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, 1998
     
                                       OR

| |  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934.
     For the transition period from            to 
                                    ----------    ------------

                         Commission file number: 0-21489

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

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

2500 Westchester Avenue, Suite 317, Purchase, New York              10577
------------------------------------------------------             --------
      (Address or Principal Executive Offices)                    (Zip Code)

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

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

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

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

     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, 1998.

     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 19, 1999 as reported on the National Association of Securities
Dealers OTC Bulletin Board was approximately $5,469,654. (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 19,
1999.

     Transitional Small Business Disclosure Format (check one): Yes |_|   No |X|

     Documents Incorporated by Reference: None



<PAGE>


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

                                     PART I

ITEM 1.   Description of Business.

General Description of Business

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

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

     The  Company  was  incorporated  under the laws of the State of Delaware in
October 1995 under the name of ReSeal Food Dispensing Systems,  Inc. and changed
its name to  International  Dispensing  Corporation in September 1996. Since its
inception,  the  Company  has  sought  to form  strategic  alliances  or  direct
license/supply  agreements  with major  food and  beverage  companies  currently
generating substantial

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revenues  from  their  existing   markets.   The  Company   intends  that  these
relationships  will  include  co-development  of new products in tandem with the
production of new dispensing  systems which incorporate the  Technologies.  Upon
successful  consummation  of  a  strategic  alliance  or  direct  license/supply
relationship,  of which there can be no  assurance,  the  customer or  strategic
partner will utilize the  Technologies in conjunction with products that have an
existing market share, as well as the Systems associated with the new products.

The License Agreement

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

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

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


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Strategic Focus

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

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

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

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

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

     The Company has engaged in preliminary  marketing discussions with a number
of  potential  strategic  alliance  partners,  licensees  and end  users  of the
Technologies  and has  had  preliminary  discussions  with a  substantial  dairy
company  which  supplies  milk  products  in a  food  service  capacity  to  the
restaurant

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industry, including fast food franchise operations and commercial establishments
throughout  Canada.  Management  has also had  discussions  regarding the use of
Technologies  in connection with a bag-in-a-box  creamer for offices,  fast food
outlets and coffee  bars,  as well as possible  applications  for yogurt and the
baby food  industry.  Based upon  discussions  that have taken place between the
Company and potential users, the Company intends to focus its initial  marketing
efforts in the areas of wine,  milk,  juice and  condiments for the food service
industry.

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

     To oversee  product  development,  the Company has engaged the  services of
Nologies,  Inc. ("Nologies"),  a product development engineering firm, to create
bag-in-a-box  prototype systems for application in the wine, milk, condiment and
baby-bottle design industries (see "Research and Development").  These prototype
systems,  which  embody  the  fundamental  approach  to the  Systems,  have been
prepared in advanced prototypical form.

     For the past two years the Company has been focusing on the preparation for
commercial  production of the Valve  Assemblies.  In 1997 the Company  engaged a
contractor  to  fabricate a prototype  mold which was  designed by  Nologies.  A
prototype  mold was  fabricated in 1998 and has been refined based upon testing.
Using the prototype mold, the Company has produced sample Valve Assemblies, some
of which have been  furnished to potential  customers for trial use with respect
to particular  products.  The Company has also submitted the Valve Assemblies to
an independent  laboratory for oxygen barrier tests,  which have been completed.
The  Company  will also  submit  the Valve  Assemblies  to  another  independent
laboratory for bacteriological  tests and to a third independent  laboratory for
product  compatibility  tests. The Company is currently developing protocols for
the  bacteriological  tests and the product  compatibility  tests in conjunction
with the respective  laboratories.  Under normal  conditions,  it takes up to 90
days to complete a bacteriological  test and 15 to 30 days to complete a product
compatibility test for each product.  Product  compatibility tests for different
products may be conducted simultaneously.

     To facilitate design modifications, the prototype mold is made of aluminum,
a pliable  material which is less durable than steel.  Therefore,  the prototype
mold  is  not  adequate  to be  used  for  long-term  production  of  the  Valve
Assemblies.  The Company has solicited bid quotations  for the  fabrication of a
permanent  steel  production mold with eight cavities and is reviewing the bids.
The Company expects that the  fabrication of the permanent  production mold will
take  approximately  four months to  complete  and the proving of same will take
approximately  one month. The permanent  production mold will be able to produce
approximately  8,000,000 Valve Assemblies annually. The Company plans to finance
the permanent production mold with a capital lease.

     The Company  plans to continue to enter into  strategic  alliances,  supply
agreements,  direct  license  agreements  and joint ventures with leaders in the
food and beverage industry. Under such agreements,  the Company anticipates that
under some  circumstances the sublicensee will pay a license fee of a negotiated
sum to the Company upon entering into the  sublicense.  Thereafter,  the Company
would

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

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

Competition and Opportunities in the Packaging Industry

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

     The Company's  competitors are the  manufacturers of all existing  packages
and bottles that contain flowable food and beverage products.  Typically,  large
sizes of beverages and other  flowable  products,  such as  condiments,  certain
fruit juices and wine, will remain fresh without  refrigeration for a relatively
long period of time before being opened;  however, once the container is opened,
the contents will spoil within a short period of time. In the case of containers
with general purpose valves, where the product is dispensed by applying pressure
with a finger, the product flows out at the same time air enters the

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container,  thereby  accelerating  the spoilage of the remainder of the product,
and the repeated use of fingers directly  adjacent to the spout also can lead to
unsanitary conditions.  There are several faucet-type valves that eliminate some
of the sanitary  problems  described  above,  but they are costly and not widely
used. Also, there are  soda-fountain-type  pumps utilized for various condiments
employing  stainless  steel or plastic  containers into which the condiments are
poured and which may encounter spillage onto the dispensing mechanism during the
course of a day and require frequent servicing. To be sanitary, these pumps must
be disassembled, cleaned and sterilized daily.

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

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

Patents, Trademarks and Other Intellectual Property

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

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

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

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

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

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

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


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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 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)

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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 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.

                                        8

<PAGE>


Research and Development

     The  Company  spent  approximately  $249,034 on  research  and  development
activities  during fiscal 1998,  $116,295  during fiscal 1997 and $39,386 during
the fiscal year ended December 31, 1996.

     The Company  has  entered  into an  agreement,  dated  March 5, 1996,  with
Nologies,  under which Nologies will assist in (i) the directing and managing of
product and  technology  development,  (ii)  licensing  and  strategic  alliance
pursuits,  and (iii) other  related  services  that the Company may request from
time to time, in the area of food and beverage  dispensing and delivery systems.
The term of such agreement has been extended  through  February 28, 2000 and may
be  terminated  upon 30 days'  written  notice.  The Company  shall pay Nologies
$8,000 per month and reimburse it for reasonable  documented  business expenses.
Pursuant to the terms of such agreement, Nologies agrees (a) not to disclose, at
any time, any  confidential  business or technical  information or trade secrets
acquired  during  its  association  with the  Company  and which  relates to the
present or  contemplated  business of the Company,  whether or not conceived of,
discovered,  developed  or  prepared  by  Nologies,  (b)  during the term of the
agreement and for a one year period thereafter, it will not represent,  consult,
serve, or be employed by any competing enterprise,  and (c) never to divulge any
confidential information to any third party.

Employees

     As of March 19, 1999, the Company employed four people,  three as executive
officers and one as an office  manager.  All of the four employees were employed
on full-time basis.


ITEM 2.   Description of Property.

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

ITEM 3.   Legal Proceedings.

          None.

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

     During the fourth  quarter of the Company's  fiscal year ended December 31,
1998, no matter was submitted to a vote of security holders of the Company.


                                        9

<PAGE>


                                     PART II


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

     Since the consummation of the Company's  initial public offering on October
23, 1996 (the  "IPO"),  the  Company's  Common  Stock has been traded and quoted
under the symbol IDND on the OTC Bulletin Board.  The 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, 1997                   $0.69              $0.32
Quarter ended June 30, 1997                    $0.49              $0.34
Quarter ended September 30, 1997               $0.39              $0.23
Quarter ended December 31, 1997                $1.22              $0.245
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

     As of March 19,  1999,  the  Company had 53 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
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.

                                       10

<PAGE>


     The Company was formed  primarily  for the purpose of  commercializing  and
marketing the Technologies  licensed from RIC, which technologies consist of the
Systems  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 the licensed technologies in the Field of Use as set forth in
the License  Agreement,  which  encompasses the food and beverage  industries as
broadly defined. 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 has entered into a
strategic  alliance with Packaging on October 1, 1997. The resulting products of
this Joint  Systems  Development  Agreement  will be a variety  of  bag-in-a-box
delivery  systems with unique  valve/pump  technology  for the food and beverage
industries.  The Company has been focusing its product development activities on
the  preparation of a permanent  production mold and the testing of sample Valve
Assemblies.  See "Item 1. - Description of Business" for more  information as to
the Company's business and products.

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

Results of Operations

     The Company has not  generated  any revenues to date and must be considered
to be in the development stage. The activities of the Company since inception in
October 1995 have been primarily directed at formational  activities,  including
the  completion  of  initial  capitalization,   pre-production   marketing,  the
preparation of molds and the testing of sample Valve Assemblies.

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

     The Company  engaged a contractor  for the  fabrication of a prototype mold
designed by  Nologies,  which  prototype  mold is being  refined by the Company.
Using the prototype mold, the Company  produced sample Valve  Assemblies  during
1998, some of which have been furnished to potential  customers for trial use or
submitted to an independent laboratory for oxygen barrier tests, which have been
completed. The

                                       11

<PAGE>


Company  has  been  in  the  process  of   developing   testing   protocols  for
bacteriological tests and product compatibility tests of the Valve Assemblies.

     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 $718,926  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.

     For the twelve  months ended  December 31, 1998,  the Company had operating
expenses of $1,341,990  versus  operating  expenses of $1,203,411 for the twelve
month period ended December 31, 1997.  This increase of $138,579,  or 11.5% over
the  comparable  period last year is primarily due to the Company's  accelerated
investment in research and development of its core technology.

     For the twelve months ended  December 31, 1998,  the Company had a net loss
of  $1,938,390  versus a net loss of  $1,145,091  for the  twelve  months  ended
December  31,  1997.  This  increase in net loss of  793,299,  or 69.3% over the
comparable  period  last  year is  almost  entirely  due to the loss  booked  in
relation to the Company's discontinued China operations.

     From January 1, 1997 to December  31, 1998,  the Company has incurred a net
loss from continuing and discontinued operations of $3,083,481.

Financial Condition

     As  reflected  in the  financial  statements,  the Company has  experienced
continuing net losses and negative cash flows from operations  through  December
31,  1998.  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 end of the third  quarter of the fiscal  year ending  December  31,
1999 ("Fiscal 1999"), at which time, it may be in a position to generate revenue
from sales of Valve Assemblies.

                                       12

<PAGE>


     As of February 28,  1999,  the Company had working  capital of  $1,181,860.
During the first  quarter of Fiscal 1999,  the Company was spending at a rate of
approximately  $95,000  per  month.  The  Company  expects  that  such rate will
increase to approximately  $130,000 per month commencing in the third quarter of
Fiscal 1999.  Such increase will primarily be due to the Company's  leasing of a
production  mold for the  production  of the Valve  Assemblies.  Therefore,  the
Company  expects  that  it  will  require  additional  capital  to  finance  its
operations after the third quarter of Fiscal 1999.

     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 $5,000,000 for the three-year period following Fiscal 1999. 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 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,  beginning on page
F-1, following this page.


                                       13

<PAGE>


                      INTERNATIONAL DISPENSING CORPORATION

                          (a development stage company)

                          INDEX TO FINANCIAL STATEMENTS

                                                                            Page

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                                     F-2

FINANCIAL STATEMENTS:

Balance Sheet as of December 31, 1998                                        F-3

Statements of Operations  for the Years Ended  December 31, 1998 and         F-4
1997,  and the Period from  Inception  (October  10,  1995)  Through
December 31, 1998

Statements  of Cash Flows for the Years Ended  December 31, 1998 and         F-5
1997,  and the Period from  Inception  (October  10,  1995)  Through
December 31, 1998

Statements of Changes in Stockholders'  Equity  (Deficiency) for the         F-6
Period from October 10, 1995  (inception) Through  December 31, 1995
and for the Years Ended December 31, 1998, 1997 and 1996

NOTES TO FINANCIAL STATEMENTS                                                F-7


                                 F-1

<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,
1998,  and the related  statements  of  operations  and cash flows for the years
ended December 31, 1998 and 1997, and for the period from inception (October 10,
1995)  to  December  31,  1998,  and  the  statements  of  stockholders'  equity
(deficiency)  for the period from inception  (October 10, 1995) through December
31, 1995, and for the years ended  December 31, 1998 and 1997.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position of  International  Dispensing
Corporation  as of December 31, 1998,  and the results of its operations and its
cash flows for the years ended  December  31, 1998 and 1997,  and for the period
from  inception  (October 10, 1995) to December 31,  1998,  in  conformity  with
generally accepted accounting principles.

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
                                                          ARTHUR ANDERSEN LLP

New York, New York
March 3, 1999 (Except for the matters discussed in 
Note 17, as to which the date is March 22, 1999)

                                       F-2

<PAGE>

<TABLE>
<CAPTION>
                INTERNATIONAL DISPENSING CORPORATION

                    (a development stage company)

                            BALANCE SHEET

                          DECEMBER 31, 1998


ASSETS
------


<S>                                                                           <C>
CURRENT ASSETS:
   Cash and cash equivalents ..............................................   $ 1,270,527
   Prepaid expenses .......................................................        43,545
                                                                              -----------
                Total current assets ......................................     1,314,072

FIXED ASSETS:
   Office equipment .......................................................         3,480
   Automobile .............................................................        21,919
   Accumulated depreciation and amortization ..............................        (8,314)
                                                                              -----------
                Net fixed assets ..........................................        17,085

OTHER ASSETS ..............................................................        30,033
                                                                              -----------
                Total assets ..............................................   $ 1,361,190
                                                                              ===========


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

CURRENT LIABILITIES:
   Accounts payable .......................................................   $    19,791
   Accrued expenses .......................................................        72,506
                                                                              -----------
                Total current liabilities .................................        92,297

COMMITMENTS AND CONTINGENCIES (Note 13)

STOCKHOLDERS' EQUITY (DEFICIENCY):
   Preferred stock, $.001 par value; 2,000,000 shares authorized, no shares
   issued or outstanding ..................................................          --   
   Common stock, $.001 par value; 40,000,000 shares authorized, 9,566,668
   shares issued and outstanding ..........................................         9,567
   Additional paid-in capital .............................................     9,895,286
   Deficit accumulated during the development stage .......................    (8,635,960)
                                                                              -----------
                Total stockholders' equity ................................     1,268,893

                Total liabilities and stockholders' equity ................   $ 1,361,190
                                                                              ===========

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

</TABLE>

                                       F-3

<PAGE>

<TABLE>
<CAPTION>

                                                INTERNATIONAL DISPENSING CORPORATION

                                                    (a development stage company)

                                                      STATEMENTS OF OPERATIONS



                                                                                                                        Cumulative  
                                                                                                                      from Inception
                                                                                                                       (October 10, 
                                                                                                                           1995)    
                                                                                  Years Ended December 31                Through    
                                                                              --------------------------------          December 31,
                                                                                  1998                 1997                 1998
                                                                              -----------          -----------          -----------

<S>                                                                           <C>                  <C>                  <C>         
REVENUES ............................................................         $      --            $      --            $      --   

COSTS AND EXPENSES:
   General and administrative .......................................           1,341,990            1,203,411            3,829,240
   Depreciation and amortization ....................................               9,896                4,516               16,456
                                                                              -----------          -----------          -----------
                Total costs and expenses ............................           1,351,886            1,207,927            3,845,696
                                                                              -----------          -----------          -----------
                                                                                                                        -----------
                Loss from operations ................................          (1,351,886)          (1,207,927)          (3,845,696)


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

INTEREST INCOME .....................................................             132,423              187,836              370,328
                                                                              -----------          -----------          -----------
                Net loss before extraordinary loss and
                discontinued operations .............................          (1,219,463)          (1,020,091)          (3,542,033)

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

LOSS FROM DISCONTINUED OPERATIONS ...................................            (718,927)            (125,000)            (843,927)
                                                                              -----------          -----------          -----------
                Net loss ............................................         $(1,938,390)         $(1,145,091)         $(4,635,960)
                                                                              ===========          ===========          ===========

BASIC AND DILUTED LOSS PER SHARE FROM ...............................         $      (.13)         $      (.11)
CONTINUING OPERATIONS

BASIC AND DILUTED LOSS PER SHARE FROM
DISCONTINUED OPERATIONS .............................................                (.07)                (.01)
                                                                              -----------          -----------

BASIC AND DILUTED LOSS PER SHARE ....................................         $      (.20)         $      (.12)
                                                                              ===========          ===========

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

The accompanying notes are an integral part of these statements

</TABLE>


                                       F-4

<PAGE>

<TABLE>
<CAPTION>

                                                INTERNATIONAL DISPENSING CORPORATION

                                                    (a development stage company)

                                                      STATEMENTS OF CASH FLOWS


                                                                                                                         Cumulative 
                                                                                                                      from Inception
                                                                                                                        (October 10,
                                                                                                                            1995)   
                                                                                   Years Ended December 31,                Through  
                                                                                -------------------------------         December 31,
                                                                                   1998                 1997                1998
                                                                                -----------         -----------         -----------
<S>                                                                             <C>                 <C>                 <C>         
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss ............................................................        $(1,938,390)        $(1,145,091)        $(4,635,960)
   Deduct loss from discontinued operations ............................            718,927             125,000             843,927
                                                                                -----------         -----------         -----------
   Net loss from continuing operation ..................................         (1,219,463)         (1,020,091)         (3,792,033)
   Adjustments to reconcile net loss to net cash used in
   operating activities-
          Depreciation and amortization ................................              9,896               4,514              16,454
          Compensation from stock grants ...............................             25,279                --                25,279
          Noncash compensation .........................................               --                  --                76,238
          Loss on retirement of debt ...................................               --                  --               250,000
          Changes in operating assets and liabilities-
             Decrease (increase) in prepaid expenses ...................              2,788              49,500             (43,545)
             Decrease (increase) in other assets .......................             27,753              37,975             (24,233)
             Increase in accounts payable ..............................              7,536              12,255              19,791
             (Decrease) increase in accrued expenses ...................             (2,539)            (67,993)             47,227
                                                                                -----------         -----------         -----------
                Net cash used in continuing operations .................         (1,148,750)           (983,840)         (3,424,822)
                Net cash used in discontinued operations ...............           (718,927)           (125,000)           (843,927)
                Net cash used by operating activities ..................         (1,867,677)         (1,108,840)         (4,268,749)
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of fixed assets ............................................               --               (21,919)            (33,539)
   Purchase of license .................................................               --                  --            (4,000,000)
                                                                                -----------         -----------         -----------
                Net cash used in investing activities ..................               --               (21,919)         (4,033,539)
                                                                                -----------         -----------         -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   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 ..............               --                  --             9,572,815
                                                                                -----------         -----------         -----------
                Net (decrease) increase in cash
                  and cash equivalents .................................         (1,867,677)         (1,130,759)          1,270,527

CASH AND CASH EQUIVALENTS, beginning of year ...........................          3,138,204           4,268,963                --
                                                                                -----------         -----------         -----------

CASH AND CASH EQUIVALENTS, end of year .................................        $ 1,270,527         $ 3,138,204         $ 1,270,527
                                                                                ===========         ===========         ===========

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


The accompanying notes are an integral part of these statements.

</TABLE>
                                      F-5

<PAGE>

<TABLE>
<CAPTION>
                                                INTERNATIONAL DISPENSING CORPORATION

                                                    (a development stage company)

                                     STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

                                          FOR THE PERIOD FROM OCTOBER 10, 1995 (INCEPTION)

                                                    THROUGH DECEMBER 31, 1995 AND

                                        FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996



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

BALANCE, December 31, 1995 ......................       5,887,500           5,888         251,150       (4,249,795)      (3,992,757)
      Issuance of common stock in
      private placement .........................         437,500             437         218,313             --            218,750
      Issuance of common stock rights
      in private placement ......................            --              --           656,250             --            656,250
      Issuance of common stock to
      bridge lenders ............................       1,575,000           1,575          (1,575)            --               --
      Issuance of common stock in
      public offering, net of issuance
      costs of $1,227,193 .......................       1,666,668           1,667       8,771,148             --          8,772,815
      Net loss ..................................            --              --              --         (1,302,684)      (1,302,684)
                                                      -----------     -----------     -----------      -----------      -----------
    BALANCE, December 31, 1996 ..................       9,566,668     $     9,567     $ 9,895,286      $(5,552,479)     $ 4,352,374

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

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

       Net loss .................................            --              --              --         (1,938,390)      (1,938,390)
                                                      -----------     -----------     -----------      -----------      -----------

    BALANCE, December 31, 1998 ..................       9,566,668     $     9,567     $ 9,895,286      $(8,635,960)     $ 1,268,893
                                                      ===========     ===========     ===========      ===========      ===========

The accompanying notes are an integral part of these statements.

                                      F-6

</TABLE>


<PAGE>


                      INTERNATIONAL DISPENSING CORPORATION

                          (a development stage company)


                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 1998




1.  THE COMPANY AND ORGANIZATION

International  Dispensing Corporation,  formerly known as ReSeal Food Dispensing
Systems,  Inc. (the  "Company"),  was  incorporated  in the State of Delaware in
October 1995 and is in the development  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.

The Company is subject to a number of risks,  including  the  Company's  lack of
prior  operating  history.  The Company is also subject to the  availability  of
sufficient financing to meet its future cash requirements and the uncertainty of
future  product  development  and regulatory  approval and market  acceptance of
existing and proposed products. In the event of bankruptcy of RIC, the status of
the  continuing  obligations  of the  various  parties to and under the  License
Agreement  (Note 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  development  stage  activities  have  resulted in an  accumulated
deficit  from  inception  to  December  31,  1998,  in  excess  of $8.6  million
(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  stock (see Note 4  regarding  IPO.)  Consequently,  there is
substantial  doubt about the Company's  ability to continue as a going  concern.
Management  plans  include the  contemplation  of a private  placement of equity
securities in 1999 to provide funding to allow it to continue its development of
its licensed  technology.  Notwithstanding,  the Company  believes that with the
completion of the production injection mold per its Gravity Feed Valve Assembly,
scheduled for the third  quarter of 1999, it will generate  sales revenue in the
fourth quarter of 1999.

                                       F-7


<PAGE>


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,  equipment and automobile are recorded at cost and are depreciated on
a straight-line basis over their estimated useful lives, generally five years.

Patents

Costs to develop patents are expensed when incurred.

Income Taxes

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

Net Loss Per Share

Effective  for the year ended  December 31, 1997,  the Company  adopted SFAS No.
128,   "Earnings  per  Share."  The  adoption  of  SFAS  No.  128  requires  the
presentation of Basic Earnings per Share and Diluted  Earnings per Share.  Basic
Earnings per Share is based on the average  number of common shares  outstanding
during the year.  Diluted  Earnings per Share is based on the average  number of
common  shares  outstanding  during the year plus the common  share  equivalents
related to  outstanding  stock  options and  deferred  contingent  common  stock
awards. There were no common share equivalents  outstanding at December 31, 1998
and 1997, 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.

                                      F-8

<PAGE>


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 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 income and earning per share,  as
calculated under the provisions of SFAS No. 123, are disclosed in Note 16.

Recently Issued Accounting Standards

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


4.  INITIAL PUBLIC OFFERING

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


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 in China  certain  Well Men  products.  Well Men also  assigned  to the
Company for the purpose of commercializing  such Well Men products,  all of Well
Men's patents and patent  applications  relating to such Well Men products.  The
agreement  is for an  initial  term of ten  years.  The  Company  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 the  fourth  quarter  of 1998,  IDC's  results  of
operations  have been  classified as  discontinued  operations and prior periods
have been restated.

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 had
refused  to pay for any of the  products  provided  to it.  As a result  of this
breach 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 of $719,000 in 1998.

                                      F-9

<PAGE>


It is the  Company's  intent to pursue  payment  of  reimbursement  of  expenses
incurred in the Company's China undertaking from Well Men


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 PLACEMENT

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


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 to certain  individuals for services
rendered equal to the par value of such shares.  Of the 1,500,000 shares issued,
552,000 were issued to individuals who are now members of the board of directors
and of the 450,000  shares  issued,  161,000  were issued to current  members of
management and the board of directors.

Pursuant to such settlement,  the holders of the Investor Shares may require the
Company to file a Registration  Statement  under the Securities Act with respect
to 25% of such shares of common  stock,  commencing  one year from the effective
date  of  the  Company's  IPO  (Note  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

                                      F-10

<PAGE>



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  common
shares,  subject to adjustments.  The $100,000 note (the "Portenoy  Note") would
have converted at a price of $.084 per common share, subject to adjustments, and
the $50,000 note (the "ATG Note")  would have  converted at a price of $.042 per
common share, subject to adjustments.

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


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, 1998  reflects  approximately  $76,000 of
compensation expense related to such shares.


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, 1998,  the Company has a receivable  due from RIC related to
operating  expenses,  rent  expense  and patent  costs in the amount of $50,695,
which has been fully  reserved  due to the  inability  of RIC to  reimburse  the
Company in the foreseeable future.

                                      F-11

<PAGE>


For the year ended  December  31,  1997,  the Company  paid  consulting  fees to
members of management in the aggregate amount of $73,000.  In 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, 1998, the
Company has net deferred tax assets of approximately  $1.9 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

a. Lease

The Company leases office space under a noncancelable  operating lease, expiring
on February 29, 2000. Rental expense for the periods ended December 31, 1998 and
1997 was $26,875 and $64,928, respectively.  Future minimum lease payments under
this lease agreement are $58,632.

b. Employment Agreement

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

c. Consulting Agreement

On March 5, 1996,  the Company  entered into an agreement  with  Nologies,  Inc.
("Nologies")  under which  Nologies will assist in the directing and managing of
product and technology  development,  licensing and strategic  alliance pursuits
and other related services in the areas of food and beverage dispensing systems.
The term of such  agreement  extends to February  28,  2000.  The  Company  pays
Nologies $8,000 per month plus expenses.

                                      F-12

<PAGE>


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 will be a variety of Bag-in-Box delivery systems
with unique Valve/Pump  Technology for the food and beverage  industries.  These
systems will be marketed throughout the United States.


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.  The Company is authorized to
grant up to 650,000 shares and 250,000 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. During 1998, the Company issued 205,000

                                      F-13

<PAGE>


and 80,000 options under the Participant  Plan and Director Plan,  respectively.
All of the options  granted during the current year become  exercisable in three
annual  installments  commencing  April 2, 1999.  Included in the options issued
under the  Participant  Plan were 155,000  incentive stock options issued to key
employees and 50,000 non-qualified options issued to an outside consultant.

The options  issued to key  employees  have been  accounted  for under APB 25 as
discussed below. The options issue to the outside  consultant were accounted for
in accordance with SFAS 123. Accordingly,  approximately $25,000 of compensation
expense has been  recognized in the current year for the estimated  value of the
options granted to the outside consultant.

The  status  of the  Company's  stock  option  plans is  summarized  below as of
December 31, 1998:


                                                                        Weighted
                                                         Number of       Average
                                                          Shares          Price
                                                          -------         ------
Outstanding at December 31, 1997 ................            --             --
Granted .........................................         285,000         $1.595
                                                          -------         ------
Exercisable at December 31, 1998 ................         285,000         $1.595
                                                          =======         ======


The Company applies APB No. 25 in accounting for its stock options granted under
the stock option plans described  above.  The option price under the Plans equal
or exceed the fair market  value of the common  shares 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 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 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, 1998
Net Loss                                                       -----------------
     As reported ...................................              $1,938,390
     Pro Forma .....................................              $2,057,203
Loss Per Share
     As reported ...................................                $(.20)
     Pro Forma .....................................                $(.22)


Total  outstanding  options and the weighted average share price at December 31,
1998 are 205,000 and $1.595, respectively.

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

                                      F-14

<PAGE>


granted in 1998:  no dividend  yield,  expected  volatility  142.12%,  risk-free
interest rates of 5.69% and expected lives of 7 years.


17.  SUBSEQUENT EVENTS

On March 15, 1999 the Company and Mr.  Silverman  entered  into an  agreement to
amend the Silverman Employment Agreement (the "Silverman  Amendment").  Pursuant
to the Silverman Amendment, Mr. Silverman will continue 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.  The Silvermen
Amendment  also provides 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 shall become exercisable on April 2, 1999 and options
to purchase an aggregate of 33,334 of such shares  shall become  exercisable  on
December 30, 1999; provided in each case that Mr. Silverman is still employed by
the Company. If they become  exercisable,  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) shall
become null and void and may 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 shall be  non-qualified  stock options rather than incentive  stock
options.

The Company and Gary 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, 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 the date of termination.

                                      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 19, 1999,  the  executive  officers  and  directors of the
Company are as follows:


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

    Gary Allanson              46        President and Chief Executive Officer
    Jon D. Silverman           58        Chairman and Director
    Jeffrey D. Lewenthal       55        Chief Financial Officer, Executive Vice
                                         President of Business Development,
                                         Treasurer and Secretary
    Jay M. Rosen               60        Director
    George V. Kriste           51        Director
    Gregory B. Abbott          48        Director
    Claude K. Lee              65        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 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.

     Jon D. Silverman has served as Chairman and a director of the Company since
November  1996,  and prior  thereto as a  consultant  to the  Company  since its
inception.  Mr.  Silverman  also  served as the  President  and Chief  Executive
Officer of the Company from November 1996 through March 15, 1999.  Since 1980 he
has  served  as the  principal  of Tilis  Products,  Inc.,  his own  specialized
international  business  consulting,  mergers and  acquisitions  firm (including
capital  formation)  in the food,  beverages  and other  consumer  products  and
services  industries.  He has  served on the  Board of  Trustees  of the  United
Hospital,  Port  Chester,  New York,  for the past 15 years (he is  currently an
Honorary Trustee) and for a number of years,

                                       14

<PAGE>



prior to May 1995,  had  served  as Vice  Chairman  thereof;  is a  director  of
Pastificio  Gazzola,  Mondovi,  Italy,  a  leading  pasta  exporter;  and a past
director of Combined  Moretti/Prinz Brau Breweries, a subsidiary of John Labatt,
Ltd.

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

     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.

     Claude K. Lee has served as director of the Company since July 1998.  Since
1968 he has served as Chairman of the Board of the Power Group, a privately held
company he founded. The Power Group engages in contract packaging and contracted
logistical services worldwide.

     Jay M. Rosen has served as a director of the Company since July 1998.  From
January 1998 to present,  he has been 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.

                                       15

<PAGE>



     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.


ITEM 10.  Executive Compensation.

Summary Compensation Table

     The  following  table  sets  forth  for the three (3)  fiscal  years  ended
December 31, 1998,  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> 
Jon Silverman               1998        $180,000         -          -                      -              -            $4,430(2)
Chairman, CEO and           1997        $187,500         -          -                      -              -            $4,000(2)
President                   1996        $144,000         -          -                      -              -            -
                                                                                       
Jeffrey D. Lewenthal        1998        $144,000         -          -                      -              -            -
Chief Financial             1997        $96,000(3)       -          -                      -              -            -
Officer, Executive          1996        -                -          -                      -              -            -
Vice President of                                                               
Business
Development,
Treasurer and
Secretary

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

(3)      Jeffrey D. Lewenthal's employment with the Company began on March 1997.
         The figure represents the compensation Mr. Lewenthal  received from the
         Company for the period of his employment with the Company in 1997.

</FN>
</TABLE>

                                       16

<PAGE>


Employment and Non-Compete Agreements

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

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

     On March 15, 1999 the Company and Mr.  Silverman  entered into an agreement
to  amend  the  Silverman  Employment  Agreement  (the  "Silverman  Amendment").
Pursuant to the Silverman Amendment, Mr. Silverman will continue 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.  The
Silverman  Amendment  also  provides  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 shall become exercisable on April 2, 1999
and options to  purchase an  aggregate  of 33,334 of such  shares  shall  become
exercisable  on December 30, 1999;  provided in each case that Mr.  Silverman is
still employed by the Company. If they become exercisable, the foregoing 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)  shall become null and void and may 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  shall be  non-qualified  stock  options
rather than incentive stock options.

     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

                                       17

<PAGE>



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 19, 1999, 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 such owners, have sole investment and
voting power with respect to such shares,  subject to community  property  laws,
where applicable.

                                       18

<PAGE>



    Name and Address                                                  Percent of
    Of Beneficial Owner(1)                         Number of Shares     Class(2)
    -------------------                            ----------------     --------
Reseal International Corporation ..................      1,230,731         12.9%
c/o The ReSeal Companies
599 Lexington Avenue, 23rd Floor
New York, New York 10022

Jon Silverman .....................................        633,333(3)       6.6%
c/o International Dispensing Corporation
2500 Westchester Avenue
Suite 317
Purchase, New York 10577

Gregory Abbott ....................................      1,102,260(4)      11.5%
1200 Kessler Drive
Aspen, CO 81611

George Kriste .....................................        293,333(5)       3.1%
20643 Seabord Road
Malibu, California 90265

Jay M. Rosen ......................................          1,000(6)       *
21 Longledge Drive
Rye Brook, New York 10593

Claude K. Lee .....................................              0(7)       *
5025 South McCaran, Apt. 344
Reno, Nevada 89502

All directors and executive officers as a .........      2,346,593(8)      23.6%
group (7 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  33,333  shares of common stock of the Company  issuable  upon
         exercise of options,  which will become  exercisable  on April 2, 1999.
         Does not include 66,667 shares of common stock of the Company  issuable
         upon exercise of options which will not become  exercisable  within the
         next 60 days.

(4)      Includes  13,333  shares of common stock of the Company  issuable  upon
         exercise of options,  which will become  exercisable  on April 2, 1999.
         Does not include 26,667 shares of common stock of the Company  issuable
         upon exercise of options which will not become  exercisable  within the
         next 60 days.

(5)      Includes  13,333  shares of common stock of the Company  issuable  upon
         exercise of options,  which will become  exercisable  on April 2, 1999.
         Does not include 26,667 shares of common stock of the Company  issuable
         upon exercise of options which will not become  exercisable  within the
         next 60 days.


                                       19

<PAGE>


(6)      Does not include  shares of common stock of the Company  issuable  upon
         exercise of options which will not become  exercisable  within the next
         60 days.

(7)      Does not include  shares of common stock of the Company  issuable  upon
         exercise of options which will not become  exercisable  within the next
         60 days.

(8)      Includes in the aggregate 376,612 shares of common stock of the Company
         issuable  upon  exercise of options held by the directors and executive
         officers of the Company,  which options are exercisable  within 60 days
         of March 19, 1999.  Does not include  163,334 shares of common stock of
         the Company  issuable  upon  exercise of options  which will not become
         exercisable within the next 60 days.


ITEM 12.  Certain Relationships and Related Transactions.

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

     Pursuant to the Sale and Assignment Agreement the Trustee agreed to sell to
the  Company or to no more than ten  qualified  designees  of the  Company  (the
"Designees"),  (a) on the closing date an  aggregate  number of shares of Common
Stock of the Company  equal to or greater than 995,705  shares minus (1) 176,778
shares,  retained by another person pursuant to a certain  settlement  agreement
with the Trustee and (2) 200,000  shares and (b) all of the remaining  shares of
Common  Stock held by the Trustee on or prior to the first  business day that is
180 days  after the  closing  date.  The  Trustee  also  agreed to assign to the
Company on the closing date all of Stratton  Oakmont's right, title and interest
in, to and under the Underwriting Agreement,  including, without limitation, (i)
all of its right,  title and interest in, to and under its option to purchase up
to an aggregate of 83,333 IPO Units for a purchase price of $.001 per underlying
IPO Unit (the  "Underwriter's  Purchase Option"),  (ii) its rights to enforce an
agreement by certain  stockholders  not to sell Common Stock for a period of two
years after the effective date of the registration statement relating to the IPO
(the  "Effective  Date"),  and (iii) its rights to enforce the  agreement by the
Company not to issue new stock (except in connection  with  dividends or similar
transactions)  for  a  period  of  two  years  after  the  Effective  Date.  The
Underwriter's  Purchase Option was exercisable for a term of twelve months after
the  Effective  Date.  Pursuant to the Sale and  Assignment  Agreement,  Mr. Jon
Silverman,  the Chairman,  President and Chief Executive Officer of the Company,
and Messrs.  Gregory Abbott and George Kriste, each of whom is a director of the
Company,  purchased from the Trustee for $0.60 per share, 100,000,  367,927, and
150,000  shares of Common Stock,  respectively.  Each of such persons has agreed
not to sell the shares he purchased for a period of two years.


                                       20

<PAGE>


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

Exhibits

 Exhibit No.
 -----------
    3.1           Restated  Certificate of Incorporation of the Registrant,  as
                  amended  (incorporated  herein by reference to Exhibit 3.1 to
                  the   Registrant's   Registration   Statement  on  Form  SB-2
                  (Registration No. 333-7915) (the "Form SB-2")).
            
    3.2           Certificate of Amendment to the Certificate of  Incorporation
                  (incorporated  herein by reference to Exhibit 3.2 to the Form
                  SB-2).
            
    3.3           Certificate of Amendment to the Certificate of Incorporation.*
            
    3.4           By-laws of the Registrant, as amended (incorporated herein by
                  reference to Exhibit 3.3 to the Form SB-2).
            
    4.1           Specimen  Common Stock  Certificate  (incorporated  herein by
                  reference to Exhibit 4.1 to the Form SB-2).
            
    4.2           Form of Class A  Warrant  Agreement  (incorporated  herein by
                  reference to Exhibit 4.2 to the Form SB-2).
            
    10.1          License  Agreement  by and  between the  Registrant  and RIC,
                  dated as of October 10, 1995, as amended (incorporated herein
                  by reference to Exhibit 10.1 to the Form SB-2).
            
    10.2          Agreement by and between the Registrant  and Nologies,  dated
                  as of March 5,  1996  (incorporated  herein by  reference  to
                  Exhibit 10.5 to the Form SB-2).
            
    10.3          Form  of  Bridge   Loan   Agreement   and   Promissory   Note
                  (incorporated herein by reference to Exhibit 10.3 to the Form
                  SB-2).
            
    10.4          Form of  Amendment  to Bridge  Loan  Agreement  (incorporated
                  herein by reference to Exhibit 10.4 to the Form SB-2).
            
    10.5          Settlement  Agreement,  dated as of October 10, 1995,  by and
                  among Hardee Capital Partners,  L.P., Louis Simpson,  Gregory
                  Abbott, George Kriste, David Brenman,  Gerald Gottlieb,  Marc
                  Gottlieb, Joseph Koster, Greg Pardes, Linda Poit, ReSeal Food
                  Dispensing  Systems,   Inc.,  ReSeal  International   Limited
                  Partnership, Technologies & Advancements, Inc., ReSeal

                                       21

<PAGE>


                  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).

    10.6          Amendment to the Agreement by and between the  Registrant and
                  Nologies, Inc., dated February 26, 1999.*
            
    10.7          Employment  Agreement,  dated as of January 17, 1997, between
                  the  Registrant  and Jon  Silverman  (incorporated  herein by
                  reference to Exhibit 10.9 to the  Company's  Annual Report on
                  Form 10-KSB for its fiscal year ended December 31, 1996).
            
    10.8          Amendment,  dated March 15,  1999,  to  Employment  Agreement
                  between the Registrant and Jon Silverman.*
            
    10.9          Employment  Agreement,  dated  March 15,  1999,  between  the
                  Registrant and Gary Allanson.*
            
    10.10         Registration  Rights  Agreement  dated  May  8,  1996  by and
                  between Banco Inversion,  S.A., and the Company (incorporated
                  herein by reference to Exhibit 10.8 to the  Company's  Annual
                  Report on Form 10-KSB for its fiscal year ended  December 31,
                  1997 ("1997 10-KSB")).
            
    10.11         Joint  Systems  Development  Agreement  entered  into  as  of
                  October  1,  1997,   between  the   Company   and   Packaging
                  (incorporated  herein by  reference  to  Exhibit  10.9 to the
                  Company's 1997 10-KSB).
            
    10.12         Sale and Assignment  Agreement  dated as of November 19, 1997
                  between the Trustee and the Company  (incorporated  herein by
                  reference to Exhibit 10.10 to the Company's 1997 10-KSB).
            
    10.13         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).
            
    10.14         Sublease  dated  November  5,  1997  between  General  Motors
                  Corporation  and  the  Company,   together  with  Consent  to
                  Sublease  dated as of November  12, 1997  between  East Ridge
                  Properties  I  Corporation  and  General  Motors  Corporation
                  (incorporated  herein by  reference  to Exhibit  10.12 to the
                  Company's 1997 10-KSB).
            
    27            Financial Data Schedule*
----------------------------

* Filed herewith

                                       22

<PAGE>


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, 1998.

                                       23

<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, 1999                 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          President and Chief Executive         March 30, 1999
---------------------      Officer
Gary Allanson              (Principal Executive 
                           Officer)             
                           

/s/ Jon Silverman          Chairman and Director                 March 30, 1999
--------------------
Jon Silverman

/s/ Jeffrey Lewenthal      Chief Financial                       March 30, 1999
----------------------     Officer, Executive Vice President
Jeffrey Lewenthal          of Business Development (Princi  
                           pal Accounting and Financial Of  
                           ficer), Treasurer and Secretary  

/s/ Jay Rosen              Director                              March 30, 1999
----------------------
Jay Rosen

/s/ Gregory Abbott         Director                              March 30, 1999
----------------------
Gregory Abbott

/s/ George Kriste          Director                              March 30, 1999
----------------------
George Kriste

/s/ Claude Lee             Director                              March 30, 1999
----------------------
Claude Lee


                                       24

<PAGE>

                      INTERNATIONAL DISPENSING CORPORATION

                          ANNUAL REPORT ON FORM 10-KSB
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

                                 EXHIBITS INDEX

                             Description of Exhibits

Exhibit No.

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

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

        3.3        Certificate of Amendment to the Certificate of 
                   Incorporation.*

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

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

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

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

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

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

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<PAGE>



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

        10.5       Settlement  Agreement,  dated as of October 10, 1995,  by and
                   among Hardee Capital Partners,  L.P., Louis Simpson,  Gregory
                   Abbott, George Kriste, David Brenman,  Gerald Gottlieb,  Marc
                   Gottlieb, Joseph Koster, Greg Pardes, Linda Poit, ReSeal Food
                   Dispensing  Systems,   Inc.,  ReSeal  International   Limited
                   Partnership,   Technologies  &  Advancements,   Inc.,  ReSeal
                   International  Corporation,  ReSeal  Pharmaceutical  Systems,
                   Ltd.,  Milton  Stanson,  Hilda  Brown,  Ann Hoopes,  Townsend
                   Hoopes, Robin Smith and Eugene Sumner (incorporated herein by
                   reference to Exhibit 10.7 to the Form SB-2).

        10.6       Amendment to the Agreement by and between the  Registrant and
                   Nologies, Inc., dated February 26, 1999.*

        10.7       Employment  Agreement,  dated as of January 17, 1997, between
                   the  Registrant  and Jon  Silverman  (incorporated  herein by
                   reference to Exhibit 10.9 to the  Company's  Annual Report on
                   Form 10-KSB for its fiscal year ended December 31, 1996).

        10.8       Amendment,  dated March 15, 1999,  to  Employment  Agreement,
                   dated between the Registrant and Jon Silverman.*

        10.9       Employment  Agreement,  dated  March 15,  1999,  between  the
                   Registrant and Gary Allanson.*

        10.10      Registration  Rights  Agreement  dated  May  8,  1996  by and
                   between Banco Inversion,  S.A., and the Company (incorporated
                   herein by reference to Exhibit 10.8 to the Company's 1997 10-
                   KSB).

        10.11      Joint  Systems  Development  Agreement  entered  into  as  of
                   October  1,  1997,   between  the  Registrant  and  Packaging
                   Systems,  LLC  (incorporated  herein by  reference to Exhibit
                   10.9 to the Company's 1997 10-KSB).

        10.12      Sale and Assignment  Agreement  dated as of November 19, 1997
                   between  Harvey  R.  Miller,   Esq.,  as  trustee,   for  the
                   liquidation  of Stratton  Oakmont,  Inc.  and the  Registrant
                   (incorporated  herein by  reference  to Exhibit  10.10 to the
                   Company's 1997 10-KSB).


                                       26

<PAGE>


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

        10.14      Sublease  dated  November  5,  1997  between  General  Motors
                   Corporation  and  the  Company,   together  with  Consent  to
                   Sublease  dated as of November  12, 1997  between  East Ridge
                   Properties  I  Corporation  and  General  Motors  Corporation
                   (incorporated  herein by  reference  to Exhibit  10.12 to the
                   Company's 1997 10-KSB).

        27         Financial Data Schedule.*

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


* Filed herewith.


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