Company by  approximately
$9,000,000 in 1994.

     The major uses of cash for 1993 were to fund increased accounts receivable,
inventory,  property,  plant and equipment and 1993 losses.  These  expenditures
were  financed by the increase in accounts  payable and net  increased  drawings
under the  Company's  bank credit  line.  The accounts  receivable  and accounts
payable  increases of  $5,104,710  and  $5,388,186  respectively  are  primarily
attributable  to the December,  1993 sales of $5,621,294 for MCT, as compared to
$2,247,300  in December,  1992 for MCT and  purchases of  $5,440,395  for MCT in
December,   1993,  as  compared  to  $2,203,151  in  December,   1992  for  MCT.
Additionally  impacting the increased  accounts  receivable and accounts payable
respectively,  are  increased  sales for the Alpine  Lace  Branded  Division  of
$1,169,951 from $7,780,297 in December, 1992 to $8,950,248 in December, 1993 and
increased  purchases  of  $2,514,583  from  $5,140,955  in  December,   1992  to
$7,655,538 in December,  1993. The Company's  inventory  increased by $1,824,507
due  primarily  to the  increased  levels  of  inventory  needed  at club  store
distribution  centers  and  increased  skim  milk  cheese  used to  produce  the
Company's fat free cheese  products.  In 1993, the Company  increased  property,
plant and equipment by principally  utilizing its equipment  credit facility for
$520,000 and incurred capital lease obligations of $440,426.  Increased drawings
under the Company's  revolving  credit facility  provided  $5,321,732 in 1993 to
finance cash needs.

                                       16

<PAGE>

ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                                             ALPINE LACE BRANDS, INC.
                                           INDEX TO FINANCIAL STATEMENTS

                                                                           Page

         Report of Independent Certified Public
                  Accountants                                               F-2

         Consolidated Financial Statements

                  Consolidated Balance Sheets as of
                           December 31, 1995 and 1994                       F-3

                  Consolidated Statements of Operations
                           for the Three Years Ended
                           December 31, 1995, 1994 and 1993                 F-5

                  Consolidated Statement of Stockholders'
                           Equity (Deficiency) for the Three Years
                           Ended December 31, 1995, 1994 and 1993           F-6

                  Consolidated Statements of Cash Flows
                           for the Three Years Ended
                           December 31, 1995, 1994 and 1993                 F-7

                  Notes to Consolidated Financial Statements                F-9



                                       17

<PAGE>

ITEM 9.       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
              ACCOUNTING AND FINANCIAL DISCLOSURE

              None.

                                    PART III

ITEM 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information  regarding  directors and executive officers of the Company
contained in the Company's  Proxy Statement for its Annual Meeting to be held on
May 16,  1996,  to be filed  within 120 days of December  31,  1995  pursuant to
Regulation  14A under the  Securities  Act of 1934 (the  "Company's  1996  Proxy
Statement") is incorporated herein by reference.

ITEM 11.      EXECUTIVE COMPENSATION

     The information regarding  remuneration of and transactions with management
in the Company's 1996 Proxy Statement is incorporated herein by reference.

ITEM 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

     The  information   regarding  ownership  of  the  Company's  securities  by
management  and certain  other  beneficial  owners in the  Company's  1996 Proxy
Statement is incorporated herein by reference.

ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The  information  regarding  relationships  and related  transactions  with
management  and others in the  Company's  1996 Proxy  Statement is  incorporated
herein by reference.

                                       18
<PAGE>

                                                      PART IV

ITEM 14.     EXHIBITS, FINANCIAL STATEMENTS AND
                      REPORTS ON FORM 10-K.

         (a)      Financial Statements:

                    The following consolidated financial statements of
                       Alpine Lace Brands, Inc. and Subsidiaries required
                       by Part II, Item 8, are included in Part IV  of this
                       report.

                                                                            PAGE

                          -       Report of Independent Certified Public
                                  Accountants.                               F-2

                          -       Consolidated Balance Sheets as of
                                  December 31, 1995 and 1994.                F-3

                          -       Consolidated Statements of Operations
                                  for the Three Years Ended December
                                  31 1995, 1994 and 1993.                    F-5

                          -       Consolidated Statement of Stock-
                                  holders' Equity (Deficiency) for the
                                  Three Years Ended December 31,
                                  1995, 1994 and 1993.                       F-6

                          -       Consolidated Statements of Cash
                                  Flows for the Three Years Ended
                                  December 31, 1995, 1994 and 1993.          F-7

                          -       Notes to Consolidated Financial
                                  Statements.                                F-9



                                       19

<PAGE>


Schedules  other than those listed above have been omitted as not being required
or because the  information  required to be submitted  has been  included in the
financial statements or notes thereto.

        (b)      The Company filed the following  Reports on Form 8-K during
                 the last quarter of 1995:

                          -       None

        (c)      Exhibits:

                         (3.1)    Certificate of Incorporation, as
                                  amended

                         (3.2)    By-Laws8

                     (4.1) (a)    Loan and Security Agreement, dated
                                  March 3, 1993, among Barclays Busi-
                                  ness Credit, Inc., the Company,
                                  Market Cheese Traders, Inc., and
                                  Mountain Farms, Inc.8

                           (b)    $1,000,000 Secured Promissory Note
                                  (Term Loan), dated March 3, 1993,
                                  from the Company, Market Cheese
                                  Traders, Inc., and Mountain Farms,
                                  Inc. to Barclays Business Credit,
                                  Inc.8

                           (c)    $3,500,000 Secured Promissory
                                  Note (Equipment Loan), dated
                                  March 3, 1993, from the Company,
                                  Market Cheese Traders, Inc.,
                                  and Mountain Farms, Inc. to
                                  Barlcays Business Credit, Inc.8

                         (4.2)    Registration Rights Agreement, dated
                                  March 21, 1995, between the Company
                                  and the holders designated therein10

                     (10.1)(a)    Agreement, dated July 18, 1988,
                                  regarding supply of PreMonde
                                  Alpine Lace Swiss Cheese1

                           (b)    Amendment to Agreement, dated
                                  March 1, 1994 regarding supply of
                                  PreMonde Alpine Lace Swiss Cheese9

                                       20

<PAGE>

                        (10.2)    Employment Agreement, dated
                                  January 4, 1993, between the
                                  Company and Carl T. Wolf8

                     (10.3)(a)    Employment Agreement, dated
                                  February 24, 1986, between the
                                  Company and Kenneth E. Meyers8

                           (b)    Amendment, dated December 10,
                                  1986, between the Company and
                                  Kenneth E. Meyers amending the
                                  terms of Exhibit 10.3(a)8

                           (c)    Second Amendment, dated as of
                                  January 1, 1988, between the
                                  Company and Kenneth E. Meyers
                                  extending the term of Exhibits
                                  10.3(a) and 10.3(b)2

                           (d)    Third Amendment dated December
                                  5, 1989, between the Company
                                  and Kenneth E. Meyers extending
                                  and amending the terms of
                                  Exhibits 10.3(a), 10.3(b) and
                                  10.3(c)5

                           (e)    Amendment, dated November 8,
                                  1991, between the Company and
                                  Kenneth E. Meyers extending the
                                  term of Exhibit 10.3(a), 10.3(b),
                                  10.3(c) and 10.3(d)7

                           (f)    Employment Agreement, dated January
                                  1, 1995, between the Company and
                                  Kenneth E. Meyers11

                        (10.4)    Employment Agreement, dated
                                  January 4, 1993, between the
                                  Company and George Wenger8

                     (10.5)(a)    Lease and Lease Modification, both
                                  dated November 1, 1988, between
                                  Dunnell Associates and First World
                                  Cheese, Inc.4

                           (b)    Lease dated July 31, 1990,
                                  between Dunnell Associates and
                                  First World Cheese, Inc.5

                                       21

<PAGE>

                           (c)    Lease Modification, dated December
                                  30, 1992, between Dunnell Asso-
                                  ciates and Alpine Lace Brands, Inc.
                                  (Formerly First World Cheese, Inc.)8

                           (d)    Lease Modification, dated March 23,
                                  1995, between Dunnell Associates, and
                                  Alpine Lace Brands, Inc.11

                        (10.6)    1987 Stock Option Plan (As
                                  Amended)

                        (10.7)    Agreement, dated July 28, 1988,
                                  regarding recipes and tradenames
                                  for Marolf Dakota Farms Longhorn
                                  Cheddar Cheese and Longhorn
                                  Colby Cheese4

                        (10.8)    Stock Purchase Agreement, dated
                                  as of November 7, 1989, among
                                  Marolf Dakota Farms Cheese, Inc.,
                                  and Michael F. Marolf, plus First
                                  Amendment to Stock Purchase
                                  Agreement, dated as of November
                                  27, 1989 3

                        (10.9)    Asset Purchase Agreement dated
                                  April 16, 1990, as amended by
                                  First Amendment dated May 21,
                                  1990, between the Company,
                                  Gamay Foods, Inc. and Dr. Aly
                                  Gamay5

                       (10.10)    Restricted Special Stock Warrant
                                  dated May 21, 1990, from the
                                  Company to Gamay Foods, Inc.5

                    (10.11)(a)    Gamay License Agreement dated
                                  May 21, 1990, among the
                                  Company, Gamay Foods, Inc. and
                                  Dr. Aly Gamay5

                           (b)    Modification of License Agreement
                                  dated February 24, 1995, between
                                  the Company, Gamay Foods and
                                  Dr. Aly Gamay10

                                       22

<PAGE>

                           (c)    SIM-GT License Agreement dated
                                  November 1, 1995, among the
                                  Company and SIM-GT Licensing
                                  Corporation.

                    (10.12)(a)    Independent Consulting Agreement,
                                  dated May 21, 1990, between the
                                  Company and Dr. Aly Gamay5

                           (b)    Modification of Independent
                                  Consulting Agreement, dated May
                                  14, 1993, between the Company
                                  and Dr. Aly Gamay9

                           (c)    Modification of Independent
                                  Consulting Agreement, dated
                                  February 24, 1995, between the
                                  Company and Dr. Aly Gamay
                                  (See 10.12b above)10

                       (10.13)    Restricted Special Stock Warrant,
                                  dated May 28, 1991, from the
                                  Company to Pleasant View Cheeses
                                  Corporation (amended and
                                  restated)6

                    (10.14)(a)    Stock Purchase Agreement, dated
                                  January 20, 1994, between the
                                  Company and Simplot Dairy Products,
                                  Inc.9

                           (b)    Supply and Conversion Agreement,
                                  dated February 17, 1994, between
                                  the Company and Mountain Farms, Inc.9

                           (c)    First Option to Purchase Stock, dated
                                  February 17, 1994, between the Company
                                  and Simplot Dairy Products, Inc.9

                           (d)    Noncompete Agreement, dated February
                                  17, 1994, between the Company and
                                  Simplot Dairy Products, Inc.9

                       (10.15)    Securities Purchase Agreement, dated
                                  March 24, 1995, between the Company
                                  and RFE Investment Partner IV L.P.10

                          (11)    Computation of Earnings (Loss) per
                                  Share of Common Stock

                                       23

<PAGE>

                          (21)    Subsidiaries of Registrant

                          (23)    Consent of Independent Certified
                                  Public Accountants

1.  Indicates  that the exhibit is  incorporated  by reference to the  indicated
exhibit of Post-Effective  Amendment No. 2 to the Registration Statement on Form
S- 18 of the Company, Registration No. 33-4622-NY.

2.  Indicates  that the exhibit is  incorporated  by reference to the  indicated
exhibit of the Annual  Report on Form 10-K of the  Company,  for the fiscal year
ended December 31, 1988.

3.  Indicates  that the exhibit is  incorporated  by reference to the  indicated
exhibit of the  Current  Report on Form 8-K of the  Company,  dated  January 10,
1990.

4.  Indicates  that the exhibit is  incorporated  by reference to the  indicated
exhibit of the Annual  Report on Form 10-K of the  Company,  for the fiscal year
ended December 31, 1989.

5.  Indicates  that the exhibit is  incorporated  by reference to the  indicated
exhibit of the Annual  Report on Form 10-K of the  Company,  for the fiscal year
ended December 31, 1990.

6.  Indicates  that the exhibit is  incorporated  by reference to the  indicated
exhibit of the  Quarterly  Report on Form 10-Q of the  Company  for the  quarter
ended June 30, 1991.

7.  Indicates  that the exhibit is  incorporated  by reference to the  indicated
exhibit of the annual  report on form 10-K of the  Company,  for the fiscal year
ended December 31, 1991.

8.  Indicates  that the exhibit is  incorporated  by reference to the  indicated
exhibit of the annual  report on form 10-K of the  Company,  for the fiscal year
ended December 31, 1992.

9.  Indicates  that the exhibit is  incorporated  by reference to the  indicated
exhibit of the annual  report on form 10-K of the  Company,  for the fiscal year
ended December 31, 1993.

10.  Indicates  that the exhibit is  incorporated  by reference to the indicated
exhibit of the annual  report on form 10-K of the  Company,  for the fiscal year
ended December 31, 1994.

11.  Indicates  that the exhibit is  incorporated  by reference to the indicated
exhibit of the  Quarterly  Report on Form 10-Q of the  Company  for the  quarter
ended March 31, 1995.

<PAGE>

                       This page left blank intentionally.

                                       F-1
<PAGE>
                         REPORT OF INDEPENDENT CERTIFIED
                               PUBLIC ACCOUNTANTS

Board of Directors and Stockholders
    Alpine Lace Brands, Inc.

We have audited the accompanying consolidated balance sheets of Alpine Lace
Brands,  Inc. (a Delaware  corporation) and Subsidiaries as of December 31, 1995
and 1994, and the related consolidated  statements of operations,  stockholders
equity and cash flows for each of the three years in the period  ended  December
31, 1995.  These financial  statements are the  responsibility  of the Companys
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We conducted  our audits 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 audits provide a reasonable basis for our opinion.

In our opinion,  the financial statements referred to above present fairly,
in all material  respects,  the consolidated  financial  position of Alpine Lace
Brands,  Inc.  and  Subsidiaries  as of  December  31,  1995 and  1994,  and the
consolidated  results of their operations and their  consolidated cash flows for
each of the three years in the period ended  December 31,  1995,  in  conformity
with generally accepted accounting principles.

/S/Grant Thornton LLP
GRANT THORNTON LLP

Parsippany, New Jersey
February 9, 1996
                                      F-2
<PAGE>

                            Alpine Lace Brands, Inc.

                           CONSOLIDATED BALANCE SHEETS

                                  December 31,

ASSETS (substantially pledged - Note H) ..........          1995          1994

CURRENT ASSETS
    Cash and cash equivalents (Note A-7) .........   $   459,610   $   438,414
    Accounts receivable - net ....................    13,068,356    16,228,784
    Inventories (Notes A-3 and C) ................     6,213,256     5,447,502
    Prepaid expenses and other
    current assets (Note K) ......................       681,445       802,004

           Total current assets ..................    20,422,667    22,916,704

PROPERTY, PLANT AND EQUIPMENT - AT COST,
    less accumulated depreciation and amortization
    (Notes A-4, B and E) .........................     2,335,654     1,928,583

ASSETS HELD FOR SALE (Note G) ....................                     265,800

OTHER ASSETS
    Note receivable -
    Mountain Farms, Inc.(Note F) .................     1,675,948     1,675,948
    Trademarks, trade names and technology,
      less accumulated amortization of
      $865,061 and $709,802 in 1995 and 1994,
      respectively ...............................     1,556,240     1,709,451
    Notes receivable (Note J) ....................        16,035        30,420
    Other ........................................       270,157       409,609

                                                       3,518,380     3,825,428

                                                     $26,276,701   $28,936,515

The accompanying notes are an integral part of these statements.

                                      F-3
<PAGE>

                            Alpine Lace Brands, Inc.

                           CONSOLIDATED BALANCE SHEETS

                                  December 31,

LIABILITIES AND STOCKHOLDERS EQUITY ............           1995           1994

CURRENT LIABILITIES
   Current maturities of long-term
   debt (Note H) ...............................                   $  1,385,846
   Accounts payable ............................   $ 12,844,895      14,610,852
   Accrued expenses and other ..................      1,995,784       2,565,802
   Income taxes payable (Note I) ...............        379,824          10,450
   Current maturities of obligations under
   capital leases (Note E) .....................        143,083         178,815

          Total current liabilities ............     15,363,586      18,751,765

LONG-TERM OBLIGATIONS, less current maturities
   Long-term debt (Note H) .....................      5,325,945       9,547,581
   Obligations under capital leases (Note E) ...        409,561         592,121
   Other long-term liability (Note G) ..........         82,362         576,531

                                                      5,817,868      10,716,233

COMMITMENTS AND CONTINGENCIES (Notes J, K,
    L, M and N)

STOCKHOLDERS EQUITY (DEFICIENCY)
(Notes A-5, M and N)
    Preferred stock, par value $.01 per share;
       authorized 1,000,000 shares; 45,000
       shares issued and outstanding in 1995;
       at liquidation amount of $50 per share ..      2,250,000
    Common stock, par value $.01 per share;
       authorized 10,000,000 shares; issued and
       outstanding, 5,050,136 shares in 1995 and
       5,012,419 in 1994 .......................         50,501          50,124
    Additional paid-in capital .................      2,611,966       3,129,888
    Retained earnings (deficit) ................        182,780      (3,711,495)

                                                      5,095,247        (531,483)

                                                   $ 26,276,701    $ 28,936,515

The accompanying notes are an integral part of these statements.
                                      F-4
<PAGE>

                            Alpine Lace Brands, Inc.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                             Year ended December 31,

                                          1995            1994             1993

Net sales (Notes J and O) ........ 145,043,395   $ 132,354,808    $ 180,745,614
Cost of goods sold (Notes J and O) 109,219,994      99,519,951      144,645,780

          Gross profit ...........  35,823,401      32,834,857       36,099,834

Operating expenses
   Selling .......................  25,616,294      25,616,706       33,227,228
   Administrative ................   4,854,554       4,546,505        6,302,877
   Restructuring charge (Note G) .                   2,640,238
   Write-down of Mountain Farms,
      Inc. (Note F) ..........                       1,517,757

                                    30,470,848      34,321,206       39,530,105
          Operating profit (loss) .. 5,352,553      (1,486,349)      (3,430,271)
Interest expense - net (Note P) ....   995,649       1,583,040        1,732,877
          Earnings (loss) before
             income tax provision
             (benefit) and
             extraordinary item ..   4,356,904      (3,069,389)      (5,163,148)
Income tax provision (benefit)
          (Notes A-6 and I) ........   444,876          53,600       (1,122,894)
          Earnings (loss) before
          extraordinary item .....   3,912,028      (3,122,989)      (4,040,254)
Extraordinary item
    Gain from extinguishment of debt,
      net of income
      taxes of $7,451 (Note H) ....    103,760


          NET EARNINGS (LOSS) .....  4,015,788      (3,122,989)      (4,040,254)

Preferred stock dividends .........    121,513


    Net earnings (loss) applicable
    to common shareholders       $   3,894,275   $  (3,122,989)   $  (4,040,254)

Earnings (loss) per share of
   common stock (Note A-5)
   Earnings (loss) before
   extraordinary item .........  $         .72   $        (.62)   $        (.81)
   Extraordinary item .........            .02            --               --

          Net earnings (loss)
          per share ...........  $         .74   $        (.62)   $        (.81)

Weighted average number of
    common and common
    equivalent shares
    outstanding ...............      5,289,275       5,012,419        5,012,419

The accompanying notes are an integral part of these statements.

                                      F-5
<PAGE>

                            Alpine Lace Brands, Inc.

           CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (DEFICIENCY)

                  Years ended December 31, 1995, 1994 and 1993

                                                   Additional Retained
                       Preferred Common    stock   paid-in    earnings
                       stock     Shares    Amount  capital   (deficit)    Total

Balance at
December 31, 1992                5012419 $ 50124  $ 3149487  $ 3451748 $6651359

Stock issuance expense                               (19599)             (19599)
Net loss for the year
   ended December 31,
   1993                                                       (4040254)(4040254)

Balance at December 31,
   1993                          5012419   50124    3129888    (588506) 2591506

Net loss for the year
   ended December 31,
   1994                                                       (3122989)(3122989)

Balance at December 31,
   1994                          5012419   50124    3129888   (3711495) (531483)

Proceeds from preferred
   stock offering, net
   of offering costs of
   $234,768         $ 2250000                       (234768)            2015232
Warrants received on debt
   repurchase                                       (212337)            (212337)
Reduction in nonemployee
   stock option                                     (275386)            (275386)
Exercise of stock options,
   including income
   tax benefit of $29,000          37717     377     204569              204946
Preferred stock dividends                                      (121513) (121513)
Net earnings for the year
   ended December 31, 1995                                     4015788  4015788

Balance at December 31,
   1995             $ 2250000  $ 5050136 $ 50501  $ 2611966  $  182780 $5095247

The accompanying notes are an integral part of this statement.

                                      F-6
<PAGE>

                            Alpine Lace Brands, Inc.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                             Year ended December 31,

                                                  1995        1994         1993

Cash flows from operating activities
   before the reclassification
   of the net assets of Mountain
   Farms, Inc. at December 31,
   1993 (Notes A-1 and F)
     Net earnings (loss)                   $ 4,015,788 $(3,122,989) $(4,040,254)
     Adjustments to reconcile net
     earnings (loss) to net cash
       used in operating activities
         Write-down of Marolf Dakota
         Farms fixed assets                              1,251,618
         Write-down of investment
           in Mountain Farms, Inc.
           and escrow accounts receivable                1,333,696
         Write-down of Marolf Dakota
           Farms trademark                                 243,680
         Extraordinary item                   (103,760)         --           --
         Depreciation and amortization         566,251     824,369    1,035,930
         Deferred taxes                                                (139,629)
         Provision for losses
           on accounts receivable              200,884     150,956       33,448
         (Gain) loss on sale of fixed assets    24,233      (3,718)       1,574
         Changes in operating assets and
           liabilities
           Accounts receivable               2,959,544  (1,107,663)  (5,104,710)
           Inventories                        (765,754)  2,104,792   (1,824,507)
           Prepaid expenses and
           other current assets                120,559     112,546    1,117,409
           Refundable income taxes                  --   1,014,795     (887,550)
           Other assets                        139,452     184,425      412,298
           Accounts payable                 (1,765,957)  1,519,095    5,388,186
           Accrued expenses and other         (570,018)  1,139,589      115,739
           Income taxes payable                369,374      30,430       23,010
           Other long-term liability          (494,169)    576,531

                                               680,639   9,375,141      171,198

       Net cash provided by (used in)
           operating activities              4,696,427   6,252,152   (3,869,056)

Cash flows from investing activities
   Proceeds from notes receivable               14,385      12,907       11,577
   Proceeds from sale of Mountain Farms, Inc.       --   3,530,013
   Purchase of property, plant and equipment  (995,196)   (275,701)  (1,045,664)
   Payments for trademarks, trade names
     and technology                             (2,047)    (56,281)     (81,495)
   Proceeds from sale of fixed assets          452,812                   30,200

       Net cash (used in) provided by
           investing activities               (530,046)  3,210,938   (1,085,382)

                                      F-7
<PAGE>

                            Alpine Lace Brands, Inc.

                CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

                             Year ended December 31,

                                                  1995        1994         1993

Cash flows from financing activities
   Payment of obligations under
   capital leases                         $   (218,292) $ (191,943) $  (200,773)
   Costs from issuance or reduction
      of common stock,
      options and warrants                    (275,386)                 (19,599)
   Preferred stock dividends                  (121,513)
   Payments of notes payable                (5,721,172) (9,071,670) (10,591,458)
   Proceeds from exercise of stock
      options                                  175,946
   Net proceeds from issuance of
      preferred stock                        2,015,232
   Net borrowings under long-term
      agreement                                                      15,913,190


          Net cash (used in) provided
          by financing activities           (4,145,185) (9,263,613)   5,101,360

          NET INCREASE IN CASH AND
              CASH EQUIVALENTS                  21,196     199,477      146,922

Cash and cash equivalents at
   beginning of year                           438,414     238,937      149,430

Cash and cash equivalents at
   end of year                            $    459,610 $   438,414 $    296,352

Supplemental disclosures of cash
   flow information:
   Cash paid during the year for
      Interest                            $  1,177,079 $ 1,602,511 $  1,580,394

      Income taxes                        $     59,549 $   103,246 $     31,296

In connection  with the sale of 65% of the  outstanding  shares of Mountain
Farms, Inc. in February 1994, the Company has a note receivable in the amount of
$1,675,948 (Note F).

Capital lease  obligations  of $61,466,  and $440,426 were incurred for the
purchase of equipment in 1994 and 1993, respectively (Note E).

Cash and cash equivalents at the beginning of 1994 excludes $57,415 of cash
relating to MFI.

The accompanying notes are an integral part of these statements.

                                      F-8
<PAGE>

                            Alpine Lace Brands, Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1995 and 1994

NOTE A - SUMMARY OF ACCOUNTING POLICIES

     A summary of the significant  accounting policies  consistently  applied in
the preparation of the accompanying consolidated financial statements follows:

     1.  Business and Principles of Consolidation

     The consolidated  financial  statements include the accounts of Alpine Lace
Brands,  Inc. (the Company) and its  wholly-owned  subsidiaries,  MCT Dairies,
Inc. (MCT) and Marolf Dakota Farms Cheese, Inc. (MDFC). Included in the 1993
statement of operations were the accounts of Mountain Farms,  Inc.  (MFI).  On
February  17,  1994,  the Company  sold 65% of MFI.  All  material  intercompany
accounts and transactions have been eliminated.

     The Company is engaged in the  development,  marketing and  distribution of
branded cheeses and other  specialty food products.  Sales of these products are
primarily to supermarket  chains,  food distributors and  delicatessens  located
throughout  the United  States.  MCT is  engaged  in cheese  and dairy  products
commodity  trading.  Prior to 1995,  MDFC  produced skim milk cheese used by the
Company in its fat free product line. In addition,  MDFC  converted and packaged
MDFC brand Colby,  Cheddar,  and Monterey Jack cheeses  marketed by the Company.
MDFC  currently  converts  and  packages  Alpine  LaceR  brand dairy case sliced
cheeses. As a result of a restructuring of the Companys  operations (Note G) in
December 1994,  MDFC no longer produces skim milk cheese used by the Company and
terminated its MDFC product line.

     2.  Revenue Recognition

     Sales and related cost of sales are  recognized  upon shipment of products.
Promotional allowances are charged to selling expense.

     3.  Inventories

     Inventories  consisting primarily of bulk cheese,  cheese products held for
resale, raw materials and packaging supplies are stated at the lower of cost or
market.  Cost is determined using the first-in, first-out method.

                                      F-9
<PAGE>

                            Alpine Lace Brands, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                           December 31, 1995 and 1994

NOTE A (continued)

     4.  Property, Plant and Equipment

     Property,  plant and equipment are depreciated  over periods  sufficient to
relate  the cost of such  assets  to  operations  over the  following  estimated
service lives:

Building and improvements .......   25-31 years
Leasehold improvements ..........   3-20 years
Furniture, fixtures and equipment   3-10 years

     The straight-line  method of depreciation is followed for substantially all
assets for financial reporting  purposes;  but accelerated methods are generally
used for tax purposes.

     5.  Earnings (Loss) Per Share of Common Stock

     Earnings  (loss) per share of common  stock was  computed by  dividing  net
earnings (loss) after deducting preferred dividend requirements, by the weighted
average  number  of  shares  of  common  stock  and  common   equivalent  shares
outstanding  during the period,  including  the dilutive  effect of warrants and
stock options outstanding, if applicable.

     6.  Income Taxes

     The Company and its wholly-owned  subsidiaries file a consolidated  Federal
income tax return.  Deferred  income taxes are  recognized  in the  accompanying
financial statements because of differences between financial and tax reporting.

     7.  Cash and Cash Equivalents

     For purposes of the  statement  of cash flows,  the Company  considers  all
highly  liquid debt  instruments  purchased  with an original  maturity of three
months or less to be cash equivalents.

                                      F-10
<PAGE>

                            Alpine Lace Brands, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                           December 31, 1995 and 1994

NOTE A (continued)

     8.  Slotting Fees

     Through  December 31, 1992,  the Company  deferred  and  amortized,  over a
one-year period,  the one-time costs that its customers charged to include a new
product in their distribution system (slotting fees). The Company restructured
its branded cheese  division  during the first quarter of 1993 and in connection
with the restructuring  altered its marketing  strategy and ceased deferring and
amortizing  slotting fees. The effect of this change in estimate was to increase
the pretax loss for the year ended December 31, 1993 by approximately  $286,000.
Slotting  fees  expensed  in 1995,  1994 and 1993 were  approximately  $542,000,
$410,000 and $1,271,000, respectively.

     9.  Capital Leases

     Capital leases are recorded at the present value of future lease  payments.
These leases are amortized over their primary term.

    10.  Other Assets

     The costs of patents,  trademarks,  trade names and technology acquired are
amortized by the  straight-line  method over their estimated useful lives, up to
20 years.

    11.  Use of Estimates

     In preparing  financial  statements in conformity  with generally  accepted
accounting principles,  management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent  assets and  liabilities at the date of the financial  statements and
revenues and expenses during the reporting  period.  Actual results could differ
from those estimates.

    12.  Fair Value of Financial Instruments

     Based on borrowing rates currently  available to the Company for bank loans
with similar terms and  maturities,  the fair value of the  Companys  long-term
debt  approximates  the carrying value.  Furthermore,  the carrying value of all
other financial  instruments  potentially subject to valuation risk (principally
consisting  of cash and  cash  equivalents,  accounts  receivable  and  accounts
payable) also approximate fair value.

                                      F-11
<PAGE>

                            Alpine Lace Brands, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                           December 31, 1995 and 1994

NOTE B - PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment are summarized as follows:

                                                        1995           1994

Leasehold improvements .......................   $   106,176    $    45,914
Furniture, fixtures and equipment ............     2,389,337      1,541,200
Equipment under capital lease ................       973,795      1,052,544
Land, building and improvements ..............       289,314        346,000

                                                   3,758,622      2,985,658
Less accumulated depreciation and amortization    (1,422,968)    (1,057,075)

                                                 $ 2,335,654    $ 1,928,583

     See Note G as to MDFC plant and  equipment  write-downs  which are shown as
reductions to the costs of the assets.

NOTE C - INVENTORIES

   Inventories are summarized as follows:

                           1995         1994

Cheese inventory .   $5,880,513   $4,986,691
Packaging supplies      332,743      460,811

                     $6,213,256   $5,447,502

     In  connection  with the purchase of cheese for  anticipated  manufacturing
requirements,  the  Company  purchases  cheese  futures  and  options  as deemed
appropriate to reduce the risk of future cheese price  increases.  These futures
and options are  accounted  for as hedges.  Under  hedge  accounting,  gains and
losses  are  deferred  and  recognized  in the cost of goods sold as part of the
product   cost.   The  Company  can  be  exposed  to  losses  in  the  event  of
nonperformance  by the other  parties to the  futures or options.  However,  the
Company does not anticipate nonperformance by the parties. At December 31, 1995,
the Company did not own any futures and options contracts.

                                      F-12
<PAGE>

                            Alpine Lace Brands, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                           December 31, 1995 and 1994

NOTE D - NEW ACCOUNTING STANDARDS NOT YET ADOPTED

     In 1995,  the  Financial  Accounting  Standards  Board issued  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),
which  provides  guidance  on when to assess  and how to measure  impairment  of
long-lived assets,  certain  intangibles and goodwill related to those assets to
be held and used, and for long-lived assets and certain identifiable intangibles
to be  disposed  of.  The  Financial  Accounting  Standards  Board  also  issued
Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation  (SFAS No. 123), which gives companies a choice of the method of
accounting used to determine stock-based compensation. Companies may account for
such compensation  either by using the intrinsic  value-based method provided in
APB Opinion 25, Accounting for Stock Issued to Employees (APB No. 25) or the
fair market  value-based  method provided in SFAS No. 123. These  statements are
effective for financial statements for fiscal years beginning after December 15,
1995.  The Company  believes  that the impact of adopting  SFAS No. 121 will not
have a material effect on the Company.  The Company intends to use the intrinsic
value-based   method   provided  in  APB  No.  25,  to   determine   stock-based
compensation.  The sole effect of the adoption of SFAS No. 123 is the obligation
imposed on the Company to comply with the new disclosure  requirements  provided
thereunder.

NOTE E - CAPITALIZED LEASES

     The following is a schedule by years of future minimum lease payments under
capital  leases,  together  with  the  present  value of the net  minimum  lease
payments as of December 31, 1995:

Year ended December 31,
     1996                                     $183,215
     1997                                      169,105
     1998                                      163,345
     1999                                      122,583
     2000                                        9,164

Net minimum lease payments ................    647,412
Less amount representing interest .........     94,768

Present value of net minimum lease payments   $552,644

Current portion ...........................   $143,083
Noncurrent portion ........................    409,561

                                              $552,644

                                      F-13
<PAGE>

                            Alpine Lace Brands, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                           December 31, 1995 and 1994

NOTE E (continued)

     Accumulated  amortization of equipment under the capital leases at December
31, 1995 and 1994 approximated $421,000 and $436,000, respectively.

 NOTE F - MOUNTAIN FARMS, INC.

     On February 17, 1994, the Company sold common stock representing 65% of the
outstanding  shares of MFI.  After the sale,  MFI owed the  Company  $1,675,948,
which is evidenced by an unsecured  note payable due ten years from closing with
accrued  interest  at LIBOR  plus 1/4%.  The sales  proceeds,  net of  expenses,
approximated the Companys proportionate investment in MFI at December 31, 1993.
In addition,  the Company  entered into a three-year  supply  agreement with MFI
whereby MFI was to convert  products  for the Company in an amount not less than
3,000,000 pounds annually.

     In December  1994,  in  connection  with a  restructuring  of the Companys
operations  (Note G), the Company  terminated the supply  agreement with MFI. In
addition, based on an evaluation of the recoverability of its investment in MFI,
the Company  recorded a charge of  $1,517,757 to write down to zero the carrying
value of its investment and certain related assets in MFI and related expenses.

     During 1995,  MFI continued to incur  operating  losses and the Company was
notified  that MFI was closing its  production  facility and  restructuring  its
business  (including  converting cheese at an affiliate of MFI) in an attempt to
improve  operations.  Although MFI has taken steps that it believes will improve
operations,  there can be no assurance  that they will be  successful  and it is
reasonably  possible that, in the near term, the Company may incur a loss on the
MFI note of $1,675,948.  The Company is pursuing its  alternatives  in receiving
full value of the note.

     The following  summarizes  certain  selected data of MFI for the year ended
December 31, 1993:

Net sales ..............   $ 50,924,327

Operating loss .........   $ (1,043,876)

Loss before income taxes   $ (1,244,132)

                                      F-14
<PAGE>

                            Alpine Lace Brands, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                           December 31, 1995 and 1994

NOTE G - RESTRUCTURING CHARGE

     In December 1994, the Company  approved a restructuring  plan in connection

relating to its Alpine Lace fat free products. In addition, MDFC cheese products
converted and packaged at MDFC were discontinued in December 1994. In connection
with the  restructuring,  the  Company,  in January  1995,  closed its skim milk
cheese production facility at MDFC and terminated its supply agreement with MFI,
and will utilize other manufacturers to perform these functions.  As a result of
the  restructuring,  all cheese  production  is performed at outside  suppliers.
Included  in the  restructuring  charge is a  write-down  of the MDFC  plant and
equipment  of  $1,252,000,  the  write-down  of the MDFC  trademark of $244,000,
termination pay obligations of $55,000, an accrual of $1,070,700 relating to the
cancellation  of the  supply  agreement  with MFI which is payable in 26 monthly
installments  commencing  January 1995 and other items of $18,000.  In 1995, the
Company sold the assets of MDFC not used at their carrying value.

NOTE H - LONG-TERM DEBT

     Long-term debt at December 31, 1995 and 1994 consists of:

                                                              1995          1994
Notes payable to bank (a) ............................ $ 5,325,945   $ 6,995,218
Subordinated note payable (less unamortized debt
    discount of $70,429) (b) .........................                 2,929,571
Note payable to bank (repaid in April 1995) ..........                   396,551
Note payable to bank (repaid in April 1995) ..........                   593,024
Obligations payable, principally to various MDFC
    creditors, payable in various quarterly and annual
    payments with a final payment in 1995 ............                    19,063

                                                         5,325,945    10,933,427
Less current maturities ..............................        --       1,385,846

                                                       $ 5,325,945   $ 9,547,581

     As of December 31, 1995, the outstanding long-term debt matures in 1998.

                                      F-15
<PAGE>

                            Alpine Lace Brands, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                           December 31, 1995 and 1994

NOTE H (continued)

     (a) The bank credit  facility  provides  for  revolving  credit loans up to
$15,500,000  through  March 1998 subject to  availability  of eligible  accounts
receivable and inventory;  and the  availability of up to $3,500,000 to purchase
equipment subject to certain limitations through March 1998. The credit facility
contains   certain   covenants  and   restrictions   on  capital   expenditures,
indebtedness,  the  declaration of future  dividends and  maintenance of certain
financial  ratios,  including  working  capital,  adjusted  tangible  net worth,
current ratio and cash flow.  Interest on the  revolving  credit loan is payable
monthly at the banks base rate (8.5% at  December  31,  1995) plus 1/2%,  and a
facility  fee of 3/16% is payable  on the unused  balance.  The  borrowings  are
collateralized by all assets of MCT and the Company. In connection with the sale
of 65% of MFI on February 17, 1994,  the Company paid to the bank  approximately
$3,653,000  from the  proceeds  from the sale of MFI and the bank  released  its
security interest in the assets of MFI.

     (b) On March 27, 1995,  the Company  redeemed its  $3,000,000  subordinated
note payable and common stock  purchase  warrants  for  $3,000,150  plus accrued
interest of $42,750.  The  redemption  resulted in a net  extraordinary  gain of
$103,760 to the Company. A portion of the funds for the redemption came from the
issuance of  $2,250,000  of  convertible  preferred  stock (Note N) on March 22,
1995.

NOTE I - INCOME TAXES

     Income tax expense  (benefit) for the years ended  December 31, 1995,  1994
and 1993 consists of:

                                             1995           1994           1993

Current
    Federal .......................   $   405,654    $    10,000    $  (941,736)
    State .........................        46,673         43,600        (41,529)
                                          452,327         53,600       (983,265)
Deferred income taxes
    Federal .......................                                    (119,449)
    State ...................... ..                                     (20,180)
                                                                       (139,629)
                                         $452,327(a) $    53,600    $(1,122,894)

       (a)  Includes $7,451 net in extraordinary item.

                                      F-16
<PAGE>

                            Alpine Lace Brands, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                           December 31, 1995 and 1994

NOTE I (continued)

     The  Companys  income tax benefit for the year ended  December 31, 1993 is
comprised of Federal and state  carryback  claims to prior years  resulting in a
refund of $983,265  and the reversal of $139,629 of prior year  deferred  income
taxes which were reversed due to available income tax carryforwards.  During the
year ended  December 31, 1995,  income tax expense was reduced by  approximately
$414,000   resulting   from  the  benefit  of  utilizing  net   operating   loss
carryforwards.

     The Company  accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes
(SFAS No. 109). SFAS No. 109 requires  recognition of deferred tax liabilities
and assets for the  expected  future tax  consequences  of events that have been
included in the financial statements or tax returns. Under this method, deferred
tax  liabilities and assets are determined  based on the difference  between the
financial  statement and tax bases of assets and  liabilities  using enacted tax
rates in effect for the year in which the differences are expected to reverse.

     Deferred tax assets and  liabilities  at December 31, 1995 and 1994 consist
of the following:

                                                        1995         1994

Deferred tax assets
    Allowance for doubtful accounts ...........   $   17,210   $   79,465
    Capitalized inventory costs ...............        8,638        6,949
    Capitalized package design cost ...........       72,328       81,991
    Alternative minimum tax credit carryforward       27,828       60,993
    Charitable contributions ..................       12,768         --
    Net operating loss carryforward ...........       26,602      362,223
    Cancellation of contract ..................       10,063      428,280
    Write-down of assets ......................         --        446,602
    Inventory reserve .........................       96,918       97,276
    Patent amortization .......................       88,484       82,344
    Other .....................................         --          8,410

        (carried forward) .....................      360,839    1,654,533

                                      F-17
<PAGE>

                            Alpine Lace Brands, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                           December 31, 1995 and 1994

NOTE I (continued)

                                                           1995           1994

        (brought forward) .......................   $   360,839    $ 1,654,533

Deferred tax liabilities
    Depreciation of property, plant and equipment       149,156        390,694
    Deferred inventory profit ...................        22,893         52,052

                                                        172,049        442,746

Net deferred tax asset ..........................       188,790      1,211,787
Less valuation allowance ........................      (188,790)    (1,211,787)

                                                    $         -    $         -

     During the year  ended  December  31,  1995,  the  change in the  valuation
allowance was approximately $1,023,000.

     The  differences  (expressed as a percentage of pretax income)  between the
statutory Federal income tax rate and the effective income tax rate as reflected
in the accompanying consolidated statements of earnings are as follows:

                                                 1995       1994       1993

Statutory Federal income tax rate ........       34.0%     (34.0)%    (34.0)%
State income taxes, net of Federal benefit         .7         .9       (1.1)
Permanent differences ....................         .6       (1.1)        .7
Write-down of investment in MFI ..........         --       16.5
Alternative minimum tax credit ...........       (1.1)        .3
Change in deferred tax valuation allowance      (22.9)      19.3       12.0
Other ....................................       (1.2)       (.2)

Effective tax rate .......................       10.1%       1.7%     (22.4)%

                                      F-18
<PAGE>

                            Alpine Lace Brands, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                           December 31, 1995 and 1994

NOTE J - RELATED PARTY TRANSACTIONS

     Market Finders Brokerage, Inc. (MFBI) is a company 100%-owned by a Director
and Vice  President  of the  Company  and wife of the  President  and  principal
stockholder  of the Company.  MFBI and the Director  introduced the Company to a
broker and  receives a  percentage  commission  from the  broker  (subject  to a
specified minimum and maximum) based on commissions generated by this business.

     During the years ended  December 31, 1995,  1994 and 1993, the Company made
purchases  of $126,729,  $181,742  and  $233,706,  respectively,  from MFBI.  In
addition,  during the years ended December 31, 1995,  1994 and 1993, the Company
had sales of $115,632, $155,210 and $205,574, respectively, to MFBI. Commissions
paid to the  purchaser  of MFBIs  commission  brokerage  business  amounted  to
$231,370, $215,258 and $309,602,  respectively,  during the years ended December
31, 1995, 1994 and 1993.

     In December  1991, MCT loaned its current  president  $65,000 which will be
repaid  over five years at an interest  rate of 11%. As a condition  of the loan
the  president  purchased  all the  outstanding  common  stock of  Herbloc  Inc.
(Herbloc) for $60,000,  and entered into a five-year  supply  agreement  through
December 31, 1996 with MCT,  which is  automatically  renewed for an  additional
five years unless MCT elects to terminate.  The supply agreement guarantees that
each year MCT will either  purchase at least 86% of Herblocs  "quota share" for
cheese and cheese  products,  or notify  Herbloc by September 15 of such year of
the amount of each "quota share" which MCT does not yet plan to purchase  during
such year imported by Herbloc.  MCT has guaranteed  Herbloc an aggregate mark-up
of $18,000 per year during the initial five-year term. The Company estimates its
purchase commitment for 1996 amounts to approximately $350,000.

NOTE K - COMMITMENTS AND CONTINGENCIES

     The Company  leases  administrative  offices for annual  rentals  totalling
approximately  $139,000 and expiring on April 30, 2000.  The lease  provides for
escalation charges for operating expenses and real estate property taxes.

     The Company had a one-year  agreement  with a public  warehouse  to provide
refrigerated  warehouse space for a minimum monthly fee of $20,000 which expired
on January 22, 1996. The Company is currently renegotiating this arrangement.

     The Company is a party to an agreement for the  manufacture of Alpine LaceR
reduced  fat swiss  cheese.  The  initial  term of the  agreement  continues  to
December 31, 2000, with five-year renewal

                                      F-19
<PAGE>

                            Alpine Lace Brands, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                           December 31, 1995 and 1994

NOTE K (continued)

periods  thereafter unless terminated by either party. The price to be paid
by the Company is based on a specified  commodity block market price on the date
the product is manufactured plus a fixed premium (subject to periodic adjustment
by mutual  agreement).  Although the manufacturer is to be the primary source of
supply of this  product,  the Company is not  obligated to purchase any specific
quantities  of the product.  As part of the cheese  manufacture  agreement,  the
Company made a $300,000 advance to the manufacturer,  which the manufacturer may
use at any time to credit the Companys current obligation. The $300,000 advance
must be maintained at all times during the duration of this agreement.

     The Company has an employment  agreement with its President providing for a
minimum  annual base salary of  $275,000.  The term of the  agreement is through
January 4, 1999.  The Company has two  agreements  with  officers that expire in
April and December 1996,  respectively,  and four  agreements with officers that
expire January 4, 1997. The terms of the agreements provide for minimum salaries
totalling $753,000. The agreements automatically renew at the end of the period,
in the  absence  of  specified  advance  notice  of  intention  not to renew and
automatically renew upon a change in control of the Company.

     The Company is a party to a  consulting  agreement  expiring on November 7,
1999. The consulting fee is based upon varying rates per pound  produced,  by or
for the Company or any of its  affiliates,  of certain of the  Companys  cheese
products up to a maximum of $375,000 per year. The minimum  payment  required in
the agreement is $132,000 per year.

     The Company has a two-year  consulting  agreement  with a former officer of
the Company expiring in October 1996. The consulting fee is $50,000 per year.

     In connection  with the  acquisition of certain rights and technology  from
Gamay Foods,  Inc.  (Gamay),  the Company entered into a consulting  agreement
with  the  principal  shareholder  of Gamay  for an  initial  term of ten  years
expiring on May 21, 2000.  The  consulting fee is $200,000 per year. The Company
also pays  Gamay a  royalty  based on  pounds  sold of its Fat Free and  Low-Fat
cheese  products.  On February 24,  1995,  the Company and Gamay  modified  this
agreement  as follows:  (i) the  consulting  agreement  was extended for another
four-year term expiring on May 20, 2004 at a fee of $100,000 per year;  (ii) the
royalty   payments  were  extended  for  a  four-year  term  from  the  original
fifteen-year  period;  (iii) in the event the  Company  receives  any  licensing
revenues,  the  Company  shall pay to Gamay a  licensing  royalty  of 25% of the
Companys net licensing revenue; and (iv) the Company has a call option whereby,
upon the sale of the  Companys  branded  division,  the  Company can cancel all
agreements  with Gamay and the  Company  shall pay to Gamay the greater of 7% of
the sales proceeds or $6,000,000.

                                      F-20
<PAGE>

                            Alpine Lace Brands, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                           December 31, 1995 and 1994

NOTE K (continued)

     The Company has  marketing  commitments  through  December 31, 1997.  These
commitments  provide  for the  Company to make  payments  on a  quarterly  basis
totalling $200,000 and $225,000 per year in 1996 and 1997, respectively.  The
Company has the right to cancel the 1997 commitment after giving proper
notification.

NOTE L - RETIREMENT PLAN

     The Company has a deferred  contribution 401(k) plan. Eligible participants
may  contribute a fixed  weekly  dollar  amount or a  percentage  of their basic
annual salary as  contributions.  The Company may  contribute to the Plan at the
discretion of the Board of Directors. The Company has not made any contributions
to the Plan.

NOTE M - STOCK OPTION PLAN

     The Company  has a stock  option plan (the  Plan) for its  employees  and
directors.  Under the Plan,  1,000,000  shares of the Companys common stock are
reserved for issuance.  The options issued to date generally become  exercisable
over  three  years  commencing  one year  after  the date of grant  and upon the
occurrence of certain  corporate  transactions  the options  become  immediately
exercisable. The following table summarizes the options granted under the plan:

                                                                    Weighted
                                                                    average
                                                       Shares       price

Outstanding at December 31, 1992 .................    194,000    $   5.08

Options granted ..................................    109,650        4.93
Options expired ..................................     (7,000)       5.11

Outstanding at December 31, 1993 .................    296,650        5.02

Options granted ..................................    121,000        3.72
Options expired ..................................    (53,632)       4.74

Outstanding at December 31, 1994 (carried forward)    364,018        4.63

                                      F-21
<PAGE>

                            Alpine Lace Brands, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                           December 31, 1995 and 1994

NOTE M (continued)

                                                                    Weighted
                                                                    average
                                                       Shares       price

Outstanding at December 31, 1994 (brought forward) .. 364,018    $   4.63

Options granted ..................................... 179,700        9.94
Options expired .....................................  (3,200)       3.88
Option exercised .................................... (36,717)       4.68

Outstanding at December 31, 1995 .................... 503,801        6.53

Exercisable at December 31, 1995 .................... 222,099        4.82

NOTE N - STOCKHOLDERS EQUITY

     During the years ended  December  31,  1995,  1994 and 1993,  warrants  and
nonemployee stock options to purchase 30,500 shares,  5,000 shares,  and 160,000
shares of  common  stock at an  average  of  $7.47,  $4.50 and $4.75 per  share,
respectively,  were issued,  subject to customary terms and  conditions.  During
1995,  the 160,000  nonemployee  stock  options were reduced by 40,000,  and the
Company  made a  payment  of  $240,000  which was  recorded  as a  reduction  of
additional paid-in capital.

     The following table summarizes shares of common stock reserved for issuance
in connection with the warrants and nonemployee options at December 31, 1995:

Number of shares issuable   245,752

Weighted average price ..   $  6.60

Exercisable .............   245,752

     The warrants have varying expiration dates through December 15, 2005.

                                      F-22
<PAGE>

                            Alpine Lace Brands, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                           December 31, 1995 and 1994

NOTE N (continued)

     On January 1, 1995, the President of MCT obtained an option to purchase 20%
of  MCT  for  approximately  $97,000.   Thirty  percent  of  the  option  vested
immediately  and the  remaining  seventy  percent  vests over three and one-half
years. Upon a change in control (as defined), the President of MCT will have the
option to put the  shares  back to the  Company  at a premium  of  approximately
$95,500 at December 31, 1995.

     On March 22, 1995, the Company  completed a private placement of $2,250,000
of 7.5% cumulative convertible preferred stock, resulting in net proceeds to the
Company of approximately $2 million.  The securities are convertible into common
stock of the Company at a  conversion  price of $7-3/8 for five years,  at which
time the Company must either  force a  conversion  at market price of the common
stock or redeem the  preferred  stock.  In the event of a change in control  (as
defined),  the Company is required to make an offer to purchase the  convertible
preferred stock.

NOTE O - BUSINESS SEGMENT INFORMATION

     The  Companys  operations  consist  of two  segments:  (1) the  marketing,
distributing,  packaging,  converting and  manufacturing  of branded cheeses and
other specialty food products and (2) cheese and dairy products trading.

     Operating profit is total revenue less operating costs and expenses related
to each  segment net of certain  unallocated  corporate  expenses.  Identifiable
assets are those used in each  segment.  One  customer,  principally  of MFI (of
which 65% of the Companys interest was sold in February 1994, see Notes A-1 and
F),  in  the  cheese   marketing,   distributing,   packaging,   converting  and
manufacturing  of branded  cheeses and other  specialty  food  products  segment
accounted for  approximately  10% of net sales for that segment during 1993. For
consolidated  purchases,  two suppliers  accounted for 52%, 37% and 27% of total
purchases  in  1995,  1994  and  1993,  respectively,  and one  supplier  of MFI
accounted for 7% of total purchases in 1993.

     During  1995,  1994  and  1993,  cheese  and  dairy  products  trading  had
inter-segment   sales  of  $5,640,794,   $6,483,344  and  $3,788,515  to  cheese
marketing,  distributing,  packaging,  converting and  manufacturing  of branded
cheeses and other specialty food products.  During 1995,  1994 and 1993,  cheese
marketing,  distributing,  packaging,  converting and  manufacturing  of branded
cheese and other  specialty  food products had  intersegment  sales of $108,729,
$172,131 and $548,652 to cheese and dairy products trading, respectively.

                                      F-23
<PAGE>

                            Alpine Lace Brands, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                           December 31, 1995 and 1994

NOTE O (continued)

     Information about the Companys  operations in different  business segments
for the years ended December 31, 1995, 1994 and 1993 is as follows:

                                                   1995        1994        1993

Net sales
   Marketing, distributing, packaging,
      manufacturing and converting of
      branded cheeses and other speci-
      alty food products ................   $ 108861583 $ 104145329 $ 147702659
   Cheese and dairy products
      trading ...........................      41931335    34864953    37380122
   Elimination of intersegment
      sales .............................      (5749523)   (6655474)   (4337167)

          Total net sales ...............   $ 145043395 $ 132354808 $ 180745614

Operating profit (loss)
   Marketing, distributing, packaging,
      manufacturing and converting of
      branded cheeses and other speci-
      alty food products ................   $   5805840 $  (1195974) $ (3388561)
   Cheese and dairy products
      trading ...........................        275615      359350      707590

          Operating profit (loss) .......       6081455     (836624)   (2680971)

Corporate expenses ......................       (728902)    (649725)    (749300)
Interest income .........................          2122        8406        8042
Interest expense ........................       (997771)   (1591446)   (1740919)

          Earnings (loss) before income
             taxes and extraordinary item   $   4356904 $  (3069389) $ (5163148)

                                      F-24
<PAGE>

                            Alpine Lace Brands, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                           December 31, 1995 and 1994

NOTE O (continued)

                                                     1995       1994       1993

       Identifiable assets
          Marketing, distributing, packaging,
             converting and manufacturing of
             branded cheeses and other
             specialty food products ........  $ 21828300 $ 21783851 $ 30596962
          Cheese and dairy products
             trading ........................     4448401    7152664    7459640

                 Total assets ...............  $ 26276701 $ 28936515 $ 38056602

       Depreciation and amortization
          Marketing, distributing, packaging,
             converting and manufacturing of
             branded cheeses and other speci-
             alty food products .............  $   566251 $   824369 $  1035930

       Capital expenditures
          Marketing, distributing, packaging,
             converting and manufacturing of
             branded cheeses and other speci-
             alty food products .............  $   995196 $   317917 $  1486090

NOTE P - INTEREST EXPENSE - NET

                                                     1995       1994       1993

       Interest expense - net
          Interest expense ..................  $   997771 $  1591446 $  1740919
          Interest income ...................       (2122)     (8406)     (8042)

                                               $   995649 $  1583040 $  1732877

                                      F-25