SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 1O-KSB
                                   (Mark One)

[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934.
     For the fiscal year ended December 31, 1997

                                       OR

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934.
     For the transition period from __________ to ____________

                         Commission file number: 0-21489

                      INTERNATIONAL DISPENSING CORPORATION
                      ------------------------------------
                 (Name of Small Business Issuer in Its Charter)

              Delaware                                    13-3856324
              --------                                    ----------
   (State or Other Jurisdiction                        (I.R.S. Employer
  of Incorporation or Organization)                   Identification No.)

2500 Westchester Avenue, Suite 304, Purchase, New York           10577
------------------------------------------------------           -----
      (Address or Principal Executive Offices)                 (Zip Code)

                                 (914) 251-0336
                                 --------------
                (Issuer's Telephone Number, Including Area Code)

Securities registered under Section l2(b) of the Exchange Act:  None

Securities registered under Section l2(g) of the Exchange Act:

                     Common Stock, $.001 par value per share
                     ---------------------------------------
                                (Title of Class)

                           Class A Redeemable Warrants
                           ---------------------------
                                (Title of Class)

    Units (consisting of two shares of Common Stock and two Class A Warrants)
    -------------------------------------------------------------------------
                                (Title of Class)

     Check whether the registrant: (1) filed all reports required to be filed by
Section 13 or l5(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing  requirements for the past 90 days.
Yes [X] No [ ]

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of Regulation S-B is 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]

     The registrant did not have any revenues for the fiscal year ended December
31, 1997.

     The  aggregate  market  value  of the  registrant's  voting  stock  held by
non-affiliates  computed by reference to the average bid and asked price of such
stock as of March 20, 1998 as reported on the National Association of Securities
Dealers OTC Bulletin Board was approximately $8,238,049. (Aggregate market value
has been  estimated  solely for the purposes of this report.  For the purpose of
this  report  it has  been  assumed  that  all  officers  and  directors  of the
registrant are affiliates of the  registrant.  The statements  made herein shall
not be construed as an admission for  determining  the  affiliate  status of any
person.)

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

     There were  9,566,668  shares of Common Stock  outstanding  as of March 27,
1998.

     Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]

     Documents Incorporated by Reference: None

<PAGE>


Information  contained or  incorporated  by  reference  in this report  contains
"forward-looking   statements"   which   can  be   identified   by  the  use  of
forward-looking  terminology  such  as  "believes,"  "expects,"  "may,"  "will,"
"should" or "anticipates" or the negative thereof or other variations thereon or
comparable terminology,  or by discussions of strategy. See, e.g., "Management's
Discussion   and  Analysis  or  Plan  of   Operations"   and   "Description   of
Business-Strategic  Focus." No  assurance  can be given that the future  results
covered  by the  forward-looking  statements  will be  achieved.  The  following
matters include cautionary statements identifying important factors with respect
to such forward-looking  statements,  including certain risks and uncertainties,
that could  cause  actual  results to vary  materially  from the future  results
covered  in such  forward-looking  statements.  Other  factors  could also cause
actual  results  to vary  materially  from the  future  results  covered in such
forward-looking statements.

                                     PART I

ITEM 1.  Description of Business.

General Description of Business

     International  Dispensing  Corporation  (the  "Company")  is the  exclusive
worldwide  sublicensee  within a field of use encompassing the food and beverage
industries (as broadly defined) of certain proprietary and patented delivery and
dispensing  technologies  for maintaining the sterility,  purity,  freshness and
integrity of flowable  products  throughout the period of time in which they are
to be  consumed  (the  "Technologies").  The  Technologies  consist  of  barrier
oriented,  closed delivery and dispensing  systems (the "Systems")  composed of:
(i)   self-adjusting   reservoir   bodies,   (ii)  patented,   barrier  capable,
unidirectional  flow  valves (the "Valve  Assemblies"),  and (iii) as  required,
mechanisms to activate and  facilitate  the product  delivery and flow functions
(the  "Pump  Assemblies").  The  self-adjusting  reservoir  body of a System  is
designed to shrink in proportion  to the amount of the product  being  dispensed
through the Valve  Assembly.  The Valve  Assemblies  are  designed to dispense a
product without  letting either air or contaminants  flow back into the internal
reservoir in which the remaining  product is held. The Company  believes that by
maintaining the purity of the product that remains in the container, the Systems
will provide higher levels of freshness for significantly longer periods of time
and, if preservatives  are eliminated,  the level of purity,  of a wide array of
packaged flowable products.

     Under an Amended and Restated  License  Agreement with an effective date of
October  10,  1995 (the  "License  Agreement")  between  the  Company and ReSeal
International Corporation, a Florida corporation ("RIC"), which is the exclusive
worldwide  licensee  of the  Technologies  for all uses,  the  Company  has been
granted the right to make, use, lease or distribute food and beverage dispensing
products  utilizing  the  Technologies  (the  "License").  Since  obtaining  the
License,  the Company has focused its activities upon the  commercialization  of
the  Technologies.  The  Company  is  working  to  develop  applications  of the
Technologies within a number of potential markets,  including but not limited to
the following:  (i) beverages,  which include  milk/cream,  coffee, tea (hot and
cold),  hot chocolate,  juices,  sweeteners,  baby formula,  baby food (in puree
form),  wines and water;  (ii) foods,  which include soups,  liquid eggs, liquid
butter, sauces,  yogurt, melted cheese (nachos),  baby foods and hot toppings in
liquid form;  and (iii)  condiments,  which  include  ketchup,  barbecue  sauce,
mayonnaise, salad dressings, oils and mustard.

     The  Company  was  incorporated  under the laws of the State of Delaware in
October 1995 under the name of ReSeal Food Dispensing Systems,  Inc. and changed
its name to  International  Dispensing  Corporation in September 1996. Since its
inception,  the  Company  has  sought  to form  strategic  alliances  or  direct
license/supply  agreements  with major  food and  beverage  companies  currently
generating substantial revenues from their existing markets. The Company intends
that these  relationships will include  co-development of new products in tandem
with  the  production  of  new   dispensing   systems  which   incorporate   the
Technologies.  Upon successful  consummation  of a strategic  alliance or direct
license/supply relationship, of which there can be no assurance, the customer or
strategic  partner will utilize the  Technologies  in conjunction  with products
that have an existing market share,  as well as the Systems  associated with the
new products.


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<PAGE>

The License Agreement

     Pursuant to the License Agreement,  the Company paid to RIC an aggregate of
$4,000,000  and issued to RIC an aggregate of 2,900,000  shares of the Company's
Common Stock,  par value $.001 per share  ("Common  Stock"),  in exchange for an
exclusive worldwide  royalty-free license to (i) directly or indirectly make (or
subcontract  to  make),  use,  sell  and  otherwise   commercially  exploit  the
Technologies,  solely  in the Field of Use (as  defined  below)  and (ii)  grant
sublicenses to affiliated and non-affiliated third parties,  solely in the Field
of Use, provided, however, that the Company shall not be permitted to sublicense
the right to manufacture the Valve  Assemblies.  "Field of Use" means the use of
the  Technologies  to  make,  use,  lease,  sell or  distribute  (a) any food or
beverage   dispensers  or  containers  that  embody  the   Technologies  or  the
manufacture,  use, lease,  sale or  distribution of which uses the  Technologies
(collectively,  the  "Product")  intended for use in an industrial or commercial
place of  business  in the  preparation  of food or  beverage  at such  place of
business,  (b) any food or beverage Product intended for use in an industrial or
commercial  place of business by a customer  purchasing food or beverage at such
place of  business  for  consumption  on or off the  premises  of such  place of
business,  or (c) any food or beverage Product intended to be sold to or by food
or beverage  wholesale price discounters,  retailers and similar  establishments
that sell food or beverage to consumers.

     Under the License Agreement,  the Company is primarily  responsible for all
research and  development  activities  necessary to exploit fully the commercial
possibilities of the Technologies. The research and development activities shall
include  testing of  proposed  products  and ongoing  technical  support for the
modification,  improvement,  enhancement,  development  or variation of existing
products and the  development of new products.  RIC is  responsible  for causing
ReSeal  International  Limited Partnership  ("RILP"),  RIC's licensor and parent
company,  to manage all intellectual  property associated with the Technologies,
including  patents and trademarks,  to maximize its commercial  potential.  This
obligation  includes the  prosecution of all patent and trademark  applications,
subject to the Company's  approval of budgets and expenditures in advance,  and,
in the  sole  discretion  of  RIC  (or  upon  receipt  by  RIC of the  Company's
commitment to pay 100% of the related reasonable costs and expenses),  all suits
against third parties for infringement of patents or trademarks.  If RIC or RILP
is unwilling or unable to undertake such patent obligations, then the Company is
authorized to undertake such obligations on its own behalf.

     The License  Agreement may not be assigned by either party thereto  without
the  express  written  consent of the other  party,  except that the Company may
sublicense  applications of the Technologies  within the Field of Use at its own
discretion and may  subcontract,  but not sublicense,  for the  manufacturing of
components incorporating the Technologies in the Field of Use.

Strategic Focus

     The Company has focused and will continue to focus its marketing activities
on the  application  of the  Technologies  to the food and beverage  industries,
specifically the food service and consumer products markets.

     First,  the Company will  continue to market the  Technologies  to the food
service industry,  which purveys bulk foods and beverages such as milk,  juices,
wine and condiments to restaurants,  fast food chains and institutions.  In this
industry,  there is a trend, away from the traditional large tins for condiments
and the cartons for milk and juice,  to one, two and three  gallon  plastic bags
that are shipped in corrugated boxes to the food outlet, where they are inserted
into  a  permanent  counter-dispenser-unit  for  customer  and/or  kitchen  food
preparation  use.  The Company  intends to market the Valve  Assemblies  and the
Systems for application to the products  mentioned  above, on a worldwide basis.
The Company will attempt to form strategic alliances with companies that already
are marketing  their products in a bag-in-a-box.  The Company  believes that the
Systems are ideal for the bag-in-a-box format since the bag is


                                        2

<PAGE>

already  a  collapsible  container  and thus  only  minimum  alterations  in the
production  line,  if any,  will  need to be made  to  incorporate  it into  the
Systems.

     In accordance  with its business  strategy,  on October 1, 1997 the Company
entered into a Joint  Systems  Development  Agreement  with  Packaging  Systems,
L.L.C.  ("Packaging"),  which has certain rights to  bag-in-a-box  manufacturing
technology and bag-in-a-box  integration  technology.  Pursuant to the agreement
the parties  will attempt to develop for the United  States  market a variety of
bag-in-a-box delivery systems with unique valve/pump technology for the food and
beverage industries.

     Second,  the Company will continue to market the  Technologies to companies
that  sell  food  and  beverage   products  directly  to  the  consumer  through
supermarkets,  grocery stores and other retail outlets. For example,  sellers of
wines and fruit juices in the  bag-in-a-box  format can utilize the Technologies
since these products tend to spoil quickly after being opened and exposed to air
and  airborne  contaminants,  which is what the Systems are designed to prevent.
Also, the Systems would enable many consumer  products to be marketed in larger,
economy sizes, which would otherwise spoil. While in many cases the bag-in-a-box
format  would be used,  the  Systems  can be used  with a  variety  of tubes and
pouches,  and thereby are  applicable to  condiments,  salad  dressings and baby
foods.  The Company believes that the Systems also have the potential to be used
with concentrated liquid products (i.e., teas, coffees,  juices,  etc.) packaged
without the use of preservatives.

     In  addition,  in many  countries  around  the  world,  the milk  market is
dominated by ultra high temperature  ("UHT") milk, which if unopened will remain
fresh without  refrigeration  for up to one year. Once opened,  UHT milk must be
refrigerated and has the same shelf-life as regular  pasteurized  milk, a number
of days. The Company believes that with the Systems,  various bag-in-a-box sizes
of UHT milk  can be sold,  dispensed  from,  and  still  remain  fresh,  without
refrigeration, for a longer period of time.

     The Company has engaged in preliminary  marketing discussions with a number
of  potential  strategic  alliance  partners,  licensees  and end  users  of the
Technologies  and has  had  preliminary  discussions  with a  substantial  dairy
company  which  supplies  milk  products  in a  food  service  capacity  to  the
restaurant  industry,  including fast food  franchise  operations and commercial
establishments  throughout Canada. Management has also had discussions regarding
the use of Technologies  in connection with a bag-in-a-box  creamer for offices,
fast food outlets and coffee bars, as well as possible  applications  for yogurt
and the baby food industry. Based upon discussions that have taken place between
the  Company  and  potential  users,  the  Company  intends to focus its initial
marketing efforts in the areas of wine, milk and condiments for the food service
industry.

     Management   anticipates  that  the  Technologies  will  prove  capable  of
accomplishing these objectives at commercially viable cost structures. There can
be no assurance,  however,  that any agreement  will be entered into between the
Company and any products provider, or that if such agreement is reached that the
products  marketed  utilizing the Technologies will ultimately obtain commercial
success.

     To oversee  product  development,  the Company has engaged the  services of
Nologies,  Inc. ("Nologies"),  a product development engineering firm, to create
bag-in-a-box  prototype systems for application in the wine, milk, condiment and
baby-bottle design industries (see "Research and Development").  These prototype
systems,  which  embody  the  fundamental  approach  to the  Systems,  have been
prepared in advanced prototypical form. The Company has solicited bid quotations
from three different  suppliers for the fabrication of multi-cavity  molds to be
used in the manufacture of the Valve Assemblies.  Simultaneously, bid quotations
for the  manufacture  of a single  cavity mold are being  solicited.  The single
cavity mold will allow for the  manufacture of prototype  tooling and refinement
for large production runs.

     The Company  plans to continue to enter into  strategic  alliances,  supply
agreements,  direct  license  agreements  and joint ventures with leaders in the
food and beverage industry. Under such


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<PAGE>

agreements,   the  Company   anticipates  that  under  some   circumstances  the
sublicensee  will pay a license  fee of a  negotiated  sum to the  Company  upon
entering into the sublicense.  Thereafter, the Company would receive income from
sale of Valve  Assemblies or other  components of the Systems and, under certain
circumstances,  royalties  and profits from the sale of products  employing  the
Technologies. The Company may provide the relevant Technologies to its customers
and,  with input from the  customers,  assist in  transferring  and adapting the
Technologies to specific product  requirements.  As some customers may choose to
take a more active role in adapting the Technologies to their specific  product,
a portion  of  development  and  marketing  costs and a portion  of the costs of
adapting  the  Technologies  to a  particular  application  may be  borne by the
sublicensees  or  supply  partners.  The  particular  relationship  between  the
customer and the Company  will vary  depending  on each  party's  resources  and
needs.  Therefore, a variety of structuring and cost sharing alternatives may be
used by the Company in commercializing the Technologies.

     All  component  parts of the Systems  must be made of  materials  which are
compatible  with the specific  contents or formulation to be dispensed.  Systems
must be adapted to meet the specific  requirements of the particular product and
to the desired type of delivery to allow the dispensing of a flowable product in
accordance with such customer's  needs. In light of the potentially  undesirable
health effects of  preservatives in certain  products,  other market factors and
the adaptability of the Technologies in the dispensing of non-preserved products
in a variety of applications,  the Company  believes that significant  marketing
opportunities,  such as that formed with  Packaging,  exist in the United States
and around the world for the  establishment  of  strategic  alliances  involving
Systems  for  various  applications  and product  categories.  The Company  will
endeavor to  integrate  other  existing  technology  with  Systems  which can be
commercialized,  marketed and  manufactured  in a wide variety of  applications,
worldwide.  The Company  anticipates  that, in many cases, the Technologies will
facilitate  positive changes in the nature of product  formulation,  quality and
efficacy.

Competition and Opportunities in the Packaging Industry

     Most   competing   dispensing   technology   is  designed  to  inhibit  the
contamination  of  various  products,  minimally.  When a can,  bottle  or other
dispenser,  such as a  bag-in-a-box,  is  initially  used and a  portion  of its
contents is dispensed,  the remaining  contents  become  contaminated  as air is
drawn into the vessel to fill the space created by the displaced contents or the
dispensing  mechanisms  are simply not  capable of  functioning  as an  adequate
barrier.  Air  transports  various types of  contaminants  which can lead to the
degradation  of a product,  as well as basic  oxidation  processes  initiated or
accelerated  by the air  itself.  In effect,  a System  dispenses  in an outward
direction as product leaves the package, but the System seals itself closed when
the dispensing is completed.  Thus, Systems are designed to maintain a product's
purity throughout the time it is being consumed by virtue of being closed and by
providing appropriate  mechanical barriers to contamination while the product is
being dispensed.  The Company  believes that the  Technologies  provide the only
commercially  viable closed  delivery and  dispensing  system,  which allows for
continuous  delivery  of a product in the desired  metered or  measured  amounts
while maintaining the product's purity.

     The Company's  competitors are the  manufacturers of all existing  packages
and bottles that contain flowable food and beverage products.  Typically,  large
sizes of beverages and other  flowable  products,  such as  condiments,  certain
fruit juices and wine, will remain fresh without  refrigeration for a relatively
long period of time before being opened;  however, once the container is opened,
the contents will spoil within a short period of time. In the case of containers
with general purpose valves, where the product is dispensed by applying pressure
with a finger,  the product flows out at the same time air enters the container,
thereby  accelerating  the spoilage of the  remainder  of the  product,  and the
repeated  use of  fingers  directly  adjacent  to the  spout  also  can  lead to
unsanitary conditions.  There are several faucet-type valves that eliminate some
of the sanitary  problems  described  above,  but they are costly and not widely
used. Also, there are  soda-fountain-type  pumps utilized for various condiments
employing  stainless  steel or plastic  containers into which the condiments are
poured and which may encounter spillage onto the

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dispensing  mechanism during the course of a day and require frequent servicing.
To be sanitary, these pumps must be disassembled, cleaned and sterilized daily.

     The Systems  offer a distinct  advantage  over each of these other  systems
because  each System is designed  to prohibit  the flow of air and  contaminants
back into it when product is being  dispensed.  It is anticipated  that a System
will require no cleanup,  since the product will always be contained in a bag or
a  pouch  and  the  entire  system  will  be  disposable   and   recyclable.   A
self-contained system provides considerably more product purity and cleanliness.

     The Systems are  designed  to keep  products  fresher and purer while being
consumed,   potentially   with  less   preservatives   and   sometimes   without
refrigeration.  In instances  where  available on premises,  additional  precise
temperature  control in conjunction  with the Systems will provide  vendors with
the ability to serve and sell perishable products at their optimum temperature.

Patents, Trademarks and Other Intellectual Property

     Under the  License  Agreement,  RIC has granted to the Company a license to
use certain patents  relating to the Systems and their component parts which RIC
in turn licenses from RILP,  the owner of such  patents.  The License  Agreement
includes a license to the Company to use certain  trademarks  RIC licensed  from
RILP,  which the Company  believes to be immaterial.  These patents  encompass a
broad range of delivery and dispensing technologies and product applications for
food and beverages. The following sets forth a summary of certain key patents.

1.   A valve assembly for a container  permitting  the easy  dispensing of fluid
     while preventing  backflow of contaminants  through the valve assembly into
     the container holding the remaining fluid.

                    U.S. Patent No. Re. 34,243  (Expiration Date: July 11, 2006)

2.   An  enclosing  sleeve for a one-way  valve  presses an  elastomeric  sheath
     against  the valve body to provide a seal  between the sheath and the valve
     body. In addition, the sleeve can form a closure over the outlet end of the
     valve body protecting it from  contamination or contact with  contaminating
     surfaces.

                    U.S. Patent No. 5,092,855 (Expiration Date: March 3, 2009)

3.   An  elastomeric  sleeve  stretched  over the valve  body  with  ring-shaped
     enlargements on each end forming  "molded  o-rings" in tight sealed contact
     to the valve body.

                    U.S. Patent No. 5,305,783 (Expiration Date: April 26, 2011)

4.   A fluid  dispensing  unit includes a collapsible  reservoir  with a one-way
     valve at its  outlet  for  directing  flow  into a  metering  chamber.  The
     metering  chamber has an outlet  connected to another  one-way  valve which
     prevents  backflow  of  contaminants  into  the  container  after  fluid is
     dispensed.  Both the collapsible  reservoir and the metering chamber can be
     completely  collapsed  to ensure  that the  dispensing  unit is  completely
     empty.

                    U.S.  Patent No.  5,279,447  (Expiration  Date:  January 18,
                    2011)

5.   A disc  shaped  valve body  enclosed  circumferentially  by an  elastomeric
     membrane.   Fluid   flows   through   separate   passageways   between  the
     circumferential edge of the valve body and the elastomeric membrane.

                    U.S.  Patent No.  5,279,330  (Expiration  Date:  January 18,
                    2011)


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6.   A one-way valve  assembly with a cover member which  encloses an expandable
     elastomer  sleeve  and  valve  body  and  which  presses  the  sleeve  into
     fluid-tight contact with the valve body at two axially spaced locations.

                    U.S. Patent No. 5,305,786 (Expiration Date: April 26, 2011)

7.   A  dispenser  with  two  separate  collapsible  chambers,  each  holding  a
     component or  substance to be mixed before use with at least one  component
     being in a flowable condition. A one-way valve permits flow of the flowable
     component  into the  other  chamber  and  prevents  any  backflow,  thereby
     providing the dispensing of a mixture having a short use lifetime where the
     components  of the mixture are capable of being  stored  separately  for an
     extended period.

                    U.S.  Patent No.  5,353,961  (Expiration  Date:  October 11,
                    2011)

8.   An  embodiment  that  replaces the tubular or disc shaped valve core with a
     flat  valve  platform  more  appropriate  for  higher  speed and lower cost
     manufacturing.  The elastomeric sheath can be executed as a flat sheet from
     roll stock.  A housing  component  protects the sheath while  providing the
     necessary sealing and resistance needed for successful functioning.

                    U.S. Patent No. 5,613,517 (Expiration Date: March 25, 2014)

9.   A one-way vacuum actuated sheath valve with a flat elastic membrane held in
     tension over a convex valve  platform  under a conforming  cover with inlet
     and outlet  channels.  The cover  includes an  expansion  area on the cover
     surface  adjacent to the membrane and between the inlet and outlet.  Liquid
     flows through the valve when it is drawn by a vacuum.  The vacuum  operates
     on both the flow path exit, but also above the membrane, lifting it to open
     the flow path. Discontinuance of the vacuum allows the membrane to seal the
     inlet and outlet, thus again preventing any flow between them.

                    U.S. Patent No. 5,673,251 (Expiration Date: August 24, 2014)

Agreement with Well Men

     On December 23, 1997,  the Company  entered into an agreement with Well Men
Industrial  Company Limited,  a Hong Kong registered  corporation  ("Well Men"),
pursuant to which Well Men granted to the Company an  exclusive  right to market
and sell in China  certain  products,  including a water heater for  showers,  a
water pitcher and a filter for such water pitcher  (collectively,  the "Well Men
Products")  manufactured  by Well Men. Well Men also assigned to the Company for
the purpose of commercializing such Well Men Products, all of Well Men's patents
and patent applications relating to such Well Men products.  Under the agreement
the  Company  has  rights  of first  refusal  to sell Well Men  Products  in any
territory outside of China and to market other products developed by Well Men in
China. The agreement is for an initial term of ten (10) years and shall continue
for successive periods of ten years unless terminated by either party by written
notice prior to the end of the existing term.

     Pursuant to the agreement,  the Company established a representative office
in Guangzhou,  China,  through which  consultation  and market research is being
provided.  The  Company  has also  established,  with Well Men's  assistance,  a
Chinese  licensed  and  registered  corporation,  which will  exclusively  sell,
promote,  market,  advertise and solicit  orders for Well Men Products in China.
The  Company is solely  responsible  for all costs and  expenses  of the Chinese
corporation until such time as it is profitable.  However,  the Company does not
have any equity interest in such corporation.

     Although  there is high  demand  for water  heaters in China,  the  Company
believes  that there are  currently  only the following  three  competing  water
heating products in China: (i) water tanks,

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which are expensive and  non-energy  efficient,  (ii) electric  outlet  heaters,
which  are  dangerous  and do not sell  well and  (iii)  natural  gas,  which is
expensive and involves  complex  installation  procedures.  The Company believes
that all of the competing  products have numerous  disadvantages,  which renders
the Well Men water heater, with its simple design, its inexpensive manufacturing
costs and its safety features, more attractive.

     The Company  believes that its  agreement  with Well Men provides it with a
cost efficient means through which to enter into the Chinese market. The Company
believes that significant marketing  opportunities exist in China and around the
world  for  the  establishment  of  strategic  alliances  involving  Well  Men's
technology for various  applications  and product  categories.  The Company will
endeavor to integrate  other  existing  technology  with Well Men's  technology,
including the Technologies licensed to the Company under the License,  which can
be commercialized,  marketed and manufactured in a wide variety of applications,
worldwide.

     The Company believes that its  relationship  with Well Men will further its
overall business purpose of  commercializing  proprietary  technologies that are
economically viable, commercially profitable and environmentally friendly.

Research and Development

     The  Company  spent  approximately  $116,295 on  research  and  development
activities  during Fiscal 1997 and $39,386 during the fiscal year ended December
31, 1996.

     The Company  has  entered  into an  agreement,  dated  March 5, 1996,  with
Nologies,  under which Nologies will assist in (i) the directing and managing of
product and  technology  development,  (ii)  licensing  and  strategic  alliance
pursuits,  and (iii) other  related  services  that the Company may request from
time to time, in the area of food and beverage  dispensing and delivery systems.
The term of such agreement has been extended  through  February 28, 1999 and may
be  terminated  upon 30 days'  written  notice.  The Company  shall pay Nologies
$8,000 per month and reimburse it for reasonable  documented  business expenses.
Pursuant to the terms of such agreement, Nologies agrees (a) not to disclose, at
any time, any  confidential  business or technical  information or trade secrets
acquired  during  its  association  with the  Company  and which  relates to the
present or  contemplated  business of the Company,  whether or not conceived of,
discovered,  developed  or  prepared  by  Nologies,  (b)  during the term of the
agreement and for a one year period thereafter, it will not represent,  consult,
serve, or be employed by any competing enterprise,  and (c) never to divulge any
confidential information to any third party.

Employees

     As of March 23,  1998,  the  Company  employed  four  people on a full-time
basis,  two as  executive  officers,  one as an  office  manager  and one as the
manager of its representative office in China.


ITEM 2.  Description of Property.

     The  Company  currently  subleases,  from  a  non-affiliated  third  party,
approximately  1,800 square feet of space for its principal  executive office at
2500 Westchester  Avenue,  Purchase,  New York 10577. The monthly rental on this
property is  approximately  $2,786.  Management  believes  that this facility is
adequate for the Company's  intended  activities in the foreseeable  future. The
sublease  terminates on February 29, 2000. If this sublease is not renewed,  the
Company  does not  anticipate  any  significant  problems  in  finding  suitable
alternative space.


                                        7

<PAGE>

ITEM 3.  Legal Proceedings.

         None.

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

         During the fourth quarter of the Company's fiscal year ended December
31, 1997 ("Fiscal 1997"), no matter was submitted to a vote of securityholders
of the Company.



                                        8

<PAGE>



                                     PART II


ITEM 5.  Market for the Company's Common Equity and Related Stockholder Matters.

     Since the consummation of the Company's  initial public offering on October
23, 1996 (the  "IPO"),  the  Company's  Common  Stock has been traded and quoted
under the symbol IDND on the OTC Bulletin Board.  The Company's Class A Warrants
and IPO Units are also  traded and quoted on the OTC  Bulletin  Board  under the
symbols IDNDW and IDNDU,  respectively.  Each IPO Unit consists of two shares of
Common Stock and two Class A Warrants. Each of the 3,241,668 outstanding Class A
Warrants  entitles  the holder  thereof to purchase one share of Common Stock at
$7.00 per share (subject to adjustment)  during the four year period  commencing
October 3, 1997. The following  table sets forth the high and low bid prices for
the Common Stock,  Class A Warrants and IPO Units, as quoted on the OTC Bulletin
Board,  for the periods  indicated.  Quotations are  interdealer  prices without
retail markup, markdown or commission,  and may not necessarily represent actual
transactions.


                            Common Stock    Class A Warrants      IPO Units
                            ------------    ----------------      ---------
                            High     Low      High     Low      High      Low
                            ----     ---      ----     ---      ----      ---

Quarter ended
  December 31, 1996 ...... $11.25   $0.30    $5.25    $0.01    $30.50    $0.625

Quarter ended
  March 31, 1997 ......... $ 0.69   $0.32    $0.125   $0.01    $ 1.45    $0.8125

Quarter ended
  June 30, 1997 .......... $ 0.49   $0.34    $0.06    $0.03    $ 1.25    $0.8125

Quarter ended
  September 30, 1997 ..... $ 0.39   $0.23    $0.03    $0.001   $  .98    $0.55

Quarter ended
  December 31, 1997 ...... $ 1.22   $0.245   $0.625   $0.001   $ 5.375   $0.375

Quarter ending
  March 31, 1998 ......... $ 2.75   $0.245   $0.625   $0.001   $ 6.375   $0.375
  (through March 17, 1998)


     As of March 23,  1998,  the  Company had 53 holders of record of its Common
Stock. The Company believes that there are a significant number of shares of the
Company's Common Stock in street name and, consequently,  is unable to determine
the actual number of beneficial owners.

     Since its  inception,  the Company has not paid any cash  dividends  on its
Common Stock. The Company intends to retain future earnings, if any, that may be
generated  from the  Company's  operations  to help finance the  operations  and
expansion  of the  Company and  accordingly  does not plan,  for the  reasonably
foreseeable  future,  to pay cash dividends to holders of the Common Stock.  Any
decisions as to the future  payment of dividends will depend on the earnings and
financial  position of the Company and such other factors as the Company's Board
of Directors deem relevant.


                                        9

<PAGE>

Recent Sales of Unregistered Securities

     In October  1995,  in  connection  with a settlement  of actions and claims
against certain affiliates of RIC and RIC's officers and directors,  the Company
issued (i) 2,900,000 shares of Common Stock to RIC as partial compensation under
the License  Agreement,  (ii) an aggregate  of 1,500,000  shares of Common Stock
(the "Investor  Shares") to certain investors in RILP,  including Gregory Abbott
(422,000 shares) and George Kriste (130,000  shares),  and (iii) an aggregate of
450,000 shares of Common Stock to certain  individuals,  including Joseph Koster
(58,000 shares), David Brenman (53,000 shares) and Jon Silverman (50,000 shares)
for services rendered.

     Between  October 1995 and April 1996,  the Company (i) sold an aggregate of
525,000 shares of Common Stock to the certain non-affiliates of the Company (the
"Bridge  Securityholders")  for a total of $1,050,000 (the "Private  Placement")
and (ii) entered into a loan with the Bridge  Securityholders  in the  aggregate
amount  of  $1,050,000   (the  "Bridge   Loan").   Each  Bridge   Securityholder
participated in both the Private  Placement and the Bridge Loan. The Bridge Loan
bore  interest at the rate of eight (8%)  percent  per annum and was  completely
repaid out of the  proceeds  received  by the  Company  from the IPO. As further
consideration for the Bridge Loan, the Bridge  Securityholders  acquired 787,500
Units (the "Bridge  Units")  which are  comprised of 1,575,000  shares of Common
Stock and  1,575,000  Class A  Warrants.  The Class A Warrants  included  in the
Bridge Units are identical to the Class A Warrants  included in the Units issued
in the IPO (the "IPO Units," and together with the Bridge  Units,  the "Units").
Each Unit  consists  of two shares of Common  Stock and two  redeemable  Class A
purchase  warrants (the "Class A Warrants").  Each Class A Warrant  entitles the
holder to  purchase  one share of Common  Stock for $7.00  during  the four year
period  commencing  October 3, 1997.  The Class A Warrants are redeemable by the
Company  at $.05 per  warrant at any time  after  October  3,  1998,  if certain
conditions are met.

     The  securities  issued in  connection  with the Private  Placement and the
Bridge Loan were issued  pursuant to Section  4(2) of the  Securities  Act.  The
Company  will not  receive  any of the  proceeds  from the  resale of the Bridge
Securities. Should the Class A Warrants offered by the Bridge Securityholders be
exercised, of which there is no assurance, the Company will receive the proceeds
therefrom aggregating up to $11,025,000.

     In November and December 1995, the Company issued  convertible notes in the
principal  amounts of $100,000 (the "November  Note") and $50,000 (the "December
Note"),  respectively.  The  November  Note and the  December  Note were  issued
pursuant to Section 4(2) of the  Securities  Act. The notes bore  interest at an
annual rate of 8%. The November Note came due on April 15, 1996 and the December
Note came due on December 20, 1996.  Each of the notes was  convertible  into an
aggregate of 1,200,000  shares of Common Stock.  On June 28, 1996, in accordance
with an agreement  with the Company,  the holder of the December  Note agreed to
transfer  such note to the  Company for  cancellation  in return for the Company
agreeing to pay it  $300,000.  The amounts owed by the Company to the holders of
the convertible notes were paid out of the proceeds of the IPO.


ITEM 6.  Management's Discussion and Analysis or Plan of Operations.

     The following  discussion and analysis  should be read in conjunction  with
the Company's financial statements, beginning on page F-1, included elsewhere in
this report.


                                       10

<PAGE>

     The Company  was  incorporated  in Delaware in October  1995 under the name
ReSeal Food  Dispensing  Systems,  Inc.  and  changed its name to  International
Dispensing  Corporation on September 12, 1996. The Company was formed  primarily
for the purpose of commercializing and marketing the Technologies  licensed from
RIC, which  technologies  consist of the Systems composed of: (i) self-adjusting
reservoir  bodies,  (ii) the Valve Assemblies,  and (iii) as required,  the Pump
Assemblies. When utilized in dispensing flowable food and beverage products like
milk, juice, wine, etc., Systems are designed to maintain the sterility,  purity
and freshness of such products  throughout its Use Life, with the possibility of
eliminating or reducing the need for adding preservatives to the product to keep
it fresh  and/or  refrigeration  throughout  its Use  Life.  The  self-adjusting
reservoir  body of a System is designed to shrink in proportion to the amount of
the product being dispensed through the Valve Assembly. The Valve Assemblies are
designed to dispense a product without  letting either air or contaminants  flow
back into the internal  reservoir in which the  remaining  product is held.  The
Company  believes that by maintaining  the purity of the product that remains in
the  container,  the  Systems  will  provide  higher  levels  of  freshness  for
significantly  longer periods of time and, if preservatives are eliminated,  the
level of purity, of a wide array of packaged flowable products.

     The Company is focusing its marketing  activities on the application of the
licensed technologies in the Field of Use as set forth in the License Agreement,
which  encompasses the food and beverage  industries as broadly defined.  Within
such categories,  the  applications of the licensed  technologies can be divided
into a number of potential markets,  including but not limited to the following:
(a)  beverages,  which  include  milk/cream,  coffee,  tea (hot and  cold),  hot
chocolate,  juices,  sweeteners,  baby formula, baby food (in puree form), wines
and water; (b) foods, which include soups,  liquid eggs, liquid butter,  sauces,
yogurt, melted cheese (nachos),  baby foods and hot toppings in liquid form; and
(c)  condiments,  which  include  ketchup,  barbecue  sauce,  mayonnaise,  salad
dressings, oils and mustard.

     The Company is undertaking  the formation of strategic  alliances or direct
license/supply  agreements  with major food and beverage  companies,  as well as
applicable equipment/bag-in-box manufacturers,  currently generating substantial
revenues from their existing  markets.  The Company  further  intends that these
relationships  will  include  co-development  of new products in tandem with the
production of new dispensing  systems which incorporate the  Technologies.  Upon
successful  consummation  of  a  strategic  alliance  or  direct  license/supply
relationship,  of which there can be no  assurance,  the  customer or  strategic
partner will utilize the  Technologies in conjunction with products that have an
existing market share, as well as the System associated with the introduction of
new products.

     The Company has entered into a strategic alliance with Packaging on October
1, 1997. The resulting products of this Joint Systems Development Agreement will
be a variety of bag-in-a-box  delivery systems with unique valve/pump technology
for the food and beverage industries. These new systems, when developed, will be
marketed throughout the United States. The Company believes that the development
of these new systems, utilizing the combined technologies, will open new markets
for bag-in-a-box applications.

     The Company entered into an agreement with Well Men on December 23, 1997 to
commercialize certain proprietary and patented technologies relating to a shower
water heater and a filter for a water  pitcher  developed by Well Men (the "Well
Men Technologies").  The Company,  without charge, has been assigned the rights,
title and  interest  in and to the Well Man  Technologies,  in addition to being
granted a right of first  refusal with respect to future  products  developed by
Well Men. The Well Men  Technologies  have  applications in the consumer durable
products market.  The Company has opened a  Representative  Office in Guangzhou,
the People's  Republic of China to promote the sales of these  products,  and to
establish the name of the Company. Operations commenced in March 1998.


                                       11

<PAGE>

     The Company is subject to a number of risks including the Company's lack of
prior  operating  history.  The Company is also subject to the  availability  of
sufficient financing to meet its future cash requirements and the uncertainty of
future  product  development  and regulatory  approval and market  acceptance of
existing and proposed products. In the event of bankruptcy of RIC, the status of
the  continuing  obligations  of the  various  parties to and under the  License
Agreement is unclear  since a court in a bankruptcy  proceeding  may not enforce
such continuing  obligations.  Additionally,  other risk factors such as loss of
key personnel,  lack of manufacturing  capabilities,  difficulty in establishing
new  intellectual   property  rights  and  preserving  and  enforcing   existing
intellectual  property  rights  as  well  as  product  obsolescence  due  to the
development  of competing  technologies  could impact the future  results of the
Company.

Results of Operations

     The Company has not  generated  any revenues to date and must be considered
to be in the development stage. The activities of the Company since inception in
October 1995 have been primarily directed at formational  activities,  including
the completion of initial capitalization.

     In addition, the Company has engaged in on-going marketing discussions with
a number of potential  strategic alliance  partners,  licensees and end users of
the  Technologies.  In this regard,  discussions  have been conducted with major
companies  in  Canada,  Europe,  Australia  and the  United  States  to  explore
opportunities in the product categories.

     During 1995, two convertible  promissory notes were issued for $100,000 and
$50,000,  respectively.  On April 15, 1996,  the $100,000  note came due and was
paid by the Company.  On June 28, 1996, in accordance with an agreement with the
Company,  the holder of the $50,000 note,  which would have come due on December
20, 1996 and  contained  the right to convert into 1.2 million  shares of common
stock,  agreed to transfer such note to the Company for  cancellation  in return
for the Company agreeing to pay it $300,000.  The amounts owed by the Company to
the holders of the notes were paid out of the  proceeds of the IPO.  The Company
recorded an  extraordinary  loss on  retirement of debt of $250,000 for the year
ended December 31, 1996.

     From October 10, 1995  (inception)  to December  31, 1997,  the Company has
incurred a net loss from operations of approximately $2,447,570.

Financial Condition

     As  reflected  in the  financial  statements,  the Company has  experienced
continuing net losses and negative cash flows from operations  through  December
31,  1997.  The  Company's  continuing  existence is dependent on its ability to
achieve and maintain profitable  operations.  The Company continues to be in the
development  stage and does not foresee  operating  revenue until the end of the
first  quarter of the fiscal year ending  December 31, 1998.  As of December 31,
1997, the Company had liquid assets of approximately $3,138,000.

     In a private  placement  concluded in February 1996,  the Company  obtained
aggregate  capital  of  $2,250,000  through  the  issuance  by  the  Company  of
convertible notes, options and the sale of Common Stock.

     In October 1996, the Company sold, in the IPO, 833,334 IPO Units,  each IPO
Unit  consisting  of two  shares of  Common  Stock  and two  redeemable  Class A
purchase  warrants for $12.00 per IPO Unit. Each warrant  entitles the holder to
purchase one share of Common Stock for $7.00 during the four year


                                       12

<PAGE>

period commencing October 3, 1997. The warrants are redeemable by the Company at
$.05 per warrant any time after October 3, 1998, if certain  conditions are met.
The net  proceeds,  which  the  Company  received  from  the  IPO,  amounted  to
approximately $8.8 million.

     The Company does not foresee needing to raise  additional funds in the next
12 months.


ITEM 7.  Financial Statements.

     See the financial  statements and notes related thereto,  beginning on page
F-1, following this page.



                                       13

<PAGE>

                      INTERNATIONAL DISPENSING CORPORATION

                          (a development stage company)

                          INDEX TO FINANCIAL STATEMENTS

                                                                            Page

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ................................... F-2

FINANCIAL STATEMENTS:

Balance Sheet as of December 31, 1997 ...................................... F-3

Statements  of  Operations  for the Years Ended  December 31, 1997 and ..... F-4
1996,  and the  Period  from  Inception  (October  10,  1995)  Through
December 31, 1997

Statements  of Cash Flows for the Years  Ended  December  31, 1997 and ..... F-5
1996,  and the  Period  from  Inception  (October  10,  1995)  Through
December 31, 1997

Statements of Changes in  Stockholders'  Equity  (Deficiency)  for the ..... F-6
Period from Inception (October 10, 1995) Through December 31, 1995 and
the Years Ended December 31, 1997 and 1996

NOTES TO FINANCIAL STATEMENTS .............................................. F-7


                                       F-1

<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Stockholders of
International Dispensing Corporation:


We have  audited the  accompanying  balance  sheet of  International  Dispensing
Corporation (a Delaware corporation in the development stage) as of December 31,
1997,  and the related  statements  of  operations  and cash flows for the years
ended December 31, 1997 and 1996, and for the period from inception (October 10,
1995)  to  December  31,  1997  and  the  statements  of  stockholders'   equity
(deficiency)  for the period from inception  (October 10, 1995) through December
31, 1995 and for the years ended  December  31, 1997 and 1996.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position of  International  Dispensing
Corporation  as of December 31, 1997,  and the results of its operations and its
cash flows for the years ended  December  31, 1997 and 1996,  and for the period
from  inception  (October 10, 1995) to December 31,  1997,  in  conformity  with
generally accepted accounting principles.



                                             ARTHUR ANDERSEN LLP

New York, New York
March 18, 1998


                                       F-2

<PAGE>

<TABLE>
<CAPTION>

                      INTERNATIONAL DISPENSING CORPORATION

                          (a development stage company)

                                  BALANCE SHEET

                                DECEMBER 31, 1997


ASSETS
------

<S>                                                                                        <C>
CURRENT ASSETS:
         Cash and cash equivalents .....................................................   $ 3,138,204
         Prepaid expenses ..............................................................        46,333

              Total current assets .....................................................     3,184,537

FIXED ASSETS:
         Leasehold improvements ........................................................         7,270
         Office equipment ..............................................................         4,350
         Automobile ....................................................................        21,919
         Accumulated depreciation and amortization .....................................        (6,558)
                                                                                           -----------
              Net fixed assets .........................................................        26,981

OTHER ASSETS ...........................................................................        57,786
         Total assets ..................................................................   $ 3,269,304


LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
-------------------------------------------------

CURRENT LIABILITIES:
         Accounts payable ..............................................................   $    12,255
         Accrued expenses ..............................................................        49,766
                                                                                           -----------
              Total current liabilities ................................................        62,021
              Total liabilities ........................................................        62,021
                                                                                           -----------
COMMITMENTS AND CONTINGENCIES (Note 11)

STOCKHOLDERS' EQUITY (DEFICIENCY):
         Preferred stock, $.001 par value; 2,000,000 shares authorized, no shares issued
           or outstanding ..............................................................          --
         Common stock, $.001 par value; 40,000,000 shares authorized, 9,566,668
           shares issued and outstanding ...............................................         9,567
         Additional paid-in capital ....................................................     9,895,286
         Deficit accumulated during the development stage ..............................    (6,697,570)
                                                                                           -----------
              Total stockholders' equity ...............................................     3,207,283
                                                                                           -----------
              Total liabilities and stockholders' equity ...............................   $ 3,269,304
                                                                                           ===========

The accompanying notes are an integral part of this balance sheet.

</TABLE>

                                       F-3

<PAGE>

<TABLE>
<CAPTION>

                      INTERNATIONAL DISPENSING CORPORATION

                          (a development stage company)

                            STATEMENTS OF OPERATIONS

                                                                                                                         Cumulative
                                                                                                                     from Inception
                                                                                                                 (October 10, 1995)
                                                                                                                            Through
                                                                              Years Ended December 31                   December 31,
                                                                             1997                   1996                       1997
                                                                        -----------             -----------             -----------

REVENUES                                                                $      --               $      --               $       --

<S>                                                                       <C>                     <C>                     <C>
COSTS AND EXPENSES:
  General and administrative ...............................              1,328,411               1,039,071               2,612,250
  Depreciation and amortization ............................                  4,516                   1,162                   6,560
                                                                        -----------             -----------             -----------
         Total costs and expenses ..........................              1,332,927               1,040,233               2,618,810
                                                                        -----------             -----------             -----------
         Loss from operations ..............................             (1,332,927)             (1,040,233)             (2,618,810)

INTEREST EXPENSE ...........................................                   --                   (62,520)                (66,665)

INTEREST INCOME ............................................                187,836                  50,069                 237,905
         Net loss before
         extraordinary loss ................................             (1,145,091)             (1,052,684)             (2,447,570)

EXTRAORDINARY LOSS ON
  RETIREMENT OF DEBT .......................................                   --                  (250,000)               (250,000)
                                                                        -----------             -----------             -----------
         Net loss ..........................................            $(1,145,091)            $(1,302,684)            $(2,697,570)
                                                                        ===========             ===========             ===========

BASIC LOSS PER SHARE BEFORE
EXTRAORDINARY ITEM .........................................            $      (.12)            $      (.15)

BASIC EXTRAORDINARY LOSS
PER SHARE ..................................................            $      --               $      (.03)
                                                                        -----------             -----------

BASIC LOSS PER SHARE .......................................            $      (.12)            $      (.18)
                                                                        ===========             ===========

BASIC WEIGHTED AVERAGE
SHARES OUTSTANDING .........................................              9,566,668               7,161,004
                                                                        ===========             ===========

DILUTED LOSS PER SHARE
  BEFORE EXTRAORDINARY
  ITEM .....................................................            $      (.12)            $      (.15)

DILUTED EXTRAORDINARY
  LOSS PER SHARE ...........................................            $      --               $      (.03)
                                                                        -----------             -----------

DILUTED LOSS PER SHARE .....................................            $      (.12)            $      (.18)
                                                                        ===========             ===========

DILUTED WEIGHTED AVERAGE ...................................              9,566,668               7,161,004
  SHARES OUTSTANDING                                                    ===========             ===========


The accompanying notes are an integral part of these statements.
</TABLE>

                                       F-4

<PAGE>

<TABLE>
<CAPTION>

                      INTERNATIONAL DISPENSING CORPORATION
                          (a development stage company)
                            STATEMENTS OF CASH FLOWS


                                                                                                                         Cumulative
                                                                                                                     from Inception
                                                                                                                 (October 10, 1995)
                                                                                                                            Through
                                                                                  Years Ended December 31               December 31,
                                                                                1997                   1996                    1997
                                                                              -----------          -----------          -----------

<S>                                                                           <C>                  <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss ..........................................................         $(1,145,091)         $(1,302,684)         $(2,697,570)
  Adjustments to reconcile net loss to net cash used
    in operating activities --
         Depreciation and amortization ..............................               4,514                1,162                6,558
         Noncash compensation .......................................                --                   --                 76,238
         Loss on retirement of debt .................................                --                250,000              250,000
         Changes in operating assets and liabilities --
           Decrease (increase) in prepaid expenses ..................              49,500              (95,833)             (46,333)
           Decrease (increase) in other assets ......................              37,975              (81,084)             (51,986)
           (Decrease) increase in accrued expenses ..................             (67,993)              71,953               49,766
           Increase in accounts payable .............................              12,255                 --                 12,255
                                                                              -----------          -----------          -----------
              Net cash used in operating activities .................          (1,108,840)          (1,156,486)          (2,401,072)
                                                                              -----------          -----------          -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of fixed assets ..........................................             (21,919)              (2,795)             (33,539)
  Purchase of license ...............................................                --             (3,649,739)          (4,000,000)
                                                                              -----------          -----------          -----------
         Net cash used in investing activities ......................             (21,919)          (3,652,534)          (4,033,539)
                                                                              -----------          -----------          -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from private placement ...................................                --              1,750,000            2,100,000
  Proceeds from issuance of convertible debt ........................                --                   --                150,000
  Repayment of promissory notes .....................................                --               (300,000)            (300,000)
  Repayment of bridge loans .........................................                --             (1,050,000)          (1,050,000)
  Repayment of convertible debt .....................................                --               (100,000)            (100,000)
  Proceeds from initial public offering .............................                --              8,772,815            8,772,815
                                                                              -----------          -----------          -----------
         Net cash provided by financing
           activities ...............................................                --              9,072,815            9,572,815
                                                                              -----------          -----------          -----------
         Net (decrease) increase in cash and
           cash equivalents .........................................          (1,130,759)           4,263,795            3,138,204

CASH AND CASH EQUIVALENTS, beginning of
  year ..............................................................           4,268,963                5,168                 --
                                                                              -----------          -----------          -----------

CASH AND CASH EQUIVALENTS, end of year ..............................         $ 3,138,204          $ 4,268,963          $ 3,138,204
                                                                              ===========          ===========          ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW
  INFORMATION:
         Cash paid for interest .....................................         $      --            $    66,665          $    66,665

NONCASH INVESTING AND FINANCING
  ACTIVITIES:
         Issuance of common stock ...................................         $      --            $      --            $     5,800
         Purchase of license from affiliate .........................                --                   --            $ 4,000,000

The accompanying notes are an integral part of these statements.

</TABLE>

                                       F-5

<PAGE>

<TABLE>
<CAPTION>

                      INTERNATIONAL DISPENSING CORPORATION

                          (a development stage company)

           STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

                FOR THE PERIOD FROM OCTOBER 10, 1995 (INCEPTION)

                        THROUGH DECEMBER 31, 1995 AND THE

                     YEARS ENDED DECEMBER 31, 1997 AND 1996


                                                                                                         Deficit
                                                                                                        Accumulated          Total
                                                                                      Additional        During the     Stockholders'
                                                            Common Stock                Paid in         Development         Equity
                                                      Shares            Amount          Capital            Stage           (Deficit)
                                                  -----------      -----------      -----------       -----------       -----------
<S>                                                 <C>                  <C>            <C>            <C>               <C>
BALANCE, October 10, 1995
  (inception) ..............................             --        $      --        $      --         $      --         $      --
  Issuance of common stock
    pursuant to License
    Agreement ..............................        2,900,000            2,900             --                --               2,900
  Issuance of common stock
    pursuant to Settlement
    Agreement ..............................        1,950,000            1,950             --                --               1,950
  Issuance of common stock to
    management .............................          950,000              950           76,238              --              77,188
  Purchase of License from
    Affiliate ..............................             --               --               --          (4,000,000)       (4,000,000)
  Issuance of common stock in
    private placement ......................           87,500               88           43,662              --              43,750
  Issuance of common stock
    rights in private placement ............             --               --            131,250              --             131,250
  Net loss .................................             --               --               --            (249,795)         (249,795)
                                                  -----------      -----------      -----------       -----------       -----------

BALANCE, December 31, 1995 .................        5,887,500            5,888          251,150        (4,249,795)       (3,992,757)
  Issuance of common stock in
    private placement ......................          437,500              437          218,313              --             218,750
  Issuance of common stock
    rights in private placement ............             --               --            656,250              --             656,250
  Issuance of common stock to
    bridge lenders .........................        1,575,000            1,575           (1,575)             --                --
  Issuance of common stock in
    public offering, net of
    issuance costs of $1,227,193 ...........        1,666,668            1,667        8,771,148              --           8,772,815
  Net loss .................................             --               --               --          (1,302,684)       (1,302,684)
                                                  -----------      -----------      -----------       -----------       -----------

BALANCE, December 31, 1996 .................        9,566,668            9,567        9,895,286        (5,552,479)        4,352,374

  Net loss .................................             --               --               --          (1,145,091)       (1,145,091)
                                                  -----------      -----------      -----------       -----------       -----------

BALANCE, December 31, 1997 .................        9,566,668      $     9,567      $ 9,895,286       $(6,697,570)      $ 3,207,283
                                                  ===========      ===========      ===========       ===========       ===========


The accompanying notes are an integral part of these statements.

</TABLE>

                                       F-6

<PAGE>

                      INTERNATIONAL DISPENSING CORPORATION

                          (a development stage company)

                          NOTES TO FINANCIAL STATEMENTS


1. THE COMPANY AND ORGANIZATION

International  Dispensing Corporation,  formerly known as ReSeal Food Dispensing
Systems,  Inc. (the  "Company"),  was  incorporated  in the State of Delaware in
October 1995 and is in the development  stage.  The Company was formed primarily
for the  purpose  of  commercializing  and  marketing  certain  proprietary  and
patented delivery and dispensing technologies (the "Technologies") licensed from
ReSeal  International  Corporation  ("RIC").  The  Technologies  are designed to
dispense a flowable product while  maintaining the product's  sterility,  purity
and freshness without employing preservatives.

The  Company is subject to a number of risks  including  the  Company's  lack of
prior  operating  history.  The Company is also subject to the  availability  of
sufficient financing to meet its future cash requirements and the uncertainty of
future  product  development  and regulatory  approval and market  acceptance of
existing and proposed products. In the event of bankruptcy of RIC, the status of
the  continuing  obligations  of the  various  parties to and under the  License
Agreement  (Note 4) is unclear since a court in a bankruptcy  proceeding may not
enforce such continuing  obligations.  Additionally,  other risk factors such as
loss  of key  personnel,  lack  of  manufacturing  capabilities,  difficulty  in
establishing  new  intellectual  property  rights and  preserving  and enforcing
existing intellectual property rights as well as product obsolescence due to the
development  of competing  technologies  could impact the future  results of the
Company.

2. SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents

Cash and cash  equivalents  consist of cash in banks,  as well as highly  liquid
investments with original maturities of less than three months.

Fixed Assets

Furniture  and  equipment  are  recorded  at  cost  and  are  depreciated  on  a
straight-line  basis over their  estimated  useful lives,  generally five years.
Leasehold  improvements  are recorded at cost and amortized over the term of the
lease or life of the asset, whichever is shorter.

Patents

Costs to develop patents are expensed when incurred.

Income Taxes

Income  taxes are  accounted  for in  accordance  with  Statement  of  Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." Under this
method,  deferred income taxes are determined  based on differences  between the
tax bases of assets and  liabilities and their  financial  reporting  amounts at
each year-end and are measured  based on enacted tax rates and laws that will be
in effect when the differences are expected to reverse. Valuation allowances are
established,  when  necessary,  to reduce  deferred  tax  assets  to the  amount
expected to be realized.


                                       F-7

<PAGE>

Net Loss Per Share

Effective  for the year ended  December 31, 1997,  the Company  adopted SFAS No.
128,   "Earnings  per  Share."  The  adoption  of  SFAS  No.  128  requires  the
presentation of Basic Earnings per Share and Diluted  Earnings per Share.  Basic
Earnings per Share is based on the average  number of common shares  outstanding
during the year.  Diluted  Earnings per Share is based on the average  number of
common  shares  outstanding  during the year plus the common  share  equivalents
related to  outstanding  stock  options and  deferred  contingent  common  stock
awards. There were no common share equivalents  outstanding at December 31, 1997
and 1996,  that would have a dilutive  effect on earnings  for those  respective
years.  As required by SFAS No. 128,  the 1996 net loss per share  amounts  have
been restated to comply with the standard.

Use of Estimates

The presentation of financial  statements in conformity with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial  statements and accompanying notes.
Although these estimates are based on  management's  knowledge of current events
and actions it may  undertake  in the future,  they may  ultimately  differ from
actual results.

Recently Issued Accounting Standards

In June 1997, SFAS No. 130, "Reporting  Comprehensive Income," and SFAS No. 131,
"Disclosures  about  Segments of an Enterprise  and Related  Information,"  were
issued and are effective for periods beginning after December 15, 1997. SFAS No.
130 establishes standards for reporting comprehensive income and its components.
SFAS No. 131  establishes  standards  for reporting  financial  and  descriptive
information  regarding  an  enterprise's  operating  segments.  These  standards
increase  financial  reporting  disclosures  and  will  have  no  impact  on the
Company's financial position or results of operations.

3. INITIAL PUBLIC OFFERING

In October 1996, the Company sold, in an initial public offering,  833,334 units
(the  "Units"),  each Unit  consisting  of two  shares  of Common  Stock and two
redeemable Class A purchase  warrants for $12.00 per Unit. Each warrant entitles
the  holder  to  purchase  one  share of the  Company's  Common  Stock for $7.00
commencing  October  3, 1997 and  expiring  October 3, 2001.  The  warrants  are
redeemable by the Company at $.05 per warrant any time after October 3, 1998, if
certain conditions are met. The net proceeds which the Company received from the
offering amounted to approximately $8,800,000.

4. LICENSE AGREEMENT

In October 1995, the Company entered into a License  Agreement (the "Agreement")
with RIC,  which was  amended on June 17,  1996,  pursuant  to which the Company
obtained the right to commercialize and market the Technologies to third parties
for its implementation in the food and beverage industries. The Technologies are
licensed  by RIC from  its  parent,  Reseal  International  Limited  Partnership
("RILP").  The  Agreement  is  royalty  free and  allows  the  Company  to grant
sublicenses  to third  parties.  Pursuant to the  Agreement,  the Company issued
2,900,000  shares  of its  common  stock  to RIC  and  paid  $750,000  upon  the
completion  of a  private  placement  (Note  5) and  the  remaining  balance  of
$3,250,000 upon the completion of the initial public offering (Note 3). The cash
paid to RIC and the  common  stock  issued  for this  acquisition  were  charged
directly to stockholders'  equity and therefore not reflected as an asset on the
Company's   Balance  Sheet.   The  Agreement   terminates  at  the  end  of  the
Technologies' useful economic life.


                                       F-8

<PAGE>

5. PRIVATE PLACEMENT

The Company was involved in a private placement ("Bridge Financing"). The Bridge
Financing  consisted of promissory  notes,  common shares,  and rights  ("Bridge
Options") to acquire Units  identical in form to the IPO Units.  The  promissory
notes bore interest at 8% per annum and were due and paid upon completion of the
IPO.  Upon  completion  of the Bridge  Financing,  the Company  had  received an
aggregate of $2,100,000 in  consideration  for  $1,050,000 in promissory  notes,
525,000 common shares and rights to obtain  787,500  Units.  In August 1996, the
Company  amended  the Bridge  Financing  agreements  so that the  787,500  Units
underlying  the Bridge Options were deemed  outstanding.  As part of the initial
public  offering,  the 787,500 Units issued in the Bridge  Financing,  which are
identical to those Units issued in the Company's IPO, were registered.

6. SETTLEMENT AGREEMENT

In October 1995, in connection  with a settlement of actions and claims  against
certain affiliates of RIC, the licensor of the Technologies,  the Company agreed
to issue (i)  2,900,000  shares of common  stock to RIC as partial  compensation
under the License  Agreement,  (ii) an aggregate  of 1,500,000  shares of common
stock  (the  "Investor  Shares")  to  certain  investors  in RILP,  and (iii) an
aggregate of 450,000 shares of common stock to certain  individuals for services
rendered equal to the par value of such shares.  Of the 1,500,000 shares issued,
552,000 were issued to individuals who are now members of the board of directors
and of the 450,000  shares  issued,  161,000  were issued to current  members of
management and the board of directors.

Pursuant to such settlement,  the holders of the Investor Shares may require the
Company to file a Registration  Statement  under the Securities Act with respect
to 25% of such shares of common  stock,  commencing  one year from the effective
date  of  the  Company's  IPO  (Note  3),  subject  to  certain  conditions  and
limitations.  Further,  if the Company proposes to register any shares of common
stock under the Securities Act other than pursuant to an initial public offering
or the previous  sentence,  then the holders of the Investor Shares are entitled
to  include  an  additional  25%  of  their  shares  of  common  stock  in  such
registration.

7. CONVERTIBLE PROMISSORY NOTES

During  1995,  two  convertible  promissory  notes were issued for  $100,000 and
$50,000  (the  "Convertible  Notes") and were due on April 15, 1996 and December
20, 1996, respectively. These notes bore interest at 8% and each was convertible
at any time  prior to the  maturity  date of the  notes  into  1,200,000  common
shares,  subject to adjustments.  The $100,000 note (the "Portenoy  Note") would
have converted at a price of $.084 per common share, subject to adjustments, and
the $50,000 note (the "ATG Note")  would have  converted at a price of $.042 per
common share, subject to adjustments.

On April 15, 1996,  the Portenoy  Note came due and was paid by the Company.  On
June 28, 1996, in accordance  with an agreement with the Company,  the holder of
the ATG Note,  which would have come due on December 20, 1996 and  contained the
right to convert  into 1.2 million  shares of common  stock,  agreed to transfer
such note to the Company for  cancellation in return for the Company agreeing to
pay it  $300,000.  The  amounts  owed  by the  Company  to  the  holders  of the
Convertible  Notes were paid out of the  proceeds  of the IPO.  The  Company has
recorded an  extraordinary  loss on  retirement of debt of $250,000 for the year
ended December 31, 1996.

8. MANAGEMENT SHARES

In 1995,  the Company issued an aggregate of 950,000 shares to management at par
as compensation for services rendered in incorporating the Company.  Such shares
were issued at fair market value of the


                                       F-9

<PAGE>

Company's common stock, which was determined based upon the fair market value of
the private  placement shares (Note 5) and the Convertible  Notes. The statement
of operations for the period from inception  through  December 31, 1997 reflects
approximately $76,000 of compensation expense related to such shares.

9. RELATED PARTY TRANSACTIONS

Until June 1997,  the  Company  shared  office  space  with  certain  affiliated
companies,  including  RIC and RILP.  The Company  also paid  certain  operating
expenses,  including  compensation of key personnel,  on behalf of RIC and RILP.
The Company was reimbursed for these expenses as an offset against the liability
related to the Agreement (Note 4) in the Company's  balance sheet as of December
31,  1996.  Beginning in May 1997,  the Company  began paying the entire cost of
obtaining and maintaining  patents, a cost which was to be shared equally by the
Company and RIC, according to the Agreement.  Until the Company is reimbursed by
RIC for 100% of these costs, RIC cannot utilize the patents for any purpose.  If
RIC does not  reimburse  the Company  within one year from the date each payment
was made,  RIC must negotiate a fee with the Company for the use of such patents
for any purpose.

As of December  31, 1997,  the Company has a receivable  due from RIC related to
operating  expenses,  rent  expense and patent  costs in the amount of $111,199,
which has been fully  reserved  due to the  inability  of RIC to  reimburse  the
Company in the foreseeable future.

For the years ended December 31, 1997 and 1996, the Company paid consulting fees
to members of  management  in the  aggregate  amount of  $73,000  and  $209,000,
respectively.

10. INCOME TAXES

As a result of losses incurred since inception, there is no provision for income
taxes in the  accompanying  financial  statements.  As of December 31, 1997, the
Company has net deferred tax assets of approximately  $1.1 million.  The Company
has established a full valuation allowance against those net deferred tax assets
as  realizability  of such  assets  is  predicated  upon the  Company  achieving
profitability.  In addition,  the use of net operating loss carryforwards may be
limited as a result of ownership changes resulting from share issuances.

11. COMMITMENTS AND CONTINGENCIES

     (a) Lease

     The Company  leases  office space under a  noncancelable  operating  lease,
expiring on February 29, 2000.  Rental  expense for the years ended December 31,
1997 and 1996 was  $64,928  and  $90,157,  respectively.  Future  minimum  lease
payments under this lease agreement are $63,510.

     (b) Employment Agreements

     The  Company  entered  into an  employment  agreement  with Jon  Silverman,
President and CEO,  dated January 17, 1997,  for the period from October 3, 1996
(the  effective  date of the Company's  registration  statement) to December 31,
1999.  Pursuant to such employment  agreement,  Mr. Silverman receives a monthly
salary of $15,000.  In addition,  the Company is obligated to pay the premium on
his $1,000,000 life insurance  policy, to which Mr. Silverman will designate the
beneficiary.  He is also entitled to customary benefits and perquisites.  In the
case that Mr. Silverman's  employment is terminated by the Company without cause
or for  disability,  or if Mr.  Silverman  leaves the employ of the  Company for
"good reason" (defined in the agreement to include, among other things, a change
in control of the Company or the removal of Mr.  Silverman  from his position as
the Chairman of the Board,  President  and Chief  Executive  Officer),  then Mr.
Silverman shall also be entitled to receive in cash within 10 days after such


                                      F-10

<PAGE>

termination an amount equal to the greater of (i) one year's basic salary at the
highest rate paid to him during the term of his  employment  under the agreement
or (ii) the  basic  salary  that  would  have  been  paid to him had the term of
employment ended on December 31, 1999 calculated at the highest rate paid to him
during the term of his employment under the agreement.

     (c) Consulting Agreement

     On March 5, 1996, the Company entered into an agreement with Nologies, Inc.
("Nologies")  under which  Nologies will assist in the directing and managing of
product and technology  development,  licensing and strategic  alliance pursuits
and other related services in the areas of food and beverage dispensing systems.
The term of such  agreement  extends to February  28,  1999.  The  Company  pays
Nologies $8,000 per month plus expenses.

12. SETTLEMENT OF LAWSUIT

In May 1996, in  connection  with the  settlement of a lawsuit  brought by Banco
Inversion, S.A. and Administratadora General de Patrimonios, S.A. (collectively,
"Banco")  against  certain  affiliates  of RIC,  RIC entered  into an  agreement
pursuant to which it agreed, among other things, (i) to transfer an aggregate of
300,000 of its shares of common stock (the "Settlement  Shares") to Banco,  (ii)
to pay Banco $50,000 at the closing of such  settlement  and $150,000 out of the
licensing  fees RIC receives  from the proceeds of the IPO and (iii) to exchange
mutual releases with the parties of such lawsuit.

The number of Settlement Shares,  subject to certain  antidilution  adjustments,
may be  increased  up to 600,000  shares in the event  that 30 months  after the
effective  date of the  registration  statement  the market value of the 300,000
Settlement Shares is less than $2,800,000.

The Company has granted to the holders of such Settlement  Shares,  the right to
register  such shares  along with shares  registered  by the Company in a public
offering,  whether on behalf of the  Company or other  holders of common  stock,
subject  to  customary  market  factor  limitations.  Such  registration  rights
terminate upon the earlier of (i) the date that all Settlement  Shares have been
either  registered  or sold,  or (ii) the date that all such  shares may be sold
pursuant to Rule 144(k) under the Securities Act.

13. BUSINESS DEVELOPMENTS

In October 1997, a strategic alliance was formed with Packaging Systems,  L.L.C.
(PSI),  the parent company of Rapak,  Inc. The resulting  products of this Joint
Systems  Development  Agreement will be a variety of Bag-in-Box delivery systems
with unique Valve/Pump Technology for the food and beverage industries.
These systems will be marketed throughout the United States.

On December  23,  1997,  the Company  entered  into an  agreement  with Well Men
Industrial  Company Limited,  a Hong Kong registered  corporation  ("Well Men"),
pursuant to which Well Men granted to the Company an  exclusive  right to market
and sell in China  certain  Well Men  products.  Well Men also  assigned  to the
Company for the purpose of commercializing  such Well Men products,  all of Well
Men's patents and patent  applications  relating to such Well Men products.  The
agreement  is for an  initial  term of ten  years.  The  Company  has  opened  a
representative  office in China to promote  the sales of these  products  and to
establish  the name of the Company.  Operations  commenced in March,  1998.  The
Company incurred  $125,000 during fiscal 1997 in connection with the start up of
the  representative  office.  These  expenses  have been included in general and
administrative  expenses on the Company's  statement of operations  for the year
ended December 31, 1997.

                                      F-11

<PAGE>


ITEM 8.   Changes  in and  Disagreements  with  Accountants  on  Accounting  and
          Financial Disclosure.

          Not applicable.


                                    PART III

ITEM 9.   Directors,   Executive   Officers,   Promoters  and  Control  Persons;
          Compliance with Section 16(a) of the Exchange Act.

          As of March 23, 1998,  the  executive  officers  and  directors of the
Company are as follows:

          Name               Age              Position(s)
          ----               ---              -----------

   Jon D. Silverman           57       Chairman, President, Chief Executive
                                       Officer and Director

   Jeffrey D. Lewenthal       54       Chief Financial Officer, Executive Vice
                                       President of Business Development,
                                       Treasurer and Secretary

   David W. Brenman           41       Director
   George V. Kriste           50       Director
   Gregory B. Abbott          47       Director


     Jon D. Silverman has served as Chairman, President, Chief Executive Officer
and a director  of the  Company  since  November  1996,  and prior  thereto as a
consultant to the Company since its  inception.  Since 1980 he has served as the
principal of Tilis Products,  Inc., his own specialized  international  business
consulting,  mergers and acquisitions firm (including  capital formation) in the
food,  beverages and other  consumer  products and services  industries.  He has
served on the Board of Trustees of the United Hospital,  Port Chester, New York,
for the past 15 years (he is currently an Honorary  Trustee) and for a number of
years, prior to May 1995, had served as Vice Chairman thereof;  is a director of
Pastificio  Gazzola,  Mondovi,  Italy,  a  leading  pasta  exporter;  and a past
director of Combined  Moretti/Prinz Brau Breweries, a subsidiary of John Labatt,
Ltd.

     Jeffrey D.  Lewenthal  has served as Executive  Vice  President of Business
Development  and Chief  Financial  Officer of the  Company  since March 1997 and
Secretary and  Treasurer of the Company  since June 1997.  From March 1996 until
joining the Company in March 1997 he was Vice  President/Regional  Director  for
Westar Linen Services,  Inc., a company providing linen services to the hospital
industry. From 1995 to 1996, Mr. Lewenthal was General Manager,  Western Region,
for Brink's  Incorporated,  a company  providing  security services to financial
institutions.  From 1993 to 1995,  he was Region  Chief  Operating  Officer  for
Loomis  Armored,  Inc.,  a security  service  provider to  financial  and retail
customers.  Prior to that,  Mr.  Lewenthal  held  various  international  senior
executive positions with PepsiCo and the Seven-Up division of Philip Morris.

     David W.  Brenman has been a director of the Company  since its  inception,
had served as President of the Company from its inception  through November 1996
and Treasurer of the Company from its inception  until June 1997. He also served
as a member of the Executive Committee, Chief Financial Officer and Treasurer of
RIC from May 1993  through  September  1996 and has been a director of RIC since
May 1993. Mr. Brenman has been a self-employed attorney and financial consultant
since 1988.


                                       14

<PAGE>

     George V.  Kriste has served as a director  of the  Company  since  October
1995. He has been the Chairman and Chief Executive Officer of New Century Media,
a radio station owner, since January 1992.

     Gregory B.  Abbott has served as a director of the  Company  since  October
1995.  Mr.  Abbott has been a private  investor  and a writer for more than five
years.

     No family  relationship  exists between any directors or executive officers
of the Company.


Section 16(a) Beneficial Ownership Reporting Compliance

     Section  16(a) of the  Securities  Exchange  Act of 1934,  as amended  (the
"Exchange Act"),  requires the Company's directors and executive  officers,  and
persons  who own more  than  ten  (10%)  percent  of a  registered  class of the
Company's equity securities, to file with the Securities and Exchange Commission
(the  "Commission")  initial  reports  of  ownership  and  reports of changes in
ownership of Common Stock and other equity securities of the Company.  Reporting
persons  are  required by  Commission  regulations  to furnish the Company  with
copies of all Section 16(a) forms they file.

     To the  Company's  knowledge,  based solely on review of the copies of such
reports furnished to the Company,  no persons failed to file, on a timely basis,
reports  required  by Section  16(a) of the  Exchange  Act for any  transactions
occurring during Fiscal 1997.


ITEM 10. Executive Compensation.

Summary Compensation Table

     The  following  table  sets  forth  for the three (3)  fiscal  years  ended
December 31, 1997,  information  concerning the compensation  paid or accrued to
the Chief Executive Officer of the Company.  As of December 31, 1997, there were
no other persons  serving as executive  officers of the Company whose salary and
bonus for Fiscal 1997 exceeded $100,000.

<TABLE>
<CAPTION>

                              Annual Compensation                            Long-Term Compensation
                 -----------------------------------------------      --------------------------------------
                                                    Other Annual
Name and                                               Compen-        Restricted    Securities     All Other
Principal          Fiscal                              sation            Stock      Underlying     Compensa-
Position            Year     Salary($)     Bonus($)    ($)(1)          Awards($)    Options(#)      tion($)

<S>                 <C>       <C>          <C>         <C>              <C>           <C>          <C>
Jon Silverman       1997      $187,500        -           -                -             -         $4000(2)
Chairman, CEO       1996      $144,000        -           -                -             -             -
and President       1995      $ 36,000        -           -                -             -             -

<FN>
(1)      The aggregate amount of perquisites and other personal benefits paid to
         Mr.  Silverman  did not exceed the lesser of (i) 10% of such  officer's
         total  annual  salary  and  bonus for any  given  fiscal  year and (ii)
         $50,000. Thus, such amounts are not reflected in the table.

(2)      Represents the premiums paid on a $1,000,000 term life insurance policy
         as to which Mr. Silverman may designate the beneficiary.

</FN>
</TABLE>

                                       15

<PAGE>

Employment and Non-Compete Agreements

     The Company has entered into an employment  agreement  with Jon  Silverman,
dated as of January 17, 1997,  which  expires on December 31, 1999.  Pursuant to
such agreement,  Mr. Silverman receives a base salary of $180,000.  In addition,
if Mr. Silverman is insurable,  the Company is obligated to pay the premium on a
$1,000,000 term life insurance policy, to which Mr. Silverman will designate the
beneficiary.  Under the agreement,  Mr.  Silverman also is entitled to customary
benefits and perquisites.

     Mr.  Silverman's  employment  agreement  may be  terminated  by the Company
sooner than December 31, 1999 in the case of his "disability" or "for cause" (as
such terms are  defined in the  agreement).  If Mr.  Silverman's  employment  is
terminated  for any  reason  he shall  receive  his  basic  salary  through  the
effective  date of  termination.  If his  employment  is  terminated  due to his
disability or without cause by the Company or if Mr. Silverman leaves the employ
of the Company for "good  reason"  (defined in the  agreement to include,  among
other things, a change in control of the Company or the removal of Mr. Silverman
from his position as the Chairman of the Board,  President  and Chief  Executive
Officer), then Mr. Silverman shall also be entitled to receive in cash within 10
days after such  termination  an amount  equal to the  greater of (i) one year's
basic salary at the highest  rate paid to him during the term of his  employment
under the  agreement  or (ii) the basic  salary that would have been paid to him
had the term of employment  ended on December 31, 1999 calculated at the highest
rate paid to him during the term of his employment under the agreement.


Compensation of Directors

     Non-employee  directors of the Company are reimbursed for reasonable travel
and lodging  expenses  incurred in attending  meetings of the Board of Directors
and any committees on which they may serve.  Directors do not presently  receive
any fees for attendance or participation at Board or committee meetings.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The  following  table sets forth certain  information  known to the Company
regarding beneficial ownership of the Common Stock as of March 23, 1998, for (i)
each  person or group that is known by the Company to be a  beneficial  owner of
more than 5% of the outstanding shares of Common Stock, (ii) the Chief Executive
Officer and each director of the Company,  and (iii) all directors and executive
officers of the Company as a group. Except as otherwise  indicated,  the Company
believes that such  beneficial  owners,  based on information  furnished by such
owners,  have sole  investment  and voting  power with  respect to such  shares,
subject to community  property laws, where applicable.  No directors or officers
own any Class A Warrants or IPO Units,  nor, to the  knowledge  of the  Company,
does any person hold more than 5% of such securities.


      Name and Address                                             Percent of
    Of Beneficial Owner (1)              Number of Shares          Class (2)(3)
    -------------------                  ----------------          -----

Reseal International Corporation              2,225,000             23.3%
c/o The ReSeal Companies
599 Lexington Avenue, 23rd Floor
New York, New York 10022


                                       16

<PAGE>


Jon Silverman                                   600,000             6.3%
c/o International Dispensing
 Corporation
2500 Westchester Avenue
Suite 304
Purchase, New York 10577


Gregory Abbott                                1,000,927            10.5%
1200 Kessler Drive
Aspen, CO 81611


David Brenman                                   253,000(3)          2.6%


George Kriste                                   280,000             2.9%


All directors and executive officers          2,133,927(3)         22.3%
as a group (5 persons)


(1)  Address provided for beneficial owners of more than 5% of the Common Stock.

(2)  For purposes of computing the  percentage of  outstanding  shares of Common
     Stock held by each person or group of persons  named  above,  any  security
     which such  person or persons  have or have the right to acquire  within 60
     days is deemed to be outstanding  but is not deemed to be  outstanding  for
     the purpose of computing the percentage ownership of any other person.

(3)  Includes  200,000  shares  of  Common  Stock  owned of  record  by  Venture
     Financial Limited Partnership, a limited partnership.  David Brenman is the
     sole  shareholder of Venture  Financial,  Inc., the General Partner of such
     limited partnership.


ITEM 12.  Certain Relationships and Related Transactions.

     In October 1996, Stratton Oakmont,  Inc. ("Stratton  Oakmont") acted as the
underwriter  of the IPO pursuant to an  underwriting  agreement with the Company
(the "Underwriting Agreement").  On January 29, 1997, the United States District
Court Judge for the Southern District of New York, entered an order which, inter
alia, appointed Harvey R. Miller, Esq. (the "Trustee") to liquidate the business
of Stratton Oakmont pursuant to the Securities  Investor  Protection Act of 1970
(the  "Liquidation  Proceeding").  As part of such Liquidation  Proceeding,  the
Trustee and the Company entered into a Sale and Assignment Agreement dated as of
November 19, 1997 (the "Sale and Assignment Agreement").

     Pursuant to the Sale and Assignment Agreement the Trustee agreed to sell to
the  Company or to no more than ten  qualified  designees  of the  Company  (the
"Designees"),  (a) on the closing date an  aggregate  number of shares of Common
Stock of the Company  equal to or greater than 995,705  shares minus (1) 176,778
shares,  retained by another person pursuant to a certain  settlement  agreement
with the Trustee and (2) 200,000  shares and (b) all of the remaining  shares of
Common  Stock held by the Trustee on or prior to the first  business day that is
180 days  after the  closing  date.  The  Trustee  also  agreed to assign to the
Company on the closing date all of Stratton  Oakmont's right, title and interest
in, to and under the Underwriting Agreement,  including, without limitation, (i)
all of its right,  title and interest in, to and under its option to purchase up
to an aggregate of 83,333 IPO Units for a purchase price of $.001 per underlying
IPO Unit (the  "Underwriter's  Purchase Option"),  (ii) its rights to enforce an
agreement by certain  stockholders  not to sell Common Stock for a period of two
years after the effective date of the registration statement relating to the IPO
(the  "Effective  Date"),  and (iii) its rights to enforce the  agreement by the
Company not to issue new stock (except in connection with dividends or similar


                                       17

<PAGE>

transactions)  for  a  period  of  two  years  after  the  Effective  Date.  The
Underwriter's  Purchase Option was exercisable for a term of twelve months after
the  Effective  Date.  Pursuant to the Sale and  Assignment  Agreement,  Mr. Jon
Silverman,  the Chairman,  President and Chief Executive Officer of the Company,
and Messrs.  Gregory Abbott and George Kriste, each of whom is a director of the
Company,  purchased from the Trustee for $0.60 per share, 100,000,  367,927, and
150,000  shares of Common Stock,  respectively.  Each of such persons has agreed
not to sell the shares he purchased for a period of two years.


ITEM 13.  Exhibits, List and Reports on Form 8-K.

Exhibits

Exhibit No.

3.1       Restated  Certificate of Incorporation  of the Registrant,  as amended
          (incorporated  herein by reference to Exhibit 3.1 to the  Registrant's
          Registration  Statement on Form SB-2  (Registration No. 333-7915) (the
          "Form SB-2")).

3.2       Certificate  of  Amendment  to  the   Certificate   of   Incorporation
          (incorporated herein by reference to Exhibit 3.2 to the Form SB-2).

3.3       By-laws  of  the  Registrant,   as  amended  (incorporated  herein  by
          reference to Exhibit 3.3 to the Form SB-2).

4.1       Specimen Common Stock Certificate (incorporated herein by reference to
          Exhibit 4.1 to the Form SB-2).

4.2       Form of Class A Warrant Agreement (incorporated herein by reference to
          Exhibit 4.2 to the Form SB-2).

10.1      License  Agreement by and between the  Registrant and RIC, dated as of
          October 10,  1995,  as amended  (incorporated  herein by  reference to
          Exhibit 10.1 to the Form SB-2).

10.2      Agreement  by and between the  Registrant  and  Nologies,  dated as of
          March 5, 1996 (incorporated herein by reference to Exhibit 10.5 to the
          Form SB-2).

10.3      Form of Bridge Loan Agreement and Promissory Note (incorporated herein
          by reference to Exhibit 10.3 to the Form SB-2).

10.4      Form of Amendment  to Bridge Loan  Agreement  (incorporated  herein by
          reference to Exhibit 10.4 to the Form SB-2).

10.5      Settlement  Agreement,  dated as of  October  10,  1995,  by and among
          Hardee Capital Partners,  L.P., Louis Simpson,  Gregory Abbott, George
          Kriste, David Brenman, Gerald Gottlieb, Marc Gottlieb,  Joseph Koster,
          Greg Pardes, Linda Poit, ReSeal Food Dispensing Systems,  Inc., ReSeal
          International Limited Partnership,  Technologies & Advancements, Inc.,
          ReSeal International Corporation, ReSeal Pharmaceutical Systems, Ltd.,
          Milton Stanson, Hilda Brown, Ann Hoopes,  Townsend Hoopes, Robin Smith
          and Eugene Sumner (incorporated herein by reference to Exhibit 10.6 to
          the Form SB-2).


                                       18

<PAGE>

10.6      Amendment to the Agreement by and between the Registrant and Nologies,
          Inc., dated January 14, 1998.*

10.7      Employment  Agreement,  dated as of  January  17,  1997,  between  the
          Registrant  and Jon  Silverman  (incorporated  herein by  reference to
          Exhibit 10.9 to the Form 10-K for 1997).

10.8      Registration  Rights  Agreement dated May 8, 1996 by and between Banco
          Inversion, S.A., and the Company.*

10.9      Joint  Systems  Development  Agreement  entered  into as of October 1,
          1997, between the Company and Packaging.*

10.10     Sale and  Assignment  Agreement  dated as of November 19, 1997 between
          the Trustee and the Company.*

10.11     Agreement entered into as of December 23, 1997 between the Company and
          Well Men.*

10.12     Sublease dated November 5, 1997 between General Motors Corporation and
          the Company,  together  with Consent to Sublease  dated as of November
          12, 1997  between  East Ridge  Properties  I  Corporation  and General
          Motors Corporation.*

27        Financial Data Schedule*

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

* Filed herewith

Reports on Form 8-K

     No Form 8-K was filed by the  Company  within the fourth  quarter of Fiscal
1997.


                                       19

<PAGE>


                                   SIGNATURES

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

Dated:  March 31, 1998                       INTERNATIONAL DISPENSING
                                               CORPORATION



                                             By: /s/ Jon Silverman
                                                 -------------------------
                                                 Jon Silverman
                                                 Chairman, President and Chief
                                                 Executive Officer


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


Signature                                    Title                     Date


/s/ Jon Silverman          Chairman, President, Chief             March 31, 1998
----------------------     Executive Officer and Director
Jon Silverman              (Principal Executive
                           Officer)

/s/ Jeffrey Lewenthal      Chief Financial                        March 31, 1998
----------------------     Officer, Executive Vice President
Jeffrey Lewenthal          of Business Development (Princi-
                           pal Accounting and Financial Of-
                           ficer), Treasurer and Secretary


----------------------     Director
David Brenman

/s/ Gregory Abbott         Director                               March 31, 1998
----------------------
Gregory Abbott


/s/ George Kriste          Director                               March 31, 1998
----------------------
George Kriste



                                       20

<PAGE>


                      INTERNATIONAL DISPENSING CORPORATION

                          ANNUAL REPORT ON FORM 10-KSB
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

                                 EXHIBITS INDEX

                             Description of Exhibits

Exhibit No.

3.1       Restated  Certificate of Incorporation  of the Registrant,  as amended
          (incorporated  herein by reference to Exhibit 3.1 to the  Registrant's
          Registration  Statement on Form SB-2  (Registration No. 333-7915) (the
          "Form SB-2")).

3.2       Certificate  of  Amendment  to  the   Certificate   of   Incorporation
          (incorporated herein by reference to Exhibit 3.2 to the Form SB-2).

3.3       By-laws  of  the  Registrant,   as  amended  (incorporated  herein  by
          reference to Exhibit 3.3 to the Form SB-2).

4.1       Specimen Common Stock Certificate (incorporated herein by reference to
          Exhibit 4.1 to the Form SB-2).

4.2       Form of Class A Warrant Agreement (incorporated herein by reference to
          Exhibit 4.2 to the Form SB-2).

10.1      License  Agreement by and between the  Registrant and RIC, dated as of
          October 10,  1995,  as amended  (incorporated  herein by  reference to
          Exhibit 10.1 to the Form SB-2).

10.2      Agreement by and between the Registrant and Nologies,  Inc.,  dated as
          of March 5, 1996 (incorporated  herein by reference to Exhibit 10.5 to
          the Form SB-2).

10.3      Form of Bridge Loan Agreement and Promissory Note (incorporated herein
          by reference to Exhibit 10.3 to the Form SB-2).

10.4      Form of Amendment  to Bridge Loan  Agreement  (incorporated  herein by
          reference to Exhibit 10.4 to the Form SB-2).

10.5      Settlement  Agreement,  dated as of  October  10,  1995,  by and among
          Hardee Capital Partners,  L.P., Louis Simpson,  Gregory Abbott, George
          Kriste, David Brenman, Gerald Gottlieb, Marc Gottlieb,  Joseph Koster,
          Greg Pardes, Linda Poit, ReSeal Food Dispensing Systems,  Inc., ReSeal
          International Limited Partnership,  Technologies & Advancements, Inc.,
          ReSeal International Corporation, ReSeal Pharmaceutical Systems, Ltd.,
          Milton Stanson, Hilda Brown, Ann Hoopes,  Townsend Hoopes, Robin Smith
          and Eugene Sumner (incorporated herein by reference to Exhibit 10.6 to
          the Form SB-2).


                                       21

<PAGE>


10.6      Amendment to the Agreement by and between the Registrant and Nologies,
          Inc., dated January 14, 1998.*

10.7      Employment  Agreement,  dated as of  January  17,  1997,  between  the
          Registrant  and Jon  Silverman  (incorporated  herein by  reference to
          Exhibit 10.9 to the Form 10-K for 1997).

10.8      Registration  Rights  Agreement dated May 8, 1996 by and between Banco
          Inversion, S.A., and the Company.*

10.9      Joint  Systems  Development  Agreement  entered  into as of October 1,
          1997, between the Registrant and Packaging Systems, LLC.*

10.10     Sale and  Assignment  Agreement  dated as of November 19, 1997 between
          Harvey R. Miller,  Esq., as trustee,  for the  liquidation of Stratton
          Oakmont, Inc. and the Registrant.*

10.11     Agreement entered into as of December 23, 1997 between the Company and
          Well Men Industrial Company Limited.*

10.12     Sublease dated November 5, 1997 between General Motors Corporation and
          the Company,  together  with Consent to Sublease  dated as of November
          12, 1997  between  East Ridge  Properties  I  Corporation  and General
          Motors Corporation.*

27        Financial Data Schedule*

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

* Filed herewith


                                       22