<PAGE>

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                  Form 10-QSB


                                   (MARK ONE)

          (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                         FOR THE QUARTERLY PERIOD ENDED

                                 APRIL 30, 1997

                                       OR

         ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                 For the transition period from        to


                        Commission file number 333-4490


                         ALL AMERICAN FOOD GROUP, INC.
                 ----------------------------------------------
                 (Name of Small Business Issuer in Its Charter)


           New Jersey                                           22-3259558
-------------------------------                             -------------------
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                              Identification No.)


     104 New Era Drive, South Plainfield, NJ                    07080
     ------------------------------------------------------------------
     (Address of Principal Executive Offices)                (Zip Code)

                                 (908) 757-3022
              (Registrant's telephone number, including area code)


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

As of June 13, 1997 there were 3,222,661 shares of the Registrant's Common
Stock outstanding.

<PAGE>

                 ALL AMERICAN FOOD GROUP, INC. AND SUBSIDIARIES


                                     INDEX


                                                                      Page No.
                                                                      --------

PART I - FINANCIAL INFORMATION

Item 1.    Financial Statements

        Consolidated Balance Sheet at April 30, 1997 and
               Consolidated Balance Sheet at October 31, 1996               3

        Consolidated Statement of Operations for the three and six
               months ended April 30, 1997 and 1996                         4

        Consolidated Statement of Cash Flows for the six
               months ended April 30, 1997 and 1996                         5

        Consolidated Statement of Stockholder's Equity for the six
               months ended April 30, 1997                                  6

        Notes to Consolidated Financial Statements                          7

Item 2.      Management's Discussion and Analysis of Financial
                      Condition and Results of Operations                   9

PART II - OTHER INFORMATION                                                15

SIGNATURES                                                                 16

<PAGE>


                ALL AMERICAN FOOD GROUP, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
                                                                                             (Unaudited)
                                                                                              April 30,       October 31,
                                                                                             -----------      -----------
                                                                                                1997             1996
                                                                                             -----------      -----------
                                    ASSETS
<S>                                                                                          <C>              <C>        
Current Assets:
        Cash                                                                                    $620,548          $84,302
        Accounts receivable, net of allowances for possible losses of $12,000
           and $12,000 respectively                                                              303,409          127,490
        Notes receivable, current portion                                                        136,583           97,115
        Notes receivable - officer                                                                97,000             --
        Inventories                                                                               99,020           66,580
        Prepaid expenses                                                                         253,687          407,516
                                                                                             -----------      -----------
        Total Current Assets                                                                   1,510,247          783,003

Property, Plant and Equipment, at cost less accumulated depreciation
        and amortization of $323,202 and $249,533 respectively                                 1,307,577          920,570
Intangible Assets, net of accumulated amortization of $493,731 and $418,460 respectively         383,477          293,319
Security Deposits                                                                                 90,160           31,148
Notes receivable - long-term                                                                     124,130          160,434
                                                                                             -----------      -----------
        Total Assets                                                                          $3,415,591       $2,188,474
                                                                                             ===========      ===========

                LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
        Notes payable                                                                              $--           $194,899
        Accounts payable and accrued expenses                                                  1,020,208        1,345,372
        Capitalized lease obligations - current maturities                                        37,236           75,517
        Loans from stockholders - current maturities                                               4,013           14,727
        Current maturities of long-term debt                                                     156,053            1,932
        Deferred franchising revenue, current portion                                            136,583          189,615
                                                                                             -----------      -----------
           Total Current Liabilities                                                           1,354,093        1,822,062

Capitalized Lease Obligations                                                                     10,367           25,300
Loans from stockholders                                                                            4,459            5,454
Long-term debt                                                                                   165,541             --
Deferred franchising revenue                                                                     124,130          160,434
                                                                                             -----------      -----------
           Total Liabilities                                                                   1,658,590        2,013,250
                                                                                             -----------      -----------


Commitments and contingencies
Redeemable preferred stock, no par value, Series A, 0 and 115,000 shares
        issued  and outstanding respectively, Series B, 60,000 and 120,000
        shares issued and outstanding respectively, Redemption value of
        $300,000 at April 30, 1997                                                               256,146          562,678
                                                                                             -----------      -----------

Stockholders' Equity (Deficit):
        Non-redeemable convertible preferred stock, no par value, Series A,
           190,000 shares authorized, 10,000 and 75,000 shares issued and
           outstanding respectively, Series B, 180,000 shares authorized
           60,000 shares issued and outstanding, Series C, 1,600,000 shares
           authorized, 982,503 shares issued and outstanding                                     505,924          537,905
        Common stock, no par value, 10,000,000 shares authorized,
           3,222,661 and 1,867,661 shares issued and outstanding respectively                  6,649,379        3,360,136
        Accumulated deficit                                                                   (5,654,448)      (4,285,495)
                                                                                             -----------      -----------
                                                                                               1,500,855         (387,454)
                                                                                             -----------      -----------

        Total Liabilities and Stockholders' Equity (Deficit)                                  $3,415,591       $2,188,474
                                                                                             ===========      ===========
</TABLE>

  The Accompanying Notes to Consolidated Financial Statements are an integral
                      part of these financial statements.

                                      -3-

<PAGE>




                ALL AMERICAN FOOD GROUP, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENT OF OPERATIONS
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                                         Three Months Ended               Six Months Ended
                                                                              April 30,                       April 30,
                                                                     ---------------------------     ---------------------------
                                                                         1997            1996            1997            1996
                                                                     -----------     -----------     -----------     -----------
<S>                                                                  <C>             <C>             <C>             <C>        
Revenues:
   Store sales                                                          $381,789        $340,325        $720,179        $646,317
   Franchising revenue                                                    70,581         165,690         399,401         195,639
   Equipment and product sales                                           185,050         139,516         356,443         296,999
                                                                     -----------     -----------     -----------     -----------
                                                                         637,420         645,531       1,476,023       1,138,955
                                                                     -----------     -----------     -----------     -----------

Operating expenses:
   Cost of Sales - equipment and product costs and
     store operations, exclusive of depreciation and amortization        427,170         407,583         850,887         735,268
   Cost of Sales - franchising activities, exclusive of
     depreciation and amortization                                          --              --           190,473            --
   Selling, general and administrative expenses                          814,964         471,153       1,589,413         893,430
   Depreciation and amortization                                          79,922          67,397         148,941         126,592
   Settlement Costs - Employment Contracts                                  --            56,784          47,010         113,568
                                                                     -----------     -----------     -----------     -----------
                                                                       1,322,056       1,002,917       2,826,724       1,868,858
                                                                     -----------     -----------     -----------     -----------

Operating loss                                                          (684,636)       (357,386)     (1,350,701)       (729,903)

Interest expense                                                           7,911           9,863          18,252          23,051
                                                                     -----------     -----------     -----------     -----------

Net loss                                                               ($692,547)      ($367,249)    ($1,368,953)      ($752,954)
                                                                     ===========     ===========     ===========     ===========

Adjusted net loss for net loss per common share calculation:
Net loss                                                               ($692,547)      ($367,249)    ($1,368,953)      ($752,954)
Increase in carrying amount of redeemable preferred stock                (19,072)       (707,540)        (31,981)       (707,540)
                                                                     -----------     -----------     -----------     -----------
Net loss attributable to common stock                                  ($711,619)    ($1,074,789)    ($1,400,934)    ($1,460,494)
                                                                     ===========     ===========     ===========     ===========



Shares outstanding:
   Weighted average number of common shares outstanding                3,210,021         943,150       2,858,628         943,150
   Additional shares                                                        --           430,558            --           430,558
                                                                     -----------     -----------     -----------     -----------
Adjusted shares outstanding                                            3,210,021       1,373,708       2,858,628       1,373,708
                                                                     ===========     ===========     ===========     ===========

Net loss per common share                                                 ($0.22)         ($0.78)         ($0.49)         ($1.06)
                                                                     ===========     ===========     ===========     ===========
</TABLE>

  The Accompanying Notes to Consolidated Financial Statements are an integral
                      part of these financial statements.

                                      -4-

<PAGE>


                ALL AMERICAN FOOD GROUP, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENT OF CASH FLOWS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                    Six Months Ended
                                                                                        April 30,
                                                                               ---------------------------
                                                                                   1997            1996
                                                                               -----------     -----------
<S>                                                                            <C>             <C>         
Cash Flows from Operating Activities:
        Net loss                                                               ($1,368,953)      ($752,954)
        Adjustments to reconcile net loss to net cash (used in) provided by
             operating activities:
                Depreciation and amortization                                      148,941         126,592
                Decrease (increase) in:
                        Accounts receivable                                       (166,133)         65,262
                        Inventories                                                (32,440)         26,164
                        Notes receivable - officer                                 (97,000)           --
                        Prepaid expenses                                           153,829         (81,249)
                        Security deposits                                          (59,012)           (200)
                Increase (decrease) in:
                        Accounts payable and accrued expenses                     (375,164)       (202,355)
                        Deferred franchising revenue                               (92,500)        (26,200)
                                                                               -----------     -----------
                           Total adjustments                                      (519,479)        (91,986)
                                                                               -----------     -----------
                           Net cash (used in) operating activities              (1,888,432)       (844,940)
                                                                               -----------     -----------

Cash Flows from Investing Activities:
        Capital expenditures                                                      (140,676)        (33,109)
        Business acquired, net of cash received                                    (62,349)           --
                                                                               -----------     -----------
                Net cash (used in) investing activities                           (203,025)        (33,109)
                                                                               -----------     -----------

Cash Flows from Financing Activities:
        Proceeds from issuance of common stock                                   3,235,337       2,003,986
        Proceeds from issuance of preferred stock                                     --           200,000
        Redemption of preferred stock                                             (338,513)       (416,997)
        Payments of notes payable                                                 (194,899)           --
        Payments of capitalized lease obligations                                  (53,214)        (37,845)
        Payments of loans from stockholders                                        (11,709)        (25,781)
        Payments of current maturities of long-term debt                            (9,299)         (2,885)
                                                                               -----------     -----------
                Net cash provided by financing activities                        2,627,703       1,720,478
                                                                               -----------     -----------


Net increase in cash                                                               536,246         842,429

Cash - beginning of period                                                          84,302          53,703
                                                                               -----------     -----------

Cash - end of period                                                              $620,548        $896,132
                                                                               ===========     ===========
</TABLE>

  The Accompanying Notes to Consolidated Financial Statements are an integral
                      part of these financial statements.

                                      -5-

<PAGE>


                ALL AMERICAN FOOD GROUP, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                    FOR THE SIX MONTHS ENDED APRIL 30, 1997
                                  (Unuadited)

<TABLE>
<CAPTION>
                                                   Common Stock               Preferred Stock     
                                            --------------------------    ------------------------    Accumulated
                                               Shares         Amount       Shares         Amount        Deficit          Total
                                            -----------    -----------    ---------    -----------    -----------     -----------
<S>                                           <C>          <C>            <C>          <C>            <C>             <C>         
Balance at October 31, 1996:                  1,867,661     $3,360,136    1,117,503       $537,905    ($4,285,495)      ($387,454)
Common stock issuance - Initial public
   offering                                   1,265,000      3,235,337         --             --             --         3,235,337
Common stock issuance - acquisition
   of business                                   25,000         53,906         --             --             --            53,906
Conversion of preferred stock to common
   stock                                         65,000           --        (65,000)          --             --              --
Increase in carrying amount of redeemable
   preferred stock                                 --             --                       (31,981)          --           (31,981)
Net Loss                                           --             --           --             --       (1,368,953)     (1,368,953)
                                            -----------    -----------    ---------    -----------    -----------     -----------
Balance at April 30, 1997                     3,222,661     $6,649,379    1,052,503       $505,924    ($5,654,448)     $1,500,855
                                            ===========    ===========    =========    ===========    ===========     ===========
</TABLE>

  The Accompanying Notes to Consolidated Financial Statements are an integral
                      part of these financial statements.

                                      -6-

<PAGE>


                ALL AMERICAN FOOD GROUP, INC. & AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1)      GENERAL

         The Company was formed in September 1993 under the name Jutland Food
Group, Inc., for the purpose of establishing a chain of franchised bagel
stores. In October 1993, the Company acquired substantially all of the assets
of Howberg Bakery Equipment Co., Inc., Bagels of New Milford, Inc. and
Goldberg's Famous Bagels of Orangeburg, Inc. The assets acquired consisted of a
bagel equipment business and two retail bagel stores. On September 29, 1994,
the Company acquired all of the outstanding stock of four interrelated
corporations all conducting business under the tradename "Sammy's New York
Bagels," The acquisition consisted of three certified kosher retail bagel
stores and a bagel production facility, all operating under rabbinical
supervision. Effective October 31, 1995 the company changed its fiscal year to
October 31st. The Company changed its name to All American Food Group, Inc. on
October 24, 1995.


         The Company is principally engaged in the development of a retail
chain of franchised bagel stores, including the operation of a certain number
of Company-owned stores for training, marketing and promotional activities, and
the distribution of bagel bakery equipment and related products to the
franchise system. The Company markets both single unit and market development
franchise agreements. The Company, in the normal course of business, also
markets stores it acquires to individuals who operate as franchisees. The
Company franchises its concepts under the names "Goldberg's New York Bagels"
and "Sammy's New York Bagels."

         On December 17, 1996 the Company completed an initial public offering
of 1,100,000 shares of its Common Stock at a price to the public of $3.50 per
share, yielding net proceeds to the Company of $2,752,000. On January 9, 1997
the underwriters of the initial public offering exercised their over-allotment
option by purchasing an additional 165,000 shares at a price of $3.50 per share
yielding net proceeds to the Company of $483,000.


(2)      BASIS OF PRESENTATION

         The consolidated financial statements have been prepared by All
American Food Group, Inc. (the "Company") and are unaudited. The financial
statements have been prepared in accordance with the instructions for Form
10-QSB and, therefore do not necessarily include all information and footnotes
required by generally accepted accounting principles. In the opinion of the
Company, all adjustments (all of which were of a normal recurring nature)
necessary to present fairly the Company's financial position, results of
operations and cash flows as of April 30, 1997 and for all periods presented
have been made. A description of the Company's accounting policies and other
financial information is included in its October 31, 1996 audited financial

statements filed on Form 10-KSB. The consolidated results of operations for the
quarter and six month periods ended April 30, 1997 are not necessarily
indicative of the results expected for the full year.

                                      -7-
<PAGE>

                ALL AMERICAN FOOD GROUP, INC. & AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(3)      NET LOSS PER COMMON SHARE

         Net loss per common share was determined by dividing net loss, as
adjusted, by the weighted average number of common shares outstanding, as
adjusted. The net loss for each period ended April 30, 1997 was adjusted by
the increase in the carrying amount of redeemable preferred stock. The weighted
average number of common shares outstanding was adjusted by an increase of
430,558 shares for the three and six months periods ended April 30, 1996. These
additional shares represent the number of shares and options issued within the
twelve months prior to May 3, 1996, when the Company filed a registration
statement for an initial public offering (IPO), that were issued for
consideration per share or at an exercise price per share less than the
anticipated IPO price of $3.50 per share. The treasury stock method was used to
determine the net increase in the number of shares outstanding. No adjustment
for these additional shares has been made in calculating the weighted average
number of common shares outstanding for the three and six month periods ended
April 30, 1997.

(4)      ACQUISITION

         On March 17, 1997, the Company completed the acquisition of
substantially all of the assets of Bagel Connection, Inc., a private company
consisting of one company-owned and three franchised bagel stores operating
under the name Bagel Connection. The purchase price was 25,000 shares of Common
Stock and the assumption of approximately $379,000 of debt and was treated as a
purchase for accounting purposes.

(5)      CANCELLATION OF STOCK OPTION

         On April 14, 1997, the Company canceled a previously issued option to
purchase up to 1,000,000 shares of the Company's Common Stock.

(6)      SUBSEQUENT EVENT

         On May 16, 1997, the Company entered into a letter of intent to acquire
a six store retail bagel chain located in St. Petersburg, Florida, four of which
will be Company-owned and the balance are intended to be franchised units. It is
anticipated the total purchase price will approximate $1,450,000 and will
consist of cash consideration of approximately $200,000, the assumption of
approximately $250,000 of debt, and convertible preferred stock having a market
value of approximately $1,000,000.

                                      -8-


<PAGE>

                         ALL AMERICAN FOOD GROUP, INC.


Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS


         EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS
DISCUSSED IN THIS REPORT ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY, INCLUDING,
WITHOUT LIMITATION, RISKS ASSOCIATED WITH THE COMPANY'S ABILITY TO DEVELOP,
CONSTRUCT, ACQUIRE OR FRANCHISE ADDITIONAL STORES IN ACCORDANCE WITH THE
COMPANY'S BUSINESS PLAN, MANAGEMENT OF QUARTER TO QUARTER RESULTS, INCREASES IN
OPERATING COSTS AND SUCCESSFUL INTEGRATION OF POSSIBLE ACQUISITIONS. THESE
RISKS ARE SET FORTH IN THE "RISK FACTORS" SECTION OF THE PROSPECTUS PORTION OF
THE COMPANY'S FORM SB-2 REGISTRATION STATEMENT AND THE "RISK FACTORS" SECTION
CONTAINED HEREIN. UPDATED INFORMATION WILL BE PERIODICALLY PROVIDED BY THE
COMPANY AS REQUIRED BY THE SECURITIES ACT OF 1933 AND THE SECURITIES EXCHANGE
ACT OF 1934. THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN
CONJUNCTION WITH THE COMPANY'S FINANCIAL STATEMENTS AND NOTES HERETO. THE
DISCUSSION OF RESULTS, CAUSES AND TRENDS SHOULD NOT BE CONSTRUED TO IMPLY ANY
CONCLUSION THAT SUCH RESULTS OR TRENDS WILL NECESSARILY CONTINUE IN THE FUTURE.


OVERVIEW


Results of Operations - Three Months Ended April 30, 1997 and 1996

         Revenues for the three months ended April 30, 1997 (the "1997
Quarter") were $637,420, a decrease of $8,111, or 1%, from $645,531 for the
three months ended April 30, 1996 (the "1996 Quarter"). This decrease is
attributable to a decrease in franchising activities of $95,109, or 57%, to
$70,581 in the 1997 Quarter from $165,690 in the 1996 Quarter consisting of (a)
a decrease in initial non-recurring franchise and market development fees of
$110,635, or 71%, to $45,575 in the 1997 Quarter from $156,210 in the 1996
Quarter offset by (b) an increase in ongoing royalties of $15,526, or 164%, to
$25,006 in the 1997 Quarter from $9,480 in the 1996 Quarter. The Company
believes the decrease in initial non-recurring franchise fees is attributable
in part to the recent decline in the Company's stock price which has adversely
affected its ability to market franchises. The decrease in revenues was also
attributable to a decrease in equipment sales of $9,151, or 11%, to $70,703 in
the 1997 Quarter from $79,854 in the 1996 Quarter. These decreases were
substantially offset by (i) an increase in store sales of $41,464, or 12%, to
$381,789 in the 1997 Quarter from $340,325 in the 1996 Quarter, as a result of
an increase to six stores from four stores operated by the Company during the
three month periods and (ii) an increase in commissary and product sales of
$54,685, or 92%, to $114,347 in the 1997 Quarter from $59,662 in the 1996
Quarter, as a consequence of a greater number of franchise stores and a
concomitant increase in demand for product during the 1997 Quarter.


         Future equipment and commissary sales will be dependent on the
Company's franchising activities, and such sales will therefore increase or
decrease in direct proportion to the Company's success in expanding its system
of franchised stores.

                                      -9-
<PAGE>

                         ALL AMERICAN FOOD GROUP, INC.

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(Continued)


         Cost of sales increased by $19,587, or 5%, to $427,170 in the 1997
Quarter from $407,583 in the 1996 Quarter. Cost of sales as a percentage of
store and product sales decreased to 76% in the 1997 Quarter from 85% in the
1996 Quarter, reflecting an improvement in controlling costs in Company-owned
stores and in the Company's Lodi, New Jersey commissary and production
facility. To the extent that future increases in the Company's total revenues
are attributable to franchise fees, market development fees and franchise
royalties, costs of sales can be expected to decrease as a percentage of
revenues.

         Selling, general and administrative expenses increased by $343,811, or
73%, to $814,964 in the 1997 Quarter from $471,153 in the 1996 Quarter. This
increase in both absolute dollars and as a percentage of revenues is
attributable to the implementation of the Company's national expansion plan.
The increase is primarily due to (i) an increase in salaries and related costs
of $100,377, or 54%, to $285,648 in the 1997 Quarter from $185,271 in the 1996
Quarter, (ii) an increase in selling expense of $68,376, or 76%, to $158,839 in
the 1997 Quarter from $90,463 in the 1996 Quarter, primarily due to increased
advertising costs to attract new franchisees and increased shipping costs
associated with increased product sales, (iii) an increase in occupancy costs
of $46,887, or 52%, to $136,238 in the 1997 Quarter from $89,351 in the 1996
Quarter attributable to an increase to six stores operated by the Company from
four stores during the three month, and (iv) an increase in professional fees
and related costs associated with the Company becoming a public Company and
pursuing an acquisition strategy of $53,462, or 196%, to $80,701 in the 1997
Quarter from $27,239 in the 1996 Quarter.

         Depreciation and amortization increased by $12,525, or 19%, to $79,922
in the 1997 Quarter from $67,397 in the 1996 Quarter, primarily as a
consequence of the Company owning and operating two more stores in the 1997
Quarter.

         Interest expense decreased by $1,952, or 20%, to $7,911 in the 1997
Quarter from $9,863 in the 1996 Quarter. Interest expense will increase in
future quarters as a result of the debt assumed in the March 17, 1997
acquisition of the assets of Bagel Connection, Inc.

         The net loss increased by $325,298, or 89%, to $692,547 in the 1997
Quarter from $367,249 in the 1996 Quarter as a result of the factors discussed
above, particularly the lack of franchise sales and associated equipment sales.



Results of Operations - Six Months Ended April 30, 1997 and 1996

         Revenues for the six months ended April 30, 1997 (the "1997 Interim
Period") were $1,476,023, an increase of $337,068, or 30%, from $1,138,955 for
the six months ended April 30, 1996 (the "1996 Interim Period "). This increase
is attributable to (i) an increase in store sales of $73,862, or 11%, to
$720,179 in the 1997 Interim Period from $646,317 in the 1996 Interim Period,
as a result of an increase to four stores from three stores operated by the
Company during the first three months and from four stores to six stores
operated by the Company during the second three months of the 1997 Interim
Period (ii) an increase in franchising activities of $203,762, or 104%, to
$399,401 in the 1997 Interim Period from $195,639 in the 1996 Interim Period
consisting of (a) an increase in initial non-recurring revenue from the sale of
Company-owned stores to franchisees of $200,000 in the 1997 Interim Period from
$0 in the 1996 Interim Period, (b) a decrease in initial non-recurring
franchise and market development fees of $34,395, or 17%, to $144,315 in the
1997 Interim

                                      -10-

<PAGE>

                         ALL AMERICAN FOOD GROUP, INC.

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(Continued)


Period from $178,710 in the 1996 Interim Period and (c) an increase in ongoing
royalties of $38,157, or 225%, to $55,086 in the 1997 Interim Period from
$16,929 in the 1996 Interim Period, and (iii) an increase in commissary and
product sales of $88,319, or 71%, to $213,138 in the 1997 Interim Period from
$124,819 in the 1996 Interim Period, as a consequence of a greater number of
franchise stores and a concomitant increase in demand for product during the
1997 Interim Period, which increases were partially offset by a decrease in
equipment sales of $28,875, or 17%, to $143,305 in the 1997 Interim Period from
$172,180 in the 1996 Interim Period, primarily due to the fact that, during the
1997 Interim Period the Company has focused on franchising activities rather
than on sales of equipment to unaffiliated purchasers.

Future equipment and commissary sales will be dependent on the Company's
franchising activities, and such sales will therefore increase or decrease in
direct proportion to the Company's success in expanding its system of
franchised stores.

         Cost of sales increased by $306,092, or 42%, to $1,041,360 in the 1997
Interim Period from $735,268 in the 1996 Interim Period. The increase in cost
of sales from franchising activities is primarily due to the sale of a
Company-owned store to a franchisee. The increase in cost of sales from
equipment and product sales and store operations is primarily due to increased
store sales. Cost of sales as a percentage of product sales increased to 79% in
the 1997 Interim Period from 78% in the 1996 Interim Period, reflecting the net

effect of an increase in the sale of a Company-owned store to a franchisee, and
an increase attributable to the upgrading of the Company's Lodi, New Jersey
commissary and production facility and increases in payroll and fixed overhead
costs associated with expansion of this facility. To the extent that future
increases in the Company's total revenues are attributable to franchise fees,
market development fees and franchise royalties, costs of sales can be expected
to decrease as a percentage of revenues.

         Selling, general and administrative expenses increased by $695,983, or
78%, to $1,589,413 in the 1997 Interim Period from $893,430 in the 1996 Interim
Period. This increase in both absolute dollars and as a percentage of revenues
is attributable to the implementation of the Company's national expansion plan.
The increase is primarily due to (i) an increase in salaries and related costs
of $199,594, or 59%, to $540,604 in the 1997 Interim Period from $341,010 in
the 1996 Interim Period, (ii) an increase in selling expense of $132,133, or
82%, to $293,867 in the 1997 Interim Period from $161,734 in the 1996 Interim
Period, primarily due to increased advertising costs to attract new
franchisees, and increased shipping costs associated with increased product
sales, (iii) an increase in occupancy costs of $94,335, or 65%, to $239,316 in
the 1997 Interim Period from $144,981 in the 1996 Interim Period attributable
to an increase to four stores from three stores operated by the Company during
the first three months and from four stores to six stores operated by the
Company during the second three months of the 1997 Interim Period, and (iv) an
increase in professional fees and related costs associated with the Company
becoming a public Company and pursuing an acquisition strategy of $79,292, or
160%, to $128,819 in the 1997 Interim Period from $49,527 in the 1996 Interim
Period.

                                      -11-

<PAGE>

                         ALL AMERICAN FOOD GROUP, INC.

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(Continued)


         Depreciation and amortization increased by $22,349, or 18%, to
$148,941 in the 1997 Interim Period from $126,592 in the 1996 Interim Period,
primarily as a result of an increase to four stores from three stores operated
by the Company during the first three months and from four stores to six stores
operated by the Company during the second three months of the 1997 Interim
Period.

         Interest expense decreased by $4,799, or 21%, to $18,252 in the 1997
Interim Period from $23,051 in the 1996 Interim Period. Interest expense will
increase in future quarters as a result of the debt assumed in the March 17,
1997 acquisition of the assets of Bagel Connection, Inc.

         The net loss increased by $615,999, or 82%, to $1,368,953 in the 1997
Interim Period from $752,954 in the 1996 Interim Period. To date, the Company
has operated at a loss as a result of the application of resources in excess of
revenues to develop its operating infrastructure, including the support

structure necessary to fulfill its obligations under its franchise agreements
and the anticipation of additional franchise sales. Consequently, total revenues
are not yet sufficient to support the Company's overhead. Management
anticipates, that during the fiscal year ending October 31, 1997, the Company's
revenues will increase due to additional franchise sales, increased royalty
income from existing stores, increased equipment sales to new franchisees,
increased sales in existing Company-owned stores and sales revenues from newly
opened Company-owned stores. There can be no assurance, however as to whether,
and to what extent, the Company will actually experience additional revenues
from any of these sources. The Company's ability to operate profitably in the
future is substantially dependent upon its ability to sell store and market
development franchises and to open additional franchise stores.


Liquidity and Capital Resources

         In April 1996, the Company completed the Private Placements of its
Common Stock pursuant to which it received proceeds of $2,413,986. Of the net
proceeds, $410,000 consisted of property in the form of two unopened retail
bagel stores in the final stages of construction.

         In December 1996 and January 1997, the Company completed an initial
public offering of 1,265,000 shares of its Common Stock (including 165,000
shares to cover the underwriters' over-allotments) at a price to the public of
$3.50 per share, yielding net proceeds to the Company of $3,235,000. The
proceeds of the offering are being used to redeem Series A and Series B
Preferred Stock, open additional Company-owned flagship stores, expand the
Company's equipment inventory, relocate and consolidate its headquarters and
commissary facilities, expand its marketing and promotional activities, reduce
accounts payable and accrued expenses, develop its franchising system and for
working capital and general corporate purposes.

         The Company's revenues are not yet sufficient to support the Company's
operating expenses. Cash used by operating activities for the six months ended
April 30, 1997 was $1,888,432 compared to cash used by operating activities of
$844,940 during the six months ended April 30, 1996.

                                      -12-
<PAGE>

                         ALL AMERICAN FOOD GROUP, INC.

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(Continued)


         Additional funds will be required to support the Company's capital
requirements during the period it continues to operate at a loss. Management is
currently attempting to raise additional capital through financing or the sale
of its common or preferred stock. There can be no assurance that the Company
will be able to obtain financing or sell its common or preferred stock in
sufficient amounts to meet its working capital requirements. Failure to obtain
additional working capital in a timely manner or on acceptable terms could have
a material adverse effect on the Company, its financial position and prospects.


         In this regard, on June 6, 1997, the Company signed a non-binding term
sheet to raise up to $3,000,000 for the Company in a transaction exempt from
registration, under the Securities Act of 1933, as amended. This capital
raising transaction is subject to, among other things, due diligence and the
execution of a definitive agreement.


                                      -13-

<PAGE>

                         ALL AMERICAN FOOD GROUP, INC.

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(Continued)


         IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS REPORT,
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FOLLOWING FACTORS IN EVALUATING THE
COMPANY AND ITS BUSINESS.

         EXPANSION. As of April 30, 1997 there were 24 stores in operation,
consisting of 6 Company-owned and 18 franchised stores. By the end of 1997, the
Company contemplates having approximately 6 to 7 Company-owned and 40 to 45
franchised stores in operation. The Company expects to have 6 to 7
Company-owned and 95 to 100 franchised stores in operation by the end of 1998.
The Company intends to use a significant portion of the net proceeds of its
initial public offering to develop additional Company-owned stores and to
support its marketing efforts to attract new franchisees. There can be no
assurance that the Company will be able to attract new franchisees to open all
of the planned new stores, or that, if opened, such stores can operate
profitably. The opening and success of the Company's owned and operated and
franchised stores will depend on various factors, not all of which are in the
control of the Company, including customer acceptance of the Company's concept
in new markets, the availability of suitable sites, the negotiation of
acceptable lease or purchase terms for new locations, permit and regulatory
compliance, the ability to meet construction schedules, the financial and other
capabilities of the Company and its franchisees, the ability of the Company to
successfully manage this anticipated expansion and to hire and train personnel,
and general economic and business conditions. Furthermore, because of the
Company's relatively small store base, an unsuccessful store could have a more
significant adverse effect on the Company's results of operations than would be
the case for a company with a larger store base.

         The Company's expansion will also require the implementation and
integration of enhanced operational and financial systems and additional
management, operational and financial resources. Failure to implement and
integrate these systems and add these resources could have a material adverse
effect on the Company's results of operations and financial condition. There
can be no assurance that the Company will be able to manage its expanding
operations effectively or that it will be able to maintain or accelerate its
growth or to maintain its present level of revenues and net loss.


         POSSIBLE ACQUISITIONS. The Company's growth strategy includes possible
acquisitions of bagel stores. However, no assurance can be given that the
Company will be able to find attractive acquisition candidates, consummate
additional acquisitions or that it will successfully integrate, convert or
operate any acquired business. In the event that the Company makes
acquisitions, there can be no assurance that any such acquisition and resulting
conversion expenses, including loss of store sales during the remodel period,
if any, will not have a material adverse effect upon the Company's operating
results, particularly during the period in which such operations are being
integrated into the Company. Furthermore, the Company's ability to make
acquisitions may depend upon its ability to obtain financing. There can be no
assurance that the Company will be able to obtain financing on acceptable
terms.

                                      -14-

<PAGE>

                         ALL AMERICAN FOOD GROUP, INC.



PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

         None

Item 2.  Changes in Securities

         None

Item 3.  Defaults upon Senior Securities

         None

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

         None

Item 5.  Other Information

         None

Item 6.  Exhibits and Reports on Form 8-K

         (a)  Exhibits
              Item 27 -- Financial Data Schedule

         (b)  Reports on Form 8-K
              None


                                      -15-

<PAGE>

                         ALL AMERICAN FOOD GROUP, INC.



                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, this 13th day of June, 1997.


                                    ALL AMERICAN FOOD GROUP, INC.


                                    By:  /s/ Andrew Thorburn
                                         -------------------------------------
                                         Chairman of the Board of Directors,
                                         Chief Executive Officer
                                         (Principal Executive Officer)

                                    By:  /s/ Chris R. Decker
                                         -------------------------------------
                                         Director, Executive Vice President
                                         and Chief Financial Officer
                                         (Principal Financial and Accounting
                                         Officer)


                                      -16-