SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-KSB


[x]      ANNUAL REPORT UNDER SECTION 13 OR 15(D)
         OF THE SECURITIES EXCHANGE ACT OF 1934

         For the Fiscal Year Ended December 31, 1996

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF
         THE SECURITIES EXCHANGE ACT OF 1934

         For the transition period from ________to ___________

                          COMMISSION FILE NO.: 0-21489


                      INTERNATIONAL DISPENSING CORPORATION
--------------------------------------------------------------------------------
                 (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)


           Delaware                                            13-3856324
--------------------------------------------------------------------------------
(STATE OR OTHER JURISDICTION OF                             (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION)                             IDENTIFICATION NO.)


342 Madison Avenue, Suite 1034, New York, New York                     10173
--------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                             (ZIP CODE)


Issuer's telephone number: (212) 682-2244

Securities registered under Section 12(b) of the Exchange Act: NONE

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

                                Title of Classes

                          Common Stock, $.001 par value
                           Class A Redeemable Warrants
                       Units (consisting of two shares of
                     Common Stock and two Class A Warrants)


<PAGE>

         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  Registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days.

                        Yes [x] No [ ]

         Check if  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. [ ]

         Issuer's revenues for its most recent fiscal year: None.

         The aggregate  market value of the voting stock held by  non-affiliates
of the Registrant as of March 26, 1997 (computed by reference to the average bid
and  asked  prices  of  such  stock  on  March  26,   1997)  was   approximately
$4,129,761.

         There were  9,566,668  shares of Common Stock  outstanding at March 26,
1997.

         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

         The Company was incorporated in Delaware in October 1995 under the name
ReSeal Food  Dispensing  Systems,  Inc.  and  changed its name to  International
Dispensing  Corporation on September 12, 1996. The Company was formed  primarily
for the  purpose  of  commercializing  and  marketing  certain  proprietary  and
patented delivery and dispensing  technologies (the "Technologies")  which, when
utilized in  dispensing  flowable  food and beverage  products,  are designed to
maintain the  sterility,  purity and freshness of such products  throughout  the
period of time it is being  consumed (its "use life"),  with the  possibility of
eliminating or reducing the need for adding preservatives to the product to keep
it fresh and/or refrigeration throughout its use life.

         The Company will focus its marketing  activities on the  application of
the  Technologies  in the Field of Use (as  defined)  set forth in that  certain
Amended and Restated License Agreement (the "Company License Agreement") between
the Company and ReSeal International Corporation, a Florida corporation ("RIC"),
which  encompasses the food and beverage  industries as broadly defined.  Within
such categories,  the  applications of the licensed  technologies can be divided
into a number of potential markets,  including but not limited to the following:
(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


<PAGE>

ketchup, barbecue sauce, mayonnaise, salad dressings, oils and mustard.

         The Company  licenses the  Technologies  from RIC,  which  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.

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

Historical Summary

         ReSeal International  Limited Partnership,  RIC's parent ("RILP"),  had
engaged  research and  development  laboratory  services to perform a variety of
tests  (including,  but not limited to, dye immersion  and  microbial  challenge
tests), in accordance with basic scientifically accepted protocols, to determine
the reliability of the Technologies to provide barrier  capabilities in order to
maintain  contamination  free  and  intact  contents  throughout  the  product's
designated  use life.  This is achieved  by the  dispensing  of product  without
allowing  contaminants  to enter the  self-adjusting  reservoir  to which  Valve
Assemblies are attached. The Company, based on such test results,  believes that
Systems, when structured  appropriately for product and use specific objectives,
should effectively  protect the contents of the System from contamination  under
static and repeat use conditions for extended periods, and that the Technologies
have application in numerous


                                       -2-


<PAGE>

product   areas.   For   example,    the   Company's   initial   marketing   and
commercialization  efforts in the food and beverage  area include  wine,  water,
juices,  coffee,  tea, milk and other dairy products.  The Company is working to
develop  Systems  for these  markets.  The  Company is also  pursuing  marketing
opportunities  with  Systems  that the  Company  intends to develop to  dispense
soups,  condiments,  sauces, edible oils and salad dressings.  In addition,  the
Company  believes  that the range of  products  which can be  dispensed  through
Systems  is  expanding  as  the  Company  identifies  additional  materials  and
structures  which can be combined to produce  Systems that are  applicable  to a
greater number of products in the food and beverage industries.

         The most recent  generation of Systems employs the Technologies for the
first time  within  traditional  packaging  formats,  including  tubes,  bags or
"bag-in-a-box,"  and pouches.  In all such cases,  these basic  systems would be
adapted in a manner appropriate to specialized  utilization within the Company's
targeted  markets  which may  include  consumer,  institutional  and  industrial
applications.  Consequently,  distributors of flowable  products should have the
ability to employ the Technologies  without  significantly  altering the outward
appearance of their existing packaging.

License Agreement

         The Company was  organized  primarily  for the purpose of licensing the
Technologies  in the Field of Use (as defined below) from RIC. The  Technologies
are licensed by RIC from RILP,  on a worldwide  exclusive  basis in all of their
applications,  pursuant to a License Agreement dated November 16, 1992 (the "RIC
License  Agreement").  The Company has licensed the Technologies  from RIC, on a
worldwide  exclusive  basis,  solely in the Field of Use pursuant to the Company
License   Agreement,   and  will  endeavor  to  commercialize   and  market  the
Technologies  to third parties for its  implementation  in the food and beverage
industries.

         Pursuant to the Company  License  Agreement,  RIC granted the Company a
royalty-free  exclusive  worldwide  license for an aggregate of  $4,000,000  and
2,900,000  shares  of Common  Stock,  to (i)  directly  or  indirectly  make (or
subcontract  to  make),  use,  sell  and  otherwise   commercially  exploit  the
Technology, solely in the Field of Use, 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  Technology to make,
use, lease, sell or distribute (a) any food or beverage dispensers or containers
that embody the Technology or the manufacture,  use, lease, sale or distribution
of which uses the Technology  (collectively,  the "Product") intended for use in
an industrial or commercial place of business in the


                                       -3-


<PAGE>

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.

         The Company is primarily  responsible  for all research and development
activities  necessary  to  exploit  fully the  commercial  possibilities  of the
Technology.  The research and  development  activities  shall include testing of
proposed   Products  and  ongoing   technical   support  for  the  modification,
improvement,  enhancement, development or variation of existing Products and the
development of new Products.  RIC is responsible  for causing RILP to manage all
intellectual  property  associated  with the Technology,  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 behalf of RILP.

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

Strategic Focus

         The Company will 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 plans 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 System for  application to the products  mentioned
above, on a worldwide basis. The Company will approach


                                       -4-

<PAGE>

companies  that already are  marketing  their  products in a  bag-in-a-box.  The
Company believes that the System is 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 System.

         Second,  the Company plans to market the  Technology 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  Technology  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 System 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 System can be used with a variety of tubes and pouches,  and
thereby is applicable to condiments, salad dressings and baby foods. The Company
believes  that the System also has 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. With the System,  various  bag-in-a-box  sizes of UHT milk can be sold,
dispensed  from,  and still remain fresh,  without  refrigeration,  for a longer
period of time.

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

         Management  anticipates  that the  Technology  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


                                       -5-


<PAGE>

marketed utilizing the Technology will ultimately obtain commercial success.

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

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  product's  use life 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.

         Competition

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


                                       -6-

<PAGE>

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 System offers a distinct advantage over each of these other systems
because the System is designed to prohibit the flow of air and contaminants back
into it when product is being dispensed.  It is anticipated that the 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,  like  the  System,   provides  considerably  more  product  purity  and
cleanliness.

     Design Advantages

         The  Technology  is 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.

     Possible Future Alliances

         The Company plans to enter into strategic alliances, supply agreements,
direct  license  agreements  and joint  ventures  with  leaders  in the food and
beverage industry.  However,  to date, the Company has not entered into any such
alliances, agreements or ventures and there can be no assurance that the Company
will  be  able  to do so in the  future.  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 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.


                                       -7-


<PAGE>

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  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.

         In addition to all the  advantages  inherent in a barrier  system,  the
Company  believes  that the  System  will  offer  basic  mechanical  advantages,
including without  limitation  portion control and a pumping mechanism that will
enable customers to mix  concentrates  (such as teas and juices) with water when
being served.

Patents, Trademarks and Other Intellectual Property

         RILP has been granted numerous patents and trademarks  covering Systems
and their component parts.

         The Company License Agreement  includes all of the patents RIC licensed
from RILP.  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)


                                       -8-


<PAGE>


2.   An  enclosing  sleeve for a one-way  valve  presses an  elastomeric  sheath
     against  the valve body to provide a seal  between the sheath and the valve
     body. In addition, the sleeve can form a closure over the outlet end of the
     valve body protecting it from  contamination or contact with  contaminating
     surfaces.
                                                       U.S. Patent No. 5,092,855
                                                (Expiration Date: March 3, 2009)

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

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

4.   A fluid  dispensing  unit includes a collapsible  reservoir  with a one-way
     valve at its  outlet  for  directing  flow  into a  metering  chamber.  The
     metering  chamber has an outlet  connected to another  one-way  valve which
     prevents  backflow  of  contaminants  into  the  container  after  fluid is
     dispensed.  Both the collapsible  reservoir and the metering chamber can be
     completely  collapsed  to ensure  that the  dispensing  unit is  completely
     empty.
                                                       U.S. Patent No. 5,279,447
                                             (Expiration Date: January 18, 2011)

5.   A disc  shaped  valve body  enclosed  circumferentially  by an  elastomeric
     membrane.   Fluid   flows   through   separate   passageways   between  the
     circumferential edge of the valve body and the elastomeric  membrane.
                                                       U.S. Patent No. 5,279,330
                                             (Expiration Date: January 18, 2011)

6.   A one-way valve  assembly with a cover member which  encloses an expandable
     elastomer  sleeve  and  valve  body  and  which  presses  the  sleeve  into
     fluid-tight contact with the valve body at two axially spaced locations.
                                                       U.S. Patent No. 5,305,786
                                              (Expiration Date:  April 26, 2011)

7.   A  dispenser  with  two  separate  collapsible  chambers,  each  holding  a
     component or  substance to be mixed before use with at least one  component
     being  in a  flowable  condition.  A one-  way  valve  permits  flow of the
     flowable  component  into the other  chamber  and  prevents  any  backflow,
     thereby  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)


                                       -9-


<PAGE>

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 Pending/Allowed;
                                                      Application No. 08/398,771

Employees

         As of March 28, 1997, the Company  employed five persons,  all of which
are on a full-time basis.

ITEM 2.  DESCRIPTION OF PROPERTY.

         The  Company  currently  leases,  from a  non-affiliated  third  party,
approximately  3,716 square feet of space for its principal  executive office at
342  Madison  Avenue,  New York,  New York  10173.  The  monthly  rental on this
property is $7,509.  Management  believes that this facility is adequate for the
Company's intended activities in the foreseeable future. The lease terminates on
November 20, 1997. If this lease is not renewed, the Company does not anticipate
any significant problems in finding suitable alternative space.

ITEM 3.  LEGAL PROCEEDINGS.

         The Company is not a party to any legal proceedings.  However,  certain
affiliates of RIC and the Company were named as defendants in a complaint  filed
on or about October 31, 1994, alleging,  among other things, breach of fiduciary
duty,  mismanagement,  waste and fraud. A settlement in connection therewith has
been entered into,  which  includes the dismissal with prejudice of the lawsuit.
See  "Certain  Relationships  and  Related  Transactions--Settlements  of  Legal
Proceedings--Stanson Settlement."


                                      -10-


<PAGE>

         In addition,  certain  affiliates  of RIC and the Company were named as
defendants in a complaint filed on or about December 11, 1992,  alleging,  among
other things, violation of certain federal securities laws, common law fraud and
negligent  misrepresentation.  A settlement  in  connection  therewith  has been
entered into,  which  provides for the eventual  dismissal with prejudice of the
lawsuit upon satisfaction of certain conditions.  See "Certain Relationships and
Related Transactions--Settlements of Legal Proceedings--Banco Settlement."

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

         During  the fourth  quarter of fiscal  year  ended  December  31,  1996
("Fiscal  1996"),  no matter was submitted to a vote of  securityholders  of the
Company.


                                      -11-


<PAGE>

                                     PART II


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

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

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

Quarter ended
<S>                      <C>       <C>         <C>        <C>      <C>        <C>
  December 31, 1996      $11.25    $0.30       $5.25      $0.01    $30.50     $0.625

Quarter ending
  March 31, 1997
  (through
  March 26, 1997)         $0.69    $0.32       $0.125     $0.01     $1.45     $0.8125
</TABLE>

         As of March 26,  1997,  the  Company  had 51  holders  of record of its
Common Stock.

         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.

Recent Sales of Unregistered Securities

         Between  October 1995 and April 1996, the Company (i) sold an aggregate
of 525,000 shares of Common Stock to the certain  non-affiliates  of the Company
(the  "Bridge   Securityholders")  for  a  total  of  $1,050,000  (the  "Private
Placement") and (ii) entered into a loan with the Bridge  Securityholders in the
aggregate amount of $1,050,000 (the "Bridge Loan").  Each Bridge  Securityholder
participated in both the Private  Placement and the Bridge Loan. The Bridge Loan
bore interest at the rate of eight (8%) percent per


                                      -12-


<PAGE>

annum and was completely repaid out of the proceeds received by the Company from
its initial public offering (the "IPO"). As further consideration for the Bridge
Loan, the Bridge  Securityholders  acquired  787,500 Units (the "Bridge  Units")
which are comprised of 1,575,000  shares of Common Stock and  1,575,000  Class A
Warrants. The Class A Warrants included in the Bridge Units are identical to the
Class A Warrants  included in the Units  issued in the IPO (the "IPO Units," and
together with the Bridge Units,  the "Units").  Each Unit consists of two shares
of Common  Stock and two  redeemable  Class A purchase  warrants  (the  "Class A
Warrants").  Each Class A Warrant  entitles  the holder to purchase one share of
Common Stock for $7.00 during the four year period  commencing  October 3, 1997.
The Class A Warrants  are  redeemable  by the Company at $.05 per warrant at any
time after October 3, 1998, if certain conditions are met.

         The securities  issued in connection with the Private Placement and the
Bridge Loan were issued  pursuant to Section 4(2) of the Securities Act of 1933,
as amended (the  "Securities  Act").  The  Registration  Statement  covering the
securities  sold by the Company in the IPO also covered the  registration of (i)
the 1,575,000 shares of Common Stock included as part of the Bridge Units,  (ii)
the Class A Warrants to purchase  1,575,000  shares of Common Stock  included as
part of the  Bridge  Units,  and (iii)  the  1,575,000  shares  of Common  Stock
issuable  upon  exercise of the Class A Warrants  included  in the Bridge  Units
(collectively,  the  "Bridge  Securities").  The Bridge  Securities  held by the
Bridge  Securityholders  may not be sold prior to  November  3,  1997;  however,
Stratton  Oakmont,  Inc., the  underwriter of the IPO (the  "Underwriter"),  may
release the Bridge  Securities  held by the Bridge  Securityholders  at any time
after the IPO Units have been sold.  The resale of the Bridge  Securities by the
Bridge Securityholders are subject to prospectus delivery and other requirements
of the Securities Act. The Company will not receive any of the proceeds from the
sale of the Bridge Securities. Should the Class A Warrants offered by the Bridge
Securityholders be exercised,  of which there is no assurance,  the Company will
receive the proceeds therefrom aggregating up to $11,025,000.

         Prior to making the Bridge Loan to the Company and purchasing shares of
Common Stock in the Private Placement,  the Bridge  Securityholders  did not own
any other  securities of the Company.  None of the Bridge  Securityholders  were
otherwise  affiliated with the Company at the time of making the Bridge Loan, at
the effective  date of the IPO or at any other time.  The Company  believes that
its financial  transactions with the Bridge  Securityholders served a legitimate
business purpose,  i.e.,  providing needed working capital for the Company,  and
were  fair and  reasonable  under the  circumstances.  The  Company's  financial
transactions with the Bridge Securityholders were managed by the


                                      -13-


<PAGE>

Underwriter  and  no  commissions  or  other   remuneration  were  paid  to  the
Underwriter in connection with such transactions.

         In November and December 1995, the Company issued a Convertible Note in
the  principal  amount of  $100,000  (the  "November  Note")  and  $50,000  (the
"December Note"), respectively. The notes bore interest at an annual rate of 8%.
The November  Note came due on April 15, 1996 and the  December  Note was due on
December 20, 1996. On June 28, 1996, in  accordance  with an agreement  with the
Company,  the holder of the December  Note,  which note  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.


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

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

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

         The Company is focusing its marketing  activities on the application of
the licensed technologies in the Field of Use as set


                                      -14-


<PAGE>

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

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

RESULTS OF OPERATIONS

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

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

         The Company has reported a net loss from operations of $1,552,479 since
inception.

FINANCIAL CONDITION

         As reflected in the financial  statements,  the Company has experienced
continuing  net losses and negative  cash flows from  operations at December 31,
1996. The Company's  continuing existence is dependent on its ability to achieve
and  maintain  profitable  operations.  The  Company  continues  to  be  in  the
development  stage and does not  foresee  operating  revenue  until  the  fourth
quarter of fiscal year ending  December 31, 1997.  As of December 31, 1996,  the
Company had liquid assets of $4,268,963.


                                      -15-


<PAGE>

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

         In October 1996, the Company sold, in the IPO, 833,334 IPO Units,  each
IPO Unit  consisting  of two shares of Common Stock and two  redeemable  Class A
purchase  warrants for $12.00 per IPO Unit. Each warrant  entitles the holder to
purchase  one  share of  Common  Stock for  $7.00  during  the four year  period
commencing  October 3, 1997.  The warrants are redeemable by the Company at $.05
per warrant any time after October 3, 1998, if certain  conditions  are met. The
net proceeds, which the Company received from the IPO, amounted to approximately
$8.8 million.

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


ITEM 7.  FINANCIAL STATEMENTS.

         See the financial  statements and notes related  thereto,  beginning on
page F-1, included elsewhere in this report.


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURE.

         Not applicable.


                                      -16-


<PAGE>

                                    PART III


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

         The  executive  officers,  directors and  significant  employees of the
Company are as follows:

    Name                           Age              Position(s)

    Jon D. Silverman                56              Chairman, President, Chief
                                                    Executive Officer and
                                                    Director
    Jeffrey D. Lewenthal            53              Chief Financial Officer and
                                                    Executive Vice President of
                                                    Business Development
    Joseph F. Koster, Jr.           61              Executive Vice President,
                                                    Secretary and Director
    David W. Brenman                40              Treasurer and Director
    George V. Kriste                49              Director
    Gregory B. Abbott               46              Director
    Michael D. Handler              46              Consultant

         Jon D. Silverman has served as Chairman, President, Chief
Executive  Officer and a director of the Company since  November 1996, and prior
thereto as a consultant  to the Company since its  inception.  Since 1980 he has
served  as  the  principal  of  Tilis   Products,   Inc.,  his  own  specialized
international  business  consulting,  mergers and  acquisitions  firm (including
capital  formation)  in the food,  beverages  and other  consumer  products  and
services  industries.  He has  served on the  Board of  Trustees  of the  United
Hospital,  Port  Chester,  New York,  for the past 15 years (he is  currently an
Honorary  Trustee) and for a number of years,  prior to May 1995,  had served as
Vice Chairman thereof;  is a director of Pastificio Gazzola,  Mondovi,  Italy, a
leading  pasta  exporter;  and a past  director of Combined  Moretti/Prinz  Brau
Breweries, a subsidiary of John Labatt, Ltd. From 1979 to 1980, he was Executive
Vice President of Esquire,  Inc., an educational,  magazine and music publishing
firm,  manufacturer of lighting equipment and importer of sporting goods. Before
that he was employed by the Seagram  Company,  Ltd., from 1965 to 1979, where he
held numerous positions,  including President of Seagram, Germany, and Executive
Vice President of Seagram Overseas Sales Company, the international  division of
Seagram.

         Jeffrey D. Lewenthal has served as Executive Vice President of Business
Development  and Chief  Financial  Officer of the Company since March 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


                                      -17-


<PAGE>

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.

         Joseph F.  Koster,  Jr. has served as Executive  Vice  President of the
Company  since  November  1996 and has been the  Secretary and a director of the
Company  since October  1995.  From January 1992 through  October 1995, he was a
consultant to RIC, RILP and ReSeal  Technologies and Advancements,  Inc., RILP's
general  partner,  where he  principally  worked in marketing  and in setting up
their investment banking relationships.  From 1964 to 1966, Mr. Koster worked at
Colgate  Palmolive,  where he reached the level of National Brand Manager.  From
1966 to 1974, he was a partner at Brown Elders Koster  Enterprises,  a marketing
company.  Thereafter,  prior to 1992, he was a self-employed business consultant
and writer.

         David W.  Brenman  has served as the  Treasurer  and a director  of the
Company  since its inception and had served as President of the Company from its
inception  through  November  1996.  He also served as a member of the Executive
Committee,  Chief  Financial  Officer and Treasurer of RIC from May 1993 through
September  1996 and has been a director of RIC since May 1993.  Mr.  Brenman has
been a  self-employed  attorney  and  financial  consultant  since  1988.  Prior
thereto,  he was a Vice  President  of  Lloyds  International  Corporation,  the
merchant  banking  subsidiary of Lloyds Bank Plc, from 1986 to 1988. Mr. Brenman
served as President of Cogenco International,  Inc., a publicly held corporation
engaged in the energy  industry,  from 1984 to 1986 and is currently a member of
the Board of Directors and an executive officer of that company.  Mr. Brenman is
a member of the Board of  Directors  and serves as  President  of Taltos SpA, an
Italian  corporation  engaged in the  production of ultra-thin  stone  products.
Prior  to 1986,  Mr.  Brenman  was an  associate  with the law firm of  Brenman,
Raskin, Friedlob and Tenenbaum P.C. of Denver, Colorado, where he specialized in
the fields of taxation and  securities  law. Mr. Brenman is also a member of the
Board of Directors of U.S. Energy Corp., a corporation engaged in the mining and
mineral industry.

         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. Prior thereto,  he had been the Chief
Operating  Officer of Cook Inlet  Region,  an investment  company  formed by the
Federal government for Alaska natives, since 1977.

         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.  From 1973 to 1986 he was  employed by Ithaca  Industries  ("Ithaca"),  a
private label manufacturer of


                                      -18-


<PAGE>

pantyhose,  men's and  women's  underwear,  and  T-shirts.  From 1979 to 1986 he
served as Chairman  and CEO of Ithaca,  during  which time the company grew from
having  just one major  customer  to over 400,  and in the  process  became  the
largest private label maker in the U.S. in each of its product lines. Mr. Abbott
also  negotiated  a  leveraged  buyout of Ithaca with  Merrill  Lynch and Butler
Capital.

         Michael D.  Handler has served as a  consultant  to the  Company  since
March 1996.  Since January  1994, he has been the President and Chief  Executive
Officer of Nologies,  Inc.  ("Nologies"),  a product and technology  development
company.  From May 1993 through January 1994, he held various positions with RIC
and its affiliates,  including Vice President of Research and Development. Prior
thereto he worked at a private  contract  research  and  development  consulting
company  for 19  years.  He has 25 years of  experience  in the  management  and
implementation of research and development activities.

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

Section 16(a) Beneficial Ownership Reporting Compliance

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

         To the  Company's  knowledge,  based  solely on review of the copies of
such reports furnished to the Company,  the following persons failed to file, on
a timely basis,  reports  required by Section 16(a) of the Exchange Act, for the
number of transactions indicated, during Fiscal 1996:

Jon Silverman                           Form 3                    1 Transaction
Joseph Koster                           Form 3                    1 Transaction
David Brenman                           Form 3                    1 Transaction
George Kriste                           Form 3                    1 Transaction
Gregory Abbott                          Form 3                    1 Transaction
ReSeal International Corporation        Form 3                    1 Transaction


ITEM 10. EXECUTIVE COMPENSATION.

Summary Compensation Table

         The following table sets forth information  concerning the compensation
for services,  in all  capacities  for Fiscal 1996 and for the fiscal year ended
December 31, 1995, of those persons who


                                      -19-


<PAGE>

were (i) the Chief  Executive  Officer during Fiscal 1996 and (ii) at the end of
Fiscal  1996,  the most  highly  compensated  executive  officers of the Company
(collectively, the "Named Officers").
<TABLE>
<CAPTION>

                                     ANNUAL COMPENSATION                    LONG-TERM COMPENSATION
                                     -------------------                    ----------------------

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

<S>                      <C>     <C>
Jon Silverman            1996    $144,000         _           _                 _            _           _
Chairman, CEO and
President                1995    $ 36,000         _           _                 _            _           _

Joseph Koster            1996    $120,000         _           _                 _            _           _
Executive Vice President
and Secretary            1995     $36,000         _           _                 _            _           _

David Brenman            1996    $ 72,000         _           _                 _            _           _
Treasurer(2)
                         1995    $ 18,000         _           _                 _            _           _
</TABLE>

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

(1)  The Company has concluded  that the  aggregate  amount of  perquisites  and
     other  personal  benefits paid to each of the Named Officers did not exceed
     the lesser of (i) 10% of such officer's total annual salary and bonus for a
     given fiscal year and (ii) $50,000. Thus, such amounts are not reflected in
     the table.

(2)  David Brenman was the  President of the Company from its inception  through
     November 1996 and acted in the capacity of chief  executive  officer during
     such period.

         The Company  plans to submit for approval of its  stockholders,  in the
near future, a stock option plan covering 900,000 shares of Common Stock.

Employment and Non-Compete Agreements

         Jon D. Silverman

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

         Michael D. Handler

         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,


                                      -20-


<PAGE>

1998 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.

COMPENSATION OF DIRECTORS

         Non-employee directors of the Company will be 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 28, 1997, 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 of the Named
Officers and  directors,  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.

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

ReSeal International Corporation                 2,225,000           23.3%
342 Madison Avenue, Suite 1034
New York, New York  10173


Jon Silverman                                      500,000            5.2%
c/o International Dispensing
Corporation
342 Madison Avenue, Suite 1034
New York, New York  10173

Gregory Abbott                                     422,000             4.4%
c/o International Dispensing
Corporation
342 Madison Avenue, Suite 1034
New York, New York  10173


                                      -21-


<PAGE>

David Brenman                                      253,000(4)          2.6%

Joseph Koster                                      158,000             1.7%

George Kriste                                      130,000             1.4%

All directors and executive                        963,000            10.1%
officers as a group
(6 persons)

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

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

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

(3)  Does not include (i)  1,575,000  shares of Common Stock  issuable  upon the
     exercise  of the Class A  Warrants  contained  in the  Bridge  Units;  (ii)
     1,666,668  shares of Common Stock issuable upon the exercise of the Class A
     Warrants  contained in the IPO Units;  (iii) 166,666 shares of Common Stock
     issuable  upon  the  exercise  of the  Unit  Purchase  Option  held  by the
     Underwriter;  and (iv)  166,666  shares of Common Stock  issuable  upon the
     exercise of the Class A Warrants  included in the Unit Purchase Option held
     by the Underwriter.

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


ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

License Agreement

         The  Company has  licensed  the  Technologies  from RIC, on a worldwide
exclusive  basis,  solely in the Field of Use  pursuant to the  Company  License
Agreement,  and will endeavor to  commercialize  and market the  Technologies to
third  parties  for its  implementation  in the  food and  beverage  industries.
Pursuant  to  the  Company  License   Agreement,   RIC  granted  the  Company  a
royalty-free  exclusive  worldwide  license for an aggregate of  $4,000,000  and
2,900,000  shares  of Common  Stock,  to (i)  directly  or  indirectly  make (or
subcontract  to  make),  use,  sell  and  otherwise   commercially  exploit  the
Technology, solely in the Field of Use, and (ii) grant


                                      -22-


<PAGE>

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.  The  Company has paid RIC the
$4,000,000 license fee,  $2,700,000 of which was paid out of the proceeds of the
IPO.

         The Company is primarily  responsible  for all research and development
activities  necessary  to  exploit  fully the  commercial  possibilities  of the
Technology.  The research and  development  activities  shall include testing of
proposed   Products  and  ongoing   technical   support  for  the  modification,
improvement,  enhancement, development or variation of existing Products and the
development of new Products.  RIC is responsible  for causing RILP to manage all
intellectual  property  associated  with the Technology,  including  patents and
trademarks,  in order 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 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 behalf of RILP.

         The Company  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.

Settlements of Legal Proceedings

         Stanson Settlement

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


                                      -23-


<PAGE>

         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 October 3, 1997,
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 the previous  sentence,  then the holders of the Investor Shares are
entitled to include an  additional  25% of their  shares of Common Stock in such
registration.

         Banco Settlement

         In May 1996, in connection with the settlement of a lawsuit (the "Banco
Settlement") 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 the Company's  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  anti-dilution
adjustments,  may be increased up to 600,000  shares in the event that 30 months
after the Effective  Date 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.

Rental Sharing

         The Company  currently  rents a portion of its office  space to RIC for
$10,000 per month. The term of such arrangement expires on April 30, 1997.

         All of the transactions  indicated above are on terms no less favorable
to the  Company  than those  which  could  reasonably  have been  obtained  from
non-affiliated  third  parties.  In  addition,   any  future  transactions  with
affiliates  will be on terms no less  favorable  to the Company than those which
could reasonably be obtained from non-affiliated third parties.


                                      -24-


<PAGE>


ITEM 13.    EXHIBITS, LIST AND REPORTS ON FORM 8-K

(a)         EXHIBITS:

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

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

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

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

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

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

     4.3        Form of Underwriter's Unit Purchase Option  (incorporated herein
                by reference to Exhibit 4.3 to the Form SB-2).

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

     10.2       Form of Subscription Agreement (incorporated herein by
                reference to Exhibit 10.2 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       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).

     10.6       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


                                      -25-


<PAGE>



                International   Limited   Partnership,   ReSeal  Technologies  &
                Advancements,  Inc., ReSeal  International  Corporation,  ReSeal
                Pharmaceutical  Systems,  Ltd., Milton Stanson, Hilda Brown, Ann
                Hoopes,   Townsend   Hoopes,   Robin  Smith  and  Eugene  Sumner
                (incorporated  herein by  reference  to Exhibit 10.6 to the Form
                SB-2).

     10.7       Settlement Agreement, dated as of May 8, 1996, by and
                among Banco Inversion, S.A., Administratadora General de
                Patrimonios, S.A., ReSeal Pharmaceutical Systems, Ltd.,
                ReSeal International Corporation, ReSeal International
                Limited Partnership, Greg P. Pardes, Lawrence B. Pentoney,
                Joseph D. Blau, Bernard Gerber, George DeBush, Michael
                Secondo, Linda Poit, Samuel Tucker, Chungliang Al Huang
                and Rainer Greeven (incorporated herein by reference to
                Exhibit 10.7 to the Form SB-2).

     10.8       Amendment to the Agreement by and between the Registrant
                and Nologies, Inc., dated March 3, 1997.

     10.9       Employment Agreement, dated as of January 17, 1997,
                between the Registrant and Jon Silverman.

     27         Financial Data Schedule

(b)      REPORTS ON FORM 8-K.

         A Form 8-K was filed by the Company with the Commission on December 12,
1996.  In  connection  with the  Company's  application  to have its  securities
registered on the Philadelphia Stock Exchange,  the Company's independent public
accountants reissued their report to reflect completion of the Company's initial
public  offering and the removal of the going  concern  qualification  from such
report. The Company's financial statements were refiled along with such reissued
report.


                                      -26-


<PAGE>

                                    SIGNATURE

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

Dated:  March 31, 1997                              INTERNATIONAL DISPENSING
                                                         CORPORATION



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

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


Signature                   Title                              Date
---------                   -----                              ----


/s/ Jon Silverman           Chairman, President,              March 31, 1997
-------------------         Chief Executive
Jon Silverman               Officer and Director
                            (Principal Executive
                                  Officer)


/s/ Jeff Lewenthal          Chief Financial                   March 31, 1997
-------------------         Officer and Executive
Jeff Lewenthal              Vice President of

                            Business Development
                            (Principal Accounting
                            and Financial Officer)

/s/ Joseph Koster           Executive Vice                    March 31, 1997
-------------------         President, Secretary
Jospeh Koster               and Director


/s/ David Brenman           Treasurer and Director            March 31, 1997
-------------------
David Brenman


/s/ Gregory Abbott          Director                          March 31, 1997
------------------
Gregory Abbott


/s/ George Kriste           Director                          March 31, 1997
-----------------
George Kriste


                                  -27-
<PAGE>

                      INTERNATIONAL DISPENSING CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)

                          INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

                                                                                                 Page

<S>                                                                                               <C>
Report of Independent Public Accountants..........................................................F-2

Balance Sheet at December 31, 1996................................................................F-3

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

Statements of Changes in Stockholders'  Equity  (Deficiency) for the Period from
   Inception (October 10, 1995) through December 31, 1995 and the Year
   Ended December 31, 1996........................................................................F-5

Statements of Cash Flows for the Year Ended  December 31, 1996,  the Period from
   Inception (October 10, 1995) through December 31, 1995
   and the Period from Inception (October 10, 1995) through December 31, 1996.....................F-6

Notes to the Financial Statements.................................................................F-7
</TABLE>


                                       F-1

<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To 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,
1996, and the related statements of operations and cash flows for the year ended
December 31, 1996, for the period from inception  (October 10, 1995) to December
31, 1995, and for the period from  inception  (October 10, 1995) to December 31,
1996 and the statements of stockholders' equity (deficiency) for the period from
inception  (October 10, 1995)  through  December 31, 1995 and for the year ended
December 31, 1996.  These  financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

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

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

                                                             Arthur Andersen LLP

New York, New York
March 18, 1997


                                       F-2

<PAGE>

                      INTERNATIONAL DISPENSING CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)

                                  BALANCE SHEET
                                December 31, 1996

                                     Assets

Current assets:
       Cash and cash equivalents                                    $ 4,268,963
       Prepaid expenses                                                  95,833
                                                                    -----------
              Total current assets                                    4,364,796
Fixed assets:
       Leasehold improvements                                             7,270
       Office equipment                                                   4,350
       Accumulated depreciation and amortization                         (2,044)
                                                                    -----------
              Net fixed assets                                            9,576
Other assets                                                             95,761
                                                                    ------------
              Total assets                                          $ 4,470,133
                                                                    ===========




                      Liabilities and Stockholders' Equity

Current Liabilities:
       Accrued expenses                                             $   117,759
                                                                    -----------
              Total current liabilities                                 117,759
                                                                    -----------
              Total liabilities                                         117,759

Commitments and contingencies (Note 11)

Stockholders' Equity (Deficiency):
       Preferred Stock, $.001 par value; 2,000,000 shares
         authorized; no shares issued or outstanding                         --
       Common Stock $.001 par value; 20,000,000
         shares authorized; 9,566,668 issued and outstanding              9,567
       Additional paid-in capital                                     9,895,286
       Deficit accumulated during the development stage              (5,552,479)
                                                                    -----------
              Total stockholders' equity                              4,352,374
              Total liabilities and stockholders'
                equity                                              $ 4,470,133
                                                                    ===========


        The accompanying notes are an integral part of this balance sheet


                                       F-3


<PAGE>

                      INTERNATIONAL DISPENSING CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                         For the Period             Cumulative
                                                                         from Inception            from Inception
                                                                     (October 10, 1995)          (October 10, 1995)
                                                        Year                 through                 through
                                                        Ended             December 31,            December 31,
                                                  December 31, 1996           1995                   1996
                                                  -----------------   --------------------       ------------
<S>                                              <C>                    <C>                    <C>

Revenues                                         $            --        $          --            $          --
Costs and expenses
       General and administrative                      1,039,071              244,768                1,283,839
       Depreciation and amortization                       1,162                  882                    2,044
                                                 ---------------        -------------            -------------
              Total costs and expenses                 1,040,233              245,650                1,285,883
                                                 ---------------        -------------            -------------
Loss from operations                                   1,040,233              245,650                1,285,883
       Interest expense                                   62,520                4,145                   66,665
       Interest income                                  (50,069)                   --                 (50,069)
                                                 ---------------        -------------            -------------
Net loss before extraordinary loss               $     1,052,684        $     249,795            $   1,302,479

Extraordinary loss on retirement
  of debt                                                250,000                   --                  250,000
                                                 ---------------        -------------            -------------
Net loss                                         $     1,302,684        $     249,795            $   1,552,479
                                                 ===============        =============            =============

Net loss per share before
  extraordinary item                             $         (.13)        $       (.03)
Extraordinary loss per share                     $         (.03)        $         --
                                                 ---------------        -------------

Net loss per share                               $         (.16)        $       (.03)
                                                 ---------------        -------------

Weighted average shares outstanding                    8,219,635            7,900,000
</TABLE>

         The accompanying notes are an integral part of these statements


                                       F-4


<PAGE>

                      INTERNATIONAL DISPENSING CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)

            STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>


                                                                                                Deficit
                                                                                               Accumulated
                                                 Common Stock              Additional           During the              Total
                                     ------------------------------         Paid in            Development          Stockholders'
                                       Shares         Amount                Capital               Stage            Equity (Deficit)
                                     ---------------------------------------------------------------------------------------------

BALANCE, OCTOBER 10, 1995
<S>                                     <C>              <C>                 <C>              <C>                    <C>
  (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                         --           --               626,250                   --                626,250
Issuance of common stock to             1,575,000        1,575                (1,575)                  --                     --
  bridge lenders
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              9,556,668       $9,567            $9,895,286          $(5,552,479)            $4,352,374
                                     ==============================================================================================
</TABLE>


         The accompanying notes are an integral part of these statements


                                       F-5


<PAGE>

                      INTERNATIONAL DISPENSING CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)

                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                  For the Period              Cumulative
                                                                                from October 10,          from October 10,
                                                                                1995 (Inception)          1995 (Inception)
                                                             Year                     through                   through
                                                            Ended                  December 31,              December 31,
                                                      December 31, 1996                1995                      1996
                                                      -----------------                ----                      ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                        <C>                       <C>                       <C>
Net loss                                                   $(1,302,684)              $  (249,795)              $(1,552,479)
Adjustments to reconcile net loss to net
   cash used in operating activities:
   Depreciation and amortization                                  1,162                       882                     2,044
   Non-cash compensation                                             --                    76,238                    76,238
   Loss on retirement of debt                                   250,000                        --                   250,000
   Change in operating assets and liabilities:
     Increase in prepaid expenses                              (95,833)                        --                  (95,833)
     Increase in other assets                                  (81,084)                   (8,877)                  (89,961)
     Increase in accrued expenses                                71,953                    45,806                   117,759
                                                            -----------               -----------               -----------
Net cash used in operating activities                       (1,156,486)                 (135,746)               (1,292,232)
                                                            ----------                ----------                ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets                                        (2,795)                   (8,825)                  (11,620)
Purchase of license                                         (3,649,739)                 (350,261)               (4,000,000)
                                                            ----------                ----------                ----------
Net cash used in investing activities                       (3,652,534)                 (359,086)               (4,011,620)
                                                            ----------                ----------                ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from private placement                               1,750,000                   350,000                 2,100,000
Proceeds from issuance of convertible debt                           --                   150,000                   150,000
Repayment of promissory notes                                 (300,000)                        --                 (300,000)
Repayment of bridge loans                                   (1,050,000)                        --               (1,050,000)
Repayment of convertible debt                                 (100,000)                        --                 (100,000)
Proceeds from initial public offering                         8,772,815                        --                 8,772,815
                                                             ----------                ----------                ----------
Net cash provided from financing activities                   9,072,815                   500,000                 9,572,815
                                                             ----------                ----------                ----------

NET INCREASE IN CASH AND CASH EQUIVALENTS                     4,263,795                     5,168                 4,268,963
Cash and cash equivalents, beginning of period                    5,168                        --                        --
                                                             ----------                ----------                ----------
Cash and cash equivalents, end of period                     $4,268,963                $    5,168                $4,268,963
                                                             ==========                ==========                ==========

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

NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock                                             --                $    5,800                $    5,800
Purchase of license from affiliate                                   --                $4,000,000                $4,000,000
</TABLE>

         The accompanying notes are an integral part of these statements


                                       F-6


<PAGE>

                      INTERNATIONAL DISPENSING CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)

                        NOTES TO THE FINANCIAL STATEMENTS

1.       THE COMPANY AND ORGANIZATION

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

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

2.       SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents

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

Fixed Assets

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

Patents

         Costs to develop patents are expensed when incurred.

Income Taxes

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


                                       F-7


<PAGE>

                      INTERNATIONAL DISPENSING CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)

                        NOTES TO THE FINANCIAL STATEMENTS
                                   (CONTINUED)

Net Loss Per Share

         Net  loss per  common  share  calculations  are  based on the  weighted
average number of shares of common stock outstanding. Pursuant to the Securities
and Exchange  Commission  ("SEC")  Staff  Accounting  Bulletin No. 83, stock and
stock rights  issued during the twelve  months  preceding the Company's  initial
public  offering at prices  below the initial  public  offering  price have been
included in the  Company's  loss per share  computations  through June 30, 1996,
even though they are  antidilutive  and have been  excluded  for the  subsequent
period.

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.

3.       INITIAL PUBLIC OFFERING

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

4.       LICENSE AGREEMENT

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

5.       PRIVATE PLACEMENT

         The Company was involved in a private placement  ("Bridge  Financing").
The Bridge Financing  consisted of promissory notes,  common shares,  and rights
("Bridge  Options") to acquire  Units  identical  in form to the IPO Units.  The
promissory  notes  bore  interest  at 8% per  annum  and were due and paid  upon
completion of the IPO.  During 1995,  the Company had received gross proceeds of
$350,000 in connection with the Bridge


                                       F-8


<PAGE>

                      INTERNATIONAL DISPENSING CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)

                        NOTES TO THE FINANCIAL STATEMENTS
                                   (CONTINUED)

Financing,  which  consisted of $175,000 of promissory  notes,  87,500 shares of
common stock and rights to obtain  131,250  Units.  During 1996, the Company had
received additional gross proceeds of $1,750,000, which consisted of $875,000 of
promissory  notes,  437,500  shares of common stock and rights to obtain 656,250
Units.  Upon  completion  of the Bridge  Financing,  the Company had received an
aggregate of $2,100,000 in  consideration  for  $1,050,000 in promissory  notes,
525,000 common shares and rights to obtain  787,500  Units.  In August 1996, the
Company  amended  the Bridge  Financing  agreements  so that the  787,500  Units
underlying  the Bridge Options were deemed  outstanding.  As part of the initial
public  offering,  the 787,500 Units issued in the Bridge  Financing,  which are
identical to those Units issued in the Company's IPO, were registered.

6.       SETTLEMENT AGREEMENT

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

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

7.       CONVERTIBLE PROMISSORY NOTES

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

         On April 15,  1996,  the Portenoy  Note came due. 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.


                                       F-9


<PAGE>

                      INTERNATIONAL DISPENSING CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)

                        NOTES TO THE FINANCIAL STATEMENTS
                                   (CONTINUED)

8.       MANAGEMENT SHARES

         In  1995,  the  Company  issued  an  aggregate  of  950,000  shares  to
management at par as compensation  for services  rendered in  incorporating  the
Company.  Such shares were issued at fair market value of the  Company's  common
stock,  which was  determined  based upon the fair  market  value of the private
placement  shares  (see  Note  5) and  the  convertible  promissory  notes.  The
statement  of  operations  for the  period  ended  December  31,  1995  reflects
approximately $76,000 of compensation expense related to such shares.

9.       RELATED PARTY TRANSACTIONS

         The Company  shares  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. At December
31, 1996 and 1995, the Company had paid $826,247 and $85,261,  respectively,  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 4) in the
Company's Balance Sheet.

         For the year ended  December 31, 1996 and the period ended December 31,
1995, the Company paid consulting fees to members of management in the aggregate
amount of $209,000 and $168,000, respectively.

10.      INCOME TAXES

         As a result of losses incurred  during the year,  there is no provision
for income  taxes in the  accompanying  financial  statements.  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.

11.      COMMITMENT AND CONTINGENCIES

         The Company leases office space under a noncancellable operating lease,
expiring on November 30, 1997.  Rental  expense for the period  ending  December
31,1996  and 1995 was $90,157 and $8,259,  respectively.  Future  minimum  lease
payments under this lease agreement are $84,571.


12.      SETTLEMENT OF LAWSUIT

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


                                      F-10


<PAGE>

                      INTERNATIONAL DISPENSING CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)

                        NOTES TO THE FINANCIAL STATEMENTS
                                   (CONTINUED)

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

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

13.      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,  he will be entitled to one year's salary due within ten days
of the termination date.


                                      F-11



<PAGE>


                                  EXHIBIT INDEX

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

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

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

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

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

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

        4.3                 Form of Underwriter's Unit Purchase Option
                            (incorporated herein by reference to Exhibit 4.3 to
                            the Form SB-2).

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

        10.2                Form of Subscription Agreement (incorporated herein
                            by reference to Exhibit 10.2 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                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).





<PAGE>


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

        10.6                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, ReSeal Technologies &
                            Advancements, Inc., ReSeal International
                            Corporation, ReSeal Pharmaceutical Systems, Ltd.,
                            Milton Stanson, Hilda Brown, Ann Hoopes, Townsend
                            Hoopes, Robin Smith and Eugene Sumner (incorporated
                            herein by reference to Exhibit 10.6 to the Form SB-
                            2).

        10.7                Settlement Agreement,  dated as of May 8, 1996, by
                            and among Banco Inversion, S.A.,  Administratadora
                            General    de    Patrimonios,     S.A.,     ReSeal
                            Pharmaceutical Systems, Ltd., ReSeal International
                            Corporation,    ReSeal    International    Limited
                            Partnership, Greg P. Pardes, Lawrence B. Pentoney,
                            Joseph D. Blau,  Bernard  Gerber,  George  DeBush,
                            Michael  Secondo,   Linda  Poit,   Samuel  Tucker,
                            Chungliang    Al   Huang   and   Rainer    Greeven
                            (incorporated  herein by reference to Exhibit 10.7
                            to the Form SB-2).

        10.8                Amendment to the Agreement by and between the
                            Registrant and Nologies, Inc., dated March 3, 1997.

        10.9                Employment Agreement, dated as of January 17, 1997,
                            between the Registrant and Jon Silverman.

        27                  Financial Data Schedule