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

   
                                    FORM 10-K/A
    

            [X] Annual Report Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934
                   For the Fiscal Year Ended December 31, 1996
                                       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 Number)

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

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<S>                                                                             <C>
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
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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 voting stock held by nonaffiliates of the
Registrant as of February 28, 1997 was approximately $52,138,707. This excludes
6,066,435 shares of common stock held by directors, officers and stockholders
whose ownership exceeds five percent of the shares outstanding at February 28,
1997.

The number of shares outstanding of the Registrant's Common Stock, as of
                    February 28, 1997 was: 15,546,200 Shares

<PAGE>   2
                             EPL TECHNOLOGIES, INC.

   
                     INDEX TO ANNUAL REPORT ON FORM 10-K/A
                          YEAR ENDED DECEMBER 31, 1996
    


<TABLE>
<CAPTION>
        1.  PART I
                                                                                     PAGE
<S>         <C>                                                                      <C>
        1.  ITEM 1. BUSINESS                                                           2


        2.  ITEM 2. PROPERTIES                                                         7


        3.  ITEM 3. LEGAL PROCEEDINGS                                                  7


        4.  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                7


        5.  ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED 
            SECURITY HOLDER MATTERS                                                    8


        6.  ITEM 6. SELECTED FINANCIAL DATA                                           10


        7.  ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 
            CONDITION AND RESULTS OF OPERATIONS                                       11


        8.  ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                       16


        9.  ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTS ON 
            ACCOUNTING AND FINANCIAL DISCLOSURE                                       35


       10.  ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY                  35


       11.  ITEM 11. EXECUTIVE COMPENSATION                                           37


       12.  ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND 
            MANAGEMENT                                                                40


       13.  ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                   43


       14.  ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON 
            FORM 8-K                                                                  44

       15.  SIGNATURES
</TABLE>
<PAGE>   3
                                     PART I

ITEM 1. BUSINESS

      GENERAL DEVELOPMENT

      EPL Technologies, Inc. and its subsidiaries (the "Company") are
      principally engaged in the development, manufacture and marketing of
      proprietary processing aids, packaging technologies and related
      scientific services that facilitate the maintenance of the quality and 
      integrity of fresh produce.
      
      The Company targets its current and expected future operations to develop
      an international sales, marketing, distribution and scientific services
      network for fresh produce processing and packaging technologies.
      Toward that goal the Company began in 1994 to seek strategic acquisitions,
      which would add incremental resources and capabilities towards a systems
      approach in the fresh produce industry that would complement its
      internally developed proprietary processing aid technology base. On 
      September 30, 1994, the Company acquired Respire Films, Inc. ("Respire") 
      a U.S.-based business involved in the marketing of packaging films that 
      are contract-manufactured under the Respire name. The Company believes 
      that this acquisition provided synergy to the Company's processing aid
      business in the fresh cut produce market and since its acquisition has
      represented a growing source of revenues.

      On September 19, 1995, the Company acquired Bakery Packaging Services
      Limited ("BPS"), based in northwest England. BPS has developed a
      proprietary perforating technology for packaging materials which are
      used by leading companies in the fresh-cut produce and institutional
      bakery industries. BPS also produces, in substantially smaller volumes,
      wax-coated packaging used principally in the confectionery industry. The
      Company believes that the acquisition of BPS provides an additional
      proprietary technology to enhance the company's strategic position, 
      together with providing an incremental source of packaging revenue and an
      opportunity for additional cross-marketing activities between the US and
      UK markets. The latter has been demonstrated by the installation in the
      U.S. of the Company's proprietary gas flame equipment (see below) and the
      servicing of US customers.
                                                                            
      On April 19, 1996, the Company acquired the tangible and intangible
      assets of Pure Produce, a Massachusetts general partnership, through a
      wholly-owned subsidiary, Pure Produce, Inc., a Massachusetts corporation.
      Pure Produce is in the business of providing companies in the food
      industry, especially those involved with fresh and minimally processed
      produce, with analysis, protocols and plans relating to food and quality
      assurance programs, including microbial testing. The Company believes
      that this acquisition extends the range of technical support services it
      can offer as part of its systems approach, as well as raising the overall
      scientific content of the Company in its relationship with the fresh-cut
      produce and food services industry.                      
      
      In July 1996, the Company acquired, through a wholly owned UK subsidiary
      (EPL Flexible Packaging Limited ("EPL Flexible")), some of the fixed
      assets located at Gainsborough, Lincolnshire, England, of a division of
      Printpack Europe (St. Helens) Limited. This company specializes in the
      printing of flexible packaging films serving primarily the snack food
      industry. The Company believes that this acquisition broadens the range
      of printed packaging materials it can offer its customers, as well as
      increasing productive capacity. Since this acquisition, the printing
      press previously located at BPS has been relocated to EPL Flexible. The
      Company believes that this will lead to economies of scale by
      concentrating printing at one location, as well as freeing up productive
      space at BPS's Runcorn, England location to accomodate higher margin
      perforation activities.


                                      -2-
<PAGE>   4
      In addition, also in July 1996, the Company formed Newcorn Co. L.L.C., a
      jointly owned limited liability company in which the Company owns a 51%
      membership interest. The other member of Newcorn Co. is Underwood Ranches,
      the trade name of Agricultural Innovation and Trade, Inc. Newcorn Co. 
      utilizes the Company's proprietary processing aid and packaging
      technologies and Underwood's existing corn processing and distribution
      capabilities with the aim of developing a year-round, national,
      value-added market for fresh corn products.

      Also in July 1996, the Company acquired through a wholly-owned US
      subsidiary, Crystal Specialty Films, Inc., the assets and assumed some of
      the liabilities of Crystal Plastics, Inc., based in Illinois. Crystal
      uses "K" resin and polystyrene resins to manufacture a range of
      proprietary films for a variety of applications. Crystal serves as the
      site for the proprietary gas flame perforation equipment which the
      Company had custom-built in the UK, shipped and installed at Crystal and
      which is planned to be the basis for penetration of the US film
      perforation market. This is based on the initial contract the Company has
      with E.I. duPont de Nemours and Company ("DuPont") for the perforation of 
      DuPont's Mylar Film (the "DuPont Agreement"). DuPont is shipping film to
      the Crystal location, where it is being perforated according to required
      specifications and then shipped either back to DuPont or to DuPont
      customers.

   
      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, Pennsylvania 19113-1507, and its telephone
      number is (610) 521-4400.
    
      
      PRODUCTS

      The Company's products fall into two major classifications: processing
      aids and related technical support services and packaging materials. The
      Company's food processing aid products, using ingredients that are
      included in the Food and Drug Administration (FDA) list as generally
      recognized as safe ("GRAS") help to maintain the quality and integrity of
      fresh-cut fruits and vegetables. See "Business - Regulatory Requirements."
      Products have been developed for apples, artichokes, broccoli florets, 
      carrots, baby leaf lettuce, mushrooms, onions, parsnips, potatoes and
      sweet corn. These are currently being marketed to processors of fresh cut
      fruits and  vegetables. The Company has also developed products for use on
      organically grown carrots and baby leaf lettuce. Work is continuing on
      products for application on other vegetables, such as celery, radicchio,
      peppers and spinach. All fruits or vegetables processed with the
      Company's developed applications technology, using strict protocols
      included in such technology, are dipped into a water bath containing the
      specified concentration of the Company's products for the specified time,
      after which the produce undergoes a thorough washing intended to ensure
      that there is little residue of the EPL product. The Company's
      complementary packaging technologies incorporate technologies that help
      to control temperature, gas and humidity. The Company believes that a
      proper packaging process can be designed to enhance the effectiveness of
      processing aids as part of an integrated processing system (which
      includes technical services support), and is continuing to commit
      resources to further develop this system.
      
      INDUSTRY AND GEOGRAPHIC AREA SEGMENTS

   
      Of the Company's two primary product lines, processing aids are sold
      primarily in the United States with smaller amounts also sold in Canada,
      while packaging materials are marketed in North America, the United
      Kingdom and, to a lesser extent, Continental Europe. Since the
      acquisition of BPS in late 1995 there has been an increase in marketing
      activity, both in the Company's processing aid and applications
      technology in Europe.  In addition, proprietary perforating technologies
      developed by BPS have been introduced into the US market. See Note 17 to
      Consolidated Financial Statements.
    


   
CUSTOMER CONCENTRATION
    

   
      During 1996, Walkers Snack Foods Ltd., a division of Frito-Lay Europe, a
      subsidiary of Pepsico, Inc. ("Pepsico") accounted for 13% of annual
      revenues. During 1995, no customer accounted for more than 10% of annual
      revenues. During 1994, two customers, Taylor Packaging and Dixie Produce,
      accounted for 18% and 17% of annual revenues, respectively. 
    

MARKETS

      Fresh fruits and vegetables begin to deteriorate after harvest. In
      response, processing aids have long been used to increase shelf life and,
      consequently, the economic value of fresh produce. Bisulfates, previously
      the most common of such aids, have been the subject of some debate in
      recent years. The Company's processing aid product-line was originally
      developed in response to the market need to eliminate the use of
      bisulfates in the pursuit of extending freshness for vegetables. Use of
      the Company's products enabled food processors to address product quality
      concerns, without requiring the use of any governmentally mandated labels.
      Markets for the Company's food processing products 


                                      -3-
<PAGE>   5
      include the processing of fresh vegetables for both the retail and food
      service markets. By improving the maintenance of produce integrity (and
      thus increasing the economic value) of fresh produce, the Company's
      products have the potential to open up a national market for processors
      previously limited to regional activities. Respire's packaging products
      are used exclusively in the fresh-cut produce industry in the U.S. BPS's
      products are used by leading companies in the U.K. and Europe, mainly
      involved in the fresh cut produce and institutional bakery industries.
      Pure Produce provides companies in the food industry especially those
      involved with fresh and minimally processed produce, with analysis,
      protocols and plans relating to food and quality assurance programs,
      including microbial testing, and provides additional internal technical
      support in developing the Company's processing aid and packaging
      protocols. EPL Flexible specializes in the printing of flexible packaging
      films serving primarily the snack food industry. Crystal manufactures a
      range of proprietary films for various applications. The Company's
      products are increasingly being marketed in concert as part of a
      co-ordinated line of products, processes and technical support services
      as a system for maintaining fresh produce integrity. To date, the
      Company's penetration of the various markets it is seeking to develop is
      insignificant.

      SOURCES OF SUPPLY

      The Company purchases its U.S. raw material requirements from a number of
      suppliers, some of which use sources outside the U.S. BPS and EPL
      Flexible purchase their requirements from a number of suppliers, most of
      which are based in the U.K. and Europe. The Company currently obtains all
      of its requirements for certain raw materials pursuant to a long-term
      contract with Jungbunzlauer, Inc., a U.S. subsidiary of a Swiss-based
      company, and is also one of the Company's stockholders. See "Certain
      Relationships and Related Transactions." These raw materials transactions
      are undertaken on an ongoing commercial arms-length basis.

      COMPETITION

      Since the FDA originally banned the use of sulfites on freshly processed
      fruits and vegetables (a ban that was subsequently overturned), other
      "sulfite substitutes" have appeared in the marketplace. The Company faces
      competition from these products as well as alternative preservation and
      packaging technologies in the marketplace such as packaging, temperature,
      gas and humidity control. The Company believes that these complementary
      technologies operate synergistically with the Company's products and
      services and that the Company's products combined with, for example,
      appropriate modified atmosphere packaging, are capable of maintaining the
      integrity of fresh cut produce by a time period in excess of that which
      either technology can achieve alone. The Company faces competition in
      each of its markets from numerous enterprises, many of which are larger
      and currently have greater resources than the Company. The Company
      believes that to succeed, its proprietary technologies must add value to
      the business of its customers. In this respect, the Company believes that
      its integrated systems approach to the sales and marketing of its related
      technologies provide it with a competitive advantage.
      
      PATENTS, PROPRIETARY INFORMATION AND TRADEMARKS

      The Company currently has two U.S. patents, two U.S. patents pending, and
      numerous others under review for application. The U.S. patent for the
      Company's "Carrot Fresh"(TM) product was granted on September 13, 1994,
      and its "Broccoli Fresh"(TM) product was granted patent pending status in
      the U.S. on January 17, 1995. 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 also has
      various registered U.S. trademarks. Furthermore, it has one non-U.S.
      patent, patents pending in
      

                                      -4-
<PAGE>   6
      26 countries outside the U.S. for its main technology, 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 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.
      
      SALES AND PRODUCT COMMERCIALIZATION PROCESS

      The Company markets its products to processors of fresh vegetables and
      fruits for both the retail and food service markets. Upon an
      expression of interest from a potential customer, the Company through its
      technical service representatives, initiates a detailed review and
      testing process to customize the application of the Company's
      technologies relating to that particular product to the potential
      customer's production system. This testing process involves both
      reproducing the Company's processing aids and designing tailored
      packaging materials. The development of new product formulations can be a
      time-consuming and expensive process. To increase the resources and
      expertise available to the Company for development, it has entered into a
      number of collaborative ventures with well-known scientific and
      commercial institutions. These include the Washington Apple Commission
      for several varieties of apples, Rutgers University for residue analysis
      Penn State University for mushrooms and the Ben Franklin Foundation. The
      Company also has a CRADA (Cooperative Research and Development Agreement)
      with the USDA/ARS (United States Department of Agriculture/Agricultural
      Research Services)  in Philadelphia, Pennsylvania. Once the development
      is completed, then the product moves through successive steps of an
      increasingly sophisticated testing program, leading to a product
      decision. Testing is a complex undertaking within which the Company has
      had to build documentation in order to perform successfully and with
      consistency. The problems uncovered in the testing process have been
      documented in detailed Company protocols to better control the process
      outcome and begin to shorten the marketing/sales time frames, with a
      resulting positive effect on the sales cycle. However, if the Company is
      unable to control the testing process satisfactorily, such lack of
      control of the time and resources so required could have an adverse
      effect on the Company's revenues. Due to the extended nature of this
      development, testing and sales process for processing aids, the Company
      has experienced no significant backlog of orders to date in this area
      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. The Company has also not experienced
      a significant backlog of orders for its packaging materials. The
      Company's market development activities continue to increase. The main
      areas of activity include potatoes and apples, where the Company is in
      volume market test in retail, food and food service outlets.
      
      REGULATORY REQUIREMENTS

      All of the ingredients used in the production of the Company's processing
      aid products are detailed on the FDA GRAS (generally recognized as safe)
      list. In addition, the Company employs a firm of Washington-based FDA
      consultants to advise the Company on existing product development, 
      together with any planned/potential changes in government attitude and 
      legislation. 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.     

      FUTURE

      The FDA ban introduced in March 1990 on the use of sulfites on freshly
      processed potatoes was subsequently struck down by federal courts for
      technical flaws, but the Company believes there is a possibility that this
      ban may be reintroduced within the next few years. In addition, the recent
      changes in labeling requirements on processed food products, introduced by
      the FDA, have increased consumer 


                                      -5-
<PAGE>   7
      awareness of substances that could be harmful to health. Furthermore,
      government promotion of fresh fruits and vegetables by the five-a-day
      program has made consumers more conscious of the need to include such
      foods as part of a balanced diet. As this awareness continues to grow,
      management believes interest in the Company's products will increasingly
      benefit. Management is continually searching for new ways to market its
      products and expand operations, both internally and, where appropriate,
      through strategic acquisitions. In this regard, among other initatives 
      the Company has recently signed a letter of intent containing its
      conditional offer to acquire a specialty packaging business (see note 18
      to the Company's Consolidated  Financial Statements). The Company also
      plans, at some point in the future, to invite other fresh corn processors
      with specific regional processing and distribution strengths
      complementary to California based Underwood Ranches, to work with or
     join Newcorn Co. LLC.

      EMPLOYMENT

      As of December 31, 1996, the Company had 111 employees providing services
      in North America and Europe, of which 21 were engaged in sales and
      marketing, 61 in production, 11 in applications and research and 18 in
      management and administration. The Company expects to recruit additional
      personnel as and when required.

      PARENTS AND SUBSIDIARIES

         1. Parents - The Company disclaims that it is controlled by any one or
            more persons or a group of persons and therefore disclaims that any
            person or group is its "parent" within the meaning of that term
            under the Securities Exchange Act of 1934, as amended. However, by
            virtue of the powers vested by law in the Company's Board of
            Directors, it is possible that some or all of the Company's
            directors might be deemed to be parents of the Company as that term
            is so defined, to the extent that they act in concert.

         2. Subsidiaries - At December 31, 1996, the Company had six wholly
            owned US subsidiaries. Integrated Produce Systems, Inc., a
            Pennsylvania corporation, is the vehicle through which the US
            processing aid business is conducted; Respire Films, Inc., also a
            Pennsylvania corporation, provides packaging related technology to
            the fresh cut produce industry; IPS Produce, Inc., a Pennsylvania
            corporation, is involved in the market testing of produce; Crystal
            Specialty Films, Inc., ("Crystal") an Illinois corporation, is
            involved in the manufacture of films; Pure Produce, Inc., a
            Massachusetts corporation, provides companies in the food industry
            with analysis, protocols, plans and microbial analysis; and Agra
            Research, Inc., an Indiana corporation, which is currently inactive.
            The Company also owns a 51% membership equity interest in Newcorn
            Co. LLC, a Delaware limited liability company, which is involved in
            the processing and distribution of fresh corn products. The Company
            also had five subsidiaries in the U.K all of which are English
            companies. These are Integrated Produce Systems Limited (formerly
            known as Extended Product Life Limited), which is the vehicle
            through which the Company conducts its activities in the U.K. and
            Europe in relation to processing aids; a U.K. holding company, EPL
            Technologies (Europe) Limited, which in turn owns 100% of BPS and
            EPL Flexible Packaging Limited. In addition, BPS has a dormant
            subsidiary, BPS Produce Packaging Limited.


                                      -6-
<PAGE>   8
            FORWARD LOOKING STATEMENTS

            The above discussions include certain forward looking statements of
            management's expectations of product development and potential
            results of operations. For a discussion of factors that may
            materially affect realization of these expectations, see
            Management's Discussion and Analysis of Financial Condition and 
            Results of Operations--Forward Looking Statements.

ITEM 2. PROPERTIES

            The Company's principal administrative office comprises 6,600 square
            feet of space located just outside Philadelphia, Pennsylvania. The
            space is rented pursuant to a lease expiring in January 2002. In
            addition, the Company formulates its products at a facility located
            in Auburn, Alabama, occupying 4,250 square feet. The Company has not
            formally renewed this lease, which expired on September 30, 1994 and
            thus currently operates on a month-to-month basis pending its
            evaluation of the most cost-effective location from which to
            operate. In 1994 the Company entered into a lease for an
            applications laboratory in Fresno, California, occupying 2,700
            square feet, expiring in February 1999. Crystal occupies 16,000
            square feet in Oswego, Illinois, pursuant to a lease expiring in
            June 1998. For its European packaging and materials business, BPS
            owns three adjoining industrial buildings in the U.K. covering a
            total of 17,478 square feet. In addition, it rents a building of
            5,085 square feet under a lease expiring September 2007. It also
            rents an additional building of 5,000 square feet on a
            month-to-month basis. EPL Flexible occupies 19,500 square feet of an
            industrial property in the U.K., pursuant to a lease expiring in
            October 2004. The Company believes that its current facilities are
            adequate for its present needs and that it would not have any
            difficulty obtaining additional or alternate space at prevailing
            rates if required.

ITEM 3. LEGAL PROCEEDINGS

            There are no material pending legal proceedings to which the Company
            is a party or to which any of its property is subject. There were no
            proceedings terminated during the fourth quarter of the fiscal year
            ended December 31, 1996. 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 known
            as being contemplated by governmental authorities.

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,
            1996.


                                      -7-
<PAGE>   9
                                     PART II

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

            MARKET INFORMATION

            The Company's common stock currently trades on the Nasdaq Small Cap
            Market tier of the Nasdaq Stock Market under the symbol "EPTG",
            having been traded on the National Association of Securities Dealers
            "bulletin board" prior to July 1996. The quotations below reflect
            inter-dealer prices, without retail markup, markdowns or commission
            and may not necessarily represent actual transactions. The high and
            low bid prices for the Company's $0.001 par value Common Stock for
            the quarterly periods during the years ended December 31, 1996 and
            1995 are as follows:


<TABLE>
<CAPTION>
                                  1996                            1995
                       --------------------------      ---------------------------
QUARTER ENDED              HIGH         LOW                HIGH          LOW
<S>                    <C>              <C>            <C>               <C>
March 31,                  5.88         3.06               1.00          0.63

June 30,                   9.00         4.75               1.50          0.50

September 30,              7.63         5.00               3.13          1.25

December 31,               7.13         4.00               3.88          2.38
</TABLE>


            As of December 31, 1996, there were 15,531,200 shares of the
            Company's $0.001 par value Common Stock issued and outstanding, held
            by 331 shareholders of record. During the twelve months ended
            December 31, 1996, the Company did not declare any cash dividends on
            its Common Stock. It is unlikely that dividends will be paid by the
            Company on its Common Stock in the foreseeable future, as the
            Company intends to reinvest its results of operations for further
            growth.

            PREFERRED STOCK

            In January 1994 the Company completed a private placement under
            Section 4(2) of the Securities Act of 1933, as amended, (the "1933
            Act") of 3,250,000 shares of Series A Preferred Stock (the Series A
            Stock") at a price of $1.00 per share. The Series A Stock carry a
            dividend of 10% per annum payable in cash and/or shares of Common
            Stock at the Company's option. This dividend is cumulative, and is
            to be paid in priority to any dividends to holders of Common Stock.
            If paid in shares, the deemed value will be $0.75 per share of
            Common Stock. The aggregate dividend due on the Series A Stock at
            December 31, 1996 was $1,100,716. Each $1 share of Series A Stock
            carries an option to convert into shares of Common Stock at a rate
            of $0.75 per common share. The Series A Stock carry equal voting
            rights to the shares of Common Stock, based on the underlying
            number of common shares after conversion. In addition, 20% of the
            Common Stock option conversion carries detachable warrants at a
            price of $1.00 per warrant, i.e., every 100 shares of Series A
            Stock has 20 warrants exercisable at $1.00 each. These can be
            exercised any time up to 5:00 p.m., December 31, 1998.
            
   
            At the Annual Meeting of the Company held on July 22, 1996, the
            shareholders of the Company approved the issuance of up 2,000,000
            shares of preferred stock, to bear such designations and preferences
            as the Board may determine ("Board Designated Preferred Stock"). On
            July 23, 1996, the Company issued 531,915 shares of 10% cumulative
            convertible Series B Preferred Stock ("Series B Preferred Stock") to
            certain accredited investors who were existing shareholders of the
            Company, in a transaction exempt from registration pursuant to
            Section 4(2) of the 1933 Act. These shares carry the option to
            convert into
    
            

                                      -8-
<PAGE>   10
            shares of Common Stock at the rate of $4.70 per share and carry
            equal voting rights to the shares of Common Stock, based on the
            underlying number of shares of Common Stock after conversion. The
            Series B Preferred Stock carries a dividend rate of 10% per annum,
            payable in cash and/or shares at the Company's option. The
            aggregate dividend due on the Series B Preferred Stock at
            December 31, 1996 was $110,445.

   
            During 1996, a total of 1,399,331 shares of Common Stock were issued
            pursuant to the exercise of outstanding warrants, resulting in net
            proceeds to the Company of $3,298,876 in a transaction exempt from
            registration pursuant to Section 4(2) of the 1933 Act. During 1996,
            the Company issued 5,983 shares of Common Stock pursuant to the 
            Company's option plan as payment for professional services 
            resulting in expense of $23,932.
    

            During 1996, the Company filed a resale registration statement on
            Form S-3, which was declared effective on November 12, 1996. The
            Company registered a total of 12,784,011 shares, comprising
            8,740,429 outstanding shares of Common Stock, 293,334 shares of
            Common Stock issuable by the Company pursuant to the terms of
            certain outstanding warrants, 45,000 share of Common Stock issuable
            by the Company pursuant to the terms of certain outstanding options,
            3,173,333 shares of Common Stock issuable by the Company upon
            conversion of outstanding shares of the Company's Series A Preferred
            Stock and 531,915 shares of Common Stock issuable by the Company
            upon conversion of outstanding shares of the Company's Series B 10%
            Preferred Stock.

   
            In September 1995, the Company sold 2,750,000 shares of Common Stock
            to a limited number of "accredited investors", (within the meaning
            of Rule 501 under the 1933 Act) for an aggregate consideration of
            $5,500,000, in a transaction exempt from registration pursuant to
            Section 4(2) of the 1933 Act (the "1995 Placement"). The Company
            issued warrants to purchase 55,000 shares of Common Stock for $2.00
            per share to Hermitage Capital Corp., as placement agent for the
            1995 Placement. Additionally, on October 2, 1995, $4,050,000 in
            outstanding borrowings under a line of credit with Trilon Dominion
            Partners, L.L.C. was converted into 2,025,000 shares of Common Stock
            and warrants to purchase 100,000 shares of Common Stock for $2.00
            per share. The Company also issued to Trilon 162,612 shares of
            Common Stock in settlement of accrued interest of $310,164, and
            46,500 shares of Common Stock in settlement of commitment fees.
    

   
            Additionally, in 1995 21,361 shares of Common Stock were issued as 
            compensation to employees and as payment for professional services 
            pursuant to the Company's option plan, resulting in expense of 
            $37,381.
    


                                      -9-
<PAGE>   11
ITEM 6. SELECTED FINANCIAL DATA

      The selected financial data presented below for the years ended December
      31, 1996, 1995, 1994, 1993 the eight months ended December 31, 1992 and
      the fiscal year ended April 30, 1992 are derived from the Company's
      audited consolidated financial statements. The selected financial
      information presented below should be read in conjunction with the
      consolidated financial statements, related notes and other financial
      information included in this report.
   
<TABLE>
<CAPTION>
                                         FISCAL          FISCAL         FISCAL         FISCAL         EIGHT         FISCAL
                                          YEAR            YEAR            YEAR          YEAR          MONTHS         YEAR
                                         ENDED            ENDED          ENDED         ENDED          ENDED          ENDED
                                        12/31/96        12/31/95       12/31/94       12/31/93       12/31/92       4/30/92
                                      (As Restated)
<S>                                  <C>             <C>             <C>            <C>            <C>            <C>
STATEMENT OF OPERATIONS


Sales                                $ 11,314,141    $  3,239,566    $   578,463    $   177,552    $   141,597    $   165,491
Gross profit                            2,177,885         770,723        190,916        131,470         65,477         81,037

Expenses: 
  Selling, general, administrative      6,352,119       3,812,938      3,471,952      2,768,685        496,149        310,802
  research and development,
  depreciation and amoritization                                                                                      
  interest expense (income) and           121,655         277,719         91,554          28,725       (14,680)       (27,348)
  income taxes                        ------------    ------------    ----------     -----------      ---------      ---------

Net loss                               (4,295,919)     (3,319,934)    (3,372,590)    (2,665,940)      (415,992)      (202,417)
Accretion, discount and
  dividends on preferred stock            998,924         313,854        324,185        199,198
                                     ------------    ------------    -----------    -----------    -----------    -----------

Net loss for common stockholders     $ (5,294,843)   $ (3,633,788)   $(3,696,775)   $(2,865,138)   $  (415,992)   $  (202,417)
                                     ============    ============    ===========    ===========    ===========    ===========

Weighted average number of
  common shares                        14,873,518       9,311,059      7,258,725      6,071,241      5,908,616      5,865,241

Net loss per common share            $      (0.36)   $      (0.39)   $     (0.51)   $     (0.47)   $     (0.07)   $     (0.03)
                                     ============    ============    ===========    ===========    ===========    ===========

BALANCE SHEET

Working capital (deficiency)         $  2,069,594    $  1,166,921    $  (378,207)   $  (622,924)   $  (149,627)   $  (267,774)

Total assets                           15,215,422      10,041,197      3,188,745      2,629,846      3,193,949      1,905,211

Long-term debt                          1,554,161         844,333      1,812,181         75,880        238,331

Total liabilities                       6,796,945       3,665,358      2,770,606        983,722      1,011,226        321,599

Total shareholders' equity              8,418,477       6,375,839        418,139      1,646,124      2,182,723      1,583,652
</TABLE>
    

Note: See Item 1. - "Business - General Development" for description of
      acquisitions of businesses which affect the comparability between years.


                                      -10-
<PAGE>   12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

      OVERVIEW

      EPL Technologies, Inc. develops, manufactures and markets complementary
      proprietary technologies designed to maintain the quality and integrity
      of fresh produce. The Company's primary products are processing aids and
      packaging materials, together with related technical support services
      which are designed and marketed to processors of fresh vegetables and 
      fruits to be integrated into a customer's fresh produce production
      system. The Company believes its products are safe, environmentally 
      friendly and add significant value to the business of its customers.  
      The Company's goal is to become a world class provider of products and
      scientific services designed to maintain the integrity of fresh produce.
      As consumer awareness of the potential health hazards of sulfite-based
      preservatives, which the Company's products do not contain, continues to
      grow, management believes interest in the Company's products will 
      increase. Management is continually searching for new ways to market its
      products and expand operations, both internally and, where appropriate, 
      through strategic and opportunistic acquisitions. In this regard, the 
      Company has recently signed a letter of intent containing its conditional
      offer to acquire a European based specialty packaging business (see note
      18 to the Company's Consolidated Financial Statements). In negotiations
      and diligence in connection with the potential UK acquisition announced
      last fall, the Company has recently terminated these discussions and 
      does not expect them to resume in the near future. However, the Company
      continues to be interested in this or similar opportunities and thus
      may revisit this potential acquisition in the future in the right 
      circumstances. There can however, be no assurance that this or any other
      acquisition will in fact occur.
      
      YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

      Sales for the twelve months ended December 31, 1996 were $11,314,141, an
      increase of $8,074,575 (249%) over the 1995 total revenue of $3,239,566.
      The 1996 total comprised $1,326,669 of processing aids and related
      activities (an increase of 181% over 1995), $1,716,984 of U.S. packaging
      materials (an increase of 98% over 1995) and $8,270,488 of UK and European
      packaging materials (an increase of 336% over 1995).

      Within the U.S. processing aid business management continues to work
      with and target medium to large food processors as the customer base to
      provide the Company a balance of satisfactory sales growth. This activity
      has continued in 1996 and as detailed below, costs have been incurred
      which are yet to show in significant revenue increases. The current
      market development activity includes work on potatoes and apples, where
      the Company is in volume market test in retail, food and food service
      outlets. Additional activities were added during the year to extend the
      range of services offered. This included Pure Produce Inc., which signed
      a contract with the U.S. Apple Institute for work on residual analysis in
      the final quarter of 1996. The main increase in revenue came from the
      inclusion of revenue from the Company's corn activities through the
      majority owned Newcorn Co. LLC, which transaction was completed on July
      22, 1996.
      
      The growth in the U.S. packaging materials business reflects mainly the
      contribution of the Crystal business acquired in July 1996, although
      management believes that the activity during 1996 in Respire will also
      provide an improved growth base for 1997. In both businesses, the Company
      continues to target and to expand product development activities and to
      seek to exploit the synergies that exist with the processing aid business.
      The successful completion of the DuPont Agreement in late 1996 did not
      generate significant revenue in the U.S. in the period. The new gas-flame
      film perforation machine was successfully installed at the Crystal factory
      and, while initial revenue contribution was at a low level, it is
      expected to contribute to the 1997 totals.

      Revenue from the UK and European packaging materials businesses grew from
      $1,898,590 to $8,270,488. This reflected a full period contribution from
      BPS, acquired in September 1995, together with an initial contribution
      from EPL Flexible. BPS continues to develop, and the Company is beginning
      to exploit the synergies between the two businesses. At the end of 1996
      the Company relocated all of the film printing activities that were
      located at BPS to the EPL Flexible site, which is expected to yield
      economies of scale from having all of the printing activities in one
      location. It will 


                                      -11-
<PAGE>   13
   
      also facilitate an increase in higher margin film perforation capacity at
      BPS and a plant reorganization to achieve this is expected to be
      undertaken during the first half of 1997. Having acquired the assets at
      EPL Flexible in July 1996, business has been increasing during the period,
      principally from its main customer, Walkers Snack Foods Ltd., a division
      of Frito-Lay Europe, a subsidiary of Pepsico, Inc. ("Pepsico"), and new
      customers are actively being sought to help maximize the available
      capacity and further diversify the customer base. There can be no
      assurance, however, that the Company will be successful in doing so.
    
      
   
      In 1996, one customer, Pepsico, accounted for 13% of annual  revenues for
      the group and in 1995 no customers accounted for more than 10% or more of
      annual revenues. Gross margin for the year was 19.2% as compared to 23.8%
      for the same period last year. This reduction is due principally to the
      inclusion in consolidation of sales of UK and European packaging
      materials, which generate a lower average margin than processing aids. In
      addition, it reflects the relationship between the volume of product sold
      and dollar volumes, which can be substantially affected from quarter to
      quarter by varying product mix, varying processor efficiency levels and by
      promotional pricing of products used for tests and evaluation. As the
      proportion of revenue generated from processing aids or perforated film
      increases, management believes that this gross margin will increase,
      although, there can be no assurance that such in fact will be the case. 
    
      
      Selling, general and administrative expenses rose to $4,413,365 from
      $2,638,116, an increase of $1,775,249. A significant part of this was due
      to the inclusion on consolidation of expenses from the BPS operations, as
      well as some incremental expenses from the inclusion of EPL Flexible,
      Crystal and Newcorn Co. The remainder was due to the continuing
      development of the sales and marketing effort as well as projects to
      support prospective large customers. As discussed above, this effort is
      focused on a number of vegetable categories, including potatoes and
      apples, where market test activity is continuing. The Company expects
      that this level of additional expenditure will continue, at least in the
      short-term. Furthermore, as interest in the Company has grown and the
      shareholders base has expanded significantly, additional costs have been
      incurred in investor relations, including SEC and other legal work,
      notably in connection to registrations of the Company's securities under
      federal and state securities laws. Research and development costs
      increased from $600,529 to $938,719, an increase of $338,190. This
      reflects the costs of some of the third-party collaborative projects
      commenced during 1995, as well as additional staff to support the
      Company's scientific and technical objectives in relation to the ongoing
      sales effort for prospective large customers. Again, the Company
      expects that these higher expenses will continue in the short-term,
      although it believes the results of these expenditures will be seen in
      incremental revenues in 1997 and beyond. Depreciation and amortization
      expense increased by $435,453 from $574,293 in 1995 to $1,009,746 in
      1996. The most significant proportion of this increase was due to a full
      years depreciation of fixed assets and amortization of goodwill arising
      from the acquisition of BPS in September 1995, with the remainder due to
      increased depreciation as a result of capital expenditure and the assets
      acquired in the EPL Flexible, Crystal and Newcorn Co. acquisitions during
      1996.
      
      YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

      Sales for the twelve months ended December 31, 1995 was $3,239,566, an
      increase of 460% on total revenue of $578,463 achieved in 1994. The
      1995 total comprised $472,747 of processing aids (an increase of 36.7%
      over 1994), $868,229 of US packaging materials (an increase of 273% over
      1994) and $1,898,590 of UK and European packaging materials (representing
      the sales of BPS since its acquisition by the Company on September 19,
      1995).

      This reflects the lack of occasional sales to very small processors,
      offset by new customers. In 1995, no such customer accounted for 10% or 
      more of annual revenues while two customers represented 35% of the 
      Company's annual revenues in 1994. Management continues to target medium
      to large volume food processors as the customer base to best provide the
      Company a balance of 
      

                                      -12-
<PAGE>   14
      satisfactory sales growth within a reasonable time frame and to limit the
      Company's customer concentration.

      The US packaging materials business results in 1995 reflect the inclusion
      of a full year's sales of Respire, representing sales to 66 customers
      during this period. This total compares with the 1994 total sales (pre and
      post acquisition) of $494,289, an increase of 76%. The Company continues
      to target new areas for growth and to exploit the synergies that exist
      with the processing aid business.

      The UK and European packaging materials business of BPS was acquired on
      September 19, 1995. On a comparable basis, the total revenues for the year
      grew by some 20%.

      Selling, general and administrative expenses rose from $2,571,865 in 1994
      to $2,638,116 in 1995, an increase of only 2.5%, despite the 460% increase
      in revenues. This is evidence of the infrastructure being able to support
      increases in sales revenue without corresponding increases in costs.
      Research and development costs increased from $522,495 in 1994 to $600,529
      in 1995, an increase of 14.9%. This reflects the costs of some of the
      collaborative projects commenced in 1995. Depreciation and amortization
      rose from $377,592 in 1994 to $574,293 in 1995, an increase of 52%. Of
      this increase of $196,701, $87,597 represents increased amortization of
      goodwill on acquisition, consisting of BPS in September 1995 and a full
      year of Respire. The remainder represents increased depreciation as a
      result of 1994 and 1995 capital expenditures.

      

                                      -13-
<PAGE>   15
      LIQUIDITY AND CAPITAL RESOURCES

      At December 31, 1996, the Company had cash and cash equivalents of
      $1,639,567, compared to $1,522,075 as of December 31, 1995, an increase of
      $117,492. For 1996, $3,839,976 of net cash was used in operations, 
      compared to $1,893,444 for 1995. The increase in the net cash used in 
      operations in 1996 was due primarily to the net loss and the increase in 
      accounts receivable and inventory.

      Net cash used in investing activities totaled $2,741,907 in 1996, compared
      to $3,622,966 in 1995. This amount in 1996 included the acquisitions of 
      assets for Pure Produce, Crystal and EPL Flexible, as well as the 
      investment in Newcorn Co. The 1995 amount reflected the acquisition of 
      BPS.

      Financing activities for 1996 provided net cash of $6,439,146 compared to
      $6,976,036 in 1995. In 1996, the Company raised $3,554,396 through the
      exercise of warrants and options. A further $2,500,000 was raised from 
      the issuance of Series B Preferred Stock.

      Also in 1996, a net $359,625 was raised from the refinancing of the BPS 
      debt. Two seven year loan facilities, totaling $1,387,125 were obtained 
      and the proceeds used to repay the existing BPS mortgage and pension fund 
      loan. In addition, EPL Technologies (Europe) Ltd. obtained a line of 
      credit of $513,750 in 1996.

      At December 31, 1996, the Company had 393,532 warrants outstanding to 
      purchase common stock at between $1 and $2.00 per share, which if 
      exercised would provide the Company with gross proceeds of approximately 
      $598,000.

      In addition, at December 31, 1996 the Company had 3,295,000 options 
      outstanding to purchase Common Stock at an weighted average price of 
      $3.01 per share, which if exercised would provide the Company with gross 
      proceeds of approximately $9,900,000.

      Subsequent to the year end, in March 1997, the Company received
      $1,000,000 through a private placement of common stock and Board
      Designated Preferred Stock. Further subscriptions are expected shortly 
      for this limited private placement from other existing offeree
      shareholders.

      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 its cost structure. The Company's management believes that
      cash flows from operations, together with its current resources
      (including cash received in the recent private placement) and with the
      availability of financing from other sources, will allow the Company to
      maintain adequate financing for the next year.
      
     
   
      YEAR 2000 COMPLIANCE
    

   
      The Company uses a significant number of computer software programs and
      operating systems in its internal operations, including applications used
      in manufacturing, product development, financial business systems and
      various administrative functions. To the extent that these software
      applications contain source code that is unable to appropriately interpret
      the upcoming calendar year "2000," some level of modification or even
      possibly replacement of such source code or applications will be
      necessary. The Company is currently in the process of completing its
      identification of software applications that are not "Year 2000"
      compliant. Given the information known at this time about the Company's
      systems, coupled with the Company's ongoing, normal course-of-business
      efforts to upgrade or replace business critical systems as necessary, it
      is currently not anticipated that these "Year 2000" costs will have any
      material adverse impact on the Company's business, financial condition or
      results of operations. However, the Company is still in the preliminary
      stages of analyzing its software applications and, to the extent they are
      not fully "Year 2000" compliant, there can be no assurance that the costs
      necessary to update software, or potential systems interruptions, would
      not have a material adverse effect on the Company's business, financial
      condition or results of operations.
    

                                      -14-
<PAGE>   16
      FORWARD LOOKING STATEMENTS

      The discussions above include certain forward looking statements regarding
      the Company's expectations of gross margin, expenses, market penetration,
      success in obtaining large new customers, possible acquisitions, access to
      capital and new product introduction. Consequently, actual results may
      vary materially from such expectations. Meaningful factors that might
      affect such results include: a) the length and effectiveness of the sales
      process for processing aids and packaging, b) raw material availability
      and pricing, c) changes in regulatory environment and d) difficulty with
      research and development activities regarding new products, including
      extension of necessary time periods or increase in expense for product
      introduction.


                                      -15-
<PAGE>   17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                          PAGE
<S>                                                                       <C>
 INDEPENDENT AUDITORS' REPORT                                              17

 CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1996 AND 1995              18

 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
    DECEMBER 31, 1996, 1995 AND 1994                                       19

 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE YEARS
    ENDED DECEMBER 31, 1996, 1995 AND 1994                                 20

 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
    DECEMBER 31, 1996, 1995 AND 1994                                       21

 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                22
</TABLE>


                                      -16-
<PAGE>   18
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, 1996 and
1995, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended December
31, 1996. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of EPL Technologies, Inc. and
subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.

   
As discussed in Note 19, the December 31, 1996 consolidated financial statements
have been restated to reflect the accretion of the Series B Preferred Stock
discount.
    

Deloitte & Touche LLP
Philadelphia, Pennsylvania

   
March 28, 1997, except for Notes 9 and 19, as to
which the date is January 26, 1998
    


                                      -17-
<PAGE>   19
EPL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
   
<TABLE>
<CAPTION>
                                                                        1996             1995
                                                                   (As restated,
                                                                    See Note 19)
<S>                                                                 <C>             <C>
CURRENT ASSETS:
  Cash and cash equivalents                                         $  1,639,567    $  1,522,075
  Accounts receivable, net                                             2,911,660       1,333,353
  Due from related parties                                                34,101          74,777
  Inventories                                                          1,938,819         561,255
  Prepaid expenses and other current assets                              623,792         442,814
                                                                    ------------    ------------

           Total current assets                                        7,147,939       3,934,274
                                                                    ------------    ------------

PROPERTY AND EQUIPMENT, Net                                            4,005,711       1,786,534
                                                                    ------------    ------------

OTHER ASSETS:
  Patent and distribution rights, net of accumulated
    amortization of $2,459,757 and  $2,130,381 at
    December 31, 1996 and 1995, respectively                           1,303,121       1,632,497
  Goodwill                                                             2,503,655       2,396,380
  Other intangibles, less accumulated amortization
    of $82,161 and $45,645 at
    December 31, 1996 and 1995, respectively                             254,996         291,512
                                                                    ------------    ------------

           Total other assets                                          4,061,772       4,320,389
                                                                    ------------    ------------

TOTAL ASSETS                                                        $ 15,215,422    $ 10,041,197
                                                                    ============    ============

CURRENT LIABILITIES:
  Accounts payable                                                  $  3,005,577    $  1,701,578
  Accrued expenses                                                     1,213,964         539,313
  Other liabilities                                                      396,418         288,651
  Current portion of long-term debt                                      262,779         237,811
                                                                    ------------    ------------

           Total current liabilities                                   4,878,738       2,767,353

LONG-TERM DEBT                                                         1,554,161         844,333

DEFERRED INCOME TAXES                                                    161,926          53,672

MINORITY INTEREST                                                        202,120
                                                                    ------------    ------------

           Total liabilities                                           6,796,945       3,665,358
                                                                    ------------    ------------

COMMITMENTS AND CONTINGENCIES (Note 13)

STOCKHOLDERS' EQUITY:
  Convertible Series A Preferred Stock, $1.00 par value -
    authorized, 3,250,000 shares; issued and outstanding
    2,490,000 and 2,890,000 shares in 1996 and 1995, respectively      2,490,000       2,890,000
  Convertible Series B Preferred Stock $0.01 par value
    authorized, issued and outstanding $531,915 and $0 1996
    and 1995, respectively                                                 5,319
  Common Stock, $0.001 par value - authorized,
    50,000,000 shares; issued and outstanding, 15,531,200
    and 13,208,552 shares in 1996 and 1995, respectively                  15,531          13,208
  Additional paid-in capital                                          21,939,678      14,843,992
  Accumulated deficit                                                (16,283,464)    (11,362,545)
  Foreign currency translation adjustment                                251,413          (8,816)
                                                                    ------------    ------------

           Total stockholders' equity                                  8,418,477       6,375,839
                                                                    ------------    ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                          $ 15,215,422    $ 10,041,197
                                                                    ============    ============
</TABLE>
    

See notes to consolidated financial statements.



                                      -18-
<PAGE>   20
EPL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
   
<TABLE>
<CAPTION>
                                                             1996             1995             1994
                                                        (As restated,
                                                         See Note 19)
<S>                                                     <C>               <C>              <C>
SALES                                                   $ 11,314,141      $ 3,239,566      $   578,463

COST OF SALES                                              9,136,286        2,468,843          387,547
                                                        ------------      -----------      -----------

GROSS PROFIT                                               2,177,855          770,723          190,916

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES               4,413,365        2,638,116        2,571,865

RESEARCH AND DEVELOPMENT COSTS                               938,719          600,529          522,495

DEPRECIATION AND AMORTIZATION                              1,009,746          574,293          377,592
                                                        ------------      -----------      -----------

LOSS FROM OPERATIONS                                      (4,183,975)      (3,042,215)      (3,281,036)

INTEREST EXPENSE, NET                                         20,223          267,176           91,554

MINORITY INTEREST                                             (9,711)
                                                        ------------      -----------      -----------

LOSS BEFORE INCOME TAX EXPENSE                            (4,194,487)      (3,309,391)      (3,372,590)

INCOME TAX EXPENSE                                           101,432           10,543
                                                        ------------      -----------      -----------

NET LOSS                                                  (4,295,919)      (3,319,934)      (3,372,590)

Accretion, discount and dividends on Preferred Stock         998,924          313,854          324,185
                                                        ------------      -----------      -----------

NET LOSS AVAILABLE FOR COMMON STOCKHOLDERS              $ (5,294,843)     $(3,633,788)     $(3,696,775)
                                                        ============      ===========      ===========
LOSS PER COMMON SHARE                                   $      (0.36)     $     (0.39)     $     (0.51)
                                                        ============      ===========      ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                14,873,518        9,311,059        7,258,725
                                                        ============      ===========      ===========
</TABLE>
    


See notes to consolidated financial statements.


                                      -19-
<PAGE>   21
EPL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

   
<TABLE>
<CAPTION>
                                                                                          SERIES A                   SERIES B
                                                                                       PREFERRED SHARES           PREFERRED SHARES
                                                            COMMON SHARES          --------------------------  ---------------------
                                                         NUMBER       AMOUNT         NUMBER        AMOUNT        NUMBER      AMOUNT
<S>                                                    <C>           <C>           <C>        <C>              <C>           <C>

BALANCE, JANUARY 1, 1994                                6,160,991    $  6,161      3,000,000  $   3,000,000

  Shares issued to employees                               25,000          25
  Shares issued for professional services                  31,289          31
  Shares issued as commitment fee                          75,000          75
  Common shares issued for cash                         1,224,133       1,224
  Shares issued for acquisition of subsidiary             140,000         140
  Preferred shares issued for cash                                                   250,000        250,000
  Net loss
  Foreign currency translation adjustment
                                                       ----------    --------      ---------  -------------    ---------     -------

BALANCE, DECEMBER 31, 1994                              7,656,413       7,656      3,250,000      3,250,000

  Shares issued in private placement (net of
    issuance cost)                                      2,750,000       2,750
  Conversion of note payable to common shares
    (net of write-off of deferred finance costs)        2,025,000       2,025
  Shares issued to pay expenses and fees                  230,472         230
  Conversion of preferred shares to common shares         480,000         480       (360,000)      (360,000)
  Exercise of warrants                                     66,667          67
  Net loss
  Foreign currency translation adjustment
                                                       ----------    --------      ---------  -------------    ---------     -------

BALANCE, DECEMBER 31, 1995                             13,208,552      13,208      2,890,000      2,890,000

  Preferred shares issued for cash                                                                               531,915     $5,319
  Discount on Series B Preferred Stock
  Exercise of options                                     384,000         384
  Shares issued to pay expenses and fees                    5,983           6
  Conversion of preferred shares to common shares         533,334         534       (400,000)      (400,000)
  Exercise of warrants (net of costs)                   1,399,331       1,399
  Net loss
  Foreign currency translation adjustment
                                                       ----------    --------      ---------  -------------    ---------     -------

BALANCE, DECEMBER 31, 1996 (as restated, see Note 19)  15,531,200    $ 15,531      2,490,000  $   2,490,000      531,915     $5,319
                                                       ==========    ========      =========  =============    =========     =======
</TABLE>
    

   
<TABLE>

<CAPTION>
                                                                                              FOREIGN
                                                                                              CURRENCY           TOTAL
                                                       ADDITIONAL           ACCUMULATED     TRANSLATION      STOCKHOLDERS'
                                                     PAID-IN CAPITAL          DEFICIT        ADJUSTMENT          EQUITY
<S>                                                  <C>                  <C>               <C>              <C>
BALANCE, JANUARY 1, 1994                             $   3,310,476        $  (4,670,021)      $    (492)       $ 1,646,124

  Shares issued to employees                                32,475                                                  32,500
  Shares issued for professional services                   46,907                                                  46,938
  Shares issued as commitment fee                          104,925                                                 105,000
  Common shares issued for cash                          1,431,575                                               1,432,799
  Shares issued for acquisition of subsidiary              279,860                                                 280,000
  Preferred shares issued for cash                                                                                 250,000
  Net loss                                                                   (3,372,590)                        (3,372,590)
  Foreign currency translation adjustment                                                        (2,632)            (2,632)
                                                     -------------        -------------       ---------        -----------

BALANCE, DECEMBER 31, 1994                               5,206,218           (8,042,611)         (3,124)           418,139

  Shares issued in private placement (net of
    issuance cost)                                       4,877,250                                               4,880,000
  Conversion of note payable to common shares
    (net of write-off of deferred finance costs)         3,909,630                                               3,911,655
  Shares issued to pay expenses and fees                   424,774                                                 425,004
  Conversion of preferred shares to common shares         359,520
  Exercise of warrants                                      66,600                                                  66,667
  Net loss                                                                   (3,319,934)                        (3,319,934)
  Foreign currency translation adjustment                                                        (5,692)            (5,692)
                                                     -------------        -------------       ---------        -----------

BALANCE, DECEMBER 31, 1995                              14,843,992          (11,362,545)         (8,816)         6,375,839

  Preferred shares issued for cash                       2,494,681                                               2,500,000
  Discount on Series B Preferred Stock                     625,000             (625,000)
  Exercise of options                                      255,136                                                 255,520
  Shares issued to pay expenses and fees                    23,926                                                  23,932
  Conversion of preferred shares to common shares          399,466
  Exercise of warrants (net of costs)                    3,297,477                                               3,298,876
  Net loss                                                                   (4,295,919)                        (4,295,919)
  Foreign currency translation adjustment                                                       260,247            260,247
                                                     -------------        -------------       ---------        -----------

BALANCE, DECEMBER 31, 1996 (as restated,
  see Note 19)                                       $  21,939,678        $(16,283,464)      $ 251,413        $ 8,418,477
                                                     =============        =============       =========        ===========
</TABLE>
    


See notes to consolidated financial statements.


                                      -20-
<PAGE>   22
EPL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
                                                                                 1996             1995             1994
<S>                                                                          <C>              <C>              <C>
OPERATING ACTIVITIES:
  Net loss                                                                   $(4,295,919)     $(3,319,934)     $(3,372,590)
  Adjustments to reconcile net loss to net cash
    used in operating activities:
    Expenses paid with common stock                                               23,932          425,004          184,438
    Depreciation and amortization                                              1,009,746          574,293          377,592      
    Minority interest and gain on sale of fixed assets                          (10,375)
    Changes in assets and liabilities, net of effects from acquisitions of
    businesses, which provided (used) cash:
    Accounts receivable                                                       (1,381,262)         536,394         (174,860)
    Due from related parties                                                      40,676            1,429          (76,206)
    Inventories                                                               (1,136,800)         247,262          (76,391)
    Prepaid expenses and other current assets                                   (168,520)          (8,549)         (50,900)
    Accounts payable                                                           1,192,893         (185,067)         264,093
    Accrued expenses                                                             669,632         (207,513)        (187,775)
    Other liabilities                                                            216,021           43,237           41,444
                                                                             -----------      -----------      ----------- 
           Net cash used in operating activities                              (3,839,976)      (1,893,444)      (3,071,155)
                                                                             -----------      -----------      ----------- 

INVESTING ACTIVITIES:
  Fixed assets acquired                                                       (1,997,071)        (442,438)        (168,343)
  Proceeds from sale of fixed assets                                              23,033
  Acquisition of businesses, net of cash acquired                               (767,869)      (3,172,528)         (57,156)
  Cost of patent acquired                                                                          (8,000)         (44,914)
                                                                             -----------      -----------      ----------- 

           Net cash used in investing activities                              (2,741,907)      (3,622,966)        (270,413)
                                                                             -----------      -----------      -----------

FINANCING ACTIVITIES:
  Deferred financing cost                                                                                          (90,778)
  Repayment to stockholders                                                                       (74,912)         (41,863)
  Proceeds from long-term debt                                                 1,511,127
  Payment of long-term debt                                                   (1,126,377)        (145,719)         (89,015)
  Proceeds from notes payable - stockholder                                                     2,250,000        1,800,000
  Proceeds from sale of common stock/warrants/options                          3,554,396        4,946,667        1,432,799
  Proceeds from sale of preferred stock                                        2,500,000                           250,000
                                                                             -----------      -----------      ----------- 

           Net cash provided by financing activities                           6,439,146        6,976,036        3,261,143
                                                                             -----------      -----------      -----------

EFFECT OF EXCHANGE RATE ON CASH                                                  260,229           (5,692)          (2,632)
                                                                             -----------      -----------      ----------- 

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                 117,492        1,453,934          (83,057)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                   1,522,075           68,141          151,198
                                                                             -----------      -----------      ----------- 

CASH AND CASH  EQUIVALENTS, END OF YEAR                                      $ 1,639,567      $ 1,522,075      $    68,141
                                                                             ===========      ===========      ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
  Interest paid                                                              $   107,027      $    26,683      $    60,290

  Income taxes paid                                                          $    55,635

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING
  ACTIVITIES:
  Issuance of common stock for:
    Conversion of note payable to common shares                                               $ 4,050,000
    Acquisition of subsidiary                                                                                  $   280,000
    Exchange for services and other fees                                     $    23,932      $   114,840      $   184,438
    Payment of interest                                                                       $   310,164
    Conversion of preferred shares to common shares                          $   400,000      $   360,000
</TABLE>


See notes to consolidated financial statements.


                                      -21-
<PAGE>   23
EPL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

      1.    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

            A.    ORGANIZATION - EPL Technologies, Inc. (the "Company") is
                  engaged in the development, manufacture and
                  marketing of proprietary processing aids and packaging
                  technologies and related scienctific services that facilitate
                  the maintenance of the quality and integrity of fresh produce.

            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.

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

            D.    ACCOUNTS RECEIVABLE - Accounts receivable are shown net of
                  allowance for doubtful accounts of $153,037 and $143,210 as of
                  December 31, 1996 and 1995, 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 (Note 3).
    

            F.    PROPERTY AND EQUIPMENT - Property and equipment are stated at
                  cost. Depreciation and amortization is calculated on 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        3-7 years

                    Leasehold improvements                The term of the lease or
                                                          the estimated life of the asset, 
                                                          whichever is shorter.

                    Motor Vehicles                        3-4 years

                    Buildings                             40 years
</TABLE>

            G.    OTHER ASSETS -

                        GOODWILL (NOTE 6) - Goodwill related to the acquisition
                        of certain subsidiaries is being amortized on a
                        straight-line basis over 10 years

                        DISTRIBUTION RIGHTS (NOTE 5) - Are being amortized on a
                        straight-line basis over the ten-year life of the
                        distribution rights agreement.

                        PATENTS (NOTE 5) - Are being amortized on a
                        straight-line basis over the life of the patent.
                        Initially, costs related to new patents are expensed as
                        incurred. However, once a patent has been confirmed to
                        patent pending status, then the direct incremental cost
                        is capitalized and amortized over the estimated useful
                        life of the patent.

                        OTHER INTANGIBLES (NOTE 6) - Other intangibles which
                        consist of trademarks, formulations and non-compete
                        agreements are being amortized on a straight-line basis
                        over 5 to 10 years.


                                      -22-
<PAGE>   24
     H.  INCOME TAXES - The Company has adopted the provisions of Financial
         Accounting Standards Board 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 basis 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.

     I.  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.

     J.  FOREIGN CURRENCY TRANSLATION ADJUSTMENT - The financial statements of
         the Company's foreign subsidiary have been translated into U.S. dollars
         in accordance with SFAS No. 52. 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 a component of stockholders'
         equity.

     K.  RECLASSIFICATIONS - Certain reclassifications have been made to the
         1995 consolidated financial statements in order to conform with the
         1996 presentation.

     L.  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.

     M.  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. Measurement of the amount of impairment, if any, is based
         upon the difference between the carrying value and fair value.

     N.  STOCK-BASED COMPENSATION - During the year ended December 31, 1996, the
         Company adopted Statement of Financial Accounting Standard (SFAS) No.
         123, Accounting for Stock-Based Compensation. The Company will continue
         to measure 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 123 had been applied in
         measuring compensation expense.

    2.  OPERATIONS

    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. The nature of the processing aid
    business is such that fresh cut produce processors and other third-party
    users supplying retail markets require extensive on site, and, in certain
    cases, independent testing prior to utilizing the Company's product in their
    production. This results in an extended sales process. Management believes
    that this process is the basis for developing sustainable growth in revenues
    which will enable the Company to achieve profitable operations.



                                      -23-
<PAGE>   25
         The Company's management believe that cash flows from operations,
         together with its current resources (including cash received in the 
         recent private placement, see Note 18) and with the availability of
         financing from other sources, will allow the Company to maintain
         adequate financing for the next year.
         
     3.  INVENTORIES

          Inventories consisted of the following:


<TABLE>
<CAPTION>
                                             DECEMBER 31,
                                     -------------------------
                                        1996            1995
<S>                                  <C>              <C>



Raw materials and supplies           $  938,050       $361,252
Finished goods                        1,000,769        200,003
                                     ----------       --------   

    Total inventories                $1,938,819       $561,255
                                     ==========       ========
</TABLE>








                                      -24-
<PAGE>   26
     4.  PROPERTY AND EQUIPMENT

         Property and equipment consisted of the following:

<TABLE>
<CAPTION>
                                                                                        DECEMBER 31,
                                                                              ------------------------------
                                                                                  1996               1995
<S>                                                                           <C>                <C>
Production and laboratory equipment                                           $ 3,489,187        $   868,128
Machinery and office equipment                                                    243,213            233,315
Leasehold improvements                                                             26,099             24,099
Motor vehicles                                                                     88,251            143,645
Buildings                                                                         814,154            731,247
                                                                              -----------        -----------

    Total property and equipment                                                4,660,904          2,000,434
Accumulated depreciation and amortization                                        (655,193)          (213,900)
                                                                              -----------        -----------

Property and equipment (net)                                                  $ 4,005,711        $ 1,786,534
                                                                              ===========        ===========
</TABLE>

    Depreciation expense was $384,902, $121,929, and $33,945 for the years ended
    December 31, 1996, 1995 and 1994, respectively.

5.  PATENTS AND DISTRIBUTION RIGHTS

    The Company owns the exclusive right to establish the worldwide sales,
    marketing and distribution network for the food processing products of Agra
    Research, Inc. for a period of ten years. The Company issued 3,061,312
    restricted shares of common stock for these product rights at a value of
    $0.75 per share for a total of $2,295,984. The asset is being amortized on a
    straight-line basis over the ten-year life of the distribution rights
    agreement. Distribution rights, net, totaled $229,599 and $459,197 as of
    December 31, 1996 and 1995, respectively.

    In connection with the acquisition of Agra Research, Inc. on December 31,
    1992, the purchase cost was allocated primarily to patents acquired. The
    patent was formally approved in June 1990, and, therefore, the patent value
    is being amortized over the remaining fourteen and one half years of its
    life commencing January 1, 1993. Patents, net totaled $1,073,522 and
    $1,173,299 as of December 31, 1996 and 1995, respectively.

6.  ACQUISITIONS
    

    On April 19, 1996, the Company acquired substantially all of the tangible 
    and intangible assets of Pure Produce, a Massachusetts general partnership,
    through a wholly-owned subsidiary, Pure Produce, Inc., a Massachusetts
    corporation. The total cost of the acquisition was approximately $150,000. 
    Pure Produce is in the business of providing companies in the food industry,
    especially those involved with fresh and minimally processed produce, with 
    analysis, protocols and plans relating to food and quality assurance
    programs including microbial testing.

    In July 1996, the Company acquired, through a wholly-owned UK subsidiary
    (EPL Flexible Packaging Limited ("EPL Flexible")), some of the fixed assets 
    located at Gainsborough, Lincolnshire, UK, of a division of Printpack
    Europe (St. Helens) Limited ("Printpack St. Helens"). EPL Flexible also
    assumed a real estate lease and offered employment to some of the employees 
    of Printpack St. Helens. The total net consideration paid was $1,286,500. 
    This company specializes in the printing of flexible packaging films serving
    primarily the snack food industry.   


                                          -25-
<PAGE>   27
    In July 1996, the Company formed a wholly-owned US subsidiary, Crystal
    Specialty Films, Inc., to acquire the assets and assume some of the
    liabilities of Crystal Plastics, Inc., based in Illinois. Crystal uses "K"
    resin and polystyrene resins to manufacture a range of proprietary films
    for a variety of applications. After an initial payment of approximately
    $400,000, an additional amount of $267,000 is payable in quarterly
    installments over two years, with a final payment based on the performance 
    of the business over the next two years. Crystal serves as the site for
    proprietary gas flame perforation equipment which the Company has had
    custom-built in the UK and which is planned to be the basis for penetration
    of the US film perforation market.
    
    In addition, also in July 1996, the Company formed Newcorn Co. LLC, a
    jointly-owned limited liability company in which the Company owns 51% equity
    interest. The Company's partner is Underwood Ranches ("Underwood"), the
    trade name of Agricultural Innovation and Trade, Inc. The new company will
    utilize the Company's proprietary processing aid and packaging technologies
    and Underwood's existing corn processing and distribution capabilities to
    develop a year-round, national, value-added market for fresh corn products.

    The pro forma effects on the above acquisitions were not significant in
    1996.
 
    On September 19, 1995 the Company acquired all of the issued and
    outstanding share capital of Bakery Packaging Services Limited ("BPS"),
    an English company, through a wholly owned subsidiary of the 
    Company, EPL Technologies (Europe) Limited, also an English Company. BPS is
    based in the northwest of England and is in the business of the manufacture
    and sale of packaging materials, principlly perforated packaging materials,
    used by leading companies in the fresh cut produce and institutional bakery
    industries, which the Company intends that BPS continue. BPS also produces
    wax-coated packaging used principally in the confectionery industry, which
    also is intended to continue. The total purchase price (including
    acquisition costs) was approximately $3,251,000. The acquisition has been
    accounted for 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. This allocation
    resulted in goodwill of approximately $2,456,000 which is being amortized
    over 10 years.

    The results of BPS have been included with those of the Company since
    the date of the acquisition. Pro Forma unaudited consolidated operating
    results of the Company and BPS for the year ended December 31, 1995,
    assuming the acquisition had been made as of January 1, 1995, are
    summarized below:
    
<TABLE>
<S>                              <C>
     Sales                       $ 8,149,255

     Net loss                     (3,281,953)

     Loss per common share             (0.35)
</TABLE>



                                      -26-
<PAGE>   28
7.  INCOME TAXES

    The provision for income taxes for the year ended December 31, 1996 and 1995
    consists of deferred foreign income tax of $101,432 and $10,543,
    respectively. 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. The tax rate on other foreign income was less than the U.S.
    rate.

    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:

<TABLE>
<CAPTION>
                                                        1996               1995               1994
                                                        ----               ----               ----
<S>                                                 <C>                <C>                <C>
Deferred Tax Asset
  Other assets                                      $    31,340        $    49,414        $    11,488
  Operating loss carryforwards                        4,552,532          3,396,572          2,292,211
                                                    -----------        -----------        -----------

  Gross deferred tax asset                            4,583,872          3,445,986          2,303,699

  Valuation allowance                                (4,570,246)        (3,338,968)        (2,195,845)
                                                    -----------        -----------        -----------

           Deferred tax asset                            13,626            107,018            107,854
                                                    -----------        -----------        -----------

Deferred Tax Liability
  Fixed assets                                           13,626            160,690            107,854
  Foreign liability                                     161,926            
                                                    -----------        -----------        -----------

  Deferred tax liability                                175,552            160,690            107,854
                                                    -----------        -----------        -----------

NET DEFERRED TAX LIABILITY                          $   161,926        $    53,672        $
                                                    ===========        ===========        ===========
</TABLE>

For income tax reporting purposes, the Company has net operating loss
carryforwards as follows:

<TABLE>
<CAPTION>
                                       NET
                                  OPERATING LOSS
                                  CARRYFORWARDS            EXPIRATION
                                       U.S.                  DATE
<S>                             <C>                      <C>
Net Operating Loss 4/30/88       $    75,031                 2003
Net Operating Loss 4/30/89           269,949                 2004
Net Operating Loss 4/30/90           203,605                 2005
Net Operating Loss 4/30/91            42,024                 2006
Net Operating Loss 12/31/92          262,926                 2007
Net Operating Loss 12/31/93        2,301,851                 2008
Net Operating Loss 12/31/94        3,159,453                 2009
Net Operating Loss 12/31/95        3,182,663                 2010
Net Operating Loss 12/31/96        3,892,298                 2011
                                 -----------      

                                 $13,389,800
                                 ===========
</TABLE>



                                      -27-
<PAGE>   29
    A change in fiscal year caused the $262,926 of U.S. loss for the period
    ended December 31, 1992 to be utilized ratably over a six-year period. The
    Company's ability to utilize the U.S. net operating loss carryover amounts
    disclosed above may be significantly limited under U.S. Internal Revenue
    Code ("IRC") Section 382 as a result of various changes affecting the
    Company's capital structure during 1996 and prior years.

    8.  LONG-TERM DEBT

<TABLE>
<CAPTION>
                                                            December 31,
                                                     -------------------------
                                                          1996        1995
<S>                                                  <C>          <C>
Mortgage loan                                                     $  465,600
Directors' pension fund loan                                         465,600
Bank term loan                                        $1,387,125
Notes payable                                            233,625
Capital leases                                           196,190     150,944
                                                      ----------  ----------

                                                       1,816,940   1,082,144
Less current portion                                     262,779     237,811
                                                      ----------  ----------

Long-term debt                                        $1,554,161  $  844,333
                                                      ==========  ==========
</TABLE>

    In 1996, the Company refinanced the mortgage loan and Directors' pension
    fund loan by EPL Technologies (Europe) Limited ("EPL Europe") entering
    into a bank term loan agreement. The bank term loan matures over the next 
    seven years and carries an interest rate ranging from 2% to 2-1/4% over 
    the Bank of Scotland Base Rate, which base rate at December 31, 1996 was 
    6%. EPL Europe also entered into a line of credit with the Bank of Scotland 
    for approximately $514,000 which bears interest of 2-1/2% over bank base
    rate. Both the term loan and the line of credit are collaterallized by the
    assets of BPS.

    In conjunction with the acquisition of some of the assets of Crystal
    Plastics, Inc., (Note 6), the Company entered into a $267,000 note payable
    with the prior owner. The note is payable in 8 quarterly principal
    installments of $33,375 through June 1998 with additional consideration
    based on the performance of the business over the next two years and bears
    an interest rate of 8%.

    Other debt relates to capital leases that bear interest rates from 5.9%
    through 13.0%, with varying monthly principal and interest payments.

    At December 31, 1996, aggregate annual maturities of long-term debt were as
    follows:

      YEAR ENDING DECEMBER 31,

<TABLE>
<S>                                    <C>
      1997                             $  262,779
      1998                                325,926
      1999                                200,735
      2000                                205,500
      2001                                222,625
      Thereafter                          599,375
                                       ----------
                                      
                                       $1,816,940
                                       ==========
</TABLE>

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 $0.75 per share. The Series A Stock carries equal
    voting rights to the common shares, based on the underlying number of common
    shares after 





                                      -28-
<PAGE>   30

    conversion. The Series A Stock carries a dividend rate of 10% per annum,
    payable in cash and/or common shares ($0.75 per share) at the Company's
    option (dividends in arrears at December 31, 1996 and 1995 totaled
    $1,100,716 and $837,237, respectively.) During 1996, shareholders holding
    400,000 shares of Series A Stock elected to exercise their right of
    conversion, leaving 2,490,000 shares of Stock outstanding at December 31,
    1996. In addition, 20% of the common stock conversion option carries
    detachable warrants at a price of $1.00 per warrant. During 1996 and 1995,
    24,667 and 66,667 warrants were exercised, respectively, leaving 238,532
    unexercised at December 31, 1996.

   
      At the Annual Meeting of the Company held on July 22, 1996, the
      shareholders of the Company authorized the issuance of up 2,000,000 shares
      of Board Designated Preferred Stock. On July 23, 1996, the Company issued
      531,915 of these shares, designated as Series B Preferred Stock (the
      "Series B Stock"). The Series B Stock contains the option to convert into
      shares of Common Stock at the rate of $4.70 per share and carries equal
      voting rights to the shares of Common Stock, based on the underlying
      number of shares of Common Stock after conversion. The Series B Stock
      carries a dividend rate of 10% per annum, payable in cash and/or shares at
      the Company's option. Gross proceeds to the Company were $2,500,000. The
      outstanding dividends on the Series B Stock at December 31, 1996 totaled
      $110,445. The Series B Stock, when issued, was convertible into shares of
      common stock at a fixed conversion price of $4.70 per share. The extent of
      the beneficial conversion feature, representing the difference between the
      $4.70 conversion price and the prevailing market price of the Common Stock
      at the date of issuance, a total of $625,000, was accreted immediately
      from accumulated deficit to additional paid-in-capital.
    

10. COMMON STOCK
   

    During 1996 the Company issued a total of 2,322,648 shares of Common Stock.
    A total of 1,399,331 shares were issued from the exercise of warrants,
    resulting in net proceeds to the Company of $3,298,876. A total of 384,000
    shares were issued from the exercise of options, resulting in net proceeds
    to the Company of $255,520. A total of 533,334 shares were issued on
    conversion of the Series A Preferred Stock. A further 5,983 shares were
    issued pursuant to the Company's option plan, as payment for professional
    services resulting in expense of $23,932. 
    
   

    During 1995, the Company issued a total of 5,552,139 shares of common stock.
    In September 1995, the Company completed a private placement transaction of
    2,750,000 restricted shares of its common stock (the "Offering"), par value
    $0.001 per share, at a price of $2.00 per share, to raise gross proceeds of
    $5,500,000. Proceeds were used for the acquisition of BPS (see Note 6) and
    for working capital. Expenses associated with the Offering were $620,000,
    which were charged against additional paid-in capital. A further 21,361
    shares were issued as compensation to employees and as payment for
    professional services pursuant to the Company's option plan, resulting in
    expense of $37,381. In connection with the 
    




                                      -29-
<PAGE>   31

    Offering, warrants for a total of 55,000 shares of Common Stock, exercisable
    at $2.00 per share up to October 1998, were issued in October 1995.

    At December 31, 1996, the Company had 393,532 warrants outstanding to 
    purchase shares of Common Stock at between $1.00 and $2.00 per share, which
    if exercised would provide the Company with gross proceeds of approximately
    $548,000. In addition, the company had 3,295,000 options outstanding to
    purchase shares of Common Stock at an weighted average price of $3.01 per
    share, which if exercised would provide the Company with gross proceeds of
    approximately $9,900,000.

11. STOCK OPTION PLANS

    The 1994 Stock Incentive Plan (the "1994 Plan") originally provided for up 
    to 1,500,000 shares of unissued Common Stock to be made available for the
    granting of options. This was approved by shareholders on July 21, 1994. On
    July 22, 1996, shareholders approved an increase in the number of shares
    available for the granting of options under the 1994 Plan to 3,000,000. On
    December 31, 1996 and 1995, 665,500 and 625,500 shares, respectively, were
    available for grant.

    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, 1993       1,070,000   $0.69
                                                                  
Activity for the Year Ended December 31, 1994                     
  Expired/Canceled                                       (40,000)  $3.25
                                                       ---------   
                                                                  
Outstanding and Exercisable at December 31, 1994       1,030,000   $0.60
                                                                  
Activity for the Year Ended December 31, 1995                     
  Granted                                                874,500   $1.84
  Expired                                                (30,000)  $4.62
                                                       ---------    
                                                                  
Outstanding and Exercisable at December 31, 1995       1,874,500   $1.12
                                                                  
Activity for the Year Ended December 31, 1996                     
  Granted                                              1,805,000   $4.47
  Exercised                                             (384,000)  $0.67
                                                       ---------   
                                                                  
Outstanding and Exercisable at December 31, 1996       3,295,500   $3.01
                                                       =========   =====
</TABLE>                                                         

    The options expire between March 10, 1998 and December 4, 2001. Of the above
    options, 345,000 options issued during 1996 were issued outside of the 1994
    Plan.

    The estimated fair value of options granted during 1996 and 1995 ranged
    between $2.93 - $6.31 and $1.73 - $1.98 per share, respectively. The
    Company applies Accounting Principles Board Opinion No. 25 and related
    Interpretations in accounting for its stock option plans. Accordingly, no
    compensation cost has been recognized for its fixed 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 method of FASB Statement 123, the Company's net loss 
    and loss per share for the years ended December 31, 1996 and 1995 would 
    have been increased to the pro forma amounts indicated below:





                                      -30-
<PAGE>   32

   
<TABLE>
<CAPTION>
                                                       1996                 1995
<S>                                              <C>                 <C>
Net loss available for common shareholders
  As reported                                    $    5,294,843       $    3,633,788
  Pro forma                                      $   11,666,398       $    5,224,529

Net loss per common share
  As reported                                    $         0.36       $         0.39
  Pro forma                                      $         0.78       $         0.56
</TABLE>
    

    The fair value of options granted under the company's stock option plans
    during 1996 and 1995 was estimated on the date of grant using the
    Black-Scholes option-pricing model with the following assumptions used: no
    dividend yield, expected volatility ranging from 88% - 224%, risk free
    interest rate ranging from 5.6% - 6.91%, and expected lives of 5 years.
    Pro forma compensation cost of options granted under the 1994 Plan is 
    measured based on the discount from market value. The pro forma effect on 
    net income for 1995 and 1995 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 1995. SFAS
    123 does not apply to awards prior to 1995, and additional awards in future
    years are anticipated.
    
12. NET LOSS PER COMMON SHARE

    Net loss per common share is computed by dividing the loss applicable to
    common shareholders by the weighted average number of common shares and
    common share equivalents outstanding during the period. Outstanding options,
    convertible preferred stock and stock warrants were determined to be
    antidilutive for the years ended December 31, 1996, 1995 and 1994, as
    applicable, and were therefore excluded from the per share calculations.

13. COMMITMENTS

    The Company has entered into various leases for facilities, vehicles and
    equipment. At December 31, 1996, future minimum lease payments were as
    follows:

        YEAR ENDED DECEMBER 31,

<TABLE>
<CAPTION>
                                       CAPITALIZED    OPERATING
                                         LEASES          LEASES
<S>                                    <C>            <C>
        1997                            $ 39,020       $  425,559
        1998                              40,689          399,877
        1999                               7,789          312,539
        2000                                              264,972
        2001                                              264,440
                                        --------          -------
                                                        
        Future Minimum Lease Payments   $ 87,498       $1,667,387
                                        ========       ==========
</TABLE>

    Rental expense for operating leases amounted to $224,461, $162,559 and
    $119,022 for the years ended December 31, 1996, 1995 and 1994, respectively.

    The Company has entered into agreements for services with certain executive
    officers, which currently will expire, if not renewed, in 1997. In addition
    to a base salary, certain other benefits are provided.




                                      -31-
<PAGE>   33

14. RELATED PARTY TRANSACTIONS

    The Company purchased certain raw materials from Jungbunzlauer Inc., a
    subsidiary of a shareholder, in the amount of $35,280 and $35,760 for the
    years ended December 31, 1996 and 1995, respectively.

15. 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.

    The fair values are based on pertinent information available to the 
    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 financial statements since that date, and current
    estimates of fair value may differ from amounts presented herein.

16. CUSTOMER CONCENTRATION

    
    In 1996, one customer accounted for 13% of annual revenues and in 1995, no
    customers accounted for 10% or more of annual revenues. Two customers
    represented 35% of revenues for the year ended December 31, 1994. 
    





                                      -32-
<PAGE>   34

17. 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 sold primarily in the United States with smaller amounts
    also sold in Canada, while packaging materials are marketed in North
    America, United Kingdom and, to a lesser extent, Continental Europe.

<TABLE>
<CAPTION>
                                                            1996              1995              1994
<S>                                                   <C>                <C>               <C>
SALES
  Domestic Operations:
    Processing aids                                   $  1,326,669       $   472,747       $   345,795
    Packaging materials                                  1,716,984           868,229           232,668
            Total Domestic                               3,043,653         1,340,976           578,463

  United Kingdom Operations - packaging materials        8,270,488         1,898,590
                                                      ------------       -----------       -----------

            Total                                      $11,314,141       $ 3,239,566       $   578,463
                                                      ============       ===========       ===========

NET (LOSS) INCOME FROM OPERATIONS
  Domestic Operations:
    Processing aids                                   $ (2,700,793       $(2,661,480       $(3,289,917)
    Packaging materials                                 (1,552,376)         (385,663)            8,881
                                                      ------------       -----------       -----------
           Total Domestic                               (4,253,169)       (3,047,133)       (3,281,036)

  United Kingdom Operations - packaging materials           69,194             4,918
                                                      ------------       -----------       -----------
          Total                                       $ (4,183,975)      $(3,042,215)       $(3,281,036)
                                                      ============       ===========       ===========

TOTAL ASSETS
  Domestic Operations:
    Processing aids                                     $2,876,117        $3,061,720        $2,673,450
    Packaging materials                                  2,149,822           657,357           515,295
                                                      ------------       -----------       -----------
          Total Domestic                                 5,025,939         3,719,077         3,188,745

  United Kingdom Operations - packaging materials       10,189,483         6,322,120
                                                      ------------       -----------       -----------

          Total                                       $ 15,215,422       $10,041,197       $ 3,188,745
                                                      ============       ===========       ===========

DEPRECIATION AND AMORTIZATION EXPENSE
   Domestic Operations:
      Processing aids                                 $    434,313       $   432,135       $   368,131
      Packaging materials                                  117,543            43,172             9,461
                                                      ------------       -----------       -----------
          Total Domestic                                   551,856           475,307           377,592

  United Kingdom Operations - packaging materials          459,890            98,986
                                                      ------------       -----------       -----------

          Total                                       $  1,009,746       $   574,293       $   377,592
                                                      ============       ===========       ===========

CAPITAL EXPENDITURES
  Domestic Operations:
      Processing aids                                 $     92,858       $   127,471       $   168,343
      Packaging materials                                    4,994            75,989
                                                      ------------       -----------       -----------
         Total Domestic                                     94,852           203,460           168,343

  United Kingdom Operations - packaging materials        1,899,219           238,978
                                                      ------------       -----------       -----------

         Total                                        $  1,997,071       $   442,438       $   168,343
                                                      ============       ===========       ===========
</TABLE>

    18. SUBSEQUENT EVENTS

    Subsequent to the year end, in March 1997, the Company executed a letter of 
    intent containing its conditional offer to acquire a specialty packaging
    business, based in Europe with sales revenue of approximately $7,500,000
    and net assets of approximately $6,300,000. The Company believes that this
    would
    




                                      -33-
<PAGE>   35

    complement its existing European operations and advance its strategic plan
    of products and services it should be offering. The expected purchase price
    will be based on the net asset value of the business at the date of
    acquisition, as adjusted by an agreed reduction in the book value of certain
    assets. The offer is subject to the preparation, negotiation, and execution
    of an agreement of definitive documentation and the Company's due diligence.
    Such negotiation and investigations are continuing. There can, however, be
    no assurance that such negotiations and due diligence will be satisfactory 
    or that this transaction will be in fact consummated.

    In addition, also in March 1997, the Company received subscriptions of
    $1.0 million in connection with a private placement of common and Board
    Designated Preferred Stock. Further subscriptions for this limited private
    placement are expected shorlty from other existing offeree shareholders, 
    although there can be no assurance that any further subscription will in 
    fact be received.
    
   
19. RESTATEMENT
    

   
    Subsequent to the issuance of the Company's consolidated financial
    statements for the year ended December 31, 1996, in conjunction with the
    SEC's review of a Registration Statement on Form S-3 filed by the Company in
    December 1997, the SEC, pursuant to the Financial Accounting Standards
    Board's Emerging Issues Task Force - Topic D 60 ["Accounting for the
    Issuance of Convertible Preferred Stock and Debt Securities with a 
    Nondetachable Conversion Feature"] issued March 13, 1997, which formally
    announced the SEC staff's position that any discounts resulting from an 
    allocation of proceeds to the beneficial conversion feature is analogous
    to a dividend and should be recognized as a return to the preferred
    shareholders over the minimum conversion period, requested that the 
    Company retroactively apply the accounting suggested to the Company's
    Series B Stock issued in July 1996. Accordingly, the Company's management
    determined that the consolidated financial statements and footnotes for
    the Company's year ended December 31, 1996 should be restated.
    

   
    Under this accounting treatment, the value of the discount ($625,000) has
    been reflected in the restated 1996 consolidated financial statements as
    additional preferred dividends and has been accreted through the first
    possible conversion date of the Series B Stock. The restatement also gives
    effect to the recognition in the calculations of net loss per share of
    additional preferred dividends on the Series B Stock representing the
    accretion of the issuance discount which had not been previously recognized
    in the calculation of net loss per share. The restatement had no effect on
    previously reported total stockholders equity as of December 31, 1996 or on
    previously reported 1996 consolidated net income (prior to preferred stock
    accretion, discount and dividends) and cash flows.
    

   
    A summary of significant effects of the restatement is as follows:
    

   
<TABLE>
<CAPTION>
                                                      AS PREVIOUSLY             AS
                                                        REPORTED             RESTATED
<S>                                                   <C>                  <C>
     At December 31, 1996:
      Additional paid-in-capital                      $ 21,314,678         $ 21,939,678
      Accumulated deficit                             $(15,658,464)        $(16,283,464)

     For the Year Ended December 31, 1996:
      Accretion, discount and dividends on
        preferred stock                                    373,924         $    998,924
      Net loss available for common stockholders      $ (4,669,843)        $ (5,294,843)
      Net loss per share                              $      (0.31)               (0.36)
</TABLE>
    


                                      -34-
<PAGE>   36

                                    PART III

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

NONE

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

  The Board of Directors and executive officers of the Company are as follows:

   
<TABLE>
<CAPTION>
     NAME                             AGE     POSITION WITH THE COMPANY AND AFFILIATE 
<S>                                   <C>     <C>
     Paul L. Devine                   42      Chairman of the Board of Directors,
                                              President, Chief Executive Officer
     Timothy B. Owen                  38      Treasurer and Secretary
     Shawn J. Collins                 41      Controller - U.S. Operations
     Derrick W. Lyon                  54      Chief Executive Officer - EPL
                                              Technologies (Europe) Limited
     Dr. William R. Romig             51      Vice President - Research and
                                              Development
     Karen A. Penichter               43      Vice President - Sales
     Antony E. Kendall                54      Chief Executive Officer of Bakery
                                              Packaging Services Ltd. and EPL
                                              Flexible Packaging Ltd.
     Joel Longstreath                 44      President of Respire Films, Inc.
     Robert D. Mattei (1)(2)          58      Member of the Board of Directors
     Dr. Rainer G. Bichlbauer (1)(2)  57      Member of the Board of Directors
     William J. Hopke(1)(2)(3)        41      Member of the Board of Directors
</TABLE>
    

    (1)     Member of the Audit Committee

    (2)     Member of the Compensation Committee

    (3)     Resigned December 1996

    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 United Kingdom (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. From 1981 until 1986, he
    worked for a U.K. clearing bank and prior to that was a research graduate at
    London University spending time both teaching and lecturing. He is a
    graduate of London University and holds Bachelors and Masters degrees in
    curriculum research. Throughout his business career, he has been intimately






                                      -35-
<PAGE>   37

    involved in the design and implementation of new product strategies, both in
    financial services and health/hygiene services.

    Timothy B. Owen. Mr. Owen was appointed Secretary and Treasurer in October
    1996 having been European Financial Controller of the Company since 1995.
    From 1992 until 1995 Mr. Owen performed financial and accounting services
    for the Company as an independent consultant. From 1990 to 1993, Mr. Owen
    served as chief financial officer and secretary of various companies,
    including three U.K. subsidiaries of Abbey Home Healthcare, Inc. Prior to
    this, from 1986 to 1990, he was a financial controller for the Foseco Group
    Plc, holding both corporate and operational positions. Mr. Owen qualified as
    a chartered accountant with Touche Ross & Co. (now Deloitte & Touche) in
    1985. He is a graduate of Brunel University, and holds an Honors degree in
    economics.

    Shawn J. Collins. Mr. Collins joined the Company in July 1993 as Controller.
    He was appointed Treasurer in July 1994 and Secretary in October 1994 until
    October 1996. Prior to joining the Company, Mr. Collins served from 1988 to
    1993, as Vice-President of a privately held environmental
    engineering/construction company. From 1978 to 1987, Mr. Collins was
    controller for a Philadelphia-based economic development corporation. Mr.
    Collins received his MBA from Drexel University and his B.S. degree in
    accounting from Villanova University.

    Derrick W. Lyon. Mr. Lyon was appointed Chief Operating Officer of Bakery
    Packaging Services Limited (BPS), following its acquisition by the Company
    in September 1995. Following the appointment of Mr. Anthony Kendall in
    August 1996, Mr. Lyon became Chief Executive Officer of EPL Technologies
    (Europe) Limited. From 1981 to 1995, Mr. Lyon was Managing Director and a
    founder shareholder of BPS. Prior to this, Mr. Lyon held senior management
    positions within Bernard Wardle & Co. Smurfit Limited, and W.R. Grace,
    where he has gained over 25 years experience in the printing and packaging
    industries. He holds a degree in mechanical engineering from City
    University, London, and Bachelors and Masters degrees in economics from St.
    John's College, Cambridge.
    
    Dr. William R. Romig. Dr. Romig was appointed Vice President of Research and
    Development to the Company in September of 1994. From 1988, Dr. Romig was
    first Senior Director of Vegetable Genetics and then Senior Director of
    Business Development and Director of Product Development for a joint venture
    with DuPont, for DNA Plant Technology Corporation. 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 PhD 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.

    Karen A. Penichter. Ms. Penichter joined the Company as Vice President Sales
    in March 1996. From 1986, Ms. Penichter worked for FMC Corporation - Food
    Ingredients Division in several sales management positions until attaining
    the position of Director of Sales in 1993. She worked as a Sales
    Representative and then Sales Manager for SCM Corporation - Durkee Foods
    Division until 1986. Ms. Penichter was employed by Thomas J. Lipton Company
    as a Food Technologist from 1978-1982. Ms. Penichter holds a BA in Biology
    from SUNY Binghampton and an MS in Food Technology from Rutgers University.

   
    Antony P. Kendall. Mr. Kendall joined the Company as chief executive of BPS
    and EPL Flexible, subsidiaries of the Company in August 1996. 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 their specialty packaging products
    in the UK and for Pepsico European contracts. He holds a B.S. degree in
    Mechanical Engineering from the University of London. 
        



                                      -36-
<PAGE>   38

    From 1964 until 1970 he worked for Wiggins Teape Group reaching the position
    of Production Manager of their main factory in Cheshire.

    Joel Longstreth. Mr. Longstreth was appointed President of Respire Films,
    Inc., a subsidiary of the Company and a Pennsylvania corporation, following
    the acquisition of Respire Films, Inc., and Ohio Corporation ("RFI") on
    September 30, 1994. From 1991 to 1994 Mr. Longstreth was President and a
    founding shareholder of RFI.

    Robert D. Mattei. Mr. Mattei is an investor and entrepreneur. Mr. Mattei has
    been self-employed in various aspects of the food service industry for over
    20 years. As a restaurateur, Mr. Mattei has developed, operated and sold
    many successful operations. Mr. Mattei currently owns three restaurants, and
    acts as an industry consultant primarily involved in the development of
    restaurant concepts. Mr. Mattei has been a member of the Board of Directors
    of the Company since February 1988 and was Secretary of the Company from
    February 1988 to March 1993.

    Dr. Rainer G. Bichlbauer. Dr. Bichlbauer was elected to the Board of
    Directors of the Company in July 1994. He currently serves as Director of
    Finance and Marketing of Jungbunzlauer Holding AG and Jungbunzlauer AG, and
    Chairman and President of Jungbunzlauer International AG, ("JI") all based
    in Basel, Switzerland. He is also Manager Director of Jungbunzlauer GmbH,
    based in Vienna, Austria, which post he has held since 1988. From 1981 to
    1987, he was Chief Financial Officer of Elin Union, a state-owned
    electronics and electrical engineering conglomerate, based in Vienna. He has
    also held key positions within Royal Dutch Shell Group, in Austria, Germany,
    and the Netherlands. Dr. Bichlbauer received his Doctorate in law and
    political science from the University of Vienna. In March 1997, JI and Dr.
    Bichlbauer entered into a plea agreements with the US Justice Department, 
    which are subject to US District Court approval in San Francisco, 
    California, under which JI agreed to pay a $11.0 million fine and Dr.
    Bichlbauer agreed to plead guilty and pay a $150,000 criminal fine in
    connection with the Justice Department's investigation into the setting of
    prices worldwide for citric acid.

    William J. Hopke. Mr. Hopke has served as Vice President of Trilon Dominion
    Partners LLC since June 1995. Mr. Hopke served as Senior Vice President and
    Treasurer of Dominion Capital, Inc. and Assistant Treasurer - Finance of
    Dominion Resources, Inc. from April 1993 to June 1995. Mr. Hopke held the
    position of Vice President and Treasurer of Dominion Capital, Inc. and
    Assistant Treasurer-Finance of Dominion Resources, Inc. from 1988 to April
    1993. Mr. Hopke joined Dominion Resources, Inc. in 1984. Mr. Hopke served as
    Director of Advanced Materials, Inc., Caldera Resources, Inc.,
    Organogenesis, Inc., and Wilshire Technologies, Inc. Mr. Hopke was elected
    to the Board of Directors of the Company in March 1993. Mr. Hopke resigned
    for personal reasons from all of the above companies, including as a
    director of the Company, in December 1996 for personal reasons.

ITEM 11. EXECUTIVE COMPENSATION

    The following table sets forth the aggregate cash compensation paid by the
    Company for the year ended December 31, 1996 for services rendered in all
    capacities to each of the Company's most highly compensated executive
    officers whose aggregate cash compensation for that period exceeded $100,000
    (the "Named Executive Officers").



                                      -37-
<PAGE>   39

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                                                         LONG-TERM COMPENSATION
                                                                      ------------------------------
                              ANNUAL COMPENSATION                          AWARDS            PAYOUTS
                         -----------------------------------------    --------------------
NAME AND                                                     OTHER    RESTRICTED                        ALL OTHER
PRINCIPAL                                                   COMPEN-    STOCK      OPTIONS/   LTIP       COMPEN-
POSITION                              SALARY   BONUS        SATION     AWARD(S)    SARs      PAYOUTS    SATION
                         YEAR           ($)     ($)          ($)         ($)        #S        ($)         ($)
<S>                      <C>        <C>        <C>         <C>        <C>        <C>         <C>        <C>      
Paul L. Devine,          1996       $225,000   $210,798    $      0       $0     500,000     $ 0       $   0
 CEO                     1995         56,250    100,000     120,000        0     200,000       0           0
                         1994              0          0     160,000        0           0       0           0
                                                                                
Howard S. Kravitz        1996        109,264          0           0        0    
                         1995        109,264          0           0        0      50,000       0           0
                         1994        106,618          0           0        0           0       0           0
</TABLE>

    No other executive officers are presented in the Summary Compensation Table
    as no other officer of the Company during the period from 1994 to 1996
    earned salary and bonus of more than $100,000 for any such year.

    COMPENSATION OF DIRECTORS

    With the exception of Mr. Devine, no cash compensation was paid to any
    director of the Company during the year ended December 31, 1996. In May
    1996, in accordance with the terms of the Company's 1994 Stock Incentive 
    Plan, William J. Hopke, Robert D. Mattei and Dr. Rainer G. Bichlbauer were
    each granted 15,000 options at an exercise price of $7.625 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.
    
    EMPLOYMENT AND CONSULTING CONTRACTS

    Effective October 1, 1995 Mr. Devine signed a new employment agreement with
    the Company, serving as Chairman of the Board of Directors, President and
    Chief Executive Officer. This agreement expires on September 30, 1997,
    subject to automatic renewal for successive one-year terms, at a base salary
    to be fixed by the Board of Directors to be, as of October 1, 1995, no less
    than $225,000 per year.

    Howard S. Kravitz was a party to an employment agreement pursuant to which
    he served as the Company's Vice President - Sales and Marketing. Notice that
    the Company did not desire to renew this contract was served on January 30,
    1996, and thus, currently are being made on a month-to-month basis at the
    equivalent annual rate of $109,264. Mr. Kravitz remains with the Company and
    is now Director - Engineering and Technical Services.

    The following table sets forth certain information concerning grants of
    stock options made during the year ended December 31, 1996 to Named
    Executive Officers.




                                      -38-
<PAGE>   40

                        OPTION GRANTS IN LAST FISCAL YEAR

   
<TABLE>
<CAPTION>
                                  INDIVIDUAL GRANTS                                                                   
                          ----------------------------------
                                      % OF                      
                                     TOTAL                                POTENTIAL REALIZABLE VALUE AT
                                    OPTIONS                               ASSUMED ANNUAL RATES OF
                                    GRANTED                               STOCK PRICE APPRECIATION FOR
                                      TO                                  OPTION TERM (5 YEARS)(1)
                          OPTIONS  EMPLOYEES      EXERCISE               -----------------------------         
                          GRANTED  IN FISCAL      OR BASE     EXPIRATION                               
NAME                        (#)      YEAR          PRICE        DATE        0%      5%         10%
<S>                       <C>      <C>          <C>          <C>          <C>   <C>         <C>
Paul L. Devine, CEO       300,000    16.62%       $4.00        3/7/01      $0    $331,538    $732,612
                          
                          200,000    11.08       $4.063       12/4/01       0     224,429     496,039
</TABLE>
    

                        

(1) The dollar amounts under these columns are the result of calculations at 0%,
5% and 10% rates set by the Securities Exchange Commission and therefore are not
intended to forecast possible future appreciation of the price of the Common
Stock. The Company did not use an alternative formula for a grant date
valuation, an approach which would state gains present, and therefore lower,
value. The Company is not aware of any formula which will determine with
reasonable accuracy a present value based on future unknown or volatile factors.



                                      -39-
<PAGE>   41

    The following table sets forth certain information concerning exercises of
    stock options during the year ended December 31, 1996 and the value of
    unexercised stock options at December 31, 1996 for Named Executive Officers.

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

<TABLE>
<CAPTION>
                                              NUMBER OF SECURITIES           VALUE OF UNEXERCISED    
                                              UNDERLYING OPTIONS AT          IN-THE-MONEY OPTIONS AT                    
                    SHARES                    DECEMBER 31, 1996              DECEMBER 31, 1996
                   ACQUIRED        VALUE      ------------------------------------------------------------      
NAME              ON EXERCISE    REALIZED    EXERCISABLE    UNEXERCISABLE  EXERCISABLE     UNEXERCISABLE
----              -----------    --------    -----------    -------------  -----------    ---------------
<S>               <C>            <C>         <C>            <C>            <C>           <C>               
Paul Devine, CEO       0            $0          1,000,000          0        $3,450,000         $0

Howard S. Kravitz      0             0            205,000          0         1,021,563          0
</TABLE>

    (1) At December 31, 1996 the closing price of a share of unrestricted Common
    Stock on the Nasdaq Small Cap market was $6.063.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The following table sets forth certain information as of December 31, 1996
    regarding the beneficial ownership of all directors, Named Executive
    Officers, all directors and Named Executive Officers as a group, and each
    person known to the Company to be a beneficial owner of more than five
    percent of the Company's outstanding Common Stock and/or Series A Preferred
    Stock (on an as converted basis) and/or Series B Preferred Stock (on an as
    converted basis) (each beneficial owner has sole voting and investment power
    with respect to the shares indicated as beneficially owned, except as
    noted):




                                      -40-
<PAGE>   42

<TABLE>
<CAPTION>
                                               SHARES               PERCENT            PERCENT            PERCENT
                                            BENEFICIALLY              OF                 OF                 OF   
NAME AND ADDRESS OF BENEFICIAL OWNER          OWNER(1)              COMMON           A PREFERRED        B PREFERRED 
<S>                                         <C>                     <C>              <C>                <C>
CERTAIN BENEFICIAL OWNERS

Trilon Dominion Partners, L.L.C.
245 Park Avenue
Suite 2820
New York, NY  10017                         5,425,106(2)             29.72%             78.80%                 0%

Lancer Partners
200 Park Avenue, 39th Floor
New York, NY  10017                         3,257,079(3)             20.27%                 0%            100.00%

Quaestas S.A.
38a Route de Malagnou
CH-1208
Geneva, Switzerland                           413,333(4)              2.59%             10.04%                 0%


DIRECTORS AND NAMED EXECUTIVE OFFICERS

Paul L. Devine                              1,340,833(5)              8.07%              2.00%                 0%
Director and                                                                                                   
  Chief Executive Officer
2 International Plaza
Suite 245
Philadelphia, PA  19113-1507

Robert D. Mattei                              428,965(6)              2.73%                 0%                 0%
Director
7060 Greenhill Road
Philadelphia, PA  19151

Dr. Rainer G. Bichlbauer                       30,000(7)              *(9)                  0%                 0%
Director
St. Alban Vorstadt 90
CH-4002 Basel,
Switzerland

Directors and executive officers as a 
  group (ten persons)                       3,050,998(8)             17.03%               *(9)                 0%

Total number of shares outstanding--
  common                                   15,531,200               100.00%

Preferred (as converted)--Series A          3,320,000                                  100.00%
                          Series B            531,915                                                     100.00%
</TABLE>



                                     -41-
<PAGE>   43

    (1)  Unissued shares of each owner subject to currently exercisable options
         or options or other rights to acquire securities exercisable within 60
         days 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 owner. Such calculation is required under Rule 13d-3(d) of the
         Securities Exchange Act of 1934, as amended, which states that a person
         shall be deemed to be the beneficial owner of a security if that person
         has the right to acquire beneficial ownership of such security within
         60 days, including the right to acquire such shares through the
         exercise of any option or warrant or through the conversion of any
         security. For purposes of Rule 13-d-3(d)(1) and the required
         calculation of the Percent of Class outstanding, any securities not
         outstanding which are beneficially owned, subject to the exercise of
         options or warrants or through the conversion of any security, shall be
         deemed to be outstanding for the purpose of computing the percentage of
         outstanding securities by such person but shall not be deemed to be
         outstanding for computing the percentage of class by any other person.
         The effect of this rule is to increase the stated total ownership
         percentage currently controlled.

    (2)  Includes 2,717,333 shares of Common Stock through the rights to convert
         1,963,000 shares of Series A Preferred Stock into 2,617,333 shares
         of Common Stock and through the rights to exercise 100,000 warrants to
         acquire shares of Common Stock.

    (3)  Includes 468,085 shares of Common Stock through the rights to convert
         468,085 shares of Series B Preferred Stock into shares of Common Stock.
         It also includes 705,000 shares of Common Stock, and 63,830 shares of
         Common Stock through the rights to convert 63,830 shares of Series B
         Preferred Stock into shares of Common Stock, both held by other funds 
         but through which common management is exercised.
         
    (4)  Includes 413,333 shares of Common Stock through the right to convert
         250,000 shares of Series A, Preferred Stock into 333,333 shares of
         Common Stock and to exercise 80,000 warrants to acquire shares of
         Common Stock.

    (5)  Includes 1,080,000 shares of Common Stock through the right to exercise
         1,000,000 options to acquire shares of Common Stock and through the
         rights to convert 50,000 shares of Series A, Preferred Stock into
         66,667 shares of Common Stock and to exercise 13,333 warrants to
         acquire shares of Common Stock.

    (6)  Includes 180,000 shares of Common Stock issuable upon the exercise of
         outstanding options, and 20,000 shares of Common Stock owned by Mr.
         Mattei's wife, as to which he disclaims beneficial ownership

    (7)  Includes 30,000 shares of Common Stock issuable upon the exercise of
         outstanding options.

    (8)  Includes 2,380,000 shares of Common Stock through the rights to
         exercise 2,300,000 options to acquire shares of Common Stock, the right
         to convert 50,000 shares of Series A, Preferred Stock into 66,667
         shares of Common Stock and to exercise 13,333 warrants to acquire
         shares of Common Stock.

    (9)  "*" indicates less than one percent of class.





                                      -42-
<PAGE>   44

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    The Company entered into a Consulting Agreement (the "Agreement") with Dr.
    Joe H. Cherry, a former director of the Company, dated January 1, 1993, to
    provide consultancy services to the Company in the area of research and
    development. The Agreement had an original term of two years, expiring
    December 31, 1994, with an annual consulting fee of $60,000 in 1993 and
    $78,000 in 1994, plus certain bonuses based on the receipt of new patents by
    the Company for applications previously approved by the Board of Directors.
    This Agreement has not been renewed, and thus currently, payments are being
    paid on a month-to-month basis.

    The Company entered into a Consulting Agreement with DWL Associates Ltd.
    (the "DWL Agreement") for the provision of consulting and advisory services
    by Mr. Derrick W. Lyon. The DWL Agreement, which was signed as part of the
    acquisition by the Company of BPS in September 1995, has an original term of
    two years, expiring September 30, 1997. Annual fees of GBP 90,000  
    ($154,125 at an exchange rate of $1.7125) per annum are payable, with this 
    Agreement plus the reimbursement of directly incurred expenses.

    The Company currently obtains all of its requirements for certain raw
    materials from Jungbunzlauer, Inc., a U.S. subsidiary of a Swiss-based
    company, which is one of the Company's principal stockholders and with which
    Dr. Bichlbauer, one of the Company's directors, is affiliated. In the years
    ended December 31, 1996 and 1995, these purchases totaled $35,280 and
    $35,760, respectively.






                                      -43-
<PAGE>   45

                                     PART IV

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

    FINANCIAL STATEMENTS

    See index to Financial Statements and Supplemental Data at page 12.

    REPORTS ON FORM 8-K AND FORM 8

    On January 30, 1996, the Company filed a report on Form 8-K under Item 5
    thereof, in connection with the execution of a letter of intent with
    Potandon Produce, L.L.C.

    On July 9, 1996 the Company filed a report on Form 8-K under Item 5 thereof,
    in connection with trading of the Company's shares of common stock on the
    Nasdaq Small Cap market.

    On July 19, 1996 the Company filed a report on Form 8-K under Item 2
    thereof, in connection with the acquisition of certain assets and certain
    liabilities of Printpack Europe (St. Helens) Limited.

    On September 12, 1996 the Company filed a report on Form 8-K under Item 5
    thereof, in connection with the execution by BPS of a supply contract with
    DuPont.

   
    On November 27, 1996 the Company filed a report on Form 8-K under Item 5
    thereof, in connection with the effectiveness of the Company's Registration
    Statement on Form S-3 (File no. 333-09719).
    

    EXHIBITS

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

  Exhibit
    No.

   
  3.1  Amended and Restated Articles of Incorporation of the Company
       (Incorporated by reference to Exhibit 3.1 of the Company's Registration
       Statement on Form S-3 (File no. 333-09719) on file with the Commission).
    

  3.2  Amended and Restated By-Laws of the Company (Incorporated by reference to
       Exhibit 3.2 to the Company's Annual Report on Form 10-K for the fiscal
       year ended December 31, 1994 on file with the Commission). 

  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 eight months
       ended December 31, 1992 on file with the Commission).

  4.2  Specimen Series A, Preferred Stock Certificate (Incorporated by reference
       to Exhibit 4.2 to the Company's Annual Report on Form 10-K for the fiscal
       year ended December 31, 1993 on file with the Commission).

  4.3  Specimen Series A, Preferred Stock, Subscription Agreement (Incorporated
       by reference to Exhibit 4.3 to the Company's Annual Report on Form 10-K
       for the fiscal year ended 





                                      -44-
<PAGE>   46

         December 31, 1993 on file with the Commission).

  10.1   Office Lease Agreement dated October 15, 1993 between Extended Product
         Life, Inc. and B.I.G., a Partnership for Fresno, CA Applications
         Laboratory (Incorporated by reference to Exhibit 10.3 to the Company's
         Annual Report on Form 10-K for the fiscal year ended December 31, 1993
         on file with the Commission).

  10.2   Stock Purchase and Supply Agreement dated May 19, 1994 between
         Jungbunzlaur Holding AG and Extended Product Life, Inc. (Incorporated
         by reference to Exhibit 10.10 to the Company's Quarterly Report on Form
         10-Q for the quarter ended June 30, 1994 on file with the Commission).

  10.3   1994 Stock Incentive Plan (Incorporated by reference to Exhibit 10.11
         to the Company's Quarterly Report on Form 10-Q for the quarter ended
         June 30, 1994 on file with the Commission).

  10.4   Employment Agreement between EPL Packaging, Inc. (now known as Respire
         Films, Inc.) and Joel Longstreath, President, dated September 30, 1994.
         (Incorporated by reference to Exhibit 10.11 to the Company's Annual
         Report on Form 10-K for the fiscal year ended December 31,1994 on file
         with the Commission).

  10.5   Agreement for the sale and purchase of the entire issued share capital
         of Bakery Packaging Services 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 Commission).

  10.6   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 
         Commission).

  10.7   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
         Commission).

  10.8   Employment agreement between EPL Technologies, Inc. and P. L. Devine,
         Director, President and Chief Executive Officer, dated October 1, 1995
         (Incorporated by reference to Exhibit 10.15 to the Company's Annual
         Report on Form 10-K for the fiscal year ended December 31, 1995 on file
         with the Commission

  10.9   Employment agreement dated March 4, 1996 between EPL Technologies, Inc.
         and Karen Penichter, Vice-President Sales (Incorporated by reference to
         Exhibit 10.15 to the Company's Quarterly Report on Form 10-Q for the
         quarter ended March 31, 1996 on file with the Commission).

  10.10* Office Lease Agreement dated September 11, 1996 between EPL 
         Technologies, Inc. and K/B Fund II for Headquarters office.

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

   
  21     Subsidiaries of the Registrant
    

   
 27      Financial Data Schedules (submitted pursuant to Item 601(c)(1)(iv) of
         Regulation S-K, but not deemed filed for purposes of Section 11 of the
         Securities Act or Section 18 of the Exchange Act)
    

   
       * Previously filed
    
                                      -45-
<PAGE>   47
                                   SIGNATURES


Pursuant to the requirements 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  February 13, 1998                           
    

   
                                          /s/ Paul L. Devine
                                          -------------------------
                                          Paul L. Devine
                                          Chairman and President
                                          Principal Executive Officer
    


   
    

                                      -47-