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, 1999

                                       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.)

I-97 Business Park, 1111 Benfield Blvd.,
   Suite 230, Millersville, Maryland                      21108
----------------------------------------                ---------
(Address or Principal Executive Offices)                (Zip Code)

                                 (410) 729-0125
                ------------------------------------------------
                (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)

     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, 1999.

      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 24, 2000 as reported on the National Association of Securities
Dealers OTC Bulletin Board was approximately $8,272,650. (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 24,
2000.

      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

Products & Technologies

         International   Dispensing  Corporation  (the  "Company")  designs  and
manufactures  products which provide dispensing  solutions for flowable food and
beverage products. The Company has proprietary  technologies that can be adapted
to provide  dispensing  solutions  across three  distinct  packaging  platforms:
flexible  packaging,   rigid  packaging  and  dispensing  systems  for  beverage
concentrates. The Company was incorporated under the laws of Delaware in October
1995.

Flexible Packaging

         Flexible packages typically use a plastic bag or pouch to hold flowable
foods or  non-carbonated  beverages.  These  packages  are in turn  enclosed  in
corrugated  boxes that  display the product  with high  imagery  graphics.  Such
products include wine, cooking oils, coffee, tea and fruit juices.

         The  Company  has  designed a gravity  flow valve  (the  "Gravity  Flow
Valve")  and a  safety  spout  (the  "Safety  Spout")  that are  disposable  and
tamper-evident products that safely deliver hot (200 degrees Fahrenheit) or cold
non-carbonated beverages. The Gravity Flow Valve fits on a flexible bag or pouch
and provides  both a safety seal closure and a dispensing  mechanism  for hot or
cold beverages. The Gravity Flow Valve is unique because it can be customized to
product needs, such as flow, and designed to meet the ergonomic  requirements of
the customer. The Company's Safety Spout is a flow restrictor that regulates the
quantity of liquid (hot or cold) that is evacuated from a bag or pouch.

         The Gravity Flow Valve and Safety Spout are enabling  technologies that
provide food and beverage  companies with product safety benefits that represent
a  competitive  advantage and a  sustainable  product  point of difference  that
competitors  cannot  copy.  The Gravity  Flow Valve is designed  with oxygen and
bacteria  barriers that maintain the quality standards of the product during the
shipping, product handling and dispensing phases of a product's life cycle. Food
service and leading food and beverage  companies  recognize the cost, safety and
product performance  benefits derived from dispensing food and beverage products
from the  original  package or  container.  The  Gravity  Flow Valve  eliminates
secondary handling, product contamination and product waste.

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         Flexible  packaging  companies  understand the  competitive  benefit of
offering food and beverage companies a turn-key packaging solution that includes
innovative  dispensing  technology.  The  Gravity  Flow Valve and  Safety  Spout
deliver  products  safely  and,  in the case of the  Gravity  Flow  Valve,  help
maintain product freshness once the package is opened.

         The Company is currently in discussions  with various  companies in the
quick  serve  restaurant,   food  service  and  warehouse  grocery  channels  of
distribution,  as well as with leading  food & beverage  and flexible  packaging
manufacturers,  regarding the Company's flexible packaging products. The Company
expects  to  manufacture  both  the  Gravity  Flow  Valve  and  Safety  Spout in
commercial quantities during the current year.

Rigid Packaging

         Rigid  packaging  typically is constructed  of a plastic  material that
holds non-carbonated  beverages,  flowable foods,  including nacho cheese, salad
dressings,  yogurts,  puddings, sauces and condiments. The Company is working to
complete a portion  control pump (the "Portion  Control Pump") that would safely
dispense  flowable foods in predictable  quantities from both flexible and rigid
packages.  The Portion Control Pump also helps maintain product freshness and is
designed  to  work  with  the  characteristics  of  specific  products  such  as
viscosity, particulate and portion size.

         The Company has met with several major food and beverage  manufacturers
and expects to  manufacture  the Portion  Control Pump in commercial  quantities
once a final  contract is entered  into with a customer  for a specific  product
application.

Dispensing Systems

         The majority of non-carbonated  beverage  dispensing  systems currently
rely on peristaltic  pumps to evacuate  products from a plastic bag or pouch. (A
peristaltic  pump is either a mechanical  or  electrical  positive  displacement
device that is embedded in a dispensing  system.) The current  technology limits
the range of  non-carbonated  beverages that can be dispensed through a post-mix
unit. The Company has developed an innovative  technology  called the Fresh Flow
System that evacuates non-carbonated beverage concentrates from a plastic bag or
pouch without using a peristaltic pump.

         The new Fresh Flow  technology  expands the  variety of  non-carbonated
beverages  that can be dispensed by post-mix  equipment.  By utilizing the Fresh
Flow System, a dispensing  equipment  manufacturer  will have the opportunity to
benefit from its  exclusive  sale to end users of flexible  bags or pouches that
incorporate the Fresh Flow System.

         The Company's Fresh Flow System has two component  parts. One component
is a valve  that is placed on the bag or pouch of  beverage  concentrate  at the
filling  facility.  This valve acts as a closure and  maintains the integrity of
the  concentrate.  Once the bag or  pouch  of  concentrate  is  attached  to the
dispensing equipment,  the second component of the Fresh Flow System facilitates
the evacuation of the beverage concentrate.

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         The Company is presently in discussions  with major post-mix  equipment
and food  dispensing  manufacturers  for the purpose of adapting  the Fresh Flow
System to their dispensing equipment.

Marketing Focus

         The Company has developed a three-pronged marketing strategy. The first
leg of the  strategy  is  directed  toward  the end  users  in the  quick  serve
restaurant,  food service and warehouse  grocery channels of  distribution.  The
second is  directed  towards  leading  food & beverage  and  flexible  packaging
manufacturers. The third is a B2B e-commerce strategy that employs the Company's
website  which  is  linked  to the  National  Flexible  Packaging  Association's
website.  The Company believes that its participation in an Internet system that
is cross-linked will create awareness and leads for the Company's products.

         The  Company  is engaged in the direct  selling  and  marketing  of its
products and technology to large and small,  national and regional,  quick serve
restaurants,  food  service and  warehouse  grocery  distributors.  Across these
channels,  there is a need to distribute  and dispense  food and  non-carbonated
beverage products safely,  conveniently and cost effectively. In the quick serve
restaurant and food service business there is a trend toward dispensing flowable
foods and  non-carbonated  beverages  right from the  plastic  bags and  pouches
received from suppliers. A majority of food and beverage products are filled and
shipped  in steel  containers  or  aluminum  cans.  Once  the  food or  beverage
container  arrives  at the  restaurant  or food  service  outlet,  the  food and
beverage contents must be carefully poured or mixed into another stainless steel
dispenser.   Therefore,   the  mixing  and  cleaning   processes  required  with
traditional  containers are not as cost effective or safe as self-contained bags
and pouches.

         The  Company  believes  that  the  increased  emphasis  placed  by  its
potential  customers on product  quality and product safety in the  distribution
and  dispensing  process  will  present  to  the  Company  a  growing  marketing
opportunity.  The Company's products and technology have the capability to offer
customized,  cost  effective  dispensing  solutions for food and  non-carbonated
beverage products that are sold for consumption away from home.

          In 1999,  more than half of every  dollar  spent on a food or beverage
product  was  consumed  "on  the  go" or  away  from  home.  As the  "on the go"
consumption trend  accelerates,  food and beverage  companies continue to source
new technologies  that will allow them to control product quality from the point
of manufacture through the distribution phase and consumption phase. The Company
has met with  leading  food and  beverage  companies  to  discuss  how to safely
distribute and dispense their  products using plastic bags and/or  pouches.  The
Company is working to form  alliances  with these national and regional food and
beverage companies to incorporate its technologies.

         The Company is also engaged in the direct  selling and marketing of its
products and technology to large and small,  national and regional packaging and
dispensing  companies that  specialize in flexible food and beverage  packaging.
Packaging  and  dispensing  companies  are looking for leading edge products and
technologies  that will  provide them with  product  safety and product  quality
dispensing solutions that are cost effective.

                                        3


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         The  Company's  products  are  designed to be bundled  with the current
products and technologies of its potential packaging and dispensing customers in
order to provide a fully integrated,  turn-key solution to the food and beverage
company  end users.  The  Company is in the  process  of  working  with  several
packaging and dispensing companies to determine the most advantageous  strategic
fit. The benefit of forming alliances with packaging and dispensing companies is
the  opportunity  to share  technology  and  reduce  costs  in order to  produce
packaging solutions and/or dispensing systems that deliver higher margins.

         With a nondisclosure agreement in place, the Company begins discussions
with  a  potential   customer  or  partner  in  order  to  adapt  the  Company's
technologies to specific product  requirements.  Customers or strategic alliance
partners  may  choose  to take a more  active  role in  adapting  the  Company's
technologies to their specific product.  In that case, a portion of the costs of
adapting  the  technologies  to a  particular  application  may be  borne by the
customer or strategic alliance partners. The particular relationship between the
customer and the Company  will vary  depending  on each  party's  resources  and
needs.  Therefore,  in commercializing  the technologies,  the Company may use a
variety of structuring and cost sharing alternatives.

Competition and Trends in the Packaging and Dispensing Industry

         The Company's  competitors  are  manufacturers  of alternative  valves,
pumps and  dispensing  systems for  flowable  food and  non-carbonated  beverage
products. Competing technologies in the packaging and dispensing industry are in
many cases  fifteen to twenty years old and are designed to dispense only simple
fluids. As a result, such technologies do not permit ergonomic  customization of
products  and cannot be embedded  into new  dispensing  systems.  Packaging  and
dispensing limitations may result from the fact that food and beverage companies
often  carefully  guard  disclosure to third parties of the  characteristics  of
products they are  developing.  Packaging and dispensing  systems to support the
new food and beverage product are generally developed  externally.  As a result,
the packaging and dispensing  collaboration  often occurs in the final stages of
the product development process.  Therefore,  packaging and dispensing solutions
often cannot be synchronized  with a new product entry until the new product has
been brought to market.

         The Company is working  with food and beverage  companies  under strict
nondisclosure  agreements to try to synchronize the packaging and/or  dispensing
development  cycle with that of the new product.  The incentive for the food and
beverage  companies  to begin work with the  Company  early on is the  Company's
ability to customize  and/or embed the technology into a unique packaging and/or
dispensing solution.

         The  Company's  technology  is designed to maintain a product's  purity
throughout  the time it is  being  used,  by  providing  appropriate  mechanical
barriers to contamination  while the product is being stored and dispensed.  The
Company  believes that its  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.

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         The Company's major current  competitors  include Waddington & Duval, a
division of David S. Smith, and Smurfit-Stone Container Corp., each of which the
Company believes has greater capital resources than the Company.

         The Company's  technologies and capabilities  differ from these leading
packaging  companies in two  distinct  ways.  First,  the Company can modify the
spout's, valve's or pump's ergonomic look and feel to fit the brand, package, or
product  characteristics.  Second, the Company can modify the spout's or valve's
or pump's  internal flow  characteristics  to conform to a wide range of product
viscosities.

         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.  Furthermore,  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.

         The  soda-fountain-type  pumps utilized for various  condiments  employ
stainless steel or plastic containers into which the condiments are poured. Such
pumps may encounter spillage onto the dispensing  mechanism during the course of
a day and require frequent  servicing.  To maintain sanitary  conditions,  these
pumps must be disassembled, cleaned and sterilized daily.

         The Company believes that its dispensing  alternatives offer a distinct
advantage  over  each of  these  other  systems  because  each of the  Company's
products is designed to prohibit the flow of air and  contaminants  back into it
when product is being dispensed.  It is anticipated that the Company's  products
will require no cleanup,  since the product will always be contained in a bag or
a pouch and the  entire  system  will be  disposable.  A  self-contained  system
provides  considerably  more  product  purity  and  cleanliness.  The  Company's
products are designed to keep products  fresher and purer while being  consumed.
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.

Research and Development

         The  Company   significantly   changed  its  approach  to  the  product
development  and research  methodology  process in 1999.  Janet George  Murnick,
Ph.D.  was  retained  by the Company in late  September  1999 and has helped the
Company redirect its testing,  research and product development  processes.  Dr.
Murnick  brings  over 25  years  of  successful  product  and  commercialization
expertise from the biomedical and pharmacutical industry.

         The  Company  spent  approximately  $502,547  on  research  and product
development  activities during fiscal 1999 as compared to a total of $349,034 on
research activities during fiscal 1998.

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The License Agreement

         Pursuant to an Amended and Restated License Agreement with an effective
date of October 10, 1995 (the  "License  Agreement")  with ReSeal  International
Corporation, a Florida corporation ("RIC"), 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
certain  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 patented unidirectional flow valves licensed
under the License Agreement (the "Valve  Assemblies").  "Field of Use" means the
use of the licensed 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  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 licensed
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 licensed technologies within the Field of Use
at its  own  discretion  and  may  subcontract,  but  not  sublicense,  for  the
manufacturing of components incorporating the licensed technologies in the Field
of Use.

Patents, Trademarks and Other Intellectual Property

                  Under the License Agreement,  RIC has granted to the Company a
license to use certain  patents 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

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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)

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

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         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)

         In January and March 2000 the  Company  also filed  provisional  patent
applications with respect to its Safety Spout technology and Safety Spout with a
carafe.

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 also  established,  with Well Men's  assistance,  a
Chinese  licensed and  registered  corporation,  which would  exclusively  sell,
promote,  market,  advertise and solicit  orders for Well Men Products in China.
The Company is solely responsible for

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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.

         In 1998 the Company received two orders for Well Men products in China.
The first order was for 2,750 water  heaters and 11,000  water  pitchers,  which
were delivered to China in April pursuant to a  Sale/Purchase  Contract  between
the Company and Guangdon Rixin  Industrial  Development  Corporation,  a Chinese
Government authorized  Importer/Exporter  ("Rixin"). The Company incurred a cost
of $217,250  for these goods and  recorded  revenues of $332,750 for the sale to
Rixin.  The  second  order  was for 5,000  water  heaters  placed in August  for
delivery to China by December 31, 1998. The $275,000 cost of these units and the
related sales revenue of $375,000  were  reflected as an account  payable and an
account receivable, respectively. In December of 1998, Rixin canceled the second
order. Rixin has yet to make payment on the first order.

         In December of 1998,  Well Men  materially  breached its agreement with
the Company by selling Well Men water heaters  directly in China. As a result of
this breach, the Company has discontinued its operations in China, and has taken
a charge of $718,926  representing costs and expenses incurred by the Company in
its China venture, and has fully reversed the $332,750 due from Rixin.

         The Company  intends to pursue payment of the $332,750  receivable from
Rixin as well as reimbursement from Well Men of expenses incurred by the Company
in its China venture.

Employees

         As of March 24,  2000,  the  Company  employed  two  people,  one as an
executive  officer and one as an office  manager.  Both persons were employed on
full-time basis.

ITEM 2.    Description of Property.

         The Company currently leases  approximately  3,825 square feet of space
for  its  principal  executive  office  at I-97  Business  Park,  1111  Benfield
Boulevard,  Millersville,  Maryland  21108.  The term of the  lease  expires  on
September  30,  2005.   The  monthly   rental  on  this  property  is  currently
approximately  $3,612.  On September 30, 2000 and annually  thereafter  the rent
shall increase by 3%. Management believes that this facility is adequate for the
Company's intended activities in the foreseeable future.

ITEM 3.    Legal Proceedings.

         In or  about  January  2000,  Nologies,  Inc.  ("Nologies"),  a  former
consultant  to  the  Company  based  in  Hartford,  Connecticut,   commenced  an
arbitration  proceeding  against the  Company  before the  American  Arbitration
Association  in Hartford,  Connecticut.  Nologies  seeks an extension of time to
exercise  certain stock options  granted to it (the exercise period of which the
Company believes has expired), $12,000 allegedly due for unpaid consulting fees,
and $10,256.79 in reimbursable expenses, together with interest and the costs of
the arbitration. The Company has filed a general denial, together with a request
to change

                                        9


<PAGE>



the locale of the  proceeding  to New York,  New York.  The  Company  intends to
oppose Nologies' request for any extension of time to exercise its stock options
and for the balance of the amounts sought.

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

         During the fourth  quarter of the Company's  fiscal year ended December
31, 1999, no matter was submitted to a vote of security holders of the Company.

                                     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 following table sets
forth the high and low bid  prices for the  Common  Stock,  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.

                                               High                Low
                                               ----                ---
Quarter ended March 31, 1998                   $1.57              $0.85
Quarter ended June 30, 1998                    $2.97              $1.55
Quarter ended September 30, 1998               $2.09              $0.78
Quarter ended December 31, 1998                $1.06              $0.50
Quarter ended March 31, 1999                   $1.00              $.469
Quarter ended June 30, 1999                    $.625              $.219
Quarter ended September 30, 1999               $.531              $.25
Quarter ended December 31, 1999                $1.125             $.17


         As of March 17,  2000,  the  Company  had 64  holders  of record of its
Common Stock.  The Company  believes that a significant  number of shares of the
Company's Common Stock are held in street name and,  consequently,  it 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

                                       10


<PAGE>



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.

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

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

         The Company was formed primarily for the purpose of commercializing and
marketing technologies designed to maintain the sterility,  purity and freshness
of flowable  food and beverage  products.  The Company is focusing its marketing
activities on the  application of licensed  technologies  in the Field of Use as
set forth in the License  Agreement  (which  encompasses  the food and  beverage
industries  as  broadly   defined)  as  well  as  technologies  the  Company  is
independently developing.

         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 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 the  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,  research and
development and pre-production marketing.

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

                                       11


<PAGE>



         For the  twelve  months  ended  December  31,  1999,  the  Company  had
operating expenses of $1,740,163 versus operating expenses of $1,341,990 for the
twelve month period ended December 31, 1998.  This increase of $398,173 or 29.7%
over  the  comparable  period  last  year is  primarily  due to an  increase  in
executive  compensation  associated with the hiring of a new President and Chief
Executive  Officer,  the cost associated with the Company's private placement of
its preferred  stock,  and the Company's  acceleration of investment in research
and development of its core technology.

         For the twelve  months ended  December 31, 1999,  the Company had a net
loss of $1,702,108  versus a net loss of $1,938,390  for the twelve months ended
December 31,  1998.  This  decrease in net loss of  $236,282,  or 12.2% over the
comparable  period last year is almost entirely due to not incurring any further
substantial   expenses   associated  with  the  Company's   discontinued   China
operations.

         In 1998 the Company received two orders for Well Men products in China.
The first order was for 2,750 water  heaters and 11,000  water  pitchers,  which
were delivered to China in April pursuant to a  Sale/Purchase  Contract  between
the Company and Guangdon Rixin  Industrial  Development  Corporation,  a Chinese
Government authorized  Importer/Exporter  ("Rixin"). The Company incurred a cost
of $217,250  for these goods and  recorded  revenues of $332,750 for the sale to
Rixin.  The  second  order  was for 5,000  water  heaters  placed in August  for
delivery to China by December 31, 1998. The $275,000 cost of these units and the
related sales revenue of $375,000  were  reflected as an account  payable and an
account receivable, respectively. In December of 1998, Rixin canceled the second
order. Rixin has yet to make payment on the first order.

         In December 1998,  Well Men materially  breached its agreement with the
Company by selling Well Men water heaters directly in China. As a result of this
breach,  the Company has  discontinued  its operations in China, and has taken a
charge of $718,927  representing  costs and expenses  incurred by the Company in
its China venture, and has fully reversed the $332,750 due from Rixin.

         From inception (October 10, 1995) to December 31, 1999, the Company has
incurred a net loss from continuing and discontinued operations of $6,338,068.

Financial Condition

         As reflected in the financial  statements,  the Company has experienced
continuing net losses and negative cash flows from operations  through  December
31,  1999.  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 anticipate generating any operating revenue until
at least the fourth quarter of the fiscal year ending December 31, 2000 ("Fiscal
2000"), at which time, it may be in a position to generate revenue from sales of
its products.

         As  of  February  28,  2000,   the  Company  had  working   capital  of
approximately  $950,000.  The Company  anticipates  that during Fiscal 2000, the
Company will be spending at a rate of approximately

                                       12


<PAGE>



$130,000  per  month.  Therefore,  the  Company  expects  that it  will  require
additional  capital to finance its operations during and after the third quarter
of Fiscal 2000.

         The Company is  currently  studying  the  alternatives  under which the
Company may raise  additional  funds.  The Company  expects that it will need an
additional  $3,000,000 to $4,000,000 for the two-year  period  commencing in the
third  quarter of Fiscal 2000.  If the Company is not able to obtain  additional
funds on terms and conditions satisfactory to the Company, the Company will have
to  scale  back its  research  and  development  and  product  commercialization
activities.  Ultimately, the Company's ability to continue as a going concern is
dependent  upon its  ability to sell its equity  securities  and to produce  and
market its products (see Note 2 of Notes to Financial Statements).

ITEM 7.    Financial Statements.

         See the financial statements and notes related thereto.


                                       13

<PAGE>






TABLE OF CONTENTS

                                                                            Page

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                                     F-1

FINANCIAL STATEMENTS:
    Balance Sheet as of December 31, 1999                                    F-2

    Statements of Operations for the Years Ended December 31, 1999
       and 1998 and for the Period from Inception (October 10, 1995)
       Through December 31, 1999                                             F-3

    Statements of Cash Flows for the Years Ended December 31, 1999
       and 1998 and for the Period from Inception (October 10, 1995)
       Through December 31, 1999                                             F-4

    Statements of Changes in Shareholders' Equity (Deficiency) for the
       Period from Inception (October 10, 1995) Through December 31,
       1995 and for the Years Ended December 31, 1999, 1998, 1997 and 1996   F-5

NOTES TO FINANCIAL STATEMENTS                                                F-6


                                       14

<PAGE>


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders 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,
1999,  and the related  statements  of  operations  and cash flows for the years
ended December 31, 1999 and 1998, and for the period from inception (October 10,
1995)  to  December  31,  1999,  and  the  statements  of  stockholders'  equity
(deficiency)  for the period from inception  (October 10, 1995) through December
31, 1997,  and for the years ended December 31, 1999 and 1998.  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 auditing standards generally accepted
in the United States. 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, 1999,  and the results of its operations and its
cash flows for the years ended  December  31, 1999 and 1998,  and for the period
from  inception  (October 10, 1995) to December 31,  1999,  in  conformity  with
accounting principles generally accepted in the United States.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 2 to the
financial statements,  the Company has suffered recurring losses from operations
and has had a significant  deficit accumulated during the development stage that
raises  substantial  doubt about its  ability to  continue  as a going  concern.
Management's  plans in regard to these matters are also described in Note 2. The
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.

                                                         /s/ Arthur Andersen LLP

New York, New York
February 23, 2000





                                       F-1


<PAGE>
<TABLE>
<CAPTION>


INTERNATIONAL DISPENSING CORPORATION
(a development stage company)

BALANCE SHEET
DECEMBER 31, 1999

                                          ASSETS

<S>                                                                                                                    <C>
CURRENT ASSETS:
    Cash and cash equivalents ..........................................................................               $    416,322
    Prepaid expenses ...................................................................................                     14,739
                                                                                                                       ------------
                 Total current assets ..................................................................                    431,061
                                                                                                                       ------------

FIXED ASSETS:
    Office equipment ...................................................................................                    461,646
    Accumulated depreciation and amortization ..........................................................                     (4,947)
                                                                                                                       ------------
                 Fixed assets, net .....................................................................                    456,699
                                                                                                                       ------------

OTHER ASSETS ...........................................................................................                     26,647
                                                                                                                       ------------
                 Total assets ..........................................................................               $    914,407
                                                                                                                       ============

           LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

CURRENT LIABILITIES:
    Accounts payable ...................................................................................               $    175,801
    Accrued expenses ...................................................................................                     51,821
                                                                                                                       ------------
                 Total current liabilities .............................................................                    227,622
                                                                                                                       ------------

COMMITMENTS AND CONTINGENCIES (Note 13)

STOCKHOLDERS' EQUITY (DEFICIENCY):
    Preferred stock, $.001 par value; 2,000,000 shares authorized,
       560 shares issued and outstanding ...............................................................                  1,120,000
    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 ...................................................                (10,338,068)
                                                                                                                       ------------
                 Total stockholders' equity ............................................................                    686,785
                                                                                                                       ------------
                 Total liabilities and stockholders' equity ............................................               $    914,407
                                                                                                                       ============

</TABLE>


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


                                      F-2

<PAGE>

<TABLE>
<CAPTION>

INTERNATIONAL DISPENSING CORPORATION
(a development stage company)

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
AND FOR THE PERIOD FROM INCEPTION
(OCTOBER 10, 1995) TO DECEMBER 31, 1999


                                                                                                                         Cumulative
                                                                                                                      from Inception
                                                                                                                        (October 10,
                                                                                                                            1995)
                                                                                     Years Ended December 31,             Through
                                                                                  ------------------------------        December 31,
                                                                                     1999               1998                1999
                                                                                  -----------        -----------        -----------
<S>                                                                               <C>                <C>                <C>
REVENUES ..................................................................       $      --          $      --          $      --

COSTS AND EXPENSES:
    General and administrative ............................................         1,740,163          1,341,990          5,569,403
    Depreciation and amortization .........................................             7,591              9,896             24,047
                                                                                  -----------        -----------        -----------
                 Total costs and expenses .................................         1,747,754          1,351,886          5,593,450
                                                                                  -----------        -----------        -----------
                 Loss from operations .....................................        (1,747,754)        (1,351,886)        (5,593,450)

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

INTEREST AND OTHER INCOME .................................................            45,646            132,423            415,974
                                                                                  -----------        -----------        -----------
                 Net loss before extraordinary loss and
                    discontinued operations ...............................        (1,702,108)        (1,219,463)        (5,244,141)

EXTRAORDINARY LOSS ON RETIREMENT OF DEBT ..................................              --                 --             (250,000)

LOSS FROM DISCONTINUED OPERATIONS .........................................              --             (718,927)          (843,927)
                                                                                                     -----------        -----------
                 Net loss .................................................       $(1,702,108)       $(1,938,390)       $(6,338,068)
                                                                                  ===========        ===========        ===========

BASIC AND DILUTED LOSS PER SHARE FROM CONTINUING OPERATIONS ...............       $      (.18)       $      (.13)

BASIC AND DILUTED LOSS PER SHARE FROM DISCONTINUED OPERATIONS .............              (.00)              (.07)
                                                                                  -----------        -----------

BASIC AND DILUTED LOSS PER SHARE ..........................................       $      (.18)       $      (.20)
                                                                                  ===========        ===========

BASIC AND DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING .....................         9,566,668          9,566,668
                                                                                  ===========        ===========

</TABLE>


The accompanying notes are an integral part of these statements.


                                      F-3


<PAGE>

<TABLE>
<CAPTION>

INTERNATIONAL DISPENSING CORPORATION
(a development stage company)

STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 AND FOR
THE PERIOD FROM INCEPTION (OCTOBER 10, 1995) TO DECEMBER 31, 1999

                                                                                                                     Cumulative from
                                                                                                                        Inception
                                                                                   Years Ended December 31,            (October 10,
                                                                               --------------------------------        1995) Through
                                                                                                                        December 31,
                                                                                   1999                1998                1999
                                                                               ------------        ------------        ------------
<S>                                                                            <C>                 <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss ...........................................................       $ (1,702,108)       $ (1,938,390)       $ (6,256,392)
    Deduct loss from discontinued operations ...........................               --               718,927             843,927
                                                                               ------------        ------------        ------------
                 Net loss from continuing operation ....................         (1,702,108)         (1,219,463)         (5,412,465)
    Adjustments to reconcile net loss to net cash used in
       operating activities-
          Depreciation and amortization ................................              7,591               9,896              24,045
          Compensation from stock grants ...............................               --                25,279              25,279
          Noncash compensation .........................................             10,961                --                87,199
          Loss on retirement of debt ...................................               --                  --               250,000
          Changes in operating assets and liabilities-
              (Increase) in accounts receivable ........................             46,925                --                  --
              Decrease (increase) in prepaid expenses ..................             28,806               2,788             (49,490)
              Decrease (increase) in other assets ......................              3,386              27,753             (20,847)
              Increase in accounts payable .............................            156,010               7,536             175,801
              (Decrease) increase in accrued expenses ..................            (20,685)             (2,539)             26,542
                                                                               ------------        ------------        ------------
                 Net cash used in continuing operations ................         (1,516,039)         (1,148,750)         (4,940,861)
          Net cash used in discontinued operations .....................               --              (718,927)           (843,927)
                                                                               ------------        ------------        ------------
                 Net cash used in operating activities .................         (1,516,039)         (1,867,677)         (5,784,788)

CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of fixed assets ...........................................           (458,166)               --              (491,705)
    Purchase of license ................................................               --                  --            (4,000,000)
                                                                               ------------        ------------        ------------
                 Net cash used in investing activities .................           (458,166)               --            (4,491,705)
                                                                               ------------        ------------        ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from issuance of preferred stock ..........................          1,120,000                --             1,120,000
    Proceeds from private placement ....................................               --                  --             2,100,000
    Proceeds from issuance of convertible debt .........................               --                  --               150,000
    Repayment of promissory notes ......................................               --                  --              (300,000)
    Repayment of bridge loans ..........................................               --                  --            (1,050,000)
    Repayment of convertible debt ......................................               --                  --              (100,000)
    Proceeds from initial public offering ..............................               --                  --             8,772,815
                                                                               ------------        ------------        ------------
                 Net cash provided by financing activities .............          1,120,000                --            10,692,815
                                                                               ------------        ------------        ------------
                 Net (decrease) increase in cash and cash
                    equivalents ........................................           (854,205)         (1,867,677)            416,322

CASH AND CASH EQUIVALENTS, beginning of year ...........................          1,270,527           3,138,204                --
                                                                               ------------        ------------        ------------

CASH AND CASH EQUIVALENTS, end of year .................................       $    416,322        $  1,270,527        $    416,322
                                                                               ============        ============        ============

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

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

</TABLE>


The accompanying notes are an integral part of these statements.

                                      F-4


<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
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, 1997 AND 1996
                                                                       Preferred Stock             Common Stock
                                                                --------------------------  --------------------------
                                                                   Shares        Amount        Shares        Amount
                                                                ------------  ------------  ------------  ------------
<S>                                                             <C>           <C>           <C>           <C>
BALANCE, October 10, 1995 (inception) ........................          --    $       --            --    $       --
  Issuance of common stock pursuant to License Agreement .....          --            --       2,900,000         2,900
  Issuance of common stock pursuant to Settlement Agreement ..          --            --       1,950,000         1,950
  Issuance of common stock to management .....................          --            --         950,000           950
  Purchase of License from Affiliate .........................          --            --            --            --
  Issuance of common stock in private placement ..............          --            --          87,500            88
  Issuance of common stock rights in private placement .......          --            --            --            --
  Net loss ...................................................          --            --            --            --
                                                                ------------  ------------  ------------  ------------
BALANCE, December 31, 1995 ...................................          --            --       5,887,500         5,888
  Issuance of common stock in private placement ..............          --            --         437,500           437
  Issuance of common stock rights in private placement .......          --            --            --            --
  Issuance of common stock to bridge lenders .................          --            --       1,575,000         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          --
  Net loss ...................................................          --            --            --            --
                                                                ------------  ------------  ------------  ------------
BALANCE, December 31, 1996 ...................................          --            --       9,566,668         9,567
  Net loss ...................................................          --            --            --            --
                                                                ------------  ------------  ------------  ------------
BALANCE, December 31, 1997 ...................................          --            --       9,566,668         9,567
  Net loss ...................................................          --            --            --            --
                                                                ------------  ------------  ------------  ------------
BALANCE, December 31, 1998 ...................................          --            --       9,566,668         9,567
  Issuance of preferred stock in private placement ...........           560     1,120,000          --            --
  Net loss ...................................................          --            --            --            --
                                                                ------------  ------------  ------------  ------------
BALANCE, December 31, 1999 ...................................           560  $  1,120,000     9,566,668  $      9,567
                                                                ============  ============  ============  ============

                                                                                 Deficit
                                                                               Accumulated        Total
                                                                 Additional     During the    Stockholders'
                                                                  Paid-in      Development       Equity
                                                                  Capital         Stage       (Deficiency)
                                                                ------------   ------------   ------------
<S>                                                             <C>            <C>            <C>
BALANCE, October 10, 1995 (inception) ........................  $       --     $       --     $       --
  Issuance of common stock pursuant to License Agreement .....          --             --            2,900
  Issuance of common stock pursuant to Settlement Agreement ..          --             --            1,950
  Issuance of common stock to management .....................        76,238           --           77,188
  Purchase of License from Affiliate .........................          --       (4,000,000)    (4,000,000)
  Issuance of common stock in private placement ..............        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 ...................................       251,150     (4,249,795)    (3,992,757)
  Issuance of common stock in private placement ..............       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)          --             --
  Issuance of common stock in public offering, net of issuance
     costs of $1,227,193 .....................................     8,772,815
  Net loss ...................................................          --       (1,302,684)    (1,302,684)
                                                                ------------   ------------   ------------
BALANCE, December 31, 1996 ...................................     9,895,286     (5,552,479)     4,352,374
  Net loss ...................................................          --       (1,145,091)    (1,145,091)
                                                                ------------   ------------   ------------
BALANCE, December 31, 1997 ...................................     9,895,286     (6,697,570)     3,207,283
  Net loss ...................................................          --       (1,938,390)    (1,938,390)
                                                                ------------   ------------   ------------
BALANCE, December 31, 1998 ...................................     9,895,286     (8,635,960)     1,268,893
  Issuance of preferred stock in private placement ...........          --             --        1,120,000
  Net loss ...................................................          --       (1,702,108)    (1,702,108)
                                                                ------------   ------------   ------------
BALANCE, December 31, 1999 ...................................  $  9,895,286   $(10,338,068)  $    686,785
                                                                ============   ============   ============
</TABLE>
The accompanying notes are an integral part of these statements.

                                      F-5
<PAGE>

INTERNATIONAL DISPENSING CORPORATION
(a development stage company)

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998


1.       THE COMPANY AND ORGANIZATION

International  Dispensing  Corporation (the "Company"),  was incorporated in the
State of Delaware in October 1995 and is in the development  phase.  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.

In the event of bankruptcy of RIC, the status of the  continuing  obligations of
the various parties to and under the License Agreement (Note 6) 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.       GOING CONCERN

The Company's financial statements have been presented on the basis that it is a
going concern.  The Company's  development  stage activities have resulted in an
accumulated   deficit  from  inception  to  December  31,  1999,  in  excess  of
$10,338,000  (including a discontinued  operation in China of $844,000, see Note
5), and losses are continuing. Efforts to market its products have yet to result
in revenue.  The Company's primary source of funds since inception has been from
the sale of its common and preferred stock (see Note 4 regarding IPO and Notes 7
and 17 regarding preferred stock private placements).

Management  plans include the completion of an additional  private  placement of
equity  securities  in 2000 to  provide  funding  to  allow it to  continue  its
development  of its  licensed  technology.  In  addition,  management  has taken
certain  steps and made  significant  management  changes in an effort to reduce
operating  expenses of the Company.  Notwithstanding,  the Company believes that
with the  completion  of certain  products,  scheduled  for the third quarter of
2000, it will generate  sales revenue in the fourth quarter of 2000. The Company
believes these steps will provide  sufficient  liquidity for it to continue as a
going  concern.  Accordingly,  the  financial  statements  do  not  include  any
adjustments  relating to the recoverability and classification of recorded asset
amounts  or  the  amounts  and   classification  of  liabilities  or  any  other
adjustments  that might  result  should the  Company be unable to  continue as a
going concern.

3.  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.

                                      F-6


<PAGE>


Patents

Costs to develop patents are expensed when incurred.

Revenue Recognition

Revenue will be recognized upon delivery of the product to the customer.

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.

Net Loss Per Share

The Company presents "per share" data in accordance with SFAS No. 128, "Earnings
per Share,"  which  requires the  presentation  of Basic  Earnings per Share and
Diluted  Earnings  per Share.  Basic  Earnings per Share is based on the average
number of shares of common stock outstanding  during the year.  Diluted Earnings
per Share is based on the average  number of shares of common stock  outstanding
during the year plus the common stock  equivalents  related to preferred  stock,
outstanding  stock options and deferred  contingent  common stock awards.  There
were no common stock equivalents outstanding at December 31, 1999 and 1998, that
would have a dilutive effect on earnings for those years.

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.

Stock Options

In  1998,  the  Company  adopted  SFAS  No.  123,  "Accounting  for  Stock-Based
Compensation."  As  permitted  under this  standard,  the Company has elected to
follow Accounting Principles Board ("APB") Opinion No. 25, "Accounting For Stock
Issued to Employees" in accounting  for its stock options and other  stock-based
employee awards. Pro forma information regarding net loss and loss per share, as
calculated under the provisions of SFAS No. 123, are disclosed in Note 16.

4.  INITIAL PUBLIC OFFERING

In October 1996,  the Company sold, in an initial  public  offering (the "IPO"),
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. As of December 31, 1999, none of
the warrants have been redeemed or exercised.

                                      F-7

<PAGE>

5.  DISCONTINUED OPERATIONS

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  certain  Well Men  products  in China.  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  was for an  initial  term of ten  years.  The  Company  had  opened a
representative  office in China to promote the sales of Well Men products and to
establish the name of the Company.  The Company incurred  cumulative expenses of
approximately   $844,000   related  to  the  opening  and   maintaining  of  the
representative  office in China,  merchandise  shipped to China, and general and
administrative expenses.

In December 1998, Well Men materially breached its agreement with the Company by
selling Well Men water heaters directly in China. In addition,  Well Men refused
to pay for any of the  products  provided  to it. As a result of this breach and
the  Company's   inability  to  obtain   payment  from  Well  Men,  the  Company
discontinued this operation and wrote-off all related receivables,  resulting in
a loss from discontinued  operations of approximately  $719,000 in 1998. Results
from operations from prior periods have also been restated.

6.  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  7) and  the  remaining  balance  of
$3,250,000 upon the completion of the initial public offering (Note 4). The cash
paid to RIC and the  common  stock  issued  for this  acquisition  were  charged
directly to stockholders'  equity and therefore are not reflected as an asset on
the  Company's  Balance  Sheet.  The  Agreement  terminates  at  the  end of the
Technologies' useful economic life.

7.  PRIVATE PLACEMENTS

Preferred Stock

During 1999, the Company  designated  2,000 shares of the  authorized  Preferred
Stock as Series A Redeemable  Convertible  Preferred  Stock (the "Series A") and
entered  into  a  Preferred  Stock  Subscription  Agreement  (the  "Subscription
Agreement")   with   certain   Directors  of  the  Company  and  a  third  party
(collectively,  the "Investors").  The Series A accrues cumulative  dividends at
the annual rate of 12%. These  dividends  accrue and accumulate from the date of
issuance and are payable quarterly on the last day of March, June, September and
December,  commencing  on the last day of the  quarter of the date of  issuance.
Cumulative  dividends are payable in cash or  additional  shares of Series A, at
the discretion of the Company. Each share of Series A is convertible any time at
the  holder's  option into  approximately  9,100  shares of common  stock of the
Company, plus additional shares of common stock for accrued but unpaid dividends
at the conversion rate of $0.22 per share.  Each share of Series A is redeemable
at the  option of the  Company  for $2,000  per share  plus  accrued  and unpaid
dividends,  if certain  conditions  are met. The Series A carries a  liquidation
preference of $2,000 per share plus accrued and unpaid dividends.

Pursuant to the Subscription Agreement, the Investors agreed, subject to certain
conditions,  to buy a maximum  of 1,000  shares  at a price of $2,000  per share
through August 31, 2000. Through December 31, 1999, the Investors  purchased 560
shares  of  Series  A,  resulting  in  total  net  proceeds  to the  Company  of
approximately $1,120,000 (see Note 17).

                                      F-8

<PAGE>


Bridge Financing

During  1996,  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 ("Bridge  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 shares of common stock and rights to
obtain  787,500  Bridge Units.  In August 1996,  the Company  amended the Bridge
Financing  agreements  so that the 787,500  Bridge Units  underlying  the Bridge
Options were deemed  outstanding.  As part of the initial public  offering,  the
787,500 Bridge Units, which are identical to the IPO Units, were registered.

8.  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 (the  "Service  Shares") to certain
individuals for services  rendered equal to the par value of such shares. Of the
Investor  Shares issued,  552,000 were issued to individuals who are now members
of the board of directors and, of the Service 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  4),  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.

9.  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  shares of
common stock,  subject to adjustments.  The $100,000 note (the "Portenoy  Note")
would have converted at a price of $.084 per share, subject to adjustments,  and
the $50,000 note (the "ATG Note")  would have  converted at a price of $.042 per
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 recorded
an  extraordinary  loss on retirement of debt of $250,000  during the year ended
December 31, 1996.

10.  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  Company's  common  stock,  which was
determined  based upon the fair  market  value of the private  placement  shares
(Note 7) and the Convertible  Notes.  The statement of operations for the period
from  inception  through  December 31, 1999  reflects  approximately  $76,000 of
compensation expense related to such shares.

                                      F-9

<PAGE>


11.  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 License  Agreement (Note 6) in the Company's  balance sheet as of
December 31, 1996. Beginning in May 1997, the Company began paying substantially
all costs 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, 1999,  the Company has a receivable  due from RIC related to
operating  expenses  and patent  costs in the amount of $46,925,  which has been
fully  reserved  due to the  inability  of RIC to  reimburse  the Company in the
foreseeable future.

During the year ended  December 31, 1997,  the Company paid  consulting  fees to
members of management in the aggregate  amount of $73,000.  In 1999 and 1998, no
such fees were paid.

12.  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, 1999, the
Company has net deferred tax assets of approximately  $2.6 million.  The Company
has established a full valuation  allowance  against its 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.

13.  COMMITMENTS AND CONTINGENCIES

Lease

The Company  leased  office space in New York under a  noncancellable  operating
lease, which expired on February 29, 2000. Rental expenses were $26,875 for both
years ended December 31, 1999 and 1998. Payments made under this lease agreement
during 2000 totaled $5,572.

                                      F-10

<PAGE>


During  December  1999,  the Company  entered  into a lease for office  space in
Maryland  beginning  March 16, 2000 through  September 30, 2005.  Minimum future
rental payments under this lease are as follows:

                                                                    Minimum
                                                                    Payment

                Year ending December 31:

                    2000                                          $    39,738
                    2001                                               65,513
                    2002                                               67,478
                    2003                                               69,502
                    2004 and thereafter                               126,477
                                                                  -----------
                          Total minimum lease payments            $   368,708
                                                                  ===========


Employment Agreement - Gary Allanson

The Company and Mr. Allanson have entered into an employment agreement, dated as
of Match 15, 1999,  which  expires on March 14, 2001 (the  "Allanson  Employment
Agreement").  The term of the Allanson Employment  Agreement may be extended for
one or two years upon written notice given by the Company to Mr.  Allanson prior
to June 14, 2000.  Pursuant to the Allanson Employment  Agreement,  Mr. Allanson
serves as the President and Chief Executive  Officer of the Company and receives
an annual salary of $240,000.  In addition,  if Mr.  Allanson is insurable,  the
Company is  obligated  to pay the premium on a  $1,000,000  term life  insurance
policy, to which Mr. Allanson will designate the beneficiary. Under the Allanson
Employment  Agreement,  Mr. Allanson is also entitled to customary  benefits and
perquisites.

Under  the  Allanson  Employment  Agreement,  if Mr.  Allanson's  employment  is
terminated  for  disability,  for cause or upon his death,  Mr.  Allanson or his
estate will receive his base salary and other  benefits  through the date of his
termination.  If Mr.  Allanson  voluntarily  terminates his employment  with the
Company for "good  reason"  (defined in the  Allanson  Employment  Agreement  to
include,  among other things,  a change in control of the Company or the removal
of Mr. Allanson from his position as the President and Chief Executive Officer),
Mr.  Allanson is entitled to receive his base salary and other benefits  through
the 180th day after the date of  termination.  If Mr.  Allanson's  employment is
terminated  by the Company  without  cause,  the Company is obligated to pay Mr.
Allanson his base salary and provide Mr. Allanson and Mr. Allanson's family with
hospital,  major  medical  and  dental  insurance  equivalent  to the  insurance
provided on the date of termination, through the end of the term of the Allanson
Employment Agreement.

Employment Agreement - Jon Silverman

On March 15, 1999,  the Company and Mr.  Silverman  entered into an agreement to
amend his employment  agreement  (the  "Silverman  Amendment").  Pursuant to the
Silverman  Amendment,  Mr.  Silverman  continued to serve as the Chairman of the
Company,  but ceased  being the  President  and Chief  Executive  Officer of the
Company, effective on the date of the Silverman Amendment. On June 30, 1999, Mr.
Silverman resigned as Chairman of the Company.

The Silvermen Amendment also provided that, of the options to purchase shares of
common  stock of the Company  previously  granted to Mr.  Silverman,  options to
purchase an aggregate of 33,333 shares became  exercisable  on April 2, 1999 and
options to purchase an aggregate of 33,334 of such shares became  exercisable on
December 30, 1999;  provided in each case that Mr.  Silverman was still employed
by the Company.  The forgoing  options may be exercised  until December 31, 2004
whether or not the  employment of Mr.  Silverman by the Company has  terminated.
Options to  purchase  the  remaining  33,333  shares (of the options to purchase
100,000 shares previously granted to Mr. Silverman) became null and void and may

                                      F-11

<PAGE>


not be exercised at any time after the termination of Mr. Silverman's employment
with the  Company.  As a result  of the  foregoing  changes  in the terms of the
options  previously  granted  to Mr.  Silverman,  all  of  such  options  became
nonqualified  stock  options  rather  than  incentive  stock  options.   As  Mr.
Silverman's  employment  terminated  prior to  December  30,  1999,  options  to
purchase an aggregate of 66,667  shares were  cancelled  and options to purchase
33,333 shares remain outstanding and exercisable.

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  extended  to February  28,  2000;  however,  it was
terminated on November 12, 1999. The Company paid Nologies $8,000 per month plus
expenses (see Note 17).

14.  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.

15.  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  were to be a  variety  of  Bag-in-Box  delivery
systems with unique Valve/Pump  Technology for the food and beverage industries.
These systems were to be marketed  throughout the United  States.  Subsequent to
year end, this agreement was terminated.

16.  STOCK COMPENSATION PLANS

The Company has two stock  option plans ("the  Plans")  effective as of April 2,
1998.  The 1998 Stock  Option Plan (the  "Participant  Plan")  provides  for the
granting  of stock  options  to key  employees,  consultants  or  other  persons
("Participants").  The objective of this Plan includes  attracting and retaining
the  best  personnel,   providing  for  additional  performance  incentives  and
promoting the success of the Company by providing  Participants  the opportunity
to acquire common stock. The Plan provides for the granting of both options that
will qualify as  "incentive  stock  options" and options that are  non-qualified
stock options. The objectives of the second Plan, The Director Option Plan ("the
Director  Plan") is to  attract  and  retain the best  available  personnel  for
service as outside  directors of the Company,  as well as to provide  additional
incentive to the outside  directors of the Company to serve as directors  and to
encourage  their  continued  service on the Board. On June 18, 1999 the Board of
Directors  approved an increase in shares  authorized,  such that the Company is
authorized  to  grant  up  to  850,000  shares  and  450,000  shares  under  the
Participant Plan and the Director Plan,  respectively.  Under both of the Plans,
the exercise  price of the shares granted shall be 100% of the fair market value
per share on the date of grant of the option. Options expire on such date as the
Board of Directors or the  Committee may  determine,  but in no event later than
ten years after the grant date.

                                      F-12

<PAGE>


During 1999, the Company granted 400,000  nonqualified options to a key employee
under the Participant  Plan. Of these options,  300,000 vested  immediately with
the remaining 100,000 vesting on June 30, 2000.

During 1998, the Company issued 205,000 and 80,000 options under the Participant
Plan and Director  Plan,  respectively.  All of the options  granted during 1998
become  exercisable  in three  annual  installments  commencing  April 2,  1999.
Included  in the  options  issued  under the  Participant  Plan during 1998 were
155,000 incentive stock options issued to key employees and 50,000  nonqualified
options  issued to an outside  consultant,  who is an employee of Nologies.  The
options  granted to the outside  consultant,  who is an  employee  of  Nologies,
expired subsequent to year end (see Note 17).

The options  issued to key employees have been accounted for under APB No. 25 as
discussed below. The options issued to the outside consultant were accounted for
in  accordance  with  SFAS  No.  123.  Accordingly,   approximately  $25,000  of
compensation  expense  was  recognized  in 1998 for the  estimated  value of the
options granted to the outside  consultant,  who is an employee of Nologies.  No
expense was recognized during 1999.

The  status  of the  Company's  stock  option  plans is  summarized  below as of
December 31, 1999:

                                                            Weighted
                                             Number of      Average
                                               Shares        Price

  Outstanding at December 31, 1997                  -        $    -
      Granted                                  285,000         1.595
                                            ----------     ---------
  Outstanding at December 31, 1998             285,000         1.595
      Granted                                  400,000          .655
      Exercised                                     -             -
      Cancelled                               (116,667)        1.595
                                            ----------     ---------
  Outstanding at December 31, 1999             568,333       $  .98
                                            ==========     =========


                                      F-13


<PAGE>


As of December  31,  1999,  378,333  options  were vested and  exercisable.  The
weighted  average  exercise  price of these  options was $.83.  No options  were
vested at December 31, 1998.

In addition,  during  1999,  the Company  issued  50,000  non-plan  options to a
Director of the Company.  These options vested  immediately at an exercise price
of $1.25, which equals fair market value on the date of grant.  During 1998, the
Company issued 16,666  non-plan  options to a former  employee of the Company as
part of a severance  agreement and 15,000 non-plan  options to a Director of the
Company.  These options vested immediately at an exercise price of $1.595, which
equalled  fair market value on the date of grant.  No  compensation  expense has
been recognized during 1999 or 1998 for these options.

The Company  applies APB No. 25 in accounting  for its stock options  granted to
employees  and  directors.  The option price under the Plans equal or exceed the
fair market value of the common stock on the date of grant and, accordingly,  no
compensation  cost has been  recognized  under the  provisions of APB No. 25 for
stock  options  granted to employees or outside  directors.  Under SFAS No. 123,
compensation  cost is measured at the grant date based on the value of the award
and is recognized over the service (or vesting) period.  Had  compensation  cost
for the Company's stock option plans been  determined  under SFAS No. 123, based
on the fair market value at the grant dates,  the Company's pro forma net income
and net earnings per share would have been reflected as follows:

                            December 31, 1999       December 31, 1998
                            -----------------       -----------------
   Net loss:
       As reported           $   1,702,108             $   1,938,390
       Pro forma                 1,912,591                 2,038,492
   Loss per share:
       As reported                (.18)                     (.20)
       Pro Forma                  (.20)                     (.21)

The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes  option  pricing model with the following  weighted  share average
assumptions used for those options granted in 1999: no dividend yield,  expected
volatility  138.7%,  risk-free  interest  rates of 5.51% and expected lives of 5
years.

The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes  option  pricing model with the following  weighted  share average
assumptions used for those options granted in 1998: no dividend yield,  expected
volatility  142.12%,  risk-free  interest  rates of 5.69% and expected  lives of
seven years.

17.      SUBSEQUENT EVENTS

Private Placement

Subsequent to year end, the Company  designated  1,500 shares of the  authorized
Preferred Stock as Series B Redeemable  Convertible Preferred Stock (the "Series
B") and entered into an amendment to the  Subscription  Agreement (the "Series B
Amendment") with the Investors and one new investor (collectively, the "Series B

                                      F-14

<PAGE>

Investors").  The Series B accrues  cumulative  dividends  at the annual rate of
12%. These  dividends  accrue and accumulate from the date of issuance and shall
be payable  quarterly on the last day of March,  June,  September  and December,
commencing  on the last day of the quarter of the date of  issuance.  Cumulative
dividends  are  payable  in  cash  or  additional  shares  of  Series  B, at the
discretion of the Company. Each share of Series B is convertible at the holder's
option into  approximately  5,700 shares of common  stock of the  Company,  plus
additional  shares of common  stock for  accrued  but  unpaid  dividends  at the
conversion rate of $0.35 per share.  Each share of Series B is redeemable at the
option of the Company for $2,000 per share plus accrued and unpaid dividends, if
certain  conditions  are met. The Series B carries a  liquidation  preference of
$2,000 per share plus accrued and unpaid dividends.

Pursuant to the Series B Amendment,  the Series B Investors purchased 440 shares
of Series B instead of the  remaining 440 shares of  unsubscribed  Series A. The
purchase  of  Series  B  resulted  in  total  net  proceeds  to the  Company  of
approximately $880,000.

Temporary Office Lease

Subsequent  to year end, the Company  entered  into a lease  whereby the Company
agreed to rent office space,  furnishings  and certain  services in Maryland for
monthly rent of $750 through March 2000.  Subsequent to March 2000,  the Company
will occupy space rented under the lease entered into during December 1999.

Nologies Arbitration

Subsequent to year end, Nologies commenced an arbitration proceeding against the
Company,  seeking an extension  related to 50,000 options granted to an employee
of  Nologies  (see Note  16).  These  options  expired  subsequent  to year end.
Nologies is also requesting  payment by the Company of approximately  $22,000 in
unpaid consulting fees and reimbursable  expenses.  Management has indicated its
plans to vigorously  contest this suit and believes the loss, if any,  resulting
from the arbitration will not have a material impact on the Company's  financial
position, results of operation, or cash flows in future years.

                                      F-15

<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 24, 2000,  the executive  officers and directors of the
Company are as follows:

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

         Gary Allanson          47       Chairman, President and Chief
                                           Executive Officer
         Jay M. Rosen           62       Director
         George V. Kriste       52       Director
         Gregory B. Abbott      49       Director
         Frank Carillo          44       Director

         Gary Allanson has served as the President and Chief  Executive  Officer
of the Company  since March 15, 1999.  From May 1997 to March 1999 Mr.  Allanson
was the  director  of  national  retail  sales  at  Arnott's  Biscuit,  Ltd.  of
Australia,  a manufacturer and marketer of biscuits,  crackers and salty snacks,
which became a fully owned subsidiary of Campbell Soup Company in December 1997.
Mr.  Allanson  was a director of bakery  sales at the  Mid-Atlantic  Division of
Pepperidge Farm, Inc. from April 1996 to May

                                       15


<PAGE>



1997.  From  October  1992 to April 1996 Mr.  Allanson  was employed by Delmarva
Engineering of Maryland in various managerial  capacities,  including  directing
the sales,  marketing,  strategic  planning and joint venture strategies for the
electronics and management consulting firm.

         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.

         Frank Carillo has served as director of the Company since January 2000.
He has served as  President  of the  Executive  Communications  Group,  Inc.,  a
management  communications  consulting  firm,  as  President  for more than five
years.

         Jay M. Rosen has served as a director of the  Company  since July 1998.
He has been Vice President,  General Counsel and Secretary of Advanced Network &
Services,  Inc., a not-for-profit  networking  services  company,  since January
2000. From January 1998 to December 1999, he was an independent consultant. From
January 1997 to December 1997, Mr. Rosen was Vice President, General Counsel and
Secretary   of   Celcore,   Inc.,   a   privately   held   company   engaged  in
telecommunications.  For more than five years prior  thereto,  he was  Corporate
Vice President and Associate General Counsel of GTE Corporation.

         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 1998.

                                       16


<PAGE>



ITEM 10.   Executive Compensation.

Summary Compensation Table

         The  following  table sets forth for the three (3) fiscal  years  ended
December 31, 1999,  information  concerning the compensation  paid or accrued to
the Chief  Executive  Officer of the Company and the one other person serving as
an  executive  officer of the  Company  whose  salary and bonus for fiscal  1998
exceeded $100,000.

<TABLE>
<CAPTION>
                                                                Annual Compensation                 Long-Term Compensation
                                                       -----------------------------------  ----------------------------------------
Name and Principal                        Fiscal        Salary       Bonus    Other Annual  Restricted   Securities       All Other
Position                                   year          ($)          ($)     Compensation     Stock     Underlying     Compensation
                                                                                  ($)(1)      Award($)   Options(#)          ($)
<S>                                        <C>         <C>            <C>          <C>         <C>        <C>            <C>
Gary Allanson .........................    1999        $190,000        -            -           -         400,000        $  4,400(2)
Chairman, CEO and                          1998        $    --         -            -           -            --              --
President                                  1997        $    --         -            -           -            --              --

Jon Silverman .........................    1999        $105,000        -            -           -            --              --
Chairman, CEO and                          1998        $180,000        -            -           -            --          $  4,430(2)
President                                  1997        $187,500        -            -           -            --          $  4,000(2)

Jeffrey D. Lewenthal ..................    1999        $156,500        -            -           -            --              --
Chief Financial                            1998        $144,000        -            -           -          50,000            --
Officer, Executive                         1997        $ 96,000(3)     -            -           -            --              --
Vice President of
Business Development,
Treasurer and Secretary

<FN>
--------------------------
(1)      The aggregate amount of perquisites and other personal benefits paid to
         each of Mr. Allanson and Mr. Lewenthal 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 $1,000,000 term life insurance policies
         as to which the person may designate the beneficiary.

(3)      Jeffrey D. Lewenthal's  employment with the Company began in March 1997
         and  terminated  in March  2000.  The  figure for 1997  represents  the
         compensation Mr. Lewenthal  received from the Company for the period of
         his employment with the Company in 1997.
</FN>
</TABLE>

                                       17


<PAGE>



Option Grants in Fiscal Year Ended December 31, 1999

         The following table sets forth certain  information  concerning options
granted  during the fiscal year ended  December  31,  1999  pursuant to the 1998
Option Plan to the executive officers listed in the Summary Compensation Table.

                Number of Securities  Percent Of Total     Exercise   Expiration
                Underlying Options    Options Granted to   Or Base    Date
                Granted (#)           Employees In Fiscal  Price
                                      Year                 ($/Sh)
Gary Allanson   400,000(1)            100%                 $.655      (2)

------------------
(1)      The terms of grant of such  options  provided  that options to purchase
         300,000  shares of Common Stock would become  exercisable  on March 15,
         1999 and  options to  purchase  100,000  shares of Common  Stock  would
         become exercisable on July 1, 2000.

(2)      Of these  options,  options to purchase  300,000 shares of Common Stock
         expire on March 14,  2006 and  options to  purchase  100,000  shares of
         Common Stock expire on June 30, 2010.

Aggregated Option  Exercises  in  Fiscal Year Ended December 31, 1999 and Fiscal
Year End Option Values

         None of the executive officers listed in the Summary Compensation Table
exercised  any option  during  the fiscal  year ended  December  31,  1999.  The
following  table  sets  forth  certain  information  with  respect to options to
purchase Common Stock held by the foregoing  executive  officers on December 31,
1999.

                                                    Value of
                   Number of Securities Underlying  Unexercised In-The-Money
                   Unexercised Options on 12/31/99  Options on 12/31/99 ($)
Name               (#)Exercisable/Unexercisable     Exercisable/Unexercisable(1)
Gary Allanson              300,000/100,000                   $28,500/$9,500
Jon Silverman              66,667/0                           0/0
Jeffrey Lewenthal          16,666/33,334                      0/0

--------------------
(1)      The average of the closing bid and asked  prices of the Common Stock on
         December 31, 1999 as reported by the National  Quotation  Bureau,  Inc.
         was $.75.  All options  held by Messrs.  Silverman  and  Lewenthal  had
         exercise prices of $1.595.  All of the options held by Mr. Allanson had
         exercise prices of $.655.

                                       18


<PAGE>


Employment and Non-Compete Agreements

         The  Company  and  Gary   Allanson  have  entered  into  an  employment
agreement,  dated as of March 15,  1999,  which  expires on March 14,  2001 (the
"Allanson Employment Agreement").  The term of the Allanson Employment Agreement
may be extended for one or two years upon written notice given by the Company to
Mr.  Allanson  prior to June  14,  2000.  Pursuant  to the  Allanson  Employment
Agreement,  Mr. Allanson serves as the President and Chief Executive  Officer of
the Company and  receives an annual  salary of  $240,000.  In  addition,  if Mr.
Allanson  is  insurable,  the  Company  is  obligated  to pay the  premium  on a
$1,000,000 term life insurance  policy, to which Mr. Allanson will designate the
beneficiary.  Under the  Allanson  Employment  Agreement,  Mr.  Allanson is also
entitled to customary benefits and perquisites.

         Under the Allanson Employment  Agreement,  if Mr. Allanson's employment
is terminated for disability,  for cause or upon his death,  Mr. Allanson or his
estate  will  receive  his base  salary and other  benefits  through the date of
termination.  If Mr.  Allanson  voluntarily  terminates his employment  with the
Company for "good  reason"  (defined in the  Allanson  Employment  Agreement  to
include,  among other things,  a change in control of the Company or the removal
of Mr. Allanson from his position as the President and Chief Executive Officer),
Mr.  Allanson is entitled to receive his base salary and other benefits  through
the 180th day after the date of  termination.  If Mr.  Allanson's  employment is
terminated  by the Company  without  cause,  the Company is obligated to pay Mr.
Allanson his base salary and provide Mr. Allanson and Mr. Allanson's family with
hospital,  major  medical  and  dental  insurance  equivalent  to the  insurance
provided on the date of termination, through the end of the term of the Allanson
Employment Agreement then in effect on the date of termination.

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 24, 2000, 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) 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

                                       19


<PAGE>



such owners,  have sole investment and voting power with respect to such shares,
subject to community property laws, where applicable.

Name and Address                                                     Percent of
Of Beneficial Owner (1)                      Number of Shares          Class(2)
-------------------                          ----------------          ------
Gregory Abbott                               3,372,731(3)               28.5%
1200 Kessler Drive
Aspen, CO 81611

Louis A. Simpson                             2,241,142(4)               19.4%
5951 La Sendita
P.O. Box 1943
Rancho Santa Fe, California 92067

George Kriste                                1,792,382(5)               16.2%
20643 Seabord Road
Malibu, California 90265

George Abbott                                1,089,642(6)               10.3%
1285 South Ocean Boulevard
Palm Beach, Florida 33480

Jon Silverman                                 633,333(7)                 6.6%
6 International Drive, Suite 160
Rye Brook, New York 10573

Gary Allanson                                 590,909(8)                 5.7%
I-97 Business Park
1111 Benfield Boulevard
Millersville, Maryland 21108

Reed Slatkin                                  557,142(9)                 5.5%
890 North Kellogg Avenue
Santa Barbara, California 93111

Jay M. Rosen                                  52,666(10)                  *
21 Longledge Drive
Rye Brook, New York 10593

Frank Carillo                                   10,000                    *
570 Grand Avenue
Englewood, New Jersey 07631


                                       20


<PAGE>



All directors and executive                     5,818,688(11)           41.5%
officers as a group (5 persons)

----------------------------------------------
*        Less than 1%.
(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  2,257,142  shares of Common Stock issuable upon conversion of
         preferred  stock  and  26,666  shares  of Common  Stock  issuable  upon
         exercise of  currently  exercisable  options.  Does not include  13,334
         shares of  Common  Stock  subject  to  options  which  will not  become
         exercisable within 60 days of the date hereof.

(4)      Includes  2,007,142  shares of Common Stock issuable upon conversion of
         preferred stock.

(5)      Includes  1,485,714  shares of Common Stock issuable upon conversion of
         preferred  stock  and  26,666  shares  of Common  Stock  issuable  upon
         exercise of  currently  exercisable  options.  Does not include  13,334
         shares of  Common  Stock  subject  to  options  which  will not  become
         exercisable within 60 days of the date hereof.

(6)      Includes  1,007,142  shares of Common Stock issuable upon conversion of
         preferred stock.

(7)      Includes  33,333  shares of Common Stock of the Company  issuable  upon
         exercise of options.

(8)      Includes  300,000  shares of Common  Stock  issuable  upon  exercise of
         currently  exercisable  options  and  290,900  shares of  Common  Stock
         issuable upon conversion of preferred stock.

(9)      Includes  557,142  shares of Common Stock  issuable upon  conversion of
         preferred stock.

(10)     Includes  51,166  shares of Common  Stock  issuable  upon  exercise  of
         currently  exercisable options. Does not include 3,334 shares of Common
         Stock  subject to options which will not become  exercisable  within 60
         days of the date hereof.

(11)     Includes an aggregate of 4,033,765 shares of Common Stock issuable upon
         conversion  of preferred  stock and an  aggregate of 404,998  shares of
         Common Stock  issuable  upon  exercise of currently  exercisable  stock
         options.

                                       21


<PAGE>



ITEM 12.   Certain Relationships and Related Transactions.

         On October 25, 1999 and December 15, 1999  certain  persons,  including
Gary  Allanson,  the Chairman and Chief  Executive  Officer of the Company,  and
George Kriste and Gregory Abbott,  directors of the Company,  purchased from the
Company  an  aggregate  of 560  shares  of the  Company's  Series  A  Redeemable
Convertible  Preferred Stock ("Series A Stock") for $2,000 per share. The number
of shares purchased by each of Messrs. Allanson, Kriste and Abbott on such dates
and the total purchase price paid by such persons are set forth below:

                                  Total Shares
                                  of Series A            Total
         Name                    Stock Purchased      Purchase Price
         ----                    ---------------      --------------
         Gary Allanson                  32              $ 64,000
         George Kriste                 132              $264,000
         Gregory Abbott                187              $374,000

         On February  22, 2000  certain  persons  including  Messrs.  Kriste and
Abbott  purchased  from the Company an aggregate of 440 shares of the  Company's
Series B Redeemable  Convertible  Preferred  Stock ("Series B Stock") for $2,000
per share.  The number of shares of Series B Stock  purchased by each of Messrs.
Kriste and Abbott are set forth below:

                                  Total Shares
                                  of Series B            Total
         Name                    Stock Purchased      Purchase Price
         ----                    ---------------      --------------
         George Kriste                  50              $100,000
         Gregory Abbott                 97.5            $195,000

         The  proceeds  of the  sale of the  Series A Stock  and  Series B Stock
(collectively,  the "Preferred Stock") are being used by the Company for working
capital.

         The  holders of  Preferred  Stock are  entitled  to receive  cumulative
dividends at the rate of 12% per year.  In the  discretion  of the Company,  the
dividends may be paid in cash, in additional  shares of Series A Stock or Series
B Stock, as the case may be, or any combination of the foregoing.

         The  holders  of Series A Stock may  convert  the  Series A Stock  into
Common Stock initially at the rate of one share of Common Stock for each $.22 of
liquidation  value of the  Series A Stock.  The  holders  of  Series B Stock may
convert the Series B Stock into Common Stock  initially at the rate of one share
of Common Stock for each $.35 of  liquidation  value of the Series B Stock.  The
conversion  rates of the  Preferred  Stock are subject to  adjustment in certain
circumstances.

                                       22


<PAGE>



         The holders of Series A Stock, voting as a separate class, are entitled
to elect one  director of the  Company.  In  addition,  the holders of Preferred
Stock are entitled to vote on all matters  (including  elections  of  directors)
together with the holders of the Common Stock with each share of Preferred Stock
having the number of votes equal to the number of whole and fractional shares of
Common Stock into which such share is then  convertible  (as of the date hereof,
each share of Series A Stock would have approximately 9,091 votes and each share
of Series B Stock would have approximately 5,714 votes).

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

Exhibits

Exhibit No.
-----------

    3.1      Restated  Certificate of Incorporation  of the Company,  as amended
             (incorporated  herein by reference to Exhibit 3.1 to the  Company'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      Certificate  of  Amendment  to  the  Certificate  of  Incorporation
             (incorporated  by reference to Exhibit 3.3 to the Company's  Annual
             Report on Form 10-KSB for the fiscal year ended  December  31, 1998
             (the "1998 10-KSB")).

    3.4      Certificate  of  Designation  of  Series A  Redeemable  Convertible
             Preferred Stock of the Company.*

    3.5      Certificate  of  Designation  of  Series B  Redeemable  Convertible
             Preferred Stock of the Company.*

    3.6      By-laws  of  the  Company,  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 Company and RIC,  dated as of
             October 10, 1995, as amended  (incorporated  herein by reference to
             Exhibit 10.1 to the Form SB-2).

                                       23


<PAGE>



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

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

    10.4     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 10.7 to the
             Form SB-2).

    10.5     Employment Agreement, dated March 15, 1999, between the Company and
             Gary  Allanson  (incorporated  by  reference to Exhibit 10.9 to the
             Company's 1998 10-KSB).

    10.6     Agreement  entered into as of December 23, 1997 between the Company
             and Well Men (incorporated  herein by reference to Exhibit 10.11 to
             the Company's 1997 10-KSB).

    10.7     Lease dated December 22, 1999 between MIE Properties,  Inc. and the
             Company.*

    10.8     Amended  and  Restated  1998 Stock  Option  Plan.  Incorporated  by
             reference to the definitive proxy statement of the Company filed on
             May 12, 1999 in connection  with the Annual Meeting of Shareholders
             of the Company held on June 18, 1999 (the "1999 Proxy Statement").

    10.9     Amended  and  Restated   Director  Option  Plan.   Incorporated  by
             reference to the 1999 Proxy Statement.

    10.10    Preferred  Stock  Subscription  Agreement dated as of September 23,
             1999  between  the  Company,   Gregory  Abbott,  George  V.  Kriste
             ("Kriste"),   Louis   Simpson   ("Simpson")   and   Gary   Allanson
             ("Allanson").*

    10.11    Amendment  No. 1, dated as of October 25, 1999 to  Preferred  Stock
             Subscription Agreement between the Company, Gregory Abbott, Kriste,
             Simpson and Allanson.*

    10.12    Amendment  No. 2, dated as of December 15, 1999 to Preferred  Stock
             Subscription Agreement between the Company, Gregory Abbott, Kriste,
             Simpson, Allanson and George Abbott.*

    10.13    Amendment  No. 3, dated as of February 22, 2000 to Preferred  Stock
             Subscription Agreement between the Company, Gregory Abbott, Kriste,
             Simpson, Allanson, George Abbott and Reed Slatkin.*

                                       24


<PAGE>



    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 the Company's fiscal year ended December 31, 1999.

                                       25


<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 30, 2000                            INTERNATIONAL DISPENSING
                                                     CORPORATION

                                                  By: /s/ Gary Allanson
                                                      -----------------
                                                      Gary Allanson
                                                      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/ Gary Allanson            Chairman, President and Chief        March 30, 2000
-----------------------      Executive Officer
Gary Allanson                (Principal Executive
                             Officer)

/s/ Jeffrey Lewenthal        Chief Financial Officer (Principal   March 30, 2000
-----------------------      Accounting and Financial Officer)
Jeffrey Lewenthal

/s/ Jay Rosen                Director                             March 30, 2000
-----------------------
Jay Rosen

/s/ Gregory Abbott           Director                             March 30, 2000
-----------------------
Gregory Abbott

/s/ George Kriste            Director                             March 30, 2000
-----------------------
George Kriste

/s/ Frank Carillo            Secretary and Director               March 30, 2000
-----------------------
Frank Carillo


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<PAGE>



                      INTERNATIONAL DISPENSING CORPORATION

                          ANNUAL REPORT ON FORM 10-KSB
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

                                 EXHIBITS INDEX

                             Description of Exhibits

Exhibit No.

    3.1      Restated  Certificate of Incorporation  of the Company,  as amended
             (incorporated  herein by reference to Exhibit 3.1 to the  Company'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      Certificate  of  Amendment  to  the  Certificate  of  Incorporation
             (incorporated  by reference to Exhibit 3.3 to the Company's  Annual
             Report on Form 10-KSB for the fiscal year ended  December  31, 1998
             (the "1998 10-KSB")).

    3.4      Certificate  of  Designation  of  Series A  Redeemable  Convertible
             Preferred Stock of the Company.*

    3.5      Certificate  of  Designation  of  Series B  Redeemable  Convertible
             Preferred Stock of the Company.*

    3.6      By-laws  of  the  Company,  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).


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<PAGE>



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

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

    10.4     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 10.7 to the
             Form SB-2).

    10.5     Employment Agreement, dated March 15, 1999, between the Company and
             Gary  Allanson  (incorporated  by  reference to Exhibit 10.9 to the
             Company's 1998 10-KSB).

    10.6     Agreement  entered into as of December 23, 1997 between the Company
             and Well Men (incorporated  herein by reference to Exhibit 10.11 to
             the Company's 1997 10-KSB).

    10.7     Lease dated December 22, 1999 between MIE Properties,  Inc. and the
             Company.*

    10.8     Amended  and  Restated  1998 Stock  Option  Plan.  Incorporated  by
             reference to the definitive proxy statement of the Company filed on
             May 12, 1999 in connection  with the Annual Meeting of Shareholders
             of the Company held on June 18, 1999 (the "1999 Proxy Statement").

    10.9     Amended  and  Restated   Director  Option  Plan.   Incorporated  by
             reference to the 1999 Proxy Statement.

    10.10    Preferred  Stock  Subscription  Agreement dated as of September 23,
             1999  between  the  Company,   Gregory  Abbott,  George  V.  Kriste
             ("Kriste"),   Louis   Simpson   ("Simpson")   and   Gary   Allanson
             ("Allanson").*


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<PAGE>


    10.11    Amendment  No. 1, dated as of October 25, 1999 to  Preferred  Stock
             Subscription Agreement between the Company, Gregory Abbott, Kriste,
             Simpson and Allanson.*

    10.12    Amendment  No. 2, dated as of December 15, 1999 to Preferred  Stock
             Subscription Agreement between the Company, Gregory Abbott, Kriste,
             Simpson, Allanson and George Abbott.*

    10.13    Amendment  No. 3, dated as of February 22, 2000 to Preferred  Stock
             Subscription Agreement between the Company, Gregory Abbott, Kriste,
             Simpson, Allanson, George Abbott and Reed Slatkin.*

    27       Financial Data Schedule.*
----------------------------

* Filed herewith.


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