<PAGE>   1






                    U.S. SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, D.C.
                                  FORM 10-KSB
(Mark One)

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

        For the fiscal year ended  December 31, 1995
                                   -------------------------------- 

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]

         For the transition period from            to
                                         ---------    ------------- 

                                               33-79922
                 Commission file number    ------------------------
                                           
                             ZACHARY VENTURES, INC.
------------------------------------------------------------------------   
                   (Name of small business issuer in its charter)



          Delaware                                      13-3760010
------------------------------------------------------------------------ 
(State or other jurisdiction                          (IRS Employer
     of incorporation)                              Identification No.)

      41 East 57th Street, 39th Floor, New York, New York         10022
------------------------------------------------------------------------  
          (Address of principal executive office)                Zip Code


Issuer's telephone number               (212) 768-2383
                           --------------------------------------------
                           
Securities registered under Section 12(b) of the Exchange Act:


   Title of Securities         Name of each exchange on which registered

------------------------       -----------------------------------------

------------------------       -----------------------------------------

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


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

    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, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days.  (See definition of affiliate in Rule 12b-2 of the Exchange Act.)  Not
Applicable

    (ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

    Check whether the issuer has 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  ____

                      DOCUMENTS INCORPORATED BY REFERENCE
                                      None
<PAGE>   2
ITEMS 1 & 2.  DESCRIPTION OF THE BUSINESS AND THE COMPANY'S PROPERTIES

A.  THE COMPANY

         Zachary Ventures, Inc. (the "Company") was organized under the laws of
the State of Delaware on December 17, 1993, for the purpose of acquiring or
merging with an unspecified operating business.  The Company, since its
incorporation, has not been engaged in any business activities, other than
those described herein.  The Company intends to effect a merger, exchange of
capital stock, asset acquisition or other similar business combination or
acquisition (a "Business Combination") with a business entity (the "Acquired
Business").  Other than general corporate activities, including but not limited
to the search for and the negotiation and consummation of a Business
Combination, the Company has not engaged in any substantive commercial business
immediately following this offering until such time as it has effected a
Business Combination.

B.  THE RULE 419 OFFERING AND ACQUISITION ACTIVITY

    1.   THE OFFERING.

         On December 9, 1994, the Company commenced a "blank check" offering
(the "Rule 419 Offering") pursuant to Rule 419 ("Rule 419") promulgated under
the Securities Act of 1933, as amended, of a maximum of 600,000 shares of
Common Stock, $.001 par value per Share at a price of $.10 per Share, which
generated $60,000 in net proceeds from approximately 400 different investors
(the "Rule 419 Investors").  Pursuant to Rule 419, $54,000 of the net proceeds
from that offering (the "Deposited Funds") and the Company shares purchased by
the Rule 419 Investors (the "Deposited Securities") were held in escrow (the
"Rule 419 Escrow") by Bernard Herold & Co., as Escrow Agent (the "Escrow
Agent") pending (i) distribution of a prospectus to each of them describing any
prospective business acquisition by Zachary and (ii) the subsequent
confirmation by the holders of at least 80% of the shares owned by the Rule 419
Investors that they elect to remain investors.

         Following the completion of the Rule 419 Offering, the Company entered
into an Agreement and Plan of Reorganization dated July 7, 1995 (the "Plan of
Reorganization") with Cartilage Technologies Inc. ("CTI"), a Barbados
corporation pursuant to which CTI would make an exchange offer (the "Exchange
Offer") to acquire the Company's issued and outstanding shares, $.001 par value
per share, in exchange for 318,000 shares (the "Exchange Shares") of CTI Common
Stock.  The Exchange Shares would constitute approximately 4% of the issued and
outstanding shares of CTI Common Stock following the consummation of the
Exchange Offer.

         The Plan of Reorganization was subject to a satisfaction, by both CTI
and the Company of certain conditions precedent to the consummation of the
transactions contemplated by the Plan of Reorganization.  Among such conditions
was the requirement that CTI obtain the approval and consent of its
stockholders as required under Barbados law.  Two minority stockholders (the
"plaintiff stockholders") of CTI commenced an action in Barbados to preclude
CTI from consummating the Exchange Offer. A temporary restraining order was
issued in September 1995 (the "TRO").  The Company gave notice to CTI on
February 23, 1996, that if the injunction was not removed by March 11, 1996,
the Plan of Reorganization would terminate as of that date.  CTI was
unsuccessful in obtaining a hearing regarding the lifting of the TRO.  The
Company and CTI entered into a settlement on April 12, 1996, pursuant to which
CTI agreed to pay all of the expenses, up to a maximum of $52,000 incurred by
the Company in connection with the Exchange Offer.  Following the settlement
with CTI, the Company continued to seek an acquisition


                                       2

<PAGE>   3
candidate and in fact commenced negotiations with a prospective operating
company (the "Target Company").  Prior to completion of an agreement with the
Target Company, the Company decided to confirm with the SEC that there remained
adequate time within which to complete the acquisition.

         Although the Company believed there was sufficient time to complete
the acquisition, the SEC could not give the Company assurance that a post
effective amendment would be reviewed and/or declared effective in time to
permit each investor to have at least 20 business days within which to make
their decision.  The SEC indicated that satisfaction of this condition was a
prerequisite to compliance with Rule 419.

         The Target Company terminated negotiations and the Company concluded
that it would proceed with the distribution of investment proceeds to the Rule
419 Investor in accordance with Rule 419.

         Rule 419 requires that before the Deposited Funds and the Deposited
Securities can be released, the Company must consummate an acquisition
satisfying the criteria of Rule 419 within 18 months of the effective date of
the registration statement pertaining to the offering.  If this is not done,
the proceeds (less 10% thereof) plus interest, if any, thereon must be returned
to the Investors.  Since the Company concluded that such a time schedule could
not be adhered to it returned the Deposited Funds to the Investors.  However,
in addition to the amount required to be returned under Rule 419, the Company
returned a further amount so that each investor received the return of 100% of
his investment.

    It is the Company's intention to file to terminate its reporting obligation
under Section 15(d) of the Act.  However, the Company continues to seek an
operating entity with which to effect a Business Combination.

C.  RISK ASSOCIATED WITH THE COMPANY'S BUSINESS.

         1.  RECENTLY ORGANIZED COMPANY.  The Company was only recently
organized and has a limited operating history.  The Company, therefore, must be
considered promotional and in its early formative and development stage.
Potential investors should be aware of the difficulties normally encountered by
a new enterprise, especially in view of the relatively small size of this
offering.  There is nothing at this time upon which to base an assumption that
the Company's business plan will prove successful, and there is no assurance
that the Company will be able to operate profitably.  The Company has limited
resources and has had no revenues to date.

         2.  MINIMAL TIME SPENT BY MANAGEMENT.  All of the Company's officers
and directors (sometimes collectively referred to herein as "Management") are
engaged full-time in other activities; and, therefore, prior to the conclusion
of this offering, whether or not the maximum number of shares is sold, devote
only a minimal amount of time (not to exceed approximately 10 hours per week)
to the Company's business.  It is unlikely that the lack of full-time
management may have a materially adverse effect upon the Company's business.
Subsequent thereto and prior to any possible Business Combination as well as
thereafter, provided Mr. Maxwell is then a member of the Company's Management,
Mr.  Maxwell intends to devote such time to the business of the Company as he
believes to be reasonably necessary.  The Company's success will be largely
dependent on the decisions made by Mr. Maxwell and any future members of
Management.  At present, the Company has no employees.  Even upon completion of
this offering, the present intention of the Company is to limit its employees
to part-time secretarial and clerical help, except for management and employees
of any Acquired Business that it may acquire.  See "Directors, Executive
Officers, Promoters and Control Persons."





                                       3
<PAGE>   4
         3.  EXPERIENCE OF MANAGEMENT.  Although Management has general
business experience, potential investors should be aware that Management has
limited experience in business combinations and may not have any significant
experience in acquiring or operating certain business interests that the
Company might choose to acquire.  Mr. Maxwell, however, has been involved as a
principal stockholder, director and officer of publicly held corporations
engaged in "reverse acquisition/merger activities."  Management does not have,
nor does it presently intend to enter into, any contracts or agreements with
any consultants or advisors with respect to its proposed business activities.
Management has not yet established the criteria that will be used to hire
independent consultants regarding their experience, the services to be
provided, the term of service, etc., and no assurance can be made that the
Company will be able to obtain such assistance on terms acceptable to the
Company.

         4.  NO PRESENT IDENTIFICATION OF INDUSTRY.    The Company has not
presently identified any specific business or, for that matter, any specific
industry which it intends to enter through the organization or acquisition of a
subsidiary or otherwise.  To the extent the Company consummates a Business
Combination with a financially unstable company or an entity in its early stage
of development or growth (including entities without established records of
sales or earnings), the Company will become subject to numerous risks inherent
in the business operations of financially unstable and early stage or potential
emerging growth companies.  In addition, to the extent that the company effects
a Business Combination with an entity in an industry characterized by a high
level of risk, the Company will become subject to the currently unascertainable
risk of that industry.  It is likely that the Company will have the ability to
effect only a single Business Combination.  Accordingly, the prospects for the
Company's success will be entirely dependent upon the future performance of a
single business.  Unlike certain entities which have the resources to
consummate several Business Combinations of entities operating in multiple
industries or multiple areas of a single industry, it is highly likely that the
Company will not have the resources to diversify its operations or benefits
from the possible spreading of risks or offsetting of losses.  In addition, by
consummating a Business Combination with only a single entity, the prospects
for the Company's success may become dependent upon the development or market
acceptance of a single or limited number of products, processes or services.
Consequently, there can be no assurance that the Acquired Business will prove
to be commercially viable.

         5.  INTENSE COMPETITION.  The Company is new and unseasoned and, thus,
it will have an inherent difficulty seeking to enter an established field.
There are numerous firms which are larger than the Company, and which are also
seeking to organize or purchase subsidiaries deemed to be potentially
profitable.  Such companies may be in a better position to finance such
subsidiaries and to offer incentives to management to run the subsidiaries and
to supervise them.  The Company will thus encounter intense competition in the
organizing or purchasing of businesses which it hopes may prove to be
profitable.

         6.  POTENTIAL FUTURE 144 SALES.  Of the 35,000,000 shares of the
Company's Common Stock authorized, there are presently issued and outstanding
(after giving effect to the return of the Deposited Securities to the Company),
990,000, all of which are "restricted securities" as that term is defined under
the Act, and in the future may be sold in compliance with Rule 144 of the Act,
or pursuant to a Registration Statement filed under the Act.  Rule 144
provides, in essence, that a person holding restricted securities for a period
of two (2) years may sell those securities in unsolicited brokerage
transactions or in transactions with a market maker, in an amount equal to one
percent (1%) of the Company's outstanding Common Stock every three (3) months.
Additionally, Rule 144 requires that an issuer of securities make available
adequate current public information with respect to the issuer.  Such
information is deemed available if the issuer satisfies the reporting
requirements of Sections 13 or 15(d) of the Exchange Act and of Rule 15c2-11
thereunder.  Rule 144 also permits, under certain





                                       4
<PAGE>   5
circumstances, the sale of shares by a person who is not an affiliate of the
Company and who has satisfied a three year holding period without any quantity
limitation and whether or not there is adequate current public information
available.  Investors should be aware that sales under Rule 144, or pursuant to
a Registration Statement filed under the Act, may have a depressive effect on
the market price of the Company's securities in any market that may develop for
such shares.  All of the presently outstanding shares will be available for
sale under Rule 144.

         7.  POSSIBLE ISSUANCE OF ADDITIONAL SHARES.  The Company's Certificate
of Incorporation, authorizes the issuance of 35,000,000 shares of Common Stock.
Presently, approximately 97% of the Company's authorized shares remain
unissued. The Company's Board of Directors has the power to issue any or all of
such additional shares without stockholder approval.  Management presently
anticipates that it may choose to issue a substantial amount of such shares to
acquire business interests or other types of property in the future, or may,
following a Business Combination issue shares for the purpose of raising
additional capital.  However, the Company presently has no commitments,
contracts or intentions to issue any additional shares.  Potential investors
should be aware that any such stock issuances may result in a reduction of the
book value or market price, if any, of the then outstanding shares.  If the
Company issues additional shares, such issuance will reduce the proportionate
ownership and voting power of the other stockholders.  Also, any new issuance
of shares may result in a change of control of the Company.

         8.  CONFLICTS OF INTEREST.  Officers and directors of the Company
including, but not limited to Messrs. Maxwell, Lippman and Sierchio, may engage
in other business activities similar or dissimilar to those engaged in by the
Company, including the formation of other blind pool companies.  To the extent
that such officers and directors engage in such other activities, they will
have possible conflicts of interest in diverting opportunities to other
companies, entities or persons with which they are or may be associated or have
an interest in, rather than diverting such opportunities to the Company.  Such
potential conflicts of interest include, among other things, time, effort and
corporate opportunity involved in their participation in other business
transactions as well as the preference, notwithstanding other possible factors,
to utilize the Law Office of Joseph Sierchio for legal services.  As no policy
has been established for the resolution of such a conflict, the Company may be
adversely affected should these individuals choose to place their other
business interests before those of the Company.  No assurance can be given that
such potential conflicts of interest will not cause the Company to lose
potential opportunities.  However, the failure by Management to resolve
conflicts of interest in favor of the Company may result in liability of
Management to the Company.  Generally, under Delaware law, directors and
officers have a fiduciary responsibility to discharge their duties in good
faith and with the degree of diligence, care and skill which an ordinarily
prudent person would exercise under similar circumstances in like positions.
Directors and officers may not acquire or divert to themselves property or
opportunities which they are under a duty to acquire for the corporation.  This
duty does not apply to all acquisitions or opportunities; it does not affect
acquisitions or opportunities that the corporation has refused, that it would
not have been able to take advantage of or that are not appropriate or
logically related to the corporation's business.

         In addition, Messrs. Maxwell, Lippman and Sierchio and shareholders of
the Company or their affiliates may receive personal financial gain, other than
from the proceeds of this Blank Check Offering, by means of (i) payment of
consulting fees; (ii) sales of affiliates' stock; or (iii) payment of salaries.

         Except as disclosed herein, the Company has not entered or negotiated
any agreement with Messrs. Maxwell, Lippman or Sierchio, any of the their
respective affiliates, or any other third party regarding any such person
acting as a consultant to the Company; nor, will it do so prior to the





                                       5
<PAGE>   6
consummation of a Business Combination.  However, following a Business
Combination, if the then management of the Company or the Acquired Business, as
the case may be, elect to engage such persons as consultants, on such terms and
conditions as may be negotiated then, any compensation payable to such persons
will be paid by the Acquired Business.

         While the company and its Management intend that no shares of the
Company's Common Stock will be sold by any officers, directors or greater than
10% shareholders or persons who may be deemed promoters of the Company without
affording all shareholders of the Company a similar opportunity, Management
may, nevertheless, actively negotiate or otherwise consent to the purchase of
all or a portion of their shares of Common Stock as a condition to or in
connection with a proposed merger or acquisition transaction.  It is noted that
Management may be deemed to have paid approximately $.02 per share of Common
Stock owned by Management.  In connection with any such stock purchase
transaction, it is possible that a premium may be paid for Management's share
of Common Stock and that public investors in the Company may not receive any
portion thereof in the event such premium may be paid.  Any transaction
structured in such manner may present Management with conflicts of interest and
as a result of such conflicts, may possibly compromise Management's fiduciary
duties to the Company's shareholders, as the potential would therefore exist
for members of Management to consider their own personal pecuniary benefit
rather than the best interest of the Company's other shareholders.  Further,
the Company's other shareholders may not be afforded an opportunity to
otherwise participate in any particular stock buy-out transaction.
Additionally, in any such transaction, it is possible, although not presently
intended, that the Company may borrow funds to be used directly or indirectly
to purchase Management's shares.  Proceeds from this Blank Check Offering will
not be utilized directly or indirectly to purchase Management's shares.

         9.  RISKS OF LEVERAGE; DEBT OF AN ACQUIRED BUSINESS.  There are
currently no limitations relating to the Company's ability to borrow funds to
increase the amount of capital available to the Company to effect a business
combination or otherwise finance the operations of any acquired business.  The
amount and nature of any borrowings by the Company will depend on numerous
considerations, including the Company's capital requirements, the Company's
perceived ability to meet debt services on any such borrowings, and
then-prevailing conditions in the financial markets, as well as general
economic conditions.  There can be no assurance that debt financing, if
required or otherwise sought, will be available on terms deemed to be
commercially acceptable and in the best interest of the Company.  The inability
of the Company to borrow funds required to effect or facilitate a business
combination, or to provide funds for an additional infusion of capital into an
acquired business, may have a material adverse effect on the Company's
financial condition and future prospects.  Additionally, to the extent that
debt financing ultimately proves to be available, any borrowings may subject
the Company to various risks traditionally associated with incurring of
indebtedness, including (i) if the Company's operating revenues after the
Business Combination were to be insufficient to pay debt service, there would
be a risk of default and foreclosure on the Company's assets; (ii) if a loan
agreement contains covenants that require the maintenance of certain financial
ratios or reserves, and any such covenant is breached without a waiver or
renegotiation of the terms of that covenant, then the lender could have the
right to accelerate the payment of the indebtedness even if the Company has
made all principal and interest payments when due;  (iii) if the interest rate
on a loan fluctuated or the loan was payable on demand, the Company would bear
the risk of variations in the interest rate or demand for payment; and (iv) if
the terms of a loan did not provide for amortization prior to maturity of the
full amount borrowed and the "balloon" payment could not be refinanced at
maturity on acceptable terms, the Company might be required to seek additional
financing and, to the extent that additional financing is not available on
acceptable terms, to





                                       6
<PAGE>   7
liquidate its assets.  Furthermore, an acquired business may already have
previously incurred debt financing and, therefore, the risks inherent thereto,
as discussed above.

         10. POSSIBLE NEED FOR ADDITIONAL FINANCING OF ACQUIRED BUSINESS.  In
the event of a consummation of a Business Combination, the Company cannot
ascertain with any degree of certainty the capital requirements for any
particular acquired business inasmuch as the Company has not yet identified any
prospective acquired business candidates.  To the extent the Business
Combination results in the acquired business requiring additional financing,
such additional financing (which, among other forms, could be derived from the
public or private offering of securities or from the acquisition of debt
through conventional bank financing), may not be available, due to, among other
things, the acquired business not having sufficient (i) credit or operating
history; (ii) income stream; (iii) profit level; (iv) asset base eligible to be
collateralized; or (v) market for its securities.  Although there are no
agreements between the Company and any of its officers and/or directors
pursuant to which the Company may borrow and such officers and/or directors are
obligated to lend the Company monies, there are no restrictions on the Company
to borrow money, including, but not limited to, loans from officers and
directors.  No stockholder approval is required in connection with any such
loans.

         11. INVESTMENT COMPANY ACT CONSIDERATIONS.  The regulatory scope of
the Investment Company Act of 1940, as amended (the "Investment Company Act"),
which was enacted principally for the purpose of regulating vehicles for pooled
investments in securities, extends generally to companies engaged primarily in
the business of investing, reinvesting, owning, holding or trading in
securities.  The Investment Company Act may, however, also be deemed to be
applicable to a company which does not intend to be characterized as an
investment company but which, nevertheless, engages in activities which may be
deemed to be within the definitional scope of certain provisions of the
Investment Company Act.  There can be no assurance that the Company will not be
deemed to be an investment company, especially during the period prior to a
Business Combination, although the Company intends to take all measures
possible to avoid such classification.  In the event the Company is deemed to
be an investment company, the Company may become subject to certain
restrictions relating to the Company's activities, including restrictions on
the nature of its Investments and the issuance of securities.  In addition, the
Investment Company Act imposes certain requirements on companies deemed to be
within its regulatory scope, including registration as an investment company,
adoption of a specific form of corporate structure and compliance with certain
burdensome reporting, record keeping, voting, proxy and disclosure requirements
and other rules and regulations.  In the event of characterization of the
Company as an investment company, the failure by the Company to satisfy
regulatory requirements, whether on a timely basis or at all, would, under
certain circumstances, have a material adverse effect on the Company.  The
Company intends to take all measures possible to avoid such characterization of
the Company.

         12. TAX CONSIDERATIONS.  As a general rule, Federal and state tax laws
and regulations have a significant impact upon the structuring of business
combinations.  The Company will evaluate the possible tax consequences of any
prospective Business Combination and will endeavor to structure the Business
Combination so as to achieve the most favorable tax treatment to the Company,
the Acquired Business and their respective stockholders.  The can be no
assurance, however, that the Internal Revenue Service (the "IRS") or
appropriate state tax authorities will ultimately assent to the Company's tax
treatment of a consummated Business Combination.  To the extent the IRS or
state tax authorities ultimately prevail in recharacterizing the tax treatment
of a Business Combination, there may be adverse tax consequences to the
Company, the Acquired Business and their respective stockholders.





                                       7
<PAGE>   8
         13. NO DIVIDENDS.  The Company has not paid any dividends on its
Common Stock to date and does not presently intend to pay cash dividends prior
to the consummation of a Business Combination.  The payment of dividends after
any such Business Combination, if any, will be contingent upon the Company's
revenues and earnings, if any, capital requirements and general financial
condition subsequent to consummation of a Business Combination.  The payment of
any dividends subsequent to a Business Combination will be within the
discretion of the Company's then Board of Directors.

         14. PENNY STOCK RULES.  There is no current trading market for the
Shares and there can be no assurance that a trading market will develop, or, if
such a trading market does develop, that it will be sustained.  The Shares, to
the extent that a market develops for the Shares at all, of which there can be
no assurance, will likely appear in what is customarily known as the "pink
sheets" or on the NASD Bulletin Board, which may limit the marketability and
liquidity of the Shares.

         Under Rule 15g-9 a broker or dealer may not sell a "penny stock" (as
defined in Rule 3a51-1) to or effect the purchase of a penny stock by any
person unless:

             (1) such sale or purchase is exempt from Rule 15g-9; or

             (2) prior to the transaction the broker or dealer has (a) approved
             the person's account for transaction in penny stocks in accordance
             with Rule 15g-9 and (b) received from the person a written
             agreement to the transaction setting for the identity and quantity
             of the penny stock to be purchased.

         Transactions exempt from the application of Rule 15g-9 are the
following:

         (1) Transactions exempted by Rule 15g-1 (a), (b), (d), (e) and (f);

         (2) transactions meeting the requirements of Rule 505 or 506 of
             Regulation D as promulgated pursuant to the Act; or

         (3) transactions in which the purchaser is an established customer of
             the broker or dealer.

         The Commission adopted regulations that generally define a penny stock
to be any equity security other than a security excluded from such definition
by Rule 3a51-1.  Such exemptions include, but are not limited to (a) an equity
security issued by an issuer that has (i) net tangible assets of at least
$2,000,000, if such issuer has been in continuous operations for at least three
years; (ii) net tangible assets of at least $5,000,000, if such issuer has been
in continuous operation for less than three years; or (iii) average revenue of
at least $6,000,000 for the preceding three years; (b) except for purposes of
Section 7(b) of the Exchange Act and Rule 419, any security that has a price of
$5.00 or more; (c) and a security that is authorized or approved for
authorization upon notice of issuance for quotation on the National Association
of Securities Dealers Automated Quotation System.

         It is likely that the Company's Common Stock will be subject to the
regulations on penny stocks; consequently, the market liquidity for the
Company's Common Stock may be adversely affected by such regulations limiting
the ability of broker/dealers to sell the Company's Common Stock and the
ability of purchasers in this offering to sell their securities in the
secondary market (following termination of the Rule 419 Escrow).  There is no
assurance that trading in the Company's securities will not be subject to these
or other regulations that would adversely affect the market for such
securities.





                                       8
<PAGE>   9
         15. NO ASSURANCE OF A PUBLIC MARKET.  There is no present market for
the Common Stock of the Company.  To date, neither the Company nor anyone
acting on its behalf has taken any affirmative steps to request or encourage
any broker/dealer to act as a market maker for the Company's Common Stock.
Further, there have been no discussions or understandings, preliminary or
otherwise, between the Company or anyone acting on its behalf and any market
maker regarding the participation of any such market maker in the future
trading market, if any, for the Company's Common Stock.  Present management of
the Company has no intention of seeking a market maker for the Company's Common
Stock at any time prior to the reconfirmation offer to be conducted prior to
the consummation of a Business Combination.  The officers of the Company after
the consummation of a Business Combination may employ consultants or advisors
to obtain such market makers.  Management expects that discussions in this area
will ultimately be initiated by the management of the Company in control of the
entity after a Business Combination is reconfirmed by the stockholders.  There
is no likelihood of any active and liquid trading market for the Company's
Common Stock developing.

    ITEM 3.  LEGAL PROCEEDINGS

    The Company is not party to any pending legal proceedings and is not aware
of any contemplated legal proceedings to which it may be a party or of which
any of its properties may be subject.

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

    During the last quarter of the fiscal year ended December 31, 1995, no
matter was submitted to the vote of the Company's security holders, through
resolutions of proxies or otherwise.





                                       9
<PAGE>   10
                                    PART II

 ITEM 5.  MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER 
          MATTERS

         There is no trading market for the Company's Common Stock.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

    A.   GENERAL.

BUSINESS OBJECTIVES

         The Company's business plan is to seek to acquire or merge with a
potential businesses that may, in the opinion of Management, warrant the
Company's involvement.  Management's discretion is unrestricted, and the
Company may participate in any business whatsoever that may in the opinion of
Management meet the business objectives discussed herein.

         The Company recognizes that as a result of its limited financial,
managerial or other resources, the number of suitable potential businesses that
may be available to it will be extremely limited.  The Company's principal
business objective will be to seek long-term growth potential in the business
in which it participates rather than immediate, short-term earnings.  In
seeking to attain its business objectives, the Company will not restrict its
search to any particular industry.  Rather, the Company may investigate
businesses of essentially any kind or nature, including but not limited to
finance, high technology, manufacturing, service, research and development,
communications, insurance, brokerage, transportation, and others.  Management
may also seek to become involved with other development stage companies or
companies that could be categorized as "financially troubled."  At the present
time, the Company has not chosen the particular area of business in which it
proposes to engage and has not conducted any market studies with respect to any
business, property or industry.

         Businesses that seek the Company's participation in their operations
may desire to do so to avoid what such businesses deem to be adverse factors
related to undertaking a public offering.  Such factors include substantial
time requirements, market conditions, legal costs, conditions or requirements
imposed by federal and state securities laws and possible loss of voting
control.  In making an investment in the Company, investors should recognize
that the terms of their purchase of the Company's securities may ultimately
prove to be less favorable than if such persons had invested in the securities
of a specific business that was undertaking its own public offering.

TAX CONSIDERATIONS.

         As a general rule, Federal and state tax laws and regulations have a
significant impact upon the structuring of business combinations.  The Company
will evaluate the possible tax consequences of any prospective Business
Combination and will endeavor to structure the Business Combination so as to
achieve the most favorable tax treatment to the Company, the Acquired Business
and their respective stockholders.  The IRS or other appropriate state tax
authorities may attempt to recharacterize the tax treatment of a particular
Business Combination and, as a result, there may be adverse tax consequences to
the Company, the Acquired Business and their respective stockholders.





                                       10
<PAGE>   11
FORM AND STRUCTURE OF ACQUISITION

         Of the various methods and forms by which the Company may structure a
transaction acquiring another business, Management is likely to use, without
limitation, one of the following forms: (i) a leveraged buyout transaction,
including the acquisition of a business, is a transaction in which most of the
purchase price is provided by borrowing from one or more lenders or from the
sellers in the form of a deferred purchase price.  Such borrowings are
typically secured by the assets of the acquired business and are intended to be
repaid out of the cash flow of the business; (ii) a merger or consolidation of
the acquired corporation into or with the Company; (iii) a merger or
consolidation of the acquired corporation into or with a subsidiary of the
Company organized to facilitate the acquisition (a "subsidiary merger"), or a
merger or consolidation of such a subsidiary into or with the acquired
corporation (a "reverse subsidiary merger"); (iv) an acquisition of all or a
controlling amount of the stock of the acquired corporation followed by a
merger of the Acquired Business into the Company; (v) an acquisition of the
assets of a business by the Company or a subsidiary organized for such purpose;
or (vi) a combination of any of the foregoing.  If a merger or consolidation
transaction involving the Company is used, the Company will be the surviving
corporation; if, however, a subsidiary of the Company is used in such a
transaction, either the subsidiary or the acquired corporation may be the
surviving corporation in the merger or consolidation, with the survivor being a
wholly owned subsidiary of the Company.  The actual form and structure of a
Business Combination may be also dependent upon numerous other factors
pertaining to the Acquired Business and its shareholders as well as potential
tax and accounting treatments afforded the Business Combination.

         The Company may utilize cash, equity, debt or a combination of these
as consideration in effecting a Business Combination.  Although the Company has
no commitments as of the date of this prospectus to issue any shares of Common
Stock other than as described in this Prospectus, the Company will, in all
likelihood, issue a substantial number of additional shares in connection with
a Business Combination.  To the extent that such additional shares are issued,
dilution to the interest of the Company's stockholders will occur.
Additionally, if a substantial number of shares of Common Stock are issued in
connection with a Business Combination, a change in control of the Company may
occur.

         If securities of the Company are issued as part of an acquisition, it
cannot be predicted whether such securities will be issued in reliance upon
exemptions from registration under applicable federal or state securities laws
or will be registered for public distribution.  When registration of securities
is required, substantial cost may be incurred and time delays encountered.  In
addition, the issuance of additional securities and their potential sale in any
trading market which may develop in the Company's Common Stock, of which there
is no assurance, may depress the price of the Company's Common Stock in any
market which may develop in the Company's Common Stock.  Additionally, such
issuance of additional securities of the company would result in a decrease in
the percentage ownership of the Company of purchasers of the Common Stock being
offered hereby.

         The Company's operations may be limited by the Investment Company Act
of 1940.  While the Company will attempt to conduct its operations so as not to
require registration under the Investment Company Act of 1940, there can be no
assurance that the Company will not be deemed to be subject to the Investment
Company Act of 1940.





                                       11
<PAGE>   12
                             ZACHARY VENTURES, INC.








                                      Index

<TABLE>
<CAPTION>
                                                                        Page
<S>                                                                <C>
Independent Auditor's Report                                             F1

Balance Sheet as of December 31, 1995                                    F2

Statements of Operations for the Years Ended
    December 31, 1995 and 1994                                           F3

Statements of Changes in Stockholders' Equity (Deficit)
     for the Years Ended December 31, 1995 and 1994                      F4

Statements of Cash Flows for the Years Ended
    December 31, 1995 and 1994                                           F5

Notes to Financial Statements                                       F6 - F8
</TABLE>
<PAGE>   13
                          INDEPENDENT AUDITOR'S REPORT




The Board of Directors
Zachary Ventures, Inc.


                We have audited the accompanying balance sheet of Zachary
Ventures, Inc. as of December 31, 1995, and the related statements of
operations, changes in stockholders' equity (deficit) and cash flows for each of
the two years in the period ended December 31, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

                We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the 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 disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

                In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of Zachary
Ventures, Inc. as of December 31, 1995, and the results of its operations and
its cash flows for each of the two years in the period ended December 31, 1995,
in conformity with generally accepted accounting principles.



                                     /s/ Mahoney Cohen Rashba & Pokart, CPA, PC

                                   


New York, New York
August 1, 1996

                                       F1
<PAGE>   14
                             ZACHARY VENTURES, INC.
                                  Balance Sheet
                                December 31, 1995





<TABLE>
<CAPTION>
                                     ASSETS
<S>                                                               <C>        
Current assets:
    Cash                                                          $       577
    Cash held in escrow (Note 3)                                       55,767
    Prepaid legal fees                                                  4,304
                                                                  -----------
                                                                  $    60,648
                                                                  ===========


                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Loans payable (Note 5)                                        $    42,500
    Escrow interest                                                     2,287
    Accrued professional fees                                           9,000
    Other accrued expenses                                                450
                                                                  -----------
                Total current liabilities                              54,237

Stockholders' equity:
    Common stock, $.001 par value:
       Authorized - 35,000,000 shares
       Issued and outstanding - 1,590,000 shares (Note 3)               1,590
    Additional paid-in capital                                         78,210
    Accumulated deficit                                               (73,389)
                                                                  -----------
                Total stockholders' equity                              6,411
                                                                  -----------
                                                                  $    60,648
                                                                  ===========
</TABLE>

                             See accompanying notes.

                                       F2
<PAGE>   15
                             ZACHARY VENTURES, INC.
                            Statements of Operations
                 For the Years Ended December 31, 1995 and 1994






<TABLE>
<CAPTION>
                                                           1995         1994
                                                        ----------    --------
<S>                                                     <C>           <C>     
Expenses:
   Professional fees                                    $   43,614    $ 26,600
   Other                                                     1,080       2,095
                                                        ----------    --------
               Total expenses                               44,694      28,695
                                                        ----------    --------

Net loss                                                $  (44,694)   $(28,695)
                                                        ==========    ========

Net loss per weighted average common share                  $ (.03)     $ (.03)
                                                            ======      ======

Weighted average number of common
   shares outstanding                                    1,491,645     968,303
                                                        ==========    ========
</TABLE>

                             See accompanying notes.

                                       F3
<PAGE>   16
                             ZACHARY VENTURES, INC.
             Statements of Changes in Stockholders' Equity (Deficit)
                 For the Years Ended December 31, 1995 and 1994



<TABLE>
<CAPTION>
                                          Total                  Common Stock
                                          Stock-            ----------------------       Addi-
                                         holders'            Out-                       tional       Subscrip-     Accumu-
                                          Equity           standing                     Paid-in        tion         lated
                                         (Deficit)          Shares          Amount      Capital     Receivable     Deficit
                                         ---------          ------          ------      -------     ----------     -------
<S>                                     <C>                  <C>          <C>         <C>           <C>           <C>   
Balance, January 1, 1994                $  12,000            900,000      $    900    $   17,100    $   (6,000)   $    -

Issuance of 90,000 shares of
   common stock at $.02 per
   share                                    1,800             90,000            90         1,710         -             -

Issuance of 300,000 shares of
   common stock at $.02 per
   share to settle receivable for
   services  provided by a
   director of the Company                  6,000              -             -             -             6,000         -

Issuance of 25,000 shares of
   common stock at $.10 per
   share                                    2,500             25,000            25         2,475         -             -

Net loss for the year                     (28,695)             -             -             -             -           (28,695)
                                        ---------       ------------      --------    ----------    ----------    ----------


Balance, December 31, 1994                 (6,395)         1,015,000         1,015        21,285         -           (28,695)

Issuance of 567,650 shares of
   common stock at $.10 per
   share                                   56,765            567,650           568        56,197         -             -

Issuance of 54,450 shares of
   common stock at $.10 per
   share                                    5,445             54,450            54         5,391         -             -

Cash refund for 47,100 shares of
   common stock held in
   escrow at $.10 per share                (4,710)           (47,100)          (47)       (4,663)        -             -

Net loss for the year                     (44,694)             -             -             -             -           (44,694)
                                        ---------       ------------      --------    ----------    ----------    ----------

Balance, December 31, 1995              $   6,411          1,590,000      $  1,590    $   78,210    $    -        $  (73,389)
                                        =========       ============      ========    ==========    ==========    ==========
</TABLE>

                             See accompanying notes.

                                       F4
<PAGE>   17
                             ZACHARY VENTURES, INC.
                            Statements of Cash Flows
                 For the Years Ended December 31, 1995 and 1994




<TABLE>
<CAPTION>
                                                                      1995        1994
                                                                    --------    --------
<S>                                                                 <C>         <C>      
Cash flows from operating activities:
   Net loss                                                         $(44,694)   $(28,695)
   Adjustments to reconcile net loss to net cash
      used in operating activities:
          Services provided for common stock                           -           6,000
          Change in assets and liabilities:
             Prepaid legal fees                                       (4,304)      -
             Escrow interest                                           2,287       -
             Accrued expenses                                         (1,516)     10,966
                                                                    --------    --------
               Net cash used in operating activities                 (48,227)    (11,729)

Cash flows from financing activities:
   Issuance of common stock                                           62,210       4,300
   Proceeds from loan payable                                         42,500       -
   Cash refund for common stock held in escrow                        (4,710)      -
                                                                    --------    --------
               Net cash provided by financing activities             100,000       4,300
                                                                    --------    --------

Net increase (decrease) in cash                                       51,773      (7,429)

Cash, beginning of year                                                4,571      12,000
                                                                    --------    --------

Cash, end of year                                                   $ 56,344    $  4,571
                                                                    ========    ========




                   Supplemental Schedule of Non-Cash Investing
                            and Financing Activities

Issuance of common stock for services rendered
   by a director of the Company                                     $  -        $  6,000
                                                                    ========    ========
</TABLE>

                             See accompanying notes.

                                       F5
<PAGE>   18
                             ZACHARY VENTURES, INC.
                          Notes to Financial Statements





Note 1 -     The Company

             Zachary Ventures, Inc. (the "Company") was incorporated in December
1993 in the State of Delaware, and intends to effect a merger, exchange of
capital stock, asset acquisition or other similar business combination or
acquisition with a business entity.

             The Company has registered its securities with the Securities and
Exchange Commission and offered certain securities in a "blank check" offering
subject to Rule 419 of the Securities Act of 1933. The offering allows for the
Company to sell a minimum of 250,000 and maximum of 600,000 shares of common
stock, $.001 par value, at $.10 per share.

Note 2 -     Summary of Significant Accounting Policies

             Use of Estimates

             The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.

             Income Taxes

             The Company files its income taxes on a calendar year basis. At
December 31, 1995, the Company has approximately $73,400 of net operating losses
available to reduce future taxable income expiring in 2009 to 2010. In
accordance with certain provisions of Financial Accounting Standards Board
Statement No. 109, "Accounting for Income Taxes", a valuation allowance has been
established equal to the tax benefit of the net operating loss at December 31,
1995 and 1994.

             Cash Flows

             The Company presents cash flows under the indirect method by
reconciling net loss to net cash flow.

             Concentration of Credit Risk

             The Company maintains its cash in an account insured by the Federal
Deposit Insurance Corporation up to $100,000. Cash held in escrow is a money
market account at a broker.

                                       F6
<PAGE>   19
                             ZACHARY VENTURES, INC.
                          Notes to Financial Statements





Note 2 -     Summary of Significant Accounting Policies (Continued)

             Fair Value of Financial Instruments

             The Company's financial instruments consist primarily of cash and
short-term loans payable. The book values of the respective financial
instruments are representative of their respective fair values. Loans payable
are considered to approximate fair value due to the relatively short period of
time until realization.

Note 3 -     Cash and Stock Held in Escrow

             Amounts received and securities purchased by investors through the
offering (600,000 shares at December 31, 1995) are deposited and held in escrow
until an acquisition meeting specific criteria is completed. Before an
acquisition can be completed and the securities and funds can be released from
escrow, the investors have to reconfirm their investments or can alternately
require the return of their investment plus interest, less certain deductions.

             If the Company does not complete an acquisition within a certain
time frame, or if 80% of the investors do not confirm their investments, 90% of
funds in escrow will be returned to investors (see Note 5).

Note 4 -     Related Party Transactions

             The Company incurred approximately $34,200 and $18,600 of
professional fees and reimbursable expenses to a director of the Company for the
years ended December 31, 1995 and 1994, respectively. In 1994, $6,000 of fees
was satisfied through the issuance of 300,000 shares of common stock.

             This same director is also providing office space to the Company at
no charge. The agreement remains in effect until a business combination is
consummated or until the Company is otherwise required to find its own space.

Note 5 -     Cartilage Technologies, Inc.

             On July 7, 1995, the Company signed an agreement and plan of
reorganization with Cartilage Technologies, Inc. ("Cartilage") to sell all of
its shares of stock, subject to the return of the Rule 419 stockholders of their
investment.

                                       F7
<PAGE>   20
                             ZACHARY VENTURES, INC.
                          Notes to Financial Statements




Note 5 -     Cartilage Technologies, Inc. (Continued)

             In addition, Cartilage made a loan of $42,500 to a stockholder of
Zachary Ventures, Inc., who in turn loaned the amount to the Company.

             The plan of reorganization was subject to a satisfaction by
Cartilage and the Company of certain conditions precedent to the consummation of
the transactions contemplated by the plan of reorganization. Due to the time
constraints of Rule 419 with respect to the consummation of a business
combination, the Company terminated the plan of reorganization effective March
11, 1996. The Company sought restitution from Cartilage of direct expenses of
$52,000 and the loss to the Company and its shareholders of a minimum of
$400,000.

             A settlement agreement dated as of April 12, 1996 was executed by
Cartilage Technologies, Inc. and Zachary Ventures, Inc. Pursuant to the
agreement, Cartilage forgave the $42,500 of debt from the stockholder of the
Company who in turn forgave the debt of Zachary. In addition, Cartilage issued a
check to the Company for $9,250 thereby reimbursing Zachary for all of its
direct expenses incurred.

             On May 20, 1996, amounts paid for the 600,000 shares held in escrow
plus interest were refunded to the investors.

                                       F8
<PAGE>   21
ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND ACCOUNTING AND
         FINANCIAL DISCLOSURE

                                      None

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT


DIRECTORS AND EXECUTIVE OFFICERS

    The following persons are the directors and executive officers of the
Company and have served in such capacities since the formation of the Company.

<TABLE>
<CAPTION>
Name                                         Age                 Position
----                                         ---                 --------
<S>                                          <C>                 <C>
Herbert Maxwell                              75                  President and Director

Harvey Lippman                               50                  Vice President, Treasurer and Director

Maureen Hughes                               36                  Secretary

Joseph Sierchio                              47                  Director

</TABLE>

    All directors and officers of the Company are elected annually to serve for
one year or until their successors are duly elected and qualified.

    Management's business experience during the past five years is as follows:

    Herbert Maxwell has been a crisis manager for troubled companies and a
principal in investment groups for the past two decades.  He has served as a
director of several private and public companies. Mr. Maxwell has served as a
director and officer (and was a principal stockholder) of three publicly held
companies, which although not engaged in blank check offerings nevertheless
consummated acquisitions of the type described in this Prospectus.  These
include:

    (1)  C.S. Primo Corp. was organized in 1986 initially as an inactive
         publicly held corporation pursuing a business acquisition.  Mr.
         Maxwell became a principal stockholder and a director of C.S. Primo
         Corp. on or about June 3, 1988.  On or about March 4, 1991, C.S. Primo
         Corp. acquired approximately 98% of the issued and outstanding common
         stock of Dynasty World Express, Inc. in exchange for approximately 90%
         of C.S. Primo Corp.'s common stock; since then, C.S. Primo Corp. has
         changed its name to Phoenix Information Systems Corp. and its common
         stock trades on the over-the-counter market.

    (2)  Lewis Resources, Inc. was organized in 1987, initially through a stock
         dividend distribution, as an inactive publicly held corporation
         pursuing a business acquisition.  Mr. Maxwell was one of





                                       21
<PAGE>   22
         the initial stockholders and directors of Lewis Resources, Inc.  On
         September 28, 1993, Lewis Resources, Inc. acquired from Lema
         Investments Ltd. all of the outstanding shares of Gallium Arsenide
         Industries Ltd., a development stage Israeli company.  Since then,
         Lewis Resources, Inc. has changed its name to Israel Semiconductor
         Corporation and its common stock trades on the over-the-counter
         market.

    (3)  Lewison Enterprises Inc. was organized in 1988 initially, through a
         stock dividend distribution, as an inactive publicly held corporation
         pursuing a business acquisition.  Mr. Maxwell was one of the initial
         stockholders and directors of Lewison Enterprises Inc.  In July 1993,
         the Company issued 8,000,000 shares of common stock to the
         shareholders of Omega Development Corp. ("Omega") in exchange for all
         of the issued and outstanding shares of common stock of Omega.  Since
         then, Lewison Enterprises Inc. has changed its name to Omega
         Development, Inc.  To date, no trading market has developed for shares
         of its common stock.

         Mr. Maxwell is no longer a principal shareholder, director or officer
of any of the foregoing corporations.  Mr. Maxwell presently serves as a
director of Lloyd Ventures, Inc., a recently formed Delaware corporation, which
had a registration statement on Form SB-2 declared effective on November 12,
1996.  He is an active investor and writes a newsletter on the New York
theater.  Mr. Maxwell has been a director and officer of the Company since
December 17, 1993.

         Harvey J. Lippman is General Counsel of Richardson & Associates.  Mr.
Lippman is a member of the Bar of the State of New York, the United District
Courts for the Southern and Eastern Districts of New York and the United States
Tax Court.  Prior to joining Richardson & Associates, he was associated with
the law firm of Kronish, Lieb, Weiner & Hellman and was a founding member of
the law firms of Jones, Hirsch, Connors & Bull and Lippman and Hashmall (1982
to 1990) and served as outside counsel to Richardson & Associates.  Mr. Lippman
is an executive officer and/or director of several private companies, including
American Assurance Group, Inc. (which is engaged in the acquisition of multi-
family residential real estate) and Richardson Financial Services, Inc. (which
acts as an agent in the placing of substandard automobile loans with financial
institutions).  Mr. Lippman has been a director and officer of the Company
since March 31, 1994.

         Maureen Hughes is Chief Financial Officer of Richardson & Associates,
Inc.  Ms. Hughes is a Certified Public Accountant.  She was formerly a tax
manager at Ernst & Young.

         Joseph Sierchio has been engaged in the practice of law in New York
since 1974.  Mr. Sierchio is a principal of the law firm of Sierchio & Albert,
P.C.  In 1988, Mr. Sierchio established his own law offices in New York
specializing in securities law.  Mr. Sierchio received a JD degree from Cornell
Law School in 1974 and a BA degree in 1971 from Rutgers College with high
honors and highest distinction in economics.

         There are no agreements, arrangements or understandings between
management and anyone else pursuant to which other management is to be selected
for a particular office or position.  It is estimated that management of the
Company will devote only such time as they deem necessary to the activities of
the Company.  The Company has not entered into any agreement or contract with
any outside consultant or advisor; nor, does it intend to enter into any such
agreements or contracts pending consummation of a Business Combination.





                                       22
<PAGE>   23
    ITEM 10.     EXECUTIVE COMPENSATION

         None of the directors or officers of the Company have received any
cash or other compensation for the fiscal year ended December 31, 1995.  The
Law Office of Joseph Sierchio received legal fees in the aggregate amount of
$27,500 during the fiscal year ended December 31, 1995.

    ITEM 11.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain information regarding the
beneficial ownership of the Company's common stock as of the date hereof (after
giving effect to the return of the Deposited Securities to the Company), by (i)
each person who is known by the Company to own beneficially more than five
percent (5%) of the Company's outstanding common stock; (ii) each of the
Company's officers and directors; and (iii) all directors and officers of the
Company as a group.

<TABLE>
<CAPTION>
     NAME OF                        SHARES OF COMMON STOCK              APPROXIMATE
    BENEFICIAL                          BENEFICIALLY                     PERCENTAGE
      OWNER                              OWNED (1)                          OWNED   
   -----------                       ---------------                     -----------


<S>                                     <C>                                  <C>
Herbert Maxwell                         235,000                               24%
Agnes T. Richardson (1)                 180,000                               18%
Joseph Sierchio (2)                     250,000                               25%
Harvey Lippman                          135,000                               14%
Renato Valente (3)                       90,000                                9%
Maureen Hughes                           10,000                                1%
All Officers and
Directors as a
Group (4 persons)                       630,000                               64%


                         
-------------------------
</TABLE>

(1) Does not include 40,000 shares held by certain family members of Mrs.
    Richardson as to which Mrs. Richardson disclaims beneficial ownership.
(2) Does not include 40,000 shares held by certain family members of Mr.
    Sierchio as to which shares Mr. Sierchio disclaims beneficial ownership.
(3) Mr. Valente is a registered sales representative with Bernard Herold & Co.,
    Inc., the Escrow Agent.





                                       23
<PAGE>   24
    ITEM 12.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

                                      None

    ITEM 13.     EXHIBITS AND REPORTS ON 8K

         (a) Exhibits

             None

         (b) Reports on Form 8-K


             No reports on Form 8-K were filed during the last quarter of the
period covered by this report.





                                       24
<PAGE>   25
                                   SIGNATURE


    In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this Annual Report on Form 10-KSB to be signed on its behalf by the
undersigned, thereunto duly authorized.



                                        Zachary Ventures, Inc.
                                        (Registrant)



                                            
Dated:  December 20, 1996             By:  s/ Herbert Maxwell
                                           -------------------------------
                                            Herbert Maxwell, President