SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-KSB
(Mark One)
[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended: December 31, 1997

                                       OR

[  ] TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

Commission file number: 0-24736

                   BioProgress Technology International, Inc.
             (Exact name of registrant as specified in its charter)

            Nevada                                               88-0361701
 (State or other jurisdiction)                               (I.R.S. employer)
of incorporation or organization                           identification number

9055 Huntcliff Trace, Atlanta, Georgia                            30350-1735
(Address of principal executive offices)                          (Zip Code)

Registrant's  telephone number,  including area code: (770) 641-0264 
Securities registered  pursuant to Section  12(b) of the Act:  None 
Securities  registered pursuant to Section 12(g) of the Act:

                          Common Stock, $.001 Par Value
                                (Title of class)

Indicate by check mark 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
                                      -----    -----

Indicate by check mark if disclosure of delinquent  filers  pursuant to Rule 405
of Regulation S-K is not contained herein and will not be contained, to the best
of  registrant's  knowledge,  in  definitive  proxy  or  information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

State the aggregate market value of the voting stock held by  non-affiliates  of
the registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold,  or the average bid and asked  prices of such
stock,  as of a specified  date  within 60 days prior to the date of filing:  On
April 6, 1998,  the closing inside bid and asked prices for the shares of common
stock of registrant,  which is the sole voting stock  outstanding of registrant,
were $.93 and $1.03, respectively.  On that date, there were 4,999,753 shares of
common stock outstanding.  Affiliates held 4,000,000 shares of this stock; thus,
the  aggregate  market  value  of  the  voting  stock  held  by   non-affiliates
approximated $979,758.

Registrant had no revenues during fiscal 1997.

Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of the latest  practicable date: As of April 6, 1998, there were
approximately 4,999,753 shares outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE


                                       1


<PAGE>


List hereunder the documents incorporated by reference and the Part of this Form
10-KSB into which the document is incorporated: None.

                                     PART I.
Item 1.  Description of Business:

History: Famous Sam's Group, Inc., formerly known as U.S. Flywheel Systems, Inc.
(the  "Company"),  was  incorporated  in  California  on  March  5,  1990,  as a
subsidiary  of  Sunbird   Technologies,   Inc.,  a  Utah  corporation  ("Sunbird
Technologies").  In June, 1991, the Company acquired three patents and a license
relating to flywheel technology from Sunbird  Technologies and its affiliates in
exchange  for common  shares of the Company  ("Common  Stock").  These shares of
Common  Stock  were  subsequently  distributed  to the  shareholders  of Sunbird
Technologies after registration with the U.S. Securities and Exchange Commission
("Commission").  The Company subsequently transferred its flywheel technology to
a partnership  (the  "Partnership")  in exchange for a minority  interest in the
Partnership.  The  Partnership  interest of the Company was  subsequently  sold,
after  which the  Company  began its search  for a business  in which to engage.
Acquisition  of BioProgress  Technology,  Inc.: On October 30, 1997, the Company
entered into a letter of intent with  BioProgress  Technology,  Inc., a Colorado
corporation ("BioProgress Technology"), which was followed on November 17, 1997,
by  a  formal  agreement  (the  "Reorganization  Agreement").  Pursuant  to  the
Reorganization  Agreement,  the Company agreed to acquire all of the outstanding
capital stock of  BioProgress  Technology in exchange for 4,000,000  post- split
shares of Common  Stock.  Immediately  prior to closing  the Company had reverse
split its outstanding capitalization on a one for five (1:5) basis.

In conjunction with the execution and delivery of the Reorganization  Agreement,
the Company  entered into an agreement with the  shareholders of the Distributor
which gives the Company the option of acquiring  all or any part,  on a pro rata
basis, of the issued and outstanding  proprietary interest of the Distributor on
or before June 30, 1998. The Company,  if an election is made, would be required
to issue one and 1/2 shares of Common  Stock for each share  outstanding  of the
Distributor,  which has 10,100,000 shares outstanding;  thus, if the option were
exercised in full, the Company would issue 15,150,000 shares of Common Stock. On
exercise of this  election,  the  Distributor  may have no more than  10,100,000
shares  outstanding,  and the Company may have no more than 5,000,000  shares of
Common Stock issued and  outstanding and must have completed or be in a position
to complete  the sale of such number of shares of Common  Stock at a price of no
less than $5.00 per share so as to generate no less than  $4,000,000  net of all
costs.

Business of BioProgress  Technology:  BioProgress Technology has entered into an
"Exclusive  Distributor  Agreement" with  BioProgress  Technology,  Limited,  an
entity incorporated in the United Kingdom (the  "Distributor").  The Distributor
is engaged in the development,  manufacture,  sale and distribution of materials
and processes used to replace  gelatin in the  manufacture of soft capsules,  as
discussed in more detail below.  BioProgress  Technology,  under this agreement,
has been  granted  the  right to serve  as the  "Exclusive  Distributor"  of the
foregoing  products in the United States and Canada,  and has agreed to purchase
34,500,000 products over a twelve month period beginning in January of next year
at a price per thousand of $66.00. The volume purchased will increase by 20% per
annum after the first year of the  agreement  through the fifth year, by 15% per
annum in years six through ten, 10% per annum in years eleven through 15, and 5%
per  annum  in  years 16  through  20.  If this  purchase  schedule  is not met,
BioProgress  Technology  will  lose  the  exclusive  right to  distribute  these
products,  but may not lose its  distribution  rights  altogether,  i.e., it may
remain as a non-exclusive  distributor;  however, the Distributor will then have
the right to find another exclusive  distributor in the United States and Canada
for the  products.  The  Distributor  remains  the sole  owner of the  technical
know-how and intellectual property rights associated with the products.

The Gelatin Capsule Industry and the Opportunity:  BioProgress Technology,  as a
result of the Exclusive Distributor Agreement, aims to take commercial advantage
of  certain  external  factors   adversely   affecting  the  gelatin   industry,
particularly soft gelatin  encapsulation,  by providing the industry with a cost
effective  commercial  substitute  and  flexible  manufacturing  process for the
gelatin  capsules.  Gelatin  capsules are currently  used to  encapsulate a wide
range of consumer products,  including cosmetics and dietary  supplements.  This
represents an extremely large and lucrative  market which is urgently  seeking a
replacement for gelatin, a product under attack on various fronts.


                                        2

<PAGE>



Gelatin  is  a  protein  derived  from  animal  renderings,  which  is  used  to
encapsulate dietary supplements, oils, cosmetic preparations and, in some cases,
drug  delivery  systems.  The  global  annual  consumption  of gelatin by weight
exceeds  210,000  tonnes,  of which 21,000 tonnes are used to produce  around 50
billion soft capsule products  annually.  Expansion of the encapsulation  market
into those groups with  religious and ethical  concerns  about the use of animal
derived  materials would open up such markets as the Muslim population which now
stands globally at approximately  935 million,  and vegetarians,  of which there
are an  estimated  29  million  in the USA alone.  Currently,  these  groups are
supplied  either with hard cellulose  capsules or, in the case of Muslims,  with
gelatin  derived  solely from bones.  In addition,  the fear of  contraction  of
Bovine  Spongiform  Encephalopathy  ("Mad Cow  Disease")  from the  ingestion of
gelatin based capsules has opened up further opportunities.

Management  of  the  Distributor  and  BioProgress  Technology  have  identified
weaknesses in the processing requirements and in-use performance of gelatin, and
the Distributor has filed a patent application in respect of a new process using
a replacement material ("X-GelTM"). In addition, trials of this new process have
been  concluded and have proved the principle  and  commercial  viability of the
technology.
BioProgress   Technology  has  landed  the  contractual  right  to  exploit  the
formulation and engineering  necessary to perfect an encapsulation  system which
does not require the unique properties of gelatin. Trial manufacturing processes
have  concluded and  management  believes that the bath oil capsule range is now
ready for commercial  use,  which,  under the means  proposed,  does not require
governmental approval.

Famous  Sam's   Acquisition:   The  Company   acquired  Famous  Sam's  Franchise
Corporation  ("Famous  Sam's") as a  wholly-owned  subsidiary  on July 23, 1996.
Subsequently,  on March 11, 1997,  the Company and Famous  Sam's  entered into a
recision  agreement  between  themselves and the former  shareholders  of Famous
Sam's (the "Shareholders")  whereby the Company returned to the Shareholders all
of the  outstanding  proprietary  interest of Famous Sam's in exchange for (i) a
release of any and all  liabilities  between the  Company,  Famous Sam's and the
Shareholders,  (ii) a representation from the Shareholders and Famous Sam's that
the Company had no outstanding  liabilities which had not been satisfied,  other
than amounts due the attorney  for the  Company,  Mr. Mark S. Pierce,  (iii) the
return to  treasury  of the shares of Common  Stock  issued to the  Shareholders
under the Reorganization  Agreement,  (iv) the resignation of the then board and
officers of the  Company  and (v) the  appointment  of a new board  member.  The
premise for the recision was what the Company, Famous Sam's and the Shareholders
felt to be certain material misrepresentations made by an independent contractor
of  the  Company  in  obtaining  the   acquiescence   of  Famous  Sam's  to  the
Reorganization  Agreement.   After  discussions  between  the  Company  and  the
independent  contractor  and  subsequent  factual  inquiries by  management,  it
appeared that it was in the best interests of the Company to  expeditiously  and
economically  resolve all  differences  between the Company and the  independent
contractor. For this reason, all matters between the Company and the independent
contractor  were resolved on April 15, 1997,  through the execution and delivery
of a mutual  release  and  settlement  agreement.  No  party  to this  agreement
admitted or denied any wrongdoing.  The recision of the Reorganization Agreement
and the  settlement  with the  independent  contractor  were entered into by the
Company  in  order to  avoid  what it  considered  to be  otherwise  unnecessary
litigation  if the disputes  which had arisen had not been  resolved,  which the
Company could not have afforded.  The recision and settlement placed the parties
in roughly the same  position as if the  acquisition  of Famous  Sam's had never
taken place.

Item 2.  Description  of Property:  The Company,  as of the date of this report,
owned no real or  personal  property,  tangible  or  intangible,  other than the
shares of its wholly-owned subsidiary,  BioProgess. The executive offices of the
Company are being provided by The Jade Partnership,  the majority shareholder of
the Company, free of charge on a month-to-month basis. These offices are located
at 9055 Huntcliff Trace, Atlanta, Georgia,  30350-1735.  The telephone number at
this address is (770) 641-0264.

Item 3. Legal  Proceedings:  No material legal  proceedings to which the Company
(or any officer or director of the Company,  or any affiliate or owner of record
or  beneficially  of more than five percent of the Common Stock, to management's
knowledge)  is a party or to which the  property  of the  Company  is subject is
pending,  and no such material  proceeding is known by management of the Company
to be contemplated.

Item 4.  Submission  of Matters  to a Vote of  Security  Holders:  There were no
meetings of security holders during the period covered by this report.



                                        3

<PAGE>



Item 5. Market for Common  Equity and Related  Shareholder  Matters:  On May 31,
1996, the Company effected a reverse one for one thousand (1:1000) capital share
split.  On November 6, 1997,  the Company  effected a reverse one for five (1:5)
capital share split. Concurrently,  the authorized capitalization of the Company
was  increased  to  10,000,000  common  shares,  $.001 par value per share,  and
1,000,000 preferred shares, $.01 par value per share. As of April 6, 1998, there
were  approximately  4,999,753  shares of Common Stock  issued and  outstanding,
which were held of record by approximately 2,197 shareholders.

The Common Stock is currently  quoted on the Bulletin  Board  maintained  by the
National Association of Securities Dealers, Inc., under the symbol "BPRG." There
was no trading in the Common Stock prior to August,  1996.  The following  table
sets forth the range of high,  low and closing bid and asked prices per share of
the Common Stock as reported by National  Quotation Bureau,  Inc. for the period
indicated.
<TABLE>
<CAPTION>


Calendar Quarter      High Bid     Low Bid    Closing Bid    High Ask     Low Ask    Closing Ask
------------------    --------     -------    -----------    --------     -------    -----------
<S>                   <C>         <C>          <C>           <C>         <C>          <C>    
September 30, 1996     $ 4.50      $ 1.00       $ 4.375       $ 5.50      $ 2.00       $ 5.375
December 31, 1996        1.875        .75         1.75          2.25        1.25         2.25
March 31, 1997            .75         .75          .75          1.25        1.25         1.25
June 30, 1997
September 30, 1997
December 31, 1997

</TABLE>

The above prices  represent  inter-dealer  quotations  without  retail  mark-up,
mark-down or commission,  and may not necessarily represent actual transactions.
Further,  the above prices have been  adjusted to reflect the two reverse  share
splits  discussed  above in this item. On April 6, 1998,  the closing inside bid
and asked prices for the Common Stock were $.94 and $1.03, respectively. On that
date there were nine market makers publishing quotes.

The Company has paid no dividends on the Common Stock since  inception  and does
not expect to pay dividends in the foreseeable  future.  There are, however,  no
restrictions on the payment of dividends.

Item 6. Management's  Discussion and Analysis of Financial Condition and Results
of Operations:

Results of  Operations:  The  Company,  previous to 1994,  operated  solely as a
research and development facility. From October, 1993, until April 23, 1996, the
Company  merely  held a  minority  stake in a  limited  partnership,  which  was
transferred  to trust on the latter  date.  As a result of the  recision  of the
acquisition of Famous Sam's, the Company had no operations  during 1996 or 1997.
The  Company  had no  revenues  or income in 1997,  1996 or 1995 from any source
whatsoever.  During 1994, the Company realized $100,000 in revenue from the sale
of a portion of its partnership interest. In 1993, the Company realized $500,000
in  revenue  from  the  sale of its  flywheel  technology  and  licenses  to the
partnership.

The Company's  expenses during the years ended December 31, 1997, 1996, 1995 and
1994 were entirely  administrative  in nature.  No meaningful  comparison can be
made between  these years since the  business of the Company  during these years
was solely administrative in nature.

Liquidity and Capital  Resources:  The Company  transferred  all  liabilities to
trust on April 23, 1996, and all other  liabilities,  to the limited extent that
there were any,  during 1996 to the date of the  recision of the  Reorganization
Agreement,  March 11, 1997,  with the exception of the legal fees of Mr. Pierce,
were  satisfied  by Famous  Sam's.  The Company had no other source of liquidity
during 1997 or 1996,  other than the largesse of Mr.  Pierce in his extension of
credit and personal funds.  The Company had no source of liquidity  during 1995,
and, as a result,  became  delinquent in payments to its creditors,  one of whom
sued for  payment  and  obtained a  judgement.  In  fulfillment  of a  condition
precedent to closing of the Famous Sam's  acquisition,  management  arranged for
the  advancement  of sums to  satisfy in full these  former  obligations  of the
Company,  as previously  transferred to the liquidating  trust,  and assigned in
consideration its claims in this regards against the trust.

                                        4

<PAGE>



In the last quarter of 1997,  the Company  sold  435,000  shares of Common Stock
under an option with a consultant  at a price per share of $.875,  for aggregate
consideration  of $385,000.  The Company then paid all past due obligations with
these monies, and continues to use this cash in the development of its business.

Compliance  with  Beneficial  Ownership  Reporting  Rules:  Section 16(a) of the
Securities  Act of 1934,  as amended  ("Exchange  Act"),  requires the executive
officers and  directors of the Company,  and persons who  beneficially  own more
than 10% of the Common Stock,  to file initial  reports of ownership and reports
of changes in ownership  with the  Commission.  These  officers,  directors  and
shareholders  are also required to furnish the Company with copies of certain of
these  reports.  Based solely on a review of copies of reports  furnished to the
Company  during its fiscal year ended  December 31,  1997,  and  thereafter,  or
written representations, if any, received by the Company from these persons that
no other reports were  required,  the Company  believes  that,  during 1997, all
applicable Section 16(a) filing requirements were satisfied.

Item 7.  Financial Statements.



                     HALLIBURTON, HUNTER & ASSOCIATES, P.C.
                          Certified Public Accountants




To the Board of Directors and Shareholders
BioProgress Technology International, Inc.
(Formerly Famous Sam's Group, Inc., and Subsidiary)

We have  audited  the  accompanying  balance  sheets of  BioProgress  Technology
International,  Inc.  (formerly  Famous Sam's Group,  Inc., and  subsidiary),  a
development  stage  company,  as of December  31 1997 and 1996,  and the related
statements of  operations,  stockholders'  equity,  and cash flows for the three
years ended ended December 31, 1997. These statements are the  responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements based on our audit.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits 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,  based on our audit, the financial  statements referred to above
present fairly, in all material respects,  the financial position of BioProgress
Technology   International,   Inc.  (formerly  Famous  Sam's  Group,  Inc.,  and
subsidiary),  a development stage company, as of December 31, 1997, and December
31, 1996,  and the results of its  operations and cash flows for the three years
ended  December 31, 1997,  in  conformity  with  generally  accepted  accounting
principles.


/s/ Halliburton, Hunter & Associates, P.C.


Littleton, Colorado
March 13, 1998


                                        5

<PAGE>
<TABLE>
<CAPTION>



                            BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.
                         Formerly FAMOUS SAM'S GROUP, INC., and Subsidiary
                                   (A Development Stage Company)

                                          BALANCE SHEETS

                                                                                December 31,
                                                                             1997          1996
                                                                         -----------    -----------

ASSETS

Current Assets:
<S>                                                                      <C>            <C>      
         Cash                                                            $      --      $      --
                                                                         -----------    -----------
               Total Current Assets                                             --             --
                                                                         -----------    -----------

Other Assets:                                                                   --
                                                                         -----------    -----------
         Intercompany                                                        120,000           --
         Distributorship Agreement                                             4,000           --
                  Total Assets                                           $   124,000    $      --
                                                                         ===========    ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
         Accounts payable (Note 5)                                       $      --      $    47,083
                                                                         -----------    -----------
                  Total Current Liabilities                                     --           47,083
                                                                         -----------    -----------

Shareholders' Equity (Deficit)
         Common Stock, $.001 par value, 10,000,000
           shares authorized, 4,999,753 outstanding in
           1997 and 390,367 in 1996 (Note 1)                                   5,000            390
         Additional paid-in capital                                        4,313,065      3,868,419
         Preferred Stock, $.01 par value, 1,000,000
           shares authorized, no shares outstanding
           (Note 1)                                                             --             --
Deficit accumulated during the development stage                          (4,039,065)    (3,915,892)
                                                                         -----------    -----------
                                                                             279,000        (47,083)
         Less stock subscription receivable                                  155,000           --

                  Total Shareholders' Equity (Deficit)                      (124,000)       (47,083)
                                                                         -----------    -----------

                  Total Liabilities and Shareholders' Equity (Deficit)   $   124,000    $      --
                                                                         ===========    ===========



                        The auditors report and accompanying notes are an
                                integral part of these statements.

                                                 6
</TABLE>

<PAGE>



                   BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.
                Formerly FAMOUS SAM'S GROUP, INC., and Subsidiary
                          (A Development Stage Company)


                            STATEMENTS OF OPERATIONS




                                                 Years ended December 31
                                               1997        1996        1995
                                             --------    --------    --------

Total Income                                     --          --          --
                                             --------    --------    --------

Expenses
         Miscellaneous                           --          --         8,969
         Professional fees                    123,173     154,493        --
                  Total Expenses              123,173     154,493       8,969
                                             --------    --------    --------

Income (loss) before Provision for 
   Income Taxes                              (123,173)   (154,493)     (8,969)
Provisions for Income Taxes                      --          --          --
                                             --------    --------    --------

Net Loss                                     (123,173)   (154,493)     (8,969)
                                             ========    ========    ========

Net Loss per share (Note 2)                      (.14)       (.93)       (.49)
                                             ========    ========    ========




               The auditors report and accompanying notes are an
                       integral part of these statements.

                                        7

<PAGE>
<TABLE>
<CAPTION>



                                       BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.
                                  Formerly FAMOUS SAM'S GROUP, INC., and Subsidiairy
                                            (A Development Stage Company)


                                          STATEMENTS OF STOCKHOLDER'S EQUITY

                                                                                                Total
                                               Common          Stock        Additional       Accumulated       Equity
                                               Shares          Amount     Paid-In Capital     (Deficit)       (Deficit)
                                               ------          ------     ---------------     ---------       ---------

<S>                                          <C>            <C>             <C>             <C>             <C>         
Balance at December 31, 1995                 12,010,000     $    12,010     $ 3,712,313     $(3,761,399)    $   (37,076)

Reverse 1:1000 common share                 (11,991,543)        (11,992)         11,992            --              --
   split on May 31, 1996

Issuance of common shares                       287,000             287          59,289            --            59,576
   for services on July 23, 1996

Issuance of common shares                        84,910              85          84,825            --            84,910
   for services on September 5, 1996

Net Loss for the year ended December
   31, 1996                                        --              --              --          (154,493)       (154,493)
                                            -----------     -----------     -----------     -----------     -----------

Balance at December 31, 1996                    390,367     $       390     $ 3,868,419     $(3,915,892)    $   (47,083)

Reverse 1:5 common share
   split on October 30, 1997                   (310,614)           (310)            310            --              --

Issuance of common shares under
   incentive stock ownership plan               100,000             100            --              --               100

Issuance of common shares for all
   of the outstanding stock of BioProgress
   Technology, Inc., on November 17, 1997     4,000,000           4,000            --              --             4,000

Issuance of common shares in
   payment of legal expenses                    385,000             385          59,771            --            60,456

Exercise of option to purchase
   shares for cash                              435,000             435         384,565            --           385,000

Net Loss for the year ended December
   31, 1997                                        --              --              --          (123,173)       (123,173)
                                            -----------     -----------     -----------     -----------     -----------

Balance at December 31, 1997                  4,999,753     $     5,000     $ 4,313,065     $(4,039,065     $   279,000
                                            ===========     ===========     ===========     ===========     ===========




                                  The auditors report and accompanying notes are an
                                          integral part of these statements.

                                                          8
</TABLE>

<PAGE>
<TABLE>
<CAPTION>



                                   BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.
                               Formerly FAMOUS SAM'S GROUP, INC., and Subsidiary
                                         (a Development Stage Company)


                                            STATEMENTS OF CASH FLOW

                                                                            Years Ended December 31,
                                                                  1997               1996               1995
                                                               ---------          ---------          ---------

Cash flows (used) by operating activities:
<S>                                                            <C>                <C>                <C>       
         Net loss                                              $(123,173)         $(154,493)         $  (8,969)

Adjustments to reconcile net gain (loss) to net
   cash provided by operating activities:
         Increase in intercompany receivable                    (120,000)              --                 --
         (Decrease) in accounts payable                          (47,083)            10,007              8,030
                                                               ---------          ---------          ---------

Net Cash Flows (used)
    by Operating Activities                                     (290,256)          (144,486)              (939)
                                                               ---------          ---------          ---------

Cash Flows Provided by Financing Activities:
         Proceeds from sale of stock                             385,000            144,486               --
         Stock issued in payment of liabilities                   60,256               --                 --
         Less stock subscription receivable                     (155,000)              --                 --
                                                               ---------          ---------          ---------
                  Net cash flows from financing activities       290,256            144,486               --
                                                               ---------          ---------          ---------

Increase (decrease) in Cash                                         --                 --                 (939)

Cash at Beginning of the Period                                     --                 --                  939
                                                               ---------          ---------          ---------

Cash at End of the Period                                           --                 --                 --
                                                               =========          =========          =========


Non-cash  transaction  of  4,000,000  shares  of  common  stock for all stock of subsidiary, whose sole asset
is distributorship agreement.






                              The auditors report and accompanying notes are an
                                     integral part of these statements.

                                                     9
</TABLE>

<PAGE>



                   BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.
                Formerly FAMOUS SAM'S GROUP, INC., and Subsidiary
                          (a Development Stage Company)


                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1997

1.  Organization and Business.

Organization - The Company was incorporated March 5, 1990.

Name  change - On  December  11,  1997,  the name of the  Company was changed to
BioProgress Technology International, Inc.

Reorganization  - Effective  March 31, 1996,  the assets and  liabilities of the
Company were  transferred  into an irrevocable  liquidating  trust. On April 24,
1996,  the  Company  adopted  a new plan of  business  to  investigate  and,  if
appropriate,  capitalize  such business  opportunities  as may from time to time
present  themselves.  Effective  May  31,  1996,  the  Board  of  Directors  and
shareholders  of the  Company  approved  the  sale of all of the  assets  of the
Company  to Famous  Sam's  Group,  Inc.,  a Nevada  corporation,  in a  tax-free
reorganization  pursuant to the  provisions  of Section  368(c) of the  Internal
Revenue Code.

Acquisition  - On July 24,  1996,  the  Company  agreed  to  acquire  all of the
outstanding  proprietary interest of Famous Sam's Franchise Corporation ("Famous
Sam's") in exchange  for 700,000  shares of the  Company's  common  stock.  This
acquisition was  subsequently  rescinded by the Company and Famous Sam's,  among
others, on March 11, 1997.

Change in Control of Company - Acquisition of BioProgress Technology, Inc., as a
wholly-owned subsidiary of registrant:  On October 30, 1997, the Company entered
into a letter of intent with Jade Partnership,  Inc., a Delaware corporation, to
purchase all the outstanding share capital of BioProgress  Technology,  Inc., in
exchange for 4,000,000 shares of Common Stock in the Company, which was followed
on November 17, 1997, by a formal  agreement (the  "Reorganization  Agreement").
Pursuant to the Reorganization  Agreement,  the Company agreed to acquire all of
the  outstanding  capital  stock  of  BioProgress  Technology  in  exchange  for
4,000,000  post-split shares of Common Stock.  Immediately prior to closing, the
Company had reverse split its outstanding capitalization on a one for five (1:5)
basis.

On  November  6, 1997,  the Board of  Directors  issued an option to buy 435,000
shares of Common Stock for $385,000 to an individual who subsequently  exercised
the option. At December 31, 1997, $155,000 of the purchase price was unpaid.
The $155,000 was paid subsequently.

Business of BioProgress Technology International, Inc. - BioProgress Technology,
Inc., has entered into an "Exclusive  Distributor  Agreement"  with  BioProgress
Technology,   Ltd.,  an  entity   incorporated   in  the  United   Kingdom  (the
"Distributor"). The Distributor is engaged in the development, manufacture, sale
and  distribution  of materials  and  processes  used to replace  gelatin in the
manufacture  of  soft  capsules.   BioProgress  Technology,   Inc.,  under  this
agreement, has been granted the right to serve as the "Exclusive Distributor" of
the  foregoing  products  in the  United  States and  Canada,  and has agreed to
purchase  34,500,000  capsules over a twelve month period  beginning in January,
1998, at a price of $66.00 per thousand.  The volume  purchased will increase by
20% per annum after the first year of the  agreement  through the fifth year; by
15% per annum in years six  through  ten;  10% per annum in years 11 through 15;
and 5% per annum in years 16 through 20. If this  purchase  schedule is not met,
BioProgress  Technology,  Inc., will lose the exclusive  distributorship  in the
United  States and Canada for the  products.  The  Distributor  remains the sole
owner of the technical know-how and intellectual property rights associated with
the products.

The Company  issued  4,000,000  shares of its common stock to Jade  Partnership,
Inc. ("JPII"),  a Delaware corporation which owned all of the outstanding shares
of BioProgress Technology, Inc.



                                       10

<PAGE>



2.  Summary of Significant Accounting Policies.

Development  Stage Company - The Company is considered to be a development stage
company for financial reporting purposes since it had not generated  significant
operating income.

Income  Taxes  - On  January  1,  1992,  the  Company  adopted  SFAS  No.  10-9,
"Accounting for Income Taxes," which requires a liability  approach to financial
accounting and reporting for income taxes. The difference  between the financial
statement  and tax basis for  assets and  liabilities  is  determined  annually.
Deferred income tax assets and  liabilities  are computed for those  differences
that have future tax consequences using the currently enacted tax laws and rates
that apply to the periods in which they are expected to affect  taxable  income.
Valuation allowances are established, if necessary, to reduce deferred tax asset
accounts to the amounts that will more likely than not be  realized.  Income tax
expense is the current tax payable or refundable  for the period,  plus or minus
the net change in the deferred tax asset and liability accounts.

Income tax  expense is  provided  on the income  reported  on the  statement  of
income. The differences  between book income and tax income for tax purposes are
insignificant and, therefore,  the effect of adopting SFAS No. 109 on net income
has not been recorded.

Per Share  Information - Per share  information is based on the weighted average
number of common shares outstanding during the reporting period.  Shares used in
the  calculations  were 881,406 on a weighted  bais for 1997,  and 18,457 (post-
split shares) for 1996 and 1995.

3. Due to An Affilite.  As of December  31,  1996,  the Company owed Mr. Mark S.
Pierce, an individual who was then affiliated with the Company,  but who was not
at the time of the  incurrence of the debt,  the sum of $47,083 in accrued,  but
unpaid legal fees. The indebtedness,  plus an additional $13,073,  was satisfied
by assignment  of 385,000  restricted  shares of the  Company's  common stock in
November, 1997.

4.  Other  Events.  In  connection  with  the  execution  and  delivery  of  the
Reorganization  Agreement,  the  Company  entered  into an  agreement  with  the
shareholders of the  Distributor  that gives the Company the option of acquiring
all or any part, on a pro rata basis, of the issued and outstanding  proprietary
interest of the  Distributor  on or before June 30,  1998.  The  Company,  if an
election is made,  would be required to issue one and 1/2 shares of Common Stock
for each share  outstanding  of the  Distributor,  which has  10,100,000  shares
outstanding; thus, if the option were exercised in full, the Company would issue
15,150,000 shares of Common Stock. On exercise of this election, the Distributor
may have no more than 10,100,000 shares outstanding, and the Company may have no
more than 5,000,000  shares of Common Stock issued and outstanding and must have
completed  or be in a position to complete  the sale of such number of shares of
Common  Stock at a price of no less than  $5.00 per share so as to  generate  no
less than $4,000,000 net of all costs.

5. New  Management.  The  Board of  Directors,  as a result  of the  BioProgress
Technology acquisition,  now consits of one member, Mr. Barry J. Muncaster, who,
it is anticipated,  will appoint  additional  directors in the near future.  The
following  table  sets  forth  all those  persons  who are now  officers  of the
Company.

       NAME                          POSITION WITH COMPANY (1)

Barry J. Muncaster          Chairman, Chief Executive Officer and President
Malcolm D. Brown            Executive Vice-President of Research and Development
James T.C. Longley          Chief Financial and Accounting Officer, Treasurer

(1) None of the above  individuals has any arrangement or understanding  whereby
they are or will be  selected  as a director  or  nominee  of the  Company or of
BioProgress  Technology,  Inc. All directors  and  executive  officers will hold
office until the next annual meeting of shareholders  and until their successors
have been  elected  and  qualified.  All  officers  are  elected by the Board of
Directors at its annual meeting immediately  following the shareholders'  annual
meeting and hold office  until their death or until they  earlier  resign or are
removed from office.  There are no written or other contracts  providing for the
election of directors or term of employment of executive  officers,  all of whom
serve on an "at will" basis.



                                       11

<PAGE>




6. Related Party  Transaction.  The Company advanced  $120,000 of those proceeds
resulting  from the sale of Common Stock to  BioProgress  Technology,  Inc., its
wholly-owned subsidiary.

Item  8.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial  Disclosure:  In May,  1996,  the Company  advised  Caldwell,  Becker,
Dervin,  Petrick &  Company  that it would not  retain  them as the  independent
accountant  to audit the  financial  statements of the Company as of and for the
year ended  December  31, 1995,  because the Company had found an auditing  firm
whose  costs for these  services  would be  substantially  less  expensive.  The
Company  had no  disagreement  with  its  former  accountant  on any  matter  of
accounting  principal or practice,  financial  statement  disclosure or auditing
scope or procedure  which would have caused the  accountant to make reference in
its report  upon the subject  matter of the  disagreement.  Further,  the former
principal  accountant's  report on the financial  statements  did not contain an
adverse opinion or a disclaimer of opinion or qualification as to audit scope or
accounting  principle.  The decision to change  accountants  was approved by the
full Board of Directors, which at that time had no audit or similar committee.

                                    PART III

Item 9.  Directors and Executive  Officers of the Company:  The following  table
sets forth all current directors and executive officers of the Company,  as well
as their ages:


      Name                  Age                  Position with Company
      ----                  ---                  ---------------------

Barry J. Muncaster           52         Chairman of the Board of Directors, 
                                          Chief Executive Officer and President

Malcolm D. Brown             39         Executive Vice-President of Research and
                                          Development

James T.C. Longley           38         Chief Financial and Accounting Officer, 
                                          Treasurer

No current  director has any  arrangement or  understanding  whereby they are or
will  be  selected  as a  director  or  nominee.  The  directors  and  executive
officerswill hold office until the next annual meeting of shareholders and until
their  respective  successor  has been duly  elected and  qualified or until his
earlier resignation. Officers are generally elected by the Board of Directors at
its annual meeting  immediately  following the shareholders'  annual meeting and
hold office until their death or until they  earlier  resign or are removed from
office.  There are no written or other  contracts  providing for the election of
directors or term of employment of the executive  officer,  who serves on an "at
will"  basis.  The  Company  does not have any  standing  audit,  nominating  or
compensation committees, or any committees performing similar functions.

Profiles of  Directors  and  Executive  Officers of the Company and  BioProgress
Technology:

Barry J.  Muncaster,  Chairman,  Chief  Executive  Officer  and  President.  Mr.
Muncaster is Chairman of the Board of  Directors,  Chief  Executive  Officer and
President  of the Company and  BioProgress  Technology,  having  served in these
capacities since November 17, 1997, and inception, respectively.

Mr. Muncaster trained as a telecommunications engineer with British Telecom, and
obtained a diploma in Telecommunications  Engineering from the Cambridge College
of Arts and Technology. Since 1970, Mr. Muncaster has been involved at executive
and  senior  executive  level with  companies  engaged  in the  development  and
commercialization  of high  technology  products,  which  include:  laser  based
systems  employed in high energy physics  experiments,  electronic  taxi meters,
personal  computer  systems and home banking  systems.  He was a cofounder,  and
served as Chief Executive Officer of Oric Products International, Limited which,
within  three  years of  start-up,  manufactured  and sold in excess of  300,000
personal  computers,  achieving sales revenues in excess of $45,000,000 prior to
its sale in 1983 to an investment company quoted on the London Stock Exchange.

Since 1987, Mr. Muncaster has been a partner in the Jade Partnership,  a firm of
management  consultants,  which specializes in assisting developmental companies
engaged  in high  technology  activities.  The  Jade  Partnership  was the  sole
shareholder of  BioProgress  Technology  and now owns  approximately  80% of the
outstanding common stock of the Company.

Malcolm D. Brown,  Executive  Vice-President  of Research and  Development.  Mr.
Brown has served the Company since November 17, 1997, and BioProgress Technology
from inception.  He is responsible for the direction and  implementation  of the
research and  development  programme of BioProgress  Technology,  the production


                                       12

<PAGE>


engineering of its products,  and for the environmental,  safety and performance
compliance of all raw materials used by BioProgress Technology.  Mr. Brown holds
a Bachelor  of Science  Degree  (Honors)  in  Applied  Biology,  and a Master of
Science Degree in Microbiology.

Prior to cofounding his affiliation with BioProgress Technology,  Mr. Brown held
senior  research  positions  with  Gestetner  Corporation  and  with  Ferrisgate
Limited, where he worked on the formulation of specialist inks and coatings used
in industrial processes.

James T.C. Longley,  Chief Financial and Accounting  Officer and Treasurer.  Mr.
Longley has been with the Company since November 17, 1997, and with  BioProgress
Technology  since inception.  He received an accounting  degree with honors from
Leeds University,  and was admitted to the Institute of Chartered Accountants in
England in July,  1983, at which time he joined Arthur Andersen & Co., a "Big 6"
accounting firm, where he worked for two years, attaining the position of Senior
Accountant,  Auditing  Division.  He then served for three years as a manager in
the Merchant Banking Division of Creditanstahl-Bankverein before leaving to join
Touche Ross and Co.,  another Big 6 accounting  firm, as a senior manager in its
corporate  financial  division.  In 1991, Mr. Longley  founded  Chapman  Longley
Chartered  Accountants and Registered Auditors in the United Kingdom,  where, in
addition to providing services to a range of clients, he participated as part of
a management  team which  successfully  completed a Li.10.5  million  management
buy-in  within  the  manufacturing  industry,  and also  served  as the  finance
director of The Fleet  Management  Group  Limited  which had annual  revenues of
Li.18 million during this time.

Consultants to BioProgress Technology:

Dawn M. Franklin. Ms. Franklin served for 21 years as Marketing Property Manager
for Mars, Inc.,  where she was responsible for the management,  registration and
prosecution  of  intellectual  property  and  trademarks.  She  has a very  high
standing  in the  international  trademark  community  and holds  the  following
positions:   (i)  Member  of  Board  of  Directors  of  International  Trademark
Association;  (ii) Chairman of Membership  Committee of International  Trademark
Association;  (iii) Vice-Chairman of Public Relations Committee of International
Trademark Association; (iv) Vice-Chairman of British Brands Group; (v) Member of
Trademark   Committee   of  AIM   (European   Association   of   Branded   Goods
Manufacturers);  (vi) Delegate  representing AIM at World Intellectual  Property
Organization ("WIPO"); (vii) Member of Committee of Experts on Subject of Famous
Marks at WIPO;  (viii)  Consultant to WIPO and Member of Committee of Experts at
WIPO on Subject of International Trademark Licensing; and (ix) Member of MARQUES
(Association of European Trademark Proprietors).

Item 10.  Executive  Compensation:  No compensation  was paid during 1997 to the
Board of Directors or executive  officers of the Company in their  capacities as
such.

Item 11.  Security  Ownership  of  Management  and  Certain  Others:  Based upon
information  which has been made  available to the Company by its stock transfer
agent, the following table sets forth, as of April 6, 1998, the shares of Common
Stock owned by each current director,  by directors and executive  officers as a
group  and by each  person  known  by the  Company  to own  more  than 5% of the
outstanding Common Stock:

<TABLE>
<CAPTION>


    Title of Class           Name of Beneficial Owner      Number of Shares     Percent of Class (1)
    --------------           ------------------------      ----------------     --------------------

<S>                          <C>                              <C>                       <C>
     Common Stock            The Jade Partnership (2)         4,000,000                 80%
Directors and Executive                                       4,000,000                 80%
Officers as a Group:

</TABLE>

(1)  Based  on  approximately  4,999,753  shares  of  common  stock  issued  and
outstanding on April 6, 1998.

(2) The Jade  Partnership  is a Delaware  corporation,  the equity  ownership of
which  is as  follows:  (i)  42.49%  - Barry  J.  Muncaster;  (ii)  21.22% - Joe
Muncaster,  the son of Barry J. Muncaster;  (iii) 7.067% - Linda Muncaster,  the
wife of Barry J. Muncaster; and (iv) 29.23% - Malcolm D. Brown.



                                       13

<PAGE>



Item 12.  Certain Transactions:

During 1996 and 1997,  Mr. Mark S.  Pierce,  a former  affiliate of the Company,
extended  services to and incurred costs on behalf of the Company.  In 1996, the
accruals were incurred while Mr. Pierce was not an affiliate.  Mr. Pierce became
an  affiliate of the Company on March 11, 1997,  and ceased his  association  as
such on November 14, 1997.  All amounts owed Mr.  Pierce were  satisfied on this
latter date.

In the latter part of 1997, the Company advanced funds to BioProgress Technology
which, in turn, loaned the same over to the Distributor.

Item 13.  Exhibits and Reports on Form 8-K:

(a)  Exhibits:

3.1(a)    Articles of Incorporation and Amendments (California).*
3.1(b)    Articles of Incorporation and Amendments (Nevada).**
3.1(c)    Articles of Incorporation and Amendments (Nevada).****
3.2(a)    Bylaws (California).*
3.2(a)    Bylaws (Nevada).**
4.1       Specimen stock certificate.*
10.1      Partnership  Agreement  dated  October 20,  1993,  among the  Company,
          Costner Industries, Inc., a California corporation,  Jack Bitterly and
          Steve Bitterly.*
10.2      Asset Purchase  Agreement  dated October 20, 1993,  among the Company,
          the Partnership,  Jack Bitterly,  Steve Bitterly, Bruce Swartout, U.S.
          Flywheel,  Inc., a California  corporation  and Sunbird  Technologies,
          Inc.*
10.3      U.S.  Flywheel  Systems Unit Purchase  Agreement  dated July 16, 1994,
          between the Company and Costner Industries, Inc.*
10.4      Straight  Note  dated  October  21,  1993,  between  the  Company  and
          Sunbird.*
10.5      Consulting  Agreement dated October 20, 1993,  between the Partnership
          and Bruce Swartout.*
10.6      Asset  Purchase  Agreement  dated  May 31,  1996,  changing  name  and
          domicile to Nevada and reverse  splitting  outstanding  capitalization
          and increasing authorized capital.**
10.7      Reorganization Agreement between the Company and Famous Sam's.**
10.8      Liquidating Trust.** 
10.9      Recision Agreement.**** 
10.10     Reorganization Agreement between the Company and BioProgress.****

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

*         Filed as an exhibit to the  Company's  Registration  Statement on Form
          10-SB dated  August  23,1994,  or October 21, 1994  (Registration  No.
          0-24736).
**        Filed as an exhibit to the  Company's  Form  10-KSB for the year ended
          December 31, 1995.
***       Filed as an exhibit to the  Company's  Form  10-KSB for the year ended
          December 31, 1996.
****      Filed herewith.
--------------------------------------------------------------------------------


(b)  Forms 8-KSB:          Form 8-KSB dated March 11, 1997.
                           Form 8-KSB dated November 14, 1997.



                                       14

<PAGE>



                                   SIGNATURES

In accordance with the requirements of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, registrant has duly caused this report to be signed on its
behalf by the undersigned,  thereunto duly authorized, in the City of Cambridge,
United Kingdom on the 10th day of April, 1998.

BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.
(Registrant)

By: /s/ Barry J. Muncaster
-------------------------------------------
Barry J. Muncaster, Chief Executive Officer
  and President

By: /s/ James T.C. Longley
-------------------------------------------
James T.C. Longley, Chief Financial
  and Accounting Officer, Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following person on behalf of the registrant in the
capacity on this 10th day of April, 1998.

/s/ Barry J. Muncaster
-------------------------------------------
Barry J. Muncaster, Director






                                       15