SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

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


(Mark One)
[X]  Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934 [No Fee Required]

     For the fiscal year ended September 30, 1999

[ ]  Transition report pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934 [No Fee Required]

     For the transition period from __________ to ___________________

     Commission File No. 0-4289


                               TONE PRODUCTS, INC.
                  --------------------------------------------
                 (Name of small business issuer in its charter)


           Arkansas                                          71-0390957
--------------------------------                       ---------------------
  (State or other jurisdiction                           (I.R.S. Employer
of incorporation or organization)                      Identification Number)


2129 North 15th Street
Melrose Park, Illinois                                          60160
---------------------------------------                        --------
(Address of principal executive offices)                      (Zip Code)

Issuer's telephone number:  (708) 681-3660

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:

                           $.10 Par Value Common Stock
                                (Title of Class)


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

     As of November 30, 1999, 3,235,200 shares of the Registrant's $.10 par
value Common Stock were outstanding. As of November 30, 1999, the market value
of the Registrant's $.10 par value Common Stock, excluding shares held by
affiliates, was $973,702 based upon a closing bid price of $1.00 per share of
Common Stock on the Electronic Bulletin Board.

     Check if there is no disclosure contained herein of delinquent filers in
response to Item 405 of Regulation S-B, and will not be contained, to the best
of the registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.[ X ]

     The registrant's revenues for its most recent fiscal year were $11,675,668.

     The following documents are incorporated by reference into Part III, Items
9 through 12 hereof: None.

<PAGE>


                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS
--------------------------------


     Except for the historical information contained herein, the matters set
forth in this Report include forward-looking statements within the meaning of
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. These forward-looking statements are subject to risks and uncertainties
that may cause actual results to differ materially. These risks and
uncertainties are detailed throughout this Report and will be further discussed
from time to time in the Company's periodic reports filed with the Commission.
The forward-looking statements included in this Report speak only as of the date
hereof.

Business

     The Company manufactures, distributes and markets under its own proprietary
brand names, as well as under private labels developed for others, a line of
specialty beverages, snack foods and condiments. The Company's product lines
include fruit and other drink concentrates; juices and juice blends; bar mixes
and cocktail bases; snow cone syrups; pancake, waffle, corn and molasses syrups;
barbeque and steak sauces, marinades and dressings; popcorn, cookies, nuts and
other snack foods.

     The Company's proprietary products are marketed under a number of its own
brand names including "Bonnie", "Hi-Tone", "Evons", "Rainbo-Rich" and "Players'
Choice." As indicated, the Company also manufactures products for its customers
under private label brand names designated by the customers, and also enters
into copacking arrangements with other manufacturers for some of its products
and acts solely as a distributor for other products.

     The Company's customers include large domestic grocery store chains (such
as Aldi's, and Von's), domestic mass merchandisers (such as Sams Club, and
Market Day), large retail food service distributors (such as Marriott, Sysco,
and Alliant), brand name soft drink bottling companies and federal, state and
local government agencies including school districts, colleges and prisons.

     The Company manufactures its own products and its private label products in
a 72,000 square foot manufacturing and distribution facility in Melrose Park,
Illinois, and a 17,000 square foot manufacturing and distribution facility in
Las Vegas, Nevada. See "Item 2". These products are marketed through the
Company's own marketing staff consisting of six individuals. Marketing efforts
include direct sales calls, attendance at trade shows, advertisements in trade
journals, and the use of food brokers and sales representatives.

     The Company's business strategy is to increase revenues by focusing on
sales of it's frozen beverage products in the convenience store market,
expanding its private label and contract packing operations, increasing its
production of certain food specialty products including barbeque sauces and
marinades and expanding it's direct store delivery system ("DSD") at the
Company's Fun City Popcorn unit in Las Vegas, Nevada. The Company believes that
existing revenues may be increased without a pro rata increase in fixed
expenses, thereby generating economies of scale (primarily in manufacturing
operations) which will create higher levels of earnings as a percentage of total
revenues.

<PAGE>


History

     Tone Products, Inc., an Illinois corporation ("TPI") was organized in
March, 1947 to manufacture and market concentrated beverage syrups. In May 1996
TPI was acquired by Minute Man of America, Inc., an Arkansas corporation ("MMA")
in a reverse merger transaction. Under the terms of the reverse merger
transaction, MMA reverse split its stock on the basis of one share for each four
shares outstanding (resulting in 773,752 shares outstanding) and initially
issued an additional 2,275,000 shares to acquire all of the outstanding shares
of TPI. As a result, the management and principal stockholders of TPI became the
management and principal stockholders of the Company. In connection with the
reverse merger transaction, MMA also sold 478,850 shares of its Common Stock at
$2.00 per share in a private placement of its securities ("Private Placement").

     In May, 1996, the Company acquired Fun City Popcorn, Inc. ("FCP") for
$875,000 in cash generated from the sale of securities under the Private
Placement and the issuance of 100,000 shares of the Company's Common Stock.

Competition

     The speciality beverage, snack food and condiments industries are highly
competitive, and there are numerous multinational, regional and local firms that
currently compete, or are capable of competing, with the Company. Specialty
beverage competitors include Nedlog, Damon and Pride Beverages; snack food
competitors include Frito-Lay, Snak-King and Granny Goose; and condiment
competitors include Redwing and Brooks. Most of the Company's competitors are
larger than the Company and have superior financial, marketing and management
resources, and brand name recognition, than the Company. Competitive factors in
these specialty foods industries include price, product quality and product
flavor. The Company believes its products compete favorably against similar
specialty food products.

Government Regulation

     The Company is subject to various federal, state and local regulations
relating to cleanliness, maintenance of food production equipment, food storage
and food handling, and the Company is subject to unannounced on-site inspections
of its food production facilities. As a manufacturer and distributor of foods,
the Company is subject to regulation by the U.S. Food and Drug Administration
("FDA"), state food and health boards, and local health boards in connection
with the manufacturing, handling, storage, transportation, labeling and
processing of food products. Future changes in the regulations may adversely
impact the Company by raising the cost to manufacture and deliver the Company's
products and/or by affecting the perceived healthfulness of the Company's
products. A failure to comply with one or more regulatory requirements could
interrupt the Company's operations and result in a variety of sanctions,
including fines and the withdrawal of the Company's products from store shelves.
The Company holds all material licenses and permits required to conduct its
operations.

     The Company is also subject to federal and state laws establishing minimum
wages and regulating overtime and working conditions. Since some of the
Company's personnel are paid at rates not far above federal or state minimum
wage levels, future increases in federal or state minimum wage levels may result
in increases in the Company's labor costs.

<PAGE>


Trade Names and Trademarks

     The Company has registered a number of its proprietary brand names as
trademarks or trade names in Illinois or with the United States Patent office,
including "Bonnie", "Rainbo-Rich", and "Players' Choice" and "Balboa Bay". There
can be no assurance that the Company's trademarks or trade names will not be
copied or challenged by others.

Employees

     At November 30, 1999, the Company employed 45 individuals including its
four executive officers, 11 administrative and clerical employees and 30 factory
and warehouse employees. The Company believes that its relations with its
employees are satisfactory.

ITEM 2.  DESCRIPTION OF PROPERTY
--------------------------------

     The Company leases 72,000 square feet of office, warehouse and
manufacturing space in Melrose Park, Illinois on a one year lease expiring
September 30, 1999 at a monthly rental of $33,235 or $5.54 per square foot. The
Company also leases 16,802 square feet of office and warehouse space in Las
Vegas, Nevada on a one year lease expiring May 31, 2000 at a monthly rental of
$8,544 or $6.10 per square foot. The Company leases its Melrose Park, Illinois
facility from two of its executive officers and directors and its Las Vegas,
Nevada facility from one of the directors. The Company believes that the terms
of both such facilities leases are fair, reasonable, and consistent with the
terms of leases which could be obtained from unaffiliated parties. The Company
believes its facilities are adequate for its needs in the foreseeable future and
that additional space is available at reasonable rates.

ITEM 3.  LEGAL PROCEEDINGS
--------------------------

     Not applicable.

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

     Not applicable.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
-----------------------------------------------------------------

     The Company's Common Stock is traded over-the-counter on the Electronic
Bulletin Board ("EBB") under the symbol "TNPD".

     The following table sets forth for the quarters indicated the range of high
and low bid prices of the Company's Common Stock on the EBB.

<PAGE>


                                                         Bid Price
                                                -------------------------
By Quarter Ended:                                High                Low
-----------------                                ----                ---

September 30, 1999..........................    $1.00               $ .62
June 30, 1999...............................    $1.25               $1.00
March 31, 1999..............................    $1.00               $ .87
December 31, 1998 ..........................    $1.25               $0.75

September 30, 1998 .........................    $1.00               $ .62
June 30, 1998...............................    $1.25               $1.00
March 31, 1998 .............................    $1.87               $1.50
December 1997 ..............................    $1.50               $0.75

     As of November 30, 1999, the Company had approximately 600 beneficial
holders of its Common Stock.

Dividend Policy

     The Company has never paid cash dividends on its Common Stock and intends
to retain earnings, if any, for use in the operation and expansion of its
business. The amount of future dividends, if any, will be determined by the
Board of Directors based upon the Company's earnings, financial condition,
capital requirements and other conditions.

Description of Securities

Common Stock

     The Company is authorized to issue 50,000,000 shares of $.10 par value
Common Stock. At December 15, 1999, there were 3,235,200 shares of Common Stock
outstanding. The holders of Common Stock are entitled to one vote for each share
held of record on all matters submitted to a vote of stockholders, including the
election of directors. There is no right to cumulate votes in the election of
directors. The holders of Common Stock are entitled to any dividends that may be
declared by the Board of Directors out of funds legally available therefor
subject to any prior rights of holders of Preferred Stock. In the event of
liquidation or dissolution of the Company, holders of Common Stock are entitled
to share ratably in all assets remaining after payment of liabilities and the
liquidation preferences of any outstanding shares of Preferred Stock. Holders of
Common Stock have no preemptive rights and have no right to convert their Common
Stock into any other securities. All of the outstanding shares of Common Stock
are fully paid and non-assessable.

Preferred Stock

     The Company is authorized to issue 500,000 shares of Preferred Stock,
$10.00 par value, none of which are outstanding. The Preferred Stock may,
without action by the stockholders of the Company, be issued by the Board of
Directors from time to time in one or more series for such consideration and
with such relative rights, privileges and preferences as the Board may
determine. Accordingly, the Board has the power to fix the dividend rate and to
establish the provisions, if any, relating to voting rights, redemption rate,
sinking fund, liquidation preferences and conversion rights for any series of
preferred stock issued in the future.

<PAGE>


     It is not possible at this time to state the actual effect of any
authorization of Preferred Stock upon the rights of holders of Common Stock
until the Board determines the specific rights of the holders of any series of
preferred stock. The Board's authority to issue Preferred Stock also provides a
convenient vehicle in connection with possible acquisitions and other corporate
purposes, but could have the effect of making it more difficult for a third
party to acquire a majority of the outstanding voting stock. Accordingly, the
issuance of Preferred Stock may be used as an "anti-takeover" device without
further action on the part of the stockholders of the Company, and may adversely
affect the holders of the Common Stock.

Stock Transfer and Warrant Agent

     Security Transfer Corporation is the stock transfer agent for the Company's
Common Stock.


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS
-------------------------------------------------------------------------------

General

Results of Operations-September 30, 1999 Compared to September 30, 1997

     Net Sales for the 12 month period ended September 30, 1999 increased to
$11,675,668 from $11,019,456 in 1998 which represents an increase of almost 6%.
Sales increases were a result of a new private label packaging customers in the
sauce and beverage categories. Sales increased in the sauce division during the
period by 18% over the previous year.

     Cost of goods sold increased to 73.2% of sales or $8,552,54 from 72% or
$7,892,331 a year ago. Higher labor costs were the largest factor in this
increase.

     Operating income rose to $828,725 from $817,770 for the previous year.
Increased expenses related to a new products line were the primary reason that
operating income did not keep pace with sales increases.

     Net Income after tax was $415,971, down from $561,401 in 1998. The decrease
was resulting from an increase in the provision for income taxes. The provision
for income taxes increased to $372,971 from $201,449 in 1998. The 1998 provision
was extraordinarily low due to the utilization of a $120,212 pre-merger net
operating loss carry-forward in 1998.

Liquidity and Capital Resources

     The Company has access to traditional lines of credit and term financing
and has in each of the past three years increased its lines of credit in order
to keep pace with growth. The Company had not made any material commitments for
capital expenditures as of September 30, 1999 and believes it has sufficient
cash resources to meet its needs in calendar 2000.

Seasonality

     A significant percentage of the Company's business is seasonal. The sale of
beverage syrups, fruit juice concentrates and barbeque sauces are greater during
warm weather. The holiday season, Thanksgiving through the New Year, helps to
offset this seasonality to some degree. Management has established lines of
credit to offset cash shortages during slow periods and has also instituted
policies and practices to manage cash flow.

<PAGE>


Trends

     The Company expects the supply of raw materials in the three largest
purchase categories to remain stable. Liquid sweeteners, juice concentrates and
packaging materials are expected to remain in adequate supply through fiscal
2000. The Company's purchasing power with suppliers continues to grow, and cost
of sales should not be adversely effected by raw material purchasing calender
2000.

     If the nations prolonged economic growth continues the Company sees labor
shortages creating increased expense in direct labor as well as production
management. It is not yet apparent whether these increased costs will result in
lower gross margins, which would require price increases to customers. The
Company will be evaluating the effect of labor efficiencies created by the new
production lines, in order to determine the degree to which these efficiencies
may offset increases in the cost of labor.

     The Company has hired a Director of Sales and Marketing who has an
extensive background in food sales and sales management. His mandate is to focus
on sales of our core product lines to mid and large sized distributors and food
service companies.

     Sales of private label sauces and marinades should continue to grow this
year. Growth in the sauce division over the past two years has largely been by
word of mouth. The Company will begin this year to actively market the products
and services of the sauce division nationally.


     This Form 10-KSB specifies the forward looking statements of management.
Forward looking statements are statements that estimate or anticipate the
happening of future events. The forward looking statement of management
specified in this Form 10-KSB have been compiled on the basis of assumptions
made by management and considered to be reasonable. Future operating results of
the Company, however, are impossible to predict and not representation regarding
future operating results of the Company is to be inferred from those forward
looking statements. The assumptions used for purposes of the forward looking
statements specified in this Form 10-KSB represent estimates of future events
and are subject to uncertainty as to possible changes in economic, legislature,
industry, and other circumstances. As a result, the developing and selecting
assumptions from and among reasonable alternatives require the exercise of
judgement to the extent that the assumed events do not occur. The outcome may
vary substantially from that projected, and accordingly, no opinion is expressed
regarding the achievability of particular forward looking results. In addition,
those forward looking statements have been compiled as of the date of this Form
10-KSB and should be evaluated with consideration of any changes occurring after
the date of this Form 10-KSB.

<PAGE>


ITEM 7.  FINANCIAL STATEMENTS
-----------------------------


                               Tone Products, Inc.



                 Index to the Consolidated Financial Statements

                      As of September 30, 1999 and 1998 and
        For Each of the Two Years in the Period Ended September 30, 1999
--------------------------------------------------------------------------------

     Report of Independent Auditors                                        1

     Consolidated Financial Statements of Tone Products, Inc.:

          Consolidated Balance Sheets, September 30, 1999 and
             1998                                                          2

          Consolidated Statements of Operations for Each of
             the Two Years in the Period Ended September 30,
             1999                                                          4

          Consolidated Statements of Shareholders' Equity for
             Each of the Two Years in the Period  Ended
             September 30, 1999                                            5

          Consolidated Statements of Cash Flows for Each of
             the Two Years in the Period Ended September 30,
             1999                                                          6

     Notes to the Consolidated Financial Statements                        8

<PAGE>





                         REPORT OF INDEPENDENT AUDITORS
                         ------------------------------



To the Board of Directors
Tone Products, Inc.

We have audited the accompanying consolidated balance sheets of Tone Products,
Inc. and its subsidiaries as of September 30, 1999 and 1998 and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the two years in the period ended September 30, 1999. 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Tone Products, Inc.
and its subsidiaries at September 30, 1999 and 1998, and the consolidated
results of its operations and its cash flows for each of the two years in the
period ended September 30, 1999, in conformity with generally accepted
accounting principles.



Kelly & Company
Newport Beach, California
December 8, 1999

                                       1
<PAGE>

                               Tone Products, Inc.


                           Consolidated Balance Sheets
                           September 30, 1999 and 1998

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

                                     ASSETS

                                                         1999             1998
                                                         ----             ----
Current assets:
     Cash and equivalents                             $  173,248      $  458,343
     Accounts receivable - trade, net                  1,042,409         975,456
     Due from a related party                               --            10,760
     Inventories                                       1,725,472       1,080,366
     Prepaid expenses                                     44,504          20,424
     Deferred tax asset                                      927          18,703
                                                      ----------      ----------

Total current assets                                   2,986,560       2,564,052

Property and equipment, net                            1,722,261       1,485,431
Intangible assets, net                                   702,163         765,605
Deposits                                                   4,648           4,648
                                                      ----------      ----------

Total assets                                          $5,415,632      $4,819,736
                                                      ==========      ==========





The accompanying notes are an integral part of the consolidated financial
statements.

                                       2

<PAGE>


                               Tone Products, Inc.


                           Consolidated Balance Sheets
                           September 30, 1999 and 1998

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

                      LIABILITIES AND SHAREHOLDERS' EQUITY

                                                             1999         1998
                                                             ----         ----
Current liabilities:
     Lines of credit                                     $  835,954   $  240,000
     Accounts payable - trade                               402,746      406,053
Accrued expenses                                            299,699      208,643
     Notes payable, current maturities                      104,010       82,361
     Income taxes payable                                     6,404      156,536
                                                         ----------   ----------
Total current liabilities                                 1,648,813    1,093,593

Notes payable, net of current maturities                    139,505      165,960
Deferred tax liability                                       66,584       62,150
                                                         ----------   ----------

Total liabilities                                         1,854,902    1,321,703
                                                         ----------   ----------

Commitments and contingencies

Shareholders' equity:
     Convertible Series A preferred stock; $10 par
        value; 500,000 shares authorized; none
        issued and outstanding at September 30,
        1999 and 1998                                          --           --
     Common stock; $0.10 par value; 50,000,000 shares
        authorized; 3,235,200 and 3,579,612 shares
        issued and outstanding at September 30, 1999
        and 1998, respectively                              323,520      357,961
Common stock committed to be issued                          15,364       21,136
Additional paid-in capital                                  804,746    1,023,307
Retained earnings                                         2,417,100    2,095,629
                                                         ----------   ----------

Total shareholders' equity                                3,560,730    3,498,033
                                                         ----------   ----------

Total liabilities and shareholders' equity               $5,415,632   $4,819,736
                                                         ==========   ==========


The accompanying notes are an integral part of the consolidated financial
statements.

                                       3

<PAGE>
<TABLE>
<CAPTION>


                               Tone Products, Inc.


                      Consolidated Statements of Operations

      For the Each of the Two Years in the Period Ended September 30, 1999

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


                                                         1999             1998
                                                         ----             ----

<S>                                                  <C>             <C>
Net sales                                            $ 11,675,668    $ 11,019,456
Cost of sales                                           8,552,954       7,892,331
                                                     ------------    ------------

     Gross profit                                       3,122,714       3,127,125

Operating costs and expenses                            2,293,989       2,309,355
                                                     ------------    ------------

Income from operations                                    828,725         817,770
                                                     ------------    ------------
Other income (expense):
     Interest expense                                     (62,698)        (60,211)
     Interest income                                        3,106           3,337
     Other income                                          19,809           1,954
                                                     ------------    ------------

                                                          (39,783)        (54,920)
                                                     ------------    ------------

Income before provision for income taxes                  788,942         762,850
Provision for income taxes                                372,971         201,449
                                                     ------------    ------------

Net income                                           $    415,971    $    561,401
                                                     ============    ============



Net income per share, basic and diluted              $       0.12    $       0.15
                                                     ============    ============

Basic weighted average common shares outstanding        3,417,841       3,642,433
                                                     ============    ============

Diluted weighted average common shares outstanding      3,428,146       3,656,276
                                                     ============    ============


The accompanying notes are an integral part of the consolidated financial
statements.

                                       4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>


                                                        Tone Products, Inc.


                                          Consolidated Statements of Shareholders' Equity

                               For the Each of the Two Years in the Period Ended September 30, 1999

-----------------------------------------------------------------------------------------------------------------------------------
                                                                           Common Stock    Additional
                                                Common         Common        Committed      Paid-in       Retained
                                                Shares         Stock       To Be Issued     Capital       Earnings         Total
                                                ------         -----       ------------     -------       --------         -----

<S>                                            <C>          <C>             <C>            <C>            <C>           <C>
Balance, September 30, 1997                    3,692,102    $   369,211           --      $ 1,012,057    $ 1,534,228    $ 2,915,496

  Shares retired that were initially
     issued in the reorganization
     (reverse merger) of Tone Product Inc.      (112,490)       (11,250)          --           11,250           --             --

  Shares committed and fully paid but not
     issued in the acquisition of T.J
     Distributing                                   --             --      $    21,136           --             --           21,136

  Net income                                        --             --             --             --          561,401        561,401
                                             -----------    -----------    -----------    -----------    -----------    -----------


Balance, September 30, 1998                    3,579,612        357,961         21,136      1,023,307      2,095,629      3,498,033

  Issuance of committed shares                     3,488            349         (5,772)         5,423           --             --

  Shares repurchased and retired by the
     Company                                    (347,900)       (34,790)          --         (223,984)       (94,500)      (353,274)

  Net income                                        --             --             --             --          415,971        415,971
                                             -----------    -----------    -----------    -----------    -----------    -----------

Balance, September 30, 1999                    3,235,200    $   323,520    $    15,364    $   804,746    $ 2,417,100    $ 3,560,730
                                             ===========    ===========    ===========    ===========    ===========    ===========




                         The accompanying notes are an integral part of the consolidated financial statements.

                                                                 5
</TABLE>
<PAGE>


                               Tone Products, Inc.


                      Consolidated Statements of Cash Flows

      For the Each of the Two Years in the Period Ended September 30, 1999

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


                                                           1999         1998
                                                           ----         ----

Cash flows from operating activities:

     Net income                                         $ 415,971    $ 561,401
  Adjustments to reconcile income to net
  cash provided by operating activities:
     Depreciation and amortization                        397,719      347,360
     Allowance for uncollectable accounts receivable        6,105      211,186
     Inventory obsolescence                                  --         22,147
     Gain on sale of assets                               (11,526)        --
Decrease (increase) in assets, net of effects
from purchase of T. J. Distributing:
     Accounts receivable - trade, net                     (73,058)    (251,295)
     Due from a related party                              10,760       11,010
     Inventories                                         (645,106)     (42,457)
     Prepaid expenses                                     (24,080)      (8,943)
     Deferred tax asset                                    17,776         (595)
     Other assets                                            --           (558)
Increase (decrease) in liabilities:
     Accounts payable - trade                              (3,307)      36,971
     Accrued expenses                                      91,056        7,961
     Income taxes payable                                (150,132)     (98,255)
     Deferred tax liability                                 4,434      (30,628)
                                                        ---------    ---------

Cash provided by operating activities                      36,612      765,305
                                                        ---------    ---------

Cash flows provided by (used in) investing activities

     Purchase of T.J. Distributing                           --        (36,000)
     Acquisition of tradename                                --       (300,000)
     Purchase of property and equipment                  (589,546)    (308,511)
     Sale of property and equipment                        29,965         --
                                                        ---------    ---------

Cash used in investing activities                        (559,581)    (644,511)
                                                        ---------    ---------

The accompanying notes are an integral part of the consolidated financial
statements.

                                        6

<PAGE>


                               Tone Products, Inc.


                      Consolidated Statements of Cash Flows

      For the Each of the Two Years in the Period Ended September 30, 1999

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

                                                           1999          1998
                                                           ----          ----

Cash flows provided by (used in) financing activities:

     Net proceeds from the line of credit                $ 595,954    $  40,000
     Payment on notes payable                              (92,217)     (92,068)
     Proceeds from the issuance of notes payable            87,411       40,000
     Purchase and retirement of Company
         common stock                                     (353,274)        --
                                                         ---------    ---------

Cash provided by (used in) financing activities            237,874      (12,068)
                                                         ---------    ---------

Net increase (decrease) in cash                           (285,095)     108,726

Cash at beginning of period                                458,343      349,617
                                                         ---------    ---------

Cash at end of period                                    $ 173,248    $ 458,343
                                                         =========    =========


                Supplemental Disclosure of Cash Flow Information

                                                           1999          1998
                                                           ----          ----

Interest paid                                            $  62,698    $  60,211
Income taxes paid                                        $ 527,537    $ 330,332

      Supplemental Schedule of Non-Cash Investing and Financing Activities

Business acquisition:
     Assets acquired                                          --      $ 106,136
     Liabilities incurred                                     --      $ (85,000)
     Common stock committed to be issued                      --      $ (21,136)

Issuance of committed stock:
     Common stock committed to be issues                 $   5,772         --
     Common stock                                        $    (349)        --
     Additional paid-in capital                          $  (5,423)        --


The accompanying notes are an integral part of the consolidated financial
statements.

                                        7
<PAGE>


                               Tone Products, Inc.


                   Notes to Consolidated Financial Statements

      For the Each of the Two Years in the Period Ended September 30, 1999

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

1.   Description of Business
     -----------------------

     Operations

     Tone Products, Inc. (an Arkansas corporation)(the "Company") and its
     subsidiaries, Fun City Popcorn, Inc. (a Nevada Corporation)("Fun City") and
     Tone Products, Inc. (an Illinois corporation)("Tone Products") are engaged
     in the purchase, manufacture, and wholesale distribution of food products
     in the beverage, dry mix beverage, snack, syrup, condiments, and sauce
     categories.

2.   Summary of Significant Accounting Policies
     ------------------------------------------

     Principles of Consolidation

     The accompanying consolidated financial statements include the accounts of
     the Company and its subsidiaries, Fun City and Tone Products. All
     significant intercompany transactions have been eliminated.

     Recognition of Revenue

     Revenues are recognized when the Company's products are shipped.

     Cash and Equivalents

     The Company invests portions of its excess cash in highly liquid
     investments. Cash and equivalents include time deposits and commercial
     paper with original maturities of three months or less. The Company has no
     requirements for compensating balances. The Company maintains cash balances
     in accounts which exceeded the federally insured limits by $ 14,126 and
     $355,145 at September 30, 1999 and 1998, respectively; however, the Company
     has not experienced any losses in such accounts.

     Concentration of Credit Risk

     Financial instruments which potentially subject the Company to
     concentrations of credit risk consist primarily of trade accounts
     receivable. The Company sells products to private and public companies
     supplying the food services industry, certain governmental entities, and
     public institutions primarily within a 300-mile radius of each of its two
     facility locations. Exposure to losses on accounts receivable is
     principally dependent on the individual customer's financial condition, as
     credit sales are not collateralized. The Company monitors its exposure to
     credit losses and reserves for those accounts receivable that it deems to

                                       8
<PAGE>


                               Tone Products, Inc.


                   Notes to Consolidated Financial Statements

      For the Each of the Two Years in the Period Ended September 30, 1999

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

2.   Summary of Significant Accounting Policies, Continued
     -----------------------------------------------------

     Concentration of Credit Risk, Continued

     be not collectible. No single customer accounted for more than 10% of the
     accounts receivable at September 30, 1999 and 1998 or of the revenues for
     the years then ended.

     Inventories

     Inventories are stated at the lower of cost or market. Cost is determined
     on a standard cost basis, which approximates the first in - first out
     method of valuation. The Company's management monitors inventories for
     excess, obsolete, and calendar date sensitive items and makes necessary
     valuation corrections when such adjustments are required.

     Property and Equipment

     Property and equipment are recorded at cost and are depreciated using the
     straight-line method over the expected useful lives noted below.
     Expenditures for normal maintenance and repairs are charged to operations.
     The cost and related accumulated depreciation of assets are removed from
     the accounts upon retirement or other disposition, and the resulting profit
     or loss is reflected in the statement of operations. Renewals and
     betterments that materially extend the life of the assets are capitalized.

                                                    Estimated Useful
                                                          Life
                                                          ----
           Property and equipment                           7 years
           Furniture and fixtures                       5 - 7 years
           Vehicles                                     5 - 7 years
           Leasehold improvements                       5 -39 years

     Intangible Assets

     Intangible assets represent the excess of the acquisition cost over the
     value assigned to the net tangible assets at the date a business or assets
     are acquired. Intangible assets consist of goodwill and a trademark, which
     are amortized over fifteen years utilizing the straight-line method.

                                       9
<PAGE>


                               Tone Products, Inc.


                   Notes to Consolidated Financial Statements

      For the Each of the Two Years in the Period Ended September 30, 1999

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

2.   Summary of Significant Accounting Policies, Continued
     -----------------------------------------------------

     Impairment of Long-Lived Assets

     The Company annually evaluates its long-lived assets, including intangible
     assets for potential impairment. When circumstances indicate that the
     carrying amount of an asset is not recoverable, as demonstrated by the
     projected undiscounted cash flows, an impairment loss is recognized. The
     Company's management has determined that there was no such impairment
     present at September 30, 1999 and 1998.

     Income Taxes

     The Company accounts for income taxes under the liability method. Under the
     liability method, deferred tax assets and liabilities are determined based
     on differences between financial reporting and tax bases of assets and
     liabilities. They are measured using the enacted tax rates and laws that
     will be in effect when the differences are expected to reverse. The Company
     is required to adjust its deferred tax liabilities in the period when tax
     rates or the provisions of the income tax laws change. Valuation allowances
     are established to reduce deferred tax assets to the amounts expected to be
     realized.

     Stock-Based Compensation

     Statement of Financial Accounting Standards ("SFAS") No. 123, Accounting
     for Stock-Based Compensation, established accounting and disclosure
     requirements using a fair value based method of accounting for stock-based
     employee compensation plans. As permitted by SFAS No. 123, the Company will
     continue to account for stock-based employee compensation using the
     intrinsic value method prescribed in Accounting Principles Board Opinion
     ("APB") No. 25, Accounting for Stock Issued to Employees. Compensation cost
     of stock options granted to employees, if any, will be measured as the
     excess of the quoted market price of the Company's stock at the date of
     grant over the amount an employee must pay to acquire the stock.
     Compensation cost is amortized over the requisite vesting periods.

     Advertising Costs

     Advertising costs are expensed as they are incurred. Advertising expense
     was $75,905 and $97,309 for the years ended September 30, 1999 and 1998,
     respectively.

                                       10
<PAGE>


                               Tone Products, Inc.


                   Notes to Consolidated Financial Statements

      For the Each of the Two Years in the Period Ended September 30, 1999

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

2.   Summary of Significant Accounting Policies, Continued
     -----------------------------------------------------

     Earnings per Common Share

     In 1997, the Financial Accounting Standards Board issued SFAS No. 128,
     Earnings Per Share. This pronouncement replaced the previously reported
     primary and fully diluted earnings per share with basic and diluted
     earnings per share ("EPS"), respectively. Earnings for the years ended
     September 30, 1999 and 1998 have been calculated in accordance with this
     pronouncement.

     Basic EPS is computed by dividing income available to common shareholders
     by the weighted average number of common shares outstanding for the year.
     Diluted EPS is similar to basic EPS except that the weighted average of
     common shares outstanding is increased to include the number of additional
     common shares that would have been outstanding if potentially dilutive
     common shares had been issued.

     Use of Estimates

     The preparation of financial statements in conformity with generally
     accepted accounting principles requires management to make estimates and
     assumptions that affect the reported amounts of assets and liabilities and
     disclosure of contingent assets and liabilities at the date of the
     consolidated financial statements and the reported amounts of revenues and
     expenses during the reporting period. Actual results could differ from
     those estimates.

     Financial Statement Classification

     Certain amounts within the 1998 financial statements have been reclassified
     in order to conform to the 1999 financial statement presentation.

3.   Accounts Receivable - Trade, Net
     --------------------------------

     During the years ended September 30, 1999 and 1998, the Company charged to
     operations an allowance for certain accounts receivable - trade, estimated
     to be uncollectable amounting to $6,105 and $211,186, respectively. The bad
     debt expense in the year ended September 30, 1998 resulted in large part
     from five customers filing for bankruptcy. The five customers'
     uncollectibility allowance amounted to $174,924, and Company sales to them
     were $156,743 for the year ended September 30, 1998.

                                       11
<PAGE>


                               Tone Products, Inc.


                   Notes to Consolidated Financial Statements

      For the Each of the Two Years in the Period Ended September 30, 1999

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

4.   Inventories
     -----------

     At September 30, 1999 and 1998 inventories consisted of the following:

                                                         1999         1998
                                                         ----         ----

             Raw materials                            $  918,061   $  551,807
             Work in process                             215,640         --
             Finished goods                              591,771      528,559
                                                      ----------   ----------

             Total inventories                        $1,725,472   $1,080,366
                                                      ==========   ==========

     In 1999, the Company purchased fabricated parts sufficient to manufacture
     approximately 200 units of a new Company developed drink dispensing
     machine. The costs of these parts total $215,640 and are included as work
     in process inventory. The Company intends to issue the drink dispensing
     machines as part of a new drink product sales program, which will commence
     in 2000.

5.   Property and Equipment
     ----------------------

     At September 30, 1999 and 1998, property and equipment consisted of the
     following:

                                                  1999           1998
                                                  ----           ----

        Property and equipment                $ 3,004,079    $ 2,649,523
        Furniture and fixtures                    111,766        109,655
        Vehicles                                  338,679        317,789
        Leasehold improvements                    581,651        490,176
                                              -----------    -----------

                                                4,036,175      3,567,143
             Less: accumulated depreciation    (2,313,914)    (2,081,712)
                                              -----------    -----------

        Total property and equipment          $ 1,722,261    $ 1,485,431
                                              ===========    ===========

     Depreciation expense for the years ended September 30, 1999 and 1998 was
     $334,277 and $294,943, respectively.

                                       12
<PAGE>


                               Tone Products, Inc.


                   Notes to Consolidated Financial Statements

      For the Each of the Two Years in the Period Ended September 30, 1999

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

6.   Intangible Assets
     -----------------

     At September 30, 1999 and 1998, intangible assets consisted of the
     following:

                                                        1999         1998
                                                        ----         ----
        Goodwill resulting from the acquisition of
          Fun City Popcorn, Inc.                     $ 442,076    $ 442,076
        Goodwill resulting from the acquisition of
          T.J. Distributing                            121,136      121,136
        Acquisition of the Balboa Bay trademark        300,000      300,000
                                                     ---------    ---------

                                                       863,212      863,212
           Less: accumulated amortization             (161,049)     (97,607)
                                                     ---------    ---------

        Intangible assets, net                       $ 702,163    $ 765,605
                                                     =========    =========

     Amortization expense for the years ended September 30, 1999 and 1998 was
     $63,442 and $52,417, respectively.

7.   Lines of Credit
     ---------------

     At September 30, 1999 and 1998, the Company had operating lines of credit
     with a bank as follows:

                                                          1999         1998
                                                          ----         ----

     Line of credit with a maximum amount of
     $1,300,000 available, collateralized by all
     Tone Products assets and guaranteed by its
     three largest shareholders, two of whom are
     also corporate officers and members of the
     board of directors of the Company (the
     "largest shareholders"). The bank line of
     credit had a weighted average interest rate
     of 7.64% for the year ended September 30,
     1999. The bank line of credit expires in
     February 2000 and is eligible for a one-year
     extension. It is the Company's intention at
     this time to extend any unpaid balance at the
     due date.                                          $580,772        --

                                       13
<PAGE>

                               Tone Products, Inc.


                   Notes to Consolidated Financial Statements

      For the Each of the Two Years in the Period Ended September 30, 1999

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

7.   Lines of Credit, Continued
     --------------------------

                                                          1999         1998
                                                          ----         ----

     Line of credit with a maximum amount of
     $650,000 available, collateralized by certain
     Tone Products assets and guaranteed by the
     largest shareholders. The bank line of credit
     had a weighted average interest rate of 8.14%
     for the year ended September 30, 1999. The
     bank line of credit expires in March 2000 and
     is eligible for a one-year extension. It is
     the Company's intention at this time to
     extend any unpaid balance at the due date.         $165,228        --

     Line of credit with a maximum amount of
     $300,000 available, collateralized by certain
     Fun City assets and guaranteed by the largest
     shareholders. The bank line of credit had a
     weighted average interest rate of 7.89% and
     8.55% for the years ended September 30, 1999
     and 1998, respectively. The bank line of
     credit expires in February 2000 and is
     eligible for a one-year extension. It is the
     Company's intention at this time to extend
     any unpaid balance at the due date.                  89,954    $240,000
                                                        --------    --------

     Total lines of credit                              $835,954    $240,000
                                                        ========    ========

8.   Notes Payable
     -------------

     At September 30, 1999 and 1998, notes payable consist of the following:

     Collateralized
                                                          1999         1998
                                                          ----         ----

     Note payable to a bank, collateralized by
     certain Tone Products assets, payable in
     monthly principal installments of $3,690 plus
     accrued interest, due in April 2001. Interest
     is calculated at the bank's prime rate plus
     three-quarters of a point (9.00% and 8.5% per
     annum at September 30, 1999 and 1998,
     respectively).                                    $  70,137   $ 114,417

                                      14
<PAGE>

                               Tone Products, Inc.


                   Notes to Consolidated Financial Statements

      For the Each of the Two Years in the Period Ended September 30, 1999

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

8.   Notes Payable, Continued
     ------------------------

     Collateralized, Continued

                                                          1999         1998
                                                          ----         ----

     Note payable to a bank, collateralized by
     certain Tone Products assets, payable in
     monthly principal and interest installments
     of $813, with any unpaid principal and
     interest due in January 2003. Interest is
     calculated at a fixed rate of 8.00% per
     annum.                                            $  29,067   $  35,554

     Notes payable, collateralized by certain of
     the Company's vehicles. Currently, the notes
     call for composite monthly installments of
     principal and interest of $3,411 for varying
     terms, none of which exceed three years. At
     September 30, 1999, the interest is
     calculated at rates varying between .90% and
     8.50% per annum. On one of the notes payable,
     the noteholder (an automobile manufacturer
     related finance company) provided a "less
     than market" financing rate as an incentive
     to purchase a truck. Accordingly, on that
     particular note payable, the carrying amount
     was adjusted to a representative market rate
     of 7.00% to recognize the fair value of the
     future payments due to a below market
     interest rate (Note 12).                             87,460      26,760

     Uncollateralized

     Note payable to an individual as part of the
     purchase price of a business acquisition;
     payable in monthly principal and interest
     installments of $1,600, with any unpaid
     principal and interest due in December 2002.
     Interest is calculated at a fixed rate of
     7.00% per annum.                                     56,851      71,590
                                                       ---------   ---------


      Total notes payable                                243,515     248,321
           Less: current maturities                     (104,010)    (82,361)
                                                       ---------   ---------

      Long term portion of notes payable               $ 139,505   $ 165,960
                                                       =========   =========

                                     15
<PAGE>

                               Tone Products, Inc.


                   Notes to Consolidated Financial Statements

      For the Each of the Two Years in the Period Ended September 30, 1999

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

8.   Notes Payable, Continued
     ------------------------

     Maturities of notes payable for the years ending September 30:

           2000                                       $     104,010
           2001                                              85,106
           2002                                              44,236
           2003                                              10,163

     Interest expense during the years ended September 30, 1999 and 1998 was
     $62,698 and $60,211, respectively.

9.   Other Income
     ------------

     For each of the two years in the period ended September 30, 1999, the
     components of other income are:

                                                       1999        1998
                                                       ----        ----

        Gain on the sale of assets, net              $11,526        --
        Miscellaneous other income                     8,283     $ 1,954
                                                     -------     -------

        Total other income                           $19,809     $ 1,954
                                                     =======     =======

10.  Income Taxes
     ------------

     At September 30, 1999 and 1998, the components of the provision for income
     taxes are:

                                                   1999          1998
                                                   ----          ----
        Current tax expense:
             Federal                            $ 307,142     $ 203,493
             State                                 43,619        29,179
                                                ---------     ---------

                                                  350,761       232,672
                                                ---------     ---------
        Deferred tax expense (benefit):
             Federal                               21,375       (23,555)
             State                                    835        (7,668)
                                                ---------     ---------

                                                   22,210       (31,223)
                                                ---------     ---------

        Total provision                         $ 372,971     $ 201,449
                                                =========     =========

                                       16
<PAGE>

                               Tone Products, Inc.


                   Notes to Consolidated Financial Statements

      For the Each of the Two Years in the Period Ended September 30, 1999

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

10.   Income Taxes, Continued
      -----------------------

     Significant components of the Company's deferred income tax assets and
     liabilities at September 30, 1999 and 1998 are:

                                                       1999        1998
                                                       ----        ----
        Deferred income tax asset:
             State taxes                             $ 4,198     $21,692
             Other                                       987         987
                                                     -------     -------

        Total deferred income tax asset                5,185      22,679
             Valuation allowance                        --          --
                                                     -------     -------

        Net deferred income tax asset                  5,185      22,679
                                                     -------     -------
        Deferred income tax liability:
             Depreciation                             70,842      66,126
                                                     -------     -------

        Total deferred income tax liability           70,842      66,126
                                                     -------     -------

        Net deferred income tax liability            $65,657     $43,447
                                                     =======     =======

     Reconciliation of the effective tax rate to the U.S. statutory rate is as
     follows:

                                                              1999       1998
                                                              ----       ----

        Tax expense at U.S. statutory rate                    34.0%      34.0%
        State tax provision                                    3.7        5.3
        Non-deductible expenses                                4.6        3.4
        Utilization of pre-merger net operating loss
          carryforward                                          --      (14.7)
        Assessment of additional taxes related to a
          prior period                                         2.8         --
        Other                                                  2.2       (1.6)
                                                              -----     ------

        Effective income tax rate                             47.3%      26.4%
                                                              =====     ======

                                       17
<PAGE>

                               Tone Products, Inc.


                   Notes to Consolidated Financial Statements

      For the Each of the Two Years in the Period Ended September 30, 1999

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

11.  Stock-Based Compensation
     ------------------------

     The Company's 1997 Stock Option Plan (the "plan") adopted in November 1997
     provides for the issuance of up to 350,000 options to purchase shares of
     its common stock to selected officers, outside directors, employees, and
     consultants. The plan's options vest pro rata over a five-year period and
     expire ten years from the date of grant. Under the term of the plan,
     options granted may be either nonqualified or incentive stock options
     ("ISOs"). The exercise price for nonqualified options or ISOs may not be
     less than the quoted market price of the stock on date the option is
     granted. For the two years ended September 30, 1999, no options have been
     granted.

12.  Disclosures about Fair Values of Financial Instruments
     ------------------------------------------------------

     The estimated fair value amounts of all financial instruments on the
     Company's 1999 and 1998 balance sheets, which are held for nontrading
     purposes, have been determined by using available market information and
     appropriate valuation methodologies. Fair value is described as the amount
     at which the instrument could be exchanged in a current transaction between
     informed willing parties, other than in a forced liquidation. However,
     considerable judgment is necessarily required in interpreting market data
     to develop the estimates of fair value. Accordingly, the estimates
     presented herein are not necessarily indicative of the amounts that the
     Company could realize in a current market exchange. The use of different
     market assumptions and/or estimation methodologies may have a material
     effect on the estimated fair value amounts. The Company does not have any
     off balance sheet financial instruments.

     The following methods and assumptions were used by the Company in
     estimating fair value disclosures for financial statements:

          Cash and equivalents, accounts receivable, inventory, prepaids,
          accounts payable, line of credit payable, and certain other current
          liability amounts are reported in the balance sheet at their
          approximate fair value due to the short term maturities of these
          instruments except for those identified below.



                                       18
<PAGE>

                               Tone Products, Inc.


                   Notes to Consolidated Financial Statements

      For the Each of the Two Years in the Period Ended September 30, 1999

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

12.  Disclosures about Fair Values of Financial Instruments, Continued
     -----------------------------------------------------------------

     The fair value of noncurrent notes payable is estimated by determining the
     net present value of future payments. The carrying amount on the balance
     sheet exceed the fair value as the interest rate on one note was below
     market (Note 8).

                                          1999                  1998
                                   -------------------   -------------------

                                   Carrying    Fair      Carrying     Fair
                                    Amount     Value      Amount      Value
                                    ------     -----      ------      -----

        Due from a related party       --         --     $ 10,760   $ 10,282

        Notes payable              $243,515   $242,033   $248,321   $248,321


13.  Employee Benefit Plans
     ----------------------

     Profit-Sharing Plan

     Effective November 1998, the Company terminated its noncontributory profit
     sharing plan (the "plan") that covered substantially all employees. No
     employer contributions were made for the years ended September 30, 1999 and
     1998. The plan is currently pending the Internal Revenue Service and
     Department of Labor termination reviews prior to being shut down.

     Employee Retirement Plan

     In November 1998, the Company adopted an employee benefit plan, whereby
     eligible employees may elect to defer a portion of their annual
     compensation, up to a maximum of 15%, pursuant to Section 401(k) of the
     Internal Revenue Code. Substantially all employees are eligible to
     participate. The Company matches contributions on a discretionary basis as
     determined by the board of directors. There were no Company contributions
     to the plan for the year ended September 30, 1999.


                                       19
<PAGE>

                               Tone Products, Inc.


                   Notes to Consolidated Financial Statements

      For the Each of the Two Years in the Period Ended September 30, 1999

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

14.   Acquisition
      -----------

     T. J. DistributingO

     On January 30, 1998, the Company acquired certain assets and related rights
     of T. J. Distributing (a sole proprietorship) located in Las Vegas, Nevada,
     for a purchase price of $142,136. The purchase price was comprised of cash,
     a promissory note, and 13,793 shares of the Company's common stock that was
     committed to be issued pro rata annually over a four year period. As of
     September 30, 1999, 3,488 of the committed shares have been issued. The
     acquisition was recorded using the purchase method of accounting.
     Accordingly, a portion of the purchase price was allocated to the net
     assets acquired based on their estimated fair values. The fair value of the
     tangible assets acquired was $21,000. The balance of the purchase price,
     $121,136 was recorded as the excess of cost over net assets acquired
     (goodwill) (Note 6). T.J. Distributings' results of operations have been
     reported by the Company since February 1, 1998.

15.  Related Party Transactions
     --------------------------

     Facilities Operating Leases

     The Company leases its Chicago area facility from an entity owned by the
     largest shareholders. For the years ended September 30, 1999 and 1998, the
     Company paid facility rent of $333,060 and $326,820, respectively.

     The Company leases its Las Vegas area facility from a major shareholder who
     is the former owner of Fun City and currently is a member of the Company's
     board of directors. For the years ended September 30, 1999 and 1998, the
     Company paid the major shareholder facility rent of $ 82,008 and $74,727,
     respectively.

     Acquisition of a Tradename

     During the year ended September 30, 1998, the Company purchased a tradename
     it had formerly used under a licensing agreement. The tradename was
     acquired for $300,000 from an entity owned by the largest shareholders
     (Note 6).

                                       20
<PAGE>

                               Tone Products, Inc.


                   Notes to Consolidated Financial Statements

      For the Each of the Two Years in the Period Ended September 30, 1999

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

15.   Related Party Transactions, Continued
      -------------------------------------

     Due from a Related Party

     In years prior to the year ended September 30, 1998, the Company conducted
     business with an entity owned by the largest shareholders. The only remnant
     of that business relationship was a residual amount due from the entity to
     the Company. No interest was charged or accrued on the outstanding balance,
     and accordingly, the carrying value was adjusted to recognize the fair
     value of the future payments due to no interest being charged to the entity
     (Note 12). During the year ended September 30, 1999, the amount was paid in
     full.

16.  Commitments
     -----------

     The Company leases its facilities on operating leases with future minimum
     lease payments at September 30, 1999, are as follows:

                2000                                    $ 426,318
                2001                                       82,008
                2002                                       82,008
                2003                                       56,712
                                                        ---------

                Total future minimum lease payments     $ 647,046
                                                        =========

     Rental expense was $415,068 and $401,547 during the years ended September
     30, 1999 and 1998, respectively.






                                       21
<PAGE>

                               Tone Products, Inc.


                   Notes to Consolidated Financial Statements

      For the Each of the Two Years in the Period Ended September 30, 1999

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

17.  Earnings Per Share
     ------------------

     The computation of earnings per common share at September 30, 1999 and 1998
     are as follows:

                                                           1999         1998
                                                           ----         ----
        Basic earnings per common share:
             Net income (numerator)                    $  415,971   $  561,401
        Weighted-average shares outstanding
                (denominator)                           3,417,841    3,642,483
                                                       ----------   ----------

        Basic earnings per common share                $     0.12   $     0.15
                                                       ==========   ==========

        Diluted earnings per common share:
             Net income (numerator)                    $  415,971   $  561,401
                                                       ----------   ----------
             Weighted-average shares outstanding        3,417,841    3,642,483
             Shares committed to be issued                 10,305       13,793
                                                       ----------   ----------
             Shares outstanding for the diluted
               earnings per common share calculation
               after assumed issuance (denominator)     3,428,146    3,656,276
                                                       ----------   ----------

        Diluted earnings per common share              $     0.12   $     0.15
                                                       ==========   ==========


18.  Common Stock
     ------------

     Settlement of Reverse Merger Acquisition Shares

     In the year ended September 30, 1998, the Company determined the final
     number of common shares to be issued as a result of the reverse merger
     acquisition consummated during the year ended September 30, 1997. The final
     determination resulted in the retirement of 112,490 common shares
     originally issued at the date of the acquisition . The financial effect of
     the transaction was all within the equity section of the balance sheet.

     Shares Committed

     In the year ended September 30, 1998, the Company committed to issue 13,793
     shares of its common stock over a four-year period as part of the purchase
     price of a business (Note 14). The fair value of the commitment to issue
     the common shares over four years was $21,136. In the year ended September
     30, 1999, the Company issued 3,488 of the committed shares.

                                       22
<PAGE>

                               Tone Products, Inc.


                   Notes to Consolidated Financial Statements

      For the Each of the Two Years in the Period Ended September 30, 1999

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

18.  Common Stock, Continued
     -----------------------

     Shares Retired

     In 1999, the Company repurchased 347,900 shares of its common stock for
     $353,274. Of those shares, 100,000 were repurchased from one of the largest
     shareholders who formerly was a corporate officer and a member of the board
     of directors at a price greater than the original issuance value resulting
     in a decrease to retained earnings of $94,500.

19.  Geographical Business Segments
     ------------------------------

     For the years ended September 30, 1999 and 1998, the Company operated in
     two geographical business segments. Each of the business segments are
     separate legal entities; each operate in a distinct geographical area with
     unique product lines.

     Tone Products operates from facilities in Chicago, Illinois that
     manufacture and distribute food products in the beverage, dry mix beverage,
     syrup, condiment and sauce categories that are sold to wholesale customers.

     Fun City operates from facilities in Las Vegas, Nevada that manufacture and
     purchase snack food products that are sold to wholesale and retail
     customers.

     Both entities focus their marketing efforts for their products on the
     client base within a 300 mile radius of the facilities.

                                                  1999            1998
                                                  ----            ----

        Revenue
        Tone Products, Inc.                   $  9,295,681    $  8,795,531
        Fun City Popcorn, Inc.                   2,379,987       2,223,925
                                              ------------    ------------

        Total revenue                         $ 11,675,668    $ 11,019,456
                                              ============    ============

        Operating income (loss)
        Tone Products, Inc.                   $    882,765    $    896,555
        Fun City Popcorn, Inc.                     (54,040)        (78,785)
                                              ------------    ------------

        Total operating income (loss)         $    828,725    $    817,770
                                              ============    ============

        Depreciation and amortization
        Tone Products, Inc.                   $    263,027    $    224,032
        Fun City Popcorn, Inc.                     134,692         123,328
                                              ------------    ------------

        Total depreciation and amortization   $    397,719    $    347,360
                                              ============    ============


                                       23

<PAGE>

                               Tone Products, Inc.


                   Notes to Consolidated Financial Statements

      For the Each of the Two Years in the Period Ended September 30, 1999

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

19.  Geographical Business Segments, Continued
     -----------------------------------------

       Interest expense
       Tone Products, Inc.                        $   46,350   $   31,680
       Fun City Popcorn, Inc.                         16,348       28,531
                                                  ----------   ----------

       Total interest expense                     $   62,698   $   60,211
                                                  ==========   ==========

       Identifiable assets
       Tone Products, Inc.                        $4,141,812   $3,485,527
       Fun City Popcorn, Inc.                      1,273,820    1,334,209
                                                  ----------   ----------

       Total identifiable assets                  $5,415,632   $4,819,736
                                                  ==========   ==========

       Expenditures for long lived assets
       Tone Products, Inc.                        $  547,882   $  293,408
       Fun City Popcorn, Inc.                         41,663       26,103
                                                  ----------   ----------

       Total expenditures for long lived assets   $  589,545   $  319,511
                                                  ==========   ==========




                                       24
<PAGE>


ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE
-----------------------------------------------------------------------
Not Applicable


PART III

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

Directors and Executive Officers

     The following table sets forth certain information regarding the Company's
executive officers and directors:

                                                               Officer or
       Name               Age            Office                Director Since(1)
       ----               ---            ------                -----------------

Timothy E. Evon           46       President, Chief Executive   October, 1996
                                   Officer, and Director

Thomas J. Evon            44       Vice-President - Special     November, 1996
                                   Accounts, and Director

William H. Hamen          39       Secretary, Treasurer,
                                   Chief Financial Officer
                                   and Director                 November, 1996

Jack T. Cory              58       Director                     October, 1996

Charles A. Ehemann        47       Director                     October, 1996

Edward R. Jancauskas      58       Director                     November, 1997

Martin J. Finan           38       Director                     March, 1999


(1)  Reflects the date TPI was acquired by the Company. Messrs. Evon and Evon
had been directors of TPI, the Company's predecessor, from September 1978.

     Directors hold office for a period of one year from their election at the
annual meeting of stockholders and until their successors are duly elected and
qualified. Officers of the Company are elected by, and serve at the discretion
of, the Board of Directors. Directors not employed by the Company do not receive
fees for attending Board of Directors' meetings but are reimbursed for
out-of-pocket expenses, and each is granted stock options to purchase 25,000
shares of the Company's Common Stock after one year of service. Timothy E. Evon
and Thomas J. Evon are brothers.

<PAGE>


Background

     The following is a summary of the business experience of each executive
officer and director of the Company for at least the last five years:


     Timothy E. Evon has been President of TPI, and subsequently the Company,
since 1989 and is responsible for the Company's overall operations, with
emphasis upon management of production facilities and sauce operations.

     Thomas J. Evon has been an executive officer of TPI, and subsequently the
Company, since 1989 with principal responsibility for marketing the Company's
products primarily to government agencies, including school districts, colleges
and prisons.

     William H. Hamen has been the Company's controller since 1996 and was named
its Secretary, Treasurer and Chief Financial Officer in November 2000 with
principal responsibility for accounting and related functions. Previously, Mr.
Hamen was an independent systems consultant and a computer network engineer
since 1992.

     Jack T. Cory founded Fun Foods, a California based popcorn and snack foods
manufacturer in 1967 and sold the company in 1982. In 1985 he founded and
subsequently managed Fun City Popcorn, Inc. ("FCP") until he sold FCP to the
Company in May 1996.

     Charles A. Ehemann has been employed by Wixon/Fontarome, a spice,
seasoning, flavors, and food chemicals manufacturer since 1974 and has acted as
its Executive Vice President since 1991.

     Edward R. Jancauskas has been employed by Coca-Cola Bottling Company of
Chicago since 1968 and has been its Director of Immediate Consumption since
1988. He is an elected trustee of Mokena, Illinois. Mr. Jancauskas earned a
Bachelor's Degree in Management form of St. Joseph Calumet College.

     Martin J. Finan has been employed by S.G. Cowen Corp. since 1993 and
currently is the Director of the Structured Finance Group. Previously he was the
Vice President of Corporate Finance at Westpac Corp. Mr. Finan is a C.P.A. and
has a M.B.A. from the University of Chicago.

ITEM 10.  EXECUTIVE COMPENSATION
--------------------------------

     The following table sets forth certain information concerning compensation
paid to the Company's Chief Executive Officer for the years ended September 30,
1998 and 1999. Timothy E. Evon currently receives an annual salaries of
$114,000.

<TABLE>
<CAPTION>

                                   Summary Compensation Table

                                              Annual                               Long-Term
                                           Compensation                           Compensation
                                           ------------                           ------------
     Name and                                              Other Annual    Awar     All Other
Principal Position          Year      Salary        Bonus  Compensation  Options  Compensation
------------------          ----      ------        -----  ------------  -------  ------------
<S>                         <C>       <C>           <C>        <C>         <C>          <C>
Timothy E. Evon,            1998      $92,300       $500       $0           $0          $0
Chief Executive Officer     1999      $104,300      $500       $0           $0          $0

</TABLE>
<PAGE>


Stock Option Plan

     In November 1997, the Company adopted its 1997 Stock Option Plan (the
"Plan"), which provides for the grant to employees, officers, directors and
consultants of options to purchase up to 350,000 shares of Common Stock,
consisting of both "incentive stock options" within the meaning of Section 422A
of the United States Internal Revenue Code of 1986 (the "Code") and
"non-qualified" options. Incentive stock options are issuable only to employees
of the Company, while non-qualified options may be issued to non-employee
directors, consultants and others, as well as to employees of the Company.

     The Plan is administered by the Board of Directors, which determines those
individuals who shall receive options, the time period during which the options
may be partially or fully exercised, vesting periods required for issuance of
options, the number of shares of Common Stock that may be purchased under each
option and the option price.

     The per share exercise price of the Common Stock subject to an incentive
stock option may not be less than the fair market value of the Common Stock on
the date the option is granted. The per share exercise price of the Common Stock
subject to a non-qualified option is established by the Board of Directors. The
aggregate fair market value (determined as of the date the option is granted) of
the Common Stock that any employee may purchase in any calendar year pursuant to
the exercise of incentive stock options may not exceed $100,000. No person who
owns, directly or indirectly, at the time of the granting of an incentive stock
option to him, more than 10% of the total combined voting power of all classes
of stock of the Company is eligible to receive any incentive stock options under
the Plan unless the option price is at least 110% of the fair market value of
the Common Stock subject to the option, determined on the date of grant.
Non-qualified options are not subject to these limitations.

     No incentive stock option may be transferred by an optionee other than by
will or the laws of descent and distribution, and during the lifetime of an
optionee, the option will be exercisable only by him or her. In the event of
termination of employment other than by death or disability, the optionee will
have three months after such termination during which he or she can exercise the
option. Upon termination of employment of an optionee by reason of death or
permanent total disability, his or her option remains exercisable for 12 months
thereafter to the extent it was exercisable on the date of such termination. No
similar limitation applies to non-qualified options.

     Options under the Plan must be granted within ten years from the effective
date of the Plan. The incentive stock options granted under the Plan cannot be
exercised more than ten years from the date of grant except that incentive stock
options issued to 10% or greater stockholders are limited to five year terms.
All options granted under the Plan provide for the payment of the exercise price
in cash or by delivery to the Company of shares of Common Stock already owned by
the optionee having a fair market value equal to the exercise price of the
options being exercised, or by a combination of such methods of payment.
Therefore, an optionee may be able to tender shares of Common Stock to purchase
additional shares of Common Stock and may theoretically exercise all of his
stock options with no additional investment other than his original shares. Any
unexercised options that expire or that terminate upon an optionee ceasing to be
an officer, director or an employee of the Company become available once again
for issuance.

<PAGE>


     As of the date of this Report, options to purchase 235,000 shares have been
granted under the Plan, of which 200,000 options have been issued to the
Company's executive officers and directors. All options are exercisable at $1.75
per share until November 2007, and none of such options have been exercised.

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

     The following table sets forth certain information as of November 30, 1999
concerning stock ownership of the Company's Common Stock by all persons known to
the Company to own beneficially 5% or more of the outstanding shares of Common
Stock, by each director and by all directors and officers as a group.

     Except as otherwise noted, the persons named in the table own the shares
beneficially and of record and have sole voting and investment power with
respect to all shares of Common Stock shown as owned by them, subject to
community property laws, where applicable. Each stockholder's address is in care
of the Company at 2129 North 15th Street, Melrose Park, Illinois 60160. The
table also reflects all shares of Common Stock which may be acquired within 60
days from the date hereof upon exercise of stock options or common stock
purchase warrants.

                                        Number of
                                        Shares of
                                         Common
                                       Stock Owned                   Percent of
                                        of Record                   Common Stock
       Name                        and Beneficially(1)                 Owned
       ----                        -------------------                 -----

Timothy E. Evon                          738,166                       22.8%
Thomas J. Evon                           738,166                       22.8%
Michael W.Evon                           516,666                       22.8%
Jack T. Cory                             255,000                        7.9%
Charles A. Ehemann                        12,500                        0.4%
Edward R. Jancauskas                       1,000                          0%
Cede & Co.                               567,750                       17.5%
All officers and directors             2,482,998                       76.7%
as a group (7 persons)
-----------

(1)  Includes Stock Options exercisable within 60 days from the date hereof.


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------

     The Company believes that the transactions described below were fair,
reasonable and consistent with the terms of transactions which the Company could
have entered into with nonaffiliated third parties. All future transactions with
affiliates will be approved by a majority of the Company's disinterested
directors.

<PAGE>


     The Company leases office, warehouse and factory space in Melrose Park,
Illinois and Las Vegas, Nevada from certain of its executive officers and
directors. See "Item 2 - Description of Property."

     In December 1997 the Company agreed to purchase from Tone Juices, Inc.,
("TJ") an affiliated company owned by Timothy E. Evon, Thomas J. Evon, and
Michael W. Evon, the trade name "Balboa Bay" which was owned by TJ, but used by
the Company as the brand name for fruit juices sold by the Company to certain
Coca-Cola bottlers. The purchase price of $300,000 will be paid by the Company's
assumption of a promissory note in like amount payable to a commercial bank and
executed by Timothy E. Evon, Thomas J. Evon, and Michael W. Evon. Management of
the Company believes that it was in the Company's best interest to acquire the
trade name in order for the Company to continue sales of its fruit juice
products under the "Balboa Bay" label to the Coca-Cola bottlers.

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

     a. Exhibits: None
     b. Reports on Exhibit 8K: None


<PAGE>

                                   SIGNATURES

     In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
has duly caused this Report to be signed on its behalf by the undersigned,
hereunto duly authorized, in Melrose Park, Illinois, on December 24, 1999.


                                                TONE PRODUCTS, INC.



                                                By /s/ Timothy E. Evon
                                                  ------------------------------
                                                  Timothy E. Evon
                                                  President

     Pursuant to the requirements of the Securities Act of 1933, as amended,
this Report has been signed below by the following persons on the dates
indicated.

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

/s/ Timothy E. Evon             President Chief Executive      December 24, 1999
---------------------------     Officer, and Director
Timothy E. Evon


/s/ Thomas J. Evon              Vice-President - Special       December 24, 1999
---------------------------     Accounts and Director
Thomas J. Evon


/s/ William H. Hamen            Secretary, Treasurer,          December 24, 1999
---------------------------     Chief Financial Officer
William H. Hamen                (Principal Accounting Officer)
                                and Director


/s/ Jack T. Cory                Director                       December 24, 1999
---------------------------
Jack T. Cory


/s/ Charles A. Ehemann          Director                       December 24, 1999
---------------------------
Charles A. Ehemann


/s/ Edward R Jancauskas         Director                       December 24, 1999
---------------------------
Edward R. Jancauskas


/s/ Martin J. Finan             Director                       December 24, 1999
---------------------------
Martin J. Finan