<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

                          [X] Annual Report Pursuant to
                           Section 13 of 15(d) of the
                             Securities Act of 1934
                   For the Fiscal Year Ended December 31, 1999
                                       OR
          [ ] Transition Report Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934
                    For the transition period from ___ to ___

                         Commission File Number: 0-28444

                             EPL TECHNOLOGIES, INC.
             (Exact name of registrant as specified in its charter)

        Colorado                                         84-0990658
(State of incorporation)                    (I.R.S. Employer Identification No.)

                        2 INTERNATIONAL PLAZA, SUITE 245
                      PHILADELPHIA, PENNSYLVANIA 19113-1507
                    (address of principal executive offices)

Registrant's telephone number, including area code:

(610) 521-4400

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

NONE

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

Common Stock $0.001 par value

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 the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K. [X]

The aggregate market value of the Common Stock held by non-affiliates of the
Registrant as of February 29, 2000 was estimated at approximately $38,340,000.
This calculation excludes an estimated 12,523,000 shares of common stock held by
directors, officers and stockholders whose ownership exceeds five percent of the
shares outstanding at February 29, 2000.

   The number of shares of the Registrant's Common Stock outstanding as of
February 29, 2000, was 30,565,618 shares.
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                             EPL TECHNOLOGIES, INC.

                       INDEX TO ANNUAL REPORT ON FORM 10-K
                          YEAR ENDED DECEMBER 31, 1999

<TABLE>
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                                                                                                                 PAGE
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<S>                                                                                                              <C>
1.     ITEM 1. BUSINESS                                                                                             2

2.     ITEM 2. PROPERTIES                                                                                          14

3.     ITEM 3. LEGAL PROCEEDINGS                                                                                   14

4.     ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                 15

5.     ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY                                          16
       HOLDER MATTERS

6.     ITEM 6. SELECTED FINANCIAL DATA                                                                             18

7.     ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
       AND RESULTS OF OPERATIONS                                                                                   19

8.     ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                         32

9.     ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
       AND FINANCIAL DISCLOSURE                                                                                    57

10.    ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY                                                    57

11.    ITEM 11. EXECUTIVE COMPENSATION                                                                             60

12.    ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
       MANAGEMENT                                                                                                  64

13.    ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                     66

14.    ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
       FORM 8-K                                                                                                    67

15.    SIGNATURES                                                                                                  70
</TABLE>
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                                     PART I
ITEM 1. BUSINESS

GENERAL DEVELOPMENT

EPL Technologies, Inc. (the "Company" or "EPL") is a leading developer,
manufacturer and marketer of proprietary produce processing technologies,
packaging technologies, and scientific and technical services. These products
and services are designed to maintain the quality and integrity of fresh-cut
produce. The Company designs and markets products that are components of
integrated systems solutions, to address the specific needs of a variety of
fresh-cut produce categories. The foundation of the Company's integrated system
is its proprietary produce processing aid technology, which inhibits the natural
enzymatic degradation of fruits and vegetables after they have been processed.
Fresh-cut fruits and vegetables that are treated with the Company's proprietary
processing aids better maintain their natural characteristics, such as color,
texture, taste and smell. In certain fresh-cut produce categories, such as
fresh-cut sliced apples, fresh-cut potatoes and fresh corn, the Company's
processing aids allow increased availability of these fresh-cut produce products
in retail and commercial markets. The Company has concluded that the use of the
Company's processing aids, in accordance with the Company's recommended
protocols, is "generally recognized as safe" ("GRAS") under U.S. Food and Drug
Administration ("FDA") regulations. The Company also uses a variety of film
technologies to create packaging specifically designed to complement and enhance
the effectiveness of the Company's processing aids by allowing fruits and
vegetables to "breathe" after they have been cut and packaged. The Company
markets these packaging products to produce growers and processors. The Company
also markets flexible packaging for uses in the snack food, bakery and
confectionery industries, and for other uses. In addition, the Company's
scientific and technical services, which include food safety and microbiological
testing, provide fresh produce processors with expertise in food safety,
post-harvest horticulture and processing techniques, and serve to support
cross-marketing efforts for the Company's other products.

The Company currently operates in two main business segments, processing
technologies and related activities, and packaging. The Company's revenues
consist of (i) revenues derived from the sale of processing technologies and
flexible packaging, (ii) revenues derived from the sale of certain fresh-cut
fruits and vegetables, (iii) royalties from the sale of certain fresh-cut fruits
and vegetables that have been processed using the Company's proprietary
technologies and (iv) fees received for scientific and technical services
rendered by the Company. The Company's revenues from the sale of produce are
derived primarily from the sale of fresh-cut corn and potatoes. The Company's
royalty revenues are derived from sales of various kinds and varieties of
fresh-cut fruits and vegetables, which at present are primarily fresh-sliced
apples, that use the Company's proprietary technologies and that the Company
believes would not be available commercially without such use. Historically,
substantially all of the Company's revenues have been derived from the sale of
flexible packaging. The Company believes that the Company's packaging
technologies, coupled with appropriate acquisitions of produce packagers,
provide a platform to increase its sales of packaging, processing technologies
and scientific and technical services to growers and processors of fresh
produce. Therefore, the Company expects that the proportion of its revenues
derived from the sale of its products and services targeted to the needs of the
fresh-cut produce industry will increase over time and constitute a significant
portion of the Company's future revenue growth. See "Item 7 - Management's
Discussion and Analysis of Financial Condition and Results of Operations."

Prior to 1994, the Company was a development stage enterprise with limited
capital and had limited revenues, operating exclusively as a manufacturer and
marketer of processing aids. After the advent of new management and an infusion
of capital in December 1992, the Company began to expand its business to include
packaging and scientific and technical services in an effort to develop
integrated systems solutions designed to maintain and

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support the quality and integrity of fresh-cut produce. The Company has made the
following acquisitions, seeking to accomplish this objective:

         -        In September 1994, the Company acquired Respire Films, Inc.
                  ("Respire"), a U.S.-based business involved in the marketing
                  of packaging films.

         -        In September 1995, the Company acquired Bakery Packaging
                  Services Limited ("BPS"), based near Runcorn, Cheshire,
                  England (the "Runcorn Facility"). BPS provided the Company
                  with a U.K. base for packaging, together with access to
                  numerous produce and other food companies in the U.K. and
                  elsewhere in Europe. BPS also provided the Company with
                  proprietary perforating technology to enhance the Company's
                  strategic position, as well as an incremental source of
                  packaging revenue. The U.K. packaging business was further
                  enhanced by the acquisition in July 1996 of a food-grade
                  printing facility and certain other assets located at
                  Gainsborough, Lincolnshire, England (the "Gainsborough
                  Facility"), from Printpack Europe (St. Helens) Limited. The
                  Company has consolidated the operations at the Runcorn
                  Facility and at the Gainsborough Facility into those of its
                  subsidiary, EPL Flexible Packaging Limited ("EPL Flexible
                  UK").

         -        In April 1996, the Company, through its Pure Produce, Inc.
                  subsidiary ("Pure Produce"), acquired the assets of Pure
                  Produce, a general partnership based in Worcester,
                  Massachusetts, providing the Company with in-house scientific
                  and technical capabilities, specifically in the areas of food
                  safety and microbiological testing.

         -        In July 1996, the Company, through its Crystal Specialty
                  Films, Inc. subsidiary, now known as EPL Flexible Packaging,
                  Inc. ("EPL Flexible US"), acquired the assets of Crystal
                  Plastics, Inc., located outside Chicago. This acquisition
                  provided the Company with a U.S. base for both the Company's
                  proprietary gas flame perforation equipment and its
                  specialized microperforating technology and helped increase
                  the Company's packaging presence in the U.S. EPL Flexible US
                  uses "K" and polystyrene resins to manufacture and convert a
                  range of films for numerous applications, some of which are
                  used to support the Company's U.S. packaging business as a
                  part of the Company's integrated systems solutions. EPL
                  Flexible US also provided the U.S. base for facilitating the
                  Company's fulfillment of an exclusive agreement with E.I.
                  duPont de Nemours & Co. Inc. ("duPont"), whereby the Company
                  provided all of duPont's gas-flame perforating requirements
                  for duPont's Mylar(R) films. In addition, EPL Flexible US is
                  also a supplier to the Company's ANC-Respire joint venture
                  (see below).

         -        In October 1997, the Company acquired California
                  Microbiological Consulting, Inc., based in Walnut Creek,
                  California ("CMC"). Together with Pure Produce, CMC
                  specializes in food safety, forensic testing and
                  microbiological consulting, and provides the Company with
                  scientific and technical facilities on the East and West
                  Coasts.

         -        In December 1997, the Company acquired Fabbri Artes Graficas
                  Valencia S.A. ("Fabbri"), a converter, printer and marketer of
                  specialty flexible packaging, serving principally the European
                  produce market, based in Valencia, Spain. The Company believes
                  that this acquisition complements and enhances the Company's
                  existing U.K.-based packaging businesses, providing
                  incremental capacity for more efficient production of the
                  combined product mix, as well as a strategic foothold on the
                  European continent for the launch of the Company's related
                  processing aid and scientific and technical services
                  businesses.


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The Company believes that its packaging technologies complement and enhance the
effectiveness of its processing technologies, thus making packaging an integral
component of the integrated system. In marketing its packaging technologies, the
Company works closely with its customers in an effort to determine optimal
packaging characteristics for the customer's products, thereby being in a
position to influence a customer's buying decision with respect to its packaging
needs. The Company's packaging business also provides a revenue stream that
helps to fund market development and the Company's lengthy sales process, and
the presence of its packaging infrastructure in regions where produce is grown
enhances its sales prospects to produce growers and processors.

The scientific and technical services the Company provides complement the
processing technologies and packaging as a part of its integrated systems
solutions. The Company's scientific and technical expertise provides the Company
with an expanding base of knowledge about food technology and the Company
believes this expertise helps to establish credibility with customers and
supports the commercialization of the Company's products.

The Company markets its processing technologies, packaging technologies and
scientific and technical services to processors of packaged, fresh-cut produce
as part of integrated systems solutions for processing fresh-cut produce. To
this end, the Company has been developing relationships with produce processors
and other companies in an effort to penetrate further the fresh-cut produce
market.

         -        In July 1996, the Company formed NewCorn Co LLC ("Newcorn"), a
                  limited liability company in which the Company has a 51%
                  membership interest. Newcorn is a joint venture between the
                  Company, Underwood Ranches and Twin Garden Farms. These latter
                  two partners are two major regional growers and processors of
                  fresh-cut sweet corn. Newcorn processes, packages, markets and
                  sells fresh-cut corn products using the Company's processing
                  aids and packaging materials, with the aim of developing
                  year-round, nationally available branded fresh-cut corn
                  products.

         -        In September 1997, the Company executed a ten-year exclusive
                  trademark license agreement (subject to extension) and
                  strategic alliance with Potandon Produce LLC ("Potandon"), a
                  "Green Giant(R) Fresh" brand licensee of The Pillsbury
                  Company. The agreement is subject to the terms of Potandon's
                  license of the "Green Giant(R) Fresh" brand, and contains
                  certain minimum royalty requirements and other customary
                  provisions. During the first three years of the term of the
                  agreement, Potandon has the option to require the Company to
                  negotiate in good faith to form a business entity in which
                  Potandon and the Company would jointly participate in the
                  fresh-cut potato products business on terms yet to be
                  established. No such option has been exercised. The Company
                  sells fresh-cut potato products, such as french fries, to the
                  food service industry under the "Green Giant(R) Fresh" brand
                  name, utilizing the Company's "Potato Fresh(R) System"
                  processing aid technologies and related protocols in
                  processing potatoes supplied principally by Potandon and now
                  by Reser's Fine Foods, Inc. (see below).

         -        In October 1997, the Company entered into a strategic alliance
                  with Farmington Fresh, a major grower and marketer of Fuji
                  apples. Under this alliance, the Company has licensed its
                  "Apple Fresh(R)" processing technology to Farmington Fresh and
                  provides scientific and technical services in connection with
                  the production by Farmington Fresh of certain varieties of
                  fresh-cut sliced apples. The agreement, which currently
                  extends until December 2002, grants Farmington Fresh
                  production exclusivity in its local geographic market. In
                  addition to revenues from sales of the Company's processing
                  aids and scientific and technical services, the agreement
                  entitles the


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                  Company to receive a royalty from each package of fresh-cut
                  apple slices sold.

         -        In March 1998, the Company entered into an agreement with
                  American National Can Company ("ANC"), a major supplier of
                  packaging materials and containers in the U.S. and a
                  subsidiary of Pechiney SA, to create a joint venture to market
                  flexible packaging systems for the fresh produce market. The
                  joint venture, ANC-Respire LLC, develops, manufactures,
                  markets, promotes and sells variety-specific, proprietary and
                  other packaging products under the brand name
                  "ANC-RESPIRE(TM)". ANC and the Company have equal ownership
                  interests in the joint venture, which has an initial term of
                  three years (subject to earlier termination) and can be
                  extended upon the agreement of ANC and the Company. The joint
                  venture formally commenced operations in January 1999. As part
                  of the Company's desire to better exploit its perforation
                  technologies in the U.S., the Company and ANC have agreed to
                  unwind their joint venture and are discussing various
                  alternative relationships going forward.

         -        In April 1998, Newcorn entered into a trademark sublicense
                  agreement with The Sholl Group II, Inc. ("Sholl"), the
                  exclusive licensee of The Pillsbury Company's "Green
                  Giant(R) Fresh" brand name. The agreement grants Newcorn the
                  exclusive right in North America to use the "Green
                  Giant(R) Fresh" brand name on the Company's fresh-cut corn
                  products. Under this agreement, Freshcorn LLC, a joint venture
                  owned equally by the Company and Sholl, will provide marketing
                  support for the Company's fresh-cut corn products. Newcorn's
                  license expires on December 31, 2020, subject to automatic
                  renewal or earlier termination in certain events, including
                  termination of Sholl's license from The Pillsbury Company.
                  Newcorn will pay a royalty to Sholl based on the number of
                  cases of licensed corn products sold by Newcorn. Additionally,
                  Newcorn will pay to Freshcorn a fee based on the profitability
                  of Newcorn's sales of fresh-cut corn products (the "Fee"),
                  against which the royalty payments to Sholl will be credited.
                  As members of Freshcorn, Newcorn and Sholl have agreed that,
                  generally, 25% of the Fee in each year will be used to
                  reimburse expenses incurred by Newcorn for the advertising,
                  marketing and promotion of the Company's fresh-cut corn
                  products.

         -        In October 1998, the Company received formal approval from
                  Sholl, on behalf of Pillsbury, to use a new facility located
                  in Camarillo, California and operated by the Company's Newcorn
                  affiliate (the "Camarillo Facility") for fresh produce
                  processing. Shipments of fresh-cut corn under the "Green
                  Giant(R) Fresh" brand from the Camarillo Facility began in
                  late October 1998. In a coordinated development, the Company
                  relocated its fresh-cut potato processing activities to the
                  Camarillo Facility from a facility operated by an approved
                  co-packer.

         -        In October 1999, EPL announced the creation of a strategic
                  alliance with Reser's Fine Foods ("Reser's"), which is one of
                  North America's largest potato product manufacturers. It
                  provides EPL with access to world-class manufacturing and
                  distribution capability across the U.S. (Reser's currently has
                  distribution centers in 14 states). Reser's has recently
                  completed a new 100,000 square feet state of the art
                  processing facility in Pasco, Washington, and will provide EPL
                  with significant economies of scale. Reser's will be
                  responsible for all aspects of raw material sourcing,
                  production and distribution to EPL of its range of fresh-cut
                  potato products. The Reser's/EPL alliance will meet all of
                  EPL's potato volume requirements for the near term, and EPL
                  believes that it will only need relatively small amounts of
                  incremental expenditure to increase future capacity.

         -        In addition, through the Reser's/EPL alliance, EPL gained the
                  sourcing of an additional range of

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                  blanched potato products. These part-cooked products broaden
                  EPL's product range and are expected to make its product
                  proposition more attractive to potential distributors. The
                  blanched potato products will be marketed under the "Fresh
                  Alternatives" brand name, also licensed from Pillsbury.

         -        In March 2000, EPL announced the signing of a long-term
                  worldwide exclusive marketing and licensing agreement with The
                  Biotech Group, an affiliate of Monterey Mushrooms. Under this
                  agreement, EPL has licensed its Mushroom Fresh(R) processing
                  technology to The Biotech Group and will receive a royalty on
                  the sale of mushroom products that use EPL's technology.

The Company was incorporated in 1985 under the laws of the State of Colorado.
The Company's executive offices are located at 2 International Plaza, Suite 245,
Philadelphia 19113-1507, and its telephone number is (610) 521-4400.

PRODUCTS AND SERVICES

The Company's products and services fall into three major classifications:
processing technologies and related activities (which include the sale of
fresh-cut corn and potatoes), packaging technologies and scientific and
technical services, all of which are complementary components of the Company's
integrated systems solutions for fresh-cut produce.

Processing Technologies. The Company develops, manufactures and markets
proprietary and patented processing technologies, designed to inhibit the
enzymatic degradation that causes fruits and vegetables to begin to deteriorate
immediately after processing, thereby better maintaining their natural
characteristics, such as color, texture, taste and smell. The Company believes
its processing aids provide it with competitive advantages over other existing
fresh-cut produce processing technologies.

According to FDA regulations, a processing aid is a substance used as a
manufacturing aid to enhance the appeal or utility of a food. FDA regulations do
not require packaged produce to identify certain processing aids used in
processing the products. The Company's processing aids are designed to be
applied to produce during post-harvest processing. The Company's processing aids
are then removed from the produce prior to packaging, although insignificant
amounts may remain on the produce. As a result, the Company believes that
produce treated with the Company's processing aids does not, under FDA
regulations, require labeling referring to those processing aids. Based on
advice from FDA counsel and on assessment of relevant scientific literature by
the Company and by third parties, the Company has concluded that the use of the
Company's processing aids in accordance with the Company's protocols is GRAS
under FDA regulations.

The Company formulates processing aids for certain varieties of produce in
accordance with its detailed scientific protocols. The Company believes that its
Apple Fresh(R), Corn Fresh(R) and Potato Fresh(R) processing aids have the
potential to create new markets. These new markets, i.e. fresh-cut apple slices,
fresh-cut sweet corn and fresh-cut potato products, have historically not been
available due to the lack of an effective, non-sulfite based alternative. For
example, Apple Fresh(R) (for which the Company has recently been granted U.S.
patent protection), when used in conjunction with the Company's packaging
technology, can be used to inhibit browning and other enzymatic degradation in
certain varieties of fresh apple slices for up to 14 days after processing. Corn
Fresh(R) and Potato Fresh(R) are designed to provide similar pre-packaged
distribution capability for fresh-cut corn on the cob and fresh-cut potato
products. In addition to Apple Fresh(R), Potato Fresh(R) and Corn Fresh(R), the
Company currently markets its Carrot Fresh(R) processing aid for carrots. The
Company is also working to exploit (i) its U.S. patent protection for a
processing-aid based technology designed to eliminate the use of ice in shipping

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boxes of processed broccoli, (ii) an exclusive license for patented technology
developed in collaboration with Penn State University for use on freshly
harvested mushrooms and (iii) its U.S. patent protection for a processing-aid
based technology designed to better maintain the quality and thus enhance the
economic value of whole-peeled potatoes. The Company is developing processing
aids for other vegetables, including onions, although there can be no assurance
that any such product will become available. Because several variables influence
the efficacy of the Company's processing aids, the Company must work closely
with each customer and potential customer, using its scientific and technical
services for product formulation and extensive on-site testing, as well as
assisting in designing packaging to optimize the effectiveness of the processing
aid for the particular type of produce.

Packaging. The Company's produce packaging business involves perforating,
converting and printing flexible packaging, using technologies and processes,
some of which are proprietary to the Company. The Company also designs packaging
films, the structure of which allows gas and moisture transmission at different
rates, thereby maintaining a balance that enhances the effectiveness of the
Company's processing aids. As with processing aids, in marketing its packaging
technology the Company works closely with each customer and potential customer,
using its scientific and technical services in seeking to determine optimal
packaging characteristics, such as the type of film and extent of perforation,
including the size, shape and number of holes of the packaging, based on the
respiration rate of the particular type of produce.

As one of the leading perforators of packaging film, the Company is targeting
specialty and, in some instances, new markets. Although historically films used
in the produce industry have not been perforated, perforating has been shown to
be beneficial to the packaging of certain varieties of fresh-cut produce, which
by their nature continue to consume oxygen and produce carbon dioxide and
moisture after being cut and packaged. Precise perforation of the packaging
materials allows the produce to "breathe," thereby permitting the packaging to
work with the processing aid to inhibit the process of enzymatic degradation.
The Company's microperforation technology is proprietary. The Company's
proprietary production capability allows the Company to produce perforated films
of high quality and great consistency in a cost-effective manner. This
capability provides control over moisture and oxygen transmission rates. The
Company believes its broad range of capabilities to produce perforated films
provides it with a competitive advantage. The Company has an exclusive agreement
with duPont, whereby duPont purchases its entire requirement for flame
perforation services for its Mylar(R) film from the Company.

Another aspect of the Company's packaging business is the conversion of
packaging film into bags designed for a customer's food packaging needs for
applications such as produce and bakery. The Company also has food-grade
standard printing capabilities in the U.K., utilizing three six-color presses
and one recently acquired eight-color press. The Company's packaging business
provides additional market presence in certain geographic regions that the
Company believes can enhance sales prospects for the Company's processing aids
and provide cross-marketing opportunities, although there can be no assurance
that such will be the case. In the U.S., the Company subcontracts its printing
and converting requirements, which the Company believes are readily available.

In addition to its produce packaging capabilities, the Company provides
packaging to the snack food, bakery and confectionery industries, and, to a
lesser extent, for other uses, including pharmaceutical and industrial
applications.

Scientific and Technical Services. The Company provides scientific and technical
services in the areas of post-harvest horticulture, forensic analysis of food
contaminants and food safety and application development for customers. These
services are areas of critical importance for processors of fresh produce. The
Company's post-harvest horticulture services are designed to help processors
understand the impact of harvesting and

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handling methods on the sensory characteristics, nutritional value and
microbiological populations of produce. In providing these services, the Company
focuses on solving particular problems unique to certain kinds and varieties of
fruits and vegetables in an effort to maintain the quality and integrity and
reduce post-harvest loss. The Company's forensic testing services involve the
analysis of food adulteration by foreign or unlabeled substances or
contaminants. The Company's food safety services, which are intended to reduce
or eliminate pathogens known to cause serious illness in humans, include
research, microbiological testing, production monitoring, and the implementation
of Total Quality Management and Hazard Analysis and Critical Control Point
("HACCP") programs. The FDA has announced its intention to introduce a new rule
requiring HACCP programs, which programs are designed to prevent microbial and
other safety hazards in food products through appropriate controls during
production and processing, at certain juice processing plants. The Company
believes that HACCP programs ultimately will become standard in the produce
processing industry in response to emerging concerns about the microbial safety
of fresh fruits and vegetables.

The Company's scientific and technical services team consists of five Ph.D.s,
six senior scientists, and additional support technicians. These areas of
expertise include microbiology, food science, post-harvest physiology, plant
physiology and plant pathology. The Company maintains three laboratories
dedicated to microbiological testing, as well as two applications laboratories
used as part of the Company's sales and marketing program. The Company also
maintains a laboratory at the U.S. Department of Agriculture's ("USDA") Eastern
Regional Research Center through a Cooperative Research and Development
Agreement ("CRADA") with the USDA. As part of its sales force, the Company also
employs process engineers and a chemical engineer with expertise in applying the
Company's scientific and technical know-how to a full-scale production facility.

The Company believes its scientific and technical expertise enhances its
credibility in marketing its processing technologies and packaging materials to
fresh-cut produce processors. Accordingly, the majority of the Company's
scientific and technical services are provided to support marketing efforts for
the Company's other products. The Company also provides microbiological services
on a contract basis for some customers, in what the Company believes is a
growing market for food safety-based testing and consulting services. In
addition to providing incremental revenue, these consulting relationships may
provide cross-marketing opportunities for the Company's products.

To increase its scientific resources and expertise, the Company has entered into
research alliances with leading institutes of produce and food research, as well
as trade associations. These have included a CRADA with the USDA/Agricultural
Research Services in Philadelphia, Pennsylvania; a research grant from the
Washington Apple Commission for a study of enzymatic browning of apples; a
collaborative effort with Rutgers University for residue analysis; a
collaborative agreement with Penn State University for research on the
preservation of mushrooms; a grant from the Ben Franklin Technology Center, also
for research on the preservation of mushrooms; and a collaborative arrangement
with Michigan State University for research on interactive packaging and other
produce-related matters. As an additional technical resource, the Company
maintains a Scientific Advisory Board, consisting of experts in the field of
food science, the members of which are available for consulting on an as-needed
basis.

Company-sponsored research and development expenditures for the years ended
December 31, 1997, 1998 and 1999 were approximately $1,203,000, $1,573,000 and
$1,870,000 respectively. See the Company's Consolidated Financial Statements.

MARKETS

The Company's focus is on products and services that are used in the processing
of fresh-cut fruits and vegetables

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for both the retail and food service markets. By helping to maintain the quality
and integrity of fresh-cut produce, the Company can meet the needs of its
customers who are seeking to offer differentiated, brand-name, nationally
available fresh-cut alternatives to commodity produce lines. In certain produce
categories, such as fresh-cut sweet corn on the cob, the Company's processing
technologies have the potential to develop a national market for its customers,
who have previously been limited to regional markets. The Company's packaging
products are used in the fresh-cut produce industry in the U.S. and by leading
companies in the U.K. and Europe in the fresh-cut produce, bakery, snack food
and confectionery industries, and for other uses. The scientific and technical
services offered by the Company provide companies in the produce industry,
especially those involved with fresh-cut and minimally processed produce, with
analysis, protocols and plans relating to food safety and quality assurance
programs, including microbiological testing, and provides additional internal
technical support in developing the Company's processing aid and packaging
protocols. The Company's products are increasingly being marketed in concert as
integrated systems solutions comprised of products, processes and scientific and
technical services to maintain the quality and integrity of fresh-cut produce.

The Company's penetration to date of the various markets it is seeking to
develop has been limited. The Company's Respire(R) brand of breathable packaging
is used on a number of produce categories, principally in produce in Europe. The
Company has been developing relationships with processors and other companies in
connection with the use of the Company's processing aid technology and related
protocols in various fruit and vegetable categories.

The Company believes that demand for fresh-cut produce is being driven at the
retail level by consumer preferences for healthy foods, convenience and variety.
Similarly, demand for fresh-cut produce by food service providers is
increasingly driven by the need to be able to deliver a product that is
consistent in quality and of high food safety standards while reducing
significant processing and storage costs associated with fresh-cut produce.
Development of new fresh-cut produce applications is further supported by
produce growers and processors who are seeking to increase revenues and margins
by establishing differentiated, brand-name, fresh-cut alternatives to commodity
produce lines.

SALES AND PRODUCT COMMERCIALIZATION PROCESS

In developing its processing technologies, the Company first seeks to identify
the physiological and biochemical issues associated with a particular fresh-cut
fruit or vegetable (e.g. white blush on carrots) and to determine the cause of
any issue so identified. Then the Company seeks to develop an appropriate
solution in a laboratory setting when it perceives that a significant market
opportunity may exist. In this connection, the Company has extensive experience
of testing and operating in a number of processing facilities and working on a
number of different fruits and vegetables, and can thus approach potential
customers from a position of extensive knowledge and experience with a proposed
produce solution. After initial discussions, the Company initiates a detailed
review and testing process to customize the application of the Company's
technologies to the potential customer's processing system. The testing process
involves both application of the Company's processing aids and, where
appropriate, other scientific and technical support services, such as HACCP and
the design of tailored packaging solutions. Once such development is completed,
the product moves through successive steps of an increasingly sophisticated
testing program, during which the Company identifies and proposes any processing
changes that may be needed and that ultimately leads to a product decision. The
Company also works with the customer to develop specific protocols that should
be applied.

With respect to its packaging business, the Company seeks to meet the growing
needs of existing customers, develop new products that can be sold to existing
customers, and sell existing and new products to new customers as such
opportunities are identified. The Company believes that the experience it has
accumulated in all aspects of

                                        9
<PAGE>   11
the produce industry, together with its scientific expertise, is helping to
facilitate an integrated systems solution approach to the packaging needs of the
processor.

In the area of scientific and technical services, the Company has an existing
customer base that it has built up over time. The Company has been actively
marketing an increased range of available services, with a specific emphasis on
enhancing cross-marketing opportunities.

The Company has been developing relationships with produce processors and other
companies in an effort to penetrate the fresh-cut produce market. The Company
believes that its packaging acquisitions in regions where produce is grown will
serve as a platform to enhance the Company's ability to cross-market its other
products and services to other produce processors and growers in those regions.
Similarly, with sales of processing technologies, the Company has an opportunity
to sell its complementary packaging. The Company also plans to make proposals
for product development or food safety programs to other existing customers of
its processing aids and packaging.

Due to the extended nature of the development, testing and sales process for
processing aids, the Company has experienced no significant backlog of orders to
date for these products and, based on the relatively small incremental cost and
time frame required to increase product output, the Company does not believe
that any backlog measurement is material. Similarly, the Company has not
experienced a significant backlog of orders for its packaging materials.

SOURCES OF SUPPLY

The Company purchases its U.S. processing aid ingredient requirements from a
number of suppliers, some of which use sources outside the U.S. These raw
materials transactions are undertaken on a commercial, arm's-length basis. The
mixing of the Company's processing aids is currently conducted under a
subcontract with a third party. The Company believes that the mixing of its
processing aids could be performed in-house or by numerous other parties on an
out-sourcing basis without incurring substantial additional expense.

Previously, certain types of potatoes (primarily Russets) used by the Company in
processing were provided under a long-term market priced supply agreement with
Potandon. The Company also previously acquired other types of potatoes on the
open market. Since the alliance with Reser's announced in late 1999, Reser's is
responsible for acquiring all of the Company's potato requirements for
processing.

The Company's U.S. packaging business utilizes a number of subcontractors for
film manufacturing, conversion and printing. The U.K. and European packaging
businesses source their film and other requirements from a number of suppliers,
most of which are based in the U.K. and Europe. The U.K. and European packaging
businesses also perform their own conversion and printing. The Company believes
that it is not dependent on a single or a few suppliers or subcontractors for
its packaging businesses.

INDUSTRY AND GEOGRAPHIC AREAS

The Company's financial statements currently present financial information for
two industry segments in which the Company does business: (a) packaging
materials and (b) processing technologies and related activities. Information
relating to sales by the Company or its subsidiaries of fresh-cut corn and
potatoes and the provision of scientific and technical services is included in
the financial information presented for the processing technologies and related
activities segment. The Company markets processing technologies and related
products

                                                          10
<PAGE>   12
primarily in the U.S., with smaller amounts also sold in Canada, while packaging
materials are marketed in North America, the U.K. and Continental Europe. See
"Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations" and Note 16 to the Company's Consolidated Financial
Statements.

CUSTOMER CONCENTRATION

During the year ended December 31, 1999, no one customer accounted for more than
10% of the Company's sales. During 1998 and 1997, Pepsico accounted for 15% and
32% respectively of the Company's sales.

SEASONALITY

Although, historically, the management of the Company has not discerned a
seasonal pattern in the Company's business on a consolidated basis, certain
aspects of the Company's business are seasonal. For example, Fabbri, one of the
Company's subsidiaries engaged in the business of manufacturing and marketing
flexible packaging sold primarily in the produce industry, historically has
reported relatively higher sales revenue and income in the Company's first and
fourth fiscal quarters because of timing of citrus and other crop harvests.
However, Newcorn, a subsidiary of the Company engaged in the business of
processing and marketing fresh-cut corn, historically has reported higher sales
revenue in the Company's second quarter, although fluctuations in the results of
Newcorn's operations are difficult to predict due to the developmental nature of
Newcorn's business. The Company's results of operations may become subject to
greater seasonality as its various businesses develop at different rates.

COMPETITION

Although many other companies provide packaging or microbiological testing and,
to a lesser extent, processing aids for fresh produce, the Company is unaware of
any competitor that provides each of these as components of integrated systems
solutions for processing fresh-cut produce. The Company's direct, indirect and
potential competitors include producers of sulfites and "sulfite substitutes,"
as well as other providers of alternative preservation and packaging
technologies, including those employing temperature, gas and humidity control.
The Company believes its products may provide technological advantages over
competing technologies and processes, particularly in terms of their safety and
effectiveness. Despite the potential advantages of the Company's products and
technologies, however, many competitors and potential competitors, particularly
in the market for produce packaging, are larger, have greater financial,
marketing, sales, distribution and technological resources, and enjoy greater
name recognition than the Company. Certain of these companies may also enjoy
long-standing relationships with processors of fresh produce. Accordingly, there
can be no assurance that the Company will be able to compete effectively against
such competitors.

The Company believes the primary competitive factors in the market for fresh-cut
produce technologies include safety and consistency, cost-effectiveness and ease
of use, availability of technical service and support and product innovation.

PATENTS, PROPRIETARY INFORMATION AND TRADEMARKS

The Company currently has six U.S. patents issued or allowed, one U.S. patent
pending and numerous other patents licensed to the Company or under review for
application. The U.S. patents for the Company's "Potato Fresh(R)" and "Carrot
Fresh(R)" processing aids were granted on June 26, 1990 and September 13, 1994,
respectively. During 1999 the Company received confirmation of patent approval
for, and is thus entitled to patent protection for, the Company's "Apple
Fresh(R)" processing technology. The Company also has U.S. patent protection for
technologies designed to (i) eliminate the use of ice in shipping boxes of
processed broccoli, (ii)
                                       11
<PAGE>   13
inhibit the enzymatic browning of fresh peeled whole potatoes and (iii)
administer treatments to pre-packed boxes of produce, although the actual
patents have not yet been issued. In addition to the foregoing, U.S. patent
protection has been obtained for a processing technology developed by the
Company in collaboration with Penn State University for use on freshly harvested
mushrooms. Penn State University has granted the Company an exclusive license
for this technology for the life of the patent. Patents that had been granted,
or applications that were pending as of June 8, 1995, run for the longer of 17
years from the date of formal grant or 20 years from the date of filing. For all
subsequent filings, U.S. patents (once granted) run for 20 years from the date
of formal application. The Company or certain of its subsidiaries also have
twelve registered U.S. trademarks, including Respire(R), and its processing aid
names, such as Potato Fresh(R), and two trademark applications pending. The
Company has a license to use the "Green Giant(R) Fresh" brand on the Company's
fresh-cut potato products which runs through September 2007, unless terminated
earlier. The Company also has a license to use "Fresh Alternatives" brand name
on potato products, also licensed from Pillsbury. In addition, the Company's
Newcorn subsidiary has a license to use the "Green Giant(R) Fresh" brand for
fresh-cut corn products which runs through December 31, 2020, unless terminated
earlier. "Green Giant(R) Fresh" is a registered trademark of The Pillsbury
Company. The Company has and may continue to seek licenses for other trademarks
that it believes will add value to a proposed product. Furthermore, the Company
has eight patents and 19 patent applications pending outside the U.S. for its
main processing aid technologies, as well as one registered trademark and two
trademark applications pending outside the U.S., with others under review. To
help protect the Company's technology and proprietary information, the Company
has confidentiality agreements with its customers, as well as internal
non-disclosure agreements and safeguards, although there can be no assurance
that these safeguards will be adequate to fully protect the Company. The
importance the Company attaches to its patent position is reflected in the
significant efforts made on research and development (see the Company's
Consolidated Financial Statements and the notes thereto). In addition to its
patent protection, the Company believes it has a competitive advantage through
its proprietary knowledge of the applications for its technology.

REGULATORY REQUIREMENTS

Based on advice from FDA counsel and on assessment of relevant scientific
literature by the Company and by third parties, the Company has concluded that
the use of the Company's processing aids in accordance with the Company's
recommended protocols is GRAS under FDA regulations. There is, however, a risk
that new scientific information about an ingredient could change its GRAS
status, that the FDA could revise its regulations governing the GRAS status of
the ingredients, or that the FDA might take the position that an ingredient is
not GRAS under the current regulations. Any such change could have a material
adverse effect on the Company's business, financial condition and results of
operations. The Company employs a firm of Washington-based FDA lawyers to advise
the Company on the effect of FDA regulations on the Company's operations,
together with any planned or potential changes in government attitude and
legislation. The Company also consults with advisors outside the U.S. concerning
foreign regulatory issues. Compliance with existing FDA regulations has not been
a material burden on the Company's operations to date, although there can be no
assurance that the regulatory requirements will not change and increase the
burden to the Company.

The Company's packaging operations are subject to federal, state and local U.S.,
U.K. and other European environmental laws and regulations that impose
limitations on the generation, storage, transport, disposal and emission of
various substances into the environment, including laws that restrict the
discharge of pollutants into the air and water and establish standards for the
treatment, storage and disposal of solid and hazardous wastes. The Company is
subject to U.S. and foreign laws and regulations regarding the use, storage,
transport and disposal of inks used with its packaging products. There can be no
assurance that there will not be an accidental contamination, disposal or injury
from the use, storage, transport or disposal of inks used in the Company's
packaging business. Additionally, the Company's use of plastic film in its
packaging operations may subject it, in

                                       12
<PAGE>   14
certain jurisdictions, to laws and regulations designed to reduce solid wastes
by requiring, among other things, plastics to be degradable in landfills,
minimum levels of recycled content, various recycling requirements, disposal
fees and limits on the use of plastic products. In addition, various consumer
and special interest groups have lobbied from time-to-time for the
implementation of additional environmental protection measures. The Company may
be required to make capital expenditures in response to changing compliance
standards and environmental regulations. Furthermore, unknown contamination of
sites currently or formerly owned or operated by the Company (including
contamination caused by prior owners and operators of such sites) and off-site
disposal of hazardous substances and wastes may give rise to additional
compliance costs. There can be no assurance that the Company will not incur
liabilities for environmental matters in the future, including those resulting
from changes in environmental regulations, that may have a material adverse
effect on the Company's business, financial condition and results of operations.

Specifically, during its due diligence investigation in connection with the
Fabbri acquisition, the Company was informed that from time-to-time in the past
Fabbri disposed of certain hazardous waste (such as used oil cans, empty dye
cans and electrolytic salts residue) using some waste management companies that
were not authorized handlers of hazardous waste under applicable Spanish
legislation. Some drums of such hazardous waste also were not labeled as
required and stored longer than permitted under Spanish legislation. Under
Spanish law, a producer of hazardous wastes remains responsible for damages to
third parties or the environment if these wastes are collected by a
non-authorized hauler. As part of the documentation of the Fabbri Acquisition,
the Company obtained from the prior owner of Fabbri, Sidlaw Group plc, a U.K.
public-company ("Sidlaw"), an indemnification for any fines or penalties levied
against the Company from the collection of waste by unauthorized haulers,
subject to a limit of approximately $4,500,000. The Company is not aware that
these past actions resulted in any environmental damages, and therefore does not
believe that these actions represent possible material losses. To the extent
that the Company incurs liabilities in respect of the foregoing that are not
covered by the indemnity from Sidlaw, or Sidlaw fails to fulfill its indemnity
obligations, there could be a material adverse effect on the Company's business,
financial condition and results of operations. Nevertheless, the Company is not
aware that any claims have been made or are pending, and is not aware of any
past or current environmental conditions that it believes will result in any
material adverse effect on the Company's business, financial condition and
results of operations.

EMPLOYMENT

As of December 31, 1999, the Company had 264 employees providing services in the
U.S. and Europe, of which 30 were engaged in sales and marketing, 186 in
production, 13 in technical services and research and 35 in management and
administration. Some of the managerial employees are employed pursuant to
employment agreements, and the Company maintains key-man insurance on Mr.
Devine, the Company's Chief Executive Officer, in the amount of $1,000,000. See
"Item 11 - Executive Compensation". The Company expects to recruit additional
personnel as and when required.

FORWARD LOOKING STATEMENTS

Statements in the foregoing discussion that are not statements of historical
fact and reflect the intent, belief or expectations of the Company and its
management regarding the anticipated impact of events, circumstances and trends
should be considered forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements are not guarantees of future performance, and actual results may vary
materially from those projected in the forward-looking statements. For a
discussion of factors that may materially affect realization of these
expectations, see Item 7 - "Management's Discussion and Analysis

                                       13
<PAGE>   15
of Financial Condition and Results of Operations - Forward Looking Statements."


ITEM 2. PROPERTIES

The Company believes that its current facilities are adequate for its present
needs and that it would not have any difficulty in obtaining additional or
alternate space at prevailing rates if necessary. The Company's current
facilities are as follows:

<TABLE>
<CAPTION>
                                       SQUARE      OWNED/LEASED
         LOCATION                       FEET       (EXPIRATION)            CHARACTER OF USE
         --------                       ----       ------------            ----------------
<S>                                    <C>         <C>                     <C>
       Philadelphia, PA                   6,600    Leased (1/2002)         Principal administrative office

       Fresno, CA                         2,600    Leased (3/2002)         Applications laboratory

       Oswego, IL                        16,400    Leased (6/2004)         Packaging operations

       Gainsborough, England             19,500    Leased (10/2004)        Printing facility

       Runcorn, England                  17,478    Owned                   Perforating and converting
                                                                           facilities

       Runcorn, England                   5,085    Leased (9/2007)         Perforating and converting
                                                                           facilities

       Runcorn, England                   8,500    Leased (12/2000)        Perforating and converting
                                                                           facilities

       Camarillo, CA(a)                  74,248    Leased (11/2004)        Fresh-cut corn processing
                                                                           facility

       Darien, WI                        35,200    Leased (5/2008)         Fresh-cut corn processing
                                                                           facility

       Shrewsbury, MA                     2,892    Leased (1/2003)         Food safety and microbiological
                                                                           testing laboratory and office space

       Valencia, Spain                  142,106    Leased (7/2007)         Packaging operations
</TABLE>


       (a)        Property is leased by Newcorn and the lease is guaranteed by
                  the Company. Newcorn occupies approximately 73% of the
                  facility. The Company intends to sublease the remaining space.

The Company also occupies additional space under agreements with third parties,
primarily in connection with research and development arrangements and
processing activities.

ITEM 3. LEGAL PROCEEDINGS

There are no material pending legal proceedings to which the Company is a party
or to which any of its subsidiaries or property is subject. None of the
Company's officers or directors, are involved in any legal proceedings relating
to the Company. To the best of the Company's knowledge, there are no proceedings
being contemplated against it or its subsidiaries by governmental authorities.


                                       14
<PAGE>   16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of the security holders during the
fourth quarter of the fiscal year ended December 31, 1999.


                                       15
<PAGE>   17
                                     PART II

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

MARKET INFORMATION

       PRICE RANGE OF COMMON STOCK

The Company's Common Stock is traded on the Nasdaq SmallCap Market under the
symbol "EPTG", and has done so since September 1999, having previously traded on
the Nasdaq National Market under the same symbol since May 1998. From January 4,
2000 to February 11, 2000 the Common Stock traded under the symbol "EPTGC", as
the Company was granted an exemption from the minimum $1.00 per share stock
price Nasdaq SmallCap Market listing requirements. From July 1996 to May 1998,
the Common Stock traded on the Nasdaq SmallCap Market under the symbol "EPTG",
except for a period of approximately 30 days following March 18, 1998 when the
Common Stock was included on the Nasdaq SmallCap Market under the symbol "EPTGD"
to indicate the one-for-two reverse split that was approved by shareholders in
March 1998. The following table sets forth the quarterly range of high and low
bid quotations for 1998 and 1999 for the Company's Common Stock during the
periods indicated, adjusted for the reverse split, assuming a price that is
twice the actual pre-split price (such high and low bid quotations reflect
inter-dealer prices without retail mark-up, mark down or commissions and may not
necessarily represent actual transactions):

<TABLE>
<CAPTION>
                                                     HIGH                   LOW
                                                     ----                   ---
<S>                                                  <C>                   <C>
1998
         First quarter                               $14.50                $10.00
         Second quarter                               14.00                  6.25
         Third quarter                                 8.00                  5.13
         Fourth quarter                                5.88                  3.81

1999
         First quarter                                 5.00                  3.75
         Second quarter                                4.38                  3.75
         Third quarter                                 3.81                  1.00
         Fourth quarter                                1.25                  0.50
</TABLE>

As of February 29, 2000 there were 30,565,618 shares of the Company's Common
Stock issued and outstanding, held by 241 shareholders of record and
approximately 3,400 beneficial shareholders. In addition, there were 210,610
shares held in treasury as of the same date. During the twelve months ended
December 31, 1999, the Company did not declare any cash dividends on its Common
Stock. Other than in connection with the payment of accumulated dividends, which
have not been declared or paid, on its Series A 10% Cumulative Convertible
Preferred Stock, Series B Convertible Preferred Stock and Series C Convertible
Preferred Stock (collectively the "Preferred Stock"), the Company intends to
retain earnings, if any, that may be generated from operations to finance the
expansion and development of its business. No cash dividends have ever been
declared or paid to date on the Common Stock. The Company does not expect to
declare or pay cash dividends to the holders of the Common Stock in the
foreseeable future and no such dividends may be declared or paid until all
accumulated dividends on the Series A, Series B and Series C Preferred Stock
have been paid. See Note 9 to the Company's Consolidated Financial Statements.

                                       16
<PAGE>   18
RECENT SALES OF UNREGISTERED SECURITIES

On various occasions during 1999, the Company issued a total of 13,419,704
shares of Common Stock in reliance on the exemption from registration provided
in Section 4(2) of the Securities Act of 1933, as amended ("Section 4(2)"), to
three private investors in connection with the conversion by such holders, for
no additional cash consideration, of 10,800 shares of the Company's Series D
Convertible Preferred Stock ("Series D Stock"). A further 2,901,354 shares of
Common Stock were issued to two affiliates of the Company to raise gross
proceeds of $1,500,000, which proceeds were used in full to redeem the remaining
1,500 shares of Series D Stock, leaving no shares of Series D Stock outstanding.
These 2,901,354 shares were unregistered as at December 31, 1999. In addition,
warrants to acquire 2,571,429 shares of Common Stock were also issued in
connection with these transactions. Finally, 210,610 shares were contributed to
the Company and were being held as treasury stock at December 31, 1999.

On December 17, 1999 the Company issued 2,000,000 shares of Common Stock in
connection with a loan of $3,500,000 received from two affiliates of the
Company. See Item 13 "Certain Relationships and Related Transactions." These
shares were unregistered as at December 31, 1999, and were issued in reliance on
the exemption from registration provided in Section 4(2). In addition, a warrant
to acquire 350,000 shares of Common Stock was also issued in connection with
this transaction. See Item 13 -- "Certain Relationships and Related
Transactions."

On December 31, 1999 the Company issued 681,096 shares of Common Stock to two
affiliates of the Company in a private placement transaction. The gross proceeds
raised from such sale was $330,000. These shares were unregistered as at
December 31, 1999, and were also issued in reliance on the exemption from
registration provided in Section 4(2). In addition, a warrant to acquire 238,571
shares of common stock were also issued in connection with this transaction. See
Item 13 "Certain Relationships and Related Transactions."


                                       17
<PAGE>   19
ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth selected condensed consolidated statement of
operations and balance sheet data for the Company and its subsidiaries. The
selected condensed consolidated financial data for the years ended December 31,
1997, 1998 and 1999 and as of December 31, 1998 and 1999 are derived from the
audited Consolidated Financial Statements of the Company, which are included
elsewhere in this report, and are qualified by reference to such Consolidated
Financial Statements and the related Notes thereto. The selected condensed
consolidated financial data for the years ended December 31, 1995 and 1996 and
as of December 31, 1995, 1996 and 1997 are derived from audited consolidated
financial statements of the Company not included herein. The selected
consolidated financial data set forth below is qualified in its entirety by, and
should be read in conjunction with the Consolidated Financial Statements, the
related Notes thereto and Item 7 - "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Report.

<TABLE>
<CAPTION>
                                                            FISCAL YEAR ENDED DECEMBER 31
                                                            -----------------------------
                                      1995              1996             1997              1998             1999
                                      ----              ----             ----              ----             ----
                                                   (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S>                               <C>                <C>             <C>                <C>               <C>
STATEMENT OF  OPERATIONS:
Sales                             $   3,240          $ 11,314        $   19,953         $ 32,977          $ 30,653
Cost of Sales                         2,469             9,136            18,090           29,481            30,370
Gross Profit                            771             2,178             1,863            3,496               283
Total operating expenses              3,813             6,362             9,185           11,196            13,909
Loss from operations                 (3,042)           (4,184)           (7,322)          (7,700)          (13,626)
Net loss                             (3,320)           (4,296)           (7,187)          (7,781)          (14,240)
Net loss for common
  shareholders                       (3,634)           (5,295)           (8,355)         (10,535)          (15,443)
Net loss per common share         $   (0.78)        $   (0.71)        $   (1.00)       $   (0.99)        $   (1.09)
  - basic and diluted

Weighted average number
  of common shares                 4,655,529         7,436,759         8,372,537       10,598,878        14,221,642
</TABLE>

<TABLE>
<CAPTION>
                                                                    DECEMBER 31,
                                                                    ------------
                                      1995              1996             1997              1998            1999
                                      ----              ----             ----              ----            ----
                                                    (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S>                                   <C>               <C>              <C>            <C>              <C>
BALANCE SHEET DATA:
Working capital(deficit)              $  1,167          $  2,269         $  6,513       $   5,131        $  (5,867)
Total assets                            10,041            15,215           26,200          29,772           26,431
Long-term debt                             844             1,554            1,792           3,683            1,341
Total liabilities                        3,665             6,797            8,967          12,620           22,581
Series D Convertible
  Preferred Stock                            0                 0           10,617          12,847               0
Accumulated deficit                    (11,363)          (16,283)         (24,207)        (34,652)        (50,095)

Total shareholders' equity            $   6,376         $  8,418         $  6,615        $  4,305        $  3,851
</TABLE>

                                       18
<PAGE>   20
ITEM 7.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
             RESULTS OF OPERATIONS

The Company is a leading developer and marketer of integrated produce systems
solutions specifically designed to address the needs of the rapidly growing
market for fresh-cut produce. In this regard, the Company develops, manufactures
and markets proprietary produce processing technologies, packaging technologies,
and scientific and technical services. These are specifically designed to
maintain the quality and integrity of fresh-cut produce. The foundation of the
Company's integrated systems solutions is its proprietary produce processing
technology. This technology inhibits the natural enzymatic degradation of fruits
and vegetables after they have been processed. Fresh-cut fruits and vegetables
that are treated with the Company's proprietary processing aids better maintain
their natural characteristics such as color, texture, taste and smell. The use
of the Company's processing aids allows for increased availability of certain
fresh-cut produce products, such as sliced apples, potatoes and corn. The
Company has concluded that the use of the Company's processing technologies, in
accordance with the Company's recommended protocols, is "generally recognized as
safe" ("GRAS") under FDA regulations. The Company also uses a variety of film
technologies to create packaging specifically designed to complement and enhance
the effectiveness of the Company's processing aids by allowing fruits and
vegetables to "breathe" after they have been cut and packaged. The Company
markets these packaging products to produce growers and processors. In addition,
the Company's scientific and technical services, which include food safety and
microbiological testing, provide fresh produce processors with expertise in food
safety, post-harvest horticulture and processing techniques, and support the
cross-marketing efforts for the Company's other products. The Company believes
its processing aid technologies are safe and environmentally "friendly" and,
together with its packaging and scientific and technical services, add
significant value to the businesses of its customers. In addition to its
integrated systems solutions for fresh-cut produce, the Company also markets
flexible packaging for uses in the snack food, bakery and confectionery
industries and, to a lesser extent, for other uses, including pharmaceutical and
industrial applications.

The Company's financial statements currently present financial information for
two industry segments in which the Company does business: (a) processing
technologies and related activities and (b) packaging materials. Information
relating to sales by the Company or its subsidiaries of fresh-cut corn and
potatoes and the provision of scientific and technical services is included in
the financial information presented for the processing aid technologies and
related activities segment.

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

Sales. Sales decreased from $32,978,000 in 1998 to $30,653,000 in 1999, a
decrease of $2,325,000 or 7%. Sales of processing technologies and related
activities decreased from $8,913,000 in 1999 to $7,885,000 in 1999, a decrease
of $1,028,000 or 11.5%. Sales of U.S. packaging materials decreased from
$3,318,000 in 1998 to $2,666,000 in 1999, a decrease of $652,000 or 20%. Sales
of U.K. packaging materials fell from $11,929,000 in 1998 to $11,486,000 in
1999, a decrease of $443,000 or 3.7%. Sales of European packaging materials
decreased marginally from $8,818,000 in 1998 to $8,616,000 in 1999, a decrease
of $202,000 or 2.2%.

The decrease in sales of processing technologies and related activities was
mainly due to the lower sales revenue from fresh-cut corn sold through the
Company's majority-owned affiliate, Newcorn. During the second quarter of 1999
the Company completed the work on its facility in Darien, Wisconsin (the "Darien
Facility"). However, this was just prior to the short period of the year when
local corn is generally available. The Company decided not to incur significant
ongoing costs to compete against low value corn at uneconomic prices and thus
limited its sales activities, principally during the third quarter but which
also adversely impacted the fourth quarter. During this

                                       19
<PAGE>   21
market withdrawal in the fourth quarter, the Company restructured Newcorn. This
withdrawal involved not only a reduction in overheads, thus reducing the
breakeven level of sales, but also a complete reappraisal of the sales model.
The Company has identified the need for changes in the way it promotes its corn
to major customers, to help support the year round model, and has been
implementing such changes accordingly. In addition, the Company is focusing its
sales efforts on food service, as well as to develop its traditional retail
market. In relation to this market extension, the Company is also extending the
range of corn products available, and plans to introduce further new products
during 2000 onwards. During part of the year, Newcorn had at times been unable
to process and sell on a profitable basis bulk corn that it had committed to
purchase. This situation impacted gross profit and since then, the Company has
limited its corn commitments under contract.

Offsetting the decrease in corn revenue described above, the Company experienced
significant growth in the volume of fresh-cut potato products sold by its EPL
Food Products, Inc. ("EPL Food") subsidiary under the "Green Giant(R) Fresh"
brand name. The Company has continued to expand both the geographical coverage
of its sales effort and the product range, and now offers a number of different
fresh-cut potato products in addition to its original "Fresh Fries". However, as
the Company continued to seek to expand its product range and geographic
coverage, the Company sought to find a strategic partner to help in this
process. As mentioned above, in October 1999 the Company announced that it had
signed a strategic five-year manufacturing and co-pack agreement with Reser's
Fine Foods, Inc. ("Reser's"). Under the agreement, Reser's will process and
supply EPL Food with all of EPL Food's fresh-cut potato product requirements.
Subsequent to the year end, the Company completed the relocation of its potato
processing equipment and production and shipment of fresh-cut potato products
commenced from Reser's Pasco, Washington facility.

In addition, Reser's will process and supply EPL Food with a new range of
blanched (partially cooked) potato products to be sold by EPL Food under the
Fresh Alternatives TM brand. The Fresh Alternatives(TM) brand has been made
available to EPL Food by the Sholl Group II, Inc., the exclusive licensee of The
Pillsbury Company's Green Giant(R) Fresh brand name. The Company has already
commenced sales of these blanched potato products, although such sales did not
have a material impact on sales revenue in 1999. In addition, the Company and
Reser's agreed to enter into a related five-year non-exclusive license agreement
for the Company's proprietary processing technology for potatoes. The Company
currently believes these arrangements for both fresh and blanched potato
products will have a material positive impact on the sales revenue of EPL Food
in 2000 and beyond, although there can be no assurance such will be the case.

The Company is continuing to focus on the sale and development of its processing
technologies, particularly with respect to corn, potatoes and apples.
Furthermore, development work continues to seek to exploit the new technologies
for use on freshly harvested mushrooms and whole peeled potatoes. In this
regard, subsequent to the year end, the Company announced an exclusive licensing
arrangement with Monterey Mushrooms for its Mushroom Fresh(R) processing
technology. The Company currently believes that these arrangements will have a
material contribution to processing technology revenue in 2000 and beyond,
although there can be no assurance that this will in fact be the case. In
addition, product testing continues on other vegetables, and in some cases has
been expanded or accelerated, and significant costs have been incurred to date
that are yet to yield material revenues. The Company also continues to grow its
capability in scientific and technical services, opening a new West Coast
laboratory in 1999, and is seeing an increasing demand for food safety and
hygiene advice in the produce industry. Revenue from this area rose by 34% over
the same period in 1998 and the Company expects further increases in this figure
in 2000 and beyond, although there can be no assurance such will be the case.
The Company believes it is well-positioned to add further value to the
operations of fresh-cut processors. Furthermore, the Company is receiving an
increasing number of inquiries for its processing technologies from potential
U.K. and European customers.

                                       20
<PAGE>   22
The reduction in U.S. packaging material sales was principally attributable to
timing differences in shipments to large customers compared to the same period
of 1998 and the Company currently expects to recover some of this volume going
forward, in addition to what was recovered in the fourth quarter. The Company is
currently engaged in discussions with a number of potential customers for new
product applications and markets, especially in relation to the Company's
proprietary perforating capabilities, leveraging the knowledge base of the U.K.
operations. These include applications in the consumer goods, produce,
horticultural, bakery and pharmaceutical industries, amongst others. Some
initial orders have been received in 2000. Should further such orders be
forthcoming, the Company expects that such new business would make a material
contribution to sales revenue in 2000 and onwards. There can be no assurance,
however, that the Company will in fact obtain this business. As noted above, as
part of the Company's desire to better exploit its perforation technologies in
the U.S., the Company and ANC have agreed to unwind their joint venture and are
discussing various alternative relationships going forward.

The small decrease in U.K. packaging material sales was principally attributable
to a reduced level of sales to Pepsico, historically the Company's largest
single customer, as well as the adverse impact of pricing pressures in the U.K.,
together with a reduction in sales of film to the bakery industry. The impact,
however, was offset by increased sales in other areas, as the Company continued
the execution of its strategic objective to reduce its dependence on Pepsico and
the bakery industry, both of which are lower margin areas of activity, and focus
more effort on utilizing its proprietary perforating technology to move into
new, higher value-added areas. This strategy began to have an impact in the
final quarter of 1999, as evidenced by the fact that sales revenue in the fourth
quarter of 1999 was 32% higher than in same period in 1998. Raw material prices
have generally fallen by some 10-15% compared with the same period in 1998,
which accounts for most of the reduction in revenue, as sales prices were
adjusted downwards to reflect the lower raw material prices. The Company
believes that its efforts to change product mix represents a more stable
foundation for sustainable and more profitable growth, although there can be no
assurance that the Company will be successful in these efforts. During 1998 the
Company's Respire(R) brand of breathable packaging for fresh produce was
launched in the U.K. and has been successful in gaining new business in 1999. In
this regard, the Company has recently gained new business from the suppliers to
the main supermarkets in the U.K., and these began to come through in increased
shipments, as indicated by the revenue increase in the fourth quarter of 1999.
The year 2000 is expected to see a full year benefit of the increased new
business, which is expected to generate a material increase in revenue during
2000 and beyond, although there can be no assurance that such additional revenue
will be obtained. In addition, the Company's proprietary micro-perforating
technology has enabled the Company to win new business in the area of cooked
meat pastry products, although the volume of this business has not been
significant to date. New business continues to be gained in the area of
"breathable" packaging and the Company has recently increased its production
capacity in this area to handle the forecast volume increase. Other applications
are currently under development, which, if successful, could have a material
impact on sales revenues in 2000, although there can be no assurance that this
development will result in new business.

Sales of European packaging materials decreased marginally, principally as a
result of timing differences in shipments. The 1999 citrus harvest was delayed
slightly, resulting in some shipments of packaging materials being delayed. The
Company, through Fabbri, is targeting further expansion not only in Spain but in
other European countries and this is beginning to show results. In addition,
Fabbri is reducing its dependency on the citrus crop by increasing its sales of
packaging materials used in fresh produce and other areas. Fabbri is also
seeking to expand its limited revenue derived from South American countries
through existing and new contacts. Furthermore, Fabbri is working increasingly
closely with the U.K. business not only to leverage the scientific and technical
knowledge base, but to be able to offer customers a pan-European service
offering. In support of this, a new sales office was opened in France in late
1999, where Fabbri already generates significant sales revenue, and a further
sales office is expected to open in the second quarter of 2000 in Amsterdam,
Netherlands. These are


                                       21
<PAGE>   23
expected to contribute to sales revenue in 2000 and beyond, although there can
be no assurance that this will in fact be the case. The increased technical base
is reflected in the launch of the Company's Respire(R) brand of "breathable"
packaging for fresh produce into Europe, from which Fabbri has already begun to
gain new business, although it did not have a material impact on sales revenue
in 1999.

The Company also continued to grow its capability in scientific and technical
services. The acquisition in late 1997 of CMC provided the Company with a West
Coast platform to extend its microbiological and other scientific services from
the Company's existing East Coast location. During 1998 the Company launched its
Pure Produce(TM) range of food safety services, focusing on its HACCP services.
This new range of services has been successfully introduced in a number of
locations and, with the increasing focus on food safety and hygiene in the
produce industry, the Company believes that it is well-positioned to add further
value to the operations of fresh-cut processors.

Gross Profit. Gross profit decreased from $3,496,000 in 1998 to $283,000 in
1999, a decrease of $3,213,000 or, as a percentage of sales, from 10.6% to 1%.
This decrease was principally due to the adverse impact of the cost of market
development and sales support within the corn and potato businesses. In
addition, Newcorn, at times, was unable to process and sell on a profitable
basis bulk corn which it had committed to purchase, which adversely impacted
gross profit. Market development and sales support costs are expected to
continue to be incurred in the future, although their adverse impact on gross
profit is expected to diminish as sales volumes and operating efficiencies
improve. The Company also expects that the relocation of Newcorn's West Coast
operations in late 1998, together with the recent completion of the Darien
Facility, which have significantly increased processing capacity, will help
enhance operating efficiencies in the future as sales volumes increase. As
outlined above, the Company withdrew from the corn market to a degree during the
third and fourth quarters of 1999. Although the cost base of the business has
been reduced during this period, the significantly lower level of corn sales
during this period had a significant adverse effect on gross profit. However,
the Company believes that these changes will provide Newcorn with a
significantly improved operating base in 2000 and beyond.

The various agreements with Reser's, in relation to the Company's Green Giant
potato activity, is expected to make a significant improvement to the
profitability of this business from 2000 onwards as the business benefits from
the economies of scale of Reser's existing production volumes. The relocation of
the potato processing facility was completed subsequent to the year end and
production and shipments have already commenced from Reser's Pasco, Washington
facility.

Gross profit from period-to-period may also be impacted by pricing pressures on
Newcorn's corn business primarily attributable to the extent to which bulk corn
is available in regions where Newcorn's fresh-cut corn products are sold, which
is largely a function of the timing of and variations in regional harvest
yields. Newcorn enters into fixed price contracts for the supply of a portion of
its bulk corn requirements, the aim of which is to ensure, where possible,
adequate supplies of bulk corn of consistent quality at a known, fixed price. If
market prices for bulk corn are constant or rise, Newcorn will benefit from such
arrangement. However, if market prices fall, Newcorn may not be able to fully
pass on all of its costs if it is unable to renegotiate contract prices. As the
Company's business becomes more reliant upon sales of its processing
technologies and related activities, results of operations may be more
susceptible to the effects of changing prices due to the pricing of certain
kinds of produce, as well as ingredients used in the Company's processing
technologies.

In addition, the Company continues to accelerate the development of certain
applications for its proprietary micro-perforating technology. These costs are
primarily expensed as incurred. Although the benefits of this expense started to
contribute to incremental sales revenue and gross profit in the 1999 fourth
quarter in the U.K. packaging business, it is expected to increase significantly
in the U.K. and other areas in 2000 and beyond,


                                       22
<PAGE>   24
although there can be no assurance that such will be the case.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased from $7,904,000 in 1998 to $9,898,000 in 1999,
an increase of $1,994,000 or 25%. This increase was due primarily to (i) the
continuing development of the Company's sales and marketing efforts,
particularly in the area of sales of processing technologies and related
activities for potatoes and corn, (ii) the non-cash expense of options granted
to non-employees and the fair value of warrants granted to certain consultants
and advisers to the Company and (iii) other costs, including the hiring of
additional personnel in some businesses and costs to reduce the future level of
overheads in other businesses. The Company's sales and marketing efforts with
respect to processing technologies and related activities are primarily focused
on fresh-cut potatoes, corn and apples and, to a lesser extent, other produce
categories, together with packaging applications. As indicated above, the corn
business was restructured during the fourth quarter of 1999 and the overhead
base reduced. The Company continues to evaluate ways to reduce its overhead base
in all areas of its business and believes that a number of the actions taken in
1999, although increasing short term costs, will help improve profitability in
2000 and beyond.

Research and Development Costs. Research and development costs increased from
$1,573,000 in 1998 to $1,870,000 in 1999, an increase of $297,000 or 18.8%. This
reflects increased costs of internal scientific activities related to sales
efforts for large potential customers, principally related to mushrooms and
potatoes, together with perforated films, as well as external costs from the
collaborative work undertaken with outside institutions. The Company continues
to expense all development costs, whether product, market or sales related, in
the year incurred, and thus costs are incurred prior to the benefits, if any,
that may be expected to be realized from such expense. Some of the initial
results from the work on mushrooms can be seen from the recently announced
licensing agreement with Monterey Mushrooms. The Company expects that research
and development costs will continue at no less than recent levels and may
increase.

Depreciation and Amortization. Depreciation and amortization increased from
$1,719,000 in 1998 to $2,141,000 in 1999, an increase of $422,000 or 25%. This
is mainly due to the increased fixed asset base which arose as a result of the
capital expenditure on the new corn processing facilities at Camarillo, CA and
Darien, WI, together with capital expenditures in the U.K.

Loss from Operations. Loss from operations increased from $7,700,000 in 1998 to
$13,626,000 in 1999, an increase of $5,926,000 or 77%. The increase was
primarily due to an increase in costs in 1999 as compared with 1998 (mainly
reflected in the fall in gross profit). As the Company moves to the next stage
of development of its respective markets, it incurs a number of unique costs,
including the market development costs of potatoes and corn, the latter
including the expensing of the start-up costs of the new Darien Facility which
was approved during the second quarter of 1999 for shipment of fresh produce
under the "Green Giant(R) Fresh" brand name. The various costs associated with
the development of the corn and potato businesses accounted for the majority of
the losses incurred. The Company continues to look for ways to leverage the
Company's infrastructure through the expansion of the Company's business, and
management believes this leverage should increase further as sales continue to
develop. Management believes that considerable commercial progress continues to
be made and that the foundation for future sustainable growth has been
considerably strengthened. The Company believes that this progress is evidenced
by (i) the restructuring of the corn business, (ii) the alliance with Reser's in
relation to the Company's potato business, (iii) the new business gained in the
fourth quarter of 1999 in the U.K. for perforated produce packaging and (iv) the
ongoing discussions related to, and development of, new products. However,
because all development costs are expensed as they are incurred, together with
the fact that such expense is necessarily incurred before the benefits of
increased sales and improved margins can be seen, the Company's financial
results do not yet reflect this activity.

                                       23
<PAGE>   25
Gain on sale of fixed assets. As noted in the Company's, consolidated financial
statements, the Company completed a sale and leaseback of the land and building
at its Spanish trading subsidiary, Fabbri, with an unrelated third party. The
Company raised gross proceeds, before costs and taxes, of PTS800,000,000
(approximately $5,100,000). The Company expects to realize a total pretax profit
of approximately $2,303,000 on this transaction. For financial reporting
purposes, $279,000 of this total profit has been recognized in the current
period. The remaining balance will be recognized over the eight year life of the
associated leaseback. The tax on this profit can be deferred for up to 10 years
under Spanish tax rules.

Accretion, Discount and Dividends on Preferred Stock. Accretion, discount and
dividends on Preferred Stock decreased from $2,754,000 in 1998 to $1,203,000 in
1999, a decrease of $1,551,000. The decrease principally reflects the completion
of the amortization of the beneficial conversion features of the Series D Stock
and accretion of the fair value of warrants issued concurrently with the
issuance of the Series D Stock. The 1999 charge principally reflects (i) the
fair value of warrants granted in connection with the conversion of the
remaining Series D Stock in 1999, and (ii) a provision representing a 4% per
annum appreciation on the stated value of the Series D Stock then outstanding.
All of the remaining Series D Stock was converted or redeemed during 1999.


YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

Sales. Sales increased from $19,953,000 in 1997 to $32,978,000 in 1998, an
increase of $13,024,000 or 65%. Sales of processing technologies and related
activities increased from $3,035,000 in 1997 to $8,913,000 in 1998, an increase
of $5,878,000 or 194%. Sales of U.S. packaging materials increased from
$2,716,000 in 1997 to $3,318,000 in 1998, an increase of $602,000 or 22%. Sales
of U.K. packaging materials fell from $13,570,000 in 1997 to $11,929,000 in
1998, a decrease of $1,641,000 or 12.1%. Sales of European packaging materials
rose from $632,000 to $8,818,000, an increase of $8,186,000 or 1,295%.

The increase in sales of processing technologies and related activities was
mainly due to the significant growth in the volume of fresh-cut corn sold
through the Company's majority-owned affiliate, Newcorn. In an effort to secure
a consistently available supply of raw material, the Company entered into supply
agreements with a number of corn growers located in various regions throughout
the U.S. and Mexico. As a result, 1998 was the first year in which the Company
had a consistent supply of corn available for sale throughout the year. In light
of increasing sales volume and capacity constraints and in an effort to provide
capacity for future growth, Newcorn relocated its West Coast operations into the
Camarillo Facility in the third quarter of 1998. In addition to significantly
increasing Newcorn's processing capacity, management expects that the Camarillo
Facility will enhance operating efficiencies. Newcorn has also constructed a new
35,000 square foot facility located in Darien, Wisconsin (the "Darien Facility")
to further increase processing capacity. Management expects that this new
facility will enable Newcorn to extend the geographic reach of its food
products, with shipments from this new facility targeted principally at the
Midwest and East Coast markets of the U.S.

In October 1998, Newcorn received formal approval from Sholl, the exclusive
licensee of the "Green Giant(R) Fresh" brand from The Pillsbury Company, to sell
fresh-cut corn processed at the Camarillo Facility under the "Green Giant(R)
Fresh" brand name. Sales under the "Green Giant(R) Fresh" brand began in late
October 1998. Management expects that sales of fresh-cut corn under the "Green
Giant(R) Fresh" brand will supplement sales of fresh-cut corn made under
Newcorn's "Somis Creek(R)" and "Fresh Traditions(TM)" brands. Management
believes that the capacity constraints and disruption caused by the relocation
inhibited sales growth in 1998, but it is unable to quantify the extent to which
sales were affected.


                                       24
<PAGE>   26
The Company also experienced significant growth in the volume of fresh-cut
potato products sold by its EPL Food Products, Inc. subsidiary under the "Green
Giant(R) Fresh" brand name, with a number of new accounts gained during 1998. In
an effort to leverage processing capabilities and operating efficiencies, the
Company relocated its fresh-cut potato processing activities to the Camarillo
Facility and received approval from Sholl to sell fresh-cut potato products
processed at this facility under the "Green Giant(R) Fresh" brand in October
1998. The Company expects to have its fresh-cut potato products available in
over 100 locations, based principally on the West Coast of the U.S. by June
1999.

The Company is continuing to focus on the sale and development of its processing
technologies, particularly with respect to corn, potatoes and apples. In
addition, the Company has obtained (i) U.S. patent protection for a
processing-aid based technology designed to eliminate the use of ice in shipping
boxes of processed broccoli, (ii) an exclusive license for patented technology
developed in collaboration with Penn State University for use on freshly
harvested mushrooms and (iii) U.S. patent protection for a processing-aid based
technology designed to better maintain the quality and thus enhance the economic
value of whole-peeled potatoes. Product testing continues on a number of other
vegetables, and in some cases has been expanded or accelerated, and significant
costs have been incurred to date that have yet to yield material revenues.

The Company also continued to grow its capability in scientific and technical
services. The acquisition in late 1997 of CMC provided the Company with a West
Coast platform to extend its microbiological and other scientific services from
the Company's existing East Coast location. During 1998 the Company launched its
Pure Produce(TM) range of food safety services, focusing on its HACCP services.
This new range of services has been successfully introduced in a number of
locations and, with the increasing focus on food safety and hygiene in the
produce industry, the Company believes that it is well-positioned to add further
value to the operations of fresh-cut processors.

The growth in the U.S. packaging materials business was principally attributable
to growth in sales of perforated film. During 1998 the Company improved the
operational efficiency of its U.S.-based perforating equipment, leveraging the
knowledge base of the U.K. operations, and identified a number of markets and
applications to target for sales and product development. As a consequence, the
Company is in the process of increasing the capacity of both its proprietary gas
flame perforating and proprietary microperforating capabilities to take
advantage of market opportunities, which include applications in the produce,
horticultural, bakery and pharmaceutical industries. The continuing growth in
sales of perforated film is also expected to improve margins, as sales of
perforated film traditionally yield a higher margin than non-perforated film
sales.

The sales of U.K. packaging materials decreased from $13,570,000 to $11,929,000,
a fall of $1,641,000 or 12.1%. This decrease was principally attributable to a
reduced level of sales to Pepsico, which fell by almost $1,300,000. Sales were
also adversely impacted by pricing pressures in the U.K., together with a
reduction in sales of film to the bakery industry. This impact, however, was
offset by increased sales in other areas, as the Company continued the execution
of its strategic objective to reduce its dependence on Pepsico and the bakery
industry, both of which are lower margin areas of activity, and focus more on
utilizing its proprietary perforating technology to move into new, higher
value-added areas. The Company believes that its efforts to change product mix
will provide a more stable foundation for sustainable and more profitable
growth. During 1998 the Company's Respire(R) brand of breathable packaging for
fresh produce was launched in the U.K. and has been successful in gaining new
business. In addition, the Company's proprietary micro-perforating technology
has enabled the Company to win new business in the area of cooked meat pastry
products. Other applications are currently under development. This increased
diversification in the U.K., together with increased sales for the Company as a
whole, meant that in 1998 Pepsico accounted for approximately 15% of the
Company's sales,


                                       25
<PAGE>   27
compared with 32% in 1997.

Sales of European packaging materials increased from $632,000 in 1997 to
$8,818,000, an increase of $8,186,000 or 1,295%. This increase was principally
attributable to the inclusion of a full year of revenue from Fabbri, acquired in
December 1997. Fabbri increased its sales by almost 20% over calendar 1997
levels, and the Company is targeting further expansion not only in Spain but in
other European countries. In addition, Fabbri reduced its dependency on the
citrus crop by increasing its sale of packaging materials used in fresh produce
and other areas. The diversification is planned to continue, and in 1999 will
include the launch of the Company's Respire(R) brand of breathable packaging for
fresh produce into Europe. In addition, Fabbri is seeking to expand its limited
revenue derived from South American countries through existing and new contacts.

Gross Profit. Gross profit increased from $1,863,000 in 1997 to $3,496,000 in
1998, an increase of $1,633,000 or, as a percentage of sales, from 9.3% to
10.6%. This increase was principally due to (i) the inclusion of a full year's
results of operations of Fabbri, (ii) higher margins at the Company's U.K.
packaging operation following the completion in 1997 of the reorganization of
the Company's Runcorn and Gainsborough facilities and (iii) higher margins on
the sales of U.S. packaging materials.

The gross profit was impacted adversely by the cost of market development and
sales support within both the corn and potato businesses. In addition, Newcorn
at times was unable to process and sell on a profitable basis bulk corn that it
had committed to purchase, which adversely impacted gross profit. Market
development and sales support costs are expected to continue to be incurred in
the future, although their adverse impact on gross profit is expected to
diminish as sales volumes and operating efficiencies improve. The Company also
expects that the relocation of Newcorn's West Coast operations and the Company's
fresh-cut potato processing activities into the Camarillo Facility will both
significantly increase processing capacity and enhance operating efficiencies.

Gross profit from period-to-period may also be impacted by pricing pressures on
Newcorn's corn business primarily attributable to the extent to which bulk corn
is available in regions where Newcorn's fresh-cut corn products are sold, which
is largely a function of the timing of and variations in regional harvest
yields. Newcorn enters into fixed price contracts for the supply of a portion of
its bulk corn requirements, the aim of which is to ensure, where possible,
adequate supplies of bulk corn of consistent quality at a known, fixed price. If
market prices for bulk corn are constant or rise, Newcorn will benefit from such
arrangement. However, if market prices fall, Newcorn may not be able to fully
pass on all of its costs if it is unable to renegotiate contract prices.
Management believes changes in prices of raw materials for its products have not
had a material effect on the Company's results of operations to date; however,
as the Company's business becomes more reliant upon sales of its processing aids
and related activities, results of operations may be more susceptible to the
effects of changing prices due to the pricing of certain kinds of produce, as
well as ingredients used in the Company's processing aids.

Furthermore, Newcorn incurred considerable start-up costs relating to the
Camarillo Facility while it was still operating its old facility. Incremental
cost was also incurred in helping to bring the Darien Facility into operation.
Management believes that this facility will make meaningful contributions to
gross profit in the second half of 1999.

In addition, the Company accelerated the development of certain applications for
its proprietary micro-perforating technology. These costs have been expensed
during 1998, although the benefits of this expense in terms of incremental sales
and gross profit, is not expected to commence until 1999 and beyond.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased from

                                       26
<PAGE>   28
$6,693,000 in 1997 to $7,904,000 in 1998, an increase of $1,211,000 or 18.1%.
This increase was due primarily (i) to incremental expenses from the inclusion
of a full year's results of operations of Fabbri and CMC, both of which were
acquired during the final quarter of 1997, (ii) the continuing and accelerating
development of the Company's sales and marketing efforts, particularly in the
area of sales of processing aids and related activities for potatoes, corn and
apples, together with packaging development, and (iii) other costs, including
the hiring of additional personnel.

The Company's sales and marketing efforts with respect to processing aid
technologies and related activities are primarily focused on fresh-cut potatoes,
corn and apples and, to a lesser extent, other produce categories, together with
packaging applications. These expenses in 1998 also include certain one-time
costs, such as (i) increased costs of patent development, (ii) additional
marketing development costs and (iii) other costs. Excluding one-time costs, the
Company expects that sales and marketing expenses will continue at recent levels
and may increase.

Research and Development Costs. Research and development costs increased from
$1,203,000 in 1997 to $1,573,000 in 1998, an increase of $370,000 or 30.8%. This
increase reflects increased costs of internal scientific activities related to
sales efforts for large potential customers, principally related to mushrooms,
potatoes and broccoli, together with perforated films, as well as external costs
from the collaborative work undertaken with outside institutions. The Company
continues to expense all development costs, whether product, market or sales
related, in the year incurred, and thus costs are incurred prior to the
benefits, if any, that may be expected to be realized from such expense. The
Company expects that research and development costs will continue at no less
than recent levels and may increase.

Depreciation and Amortization. Depreciation and amortization increased from
$1,290,000 in 1997 to $1,719,000 in 1998, an increase of $429,000 or 33.3%. This
increase is a result of the inclusion of a full year of expenses for Fabbri
since its acquisition made in December 1997, plus capital expenditures during
1998. Amortization expense increased due to the acquisition of CMC and the
admission into Newcorn of Twin Gardens, which occurred during the final quarter
of 1997, as well as increased amortization of costs of patents and trademarks as
more have been granted during 1998, offset in part by the completion at December
31, 1997 of the amortization of distribution rights.

Loss from Operations. Loss from operations increased from $7,322,000 in 1997 to
$7,700,000 in 1998, an increase of $378,000 or 5.2%. The increase was primarily
due to an increase in costs, many of which were one time costs as detailed
above, partially offset by the increase in gross profit. However, total
operating expenses, excluding depreciation and amortization, increased by
$1,581,000 or 20%, but rose at a lower rate than the growth in sales, as
reflected by the decrease in total operating expenses as a percentage of sales,
from 39.6% in 1997 to 28.7% in 1998. This reflects the continuing and increased
leveraging of the Company's infrastructure through the expansion of the
Company's business. Management believes that considerable commercial progress
was made in 1998 and that the foundation for future sustainable growth has been
considerably strengthened. However, because all development costs are expensed
as they are incurred, together with the fact that such expense is necessarily
incurred before the benefits of increased sales and improved margins can be
seen, the Company's financial results do not yet reflect this activity.

Accretion, Discount and Dividends on Preferred Stock. Accretion, discount and
dividends on preferred stock increased from $1,167,000 in 1997 to $2,754,000 in
1998, an increase of $1,587,000. The increase principally reflects the
amortization of the beneficial conversion features of the Series D Stock,
accretion of the fair value of warrants issued concurrently with the issuance of
the Series D Stock, and a provision representing a 4% per annum appreciation on
the stated value of the Series D Stock while the Series D Stock remains
outstanding. The amortization and accretion charges, which commenced in the
fourth quarter of 1997, were


                                       27
<PAGE>   29
complete as at December 31, 1998.


YEAR 2000 COMPLIANCE

The term "year 2000 issue" is a general term used to describe the various
problems that may result from the improper processing of dates and the
performance of date-sensitive calculations by computers and other equipment as
the year 2000 is approached and reached. During late 1998 and 1999, the Company
adopted a written plan (the "EPL Y2K Plan") that outlined the actions the
Company planned to take to identify and address year 2000 issues. The EPL Y2K
Plan required each of the Company's business units to prepare a compliance plan
(a "Unit Plan") that (i) summarized efforts taken to identify, prioritize and
address year 2000 issues facing such business unit, (ii) estimated the extent to
which these year 2000 issues have been addressed, and (iii) flagged foreseeable
problems.

The EPL Y2K Plan called for each Unit Plan to identify, prioritize and address
both "internal" year 2000 issues (those arising from such unit's computer
hardware and software, embedded chips and unit practices with respect to date
entry) and "external" year 2000 issues (those arising by virtue of material
relationships with customers and suppliers that have year 2000 issues). The
Company received and reviewed Unit Plans from each of its business units and
completed its identification of year 2000 issues that might reasonably have had
a material impact on the Company's operations. The Company completed development
of its remediation plans for such material issues during the second quarter of
1999 and performed most of the required remediation during the third quarter of
1999. Early in the fourth quarter of 1999, the Company completed its already
substantially performed identification and prioritization of, and communication
with, critical suppliers, distributors and customers to determine the extent to
which the Company might have been vulnerable to external year 2000 issues. While
no material risks were identified, the Company developed contingency plans as
noted below to address external parties' potential shortcomings.

The total cost of the Company's year 2000 project, excluding the cost of using
internal resources, was approximately $100,000 and funded through operating
cashflows. Of this total cost, approximately $30,000 was attributable to the
purchase of new hardware and software and was capitalized in accordance with the
Company's current policies, with the remaining $70,000 was expensed as incurred.
Contingency plans to address possible business interruptions resulting from
internal or external Year 2000 factors were in place by the end of November
1999. These contingency plans included stockpiling raw materials, increasing
inventory levels, securing alternate sources of supply, scheduling non
mission-critical activities during the first week of 2000, making contingency
arrangements for funds transfer, establishing back-up means of communication and
other measures.

As a result of the Company's internal efforts and preparation, together with
that of our suppliers and customers, no business interruptions of any kind
resulted from Year 2000 causes. The operations will continue to be reviewed in
relation to the possibility of delayed effects that might arise.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1999, the Company had $588,000 in unrestricted cash and short
term investments, compared with $1,345,000 at December 31, 1998, a decrease of
$757,000. In addition, the Company has $395,000 of restricted cash - current and
$511,000 of restricted cash - noncurrent. During the year ended December 31,
1999, $6,045,000 was used in operating activities. In addition, $3,476,000 was
generated from investing activities, $4,889,000 from net proceeds from the sale
of fixed assets (mainly representing the Spanish sale and leaseback


                                       28
<PAGE>   30
transaction referred to above), net of purchase of fixed assets of $1,413,000.
The decrease in cash used in operating activities of $1,107,000 in 1999 compared
to 1998 reflects the increased loss in 1999 offset by increased non cash charges
and depreciation and amortization in 1999, together with lower working capital.
The latter item was principally due to an increase in accounts payable and other
liabilities. Part of this increase was due to an increase in accounts payable at
Newcorn, where the company has worked with its suppliers to move the business
forward.

Total financing activities during 1999 provided net cash of $3,175,000, compared
with net cash provided of $9,444,000 in 1998. In 1999, a net $899,000 of long
term debt was repaid and $1,500,000 used to redeem part of the Series D Stock.
This was offset by $1,977,000 of proceeds from the sale of common stock and
exercise of previously issued stock options to purchase shares of Common Stock,
together with $3,597,000 of new short term debt. Of the 1998 total, gross
proceeds of $8,090,970 were raised in the Company's public offering completed in
the second quarter of 1998. The balance came from a net increase in long term
debt.

As of December 31, 1999 and 1998, the Company had drawn $644,700 and $665,500
respectively under its line of credit with the Bank of Scotland, entered into by
its subsidiary, EPL Technologies (Europe) Limited, for up to $644,700, which
bears interest of 2% over bank base rate (5.5% as of December 31, 1999). The
Company also has a short-term line of credit with the Bank of Scotland in the
amount of $1,611,700, which also bears interest of 2% over bank base rate. At
December 31, 1999 and 1998, approximately $1,040,300 and $60,000 respectively,
had been drawn under this facility. The lines of credit are collateralized by
the assets of EPL Technologies (Europe) Limited and its subsidiaries. The debt
agreements with the Bank of Scotland contain certain covenants applicable to the
results of operations of these businesses that provide for maintenance of
minimum asset levels and minimum earnings before interest and tax to external
interest ratios. The Company was not in compliance with the latter covenant for
the month of December 1999 only. Subsequently the Company has paid an additional
administrative fee of $250 to the Bank of Scotland as a penalty for such
noncompliance.

In addition, in July 1998 the Company, through its Spanish subsidiary, Fabbri,
finalized with BankInter an unsecured line of credit for PTS275,000,000
($1,656,600 at $1.00:PTS166). This facility was drawn in full as of December
31, 1998. The facility carried interest of 0.3% over the BankInter base rate.
There were no covenants applicable to the facility. During the third quarter of
1999 this facility was repaid out of part of the proceeds of the sale and
leaseback of the Spanish property. A new unsecured facility was then granted
from BankInter in the amount of PTS100,000,000 ($602,400 at $1.00:PTS166) .
This facility carries interest of 1.0% over the BankInter base rate (2.85% as of
December 31, 1999). The Company had drawn PTS55,000,000 ($331,300 at $1.00:
PTS166) on this facility as at December 31, 1999.

During the final quarter of 1999, the Company, through its subsidiary, EPL
Flexible Packaging, Inc., was granted a short term credit facility of $100,000
with Old Second National Bank of Aurora. This facility is secured upon the
inventory of EPL Flexible Packaging, Inc. and carries interest at a rate of 1.5%
over the banks prime rate (8.25% as at December 31, 1999). There are no
covenants applicable to this facility. As at December 31, 1999, $50,000 had been
drawn under this facility.

At the end of the third quarter of 1998, Newcorn entered into two equipment
financing loans with General Electric Capital Corporation ("GECC") and Santa
Barbara Bank & Trust ("SBBT") secured by specifically identified capital assets.
The GECC loan is for approximately $549,000, for a term of 48 months bearing
interest at 10.25% per annum. The SBBT loan is for approximately $466,000, for a
term of 48 months, payable in equal monthly installments, bearing interest at
10.5% per annum. At December 31, 1999, approximately $401,000 and $341,000 were
outstanding under the GECC and SBBT loans, respectively.

                                       28
<PAGE>   31
In March 1999, Paul L. Devine, the Company's Chairman and Chief Executive
Officer, agreed to extend to the Company, on a short-term basis, a revolving
credit facility in an amount of up to $500,000, which was increased to
$1,000,000 in June 1999. At December 31, 1999, $377,400 was outstanding. The
Company's obligations under this facility are unsecured and amounts outstanding
thereunder bear interest at a rate of nine percent (9%) per annum. The Company's
Chairman has agreed to defer repayment of the remaining balance owed to him
until the earlier of (i) such time as the Company and he agree a repayment date,
or (ii) June 30, 2000. The Company has agreed to pay all reasonable
out-of-pocket expenses incurred by Mr. Devine in connection with advancing funds
to the Company under this facility. See Item 13 - "Certain Relationships and
Related Transactions."

In December 1999 two investment funds affiliated with the Company granted the
Company a six months credit facility of $3,500,000, which amount was fully drawn
as at December 31, 1999. The facility carries a stated interest at the rate of
10% per annum and is secured by a pledge of certain assets of the Company. In
connection with this facility, the Company issued two million shares of Common
Stock and issued a warrant to acquire 350,000 shares of Common Stock at an
exercise price of $0.50 per share. See Item 13 - "Certain Relationships and
Related Transactions."

In February and March 2000, the Company, in a series of transactions, borrowed
from individual investors $3,275,000 for a period of 12 months. The loans, which
are unsecured, carry interest at the rate of 10% per annum. In connection with
these loans, the Company issued warrants to acquire a total of 1,637,500 shares
of Common Stock at an exercise price of $1.00 per share.

At December 31, 1999, the Company had warrants outstanding and exercisable to
purchase 4,173,857 shares of Common Stock at a weighted average price of $1.65
per share. In addition, at December 31, 1999, the Company had 1,897,625 options
outstanding and exercisable to purchase shares of Common Stock at a weighted
average price of $8.67 per share. See Note 11 to the Company's Consolidated
Financial Statements. At December 31, 1999, there were no material commitments
for capital expenditures.

The consolidated financial statements of the Company have been prepared on a
going concern basis, which contemplates the continuation of operations,
realization of assets and liquidation of liabilities in the ordinary course of
business, and do not reflect any adjustments that might result if the Company is
unable to continue as a going concern. The Company has incurred net losses of
$7,187,000, $7,781,366 and $14,240,355 in 1997, 1998 and 1999, respectively, has
an accumulated deficit of $50,894,608 and has negative working capital of
$5,867,259 as of December 31, 1999.  The Company's continued ability to operate
is dependent upon its ability to maintain adequate financing and to achieve
levels of revenue necessary to support the Company's cost structure.
Historically, the Company's revenues have not been sufficient to fund the
development of the Company's business, and thus it has had to finance its
operating losses externally, principally through equity financing.

The factors described above have caused the Company's independent public
accountants to include a going concern uncertainty paragraph in their audit
report accompanying the Company's 1999 Consolidated Financial Statements.  The
paragraph states that the Company's recurring losses from operations, negative
working capital and accumulated deficit raise substantial doubt about its
ability to continue as a going concern and cautions that the financial
statements do not include any adjustments that might result should the Company
be unable to continue as a going concern.

                                       29
<PAGE>   32
To address the current financial situation, the Company has undergone a number
of operational improvements as well as made significant investments in
development and marketing activities related to its various processing
technology businesses and packaging businesses in 1999 and 1998, which the
Company's management believes will improve cash flows from operations. The
Company expects that the following, amongst others, should contribute to an
improvement in the financial performance of the Company in the year 2000 and
beyond, although there can be no assurance that such will in fact be the case:
(i) the restructuring of the corn portion of the processing aids business
segment and the reduction in ongoing overheads of that operation, (ii) the
agreement with Reser's for Reser's to process and supply EPL Food with all of
EPL Food's fresh-cut potato requirements, (iii) the Company's completion
subsequent to year end of the relocation of its potato processing equipment and
production and shipment of fresh-cut potato products commenced from Reser's
Pacso, Washington facility, (iv) further exploitation of the Company's
processing technologies, as evidenced by the exclusive licensing arrangement
with Monterey Mushrooms for mushrooms entered into subsequent to year-end, and
(v) further exploitation of the Company's perforating technologies, as evidenced
by the new orders gained in produce packaging in the U.K. during the fourth
quarter of 1999, together with the various applications development projects
currently in progress.

At December 31, 1999 the Company had available borrowing facilities remaining in
the US, the UK and Spain aggregating approximately $892,000.  In addition,
subsequent to the year-end the Company obtained a 12-month loan of $3,275,000
from individual investors (see Note 17 to the Consolidated Financial
Statements).   Such loan has a stated interest rate of 10% and required the
Company to issue the lender warrants to acquire 1.6 million shares of the
Company's common stock.  The Company will be required to seek additional and
longer-term debt or equity financing to fund operating requirements in 2000 and
repay and/or refinance existing short term debt.  In this regard, the Company is
currently exploring a number of options to raise additional capital over and
above that mentioned above.  The cost of such additional financing arrangements
may not be acceptable to the Company and could result in significant dilution to
the Company's existing shareholders.  No assurances can be given that the
Company will be successful in raising additional capital and failure to raise
such capital, if needed, could have a material adverse effect on the Company's
business, financial condition and results of operations.

FORWARD LOOKING STATEMENTS

Statements in the foregoing discussion that are not statements of historical
fact and reflect the intent, belief or expectations of the Company and its
management regarding the anticipated impact of events, circumstances and trends
should be considered forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements are not guarantees of future performance and actual results may vary
materially from those projected in the forward-looking statements. Meaningful
factors that might affect such results include, but are not limited to: a) the
Company's needs for capital, including for acquisitions, which needs have been
and, particularly in the short term, are expected to continue to be substantial,
and its potential inability to obtain additional financing on satisfactory terms
or in satisfactory amounts, b) the Company's product development and sales
process, which is lengthy and resource intensive, c) the uncertainty of demand
for, or the market acceptance of, the Company's products and services, d) the
Company's limited resources and experience in marketing and selling its products
and services, e)financial, personnel resources and production requirements and
potential difficulties in cross-marketing and managing multiple product lines,
f) the Company's potential inability to identify and acquire acceptable
acquisition targets, to the extent necessary to fulfill its expansion plans, and
its potential inability to successfully integrate any such acquisitions into its
operations, g) potential product obsolescence and short product life cycles, h)
potential competition, particularly in the market for produce packaging, from
companies with greater financial, management and other resources, i) the
unpredictability and volatility of the market for agricultural products, j)
changes in U.S. and foreign regulation, k) difficulty with research and
development and sales and marketing activities regarding new and existing
products, including extension of necessary time periods or increase in expense
for product introduction and market penetration, l) potential difficulties in
obtaining or protecting intellectual property rights or the infringement of
proprietary or other rights of the Company by third parties, m) raw material
availability and pricing, n) loss of services of key employees of the Company
and o) delays in the Company's ability to bring into production new facilities
or equipment, as well as other information contained in the Company's other
filings with the Securities and Exchange Commission.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Company uses its unsecured and secured lines of credit, equipment financing
loans, notes payable and capital leases to finance a significant portion of its
operations. These on-balance sheet financial instruments, to the extent they
provide for variable rates of interest, expose the Company to interest rate risk
resulting from changes in the related banks' base rates.

To the extent that the Company's financial instruments expose the Company to
interest rate risk and market risk, they are presented in the table below. The
table presents principal cash flows and related interest rates by year


                                       30
<PAGE>   33
and maturity for the Company's unsecured and secured lines of credit, equipment
financing loans, notes payable and capital leases in effect at December 31,
1999. The information is presented in U.S. dollars, or where appropriate, U.S.
dollar equivalents, which is the Company's reporting currency. The instruments'
actual cash flows are denominated in U.S. dollars ($US), British pounds sterling
and Spanish pesetas, as indicated in parentheses.

<TABLE>
<CAPTION>
                                                     Principal Amount Maturing in
                                                     ----------------------------

                                      2000      2001      2002      2003            2004    Thereafter   Total          Fair value
                                      ----      ----      ----      ----            ----    ----------   -----          ----------
<S>                               <C>          <C>       <C>       <C>             <C>         <C>    <C>            <C>
Long-term debt
Fixed Rate ($US)                     974,573   378,205   239,544   115,473         1,468          --    1,709,263       1,709,263
Average Interest Rate                   9.49%     9.78%    10.16%    10.16%          8.0%         --         --              --

Variable Rate (pounds sterling)      368,233   133,333   133,333    97,311          --            --      732,210         732,210
Variable Rate ($US)                  612,666   221,840   221,840   162,157          --            --    1,218,503       1,218,503
Average Interest Rate                   7.50%     8.25%     8.25%     8.25%         --            --         --              --

Variable Rate (Pesetas)           55,000,000      --        --        --            --            --   55,000,000      55,000,000
Variable Rate ($US)                  331,333      --        --        --            --            --      331,333         331,333
Average Interest Rate                   3.85%     --        --        --            --            --         --              --
</TABLE>


                                       31
<PAGE>   34
ITEM 8: CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                             PAGE
                                                                                                             ----
<S>                                                                                                          <C>
                                INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

INDEPENDENT AUDITORS' REPORT                                                                                   33

CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1999 AND 1998
     AND FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

CONSOLIDATED BALANCE SHEETS                                                                                    34

CONSOLIDATED STATEMENTS OF OPERATIONS                                                                          35

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY                                                                36

CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                          37

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                                  38-56
</TABLE>


                                       32
<PAGE>   35
INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders of
   EPL Technologies, Inc.
Philadelphia, Pennsylvania

We have audited the accompanying consolidated balance sheets of EPL
Technologies, Inc. and subsidiaries (the "Company") as of December 31, 1999 and
1998, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended December
31, 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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, such consolidated financial statements present fairly, in all
material respects, the financial position of EPL Technologies, Inc. and
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with accounting principles generally accepted in
the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company's recurring losses from
operations, negative working capital and accumulated deficit raise substantial
doubt about its ability to continue as a going concern. Management's plans
concerning these matters are also described in Note 2. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.


Philadelphia, Pennsylvania
April 7, 2000

                                       33
<PAGE>   36
EPL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                                                  1999           1998
<S>                                                                                          <C>           <C>
CURRENT ASSETS:
  Cash and cash equivalents                                                                      $587,589     $1,344,995
  Restricted cash - current                                                                       394,516
  Accounts receivable, net                                                                      5,808,740      6,419,712
  Inventories, net                                                                              4,168,209      4,275,490
  Deferred debt costs                                                                           1,427,094
  Prepaid expenses and other current assets                                                     1,125,021      1,462,663
                                                                                                ---------      ---------

           Total current assets                                                                13,511,169     13,502,860
                                                                                               ----------     ----------

PROPERTY AND EQUIPMENT, Net                                                                     8,862,422     11,724,648
                                                                                                ---------     ----------
INTANGIBLE ASSETS, Net:
  Patent and distribution rights, net of accumulated amortization of $2,013,660
    and $1,895,910 at December 31, 1999 and 1998                                                  783,535        901,285
  Goodwill, net of accumulated amortization of $1,415,326 and $959,212 at December 31,          2,493,793      2,921,061
    1999 and 1998
  Other intangibles, net of accumulated amortization of $191,708 and $155,194 at
    December 31, 1999 and 1998                                                                    145,448        181,964

Restricted cash - noncurrent                                                                      511,126        486,144
Other noncurrent assets                                                                           124,000         53,546
                                                                                                  -------         ------

           Total other assets                                                                   4,057,902      4,544,000
                                                                                                ---------      ---------

TOTAL ASSETS                                                                                  $26,431,493    $29,771,508
                                                                                              ===========    ===========

CURRENT LIABILITIES:
  Accounts payable                                                                             $9,645,801     $6,469,055
  Accrued expenses                                                                              1,872,363      1,210,129
  Other liabilities                                                                             1,704,707        705,029
  Deferred gain on sale-leaseback, current portion                                                359,985
  Short term revolving credit facilities with related parties, net of issue costs               3,877,000
  Current portion of long-term debt and short term credit facilities                            1,918,572        474,098
                                                                                                ---------        -------

           Total current liabilities                                                           19,378,428      8,858,311

LONG-TERM DEBT                                                                                  1,340,527      3,683,604
DEFERRED GAIN ON SALE-LEASEBACK, NONCURRENT PORTION                                             1,670,700
DEFERRED INCOME TAXES                                                                             191,196         77,964
                                                                                                  -------         ------

           Total liabilities                                                                   22,580,851     12,619,879
                                                                                               ----------     ----------

COMMITMENTS AND CONTINGENCIES (Note 13)

CONVERTIBLE SERIES D PREFERRED STOCK, $1,000 par value -
  authorized, 12,500 shares; issued and outstanding, 0 and 12,300 shares in 1999 and 1998                     12,846,586

STOCKHOLDERS' EQUITY:
  Convertible Series A Preferred Stock, $1.00 par value - authorized, 3,250,000 shares;
    issued and outstanding, 60,000 shares in 1999 and 1998                                         60,000         60,000
  Convertible Series C Preferred Stock, $.001 par value -
    authorized, 144,444 shares; issued and outstanding, no shares in 1999 and 1998
  Common Stock, $0.001 par value - authorized, 50,000,000 shares; issued, 30,776,228
    and outstanding, 30,565,618 and 11,510,964 shares in 1999 and 1998, respectively               30,776         11,511
  Additional paid-in capital                                                                   54,916,708     38,442,213
  Accumulated deficit                                                                        (50,094,608)   (34,651,720)
  Treasury stock, at cost                                                                       (138,160)
  Accumulated other comprehensive (loss) income                                                 (924,074)        443,039
                                                                                                ---------        -------

           Total stockholders' equity                                                           3,850,642      4,305,043
                                                                                                ---------      ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                    $26,431,493    $29,771,508
                                                                                              ===========    ===========
</TABLE>

See notes to consolidated financial statements.

                                       34
<PAGE>   37
EPL TECHNOLOGIES, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                                                 1999           1998          1997
<S>                                                                          <C>            <C>           <C>
SALES                                                                          $30,652,555    $32,977,537   $19,953,480
COST OF SALES                                                                   30,369,479     29,481,264    18,090,546
                                                                                ----------     ----------    ----------

  Gross Profit                                                                     283,076      3,496,273     1,862,934

OPERATING EXPENSES:
  Selling, general and administrative expenses                                   9,897,520      7,903,882     6,692,727
  Research and development costs                                                 1,870,105      1,572,825     1,202,645
  Depreciation and amortization                                                  2,141,347      1,719,442     1,289,758
                                                                                 ---------      ---------     ---------

LOSS FROM OPERATIONS                                                          (13,625,896)    (7,699,876)   (7,322,196)

OTHER EXPENSES (INCOME):
  Interest Expense, net                                                            819,800         25,345       122,025
  Gain on sale of fixed assets                                                   (284,570)
  Loss from unconsolidated affiliates                                               61,708         56,145
  Minority Interest                                                                                           (202,120)
                                                                                 ---------      ---------     ---------

LOSS BEFORE INCOME TAX EXPENSE (BENEFIT)                                      (14,222,834)    (7,781,366)   (7,242,101)

Income tax expense (benefit)                                                        17,521                     (55,043)
                                                                                 ---------      ---------     ---------

NET LOSS                                                                      (14,240,355)    (7,781,366)   (7,187,058)

Accretion, discount and dividends
  on preferred stock                                                             1,202,533      2,753,727     1,167,486
                                                                                 ---------      ---------     ---------

NET LOSS AVAILABLE TO COMMON STOCKHOLDERS                                    $(15,442,888)  $(10,535,093)  $(8,354,544)
                                                                             =============  =============  ============

LOSS PER COMMON SHARE - basic and diluted                                          $(1.09)        $(0.99)       $(1.00)
                                                                                   =======        =======       =======

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - basic and diluted                  14,221,642     10,598,878     8,372,537
                                                                                ==========     ==========     =========
</TABLE>

See notes to consolidated financial statements.

                                    35
<PAGE>   38
EPL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE LOSS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                                          SERIES A             SERIES B           SERIES C
                                                 COMMON STOCK         PREFERRED STOCK       PREFERRED STOCK    PREFERRED STOCK
                                             --------------------- ----------------------- ------------------ ------------------
                                               NUMBER      AMOUNT    NUMBER     AMOUNT      NUMBER   AMOUNT    NUMBER   AMOUNT
<S>                                          <C>           <C>      <C>        <C>         <C>       <C>       <C>      <C>
BALANCE, DECEMBER 31, 1996                    7,765,600    $7,765   2,490,000  $2,490,000   531,915   $5,319
  Shares issued in private placement (net       168,750       169
of issuance costs)
  Preferred shares issued for cash:
    Series C preferred stock                                                                                    144,444   $144
    Series D preferred stock
    Accretion of Series C warrant value
    Accretion of Series D warrants,
discount, increase in stated value and
       issuance costs
    Discount on Series C preferred stock
    Exercise of options (net of costs)          410,250       410
    Conversion of preferred shares to           543,957       544   (417,000)   (417,000)  (531,915) (5,319)
common shares
    Exercise of warrants (net of costs)         119,425       120
    Shares issued for acquisitions               40,000        40
  Comprehensive loss

    Net loss

    Other comprehensive income (loss)
      Foreign currency adjustment


  Comprehensive loss
                                             ----------    ------   ---------  ----------   -------   -------   -------   ----

BALANCE, DECEMBER 31, 1997                    9,047,982     9,048   2,073,000   2,073,000                       144,444    144

  Shares issued in public offering (net of      809,097       809
issuance costs)
  Accretion of Series C warrant value
  Accretion of Series D warrants, discount,
increase in stated value and issuance costs
  Exercise of options (net of costs)            158,000       158
  Conversion of Series A and C preferred
shares to common shares                       1,414,222     1,414  (2,013,000)(2,013,000)                     (144,444)  (144)
  Conversion of Series D preferred stock to      48,088        48
common shares
  Exercise of warrants (net of costs)            33,575        34
  Comprehensive (loss) income

    Net loss

    Other comprehensive income (loss)
      Foreign currency adjustment


  Comprehensive loss
                                             ----------    ------   ---------  ----------   -------   -------   -------   ----

BALANCE, DECEMBER 31, 1998                   11,510,964    11,511      60,000      60,000

  Accretion of Series C warrant value
  Accretion of Series D stated value and
warrant value
  Exercise of options                            52,500        53
  Conversion of Series D preferred stock to  13,630,314    13,630
common shares
  Issuance of warrants to Series D Holders
  Contribution of shares by Series D Holders
  Forgiveness of dividends on Series D Stock
  Issuance of stock in private placement      3,582,450     3,582
(net of costs)
  Issuance of stock to lender                 2,000,000     2,000
  Issuance of Warrants to lender
  Issuance of Warrants to consultants in
lieu of compensation
  Comprehensive (loss) income

    Net loss

    Other comprehensive income (loss)
      Foreign currency adjustment


  Comprehensive loss

                                             ----------    ------      ------      ------   -------   -------   -------   ----
BALANCE, DECEMBER 31, 1999                   30,776,228    30,776      60,000      60,000
                                             ==========    ======      ======      ======   =======   =======   =======   ====
</TABLE>

<TABLE>
<CAPTION>
                                                                                                   ACCUMULATED
                                                                                                      OTHER
                                               ADDITIONAL                                         COMPREHENSIVE      TOTAL
                                                PAID-IN     TREASURY COMPREHENSIVE ACCUMULATED        INCOME      STOCKHOLDERS'
                                                CAPITAL      STOCK        LOSS       DEFICIT          (LOSS)        EQUITY
<S>                                           <C>           <C>      <C>           <C>            <C>             <C>
BALANCE, DECEMBER 31, 1996                    $21,947,444                          $(16,283,464)   $251,413       $8,418,477

  Shares issued in private placement (net       1,246,672                                                          1,246,841
of issuance costs)
  Preferred shares issued for cash:
    Series C preferred stock                      622,549                                                            622,693
    Series D preferred stock                    1,943,569                                                          1,943,569
    Accretion of Series C warrant value            19,833                              (19,833)
    Accretion of Series D warrants,
discount, increase in stated value
       and issuance costs                                                             (644,377)                     (644,377)

    Discount on Series C preferred stock           72,222                              (72,222)
    Exercise of options (net of costs)          1,489,557                                                          1,489,967
    Conversion of preferred shares to             421,775
common shares
    Exercise of warrants (net of costs)           369,180                                                            369,300
    Shares issued for acquisitions                564,960                                                            565,000
  Comprehensive loss

    Net loss                                                          $(7,187,058)  (7,187,058)                   (7,187,058)

    Other comprehensive income (loss)
      Foreign currency adjustment                                        (208,986)                (208,986)     (208,986)
                                               ----------   ---------    --------- ------------   ---------     ---------

  Comprehensive loss                                                  $(7,396,044)
                                                                      ============
BALANCE, DECEMBER 31, 1997                     28,697,761                          (24,206,954)      42,427     6,615,426

  Shares issued in public offering (net of      6,622,813                                                       6,623,622
issuance costs)
  Accretion of Series C warrant value              40,000                              (40,000)
  Accretion of Series D warrants, discount,
     increase in stated value and issuance
     costs                                                                          (2,623,400)               (2,623,400)
  Exercise of options (net of costs)              794,949                                                         795,107
  Conversion of Series A and C preferred
shares to common shares                         2,011,730
  Conversion of Series D preferred stock to       208,435                                                         208,483
common shares
  Exercise of warrants (net of costs)              66,525                                                          66,559
  Comprehensive (loss) income

    Net loss                                                           (7,781,366)  (7,781,366)               (7,781,366)

    Other comprehensive income (loss)
      Foreign currency adjustment                                          400,612                  400,612       400,612
                                                                           -------

  Comprehensive loss                                                   (7,380,754)

BALANCE, DECEMBER 31, 1998                     38,442,213                          (34,651,720)     443,039     4,305,043

  Accretion of Series C warrant value              40,000                              (40,000)
  Accretion of Series D stated value and                                              (367,286)                 (367,286)
warrant value
  Exercise of options                             158,697                                                         158,750
  Conversion of Series D preferred stock to    11,575,475                                                      11,589,105
common shares
  Issuance of warrants to Series D Holders        795,247                             (795,247)
  Contribution of shares by Series D Holders      138,160   (138,160)
  Forgiveness of dividends on Series D Stock      124,767                                                         124,767
  Issuance of stock in private placement        1,814,347                                                       1,817,929
(net of costs)
  Issuance of stock to lender                   1,186,000                                                       1,188,000
  Issuance of Warrants to lender                  161,000                                                         161,000
  Issuance of Warrants to consultants in          480,802                                                         480,802
lieu of compensation
  Comprehensive (loss) income

    Net loss                                                          (14,240,355) (14,240,355)               (14,240,355)

    Other comprehensive income (loss)
      Foreign currency adjustment                                      (1,367,113)                (1,367,113) (1,367,113)
                                                                       -----------

  Comprehensive loss                                                  (15,607,468)
                                               ----------   --------- ============ ------------   ---------     ---------
BALANCE, DECEMBER 31, 1999                     54,916,708   (138,160)              (50,094,608)   (924,074)     3,850,642
                                               ==========   =========              ============   =========     =========
</TABLE>

See notes to consolidated financial statements.

                                       36
<PAGE>   39
EPL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                                                  1999          1998          1997
OPERATING ACTIVITIES:
<S>                                                                            <C>            <C>           <C>
  Net loss                                                                     $(14,240,355)  $(7,781,366)  $(7,187,058)
  Adjustments to reconcile net loss to net cash
    used in operating activities:
      Expenses paid with warrants for common stock                                  480,802
      Amortization of debt issue costs                                              277,815
      Depreciation and amortization                                               2,141,347     1,719,442     1,289,758
      Provision for inventory obsolescence                                          103,205
      Minority interest and gain on sale of fixed assets                           (284,570)      (44,835)     (189,954)
      Equity loss                                                                    61,708        56,145
      Changes in assets and liabilities, net of effects from acquisitions of
        businesses, which (used) provided cash:
          Restricted cash - current                                               (394,516)
          Accounts receivable                                                       610,972   (1,037,587)       218,752
          Due from related parties                                                                               34,101
          Inventories                                                                 4,076     (864,277)        36,617
          Prepaid expenses and other current assets                                 337,642     (455,703)     (274,905)
          Other noncurrent assets                                                  (70,454)
          Accounts payable                                                        3,176,746     1,730,686       529,792
          Accrued expenses                                                          662,234        62,532     (405,749)
          Deferred tax liability                                                    113,232
          Restricted cash - noncurrent                                             (24,982)     (486,144)
          Other liabilities                                                         999,678      (50,625)        27,900
                                                                                    -------      --------        ------

           Net cash used in operating activities                                (6,045,420)   (7,151,732)   (5,920,746)
                                                                                -----------   -----------   -----------

INVESTING ACTIVITIES:
  Property and equipment acquired                                               (1,412,858)   (5,062,696)   (1,036,638)
  Net proceeds from sale of fixed assets                                          4,889,000        59,546        36,822
  Acquisition of businesses and contingent payments, net of cash acquired                        (75,000)   (7,330,279)
  Cost of patent acquired                                                                        (29,363)       (4,157)
                                                                                  ---------      --------       -------

           Net cash provided by (used in) investing activities                    3,476,142   (5,107,513)   (8,334,252)
                                                                                  ---------   -----------   -----------
FINANCING ACTIVITIES:
  Proceeds from long-term debt                                                                  3,443,666     1,800,410
  Proceeds from short term lines of credit                                        3,597,000
  Net payment of long-term debt                                                   (898,603)   (1,533,562)   (1,429,377)
  Proceeds from sale of common stock/warrants/options                             1,976,679     7,533,517     3,671,110
  Redemption of Series D Stock                                                  (1,500,000)
  Proceeds from sale of preferred stock                                                                      12,539,230
                                                                                -----------     ---------    ----------

           Net cash provided by financing activities                              3,175,076     9,443,621    16,581,373
                                                                                  ---------     ---------    ----------

EFFECT OF EXCHANGE RATE CHANGE ON CASH                                          (1,363,204)       403,663     (208,986)
                                                                                -----------       -------     ---------

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                  (757,406)   (2,411,961)     2,117,389

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                      1,344,995     3,756,956     1,639,567
                                                                                  ---------     ---------     ---------

CASH AND CASH EQUIVALENTS, END OF YEAR                                             $587,589    $1,344,995    $3,756,956
                                                                                   ========    ==========    ==========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
    Cash paid during year for:
      Interest                                                                     $149,487      $186,084      $195,857
      Income taxes                                                                   33,815        36,173        23,951

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING
  AND FINANCING ACTIVITIES:
  Accretion of warrants, discount, increase in stated value and
    issuance costs related to preferred stock                                    $1,202,533    $2,663,400      $736,432
  Issuance of common stock for:
    Acquisition of subsidiary                                                                                   565,000
    Exchange for debt issue costs                                                 1,188,000
    Conversion of preferred shares to common shares                              11,589,105       208,483       422,319
  Issuance of warrants to lender                                                    161,000
  Contribution of treasury stock and forgiveness of dividend on Series D           $262,927
  Preferred Stock
</TABLE>

See notes to consolidated financial statements.

                                       37
<PAGE>   40
EPL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


1.    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      A.    ORGANIZATION - EPL Technologies, Inc. and subsidiaries (the
            "Company") is engaged in the development, manufacture and marketing
            of proprietary food processing aid technologies (primarily through
            its EPL Food Products Inc., EPL Produce Technologies, Inc. and
            NewCornCo, LLC subsidiaries), packaging technologies (primarily
            through its EPL Flexible Packaging, Inc., EPL Flexible Packaging
            Ltd. and Fabbri Artes Graficas Valencia, S.A. subsidiaries) and
            related scientific and technical services that facilitate the
            maintenance of the quality and integrity of fresh produce (primarily
            through its California Microbiological Consulting, Inc. and Pure
            Produce, Inc. subsidiaries).

      B.    PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
            include the accounts of EPL Technologies, Inc. and its majority and
            wholly owned subsidiaries. All material intercompany transactions
            and balances have been eliminated in consolidation. The consolidated
            financial statements include the operations of NewCornCo, LLC, an
            entity 51% owned by the Company. Since the equity of the minority
            owners has been reduced to zero, the Company is recording 100% of
            NewCornCo, LLC's losses until such time as NewCornCo LLC achieves a
            profitable level.

      C.    CASH AND CASH EQUIVALENTS - The Company considers all short-term
            investments with original maturities of three months or less to be
            cash equivalents.

      D.    ACCOUNTS RECEIVABLE - Accounts receivable are shown net of allowance
            for doubtful accounts of $1,217,477 and $545,898 as of December 31,
            1999 and 1998, respectively.

      E.    INVENTORIES - Inventories are stated at the lower of cost or net
            realizable value. Cost is determined by the first-in, first-out
            (FIFO) method (see Note 3).

      F.    PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
            Depreciation and amortization is calculated by the straight-line
            method, based upon the estimated useful lives of the assets which
            are as follows:

<TABLE>
<S>                                                                 <C>
             Production and laboratory equipment                    5-10 years
             Machinery and office equipment                         3-11 years
             Leasehold improvements                                 The term of the lease and up to
                                                                    two option periods or the
                                                                    estimated life of the asset,
                                                                    whichever is shorter.
             Motor vehicles                                         3-6 years
             Buildings                                              20-40 years
</TABLE>

                                       38
<PAGE>   41
      G.    RESTRICTED CASH - Restricted cash is primarily invested in
            certificates of deposit which mature within one year and are
            principally used as security for equipment financing and escrow
            requirements (see Note 13). The classification of these securities
            is determined based on the expected term of the collateral
            requirements and not necessarily the maturity date of the underlying
            securities.

      H.    OTHER ASSETS -

            Goodwill - Goodwill related to the acquisition of certain
                  subsidiaries is being amortized on a straight-line basis over
                  10 years.

            Patents and Distribution Rights - Costs related to acquired patents
                  are being amortized on a straight-line basis over the life of
                  the patent. Costs related to internally-developed patents are
                  generally expensed as incurred. Distribution rights were
                  amortized on a straight-line basis over the ten-year life of
                  the distribution rights agreement. Distribution rights were
                  fully amortized at December 31, 1998.

            Other Intangibles - Other intangibles which consist of trademarks,
                  formulations and non-compete agreements are being amortized on
                  a straight-line basis over 5 to 10 years.

            Total amortization expense related to intangible assets was
            $610,378, $549,823 and $670,309 for the years ended December 31,
            1999, 1998 and 1997, respectively.

      I.    INCOME TAXES - The Company has adopted the provisions of Financial
            Accounting Standards Board ("FASB") Statement No. 109, Accounting
            for Income Taxes (SFAS No. 109). SFAS No. 109 requires that deferred
            income taxes reflect the tax consequences in future years of
            differences between the tax bases of assets and liabilities and
            their financial report amounts using the enacted marginal rate in
            effect for the year in which the differences are expected to
            reverse.

      J.    REVENUE RECOGNITION - Revenues are recognized either at the time of
            shipment to customers or, for inventory held at customers'
            facilities, at the time the product is utilized in the customers'
            processing operations.

      K.    FOREIGN CURRENCY TRANSLATION ADJUSTMENT - The financial statements
            of the Company's foreign subsidiaries have been translated into U.S.
            dollars in accordance with SFAS No. 52, Foreign Currency
            Translation. All balance sheet accounts have been translated using
            the current exchange rate at the balance sheet date. Income
            statement amounts have been translated using the average rate for
            the year. The profit or loss resulting from the change in exchange
            rates has been reported separately as other comprehensive income or
            loss.

      L.    INVESTMENT IN UNCONSOLIDATED SUBSIDIARY - The Company holds a 50%
            interest in its unconsolidated subsidiary, Freshcorn LLC
            ("Freshcorn"). This investment is accounted for under the equity
            method as the Company does not maintain control of Freshcorn. The
            Company's share of Freshcorn's losses for the years ended December
            31, 1999 and 1998 was $61,708 and $56,145, respectively. The
            Company's equity in the accumulated deficit of Freshcorn, $117,853,
            is included in other liabilities on the Company's balance sheet.

                                       39
<PAGE>   42
      M.    RECLASSIFICATIONS - Certain reclassifications have been made to the
            1998 and 1997 consolidated financial statements in order to conform
            with the 1999 presentation.

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

      O.    LONG LIVED ASSETS - The Company evaluates the carrying value of its
            long-lived assets for impairment whenever events or changes in
            circumstances indicate that the carrying value of an asset may not
            be recoverable. Impairment is recognized when the net carrying value
            of the long-lived asset exceeds the estimated future undiscounted
            cash flows related to such asset. Measurement of the amount of
            impairment, if any, is based upon the difference between the
            carrying value and estimated fair value.

      P.    STOCK-BASED COMPENSATION - The Company measures compensation expense
            for its stock-based employee compensation plans using the intrinsic
            value method prescribed by APB Opinion No. 25, Accounting for Stock
            Issued to Employees. See Note 11 for pro forma disclosures of net
            income and earnings per share as if the fair value-based method
            prescribed by SFAS No. 123, Accounting for Stock-Based Compensation,
            had been applied in measuring compensation expense.

      Q.    NEW ACCOUNTING PRONOUNCEMENTS - In April 1998, the Accounting
            Standards Executive Committee of the AICPA issued Statement of
            Position ("SOP") 98-5, Reporting on the Costs of Start-up
            Activities. This SOP provides guidance on the financial reporting of
            start-up costs and organizational costs. It requires costs of
            start-up activities and organization costs to be expensed as
            incurred. The Company adopted this SOP on January 1, 1999. The
            adoption of this SOP did not have a material impact on its
            consolidated financial position or results of operations.

            In June 1998, the FASB issued SFAS No. 133, Accounting for
            Derivative Instruments and Hedging Activities. This statement
            establishes accounting and reporting standards for derivative
            instruments, including certain derivative instruments embedded in
            other contracts collectively referred to as derivatives, and for
            hedging activities. It requires that an entity recognize all
            derivatives as either assets or liabilities in the consolidated
            balance sheet and measure those statements at fair value. This
            statement, as amended, is effective for fiscal years beginning after
            June 15, 2000, although early adoption is encouraged. The Company
            has not yet determined the impact SFAS No. 133 will have on its
            consolidated financial position or results of operations.

2.    OPERATIONS

      The consolidated financial statements of the Company have been prepared on
      a going concern basis, which contemplates the continuation of operations,
      realization of assets and liquidation of liabilities in the ordinary
      course of business, and do not reflect any adjustments that might result
      if the Company is unable to continue as a going concern. The Company has
      incurred net losses of $7,187,000, $7,781,366 and $14,240,355 in 1997,
      1998 and 1999, respectively, has an accumulated deficit of $50,894,608 and
      has negative working capital of $5,867,259 as of December 31, 1999. The
      Company's continued ability to

                                       40
<PAGE>   43
      operate is dependent upon its ability to maintain adequate financing and
      to achieve levels of revenue necessary to support the Company's cost
      structure. Historically, the Company's revenues have not been sufficient
      to fund the development of the Company's business, and thus it has had to
      finance its operating losses externally, principally through equity
      financing.

      These factors indicate that there is substantial doubt about the Company's
      ability to continue as a going concern. The accompanying financial
      statements do not include any adjustments that might be necessary should
      the Company be unable to continue as a going concern.

      The Company has undergone a number of operational improvements as well as
      made significant investments in development and marketing activities
      related to its various processing technology businesses and packaging
      businesses in 1999 and 1998, which the Company's management believes will
      improve cash flows from operations. The Company expects that the
      following, amongst others, should contribute to an improvement in the
      financial performance of the Company in the year 2000 and beyond, although
      there can be no assurance that such will in fact be the case : (i) the
      restructuring of the corn business and the reduction in ongoing overheads
      of that business, (ii) the agreement with Reser's for Reser's to process
      and supply EPL Food with all of EPL Food's fresh-cut potato requirements,
      (iii) the Company's completion subsequent to year-end of the relocation of
      its potato processing equipment and production and shipment of fresh-cut
      potato products commenced from Reser's Pacso, Washington facility, (iv)
      further exploitation of the Company's processing technologies, as
      evidenced by the agreement with Farmington for apples and, subsequent to
      the year end, the exclusive licensing arrangement with Monterey Mushrooms
      for mushrooms, and (v) further exploitation of the Company's perforating
      technologies, as evidenced by the new orders gained in produce packaging
      in the U.K. during the fourth quarter of 1999, together with the various
      applications development projects currently in progress. The Company's
      ability to operate beyond the immediate future is dependent upon its
      ability to achieve levels of revenues to support the Company's cost
      structure, maintain adequate financing and generate sufficient cash flows
      from operations to meet its operating needs. However, no assurance can be
      given that the Company will be successful in its efforts to implement its
      plans and achieve a level of profitability.


3.    INVENTORIES

      Inventories consisted of the following:

<TABLE>
<CAPTION>
                                             DECEMBER 31,
                                  --------------------------------
                                        1999              1998
<S>                                  <C>               <C>
Raw materials and supplies           $2,263,334        $2,594,370
Finished goods                        1,904,875         1,681,120
                                      ---------         ---------
                                     $4,168,209        $4,275,490
                                      =========         =========
</TABLE>

                                       41
<PAGE>   44
4.    PROPERTY AND EQUIPMENT

      Property and equipment consisted of the following:

<TABLE>
<CAPTION>
                                                           DECEMBER 31,
                                               ----------------------------------
                                                     1999               1998
<S>                                              <C>                 <C>
Production and laboratory equipment               $8,384,464          $7,298,084
Buildings                                            865,921           3,876,452
Machinery and office equipment                       611,728             413,357
Leasehold improvements                             2,290,512           2,169,413
Motor vehicles                                        90,653              63,855
                                                      ------              ------

    Total property and equipment                  12,243,278          13,821,161
Accumulated depreciation and amortization        (3,380,856)         (2,096,513)
                                                 -----------         -----------

Property and equipment, net                       $8,862,422         $11,724,648
                                                  ==========         ===========
</TABLE>

      Depreciation expense was $1,530,969, $1,169,619, and $619,449 for the
      years ended December 31, 1999, 1998 and 1997, respectively.

      During 1999, the Company completed a sale and leaseback of the land and
      building at its Spanish trading subsidiary, Fabbri, with an unrelated
      third party. The Company raised gross proceeds, before costs and taxes, of
      PTS800,000,000 (approximately $5,100,000). The Company expects to
      recognize a total pretax profit of approximately $2,303,000 on this
      transaction. For financial reporting purposes, $279,000 of this total
      profit has been recognized in the current period. The remaining balance
      will be recognized over the eight year life of the associated leaseback.
      Future lease payments under the sale leaseback transaction are
      approximately $412,000 per year for the lease term of eight years. The tax
      on this profit can be deferred for up to 10 years under Spanish tax rules.


5.    ACQUISITIONS

      In December 1997, the Company acquired all of the issued and outstanding
      shares of capital of Fabbri Artes Graficas Valencia S.A. ("Fabbri"), a
      Spanish company, through a newly formed, wholly owned subsidiary of the
      Company, EPL Technologies SL. Fabbri is based in Valencia, Spain, and is a
      converter, printer and marketer of specialty flexible packaging, serving
      principally the southern European citrus fruit market. The business was
      acquired for cash of US $5,500,000. The Company has accounted for the
      Fabbri acquisition under the purchase method of accounting. The cost of
      the acquisition has been allocated on the basis of the estimated fair
      market value of the assets acquired and the liabilities assumed. The
      Fabbri acquisition was financed with a portion of the proceeds from a
      private placement of 12,500 shares of its Series D Preferred Stock, par
      value $0.01 per share (the "Series D Stock") (see Note 9).



6.    INCOME TAXES

      The components of loss before income taxes for the year 1999, 1998 and
      1997 were taxed under the following jurisdictions:

                                       42
<PAGE>   45
<TABLE>
<CAPTION>
                       1999                  1998                1997
<S>                <C>                   <C>                 <C>
Domestic           $(14,041,549)         $(7,677,762)        $(6,705,322)
Foreign                (181,285)            (103,604)           (536,779)
                       ---------            ---------           ---------
    Total          $(14,222,834)         $(7,781,366)        $(7,242,101)
                   =============         ============        ============
</TABLE>


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

<TABLE>
<CAPTION>
                                                        1999         1998        1997
<S>                                                  <C>          <C>          <C>
Deferred foreign income tax expense (benefit)        $ 113,232    $            $ (55,043)
Current foreign income tax expense (benefit)           (95,711)
                                                     ---------    ---------    ---------
  Total income tax expense (benefit)                 $  17,521    $            $ (55,043)
                                                     =========    =========    =========
</TABLE>


      There was no federal or state benefit provided for domestic losses as a
      100% valuation allowance was recorded based on management's assessment
      that realization was not likely. In addition, there was no foreign benefit
      provided for certain foreign losses as a 100% valuation allowance was
      recorded based on management's assessment that realization was not likely.

      Income tax expense (benefit) was different from the amounts computed by
      applying the statutory federal income tax rate to the loss before income
      taxes due to the following:

<TABLE>
<CAPTION>
                                                           1999         1998         1997
<S>                                                        <C>          <C>          <C>
Federal income tax (benefit) at U.S. statutory rate        (34%)        (34%)        (34%)
Reduction in income tax benefit resulting from:
  Federal losses not benefited                              33%          23%          28%
  Other                                                      1%          11%           5%
                                                           ---          ---          ---
Tax benefit                                                  0%           0%          (1)%
                                                           ===          ===          ===
</TABLE>


      Deferred income taxes reflect the net tax effects of temporary differences
      between the carrying amount of assets and liabilities for financial
      reporting purposes and is a summary of the significant components of the
      Company's deferred federal tax assets and liabilities:

                                       43
<PAGE>   46
<TABLE>
<CAPTION>
                                           1999               1998
<S>                                    <C>               <C>
Deferred Tax Asset:
  Other assets                             $389,872          $79,653
  Foreign assets                                             194,118
  Operating loss carryforwards           13,123,050        8,450,080
                                         ----------        ---------
  Gross deferred tax asset               13,512,922        8,723,851
  Valuation allowance                   (13,512,922)      (8,645,197)
                                       ------------      -----------

           Deferred tax asset                                 78,654
                                       ------------           ------

Deferred Tax Liability:
  Fixed assets                               30,153           60,622
  Foreign liability                         161,043           95,996
                                            -------           ------

  Deferred tax liability                    191,196          156,618
                                            -------          -------

Net deferred tax liability                 $191,196          $77,964
                                           ========          =======
</TABLE>

      For income tax reporting purposes, the Company has net operating loss
      carryforwards of $38,597,206 which will expire between 2003 and 2014.

                                       44
<PAGE>   47
7.       DEBT

      As of December 31, 1999 and 1998, debt includes the following:

<TABLE>
<CAPTION>
                                                                     DECEMBER 31,
                                                          --------------------------------
                                                                 1999              1998
<S>                                                          <C>               <C>
Unsecured line of credit                                       $331,333        $1,940,775
Secured lines of credit                                       1,734,984           725,146
Equipment financing loans                                       741,734           955,088
Notes payable                                                   119,329           229,948
Capital leases                                                  331,719           306,745
                                                                -------           -------

                                                              3,259,099         4,157,702
Less current portion and short term credit facilities         1,918,572           474,098
                                                              ---------           -------
Long-term debt                                               $1,340,527        $3,683,604
                                                             ==========        ==========
</TABLE>


      As of December 31, 1999 and 1998, the Company had outstanding
      approximately $644,700 and $665,500, respectively, under its long term
      line of credit with the Bank of Scotland, entered into by its subsidiary,
      EPL Technologies (Europe) Limited, for up to $644,700, which bears
      interest of 2% over bank base rate (5.5% as of December 31, 1999). The
      Company also has a short-term line of credit with the Bank of Scotland in
      the amount of $1,611,700, which also bears interest of 2% over bank base
      rate. At December 31, 1999 and 1998, $1,040,304 and $59,626, respectively,
      was outstanding under this facility. The lines of credit are
      collateralized by the assets of EPL Technologies (Europe) Limited and its
      subsidiaries. The debt agreements with the Bank of Scotland contain
      certain covenants applicable to the results of operations of these
      businesses that provide for maintenance of minimum asset levels and
      minimum earnings before interest and tax to external interest ratios. The
      Company was not in compliance with the latter covenant for the month of
      December 1999 only. Subsequently, the Company has paid an administrative
      fee of approximately $250 to the Bank of Scotland as a penalty for such
      noncompliance.

      In addition, in July 1998 the Company, through its Spanish subsidiary,
      Fabbri, finalized with BankInter an unsecured line of credit for
      PTS275,000 ($1,656,600 at $1.00:PTS166 at December 31, 1999). This
      facility was drawn in full as of December 31, 1998. The facility carried
      interest of 0.3% over the BankInter base rate. There were no covenants
      applicable to this facility. During the third quarter of 1999 this
      facility was repaid out of part of the proceeds of the sale and leaseback
      of the Spanish property referred to below. A new unsecured facility was
      then granted from BankInter in the amount of PTS100,000,000 ($602,400 at
      $1.00:PTS166 at December 31, 1999). This facility carries interest of 1.0%
      over the BankInter base rate (2.85% as of December 31, 1999 at December
      31, 1999). The Company had drawn PTS55,000,000 ($331,300 at $1.00:PTS166
      at December 31, 1999) on this facility as of December 31, 1999.

      During the final quarter of 1999, the Company, through its subsidiary, EPL
      Flexible Packaging, Inc., was granted a short term credit facility of
      $100,000 with Old Second

                                       45
<PAGE>   48
      National Bank of Aurora. This facility is secured upon the inventory of
      EPL Flexible Packaging, Inc. and carries interest at a rate of 1.5% over
      the banks prime rate (8.25% as at December 31, 1999). There are no
      covenants applicable to this facility. As at December 31, 1999, $50,000
      had been drawn under this facility.

      In 1998, NewCornCo, LLC entered into two equipment financing loans with
      General Electric Capital Corporation ("GECC") and Santa Barbara Bank &
      Trust (SBB&T) secured by specifically identified capital assets. The GECC
      loan is for $549,032 for a term of 48 months bearing interest at 10.34%
      per annum. The SBB&T loan is for $465,977 for a term of 48 months payable
      in equal monthly installments bearing interest at 10.5% per annum. At
      December 31, 1999, $401,053 and $340,681 were outstanding on the GECC and
      SBB&T loans, respectively.

      Notes payable at December 31, 1999 and 1998 relate primarily to a
      financing arrangement related to an insurance policy.

      Other debt relates to capital leases that bear interest at rates from 8.0%
      through 10.5%, with varying monthly principal and interest payments.

      At December 31, 1999, aggregate annual maturities of debt (including short
      term lines of credit) were as follows:

YEAR ENDING DECEMBER 31,

<TABLE>
<S>                                                           <C>
2000                                                          $1,918,572
2001                                                             600,045
2002                                                             461,384
2003                                                             277,630
2004                                                               1,468
                                                                   -----
                                                              $3,259,099
                                                              ==========
</TABLE>

8.    CREDIT FACILITIES WITH RELATED PARTIES


<TABLE>
<CAPTION>
                                                    DECEMBER 31,
                                                       1999
                                                 -----------------
<S>                                              <C>
Revolving credit facility with CEO                       $377,000
Revolving credit facility with stockholders             3,500,000
                                                       ----------
  Total                                                $3,877,000
                                                       ==========
</TABLE>

      In March 1999, Paul L. Devine, the Company's Chairman and Chief Executive
      Officer, agreed to extend to the Company, on a short-term basis, a
      revolving credit facility in an amount of up to $500,000, which was
      increased to $1,000,000 in June 1999. At December 31, 1999, $377,000 was
      outstanding. The Company's obligations under this facility are unsecured
      and amounts outstanding thereunder bear interest at a rate of nine percent
      (9%) per annum. The Company's Chairman has agreed to defer repayment of
      the remaining balance owed to him until the earlier of (i) such time as
      the Company and he agree to a repayment date, or (ii) June 30, 2000. The
      Company has agreed to pay all

                                       46
<PAGE>   49
      reasonable out-of-pocket expenses incurred by Mr. Devine in connection
      with advancing funds to the Company under this facility.

      In December 1999, an institutional investor and a related party to such
      investor granted the Company a credit facility of $3,500,000, which amount
      was fully drawn as at December 31, 1999. The facility, which is secured by
      a pledge of certain assets of the Company, carries interest at the rate of
      10% per annum and is repayable in June 2000. In connection with obtaining
      this facility, the Company paid debt issuance costs totaling approximately
      $356,000, issued 2,000,000 shares of common stock valued based on the
      market price on the date of issuance at $1,188,000 and issued 350,000
      warrants to purchase the Company's common stock, valued at approximately
      $161,000. These costs have been recorded as deferred debt costs and are
      being amortized into interest expense over the six month term of the
      facility. The effective interest rate of this facility, after including
      all of the debt issue costs including the value of the stock and warrants
      issued, is approximately, 107%.


9.    CONVERTIBLE PREFERRED STOCK

      The Series A Preferred Stock, (the "Series A Stock") which has been issued
      up to its authorized limit of 3,250,000, was issued at a price of $1.00
      per share with each share of Series A Stock carrying the option to convert
      into common shares at a rate of $1.50 per share. The Series A Stock
      carries equal voting rights to the common shares, based on the underlying
      number of common shares after conversion. The Series A Stock carries a
      dividend rate of 10% per annum, payable in cash and/or common shares
      ($1.50 per share) at the Company's option (dividends in arrears at
      December 31, 1999 and 1998 totaled $1,420,692 and $1,414,692,
      respectively.) No shares of Series A Stock were converted during 1999. In
      addition, 20% of the common stock conversion option carries detachable
      warrants at a price of $2.00 per warrant. During 1998 and 1997, 33,575 and
      54,200 warrants were exercised, respectively, leaving no such warrants
      unexercised at December 31, 1999 and 1998.

      On July 23, 1996, the Company issued 531,915 of these shares, designated
      as Series B Convertible Preferred Stock (the "Series B Stock") at an
      aggregate consideration of $2,500,000 to two existing institutional
      investors in the Company. The Series B Stock contains the option to
      convert into such number of shares of common stock as is determined by
      dividing $4.70 by the conversion price (as defined in the documentation
      for the Series B stock) in effect at the time of conversion for each share
      of Series B stock. The extent of the beneficial conversion feature,
      representing the difference between, the $9.40 conversion price and the
      prevailing market price of the common stock at the date of issuance, a
      total of $625,000, was immediately accreted upon issuance. During 1997,
      the shareholders of the Series B Stock elected to fully exercise their
      right of conversion into common stock and thus there were no shares of
      Series B Stock outstanding at December 31, 1999 or 1998.

      During 1997, the Company received gross proceeds of $1.0 million, before
      deducting associated costs of approximately $42,000, from an existing
      institutional stockholder in connection with a private offering of common
      and Board Designated Preferred Stock. This resulted in the issuance of
      43,750 shares of common stock, together with 144,444 shares of Board
      Designated Preferred Stock-designated Series C Convertible Preferred Stock
      (the "Series C Stock"). The Series C Stock carries the option to convert
      into such number of shares of Common stock as is determined by dividing
      $4.50 by the conversion price (as defined in the documentation for the
      Series C Stock), in effect at the time of conversion for

                                       47
<PAGE>   50
      each share of Series C stock. The extent of the beneficial conversion
      feature, representing the difference between the $9.00 conversion price
      and the prevailing market price of the common stock at the date of
      issuance, a total of $72,222, was accreted immediately upon issuance. The
      Series C Stock carries a dividend rate of 10% per annum, payable in cash
      and/or shares at the Company's option. Dividends in arrears on the Series
      C Stock at December 31, 1999 and 1998 totaled $49,239. In connection with
      the issuance of the Series C Stock, the Company issued warrants to
      purchase 30,993 shares of the Company's common stock at an exercise price
      of $10.00 per share. The value of these warrants is being accreted over
      the estimated lives of these warrants (5 years). During 1998, the
      shareholders of the Series C Stock elected to fully exercise their right
      of conversion into common stock and thus, there were no shares of Series C
      Stock outstanding at December 31, 1999 and 1998.

      At the Annual Meeting of the Company held on July 21, 1997, the
      stockholders of the Company approved an increase in the number of shares
      of Board Designated Preferred Stock reserved for issuance from 2,000,000
      to 4,000,000. During 1997, the Company issued 12,500 shares of Board
      Designated Preferred Stock - designated Series D Convertible Preferred
      Stock - at an aggregate consideration, before associated costs and
      expenses, of $12,500,000, to three new institutional investors (the
      "Series D Stock"). Such issuance was made under Regulation D under the
      Securities Act of 1933, as amended, in a transaction not involving a
      public offering. The Series D Stock certificate of designation contains
      provisions which in certain circumstances outside of the Company's
      control, could provide the Series D Stockholders with the ability to
      redeem their shares. The amount to be paid by the Company in the event of
      a redemption would be calculated as the greater of (a) 115% of the stated
      value of the Series D stock plus 4% appreciation accrued from the issuance
      date to the redemption date or (b) the "parity value" of the shares to be
      redeemed, which is calculated as the number of shares issuable upon
      conversion multiplied by the closing price on the redemption date.

      The terms of the Series D Stock Agreement limit the number of shares the
      Series D stock is convertible into to 19.99% of the Company's outstanding
      common stock at the conversion date without obtaining the approval of the
      Company's common stockholders. At such conversion date, any additional
      shares presented for conversion must be redeemed by the Company.

      The Series D Stock carried the option to convert into shares of common
      stock at a variable rate, based on the stated value ($1,000) divided by
      94% of the prevailing market price at the time of conversion, as
      calculated based on the lowest five-day average closing bid price per
      share of common stock during a specified period of time, and subject to
      certain limitations. The extent of the beneficial ownership feature,
      representing the 6% discount from the market price at the conversion date,
      a total of $800,000, was accreted over the earliest period after which all
      such shares are convertible, or nine months (the "Conversion Period"). In
      addition, the Series D Stock agreement contains a provision whereby the
      stated value of the Series D Stock is to increase by 4% per annum,
      accruing from the date of issuance until conversion. In connection with
      the issuance of the Series D Stock, the Company issued 201,614 warrants to
      purchase the Company's common stock at an exercise price of 130% of the
      closing price on the issuance date (i.e., $20.16 per share). The fair
      value of these warrants ($1,200,000) was accreted over the Conversion
      Period of the Series D Stock. The accretion of the warrant value and the
      value ascribed to the beneficial conversion feature was complete as of
      December 31, 1998.

                                       48
<PAGE>   51
      During 1999, shareholders of 10,800 shares of the Series D stock elected
      to exercise their right of conversion into common stock. In connection
      with the conversion of 1,324 of these shares of the Series D Stock, the
      Company granted certain Series D shareholders warrants to purchase
      1,571,429 shares of common stock at exercise prices of $0.52 and $0.66 per
      share to induce conversion. These warrants are immediately vested and
      expire in 2004. The value of these warrants, $795,247, has been recorded
      as a return to the Series D shareholders. In connection with these
      conversions, the shareholders received common stock based only on the
      stated value of the Series D Stock held. The 210,610 shares of common
      stock issuable as a result of the appreciated value of the Series D Stock
      (the "Premium Shares") were contributed back to the Company and have been
      accounted for as Treasury Stock at the market value of the Company's stock
      at the date of the conversion.

      Also in 1999, holders of the remaining 1,500 shares of Series D Stock
      redeemed their shares to the Company for a cash payment of $1,500,000, the
      stated value of the shares redeemed. The additional value of the redeemed
      shares based on the 4% appreciation factor, $124,767, has been recorded as
      additional paid-in capital. There were no shares of Series D Stock
      outstanding at December 31, 1999.

10.   COMMON STOCK

      During 1999, the Company issued a total of 19,265,264 shares of common
      stock. A total of 13,630,314 shares were issued upon the conversion of
      10,800 shares of Series D Stock, of which 210,610 shares, with a market
      value of $138,130 were subsequently contributed back to the Company to be
      held as treasury stock. A total of 2,901,354 shares were issued in private
      placements to raise gross proceeds of $1,500,000, which were used in full
      to redeem the remaining 1,500 shares of Series D Stock (see Note 9). An
      additional 52,500 shares were issued in connection with the exercise of
      previously issued options, resulting in net proceeds to the Company of
      approximately $158,750. A total of 2,000,000 shares, valued at $1,188,000,
      were issued in connection with a loan received from two institutional
      investors. A further 681,096 shares were issued in connection with a
      private placement, resulting in net proceeds to the Company of
      approximately $330,000. Total issuance costs related to these issuances of
      stock amounted to approximately $12,000.

      During 1998, the Company issued a total of 2,462,982 shares of common
      stock. A total of 809,097 shares were issued in connection with the public
      offering completed in May 1998, resulting in net proceeds to the Company
      of approximately $6,624,000. A total of 1,462,310 shares were issued upon
      the conversion of 2,013,000 shares of Series A Stock, all 144,444 shares
      of Series C Stock and 200 shares of Series D Stock. A total of 158,000
      shares were issued from the exercise of previously issued options,
      resulting in net proceeds to the Company of approximately $795,000. A
      total of 33,575 shares were issued from the exercise of previously issued
      warrants, resulting in net proceeds to the Company of approximately
      $67,000.

      During 1997, the Company issued a total of 1,282,382 shares of common
      stock. A total of 119,425 shares were issued from the exercise of
      warrants, resulting in net proceeds to the Company of $369,300. A total of
      410,250 shares were issued from the exercise of options, resulting in net
      proceeds to the Company of $1,489,967. 278,000 and 265,957 shares of
      common stock were issued upon conversion of 417,000 shares of Series A
      Preferred Stock and all 531,915 shares of Series B Preferred Stock,
      respectively. A total of 168,750 shares were issued in connection with two
      private placements, which resulted in net proceeds to the

                                       49
<PAGE>   52
      Company of $1,246,841. A further 40,000 shares were issued in connection
      with the CMC acquisition.

      During 1999, the Company granted 750,000 warrants and 50,000 options to
      consultants in lieu of cash compensation for advisory services provided.
      The value of these options and warrants, $481,000, has been recorded as
      selling, general and administrative expenses in the Company's statement of
      operations. At December 31, 1999, the Company had warrants outstanding to
      purchase 4,173,857 shares of common stock at an average price of $1.65 per
      share. In addition, the Company had options outstanding for the issuance
      of 1,897,625 shares of common stock at an average price of $8.67 per share
      (see Note 11).

11.   STOCK OPTION PLANS

      The 1994 Stock Incentive Plan (the "1994 Plan") originally provided for up
      to 750,000 shares of unissued common stock to be made available for the
      granting of options. This was approved by stockholders on July 21, 1994.
      On July 22, 1996, stockholders approved an increase in the number of
      shares available for the granting of options under the 1994 Plan to
      1,500,000. On July 21, 1997, the stockholders approved another amendment
      to the 1994 Plan, which increased the number of shares of common stock
      reserved for issuance under the 1994 Plan to 2,250,000. The 1994 Plan
      provided that no options could be granted under it after May 4, 1999, and
      thus no options were available for grant under the 1994 Plan as of
      December 31, 1999.

      The Company's 1998 Stock Incentive Plan, as amended and restated (the
      "1998 Plan"), was adopted by the Company's shareholders on September 29,
      1998. Under the 1998 Plan, 850,000 shares of common stock are reserved for
      issuance.

      The 1998 Plan provides for options to be granted with exercise prices at
      or in excess of the market value of the Company's stock at the date of
      grant. Such options are generally immediately vested and have terms of 5
      years.

                                       50
<PAGE>   53
      Combined information regarding these plans is as follows:

<TABLE>
<CAPTION>
                                                                           WEIGHTED
                                                                            AVERAGE
                                                            SHARES         EXERCISE
                                                         UNDER OPTION        PRICE

<S>                                                      <C>               <C>
Outstanding and Exercisable at December 31, 1996            1,647,750         $6.02

Activity for the Year Ended December 31, 1997:
  Granted                                                     520,625         13.56
  Exercised                                                 (410,250)          3.68
                                                            ---------

Outstanding and Exercisable at December 31, 1997            1,758,125          8.92

Activity for the Year Ended December 31, 1998:
  Granted                                                     396,625          8.61
  Exercised                                                 (158,000)          5.05
                                                            ---------

Outstanding and Exercisable at December 31, 1998            1,996,750          9.17
                                                            ---------

Activity for the Year Ended December 31, 1999:
  Granted                                                     298,125          4.26
  Exercised                                                  (52,500)          3.02
  Expired                                                   (344,750)          8.62
                                                            ---------

Outstanding and Exercisable at December 31, 1999            1,897,625         $8.67
                                                            =========
</TABLE>


      These options expire between April 15, 2000 and May 3, 2004.

      The following table summarizes information about the Company's stock
options outstanding at December 31, 1999:

<TABLE>
<CAPTION>
                          NUMBER                 WEIGHTED        WEIGHTED
    RANGE OF            OUTSTANDING              AVERAGE          AVERAGE
    EXERCISE                AT                  REMAINING        EXERCISE
    PRICES           DECEMBER 31, 1999       CONTRACTUAL LIFE      PRICE
<S>                  <C>                     <C>                <C>
$0.69 - $4.50              425,125              2.3 years        $   3.68
$4.61 - $8.00              524,250                    2.5            6.72
$8.13 - $13.25             392,625                    2.2            9.02
$14.00 - $15.25            555,625                    2.6           14.10
                         ---------
                         1,897,625
                         =========
</TABLE>

      The estimated fair value of options granted during 1999, 1998 and 1997
      ranged between $0.42 - $2.87, $3.13 - $8.18, and $2.48 - $3.21 per share,
      respectively. The Company applies Accounting Principles Board Opinion No.
      25 and related interpretations in accounting for its stock option plans.
      All options have been granted with exercise prices at or above the market
      value of the Company's common stock at the date of grant.

                                       51
<PAGE>   54
      Accordingly, no compensation cost has been recognized for its stock option
      plans. Had compensation cost for the Company's stock option plans been
      determined based on the fair value at the grant dates for awards under
      those plans consistent with the provisions of SFAS No. 123, the Company's
      net loss and loss per share for the years ended December 31, 1999, 1998
      and 1997 would have been increased to the pro forma amounts indicated
      below:

<TABLE>
<CAPTION>
                                                          1999                1998                1997
<S>                                                 <C>                 <C>                 <C>
Net loss available for common stockholders:
  As reported                                       $   15,442,888      $   10,535,093      $    8,354,544
  Pro forma                                         $   16,034,165      $   12,077,683      $   11,550,509

Net loss per common share (basic and diluted):
  As reported                                       $         1.09      $         0.99      $         1.00
  Pro forma                                         $         1.13      $         1.14      $         1.38
</TABLE>

      The fair value of options granted under the Company's stock option plans
      during 1999, 1998 and 1997 was estimated on the date of grant using the
      Black-Scholes option-pricing mode with the following assumptions used: no
      dividend yield, expected volatility of 81%, 65% and from 62% - 66% for the
      years ended December 31, 1999, 1998 and 1997, respectively, risk free
      interest rates of 6%, from 5.34% - 5.75%, and from 5.4% - 6.4% for the
      years ended December 31, 1999, 1998 and 1997, respectively, and expected
      lives of 5 years. The pro forma effect on net income for 1999, 1998 and
      1997 is not representative of the pro forma effect on net income in future
      years because it does not take into consideration pro forma compensation
      expense related to grants made prior to 1996.

12.   NET LOSS PER COMMON SHARE

      Net loss per common share is computed by dividing the loss applicable to
      common stockholders by the weighted average number of common shares
      outstanding during the period. For the years ended December 31, 1999, 1998
      and 1997, the potential common shares have an antidilutive effect on the
      net loss per common share for common stockholders.

      The following table summarizes those securities that could potentially
      dilute loss per common share for common shareholders in the future that
      were not included in determining net loss per common stockholders as the
      effect was antidilutive.

<TABLE>
<CAPTION>
                                                        DECEMBER 31,
                                            ----------------------------------
                                                 1999        1998        1997
                                                    (SHARES IN THOUSANDS)
<S>                                             <C>         <C>         <C>
Potential common shares resulting from:
  Stock options                                 1,898       1,997       1,758
  Convertible preferred stock                      40       2,907       2,724
  Warrants                                      4,174         264         341
                                                -----         ---         ---
                                                6,112       5,168       4,823
                                                =====       =====       =====
</TABLE>

                                       52
<PAGE>   55
13.   COMMITMENTS AND CONTINGENCIES

      The Company has entered into various operating leases for facilities,
      vehicles and equipment. At December 31, 1999, future minimum lease
      payments were as follows:

YEAR ENDED DECEMBER 31,

<TABLE>
<S>                                        <C>
2000                                       $1,218,879
2001                                        1,158,298
2002                                          873,915
2003                                          553,063
2004 and thereafter                           978,274
                                              -------
Future minimum lease payments              $4,782,429
                                           ==========
</TABLE>

      Rental expense for operating leases amounted to $1,071,530, $891,118 and
      $430,039 for the years ended December 31, 1999, 1998 and 1997,
      respectively.

      The Company has entered into agreements for services with certain
      executive officers. In addition to a base salary, certain other benefits
      are provided. At December 31, 1999, minimum payments to executive officers
      under these agreements totaled approximately $1,076,000.

      In connection with the Fabbri acquisition, the Company was informed that
      from time to time in the past Fabbri disposed of certain hazardous waste
      using some waste management companies that were not authorized handlers of
      hazardous waste under applicable Spanish legislation. The Company obtained
      from the prior owner of Fabbri an indemnification for any fines or
      penalties levied against the Company from such actions. Management
      believes that the matter will not have a material adverse effect on the
      Company's consolidated financial position or results of operations.

      In connection with the sale and leaseback of the premises at Fabbri, the
      Company became aware of certain planning and compliance issues with the
      local authorities that remain unresolved. The Company does not believe
      that it will incur any material liability related to these matters,
      however, if any costs are incurred, the Company believes it can recover
      these costs from the prior owner of Fabbri under a warranty in the sale
      and purchase agreement. As a result of this uncertainty, the Company has
      placed approximately $395,000 into escrow pending the resolution of this
      matter. Such amount has been recorded as restricted cash - current on the
      balance sheet.

14.   FAIR VALUE OF FINANCIAL INSTRUMENTS

      The carrying value of cash and cash equivalents, accounts receivable, due
      from related parties and accounts payable approximate fair value because
      of the short maturities of these items.

      Interest rates that are currently available to the Company for issuance of
      long-term debt (including current maturities) with similar terms and
      remaining maturities are used to estimate fair value for long-term debt.
      The estimated fair value of the long-term debt approximates its carrying
      value.

                                       53
<PAGE>   56
      The fair values are based on pertinent information available to management
      as of respective year-ends. Although management is not aware of any
      factors that could significantly affect the estimated fair value amounts,
      such amounts have not been comprehensively revalued for purposes of these
      consolidated financial statements since that date, and current estimates
      of fair value may differ from amounts presented herein.

15.   CUSTOMER CONCENTRATION

      During the year ended December 31, 1999, no single customer accounted for
      more than 10% of total consolidated revenues. In 1998 and 1997, one
      customer accounted for approximately 15% ($5,054,000) and 32% ($6,313,000)
      of total consolidated revenues, respectively.

16.   INDUSTRY AND GEOGRAPHIC AREA SEGMENT INFORMATION

      The Company develops, manufactures, and markets proprietary technologies
      designed to maintain the integrity of fresh produce. These products fall
      into two major classifications: processing aids and packaging materials.
      Processing aids are designed to inhibit the enzymatic degradation that
      causes fruits and vegetables to begin to deteriorate immediately after
      processing and are sold primarily in the United States with smaller
      amounts also sold in Canada. This category also includes activities of the
      Company's fresh-cut corn and potato products, as well as provision of
      scientific and technical services in the United States. The Company's
      produce packaging business involves perforating, converting and printing
      flexible packaging, using technologies and processes, some of which are
      proprietary to the Company, which are marketed in North and South America,
      the United Kingdom and Continental Europe.

                                       54
<PAGE>   57
      The following table summarizes the Company's financial information by
industry segment.

<TABLE>
<CAPTION>
                                                                        1999                1998               1997
<S>                                                                <C>                 <C>                <C>
SALES:
  Processing aids                                                     $7,884,006         $8,912,517         $3,034,795
  Packaging materials                                                 22,768,549         24,065,020         16,918,685
                                                                      ----------         ----------         ----------

           Total sales                                               $30,652,555        $32,977,537        $19,953,480
                                                                     ===========        ===========        ===========

NET LOSS FROM OPERATIONS:
  Processing aids                                                  $(10,344,151)       $(6,729,036)       $(4,742,326)
  Packaging materials                                                (3,281,745)          (970,840)        (2,579,870)
                                                                     -----------          ---------        -----------

           Total net loss from operations                          $(13,625,896)       $(7,699,876)       $(7,322,196)
                                                                   =============       ============       ============

DEPRECIATION AND AMORTIZATION EXPENSE:
  Processing aids                                                       $949,242           $558,202           $543,960
  Packaging materials                                                  1,192,105          1,161,240            745,798
                                                                       ---------          ---------            -------

           Total depreciation and amortization expense                $2,141,347         $1,719,442         $1,289,758
                                                                      ==========         ==========         ==========

TOTAL ASSETS:
  Processing aids                                                    $10,753,218         $9,747,366
  Packaging materials                                                 15,678,275         20,024,142
                                                                     -----------         ----------

           Total assets                                              $26,431,493        $29,771,508
                                                                     ===========        ===========

TOTAL CAPITAL EXPENDITURES:
  Processing aids                                                       $607,433         $3,638,067           $419,608
  Packaging materials                                                    805,425          1,424,629            617,030
                                                                         -------          ---------            -------

           Total capital expenditures                                 $1,412,858         $5,062,696         $1,036,638
                                                                      ==========         ==========         ==========
</TABLE>

                                       55
<PAGE>   58
      The Company has operating facilities in the United States, the United
      Kingdom and Spain. The following table summarizes the Company's financial
      information based on operation location.

<TABLE>
<CAPTION>
                                                                       1999               1998               1997
<S>                                                                 <C>                <C>                <C>
SALES:
  United States                                                     $10,550,077        $12,230,514         $5,750,733
  United Kingdom                                                     11,486,238         11,929,324         13,570,473
  Spain                                                               8,616,240          8,817,699            632,274
                                                                      ---------          ---------            -------

           Total                                                    $30,652,555        $32,977,537        $19,953,480
                                                                    ===========        ===========        ===========

TOTAL LONG-LIVED ASSETS:
  United States                                                      $7,027,044         $6,204,642
  United Kingdom                                                      5,086,962          5,554,015
  Spain                                                                 806,318          4,509,991
                                                                        -------          ---------

           Total                                                    $12,920,324        $16,268,648
                                                                    ===========        ===========
</TABLE>

17.        SUBSEQUENT EVENTS

      In February and March 2000, the Company, in a series of transactions,
      borrowed from individual investors $3,275,000 for a period of 12 months.
      The loans, which are unsecured, have a stated interest rate of 10% per
      annum. In connection with these loans, the Company issued warrants to
      acquire a total of 1,637,500 shares of common stock at an exercise price
      of $1.00 per share. The value ascribed to these warrants will be amortized
      into interest expense over the 12 month life of the loans.

                                       56
<PAGE>   59
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

       The following table sets forth certain information with respect to each
of the directors and executive officers of the Company.

<TABLE>
<CAPTION>
     NAME                                        AGE                     POSITIONS WITH THE COMPANY AND AFFILIATES
<S>                                              <C>          <C>
Paul L. Devine                                    45          Chairman of the Board of Directors, President, Chief
                                                              Executive Officer

Dr. William R. Romig                              53          Senior Vice President-Science and Technology

Michael S. Leo                                    56          Secretary

Antony E. Kendall                                 56          Chief Executive Officer of EPL Flexible Packaging Ltd.

Jose Saenz de Santa Maria                         44          Chief Operating Officer - Fabbri Artes Graficas
                                                              Valencia SA

Virginia N. Finnerty                              39          Chief Operating Officer of EPL Food Products, Inc.

Adolph S. Clausi (1)(2)                           77          Director

W. Ward Carey (1)(2)(3)                           62          Director
</TABLE>

(1)    Member of Compensation Committee

(2)    Member of Audit Committee

(3)    Appointed January 12, 1999

Paul L. Devine. Mr. Devine was appointed Chairman and Chief Executive Officer of
the Company in March 1992. From 1989 to 1992, Mr. Devine was involved as a
business consultant in the identification and targeting of acquisitions for
various public companies. During this time, he also served as a director and
chief executive officer of various companies, including three U.K. subsidiaries
of Abbey Home Healthcare, Inc., a U.S. public health care group. Prior to this,
he was the Chief Executive of Leisure Time International, plc from 1986 to 1989.
He is a graduate of London University and holds Bachelors and Masters degrees in
curriculum research. Throughout his business career, he has been intimately
involved in the design and implementation of new product strategies, both in
financial services and health/hygiene services.

                                       57
<PAGE>   60
Dr. William R. Romig. Dr. Romig was appointed Vice President of Research and
Development of the Company in September 1994, and, as of January 1, 1998, serves
as Senior Vice President of Science and Technology. From 1988 until 1994, Dr.
Romig was first Senior Director of Vegetable Genetics and then Senior Director
of Business Development and Director of Product Development for FreshWorld, a
joint venture between DNA Plant Technology Corporation, a public company, and
duPont. Prior to 1988, he worked for General Foods Corporation (Kraft)
eventually attaining the highest technical position of Principal Scientist. Dr.
Romig received his B.S. in Plant Pathology from Cornell University and his Ph.D.
from the University of Delaware. He has held positions of Adjunct Professor at
several universities and has lectured and published in the area of fresh-cut
fruits and vegetables. Dr. Romig is also Chairman of the Company's Scientific
Advisory Board.

Michael S. Leo. Mr. Leo was appointed Secretary of the Company in February 2000.
He is a partner in the law firm of Gibbons, Del Deo, Dolan, Griffinger &
Vecchione, where he has worked since January 1997. Prior to this he was a
partner with Day, Barry & Howard from November 1994 to December 1996. In
industry, Mr. Leo has held positions as Senior Vice President, General Counsel
and a director of Rhone-Poulenc, Inc., Assistant General Counsel of
International Paper Company and Associate General Counsel of Standard &
Poor's/Intercapital, Inc. He has also held a position in enforcement and
compliance with the U.S. Securities and Exchange Commission. Mr. Leo received
his B.A. degree at Brooklyn College, his M.A. degree in Business Policy at
Columbia University and his J.D. at George Washington University.

Antony E. Kendall. Mr. Kendall joined the Company in August 1996 as chief
executive officer of BPS (now EPL Flexible Packaging Ltd). From 1970 to 1996,
Mr. Kendall worked for the UCB group of companies in various senior management
positions. Most recently he was Managing Director of UCB Flexible Ltd.,
responsible for marketing its specialty packaging products in the U.K. and for
Pepsico European contracts. He holds a B.S. degree in Mechanical Engineering
from the University of London.

Jose Saenz de Santa Maria. Mr. Saenz de Santa Maria has served as Chief
Operating Officer of Fabbri since its acquisition by the Company in December
1997. Mr. Saenz de Santa Maria joined the Company in July 1997 as an independent
consultant, and was responsible for conducting the Company's on-site due
diligence with respect to the Fabbri acquisition. From January 1994 to July 1997
Mr. Saenz de Santa Maria served as Managing Director of AMCOR Flexibles Espano.
Prior to this, Mr. Saenz de Santa Maria served as a senior executive of
Ramondine, Inc., a specialty packaging company, from August 1987 to December
1993. He is a law graduate of the University of Madrid and holds Masters degrees
in Commercial Management and Marketing from CESEM Business School (Madrid).

Virginia N. Finnerty. Ms. Finnerty has served as Chief Operating Officer of EPL
Food Products, Inc. (formerly known as IPS Produce, Inc.), the subsidiary
through which the Company conducts its activities related to fresh-cut potatoes,
since June 1997. From June 1994 to June 1997, Ms. Finnerty served as the
Company's Director of Business Development. From December 1993 to June 1994, Ms.
Finnerty worked in sales and marketing development for the Greater Philadelphia
Chamber of Commerce. From 1990 to 1993, Ms. Finnerty served as a sales and
marketing manager for Osterman Foods. Ms. Finnerty holds a BFA and an Education
Certification from Temple University and an MBA in marketing from St. Joseph's
University.

Adolph S. Clausi. Mr. Clausi was elected to the Board of Directors in March
1998. For more than five years, Mr. Clausi has served as a consultant and
adviser to the food industry. He was Senior Vice President and Chief Research
Officer of General Foods Corporation worldwide, prior to his retirement. Mr.
Clausi is a past President of the Institute of Food Technologists (IFT), past
Chairman of the IFT Foundation and past Chairman of the Food Safety Council. He
has a chemistry degree from Brooklyn College and has done graduate work at
Stevens Institute of Technology. Mr. Clausi is the holder of 13 patents, has
authored chapters in food

                                       58
<PAGE>   61
technology texts and has delivered numerous papers on various aspects of the
management of food science and technology. Mr. Clausi is currently a director of
Opta Food Ingredients, Inc. and also serves as a member of the Technical
Advisory Board of Goodman Fielder, Ltd. He served on the Technical Advisory
Board of Martek Biosciences, Inc. from 1990 to 1997. Mr. Clausi serves as a
director and a member of Technical Advisory Boards of a number of private
companies as well.

W. Ward Carey. Mr. Carey was elected to the Board of Directors in January 1999.
He is currently Senior Vice President - Investments at PaineWebber Incorporated
in New York. Prior to joining PaineWebber in 1993, he served as an Executive
Vice President and Director of Bessemer Trust Company of Florida. He previously
served as President, Chairman and Chief Executive Officer of Tucker Anthony in
New York and Chairman of the Executive Committee of Sutro and Company in San
Francisco. He has almost 40 years of senior level experience in the investment
and investment banking fields.


COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

       Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors, and persons who own more than 10%
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and Nasdaq, copies of which are required by regulation to be furnished to the
Company.

       Based solely on review of the copies of such forms furnished to the
Company, the Company believes that during fiscal 1999 its officers, directors
and ten percent (10%) beneficial owners complied with all Section 16(a) filing
requirements.

                                       59
<PAGE>   62
ITEM 11. EXECUTIVE COMPENSATION

       The following table sets forth the aggregate compensation paid by the
Company for the year ended December 31, 1999 for services rendered in all
capacities to the Chief Executive Officer and each of the other five most highly
compensated executive officers (the "Named Executive Officers").

<TABLE>
<CAPTION>
                                                                                             LONG-TERM COMPENSATION
                                                   ANNUAL COMPENSATION                   AWARDS                  PAYOUTS
                                                                                                                          ALL
                                                                                 RESTRICTED                              OTHER
                                                                      OTHER        STOCK       OPTIONS/     LTIP        COMPEN-
             NAME AND                        SALARY     BONUS      COMPENSATION   AWARD(S)       SARS      PAYOUTS      SATION
       PRINCIPAL POSITION         YEAR        ($)        ($)           ($)          ($)          (#)         ($)          ($)
<S>                               <C>       <C>       <C>          <C>           <C>           <C>        <C>          <C>
       Paul L. Devine             1999      275,000          0        5,888             0            0          0            0
         Chairman, President      1998      275,000          0        2,872             0            0          0            0
         and Chief Executive      1997      225,000    225,000            0             0      100,000          0            0
         Officer

       Jose Saenz de Santa Maria  1999      128,205          0       21,659(1)          0            0          0            0
         Managing Director        1998      133,600     13,360       25,593(1)          0       52,500          0            0
         Fabbri Artes Graficas    1997            0          0       32,895(1)          0            0          0            0
         Valencia S.A.

       Bruce M. Crowell           1999      111,136          0       51,392             0            0          0            0
         Vice President           1998      157,500          0            0             0      100,000          0            0
         Chief Financial Officer  1997            0          0            0             0            0          0            0

       Antony E. Kendall          1999      134,460          0       15,837(2)          0            0          0            0
         Chief Executive Officer  1998      137,423          0       12,788(2)          0       20,000          0            0
         EPL Flexible             1997      125,470      8,200       13,089(2)          0       25,000          0            0
         Packaging Ltd

       William R. Romig           1999      130,000          0            0             0            0          0            0
         Senior Vice President    1998      120,000          0            0             0            0          0            0
         Science and Technology   1997      105,750     14,075        1,634             0       75,000          0            0
</TABLE>

         (1)      assumes an exchange rate of $1:PTS162 for 1999, $1:PTS149.70
for 1998 and $1:PTS152.10 for 1997.

         (2)      assumes an exchange rate of (pound sterling)1:$1.652 for 1999
and (pound sterling)1:$1.65 for 1998 and 1997

COMPENSATION OF DIRECTORS

With the exception of Mr. Devine in his capacity as an officer of the Company,
no cash compensation was paid to any director of the Company during the year
ended December 31, 1999. In May 1999, in accordance with the terms of the
Company's 1994 Stock Incentive Plan, W. Ward Carey, Adolph S. Clausi and former
director Robert D. Mattei were each granted an option to acquire 1,875, 7,500
and 7,500 shares, respectively of Common Stock at an exercise price of $3.875
per share, for their services as members of the audit and compensation
committees. These options are exercisable for five-year terms and have exercise
prices equal to the fair market value of such shares on the date of grant.

Pursuant to the terms of the Company's 1998 Stock Incentive Plan, as amended and
restated, each non-employee director of the Company shall receive an automatic
grant of options to purchase 7,500 shares of Common Stock on June 25, 2000 and
on each June 25 thereafter during the term of such plan. See "Stock Incentive
Plans" below.

In addition, the Company from time to time has granted to certain of its
non-employee directors a number of options to purchase shares of Common Stock
upon the initial election of such director to the Company's Board

                                       60
<PAGE>   63
of Directors to provide incentive for a high level of dedication in the future
and to align the interests of such directors with the interests of the Company's
shareholders. See Item 13 - "Certain Relationships and Related Transactions."

EMPLOYMENT AND CONSULTING CONTRACTS

Mr. Devine and the Company are parties to an employment agreement dated as of
January 1, 1997 that provides that Mr. Devine is to serve as the Company's
Chairman of the Board, President and Chief Executive Officer. The agreement
provides for a rolling three-year term. The agreement provides for a base salary
to be fixed by the Board which, as of January 1, 1997, was $275,000 per year. On
March 28, 2000, the Board increased Mr. Devine's annual salary to $375,000.
Pursuant to the agreement the Company will maintain life insurance on Mr.
Devine's life with a face amount equal to at least $1,000,000, for which Mr.
Devine may designate a beneficiary. Under the agreement Mr. Devine also will be
entitled to receive a retirement benefit if he remains continuously employed (as
defined) by the Company until age 50. Generally, if Mr. Devine retires at age
65, the retirement benefit to be received annually will be equal to 50% of his
average annual base salary and bonus during the final three years of his
employment (less benefits from any other defined benefit pension plan of the
Company). The percentage of Mr. Devine's average annual base salary and bonus
will be reduced or increased by 6% for each year by which Mr. Devine elects to
have such retirement benefit commence earlier or later than his 65th birthday.
The agreement also provides that Mr. Devine is entitled to participate in all
benefit plans and arrangements of the Company and may also receive bonuses, if
any, as determined by the Board of Directors. The agreement also provides
certain disability and death benefits to Mr. Devine, as well as severance
payments approximately equal to Mr. Devine's average salary and bonus for the
previous three years, to continue for three years if Mr. Devine is terminated
under certain conditions. Additionally, Mr. Devine is entitled to receive a
payment of slightly less than three times his "base amount" (as defined in the
Internal Revenue Code of 1986) in the event of a "change of control" of the
Company (as defined in the agreement). This agreement also contains certain
customary provisions regarding confidentiality and non-competition.

The Company, through Fabbri Artes Graficas Valencia S.A. ("Fabbri"), entered
into an employment agreement with Mr. Saenz de Santa Maria commencing on May 1,
1998, which provides that Mr. Saenz de Santa Maria is to serve as managing
director of Fabbri. The agreement provides for an annual salary of PTS20,000,000
($133,000 at an exchange rate of $1:PTS150), which salary is reviewable on
January 1 annually, together with customary benefits, such as vacation and the
provision of an automobile. A bonus is also payable upon the achievement of
certain performance targets, as agreed on an annual basis. The contract may be
terminated by either side upon six months' notice. The agreement also contains
certain customary provisions regarding confidentiality and non-competition.

The Company, through Bakery Packaging Services Limited (now known as EPL
Flexible Packaging Limited ("EPL Flexible")), entered into an employment
agreement with Mr. Kendall commencing on August 1, 1996, which provides that Mr.
Kendall is to serve as Chief Executive Officer of EPL Flexible. The agreement
originally provided for an annual salary of (pound sterling)70,000 ($115,000 at
an exchange rate of (pound sterling)1:$1.65), which salary is reviewable on
January 1 annually and has been increased to (pound sterling)83,000 ($137,000 at
an exchange rate of (pound sterling)1:$1.65) as of July 1, 1997, together with
customary benefits, such as vacation, the provision of an automobile, healthcare
coverage and contributions into a defined contribution pension scheme. A bonus
is also payable upon the achievement of certain performance targets, as agreed
on an annual basis. The contract may be terminated by either side upon six
months' notice. The agreement also contains certain customary provisions
regarding confidentiality and non-competition. The annual salary was increased
to (pound sterling)100,000 ($165,000 at an exchange rate of (pound
sterling)1:$1.65), effective January 1, 2000.

                                       61
<PAGE>   64
Effective January 1, 1998, the Company entered into a new employment agreement
with Dr. Romig, which runs for an initial term of two years, with annual renewal
terms thereafter. Either party may terminate the contract upon six months'
notice. The initial annual salary is $120,000, with a bonus of up to 25% of the
salary based upon the achievement of agreed-upon objectives. The salary was
increased to $140,000 effective July 1, 1999. In addition to the customary
provisions on vacation and healthcare coverage, the agreement also provides
that, in the event of a termination of employment by either party due to a
change in control (as defined in the agreement), Dr. Romig would receive a total
payment equal to twice his annual salary plus a bonus equal to his average bonus
earned over the previous twelve months. The agreement also contains certain
customary provisions regarding confidentiality and non-competition.

STOCK INCENTIVE PLANS

The Company's 1994 Stock Incentive Plan was adopted by the shareholders on July
21, 1994, and modified by the shareholders to increase the shares issuable
thereunder and to make certain other changes on July 22, 1996, and again on July
21, 1997 (as so modified, the "1994 Plan"). The Company's 1998 Stock Incentive
Plan, as amended and restated ( the "1998 Plan"), was adopted by the Company's
shareholders on September 29, 1998. The 1994 Plan and the 1998 Plan are intended
to provide additional incentive to certain employees, certain consultants or
advisors and non-employee members of the Board of Directors to enter into or
remain in the employ of the Company or to serve on the Board of Directors by
providing them with an additional opportunity to increase their proprietary
interest in the Company and to align their interests with those of the Company's
shareholders generally through the receipt of options to purchase Common Stock
that have been structured to comply with the applicable provisions of Section
16(b) of the Securities Exchange Act of 1934, as amended, and Rule 16b-3
thereunder. The 1994 Plan and the 1998 Plan provide for the grant of incentive
stock options within the meaning of the Internal Revenue Code of 1986, as
amended, and non-qualified stock options and the award of shares of Common
Stock. The particular terms of each option grant or stock award are set forth in
a separate agreement between the Company and the optionee or award recipient.
The 1994 Plan and the 1998 Plan are administered by the administration
committees appointed by the Board of Directors, which are currently comprised of
W. Ward Carey and Adolph S. Clausi. The committees generally have the discretion
to determine the number of shares subject to each award, and other applicable
terms and conditions, including a grant's vesting schedule. The term of an
option granted under the 1994 Plan could not be more than five years from the
grant date and options generally terminate three months after an optionee ceases
to be employed by the Company (twelve months in the case of death or
disability). The 1994 Plan provided that no option may be granted under it after
May 4, 1999.

Under the 1998 Plan, 850,000 shares of Common Stock are reserved for issuance.
The terms of the 1998 Plan are substantially similar to those of the 1994 Plan,
except that (i) the minimum exercise price for options granted under the 1998
Plan to executives, officers and employee directors of the Company that were
serving as of September 29, 1998, is $14.00 per share, (ii) all options granted
under the 1998 Plan must be granted at a premium to the market price of the
Common Stock at the time of grant, (iii) options granted under the 1998 Plan
cannot be repriced without shareholder approval and (iv) the term of an option
may not be more than ten years from the grant date. In addition, the 1998 Plan
provides for the automatic grant to each non-employee director of the Company of
options to purchase 7,500 shares of Common Stock on each June 25 thereafter
during the term of the 1998 Plan. The 1998 Plan provides that no option may be
granted under it after June 25, 2008.

No grants of options to purchase Common Stock were made during the year ended
December 31, 1999 to Named Executive Officers.

                                       62
<PAGE>   65
The following table sets forth certain information concerning exercises by Named
Executive Officers of options to purchase Common Stock during the year ended
December 31, 1999 and the value as of December 31, 1999 of unexercised stock
options held by Named Executive Officers as of such date.


                   AGGREGATED OPTION EXERCISES IN LAST FISCAL
                    YEAR AND FISCAL YEAR-END OPTION VALUES(1)

<TABLE>
<CAPTION>
                                                                                                        VALUE OF UNEXERCISED
                                                                             NUMBER OF SECURITIES           IN-THE-MONEY
                                                                        UNDERLYING UNEXERCISED OPTIONS       OPTIONS AT
                                                                             AT DECEMBER 31, 1999        DECEMBER 31, 1999(1)
                                        SHARES                          -----------------------------------------------------
                                       ACQUIRED          VALUE                             UNEXER-                    UNEXER-
         NAME                         ON EXERCISE     REALIZED($)          EXERCISABLE     CISABLE     EXERCISABLE    CISABLE
         ----                         -----------     -----------          -----------     -------     -----------    -------
<S>                                   <C>             <C>                  <C>             <C>         <C>            <C>
         Paul L. Devine                    0              0                   400,000          0             0           0
         Jose Saenz de Santa Maria         0              0                    45,000          0             0           0
         Antony E. Kendall                 0              0                    95,000          0             0           0
         William R. Romig                  0              0                   180,000          0             0           0
</TABLE>

         (1)      At December 31, 1999, the closing price of a share of Common
                  Stock on the Nasdaq Small Cap Market was $1.00

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of the Company's Compensation Committee during fiscal 1999 were Mr.
Clausi, who served for the entire year, Mr. Mattei, who served until his
resignation in November 1999, and Mr. Carey who was elected to the committee in
January 1999. None of Mr. Clausi, Mr. Mattei or Mr. Carey were officers or
employees of the Company or any of its subsidiaries during 1999. Mr. Mattei was
Secretary of the Company from February 1988 to March 1993. Except as disclosed
under "Item 13 - Certain Relationships and Related Transactions," none of the
members of the Compensation Committee nor any of their affiliates entered into
any transactions with the Company during 1999.

                                       63
<PAGE>   66
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain information, as of December 31,
1999, regarding the beneficial ownership of (i) each director, (ii) each of the
Named Executive Officers, (iii) all executive officers and directors of the
Company as a group and (iv) each person known to the Company to be a beneficial
owner of more than 5% of the Company's outstanding Common Stock. The table also
sets forth certain information as of December 31, 1999, regarding beneficial
ownership of the Company's Series A Preferred Stock, each share of which is
convertible into Common Stock and is entitled to the number of votes equal to
the number of whole shares of Common Stock into which each such share is
convertible. Except as set forth below, the shareholders named below have sole
voting and investment power with respect to all shares of Common Stock shown as
beneficially owned by them.

<TABLE>
<CAPTION>
                                         SHARES                PERCENT
                                      BENEFICIALLY                OF
NAME OF BENEFICIAL OWNER                OWNED (1)             COMMON STOCK
------------------------                ---------             ------------
<S>                               <C>                         <C>
GHM, Inc.                            4.370,487(2)                13.85%

Lancer Partners, L.P.                3,788,505(3)                12.39%

Joseph Giamanco                      3,227,412(4)                10.22%

Wayne Close                          2,992,307(5)                 9.70%

Paul L. Devine                         770,416(6)                 2.49%

Adolph S. Clausi                        73,125(7)                    *

W. Ward Carey                           35,300(8)                    *

William R. Romig                       180,000(9)                    *

Antony E. Kendall                      96,000(10)                    *

Jose Saenz de Santa Maria               45,000(9)                    *

Directors and executive officers
  as a group (8 persons)            1,390,466(11)                 4.41%

Total number of shares outstanding -   30,565,618               100.00%
  common

Shares of common stock issuable upon
 conversion of Series A Preferred       40,000(12)                   *
</TABLE>

         *        Less than one percent.

(1)      Unissued shares of Common Stock of each owner subject to currently
         exercisable options or other rights to acquire securities exercisable
         within 60 days of the date hereof are included in the totals listed and
         are deemed to be outstanding for the purpose of computing the
         percentage of Common Stock owned by such person, but are not deemed to
         be outstanding for the purpose of computing the percentage of the class
         owned by any other person. The effect of this calculation is to
         increase the stated total ownership percentage currently controlled.
         Information in the table is based solely upon information contained in
         filings with the Securities and Exchange Commission, pursuant to
         sections 13(d) and 13(g) of the Securities Exchange Act of 1934, as
         amended, and the records of the Company. The calculation also excludes
         210,610 shares held in treasury at December 31, 1999.

(2)      Includes 1,000,000 shares of Common Stock that may be acquired by
         exercising warrants. The address for GHM, Inc. is 74 Trinity Place, New
         York, NY 10006

                                       64
<PAGE>   67
(3)      Includes shares of Common Stock held by funds other than Lancer
         Partners, L.P., but which are commonly managed in a group that includes
         Lancer Partners, L.P. The address for Lancer Partners, L.P. is 375 Park
         Avenue, Suite 2006, New York, NY 10152.

(4)      Includes 1,000,000 shares of Common Stock that may be acquired by
         exercising warrants. Mr Giamanco is a controlling shareholder in GHM,
         Inc. The address for Mr Giamanco is c/o GHM, Inc., 74 Trinity Place,
         New York, NY 10006.

(5)      Includes 20,000 shares of Common Stock held jointly with a family
         member. Also includes 278,571 shares of Common Stock that may be
         acquired by exercising warrants. The address for Mr. Close is c/o
         Marcus J. Williams Esq., Davis Wright Tremaine, LLP, Suite 2300, 1300
         SW Fifth Avenue, Portland, OR 97201-5682.

(6)      Includes 400,000 shares of Common Stock that may be acquired by
         exercising options. The address for Mr. Devine is c/o the Company, 2
         International Plaza, Suite 245, Philadelphia, PA 19113-1507.

(7)      Includes 58,125 shares of Common Stock issuable upon exercise of
         options.

(8)      Includes 51,875 shares of Common Stock issuable upon exercise of
         options. Also includes 5,000 shares of Common Stock owned by Mr.
         Carey's wife, as to which he disclaims beneficial ownership.

(9)      Amount shown represents shares of Common Stock that may be acquired by
         exercising options

(10)     Includes 95,000 shares of Common Stock that may be acquired by
         exercising options.

(11)     Includes 967,500 shares of Common Stock that may be acquired by
         exercising options.

(12)     As of December 31, 1999 there were a total of 60,000 shares of Series A
         Preferred Stock outstanding, beneficially held as follows: 50,000 or
         83.34% held Dr. Joe H. Cherry, whose address is 320 Cardinal Heights,
         Dadeville, AL; 5,000 or 8.33% held by J. Matthew Dalton, whose address
         is 1232 W. George Street, Chicago, IL 60657; and 5,000 or 8.33% held by
         Verne Scazzero, whose address is 1414 South Prairie Ave., Chicago, IL
         60605.

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<PAGE>   68
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In March 1999, Paul L. Devine, the Company's Chairman and Chief Executive
Officer, agreed to extend to the Company on a short-term basis a revolving
credit facility in an amount of up to $500,000, of which $377,400 is outstanding
as of the date of this Annual Report. The Company's obligations under this
facility are unsecured, and amounts outstanding thereunder bear interest at a
rate of nine percent (9%) per annum. The Company's Chairman has agreed to defer
repayment of the remaining balance owed to him until the earlier of (i) such
time as the Company and he agree a repayment date, or (ii) June 30, 2000. The
Company has agreed to pay all reasonable out-of-pocket expenses incurred by Mr.
Devine in connection with advancing funds to the Company under this facility.

The Company from time-to-time has granted to certain of its non-employee
directors a number of options to purchase shares of Common Stock upon the
initial election of such director to the Company's Board of Directors to provide
incentive for a high level of dedication in the future and to align the
interests of such directors with the interests of the Company's shareholders. On
March 26, 1999, the Company granted, under the 1998 Plan, to each of Adolph S.
Clausi and W. Ward Carey options to purchase 50,000 shares of Common Stock at
$4.6063, an exercise price which represents 110% of the closing price of the
Common Stock on the date of grant. Such options were fully vested as of the date
of grant.

In December 1999, two investment funds affiliated with Lancer Partners, L.P., a
holder of over 5% of the outstanding Common Stock, granted the Company a credit
facility of $3,500,000, which amount was fully drawn as at December 31, 1999.
The facility carries a stated interest at the rate of 10% per annum and is
secured by a pledge of certain assets of the Company. In connection with this
facility, the Company issued to Lancer Offshore, L.P. two million shares of
Common Stock and issued warrants to acquire 350,000 shares of Common Stock at an
exercise price of $0.50 per share.

Also in December 1999, the Company issued to Joseph Giamanco and GHM, Inc., each
holders of over 5% of the outstanding Common Stock, an aggregate of 2,901,354
shares of Common Stock in exchange for which the Company received $1,500,000. In
connection with these transactions, the Company issued to Joseph Giamanco and
GHM, Inc. warrants to purchase an aggregate of one million shares of Common
Stock at an exercise price of $0.51 per share.

On December 31, 1999, Wayne Close, a holder of more than 5% of the outstanding
Common Stock, and his wife, purchased 681,090 shares of Common Stock for
$330,000. In addition, a warrant to acquire 238,571 shares of Common Stock at an
exercise price of $0.6562 per share was issued to Mr. Close in connection with
this transaction.

In December 1999, Wayne Close, Joseph Giamanco and GHM, Inc., in the aggregate
purchased for $414,000 414 shares of Series D Stock from the holders thereof.
This Series D Stock was then converted into 791,738 shares of Common Stock. In
connection with these transactions, the Company issued: a) to Joseph Giamanco
and GHM, Inc. warrants to purchase an aggregate of one million shares of Common
Stock at an exercise price of $0.51 per share and b) a warrant to Wayne Close to
purchase 40,000 shares of Common Stock at an exercise price of $0.6562 per
share.

                                       66
<PAGE>   69
                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K


FINANCIAL STATEMENTS

See index to Financial Statements at page 32.


REPORTS ON FORM 8-K

On October 14, 1999 the Company filed an 8-K under Item 5 thereof relating to a
press release issued by the Company on October 8, 1999. This press release was
issued in relation to the manufacturing and co-pack agreement with Reser's Fine
Foods, Inc. for fresh-cut potato products.

On December 15, 1999 the Company filed an 8-K under Item 5 thereof relating to a
press release issued by the Company on December 13, 1999. This press release was
issued in relation to transactions related to the Series D Stock and a credit
arrangement.



EXHIBITS

The following is a list of exhibits filed as part of this Annual Report on Form
10-K. Where so indicated, exhibits that were previously filed are incorporated
by reference.

<TABLE>
<CAPTION>
    EXHIBIT
    NUMBER    DESCRIPTION
<S>           <C>
     3.1      Amended and Restated Articles of Incorporation of the Company, as
              amended. (Incorporated by reference to Exhibit 3.1 to the
              Company's Quarterly Report on Form 10-Q for the quarter ended
              September 30, 1997 on file with the Securities and Exchange
              Commission (the "SEC").)

     3.2      Amended and Restated Bylaws of the Company, as amended.
              (Incorporated by reference to Exhibit 3.2 to the Company's
              Quarterly Report on Form 10-Q for the quarter ended September 30,
              1997 on file with the SEC.)

     3.3      Plan of Reverse Stock Split (Incorporated by reference to the
              Company's definitive proxy statement for a special meeting of
              stockholders dated February 27, 1998, on file with the SEC.)

     4.1      Specimen Common Stock Certificate (Incorporated by reference to
              Exhibit 4.1 to the Company's Annual Report on Form 10-K for the
              year ended December 31, 1997 on file with the SEC.)

    10.1      1994 Stock Incentive Plan, as amended (Incorporated by reference
              to Exhibit 4.1 to the Company's Registration Statement on Form S-8
              (File No 333-42047) on file with the SEC).

    10.2      Agreement for the sale and purchase of the entire issued share
              capital of Bakery Packaging Services
</TABLE>

                                       67
<PAGE>   70
<TABLE>
<CAPTION>
    EXHIBIT
    NUMBER    DESCRIPTION
<S>           <C>
              Limited, dated September 15, 1995. (Incorporated by reference to
              Exhibit 2.1 to the Company's Report on Form 8-K dated October 3,
              1995 on file with the SEC.)

    10.3      Disclosure letter in relation to the agreement for the sale of the
              entire issued share capital of Bakery Packaging Services Limited,
              dated September 15, 1995. (Incorporated by reference to Exhibit
              2.2 to the Company's Report on Form 8-K dated October 3, 1995 on
              file with the SEC.)

    10.4      Agreement between EPL Technologies (Europe) Limited and DWL
              Associates for the services of D.W. Lyon as Chief Operating
              Officer of Bakery Packaging Services Limited. (Incorporated by
              reference to Exhibit 2.3 to the Company's Report on Form 8-K dated
              October 3, 1995 on file with the SEC.)

    10.5      Employment agreement between EPL Technologies, Inc. and P.L.
              Devine, Director, President and Chief Executive Officer, dated as
              of January 1, 1997. (Incorporated by reference to Exhibit 10.15 to
              the Company's Quarterly Report on Form 10-Q for the quarter ended
              June 30, 1997 on file with the SEC.)

    10.6      Office Lease Agreement dated September 11, 1996 between EPL
              Technologies, Inc. and K/B Fund II for Headquarters office.
              (Incorporated by reference to Exhibit 10.10 to the Company's
              Annual Report on Form 10-K for the fiscal year ended December 31,
              1996 on file with the SEC.)

     10.7     License agreement dated as of April 29, 1997 by and between
              Integrated Produce Systems, Inc. and Farmington Fresh.
              (Incorporated by reference to Exhibit 10.1 to the Company's
              Registration Statement on Form S-3 (File No. 333-42185) on file
              with the SEC.)

     10.8     Amendment to License Agreement, dated December 1, 1997, between
              Integrated Produce Systems, Inc. and Farmington Fresh.
              (Incorporated by reference to Exhibit 10.2 to the Company's
              Registration Statement on Form S-3 (File No. 333-42185) on file
              with the SEC.)

     10.9     Operating Agreement of NewCornCo, LLC, dated July 19, 1996, as
              amended, between the Company and Agricultural Innovation & Trade,
              Inc. (Incorporated by reference to Exhibit 10.3 to the Company's
              Registration Statement on Form S-3 (File No. 333-42185) on file
              with the SEC.)

    10.10     Fresh-Cut Corn Processing Agreement, dated July 22, 1996, between
              NewCornCo, LLC, and Agricultural Innovation & Trade, Inc.
              (Incorporated by reference to Exhibit 10.4 to the Company's
              Registration Statement on Form S-3 (File No. 333-42185) on file
              with the SEC.)

     10.11    Assignment of Membership Interest, dated December 6, 1997, between
              Agricultural Innovation & Trade, Inc. and Twin Garden Sales, Inc.
              (Incorporated by reference to Exhibit 10.5 to the Company's
              Registration Statement on Form S-3 (File No. 333-42185) on file
              with the SEC.)

    10.12     Requirements Agreement, dated as of January 1, 1998, between
              NewCornCo, LLC, and Twin Garden Farms. (Incorporated by reference
              to Exhibit 10.6 to the Company's Registration Statement on Form
              S-3 (File No. 333-42185) on file with the SEC.)

    10.13     Employment Agreement, dated January 1, 1998, between the Company
              and William R. Romig. (Incorporated by reference to Exhibit 10.17
              to the Company's Registration Statement on Form S-3 (File No.
              333-42185) on file with the SEC.)

    10.14     Agreement for the Sale and Purchase of the entire issued share
              capital of Fabbri Artes Graficas Valencia S.A., dated December 11,
              1997. (Incorporated by reference to Exhibit 2.1 to the Company's
              Current Report on Form 8-K filed on December 24, 1997.)

    10.15     Securities Purchase Agreement dated as of November 6, 1997 between
              the Company and each of the purchasers of the Company's Series D
              Preferred Stock. (Incorporated by reference to Exhibit 4.4 to the
              Company's Quarterly Report on Form 10-Q for the quarter ended
              September 30, 1997.)

    10.16     Registration Rights Agreement dated as of November 6, 1997 between
              the Company and each of the purchasers of the Company's Series D
              Preferred Stock. (Incorporated by reference to Exhibit 4.5 to


    EXHIBIT
    NUMBER    DESCRIPTION

</TABLE>
                                       68
<PAGE>   71
<TABLE>
<CAPTION>
    <S>           <C>
              the Company's Quarterly Report on Form 10-Q for the quarter ended
              September 30, 1997.)

     10.17    Trademark License Agreement between IPS Produce, Inc. (now known
              as EPL Food Products, Inc. and Potandon Produce LLC (confidential
              treatment has been granted for certain portions of this document).
              (Incorporated by reference to Exhibit 10.12 to the Company's
              Quarterly Report on Form 10-Q for the quarter ended September 30,
              1997.)

     10.18    Employment Agreement dated as of February 18, 1998, by and between
              EPL Technologies, Inc. and Bruce M. Crowell. (Incorporated by
              reference to Exhibit 10.22 to the Company's Registration Statement
              on Form S-1 (File No. 333-46397) on file with the SEC.)

     10.19    Employment Agreement dated as of October 1, 1997, by and between
              EPL Technologies, SRL. and Jose Saenz de Santa Maria.
              (Incorporated by reference to Exhibit 10.23 to the Company's
              Registration Statement on Form S-1 (File No. 333-46397) on file
              with the SEC.)

     10.20    Agreement dated February 1, 1998 by and between the Company and
              American National Can Company (Incorporated by reference to
              Exhibit 99.2 to the Company's Current Report on Form 8-K filed on
              March 30, 1998.)

     10.21    Operating Agreement of the new joint venture between the Company
              and American National Can Company. (Incorporated by reference to
              Exhibit 99.3 to the Company's Current Report on Form 8-K filed on
              March 30, 1998.)

     10.22    Employment Agreement dated as of May 1, 1998 by and between Fabbri
              Artes Graficas Valencia SA and Jose Saenz de Santa Maria.
              (Incorporated by reference to Exhibit 10.24 to the Company's
              Quarterly Report on Form 10-Q for the quarter ended September 30,
              1998.)

     10.23    Employment Agreement dated as of July 1, 1998 by and between EPL
              Technologies, Inc. And R. Brandon Asbill. (Incorporated by
              reference to Exhibit 10.25 to the Company's Quarterly Report on
              Form 10-Q for the quarter ended September 30, 1998.)

     10.24    1998 Stock Incentive Plan, as amended and restated (Incorporated
              by reference to the Company's Proxy Statement on Form 14A filed
              with the SEC on August 25, 1998.)

     11.0     Computation of Earnings per Common Share and Fully Diluted
              Earnings per Common Share.

     21       Subsidiaries of the Company (Incorporated by reference to Exhibit
              21 to the Company's Registration Statement on Form S-1 (File No
              333-46397) on file with the SEC).

     23.1     Consent of Deloitte & Touche LLP.

     27.1     Financial Data Schedules (for SEC use only)
</TABLE>

                                       69
<PAGE>   72
                                   SIGNATURES

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

                                    EPL TECHNOLOGIES, INC.

Date: April 14, 2000                /S/ Paul L. Devine
                                    --------------------------------
                                    Paul L. Devine
                                    Chairman and President
                                    Principal Executive Officer

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

Date: April 14, 2000                /S/ Paul L. Devine
                                    --------------------------------
                                    Paul L. Devine
                                    Chairman and President
                                    (Principal Executive Officer)

Date: April 14, 2000                /S/ Robert S. Brzezinski
                                    ------------------------------------
                                    Robert S. Brzezinski
                                    Treasurer
                                    (Principal Financial and Accounting Officer)

Date: April 14, 2000                /S/ Adolph S. Clausi
                                    ------------------------------
                                    Adolph S. Clausi
                                    Director

Date: April 14, 2000                /S/ W. Ward Carey
                                    ------------------------------
                                    W. Ward Carey
                                    Director

                                       70