U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                   FORM 10-KSB
(Mark One)
[x]
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 1998
[ ]
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934

                         Commission file number 0-19721
                              SARATOGA BRANDS INC.
                 (Name of small business issuer in its charter)

         New York                                    13-3413467
(State or other jurisdiction               (IRS Employer identification no.)
of incorporation  or  organization)  

   1835 Swarthmore Avenue, Lakewood, New Jersey          08701
    (Address of principal executive offices)          (Zip Code)

                                  (732) 363-3800
                           (Issuer's telephone number)
                        ---------------------------------
 Securities registered under section 12(b) of the Exchange Act:

 Title of each class                  Name of each exchange on which registered
_______________________________      __________________________________________
_______________________________      __________________________________________

Securities registered under Section 12(g) of the Exchange Act:

                         Common Stock, $0.001 par value
--------------------------------------------------------------------------------
                                (Title of class)
                     
--------------------------------------------------------------------------------
                                (Title of class)

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

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  S-B is met  contained  in  this  form,  and no  disclosure  will  be
contained,  to  the  best  of  registrant's   knowledge,   definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. ( )

State issuer's revenues for its most recent fiscal year: 
Revenues for the fiscal year ended December 31, 1998 were $12,754,266

State the aggregate market value of the voting stock held by non-affiliates
computed  by  reference  to the  price at which  the  stock  was  sold,  as of a
specified  date within the past 60 days.  (See  definition  of affiliate in Rule
12b-2 of the Exchange Act).

Note;  If  determining  whether  a  person  is an  affiliate  will  involve
unreasonable  effort and expense,  the issuer may calculate the aggregate market
value of the common  equity held by  non-affiliates  on the basis of  reasonable
assumptions, if the assumptions are stated.

The aggregate market value of the voting stock held by non-affiliates as of
March 31, 1999 was $3,475,072. 

                        (ISSUERS INVOLVED IN BANKRUPTCY
                     PROCEEDINGS DURING THE PAST FIVE YEARS)
Check whether the  registrant  filed all  documents  and reports  required to be
filed by Section 12, 13 or 15(d)of the  Exchange Act after the  distribution  of
securities  under  a plan  confirmed  by a  court.  Yes  .......No  .......  N/A

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date.
 
     Title of Each Class                       Number of Shares  Outstanding  
Common Stock, $.001 par value per share       5,046,661 (as of March 31, 1999)

                       DOCUMENTS INCORPORATED BY REFERENCE
     If the following documents are incorporated by reference,  briefly describe
them and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into
which the document is incorporated:  (1) any annual report to security  holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
rule 424(b) or (c) of the Securities Act of 1933 ("Securities  Act"). The listed
documents should be clearly described for identification  purposes (e.g., annual
report to security holders for fiscal year ended December 24, 1990).
Transitional Small Business Disclosure Format (Check one): Yes ____; No__X__
<PAGE>

PART 1

Item 1.  Business

         Description of business

     Saratoga   Brands  Inc.  (the   "Company")  is  a  New  York   corporation,
headquartered in Lakewood,  New Jersey.  The Company has two principal  business
lines:  (i)  producing and  importing  specialty  cheeses and Italian foods (the
"cheese  business") and (ii) producing and  distributing  delicatessen and snack
foods  to  mobile  caterers,  vending  companies,   wholesale  distributors  and
institutions  (the  "deli  business").  In July  1996,  Saratoga  formed  Mobile
Caterers,  Inc.  ("Mobile")  and  contributed  all  of  the  stock  of  the  two
subsidiaries which operate the deli business,  Deli King, Inc. ("Deli King") and
JR's Delis,  Inc.  ("JR's"),  to Mobile.  
     The Company's  cheese business,  Cucina Classica  Italiana,  Inc.  ("CCI"),
engaged in the production,  importation and  distribution of premium cheeses and
Italian foods, is located at the Company's headquarters in Lakewood, New Jersey.
     Mobile  operates in a 28,000 square foot facility  located in West Warwick,
Rhode Island.  From this  facility,  often  referred to as a commissary,  Mobile
produces "prepared foods" such as sandwiches,  soups, salads, pasta, baked goods
and other entrees,  and distributes  these products along with  delicatessen and
other food items such as snacks and  beverages.  Mobile sells these  products to
mobile catering truck customers,  vending companies,  wholesale distributors and
institutions;  and additionally provides support services to its mobile catering
truck customers. The mobile catering and wholesale division's of Mobile generate
approximately 75% and 25%, respectively, of Mobile's revenues.

         Products

     The Cheese Business. CCI is a leading producer of specialty Italian cheeses
and  Greek-style  Feta and a major importer of Italian  specialty  cheeses,  and
Prosciutto di Parma (Italian ham). CCI distributes its products  nationally with
its heaviest  areas of  distribution  located on the East and West Coasts of the
U.S.  Its  customers  are other  importers  and large  distributors  who sell to
smaller  distributors and retail accounts.  Sixty five percent of sales are food
service; i.e., sales to restaurants, airlines, cruise ships.

                                       2
<PAGE>

     CCI markets Italian specialty and Greek-style Feta cheeses. Bel Paese(R) is
a semi-soft  natural  cheese,  manufactured  in 5 lb. bulk wheels and 6 oz. mini
wheels,  In reply to:  several  flavors  such as Basil and  Sun-dried  Tomatoes.
Greek-style Feta cheese and Feta flavored with dill, oregano, sun-dried tomatoes
and basil,  and with  peppercorn  are  produced  in random  and in exact  weight
portions.  Freshly  grated and  shredded  Romano and  Parmesan  cheeses are also
produced  by CCI  and  are  sold  both  in  bulk  for  institutional  use and in
consumer-sized  cups. Dry grated  Parmesan and Romano are available in canisters
under the Cucina Classica Italiana(R) brand. CCI produces annually approximately
300,000 pounds of Bel Paese(R) and 150,000 pounds of Feta.

     Galbani(R)  Mascarpone  and Bel  Paese(R)  Medallions  are  CCI's  imported
products.  750,000 pounds of Galbani Mascarpone,  a specialty dessert cheese was
imported in 1998. CCI imports more than 50% of the nation's imported  Mascarpone
sales. In 1998 the company imported 250,000 pounds or approximately four and one
half million  individual  medallions  of Bel Paese Process  Medallions,  a soft,
spreadable cheese.
     Prosciutto di Parma and  Gorgonzola  Dolcelatte(R),  the Italian  blue-mold
cheese, round out the line with 1998 imports of 35,000 pounds and 55,000 pounds,
respectively.
     From other Italian exporters,  CCI also imports Parmigiano Reggiano,  Grana
Padano, and Pecorino Romano which are sold in whole wheels,  pre-cut portions or
freshly grated in deli cups.
     The Mobile Catering and Wholesale Business.  Mobile produces  approximately
seventy  percent of the prepared foods sold by the Company,  and this production
consists of  approximately  60% sandwiches and 40% soup, pasta or other entrees.
Sandwiches are produced fresh daily based on previous day orders from the mobile
catering  customers and weekly orders from the vending and wholesale  customers.
Each sandwich is produced  individually  as part of a production run by sandwich
type,  using  recipes  developed by the Company,  to ensure the  consistency  of
proper quantity and quality of ingredients.
     Soups,  pastas and other  entrees are prepared in bulk and then packaged in
individual portion size containers.  The in-house prepared food products provide
the largest profit margin of the Company's  products.  The bulk of the remaining
30% of the prepared foods are purchased from third parties and are frozen. These
frozen items provide the Company's second largest profit margin.

                                       3
<PAGE>

     The Company's bakery produces  approximately 80% of the pastries and Danish
sold,  with the remaining  products  originating  from other local  bakeries and
larger local and national suppliers.
     The  remaining  products  include  beverages,  snacks and  candy.  Beverage
products include such national brands as Coca-Cola, 7-Up, Dr. Pepper and various
others, including mineral waters, fruit juices, iced tea and hot tea and coffee.
     Mobile  Catering  Business - This division of Mobile derives  revenues from
three principal  activities:  the sale of prepared foods, snacks,  beverages and
supplies (ice,  containers,  plastic  utensils,  etc.); to independent  catering
operators;  the operation of a mobile  catering  truck service  facility and the
rental of catering routes and trucks.
     The Company  believes that  approximately  65% of the area mobile  catering
truck  operators  obtain their goods from Mobile's  West  Warwick,  Rhode Island
facility. Mobile has operated in this area since 1985. Approximately 35% of Deli
King's sales consist of products produced under one of the Company's brand names
at  the  Company's   kitchen  and  bakery.   The  remaining   sales  consist  of
approximately  15% third party  prepared  foods,  10%  purchased  snacks and 40%
beverages.  As is customary in the business, the mobile catering operators place
orders  at the end of each day to be picked up the  following  morning  and paid
primarily in cash.
     The mobile catering division's customers are all mobile catering operators.
These mobile caterers include persons  operating their own vehicles on their own
routes;  persons operating their own vehicles on routes rented from Mobile;  and
persons  renting one of the 27 catering  trucks owned by Mobile for use on their
own routes or routes  rented from  Mobile.  The mobile  caterer must pay a fixed
amount per week for routes  rented from the Company and a weekly  rental for the
use of catering  trucks owned by the Company.  These  operators are  independent
from the Company.  Mobile served  approximately  60 mobile catering trucks as of
December 31, 1998.
     Mobile  controls 26 catering  routes  which it "rents" to  operators  for a
weekly fee. These controlled routes, which are also referred to as owned routes,
represent an  established  series of regular  stops served by the same  vehicle.
Each stop is usually a business  where the  employees  depend on the caterer for
their snacks,  beverages or meals. In some areas,  where the business is located
some distance from any restaurant or market,  the mobile caterer may be the only
source of food and drink items during the workday.
     In addition  to  supplying  the mobile  caterers  with food,  drink and the
related supplies,  Mobile has a full service facility staffed with mechanics for
the  maintenance  and repair of mobile  catering  vehicles  and  equipment.  The
facility is able to service and repair equipment used for mobile  refrigeration,
food warming and hot beverage brewing.

                                       4
<PAGE>

     Wholesale  Business - This division of Mobile markets a significant  number
of the Catering division's products to vending companies, DSD operations,  other
commissaries, and in the upcoming year via the internet.
     The  wholesale  division is  currently  developing  new products and or new
sku's for sale to the club  stores.  Some of these  products  include  Home Meal
Replacement entrees, pizza, and pastries packaged for retail sale.

         New Products and Expansion

     CCI is continually  seeking to expand its product line by either  producing
or importing new products.
     In late 1998, CCI developed a strategy to begin selling its current as well
as  additional  product on the  internet.  CCI plans on  marketing  gourmet food
baskets developed exclusively for sale to its customers. CCI anticipates a fully
operational  fully  integrated Web Site where customers will have the ability to
consummate purchases completely electronically by mid 1999.
     Mobile  is  constantly  seeking  new  food  and  beverage   products.   The
preponderance of advertising for such products,  which is found in most types of
media,  creates consumer awareness of new items. The Company is constantly being
approached  by its  suppliers  with  new  products.  As a member  of the  Mobile
Independent Catering Association,  the Company receives publications and attends
trade shows, which present potential new products.
     At the present time, the Company's kitchen and bakery operate at capacities
of approximately 35% and 20%, respectively. Management believes that the Company
will  maintain its current  competitive  position  and that the mobile  catering
business  can be expanded by opening  additional  distribution  locations.  Such
satellite  operations  would be located beyond a 30-mile radius from the current
facility. Any new locations would operate as distribution and service facilities
where third party products  would be warehoused.  Prepared foods produced in the
current kitchen and bakery would be shipped to any such new location. Management
estimates that the production  capacity of the current location can supply up to
three satellite  operations.  While management  believes  implementation of such
growth  plans is feasible,  no  assurance  can be given as to the success of any
efforts to expand.

                                       5
<PAGE>

         Competitive Position

     The Cheese  Business  - CCI  maintains  a strong  presence  in the  Italian
specialty  food  market.  CCI provides  point-of-sale  materials to help product
sell-through  at the retail  level and uses  consumer  and trade media  increase
product awareness nationwide.
     Mobile   catering   business  -   Management   believes   that  Mobile  has
approximately  65% of the mobile  catering  business in the  geographic  area it
serves.  Maintenance  of its customer base is dependent on the ability of Mobile
to provide superior service and reliability.  The underlying relationship of the
mobile  caterer  with  its  customers  is  dependent  on  service,   reliability
(customers expect the catering trucks to arrive within a few minutes of the same
time each day) and on product  selection and quality.  The Company employs route
managers whose function is to review the  performance of the mobile  caterers as
it relates to their  service  and  reliability.  The goal is to ensure  that the
Company's quality standards are kept at high levels.
     Management   recognizes  that  some  mobile  caterers   provide  their  own
sandwiches and other entree items by preparing them in their home kitchens,  and
that they  provide soft drinks,  candy and other items by  purchasing  them from
large discount retail outlets.  Management  believes that these caterers make up
an  insignificant  percentage  of the  remaining  35% of the market.  Management
believes that  substantially  all of the  remaining  35% of the mobile  catering
market  are  supplied  by only  one  other  commissary,  Freeman's  Catering  in
Providence, Rhode Island.
     Time is a  valuable  commodity  to the  mobile  caterer.  For that  reason,
drivers  are  limited in the  distance  they can travel from their route area to
obtain  their  products.  Management  believes  that for this  reason the mobile
caterer must choose between Mobile and its one major competitor. Due to the high
cost of  opening  a new  facility  and the  small  number  of  persons  with the
expertise  necessary for such an  undertaking,  there is little  likelihood that
another competitor will enter the market.

     Wholesale  Business - The  wholesale  division  will compete  directly with
other  wholesalers  of  similar  products.  At this  time  the  Company  has not
identified any competitors  producing  identical products to those we are either
offering  or  anticipate  offering  in the  future.  The niche of the  wholesale
division will be to fill a gap in supplying  fresh "Home Meal  Replacement"(HMR)
meals, as well as gourmet quality pastries, where little competition exists.

                                       6
<PAGE>

         Raw Materials

     The raw materials or  ingredients  used in Mobile's  products are available
from many suppliers. The deli business has a core group of 50 vendors with which
it has developed  good  relationships.  Because of the large number of potential
suppliers in the food and beverage industry, the Company is not dependent on any
one supplier.  The prepared food  ingredients  include many well-known  national
brands  such  as  Oscar  Meyer,  Kayem,  Boars  Head,  Dubuque  and  Louis  Rich
(lunchmeats) and Heinz and Kraft dressings and spreads.

         Product Line Exclusivity License & Trademark Agreements

     CCI is the exclusive U.S. importer of the Galbani line of Italian specialty
cheeses and pork products.  Egidio Galbani,  S.p.A. of Milan,  Italy, is a major
force in the  European  Dairy  Market  with an  annual  sales  volume of about 2
billion  dollars and is a  subsidiary  of GROUPE  DANONE,  with an annual  sales
volume of approximately 15 billion dollars.
     CCI has the exclusive  right to import Galbani  products into the U.S., and
is the only company  worldwide with the license to manufacture  cheeses  bearing
the Galbani  trademarks.  The  Product  Exclusivity  and License to  Manufacture
Agreements  are granted in a contract  which runs  through the year 2000 when it
will be subject to renewal. CCI is currently  negotiating with Galbani to extend
the agreement into the 21st century.
     CCI's   trademarks  are  Cucina  Classica   Italiana(R),   Classika(R)  and
Tal-Fino(R).  CCI is currently  applying for the trademark Classica and uses the
(TM) symbol to denote its application.
     Except for  prepared  foods and baked  goods  produced by and unique to the
deli  business,  the  deli  business  has no  product  line  exclusivity  or any
trademarks under its control. The products produced by the deli business may use
recipes slightly different than for those same products made elsewhere. However,
this is a benefit in that the deli business  sells generic,  traditional  foods,
which must be prepared in a manner  consistent  with the common recipes for each
type of dish.

                                       7
<PAGE>

         Government Regulations

     All of the Company's  subsidiaries  are subject to  regulations of the U.S.
Department  of  Agriculture  (USDA)  and The U.S.  Food and Drug  Administration
(FDA).
     The USDA establishes  regulations for cheese identity and also oversees the
importation of meat products into the U.S. The FDA regulates cheese labeling and
has  established  strict  guidelines   regarding   ingredients  and  nutritional
information.  The State of Rhode Island has jurisdiction  over the activities of
the deli business. Mobile is subject to federal, state and local health and food
regulations.  These  regulations  generally  provide  standards for  sanitation,
storage,  food quality and grade,  shelf lives and product labeling.  Management
strives to keep the deli business in full compliance with these regulations.
     On August 22,  1997  Mobile  completed  the  purchase  of a USDA  certified
processing  operation in  Johnston,  Rhode  Island,  a short  distance  from its
current  operation.  The purchase was completely  funded through  operating cash
flows.  This facility will produce meat products and HMR meals for Mobile. It is
anticipated that the addition of these products will enhance Mobile's  revenues,
as well as increase Mobile's customer base.

         Research & Development

     Research and  development  costs relate to developing new cheeses  (reduced
fat, spreadable versions of current semi-soft cheeses,  new flavor extensions to
existing lines) for CCI. Research costs for both operations are minimal.  In the
most recent two years, Mobile has not expended a material amount on research and
development. However, Mobile is continually looking to acquire new products from
third parties. In addition, the Company's kitchen and bakery work to develop new
products to follow industry  trends  although the monetary  expenditure for such
efforts has been minimal to date.

                                       8
<PAGE>

         Cost and Effects of Compliance with Environmental Laws

     The  costs  and  effects  of  compliance  with  environmental  laws are not
material to our operations.

         Current Employees

     The company and its  subsidiaries  currently  employ 48 persons of which 43
are full time.


Item 2.  Description of Property

     CCI  leases  a 20,000  square  foot  facility  at 1835  Swarthmore  Avenue,
Lakewood,  New Jersey 08701, of which  approximately 3,000 square feet serves as
office space. This facility serves as Saratoga and CCI's headquarters as well as
a shredding  and grating  operation and  warehouse.  The facility is a fireproof
high bay  warehouse  located on 3.5 acres with ample  expansion  potential.  The
warehouse contains 13,000 cubic feet of cooler space. This facility is leased at
a basic rent of $6,642.68  per month or $79,712  annually.  The lease has a five
year term,  which began in 1994,  with no rent escalation and an option to renew
for an additional five years at an annual rent of $91,975.
     Mobile owns a 28,000  square foot  building on 3.88 acres in West  Warwick,
Rhode Island. The facility includes administrative and sales offices, warehouse,
frozen and cold storage space, food production areas and equipment service bays.
     Mobile's  leases its 2,000  square  foot USDA  facility  at 269  Greenville
Avenue,  Johnston, Rhode Island. This facility is leased at a basic rent of $950
per month or $11,400 annually. The lease has a 2-year term expiring on September
1, 1999, renewable for an additional 2 years at a base rent of $975 per month or
$11,700 annually.

Item 3.  Legal Proceedings

     The Company  currently has no material legal  proceedings by or against the
Company, or any of its subsidiaries.

Item 4.  Submission of Matters to a Vote of Security Holders

                  None

                                       9
<PAGE>

Part II

Item 5.  Market for Common Equity and Related Stockholder Matters

     The  Company's  common  shares  are traded on the  over-the-counter  market
through the NASDAQ Small Cap Market  Trading  System under the symbol STGA.  The
following  table  sets  forth the range of high and low bid  quotations  for the
common stock for the period indicated, as reported on NASDAQ, after having given
effect to a reverse stock split of 1:3 which became effective November 24, 1997,
as though  the split had  occurred  prior to the  periods  reported  below.  The
quotations are inter-dealer prices in the over-the-counter market without retail
mark-ups, markdowns or commissions, and may not represent actual transactions.

                                           1998                     1997
                                       Common Shares           Common Shares
        Period                         High        Low         High        Low
                                    --------------------------------------------
January 1 - March 31                  2.68        1.25        3.93       1.6875

April 1 - June 30                     2.34        1.37        3.00       0.8438

July 1 - September 30                 1.96        0.81        1.50       0.8906

October 1 - December 31               1.37        0.81        1.56       0.8438



     As of March 31, 1999, there were approximately 240 holders of record of the
Company's common stock.
     The  Company  has not paid a cash  dividend  on its common  stock since its
inception.  The Company  expects that for the foreseeable  future,  any earnings
will be retained for use in the business or other corporate purposes,  and it is
not expected that cash or share  dividends will be paid.  However,  there are no
restrictions on the payment of dividend, either by contract or regulation.

                                       10
<PAGE>

Item 6.  Management's Discussion and Analysis or Plan of Operation

     Management's  Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the Audited Consolidated Financial
Statements and related notes which are contained in Item 7 herein.

     Results of Operations for the Years Ended December 31, 1998 and 1997

     Net sales for the year ended  December 31, 1998 were  $12,754,266  compared
with  $13,712,800 in 1997, a decrease of $958,534.  This decrease is primarily a
result of the abandonment of JR's operation.  The Company generated gross profit
of $3,003,253 or 23.5% in 1998, verses $3,622,861 or 26.4% in 1997. The decrease
in gross profit margin was the result of the reduction in gross revenue  thereby
increasing  fixed  production  costs as a percentage,  as well as a shift in the
product  mix at CCI and a  significantly  large  number  of  returns  in the now
abandoned operation.
     Selling, general and administrative expenses were $2,191,187 and $2,417,793
in 1998 and 1997, respectively. This represents a reduction of $226,606 or 9.4%.
This reduction is the result of a  streamlining  of the operations at all levels
of the Company,  as well as the elimination of product lines.
     Management expects gross margins to improve as the Company begins to regain
sales volume lost by the abandonment of JR's operation. However, there can be no
assurance that any such  improvements  in the margins will be achieved.  To this
end,  the  Company's  Deli  King  subsidiary  is  seeking  additional  wholesale
customers,  as well as developing products for sale through mass merchants.  The
Company  reported  no  provision  for Federal  income  taxes for the years ended
December 31, 1998 and 1997, as the  Company's  taxable  operating  earnings were
offset by net operating loss carryforwards. The Company reported a provision for
state income  taxes of $31,000 and $0 for the years ended  December 31, 1998 and
1997 respectively.
     Income before  extraordinary  item for the year ended December 31, 1998 was
$24,168 versus $679,964 in 1997 or $0.00 and $0.17 per share on diluted weighted
average  shares of  5,117,693  and  3,957,141  respectively.  This  represents a
reduction of $655,796 of which  $482,307  resulted from the loss on an abandoned
operation.  The  balance,  $166,657,  after  giving  effect  for the  state  tax
provision,  management  believes is the result of a change in product mix at CCI
and lower volume at Mobile.  Management  believes that increased  volume in both
divisions will correct this problem in the future.

                                       11
<PAGE>

Liquidity and Capital Resources

     The  Company's  sources of capital  include,  but are not  limited  to, the
issuance of public or private debt,  bank  borrowings and the issuance of equity
securities.
     At December  31, 1998 the  Company had a net worth of  $3,727,466  compared
with $3,709,377 at December 31, 1997.
     The  Company has a limited  requirement  for  capital  expenditures  in the
immediate  future.  CCI's factoring  arrangement with Bank of New York Financial
Corporation  has adequate  availability  to provide  working  capital to support
sales  growth in that  division.  Mobile owns real estate with a market value of
approximately  $1,200,000 against which there exists a mortgage in the amount of
$741,000.  The asset  provides  adequate  collateral  to support  borrowing  for
working capital needs in that subsidiary.
     Additionally,  the  Company  has a loan  outstanding  with a  bank,  with a
current balance of $300,000 at the prime rate plus 1 percent. This loan is to be
repaid during the next 12 months.
     Management believes that the Company has sufficient working capital to meet
the needs of its current level of operations.

Anticipated Future Growth

     Management  believes  that the  future  growth of the  Company  will be the
result of four efforts;  (1) acquisition of other companies in the food and food
related  industries,  (2) increasing sales to existing customers by offering new
products and product lines,  (3) obtaining new customers in the existing markets
developing new markets via current marketing channels and the internet,  and (4)
controlling and containing production, operating and administrative costs.

                                       12
<PAGE>

Year 2000 Readiness

     This disclosure is a year 2000 ("Year 2000")  Readiness  Disclosure  within
the meaning of the Year 2000 Information and Readiness Disclosure Act of 1988 to
the  extent  that the  disclosure  relates  to the Year 2000  processing  of the
Company.
     The Company has implemented a program to assess, mitigate and remediate the
potential  impact of the Year 2000 problem  throughout the Company.  A Year 2000
problem  will occur where  date-sensitive  software  uses two digit date fields,
sorting the Year 2000 ("00") before the year 1999 ("99").  The Year 2000 problem
can arise in  hardware,  software,  or any other  equipment or process that uses
embedded software or other  technology.  The failure of such systems to properly
recognize  dates after  December  31, 1999 could result in data  corruption  and
processing errors.
     Management has reviewed the possible effects of the Year 2000 problem in so
far as it  relates  to the  Company;  and has  determined  that the  Company  is
currently utilizing Year 2000 compatible  equipment and software.  The Year 2000
problem is not expected to have a material  adverse  effect on the operations of
the Company.
     In addition,  the Company has  implemented  a program to determine the Year
2000 compliance status of its material vendors, suppliers, service providers and
customers,  and based on currently available information does not anticipate any
material  impact to the Company based on the failure of such third parties to be
Year 2000 compliant. However, the process of evaluating the Year 2000 compliance
status of material  third  parties is  continually  ongoing and,  therefore,  no
guaranty or warranty  can be made as to such third  parties'  future  compliance
status and its  potential  effect on the  Company.  The Company  believes  there
exists a sufficient number of suppliers of raw material for its business so that
if any supplier is unable to deliver raw  materials  due to Year 2000  problems,
alternate sources will be available and that any supply interruption will not be
material to the Company's operations. There can be no assurances,  however, that
the  Company  would be able to obtain all of its supply  requirements  from such
alternate  sources  in a timely  way or on  terms  comparable  with  that of its
current suppliers.
     The information set forth in the preceding three  paragraphs  constitutes a
"Year 2000  Readiness  Disclosure"  pursuant  to the Year 2000  Information  and
Readiness Disclosure Act. (P.L. 105-271, signed into law October 19, 1998).

                                       13
<PAGE>
  
   The  preceding  Year  2000  discussion  contains  various   forward-looking
statements  within the meaning of Section 21E of the Securities  Exchange Act of
1934  and  the  Section  27A  Securities  Act  of  1933.  These  forward-looking
statements  represent the Company's  beliefs or  expectations  regarding  future
events. When used in the Year 2000 discussion,  the words "believes," "expects,"
"estimates"  and similar  expressions  are intended to identify  forward-looking
statements. Forward-looking statements include, without limitation the Company's
belief that its internal  systems are Year 2000 compliant.  All  forward-looking
statements  involve a number of risks and  uncertainties  that  could  cause the
actual results to differ materially from the projected results. Factors that may
cause these  differences  include,  but are not limited to, the  availability of
qualified personnel and other information  technology resources;  the ability to
identify and remediate all  date-sensitive  lines of computer code or to replace
embedded  computer  chips in affected  systems or equipment;  and the actions of
governmental agencies or other third parties with respect to Year 2000 problems.

Forward Looking Statements

     The matters discussed in this Item 6 may contain forward looking statements
that involve risk and  uncertainties.  The  forward-looking  statements are made
pursuant to the safe harbor  provisions  of the  Private  Securities  Litigation
Reform Act of 1995.  Actual  results may differ  materially  due to a variety of
factors,  including without  limitation the presence of competitors with broader
product lines and greater financial resources;  intellectual property rights and
litigation,  needs of liquidity;  and the other risks detailed from time to time
in the company's reports filed with the Securities and Exchange Commission.

                                       14
<PAGE>

Item 7. Financial Statements

        Response  submitted as a separate section of this report  commencing on
page F-1.

Item 8. Changes in and Disagreement With Accountants on Accounting and Financial
        Disclosure

     Effective May 11, 1998, Saratoga Brands Inc. (the "Company")  dismissed its
prior   certifying   accountants,   Broza,   Block  &  Rubino  Certified  Public
Accountants, PA ("BBR") and retained as its new certifying accountants, Deloitte
& Touche LLP ("Deloitte").  BBR's report on Saratoga's  financial statements for
the fiscal years ended December 31, 1994 through  December 31, 1997,  which were
the only fiscal  years during which BBR was the  certifying  accountant  for the
Company,  contained no adverse  opinions or disclaimer of opinions,  and was not
qualified  as to  uncertainties,  audit  scope  or  accounting  principles.  The
decision to change accountants was approved by the Audit Committee and the Board
of Directors of the Company.  As required by applicable  rules of the Securities
and  Exchange  Commission,  the  Company  notified  BBR that during the two most
recent  fiscal years and the interim  period from  December 31, 1997 through May
11, 1998 the Company was unaware of any disputes  between the Company and BBR as
to  matters  of  accounting   principles  or  practices,   financial   statement
disclosure, or audit scope of procedure, which disagreements, if not resolved to
the satisfaction of BBR, would have caused it to make a reference to the subject
matter of the  disagreements in connection with its reports and requested BBR to
confirm this, a copy of which as filed with the Form 8-K.

     Effective  May 11, 1998,  the Company  engaged  Deloitte as its independent
accountants.  During the most recent fiscal year end and the subsequent  interim
periods to the date hereof,  the Company did not consult Deloitte  regarding any
of the  matters  or  events  set  forth  in item 304 (a) (2) and (i) and (ii) of
Regulation S-B.

                                       15
<PAGE>

Part III.

Item 9.  Directors, Executive Officers, Promoters and Control Persons

     Incorporated  by reference  from the proxy  statement,  which will be filed
within 30 days of the filing of this report.

Item 10. Executive Compensation

     Incorporated  by reference  from the proxy  statement,  which will be filed
within 30 days of the filing of this report.

Item 11. Security Ownership of Certain Beneficial Owners and Management

     Incorporated  by reference  from the proxy  statement,  which will be filed
within 30 days of the filing of this report.

Item 12. Certain Relationships and Related Transactions

     Incorporated  by reference  from the proxy  statement,  which will be filed
within 30 days of the filing of this report.

Item 13. Exhibits and Reports on Form 8-K

     (a) (1) and (2) The  response to this  portion of Item 13 is submitted as a
separate report commencing on Page F-1.

     (a) (3)

Exhibit No.          Description of Exhibit                                 Note

3. (a) - -  Certificate of Incorporation                                      1
   (b) - -  By-Laws, as amended                                               1
4. (a) - -  Form of Warrant Agency Agreement between Registrant Thomas        1
            James Associates, Inc. and American Stock Transfer & Trust 
            Company with
            attached form of Warrant
   (b) - -  Form of Private Placement I Warrant                               1
   (c) - -  Form of Private Placement II Warrant                              1
   (d) - -  Form of Private Placement Warrant                                 1
10.(a) - -  Lease agreement between Saratoga Brands and Hoffman Investors     1
            Corp. dated August 18, 1992

                                       16
<PAGE>

   (b) - -  Amended Employment Agreement between Registrant and Daniel J.     1
            Feld dated January 26, 1994
   (c) - -  Option Agreement, as amended between Registrant and Daniel J.     1
            Feld respecting 77,949 (as adjusted) Common Shares
   (d) - -  Incentive Option Plan dated June 12, 1991                         1
   (e) - -  Form of Incentive Stock Option contract                           1
   (f) - -  Restricted Stock Purchase Agreement                               1
   (g) - -  Factoring Agreement dated October 23, 1992 between Saratoga       1
            Brands Inc. and Platinum Funding Corp.
   (h) - -  Form of Owner Operator distributor Agreement                      1
   (i) - -  Form of Agreement between the Company and holder of the 11%       1
            subordinated Notes and Warrants to purchase common shares
   (j) - -  Asset Purchase Agreement, dated as of January 5, 1994,            1
            between Saratoga Brands Inc. and Mellons Limited
   (k) - -  Voting and Limitation of Transfer Agreement between Daniel J.     2
            Feld, Registrant and Mellons, Limited.
   (l) - -  Amended and Restated Employment Agreement between Registrant      2
            and Daniel J. Feld
   (m) - -  Non-Compete Agreement between the Registrant and Agama, Inc.      2
   (n) - -  Non-Compete Agreement between Mellons Limited and the             2
            Registrant.
   (o) - -  Lease Agreement between Cucina Classica Italiana, Inc. and        3
            Arthur Sommers
   (p) - -  Lease Agreement between Cucina Classica Italiana, Inc. and        3
            Angelo Dominioni.
   (q) - -  Lease Agreement between JR's Delis, Inc. and Chicken by           3
            Chickadee Farms, Inc.
   (r) - -  Employment Agreement between the Registrant and Scott G.          3
            Halperin, dated August 16, 1995
   (s) - -  Acquisition Agreement between the Registrant and Cucina           4
            Classica Italiana, S.p.A.
   (t) - -  Acquisition Agreement between the Registrant and Goldberg,        5
            Feinstein and Sons Company
   (u) - -  Amendment to the Acquisition Agreement between the Registrant     6
            and Goldberg, Feinstein and Sons Company

                                       17
<PAGE>

   (v) - -  Credit Agreement between Cucina Classica Italiana, Inc. and       7
            Banca Nazionale del Lavoro S.p.A. - New York Branch, Istituto 
            Bancario San Paolo di Torino - New York Branch, Banco di 
            Sicilia S.p.A. -  New York Branch, Banca Populare di Milano - 
            New York Branch, and  Banca Commerciale Italiana - New 
            York Branch
   (w) - -  Termination  Agreement between the Registrant and Daniel J.       8
            Feld
   (x) - -  Merger and Real Estate Purchase Agreement Between the Company     9
            and Roy LaCroix for the purchase of Deli King, Inc.
   (y) - -  Credit Agreement between Cucina Classica Italiana, Inc.          10
            and Banca Nazionale del Lavoro S.p.A. - New York Branch, 
            dated December 15, 1997
   (z) - -  Credit Agreement between Cucina Classica Italiana, Inc.          10
            and BancaCommerciale Italiana - New York Branch, dated 
            December 15, 1997
  (aa) - -  Forgiveness Agreement between Cucina Classica Italiana,          10
            Inc. and Istituto Bancario San Paolo di Torino - New York 
            Branch, dated December 29, 1997
  (ab) - -  Forgiveness Agreement between Cucina Classica Italiana, Inc.     10
            and Banca Populare di Milano - New York Branch, dated 
            December 29, 1997
  (ac) - -  Forgiveness Agreement between Cucina Classica Italiana, Inc.     10
            and Banco di Sicilia S.p.A. - New York Branch, dated 
            December 31, 1997
  (ad) - -  Settlement Agreement between Saratoga Brands, Inc., Angelo M.    10
            Dominioni, Valerie A. Dominioni, Silvana L. Dominioni, 
            Robert J. Castellano, and Cucina Classica Italiana, SpA, 
            dated December 31, 1997
  (ae) - -  Employment Agreement between the Registrant and Scott G.         10
            Halperin, dated August 1, 1997
  (af) - -  Employment Agreement between the Registrant and Bernard F.       10
            Lillis, Jr., dated August 1, 1997
  (ag) - -  Lease Agreement between Deli King, Inc. and Giovanni and Lina    10
            Conti, dated September 1, 1997.
  (ah) - -  Investment Banking Agreement between the Company and M.H.        10
            Meyerson and Co., Inc.

                                       18
<PAGE>

NOTES

     1. Filed with the  Company's  registration  statement on form S-1 (File No.
        33-36937), and incorporated herein.
     2. Filed with the  Company's  Form 8-K filed on  February  14,  1995,  and
        incorporated herein.
     3. Filed with the Company's 1994 Form 10-KSB, and incorporated herein.
     4. Filed with the Company's Form 8-K filed on November 4, 1994, and 
        incorporated herein.
     5. Filed with the Company's Form 8-K filed on November 10, 1994, and
        incorporated herein.
     6. Filed with the Company's Form 8-K filed on March 28, 1995, and 
        incorporated herein.
     7. Filed with the Company's Form 8-K filed on March 14, 1995, and 
        incorporated herein.
     8. Filed with the Company's Form 8-K filed on August 18, 1994, and
        incorporated herein.
     9. Filed with the  Company's  Form 8-K dated April 29,  1996,  and
        incorporated herein.
    10. Filed with the Company's Form 8-K dated June 8, 1998 and
        incorporated herein.

    (b)      Reports on Form 8-K.

         Form 8-K Filed on June 8, 1998 - 

         Item 4.  Changes in Registrant's Certifying Accountant

                                       19
<PAGE>

                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


SARATOGA BRANDS INC.


By:/s/ Scott G. Halperin                           Date:   April 15, 1999
   ------------------------------
    Scott G. Halperin
    Chairman of the Board
    Chief Executive Officer


     In  accordance  with the Exchange Act, this report has been signed below by
the following  persons on behalf of the  registrant and in the capacities and on
the dates indicated.


By:/s/ Scott G. Halperin                           Date:   April 15, 1999
   ------------------------------

    Scott G. Halperin
    Chairman of the Board
    Chief Executive Officer
    Audit Committee Member


By:/s/ Bernard F. Lillis, Jr.                      Date:   April 15, 1999
   ------------------------------
    Bernard F. Lillis, Jr.
    Chief Operating Officer
    Chief Financial Officer
    Principal Accounting Officer
    Director


By:/s/ Joseph M. Greene                            Date:   April 15, 1999
   ------------------------------
    Joseph M. Greene
    Director
    Audit Committee Member

                                       20
<PAGE>


                      SARATOGA BRANDS INC. AND SUBSIDIARIES
                                      INDEX


                              FINANCIAL STATEMENTS


Included in Part II


Reports of Independent Certified Public Accountants


Consolidated Balance Sheet at December 31, 1998


Consolidated Statements of Income for the Years Ended December 31, 1998 and 1997


Consolidated  Statements of Cash Flows for the Years Ended December 31, 1998 and
1997

Consolidated  Statement of Changes in  Stockholders'  Equity for the Years Ended
December 31, 1998 and 1997


                                       F-1
<PAGE>





                          INDEPENDENT AUDITORS' REPORT




To the Board of Directors and Stockholders of
Saratoga Brands Inc. and Subsidiaries
Lakewood, New Jersey


We have audited the accompanying  consolidated  balance sheet of Saratoga Brands
Inc. and  Subsidiaries  ("the Company") as of December 31, 1998, and the related
consolidated statements of income,  stockholders' equity, and cash flows for the
year then  ended.  These  financial  statements  are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audit. The financial statements of the Company
for the year  ended  December  31,  1997 were  audited by other  auditors  whose
report,  dated  February 28, 1998,  expressed  an  unqualified  opinion on those
statements.

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

In our opinion,  such consolidated  financial  statements present fairly, in all
material  respects,  the financial position of the Company at December 31, 1998,
and the results of its  operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.


DELOITTE & TOUCHE LLP

Parsippany, New Jersey
April 6, 1999


                                       F-2
<PAGE>





                          INDEPENDENT AUDITORS' REPORT




To the Board of Directors and Stockholders of
Saratoga Brands, Inc. and Subsidiaries


We have audited the  accompanying  consolidated  statements of operations,  cash
flows and changes in  stockholders'  equity for the period  ended  December  31,
1997. These  consolidated  financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
consolidated 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 audits 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 disclosure in the financial  statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the results of operations and cash flows of
Saratoga Brands, Inc. and Subsidiaries for the period ended December 31, 1997 in
conformity with generally accepted accounting principles.


BROZA, BLOCK & RUBINO
Certified Public Accountants


Asbury Park, New Jersey
February 28, 1998


                                       F-3
<PAGE>


                      SARATOGA BRANDS INC. AND SUBSIDIARIES
                           Consolidated Balance Sheet
                                December 31, 1998


                                     ASSETS

Current Assets:
       Cash and cash equivalents                                        $108,357

       Accounts receivable - net of allowance for doubtful accounts
            of $80,555                                                   917,399


       Inventories                                                       492,838


       Prepaid expenses and other current assets                          75,463
                                                                      ----------

            Total current assets                                       1,594,057


Fixed Assets - net                                                     3,096,718

Other assets                                                             587,413

Intangible assets  - net                                               1,179,363

Excess of cost over fair value of assets acquired - net                  247,500
                                                                      ----------

         TOTAL ASSETS                                                 $6,705,051
                                                                      ==========

                   Notes to Consolidated Financial Statements


                                       F-4
<PAGE>




                      SARATOGA BRANDS INC. AND SUBSIDIARIES
                     Consolidated Balance Sheet (continued)
                                December 31, 1998

                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                   LIABILITIES

Current Liabilities:
         Accounts payable and accrued expenses                        $1,362,713


         Current portion of long-term debt                               628,956


         Current portion of capital lease obligations                     57,170
                                                                      ----------

           Total current liabilities                                   2,048,839

Long-term debt                                                           795,400

Capital lease obligations                                                133,346
                                                                      ----------

         Total liabilities                                             2,977,585
                                                                      ----------

         COMMITTMENTS AND CONTINGENCIES

         STOCKHOLDERS' EQUITY

Preferred stock                                                          397,898
         Class A participating convertible preferred shares, 
         $1 par value, stated at liquidation value, authorized 
         200 shares of which 16.5 shares are issued and outstanding

Common stock                                                               5,047
         Par value $.001 - 25,000,000 shares authorized,5,046,661
         shares issued and outstanding

Additional paid-in-capital                                               521,076

Retained Earnings since April 1, 1997                                  2,803,445
                                                                      ----------

         Total Stockholders' Equity                                    3,727,466
                                                                      ----------

         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                   $6,705,051
                                                                      ==========

                   Notes to Consolidated Financial Statements


                                       F-5
<PAGE>




                      SARATOGA BRANDS INC. AND SUBSIDIARIES
                        Consolidated Statements of Income

                                                           For the Years Ended
                                                               December 31,
                                                       -----------   -----------
                                                            1998          1997

Net sales                                              $12,754,266   $13,712,800

Cost of sales                                            9,751,013    10,089,939
                                                       -----------   -----------

Gross profit                                             3,003,253     3,622,861

Selling, general and administrative expenses             2,191,187     2,417,793

Loss on abandoned operation                                482,307          --
                                                       -----------   -----------

Income from Operations                                     329,759     1,205,068

Interest expense - net                                     274,591       525,104
                                                       -----------   -----------

Income before taxes and extraordinary item                  55,168       679,964

Income tax provision                                        31,000          --
                                                       -----------   -----------

Income before extraordinary item                            24,168       679,964

Extraordinary Item - earnings from forgiveness of debt, net   --       2,154,820
                                                       -----------   -----------

Net Income                                                 $24,168    $2,834,784
                                                       ===========   ===========

EARNINGS PER COMMON SHARE

BASIC AND DILUTED

Income before extraordinary item                             $--           $0.17
Extraordinary Item                                            --            0.55
                                                       -----------   -----------

Net income                                                   $--           $0.72
                                                       ===========   ===========

Basic weighted average shares used in computation        4,901,804     3,956,925

Diluted weighted average shares used in computation      5,117,693     3,957,141

                   Notes to Consolidated Financial Statements



                                       F-6
<PAGE>




                      SARATOGA BRANDS INC. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows

                                                          For the Years Ended
                                                              December 31,
                                                          1998           1997
                                                     ------------    -----------
Cash Flows from operating activities:
   Net income                                            $24,168     $2,834,784
Adjustments to reconcile net income to net cash
  provided by operating activities:
   Depreciation and amortization                         431,118        411,055
   Forgiveness of debt                                     --        (2,154,820)
   Provision for losses on accounts receivable             2,555          7,190
   Loss on sale of equipment                               1,550           --
   (Increase) decrease in accounts receivable             14,400       (252,716)
   (Increase) decrease in inventories                    (48,604)        29,111
   (Increase) decrease in prepaid expenses and 
      other current assets                                (1,912)       278,597
   (Decrease) increase in accounts payable and 
      accrued expenses                                  (334,178)       487,243
                                                     ------------    -----------
   Net cash provided by operating activities              89,097      1,640,444
                                                     ------------    -----------
Cash flows from investing activities:
   Decrease in note receivable related parties              --          167,863
   Purchase of fixed assets                             (295,259)      (127,191)
   Increase in other assets                             (226,677)      (152,541)
   Redemption of investment                                 --        1,209,800
   Increase in intangible assets                         (61,232)      (234,468)
                                                     ------------    -----------
   Net cash (used in) provided by investing activities  (583,168)       863,463
                                                     ------------    -----------
Cash flows from financing activities:
   Proceeds of long term debt                            750,000        580,518
   Repayment of long term debt                          (441,069)    (1,079,358)
   Common Stock Issued in settlement of debt                --          123,438
   Purchase of treasury stock                               --       (1,938,300)
   Proceeds from capital leasing transactions            168,775         16,000
   Repayment of capital leases                          (104,223)       (59,454)
                                                     ------------    -----------
   Net cash provided by (used in) financing activities   373,483     (2,357,156)
                                                     ------------    -----------
Increase (decrease) in cash                             (120,588)       146,751

Cash and cash equivalents at beginning of year           228,945         82,194
                                                     ------------    -----------
Cash and cash equivalents at end of year                $108,357       $228,945
                                                     ============    ===========

Supplemental disclosure of cash flow information:

Interest paid                                           $266,869       $299,248
Income taxes paid                                         $1,350           $600

                   Notes to Consolidated Financial Statements


                                       F-7
<PAGE>





                      SARATOGA BRANDS INC. AND SUBSIDIARIES
                      Consolidated Statement of Changes in
                    Stockholders' Equity For the Years Ended
                           December 31, 1998 and 1997


<TABLE>
<CAPTION>
                                                                           
                             CLASS "A" PARTICIPATING          
                              CONVERTIBLE PREFERRED
                                    SHARES                                          TREASURY SHARES,
                               ------------------   COMMON SHARES                       AT COST
                                         AMOUNT    ------------------             -------------------
                               NUMBER  STATED AT                        ADDITIONAL
                                 OF   LIQUIDATION  NUMBER OF             PAID-IN    NUMBER OF         RETAINED EARNINGS
                               SHARES    VALUE      SHARES     AMOUNT    CAPITAL     SHARES    AMOUNT     (DEFICIT)       TOTAL
                               -----------------------------------------------------------------------------------------------------


<S>                           <C>    <C>         <C>         <C>     <C>          <C>      <C>        <C>            <C>        
Balance at December 31, 1996    16.5   $397,898    3,074,916   $3,076  $23,027,435  (90,653) ($107,213) ($12,988,468)  $10,332,728
                               =====================================================================================================

Rounding on 1:3 
   reverse split                                         134                                                                   -
Shares issued in Italian 
   Bank Settlement                                   200,000      200      123,238                                         123,438
Shares issued CCI SpA                                224,000      224     (163,520)                                       (163,296)
Issuance of common shares 
   as compensation and awards                      1,574,084    1,574     (363,189)                                       (361,615)
Shares acquired and retired                         (485,667)    (486)    (728,014)                                       (728,500)
Revaluation of Deli King 
   Acquisition                                                            (671,994)                                       (671,994)
Conversion of Loans                                  280,000      280      419,720                                         420,000
Treasury shares cancelled                            (90,500)     (91)    (159,184)   90,500   106,568                    (52,707)
Quasi Reorganization                                                                                      (8,023,460)   (8,023,460)
Net Income for the 
   period 1/01-3/31/97                                                                                        55,506        55,506
Quasi Reorganization                                                   (20,956,422)                       20,956,422           -
Earnings after April 1, 1997                                                                               2,779,277     2,779,277
                               -----------------------------------------------------------------------------------------------------

Balance at December 31, 1997    16.5    397,898    4,776,967    4,777      528,070      (153)     (645)    2,779,277     3,709,377
                               =====================================================================================================

Issuance of Common Shares for options exercised      269,847      270       (6,349)                                         (6,079)
Treasury shares cancelled                               (153)                 (645)      153       645                           -
Net Income                                                                                                    24,168        24,168
                               -----------------------------------------------------------------------------------------------------

Balance at December 31, 1998    16.5   $397,898    5,046,661   $5,047     $521,076        -       $ -     $2,803,445    $3,727,466
                               =====================================================================================================
<CAPTION>
</TABLE>

                   Notes to Consolidated Financial Statements


                                       F-8
<PAGE>

                      SARATOGA BRANDS INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

NOTE 1 --ORGANIZATION AND BUSINESSES

     Saratoga  Brands  Inc.,  ("the  Company")  a  New  York  corporation,   was
incorporated  on June  12,  1987.  The  Company  entered  the  specialty  cheese
industry,  through the acquisition of Cucina Classica Italiana,  Inc. ("CCI"), a
company located in Lakewood, New Jersey.
     On December 30, 1994, the company acquired JR's Delis,  Inc. ("JR") a Rhode
Island based  catering and  distribution  business.  JR sold and delivered  deli
products to convenience stores and retail outlets in Rhode Island, Massachusetts
and Connecticut.
     On April 29, 1996,  (effective  January 1, 1996), the Company acquired Deli
King, Inc. ("Deli"), a food processor,  distributor and mobile catering business
serving Rhode Island, eastern Connecticut and southeastern  Massachusetts.  Deli
has  been  integrated  with JR and  operates  out of  Deli's  modern  commissary
facility in West Warwick,  Rhode Island.  From that point JR was operated as the
Direct Store Delivery ("DSD") Division of Deli.
     On May 7, 1996, the Company acquired the assets of Dotties  Caterers,  Inc.
("Dotties"),  a mobile  catering  business  serving  Rhode  Island.  Dotties was
integrated with Deli and operates out of Deli's facility.
     In the fourth  quarter of 1998 Deli  abandoned  the operation of JR due to
its inability to demonstrate profitable operations.
       
         QUASI-REORGANIZATION

     Effective  April 1, 1997,  the Board of Directors  of the Company  directed
that the Company undergo a quasi-reorganization  which is an elective accounting
procedure  intended  to restate  assets and  liabilities  to current  values and
eliminate any accumulated deficit in retained earnings.
     This  resulted  in a  reduction  in the  carrying  value of goodwill in the
amount of  $8,023,460,  which has been  accounted for as a direct  shareholders'
equity transaction.  Further,  the Company's  accumulated deficit as of April 1,
1997 ($20,956,422) was eliminated against additional paid-in-capital.

         FORGIVENESS OF DEBT

     In December  of 1997 the Company  entered  into  agreements  with 5 Italian
banks,  retiring  all  liabilities  to these banks for  payment of $500,000  and
200,000  unregistered  shares of the Company's common stock. The  aforementioned
payment and shares represented the entire payment to the banks.


NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

     The consolidated  financial  statements include the accounts of the Company
and its wholly  owned  subsidiaries.  All  material  intercompany  balances  are
eliminated.


                                       F-9
<PAGE>


                      SARATOGA BRANDS INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                   (Continued)

INVENTORIES

     Inventories  are stated at the lower of cost or market as determined by the
first-in,  first-out method.  The components of inventories at December 31, 1998
were as follows:

           Raw Materials    Finished Goods         Total
          ---------------  ----------------      ---------

              $203,780          $289,058          $492,838

          ===============  ================      =========


DEPRECIATION AND AMORTIZATION

     Depreciation  and  amortization  is computed  utilizing  the straight  line
method over the estimated useful lives of the related assets as follows:

                 Fixed Assets                     5 - 50 years
                 Identifiable Intangible Assets   5 - 15 years

     The Company will assess the  recoverability  of fixed assets and intangible
assets based on existing facts and circumstances  and projected  earnings before
interest,  depreciation  and amortization on an undiscounted  basis.  Should the
Company's  assessment  indicate  impairment an  appropriate  write-down  will be
recorded.


REVENUE RECOGNITION

     Revenues are recognized upon shipment of product.


GOODWILL

     Goodwill,  which  represents  costs in excess of the fair  value of the net
assets acquired, is amortized on the straight line basis over 10 years.
     The Company  assesses  the  recoverability  of  goodwill at each  reporting
period based on existing facts and circumstances  and projected  earnings before
interest,  depreciation  and amortization on an undiscounted  basis.  Should the
Company's assessment indicate an impairment,  an appropriate  write-down will be
recorded.

CASH EQUIVALENTS

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

                                       F-10
<PAGE>

                      SARATOGA BRANDS INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                   (Continued)


CONCENTRATIONS

     The Company  does not have any single  customers  who account for more than
10% of the Company's  trade  receivables  or sales.  The Company's  products are
distributed  nationally.  Most of the Company  customers are food  retailers and
distributors.
     Approximately  30% of the Company's  sales volume relates to products which
are purchased  from one supplier  under a exclusive  contract which runs through
the year 2000 when it will come up for renewal.

ADVERTISING COSTS

     The  Company  expenses  production  costs of print,  radio  and  television
advertisements  as of the first date the  advertisements  take place.  All other
advertising  costs are expensed as incurred.  Advertising  expenses  included in
selling, administrative and general expenses were $41,769 in 1998 and $37,845 in
1997.

DEFERRED FINANCING COSTS

     Deferred  financing costs are amortized  utilizing the interest method over
the life of the related indebtedness.

COMPREHENSIVE INCOME

     Effective in 1998, the Company  adopted  Statement of Financial  Accounting
Standards No. 130, Reporting Comprehensive Income ("SFAS No. 130"). The Company,
at this time, has no items of comprehensive income other than net income.

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 amounts  reported in the financial  statements  and
accompanying notes. Actual results could differ from those estimates.

RECLASSIFICATIONS

     Certain  reclassifications  have been made to the  prior  year's  financial
statements to conform to the current year's presentation.

NEW ACCOUNTING STANDARDS NOT YET ADOPTED

     In June 1998, the Financial  Accounting Standards Board issued Statement of
Financial  Accounting  Standards No. 133, Accounting for Derivative  Instruments
and Hedging  Activities  ("SFAS No. 133").  SFAS No. 133 applies to all entities
and to all types of  derivatives,  and is effective  for all fiscal  quarters of
fiscal years  beginning after June 15, 1999. The adoption of SFAS No. 133 in not
expected to materially affect the financial position or results of operations of
the Company.

                                       F-11
<PAGE>


                      SARATOGA BRANDS INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                   (Continued)


NOTE 3 - FIXED ASSETS

     Fixed assets consists of the following at December 31, 1998:
        
                                                          Useful Life
                                                          -----------
            Land                             $611,007
            Buildings                       1,394,402        50 years
            Furniture & equipment             965,823    5 - 10 years
            Vehicles                          501,419     5 - 7 years
            Leasehold Improvements             45,401         5 years
            Capital leases                    289,996
                                         ---------------

               Total Cost                   3,808,048
                  Less accumulated 
                  depreciation and 
                  amortization               (711,330)
                                         ===============
               Fixed assets, net           $3,096,718
                                         ===============
                                                                                
     Depreciation  and  amortization  is  computed  on  a  straight-line  basis.
Depreciation  and  amortization  expense was  $263,247 and $219,542 for 1998 and
1997, respectively.

NOTE 4 -  OTHER ASSETS

     Other assets consists of the following at December 31, 1998:

            Pledged Collateral Account       $335,145
            Deferred Financing Costs           59,047
            Notes Receivable                  111,468
            Deposits                           46,186
            Other                              35,567
                                          --------------

            Total                            $587,413
                                          ==============

     The pledged  collateral account contains certain assets of the Company used
to guaranty its obligations to one of its suppliers.


NOTE 5 - INTANGIBLE ASSETS

     Intangible assets consists of the following at December 31, 1998:

            Trademarks and licenses          $555,785
            Catering routes                 1,254,622
                                          --------------
                                            1,810,407
            Accumulated amortization         (631,044)
                                          --------------
            Intangible assets, net         $1,179,363
                                          ==============

     Amortization  of  intangibles  was $137,871 and $123,800 for 1998 and 1997,
respectively.

                                       F-12
<PAGE>

                      SARATOGA BRANDS INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                   (Continued)


NOTE 6 -- LONG-TERM DEBT

Long term debt consists of the following at December 31, 1998:

        Bank - unsecured loan payable in six equal
        monthly principal installments plus accrued 
        interest beginning January 1, 1999; bearing
        interest at prime plus 1%. Prime was 7.75%
        at December 31, 1998                                 $300,000

        Term Loan - payable in installments through
        2000. Interest at prime plus 1%.  Secured by
        accounts receivable, inventories and fixed assets     106,200

         Term Loan -  payable  $37,500  annually 
         through 2002, With a balloon payment in 
         2003. Interest at 8%. Secured by building.           740,625

         Note Payable, unsecured - payable in monthly 
         installments of $9,375. Interest at prime plus 1%.   159,375

         Note Payable, unsecured - payable in monthly 
         installments of $10,609.  Non-interest bearing.       63,654

         Other                                                 54,502
                                                           -----------

         Subtotal                                           1,424,356

         Less Current Maturities                              628,956
                                                           -----------
         Long-term debt                                      $795,400
                                                           ===========
     Maturities of Long Term Debt are as follows:

                              1999                           $628,956
                              2000                            129,775
                              2001                             37,500
                              2002                             37,500
                                                              590,625
                                                           -----------
                                                           $1,424,356
                                                           ===========

                                       F-13
<PAGE>
 
                     SARATOGA BRANDS INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                   (Continued)


NOTE 7 - LEASE OBLIGATIONS

     At December 31, 1998, the Company was liable under terms of  noncancellable
leases for the following minimum lease commitments:

                                           Capital       Operating Leases
     Year Ending December 31,               Leases    Lakewood,    Johnston, RI
    ----------------------------------------------------------------------------
      1999                                 $76,990     $53,141        $7,600
      2000                                  48,766        --            --
      2001                                  44,974        --            --
      2002                                  44,974        --            --
      2003                                  26,631        --            --
                                          --------------------------------------
      Total minimum lease payments         242,335      53,141         7,600
      Less: amount representing interest   (51,819)       (a)            (b)
                                         ----------
      Present value of net minimum lease
         payments including current
         maturities of $57,170            $190,516
                                         ==========


     (a) The lease has a five-year  term expiring on August 31 1999. The Company
         has an option  to renew  for an  additional  five  years at an annual  
         rental of $91,975.


     (b) The lease has a two year term expiring on September 1, 1999,  renewable
         for an additional two years at an annual rental of $11,700.


     Rent  expense for the years ended  December  31, 1998 and 1997 was $114,168
and $106,494, respectively.

                                       F-14
<PAGE>

                      SARATOGA BRANDS INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                   (Continued)


NOTE 8 -- EARNINGS PER SHARE

     In accordance  with SFAS No. 128  "Earnings Per Share," the basic  earnings
per share have been computed  based upon the weighted  average  number of common
shares  outstanding.  Diluted  earnings  per share gives  effect to  outstanding
options and  warrants.  The  financial  statements  reflect  share amounts after
having  given  effect to a reverse  stock  split of 1:3 on  November  24,  1997.
Earnings per common share have been computed as follows:

                                                   Year Ended
                                    -------------------------------------------
                                      December 31, 1998    December 31, 1997
                                    -------------------------------------------
                                      Basic    Diluted     Basic      Diluted
                                    --------  --------  -----------  ----------
Income before extraordinary item    $ 24,168   $24,168    $679,964    $679,964
Extraordinary item                       -         -     2,154,820   2,154,820
                                    --------  --------  -----------  ----------
Net Income                          $ 24,168   $24,168  $2,834,784  $2,834,784
                                    ========  ========  ===========  ==========
Average common shares outstanding  4,901,804 4,901,804   3,956,925   3,956,925
Stock options and warrants               -     215,889         -           216
                                    --------  --------  -----------  ----------
Total average equivalent shares    4,901,804 5,117,693   3,956,925   3,957,141

Income per share before
  extraordinary item                    $-        $-         $0.17       $0.17
Extraordinary item                       -         -          0.55        0.55
                                    --------  --------  -----------  ----------
Net income per share                    $-      $  -         $0.72       $0.72
                                    ========  ========  ===========  ==========

     Options and warrants to purchase 559,836 and 743,634 shares of common stock
at prices  ranging  from $1.25 to $5.25 per share were  outstanding  in 1998 and
1997, respectively, but were not included in the computation of diluted earnings
per share  because the exercise  price of the options and warrants  exceeded the
average market price and would have been antidilutive.

                                       F-15
<PAGE>

                      SARATOGA BRANDS INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                   (Continued)
NOTE 9 -- Income Taxes

         The income tax  provision  (benefit) is comprised of the  following for
the years ended:

                                               December 31,
                                            1998         1997
                                      ------------------------
             Current
               Federal                       $--      $    --
               State                      31,000           --
             Deferred
               Federal                (1,194,000)    (200,000)
               State                          --           --
                                      ------------------------
             Subtotal                 (1,163,000)    (200,000)

             Valuation allowance       1,194,000      200,000
                                      ------------------------
             Income tax provision        $31,000          $--
                                      ========================

     The balance  sheet  classification  of the  deferred  income tax assets and
liabilities is as follows:

                                            December 31,      
                                      ------------------------
                                         1998          1997
                                      Non-current   Non-current
                                      ------------------------
             Assets                   $1,394,000     $200,000
             Liabilities                     --           --
                                      ------------------------  
             Subtotal                  1,394,000      200,000
             Less: Valuation 
               allowance              (1,394,000)    (200,000)
                                       -----------------------
Total                                       $--          $--
                                       =======================


     During the years  ended  December  31, 1998 and 1997,  the  increase in the
valuation  allowance was  $1,194,000 and $200,000,  respectively.  These charges
reflect  increases in the valuation  allowance related to the deferred tax asset
which the Company has concluded is not likely to be realized,  partially  offset
in 1998 by a decrease in the valuation  allowance  related to the utilization of
the Company's net operating loss carryforwards.
     The Company  will  continue to assess the  recoverability  of its  deferred
income  tax  asset  and  adjustments  may be  necessary  based  on the  evidence
available at that time. The difference  between the expected rate of tax and the
actual tax expense  relates  entirely  to state tax  expense  and the  valuation
allowance.

                                       F-16
<PAGE>

                      SARATOGA BRANDS INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                   (Continued)


NOTE 10 -- STOCKHOLDERS' EQUITY

     The  Preferred  Stockholders  have no voting  rights but are  entitled to a
priority of payment in the amount of the  original  subscription  price paid for
each  Preferred  Share ($16,667 to $25,000),  plus a  proportionate  amount,  as
defined,  on any remaining  excess proceeds if there is, among other matters,  a
sale of all or  substantially  all of the shares or assets of the  Company.  The
Preferred Stockholders are not entitled to specific dividends;  however,  should
the  Company  declare  any  dividends  on  the  common  shares,   the  Preferred
Stockholders  will be entitled to receive  dividends as if they had converted to
common shares immediately prior to the dividend declaration.  The holders of the
Preferred Shares may convert, at their option, at any time, all or part of their
shares into common shares. Holders of 29 Preferred Shares and certain holders of
the  Company's  Debentures  having  had  conversion  rights  with  respect to an
aggregate of 11.75 additional  Preferred Shares granted the Company the right to
require the  conversion  of their  shares  into common  shares at any time on or
after the filing by the Company of a registration  statement with the Securities
and  Exchange  Commission  for the  purpose  of  offering  for  sale  any of the
Company's securities.  Upon the closing of the Company's initial public offering
of its common  shares in September  1991,  the Company  exercised  its right and
converted  said  Preferred  Shares  and  Debentures  into  common  shares.  Each
outstanding  Preferred Share is convertible into approximately 19 common shares,
subject  to  certain  adjustments  as  defined  in the  Amended  Certificate  of
Incorporation. Subsequent to the initial public offering of the Company's common
shares, holders of eight Preferred Shares converted into common shares.
     The Company has  reserved,  in  aggregate,  314 common  shares for possible
future issuance to Preferred Stockholders in the event of conversion.
     At December 31, 1997 their were 16.5 preferred  shares  outstanding  all of
which are convertible into common shares at the holders option.


NOTE 11 -- COMMITMENTS

         Factoring Agreement

     On June 15, 1995, CCI entered into a factoring agreement with BNY Financial
Corporation ("BNYF") for three years that is renewable after the initial period.
The agreement states that CCI would be required to factor  substantially  all of
its trade  receivables  and would in return receive  immediate cash credit for a
major portion of these factored receivables as well as a portion of the finished
goods inventory. The factoring fee is 1% of the invoice amount and 1% over prime
on the amount  advance under the factoring  agreement.  The factoring  agreement
provides CCI with an ability to receive advances  collateralized by invoices and
inventory  of $2.0  million  and letters of credit in favor of  suppliers  of an
additional   $1.0  million.   CCI  has  pledged  all  of  accounts   receivable,
inventories, real estate and equipment as collateral for this credit agreement.
     This  agreement has covenants in regards to minimum  factoring of invoices,
minimum net worth,  quick ratio and  profitability  on a standalone  basis.  The
agreement  provides for covenant  violation  penalties,  which include increased
interest.  The Company is not in compliance  with the minimum income and minimum
net worth  covenants  at December  31,  1998.  The Company has obtained a letter
dated April 5, 1999,  from BNYF waiving  these two covenant  violations  and the
related  penalties.  Based upon  projected  results for the upcoming  year,  the
Company believes it will be in compliance with it covenants.

                                       F-17
<PAGE>

                      SARATOGA BRANDS INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                   (Continued)


         Investment Banking Agreement

     On  October  28,  1997  the  Company  entered  into an  investment  banking
agreement between the Company and M.H. Meyerson & Co., Inc.  ("Meyerson")  Under
the terms of the agreement Meyerson is to provide investment banking services to
the Company on a  non-exclusive  basis for a five year term. In connection  with
the agreement the Company granted Meyerson warrants to purchase 83,334 shares of
the Company's common stock at a price of $1.50 per share, and 83,333 shares at a
price of $1.80 per  share,  a total of  166,667  shares  of common  stock of the
Company.  The warrants vest one third at each purchase price on October 28 1997,
one-third at each  purchase on April 28 1998,  and  one-third  at each  purchase
price on October 28, 1998.  The warrants are cancelled  upon  termination of the
agreement;  however, once vested the warrants shall remain in force until either
exercised  or upon  expiration  thereof on October 28, 2002.  Additionally,  the
Company paid a one-time fee in the amount of $25,000,  which is being  amortized
over the life of the agreement.
     The foregoing does not purport to be a complete  statement of all terms and
conditions  contained in the Agreement.  Reference is made to exhibit 10(ad) for
all terms and conditions of the Agreement.


NOTE 12 -- STOCK PLANS

     The Company's  1998 Incentive and  Nonqualified  Stock Option Plan provides
for the  granting  of  options to  purchase  800,000  shares of common  stock to
certain employees of the Company. Exercise and vesting terms for options granted
under this plan are  determined at each grant date.  All options were granted at
not less than fair market value at dates of grant.  At the end of 1998,  580,000
options  were  available  for grant under the plan and 800,000  shares of common
stock were reserved for issuance under the 1998 Incentive and Nonqualified Stock
Option Plan.  The  Company's  1998  Director  Stock Option Plan provides for the
granting  of  options  to  purchase  200,000  shares of common  stock to certain
directors of the Company.  Exercise and vesting terms for options  granted under
this plan are  determined  at each grant date.  All options  were granted at not
less  than fair  market  value at dates of  grant.  At the end of 1998,  120,000
options  were  available  for grant under the plan and 200,000  shares of common
stock were  reserved for  issuance  under the 1998  Director  Stock Option Plan.
Under the terms of the 1994 Stock Award Plan  1,400,000  shares of common  stock
may be granted to officers, directors,  employees and consultants of the Company
through  2004.  Various  options  and  warrants to acquire  823,017  shares were
granted to employees  and  consultants  to the Company under the Plan during the
period from 1994 through 1997.  All options and warrants  granted under the Plan
were  granted at not less than fair market  value at the date of grant.  Certain
options and warrants granted under the Plan remain  outstanding and are included
in the summary below.  SFAS No. 123 "Accounting  for  Stock-Based  Compensation"
("SFAS No. 123") was  effective  for the Company for fiscal  1998.  SFAS No. 123
encourages (but does not require)  compensation  expense to be measured based on
fair value of the  equity  instrument  awarded.  In  accordance  with APB No. 25
"Accounting  for  Stock  Issued  to  Employees"  no  compensation  cost has been
recognized in the  Consolidated  Statements  of Income for the  Company's  stock
option plans. If compensation cost for the Company's stock option plans had been
determined in accordance with the fair value method  prescribed by SFAS No. 123,
the Company's net income would have been  $(77,106) and  $2,306,293 for 1998 and
1997 respectively.  Diluted earnings per share would have been $(0.02) and $0.58
for  1998  and  1997  respectively.  This  pro  forma  information  may  not  be
representative  of the amounts to be expected in future  years as the fair value
method of accounting  prescribed by SFAS No. 123 has not been applied to options
granted prior to 1996.

                                       F-18
<PAGE>

                      SARATOGA BRANDS INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                   (Continued)


     Stock options transactions are summarized as follows:

<TABLE>
<CAPTION>

                          1998 Options        1998 Warrants        1997 Options      1997 Warrants
                            Weighted            Weighted             Weighted           Weighted
                             Average             Average              Average            Average
                            Exercise            Exercise             Exercise           Exercise
                    Shares   Price    Shares     Price     Shares     Price     Shares   Price
---------------------------------------------------------------------------------------------------

<S>                <C>       <C>      <C>        <C>        <C>       <C>       <C>      <C>   
Outstanding,
beginning of year  443,184   0.8750   379,833    2.1341     65,050    2.5000    66,667   1.5000

Granted            140,000   0.9285   160,000    1.9688  1,957,843    1.8100   313,166   2.2691

Excercised, Net    (78,739)  0.9285       --            (1,579,709)   1.8400       --
---------------------------------------------------------------------------------------------------
Outstanding, 
end of year        504,445   0.8879   539,833    2.0851    443,184    1.8100   379,833   2.1341

Options or 
   warrants
   exercisable
   at year-end     504,445   0.8878   464,833    2.0869    443,184    1.8100   379,833   2.1341

Weighted-average    0.8289                                            1.6900
   fair value of   
   options granted 
   during the year 
<CAPTION>
</TABLE>

     The fair  value of each  option  granted is  estimated  on the date of each
grant using the Black-Scholes  option-pricing  model with the following weighted
average  assumptions used for grants in 1998 and 1997,  respectively:  risk free
interest rate 5.2% and 5.2%;  expected life within 5 years;  expected volatility
of 180.3% and 161.02%;  dividend  yield 0% and 0%. The fair values  generated by
the  Black-Scholes  model may not be indicative of the future  benefit,  if any,
that may be received by the option holder.

Note 13-- SEGMENT REPORTING

     The  Company  adopted  Statement  Financial   Accounting  Standard  No.131,
Disclosures about Segments of an Enterprise and Related  Information (SFAS 131),
in 1998. This statement  establishes  standards for reporting  information about
operating  segments in annual financial  statements and selected  information in
interim  financial  statements.   It  also  establishes  standards  for  related
disclosures about products and services and geographic areas. Operating segments
are  defined as  components  of an  enterprise  about which  separate  financial
information  is  available  that is evaluated  regularly by the chief  operating
decision  maker  in  deciding  how  to  allocate   resources  and  in  assessing
performance. The Company's chief operating decision maker is the Chief Executive
Officer.

     The  accounting  policies of the  operating  segments are the same as those
described  in the  summary  of  significant  accounting  policies.  There are no
material  inter-segment  sales or  transfers.  Substantially  all  revenues  are
generated within the United States and all revenue  producing assets are located
therein.

                                       F-19
<PAGE>

                      SARATOGA BRANDS INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                   (Continued)


         Industry segment information is summarized as follows:

                               Total Revenues         Operating Profits
                               1998       1997        1998          1997
                         ----------------------------------------------------
    CCI                    $8,148,937  $8,360,289   $991,581     $1,159,412
Mobile                      4,438,026   5,352,428   (284,309)       112,163
                         ----------------------------------------------------
  Total Segment            12,586,963  13,712,717    707,272      1,271,575
Eliminations and other
corporate income(expenses)    167,303          83   (377,513)       (66,507)
                         ----------------------------------------------------
Consolidated               $12,754,266 $13,712,800    329,759      1,205,068
                         ==========================
Interest expense                                      274,591        525,104
                                                   --------------------------
Consolidated income before
   income taxes and
   extraordinary item                                 $55,168       $679,964
                                                   ==========================

                                      Depreciation and           Identifiable
              Capital Expenditures  Amortization Expense            Assets
              ------------------------------------------------------------------
                 1998       1997       1998       1997       1998         1997
CCI            $263,325   $65,239   $142,345   $126,306   $1,686,341  $1,603,977
Mobile           31,934    61,952    258,773    217,037    4,287,016   4,320,448
Corporate            -         -      30,000     67,712      731,694     723,232
              ------------------------------------------------------------------
Consolidated   $295,259  $127,191   $431,118   $411,055   $6,705,051  $6,647,657
              ==================================================================

NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS

     The fair value of a financial instrument represents the amount at which the
instrument could be exchanged in a current  transaction between willing parties,
other  than a forced  sale or  liquidation.  Significant  differences  can arise
between the fair value and  carrying  amount of financial  instruments  that are
recognized at historical  cost amounts.  The following  methods and  assumptions
were used by the Company in  estimating  fair value  disclosures  for  financial
instruments:

o    Cash and cash equivalents,  trade  receivables,  short-term  borrowings and
     current   maturities  of  long-term  debt:  The  amounts  reported  in  the
     consolidated balance sheet approximate fair value.

o    Long-term  debt:  The amount  reported in the  consolidated  balance  sheet
     approximates fair market value, since such debt was primarily variable rate
     debt.

                                       F-20
<PAGE>

                      SARATOGA BRANDS INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                   (Continued)


NOTE 15- RESTATEMENT OF FINANCIAL STATEMENTS

     The  financial  statements  for the year ended  December 31, 1997 have been
restated  to reflect  the  reclassification  of  $450,281  of  interest  expense
forgiven  by the  banks  from  extraordinary  item to  current  operations.  The
restatement does not change the net earnings for the period previously reported.


                                       F-21