ALL AMERICAN FOOD GROUP INC, SB-2/A, 1996-09-05

ALL AMERICAN FOOD GROUP INC
SB-2/A, 1996-09-05
PATENT OWNERS & LESSORS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 5, 1996

REGISTRATION NO. 333-4490
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- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------

AMENDMENT NO. 3
TO
FORM SB-2

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------

ALL AMERICAN FOOD GROUP, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)

NEW JERSEY
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)

5461
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)

22-3259558
(I.R.S. EMPLOYER
IDENTIFICATION NO.)

9 LAW DRIVE
FAIRFIELD, NEW JERSEY 07006
(201) 244-9336
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES AND PRINCIPAL PLACE
OF BUSINESS)

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

ANDREW THORBURN
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
ALL AMERICAN FOOD GROUP, INC.
9 LAW DRIVE
FAIRFIELD, NEW JERSEY 07006
(201) 244-9336
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)

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Copies to:

<TABLE>
<S> <C>
DAVID J. LEVENSON, ESQ. CHARLES BARKLEY, ESQ.
ANITA J. FINKELSTEIN, ESQ. 3001 PLANTERS WALK CT.
VENABLE, BAETJER, HOWARD & CIVILETTI, LLP CHARLOTTE, NC 28210
1201 NEW YORK AVENUE, N.W. (704) 543-8806
WASHINGTON, DC 20005
(202) 962-4800
</TABLE>

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

APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
As soon as possible after the Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. /X/

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. / /

If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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<PAGE> 2

EXPLANATORY NOTE

This Registration Statement covers the registration of (i) up to 690,000
shares, including shares to cover overallotments, if any, of Common Stock, no
par value per share ("Common Stock"), of All American Food Group, Inc., a New
Jersey corporation (the "Company"), for sale by the Company in an underwritten
public offering; (ii) an additional 1,773,900 shares of Common Stock for resale
from time to time by the holders thereof, who acquired such shares in the
Company's prior private placements, subject to the contractual restriction that
the holders may not sell their shares until a minimum of six months after
completion of the underwritten offering; and (iii) 24,000 shares of Common Stock
to be issued to the Underwriter in connection with the underwritten offering.
The shares of Common Stock issued by the Company in its private placements are
referred to collectively as the "Selling Securityholder Securities" and the
holders thereof as the "Selling Securityholders."

The complete Prospectus relating to the underwritten offering follows
immediately after this Explanatory Note. Following the Prospectus for the
underwritten offering are pages of the Prospectus relating solely to the Selling
Securityholder Securities, including alternative front and back cover pages and
sections entitled "Concurrent Public Offering," "Plan of Distribution," and
"Selling Securityholders," to be used in lieu of the sections entitled
"Concurrent Offering" and "Underwriting" in the Prospectus relating to the
underwritten offering. Certain sections of the Prospectus for the underwritten
offering, such as "Use of Proceeds" and "Dilution," will not be used in the
Prospectus relating to the Selling Securityholder Securities.
<PAGE> 3

ALL AMERICAN FOOD GROUP, INC.

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CROSS REFERENCE SHEET

<TABLE>
<CAPTION>
FORM SB-2 ITEM CAPTION IN PROSPECTUS
------------------------------------------------- -------------------------------------
<S> <C>
PART I
1. Front of Registration Statement and Outside Front
Cover of Prospectus............................ Cover of Prospectus
2. Inside Front and Outside Back Cover Pages of Inside Front and Outside Back Cover
Prospectus..................................... Page of Prospectus
3. Summary Information and Risk Factors............. Prospectus Summary; Risk Factors
4. Use of Proceeds.................................. Use of Proceeds
5. Determination of Offering Price.................. Underwriting
6. Dilution......................................... Dilution
7. Selling Security Holders......................... Concurrent Offering; Selling
Securityholders
8. Plan of Distribution............................. Underwriting; Plan of Distribution
9. Legal Proceedings................................ Business -- Legal Proceedings
10. Director, Executive Officers, Promoters and
Control Persons................................ Management
11. Security Ownership of Certain Beneficial Owners
and Management................................. Principal Shareholders
12. Description of Securities........................ Description of Securities
13. Interest of Named Experts and Counsel............ Not Applicable
14. Disclosure of Commission Position on
Indemnification for Securities Act Management -- Limitation of Liability
Liabilities.................................... and Indemnification Matters
15. Organization Within Last Five Years.............. Business
16. Description of Business.......................... Business
17. Management's Discussion and Analysis or Plan of Management's Discussion and Analysis
Operation...................................... or Plan of Operation
18. Description of Property.......................... Business -- Properties
19. Certain Relationships and Related Transactions... Certain Transactions
20. Market for Common Equity and Related Stockholder Risk Factors -- No Prior Public
Matters........................................ Market for the Common Stock;
Dividend Policy; Description of
Securities
21. Executive Compensation........................... Management -- Executive Compensation
22. Financial Statements............................. Financial Statements
23. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure............ Not Applicable
</TABLE>
<PAGE> 4

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED SEPTEMBER 5, 1996

PROSPECTUS

600,000 SHARES

ALL AMERICAN FOOD GROUP, INC.
COMMON STOCK
(NO PAR VALUE)
------------------------

The 600,000 shares of Common Stock (the "Shares") of All American Food
Group, Inc. (the "Company") offered hereby are being sold by the Company through
Westminster Securities Corporation and Myers, Pollack & Robbins (the
"Underwriters").

The initial public offering price of the Shares will be determined by
negotiation between the Company and the Underwriters. It currently is
anticipated that the initial public offering price per Share will be $6.00. For
information regarding factors to be considered in determining the initial public
offering price see "Underwriting." Prior to this offering (this "Offering"),
there has been no public market for the Common Stock and there can be no
assurance that any significant trading market will develop or be sustained.
Application has been made to list the Shares, and it is anticipated that, upon
completion of the Offering the Shares will be approved for listing, on the
Nasdaq SmallCap Market ("Nasdaq").

Upon completion of the Offering, the present directors, executive officers
and principal stockholders of the Company will beneficially own approximately
38.4% of the outstanding Common Stock (assuming no exercise of the option
granted to the Underwriter to cover over-allotments). See "Risk
Factors -- Concentration of Stock Ownership."

The registration statement of which this Prospectus forms a part (the
"Registration Statement") also covers the offering for resale by certain
securityholders (the "Selling Securityholders") of up to 1,773,900 shares of
Common Stock (the "Selling Securityholder Securities") and the issuance of
24,000 shares of Common Stock to the Underwriters (the "Underwriters' Shares").
The Underwriters have agreed not to sell any of the Underwriters' Shares for a
minimum of 12 months following completion of the Offering. The Selling
Securityholders have agreed not to sell any of the Selling Securityholder
Securities for a minimum of six months following completion of the Offering. The
Company will not receive any proceeds from the sale of shares by the Selling
Securityholders or the Underwriters. See "Concurrent Offering" and
"Underwriting."

------------------------
THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE AND INVOLVE A HIGH DEGREE
OF RISK
AND SUBSTANTIAL DILUTION. AN INVESTMENT IN THESE SECURITIES SHOULD BE
MADE ONLY BY INVESTORS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE
INVESTMENT. POTENTIAL PURCHASERS SHOULD CAREFULLY CONSIDER THE
MATTERS SET FORTH UNDER "RISK FACTORS" BEGINNING ON PAGE 7
AND "DILUTION".
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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<TABLE>
<S> <C> <C> <C> <C>
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ESTIMATED UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SECURITYHOLDERS
</TABLE>

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<TABLE>
<S> <C> <C> <C> <C>
Per Share....................................... $ $ $
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Total(3)........................................ $ $ $
</TABLE>

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(1) Does not include additional compensation to be received by the Underwriter
in the form of (i) a non-accountable expense allowance of 3% of the gross
proceeds of this Offering, or $0.18 per share (for an aggregate amount of
$108,000, or $124,200 if the over-allotment option described in note 3 below
is exercised in full), of which $55,000 has been paid to date; (ii) 24,000
shares of Common Stock (the "Underwriters' Shares"); and (iii) the retention
of the Westminster Securities Corporation by the Company for a period of 24
months commencing upon completion of the Offering at a monthly fee of $3,000
(for an aggregate fee of $72,000). In addition, the Company has agreed to
indemnify the Underwriters against certain liabilities under the Securities
Act of 1933, as amended (the "Securities Act"). See "Underwriting."

(2) Before deducting expenses of the Offering (including the Underwriters'
non-accountable expense allowance) estimated at $ ($ ) per share,
or $ ($ ) per share if the over-allotment option described in note
3 below is exercised in full, payable by the Company. See "Use of Proceeds."

(3) The Company has granted the Underwriters a 30-day over-allotment option to
purchase up to 90,000 additional shares of Common Stock on the same terms
set forth above, solely to cover over-allotments, if any. If the
Underwriters' over-allotment option is exercised in full, the total Price to
Public, Underwriting Discounts and Commissions, and Proceeds to Company will
be $ , $ and $ , respectively.

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

The Shares are offered by the Underwriters on a "firm commitment" basis,
subject to prior sale, when, as and if delivered to and accepted by the
Underwriters and subject to the right of the Underwriters to reject any order in
whole or in part. It is expected that delivery of certificates representing the
Shares will be made at the offices of Westminster Securities Corporation, 19
Rector Street, New York, NY 10006, on or about , 1996.

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WESTMINSTER SECURITIES CORPORATION MYERS, POLLACK & ROBBINS

------------------------
The date of this Prospectus is , 1996
<PAGE> 5

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, ANY SUCH INFORMATION OR REPRESENTATION NOT CONTAINED
HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO PURCHASE,
ANY OF THE SECURITIES OFFERED BY THIS PROSPECTUS, IN ANY JURISDICTION TO OR FROM
ANY PERSON TO OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION OF
AN OFFER, IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR THE
ISSUANCE OR SALE OF ANY SECURITIES HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET
FORTH HEREIN SINCE THE DATE HEREOF.

THE INSIDE FRONT COVER OF THE PROSPECTUS CONTAINS FOUR PHOTOGRAPHS -- (1) BAGELS
SURROUNDING A CUP OF GOLDBERG'S COFFEE; (2) A BAGEL SANDWICH; (3) A DELI
PLATTER; AND (4) A FRONT VIEW OF ONE OF THE COMPANY'S GOLDBERG'S
STORES -- SURROUNDING THE "GOLDBERG'S" LOGO.

The Company currently is not a reporting company under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). As a result of the
offering made hereby, the Company will become subject to the periodic and other
informational requirements of the Exchange Act. The Company intends to
distribute to its shareholders Annual Reports containing audited financial
statements and may distribute quarterly reports as determined by the Board of
Directors of the Company. The Company's fiscal year ends October 31.

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

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

<PAGE> 6

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and financial
statements (including the notes thereto) appearing elsewhere in this Prospectus.
Investors should carefully consider the information set forth under the heading
"Risk Factors." Unless otherwise indicated, the information presented in this
Prospectus assumes that the Underwriters' over-allotment option will not be
exercised. Unless otherwise indicated, references to the Company's Preferred
Stock include both redeemable and non-redeemable preferred stock.

THE COMPANY

All American Food Group, Inc. (together with its wholly owned subsidiaries,
the "Company") franchises two distinct bagel store concepts, distributes bagel
bakery equipment and currently operates four retail bagel stores. All of the
Company's bagels are prepared using the Company's proprietary bagel mix and
dough conditioner, in the "Old World" style, by first boiling and then baking
the dough using the Company's bagel kettle and bagel oven. The Company believes
that this process and the use of its proprietary ingredients and its equipment
ensure the consistent preparation of premium quality bagels with a shine, crust,
texture and overall flavor that distinguish its products from those of its
competitors.

The Company franchises its concepts and operates its bagel stores under the
names "Goldberg's Original Old World Bagels" ("Goldberg's") and "Sammy's New
York Bagels" ("Sammy's"). Stores franchised under the Goldberg's name and
concept offer a traditional bagel/delicatessen menu, consisting of bagels,
spreads, sandwiches, salads, soups and "appetizing" bakery items. Sammy's stores
differ from Goldberg's stores in that they offer bagels and related dairy items
in a kosher store, under national Kof-K Kosher Supervision. Management believes
that Sammy's is the only franchised food chain subject to national kosher
certification currently available in the United States.

The Company's operations are based on those of a group of bagel shops
operating in New York and New Jersey under variations of the "Goldberg" name
since 1938. In October 1993, the Company acquired two such restaurants (one of
which subsequently was sold), together with exclusive franchise rights to their
recipes, flours, mixes and equipment and the prior owners' related bagel bakery
equipment business. (The Goldberg family continues to operate ten bagel stores
that are not affiliated with the Company and, subject to certain noncompetition
covenants, may open additional stores in the future.) In September 1994, the
Company acquired three Sammy's stores (one of which subsequently was sold) and a
commissary. Since its acquisition of the Goldberg's and Sammy's stores, the
Company has engaged in an extensive process of analyzing, standardizing and
documenting all aspects of its retail bagel operations, preparing franchise
materials and developing its franchise system and program. In addition, it
retrofitted one of the Goldberg's locations to serve as a prototype store for
purposes of marketing franchises and training personnel. As of July 31, 1996,
the Company's retail system consisted of five Goldberg's and six Sammy's stores
located in four states, including two Goldberg's and two Sammy's stores owned
and operated by the Company and three Goldberg's and four Sammy's stores
operated under franchise or license arrangements with the Company. As of July
31, 1996, one additional Goldberg's and two additional Sammy's stores to be
operated under franchise or license arrangements with the Company, and one
Company-owned Goldberg's store, were under development and scheduled to open by
October 31, 1996.

The Company also distributes and services its bagel bakery equipment for
use by its franchisees and by unaffiliated purchasers. During the years 1990
through 1995, the Company and its predecessor provided equipment and other
services to over 100 separate stores. The Company specializes in providing
equipment and services to restaurants and bakeries utilizing the "Old World"
method of boiling, then baking bagels utilizing revolving tray ovens. Management
believes that the Company is the only franchiser of bagel stores that provides
its equipment directly to its franchisees.

The Company intends to expand its retail operations primarily through
franchising. Management believes that food service franchising in general, and
the franchising of bagel restaurants in particular, present a unique opportunity
for success in the current consumer and franchise markets. According to industry
and government

3
<PAGE> 7

statistics, U.S. per capita bagel consumption (currently an average of eight
bagels per person annually) currently is growing at the rate of 8% annually and
rose 45% over the last five years. Management believes that this increased
demand for bagels arises primarily from increased consumer demand for healthier,
low-fat food products and that the versatility, convenience and relatively low
price of bagels add to their appeal. In keeping with this growing consumer
demand, bagel shops were selected by Entrepreneur magazine as among the "hottest
new franchises" for both 1995 and 1996.

Management believes that the Company has a unique combination of
characteristics that will help it to build a successful nationwide chain of
franchised bagel restaurants under both of its concepts. The Company's key
competitive strengths include the following:

- Quality Products. Management believes that the key to the Company's
success lies with the quality of its products. Therefore, all of the
Company's bagels are prepared in the "Old World" style, using the Company's
proprietary bagel mix and dough conditioner, by first boiling and then
baking the dough using the Company's bagel kettle and bagel oven. The
Company believes that this process and the use of its proprietary
ingredients and its equipment ensure the consistent preparation of premium
quality bagels with a shine, crust, texture and overall flavor that
distinguish its products from those of its competitors.

- Experience. The Company's products and operating systems are based
on those developed by the Goldberg family during the 58 years of operation
of its family-owned bagel shops. The Company's products and operating
systems are the product of this half-century of experience.

- Complementary Concepts. Management believes that the Company's
franchise program is unique in offering two complementary bagel concepts.
Management also believes that the availability of these two concepts
uniquely positions the Company to benefit from economies of scale in
purchasing, while permitting it to penetrate distinct segments of the bagel
market.

- Kosher Concept and Production Facilities. Management believes that
Sammy's is the only franchised food chain subject to national kosher
certification currently available in the United States. In addition to the
market for kosher products by consumers requiring kosher foodstuffs by
reason of dietary restrictions in connection with their religious faith,
management believes that a market for kosher products exists among
consumers who are not subject to such restrictions, but who view kosher
certification as a sign of high quality, authenticity and careful
preparation.

- Equipment Business. Management believes that the Company is unique
in designing, manufacturing and distributing its bagel bakery equipment and
providing consulting services in connection with the sale and installation
of such equipment. Management believes that this capability provides the
Company with a distinct advantage in equipping and advising its franchise
outlets and in ensuring the quality of its products.

The Company was incorporated under the laws of the State of New Jersey on
September 27, 1993, under the name "Jutland Food Group, Inc." for the purpose of
establishing a chain of franchised bagel restaurants using the recipes,
procedures, experience and expertise of an existing, well-seasoned bagel
restaurant and bakery operation. The Company changed its name to "All American
Food Group, Inc." on October 24, 1995. Its executive offices are located at 9
Law Drive, Fairfield, New Jersey 07006 and its telephone number is (201)
244-9336.

4
<PAGE> 8

THE OFFERING

<TABLE>
<S> <C>
Common Stock Offered by the Company..... 600,000 shares
Common Stock Outstanding Before the
Offering(1)........................... 3,735,200 shares
Common Stock to be Outstanding After the
Offering(1)(2)........................ 4,359,200 shares
Proposed Nasdaq SmallCap Symbol(3)...... "AAFG"
Use of Proceeds......................... Mandatory redemption of 175,000 shares of currently
outstanding Preferred Stock; opening of
Company-owned flagship stores; consolidation,
integration and expansion of existing facilities
including the expansion or relocation of commissary
facilities and the relocation of corporate
headquarters; expansion of equipment inventory;
marketing and promotional activities; and working
capital and general corporate purposes.
Risk Factors............................ The securities offered hereby involve a high degree
of risk and immediate and substantial dilution.
Investors should purchase the securities offered
hereby only if they can afford the loss of their
entire investment. See "Risk Factors" and
"Dilution."
</TABLE>

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

(1) Does not include the effects of consummation of the Modification and
Settlement Agreement between the Company and Howard Goldberg. See
"Underwriting" and "Business -- Renegotiation of Certain Acquisition Terms."

(2) Includes the 600,000 shares of Common Stock offered hereby and the 24,000
shares of Common Stock to be issued to the Underwriters in connection with
the underwritten offering.

(3) The Company has applied to list the Common Stock on the Nasdaq SmallCap
Market. However, there can be no assurance as to when, if ever, the Common
Stock will be approved for listing or that, if listed, any significant
trading market will develop or be sustained. See "Risk Factors -- Arbitrary
Offering Price," "-- No Prior Public Market for the Common Stock; Possible
Volatility of Stock Price" and "-- Continued Nasdaq Listing; Potential
Adverse Effects of Delisting."

5
<PAGE> 9

SUMMARY OF FINANCIAL DATA

The summary financial data set forth below are derived from the
Consolidated Financial Statements of the Company and its subsidiaries appearing
elsewhere in this Prospectus. The Consolidated Financial Statements of the
Company as of, and for the six months ended, April 30, 1996 and 1995 and for the
three months ended January 31, 1996 and the year ended January 31, 1996, as
aggregated, are unaudited. The summary financial data should be read in
conjunction with, and are qualified in their entirety by reference to, the
Consolidated Financial Statements of the Company and the Notes thereto, and
"Management's Discussion and Analysis or Plan of Operation," included elsewhere
in this Prospectus. At the time of its formation in September 1993, the
Company's fiscal year end was January 31. During calendar year 1995, the Company
changed its fiscal year end to October 31.

STATEMENT OF OPERATIONS DATA:

<TABLE>
<CAPTION>
THREE
MONTHS YEAR
NINE ENDED ENDED
MONTHS JANUARY JANUARY 31, SIX MONTHS ENDED APRIL 30,
YEAR ENDED ENDED 31, 1996 ------------------------------------
JANUARY 31, OCTOBER 31, 1996 (AGGREGATED)(1)/ 1996 1995
1995 1995 (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ----------- --------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Revenues................... $ 1,982,978 $ 2,350,268 $ 493,424 $ 2,843,692 $ 1,138,955 $ 1,334,727
Net loss................... $(1,062,621) $(1,151,545) $(385,705) $ (1,537,250) $ (752,954) $ (856,656)
Net loss per share......... $ (0.28) $ (0.30) $ (0.11) $ (0.41) $ (0.39) $ (0.20)
Weighted average number of
common shares
outstanding.............. 3,857,237 3,777,370 3,777,370 3,777,370 3,777,975 4,196,271
</TABLE>

- ---------------
(1) Represents the total of results for the nine-month fiscal period ended
October 31, 1995 and the three-month interim period ended January 31, 1996.

BALANCE SHEET DATA (UNAUDITED):

<TABLE>
<CAPTION>
APRIL 30, 1996
-----------------------------
ACTUAL AS ADJUSTED(1)
----------- --------------
<S> <C> <C>
Current assets.................................................... $ 1,236,042 $ 2,701,042
Current liabilities............................................... 1,054,760 804,760
Working capital................................................... 181,282 1,896,282
Total assets...................................................... 2,701,582 5,066,582
Total long term debt.............................................. $ 57,817 $ 57,817
Deferred franchising revenue...................................... 193,143 193,143
Redeemable preferred stock........................................ $ 707,540 $ 207,540
Common stock...................................................... $ 3,360,136 $ 6,300,136
Non-redeemable preferred stock.................................... $ 393,043 $ 561,214
Accumulated deficit............................................... $(3,064,857) $ (3,064,857)
</TABLE>

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

(1) As adjusted to give effect to the sale, by the Company, of the 600,000
Shares of Common Stock offered hereby, the application of the estimated net
proceeds therefrom, and the terms of the Modification and Settlement
Agreement between the Company and Howard Goldberg. See "Use of Proceeds" and
"Business -- Renegotiation of Certain Acquisition Terms."

6
<PAGE> 10

RISK FACTORS

The securities offered hereby are highly speculative and involve a high
degree of risk and substantial dilution. An investment in these securities
should be made only by investors who can afford the loss of their entire
investment. In addition to the factors set forth elsewhere in this Prospectus,
prospective investors should give careful consideration to the following risk
factors in evaluating the Company and its business before purchasing the
securities offered hereby.

LIMITED OPERATING HISTORY; OPERATING LOSSES

The Company has been in existence for less than three years, the four
stores owned and operated by the Company have been in operation under the
Company's management for 34, 21, 20 and five months, respectively, and seven of
the nine stores currently in operation under franchise or license arrangements
have been in operation for less than 12 months. Further, the Company incurred
net losses of $1,062,621 and $1,537,250 in its fiscal year ended January 31,
1995 and the 12-month period ended January 31, 1996, respectively (the two
12-month fiscal periods since its formation) and, as of April 30, 1996, had an
accumulated deficit since inception of approximately $3,065,000. Such operating
losses and deficits reflect the cost of developmental and other start-up
activities including, in particular, the acquisition of the Company's initial
retail stores and equipment business and the development of its franchise
program. See "Business -- Overview" and "-- History of the Company." The Company
expects to continue to incur significant losses in the future as it implements
its expansion program. See "Business -- Plan of Operations."

The Company's operations are subject to numerous risks associated with
establishing any new business, including unforeseen expenses, delays and
complications, as well as specific risks of the food service and franchising
industries. There can be no assurance that the Company will achieve or sustain
profitable operations or that it will be able to remain in business. In
particular, there can be no assurance that the Company-owned and operated stores
will operate profitably, that the Company will succeed in opening additional
stores successfully, that stores currently operating under franchise or license
arrangements will operate successfully or that the Company will be successful in
selling additional franchises.

NEED FOR ADDITIONAL WORKING CAPITAL

The Company anticipates that its capital resources, including the net
proceeds from this Offering, will be adequate to satisfy its capital
requirements for at least 12 months following completion of the Offering. See
"Use of Proceeds" and "Management's Discussion and Analysis or Plan of
Operation -- Liquidity and Capital Resources." During that time, the Company
intends to expand through the sale of additional franchises and to seek
additional customers for its bagel bakery equipment, which expansion will
require the expenditure of working capital. The Company's future capital
requirements will depend upon many factors, including the Company's ability to
market its franchises and operate its own stores successfully, as well as market
developments and cash flow from operations. To the extent that the net proceeds
of this Offering and cash generated from operations are insufficient to fund the
Company's activities, the Company will be required to raise additional funds
through bank borrowings or equity or debt financings. There can be no assurance
that additional financing, if required, will be available at all or in amounts
or on terms acceptable to the Company. In addition, any equity financing could
result in dilution to the Company's existing shareholders. Failure to obtain
additional working capital in a timely manner or on acceptable terms could have
a material adverse effect on the Company, its operations, financial results and
prospects. See "Business," "Management's Discussion and Analysis or Plan of
Operation -- Liquidity and Capital Resources" and the Consolidated Financial
Statements of the Company included elsewhere herein.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have outstanding an
aggregate of 4,359,200 shares of Common Stock which includes the 600,000 Shares
offered hereby and the Underwriters' Shares. Upon completion of the Offering,
the 600,000 Shares issued in the Offering will be freely transferable without
restriction under the Securities Act (excluding any Shares purchased in the
Offering by any person who is or

7
<PAGE> 11

thereby becomes an "affiliate" of the Company). With respect to the 24,000
Underwriters' Shares, so long as such shares remain subject to an effective
registration statement, and following any sale pursuant thereto, such shares
will be freely transferable without restriction under the Securities Act
(subject to a contractual limitation on sales of such securities within 12
months following completion of the Offering). All of the 3,735,200 shares
outstanding immediately prior to the Offering were issued in private placements
without registration under the Securities Act and, therefore, are "restricted
securities" as that term is defined in Rule 144 under the Securities Act.

Of the 3,735,200 shares outstanding immediately prior to the Offering,
1,773,900 shares (the "Private Placement Shares") were issued in the Private
Placements and, pursuant to registration rights granted in connection therewith,
all of the Private Placement Shares are being registered for resale pursuant to
the Registration Statement of which this Prospectus forms a part. So long as
such shares remain subject to an effective registration statement, and following
any sale pursuant thereto, such shares will be freely transferable without
restriction under the Securities Act (subject to a contractual limitation on
sales within six months following completion of the Offering). See "Concurrent
Offering." The remaining 1,961,300 shares of Common Stock outstanding prior to
this Offering are "restricted securities." In addition, 240,000 shares
underlying currently outstanding options will, upon issuance, be "restricted
securities" and any shares of Common Stock issued upon conversion of the
1,352,503 shares of Preferred Stock outstanding prior to completion of the
Offering, prior to the expiration of the applicable holding period with respect
thereto likewise will be "restricted securities."

The Company is unable to predict the effect that sales of Private Placement
Shares, the Underwriters' Shares or sales under Rule 144 may have on the then
prevailing market price of the Common Stock, but such sales may have a
substantial depressing effect on such market price. However, holders of the
1,773,900 Private Placement Shares who are not officers or directors of the
Company have agreed not to sell, assign or transfer any of their shares of
Common Stock for six months from the effective date of the Registration
Statement of which this Prospectus forms a part, without the prior consent of
the Underwriter. The officers and directors of the Company have agreed not to,
directly or indirectly, sell, offer to sell, grant an option for the sale of,
transfer, assign, pledge, hypothecate or otherwise encumber any shares of the
Company's Common Stock currently held thereby for a period of 13 months from the
effective date of the Registration Statement. The Underwriters have agreed not
to sell, assign or transfer any of the Underwriters' Shares for 12 months from
the effective date of the Registration Statement. The remaining 1,961,300 shares
of Common Stock that will be "restricted securities" immediately subsequent to
the Offering will become eligible for sale at various time beginning in
September 1996. See "Underwriting."

NO PRIOR PUBLIC MARKET FOR THE COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to this Offering there has been no public market for the Company's
Common Stock and there can be no assurance that an active public trading market
for the Company's Common Stock will develop or be sustained. The absence of an
active trading market would adversely affect the liquidity of the Common Stock
and, consequently purchasers of Shares in the Offering could experience
substantial difficulty in selling these securities. The initial public offering
price will be determined by negotiation between the Company and the Underwriters
and may not bear any relationship to the market price for the Common Stock
subsequent to the Offering. See "-- Arbitrary Offering Price" and
"Underwriting." In addition, the trading price for the Common Stock may be
highly volatile and could be subject to significant fluctuations in response to
variations in the Company's quarterly operating results, general conditions in
the food service industry or the general economy, and other factors. In
addition, the stock market is subject to price and volume fluctuations affecting
the market price for public companies generally, or within broad industry
groups, which fluctuations may be unrelated to the operating results or other
circumstances of a particular company. Such fluctuations may adversely affect
the liquidity of the Common Stock, as well as the price that holders may achieve
for their shares upon any future sale.

8
<PAGE> 12

CONTINUED NASDAQ LISTING; POTENTIAL ADVERSE EFFECTS OF DELISTING

The standards for initial listing on the Nasdaq SmallCap Market require
that a company must have (i) at least $4,000,000 in total assets; (ii) at least
$2,000,000 in capital and surplus; (iii) a minimum bid price of $3.00 per share;
(iv) "public float" (the market value of Common Stock held by non-insiders) of
at least $2,000,000; and (v) at least two market makers in its listed security.
Once listed, a company must maintain (i) at least $2,000,000 in total assets;
(ii) $1,000,000 in capital and surplus; (iii) a minimum bid price of $1.00 per
share; (iv) public float of at least $1,000,000; and (v) at least two market
makers. If a company falls below the bid price maintenance standard, it may
maintain its listing on Nasdaq if the market value of public float is at least
$1,000,000 and the company has at least $2,000,000 in capital and surplus. The
Company has applied to list the Common Stock on the Nasdaq SmallCap Market and
anticipates that the Common Stock will be eligible for listing upon completion
of the Offering and upon official notice of issuance. However, there can be no
assurance that the Company will be able to maintain the standards for continued
listing of the Common Stock. Delisting of the Common Stock would adversely
affect the price of the Common Stock and the ability of holders to sell their
shares. In addition, in order to be relisted on Nasdaq, the Company would be
required to comply with the initial listing requirements, which are
substantially more onerous than the maintenance standards.

If the Company were unable to satisfy the Nasdaq maintenance requirements
for continued listing and the share price for Common Stock were to fall below
$5.00 per share, unless the Company satisfies certain asset or revenue tests (at
least $5,000,000 in net tangible assets if in business less than three years, at
least $2,000,000 in net tangible assets if in business at least three years, or
average revenues of at least $6,000,000 for the last three years), the Common
Stock would become subject to the so-called "penny stock" rules promulgated by
the Securities and Exchange Commission (the "Commission"). Under the penny stock
rules, a broker or dealer selling penny stock to anyone other than an
established customer or "accredited investor" (generally, an individual with net
worth in excess of $1,000,000 or annual income exceeding $200,000, or $300,000
together with his or her spouse) must make a special suitability determination
for the purchaser and must receive the purchaser's written consent to the
transaction prior to sale, unless the broker or dealer or the transaction
otherwise is exempt. In addition, the penny stock rules require the broker or
dealer to deliver, prior to any transaction, a disclosure schedule prepared by
the Commission relating to the penny stock market, unless the broker or dealer
or the transaction otherwise is exempt. A broker or dealer also is required to
disclose commissions payable thereto and to the registered representative and
current quotations for the securities. In addition, a broker or dealer is
required to send monthly statements disclosing recent price information with
respect to the penny stock held in a customer's account and information with
respect to the limited market in penny stocks. These additional sales practice
and disclosure requirements could adversely effect the level of trading activity
in the secondary market and could impede the sale of the Company's Common Stock
in that market, with a concomitant adverse effect on the price of the Common
Stock in the secondary market.

SUBSTANTIAL DILUTION

Assuming an initial public offering price of $6.00 per share, purchasers of
the Shares offered hereby will incur immediate dilution in the net tangible book
value from the Offering price of $5.20 per share, or 87% of the initial public
offering price. See "Dilution."

ARBITRARY OFFERING PRICE

The initial public offering price of the Common Stock will be determined by
negotiation between the Company and the Underwriters. See "Underwriting." Such
price will not necessarily relate to the Company's asset value, earnings, net
worth, financial condition or any other established criteria of value and should
not be regarded as an indication of the actual value or future market price of
the Common Stock.

9
<PAGE> 13

DISCRETION IN USE OF PROCEEDS DESIGNATED FOR WORKING CAPITAL

The Company will have broad discretion with respect to the application of
approximately $1,115,000, or 37.9%, of the net proceeds of this Offering. While
such funds are to be applied for working capital and general corporate purposes
in furtherance of the Company's business, investors will be reliant on
management as to the specific application of these amounts. See "Use of
Proceeds."

NO DIVIDENDS

The Company has not paid any cash or other dividends on its Common Stock
since its inception and does not anticipate paying any such dividends in the
foreseeable future. It is anticipated that earnings, if any, will be used in the
Company's operations and to finance the expansion of its business. See "Dividend
Policy" and "Management's Discussion and Analysis or Plan of
Operation -- Liquidity and Capital Resources."

SEASONAL AND QUARTERLY FLUCTUATIONS

The Company's interim results of operations may be affected by the timing
of the sale of franchises and the opening of new stores, receipt of franchise
and market area developer fees and seasonal factors, such as weather conditions,
in the areas where stores are located. In addition, the Company's results may be
affected by the timing of expenses associated with its expansion.

DEPENDENCE ON FRANCHISEES

The Company will realize a substantial portion of its revenues from initial
franchise fees, ongoing royalty payments from its franchisees and the sale of
foodstuffs and equipment to its franchisees. The Company is therefore
substantially dependent upon its ability to attract, retain and contract with
suitable franchisees, and the ability of these franchisees to open and operate
their stores successfully. Should the Company experience difficulty in
attracting suitable franchisees, or should the Company's franchisees encounter
business or operational difficulties, the Company's revenues will be adversely
affected. Such a reduction in revenues may also have an adverse effect on the
Company's ability to sell new franchises and on its financial results and
prospects. Consequently, the Company's financial prospects are directly related
to the success of its franchisees, over which the Company has no direct control.
There can be no assurance that either the Company or its franchisees will be
able to develop new franchises, or operate the Company's bagel stores,
successfully.

EXPANSION

The opening and success of the Company's bagel stores will depend on
various factors, including the availability of suitable sites; the ability of
franchisees to negotiate acceptable lease terms for new locations, to obtain
construction and any other necessary permits in a timely manner, and to meet
construction and opening schedules; the Company's ability to manage its
anticipated expansion and to hire and train personnel; and general and local
economic and business conditions. The foregoing factors are not within the
control of the Company.

The Company's proposed expansion will also require the implementation of
enhanced operational and financial systems and will require additional
management, operational and financial resources. Failure to implement these
systems and add these resources could have a material adverse effect on the
Company's operations, financial results and prospects. There can be no assurance
that the Company will be able to manage its expanding operations effectively or
that it will be able to maintain or accelerate its growth. In addition, there
can be no assurance of the viability of the Company's concepts in new geographic
regions or particular local markets.

COMPETITION; EASE OF ENTRY INTO BUSINESS

The food service industry, in general, and the fast-food and take-out
sectors in particular, are intensely competitive. The Company competes, and can
be anticipated to compete, against well established food service

10
<PAGE> 14

companies with substantially greater product and name recognition and with
substantially greater financial, marketing and distribution capabilities than
the Company's, as well as against a large number of local food establishments
that offer similar or competitive products. In addition, management believes
that the start-up costs associated with opening a retail food establishment
offering similar products on a stand-alone basis are comparable to the start-up
costs of the Company's bagel stores and, accordingly, such start-up costs are
not an impediment to entry into the retail bagel business. Further, as the
demand for bagels increases and consumers become more familiar with the product,
they also may be expected to become increasingly discriminating in selecting
bagels based on quality and value. There can be no assurance that the Company
can compete successfully in this complex and changing market.

FOOD SERVICE INDUSTRY

Food service businesses are often affected by changes in consumer and
competitive conditions, including changes in consumer tastes; national,
regional, and local economic conditions and demographic trends; traffic
patterns, and the type, number, and location of competing businesses. Adverse
publicity resulting from food quality, illness, injury, or other health concerns
or operating issues stemming from one store or a limited number of stores also
may adversely affect multi-unit chains such as the Company. In addition, factors
such as inflation, increased food, labor, and employee benefit costs, regional
weather conditions and the unavailability of experienced management and hourly
employees also may adversely affect the food service industry in general, and
the Company's operations, financial results and prospects in particular.

GOVERNMENT REGULATION

The Company's franchise operations are subject to regulation by the Federal
Trade Commission (the "FTC") in compliance with the Uniform Franchise Act which
requires, among other things, that the Company prepare and update a
comprehensive disclosure document in connection with the sale and operation of
its franchises. The Company and its franchisees also must comply with state
franchising laws and a wide range of other state and local rules and regulations
applicable to their businesses. See "Business -- Government Regulation."
Continued compliance with this broad federal, state and local regulatory network
is essential and costly, and the failure to comply could have a material adverse
effect on the Company and its franchisees. Violations of franchising laws and/or
state laws and regulations governing substantive aspects of doing business in a
particular state could subject the Company and its affiliates to rescission
offers, monetary damages, penalties, imprisonment and/or injunctive proceedings.
In addition, under court decisions in certain states, absolute vicarious
liability may be imposed upon franchisers based upon claims made against
franchisees. The Company currently does not carry insurance against such claims,
although it intends to obtain such coverage in the future. However, there can be
no assurance that the Company will be able to obtain such coverage or that such
coverage will be sufficient to cover potential claims against the Company.

This Prospectus does not constitute, and shall not be construed as, an
offer to sell a Goldberg's or Sammy's franchise. Such offers may be made only by
an Offering Circular in compliance with applicable state law and the Federal
Trade Commission Disclosure Rule. The description of the franchises set forth in
this Prospectus is not intended to be a complete description of a Goldberg's or
Sammy's franchise business.

LACK OF TRADEMARK AND PATENT PROTECTION

The Company has filed applications to register the trademarks "Goldberg's
Original Old World Bagels" and "Goldberg's New York Bagels est. 1938" on the
United States Patent and Trademark Office principal register. Otherwise, the
Company has no registered trademark or service mark protection under federal
trademark law. While management believes that, in the food service industry,
trademarks, service marks and the look ("trade dress"), of a retail chain can be
adequately protected by common law, there can be no assurance that the absence
of protected, registered marks will not have an adverse effect on the Company's
competitive position, business or prospects. Further, although the Company
modifies and installs certain bagel bakery equipment in a proprietary manner,
the Company does not believe these refinements are patentable. Therefore, there
can be no assurance as to whether, to what extent, or for what period of time
the Company may enjoy a competitive advantage based on the availability of its
equipment. In addition, it is the Company's

11
<PAGE> 15

practice to protect its proprietary dough conditioner, bagel mix and bagel dough
by relying on trade secret laws and confidentiality agreements. There can be no
assurance that the confidentiality of its trade secrets will be maintained or
that others will not independently develop or obtain access to the same,
comparable or improved recipes and formulas. See "Business -- Trademarks and
Service Marks."

DEPENDENCE ON KEY PERSONNEL

The Company is substantially dependent upon the personal efforts and
abilities of its senior management. See "Management." The loss of any of the
Company's senior management personnel could adversely affect the Company until
such time, if any, as a suitable replacement is found. The Company's ability to
develop and market its products and to achieve and maintain its competitive
position depends, in large part, on its ability to attract and retain qualified
personnel. Competition for such personnel is intense and there can be no
assurance that the Company will be able to attract and retain such personnel.

CONCENTRATION OF STOCK OWNERSHIP

Upon completion of this Offering, the Company's present directors,
executive officers and principal shareholders will beneficially own
approximately 38.4% of the Common Stock of the Company. Although other
shareholders will have the opportunity to consider and vote upon those matters
affecting the Company that are submitted to a vote of the shareholders, they
will not have the ability to approve or disapprove any such matters without the
concurrence of the majority of shareholders. Consequently, decisions regarding
the management and operations of the Company will continue to be made by the
current shareholders and purchasers of Common Stock in this Offering may not be
able to influence the management of the Company and its business. Because they
may not be able to control the decisions made by current shareholders with
respect to management and operations of the Company, no one should invest in the
Company unless he or she is willing to entrust all aspects of the Company's
business to the discretion of such shareholders. See "Management" and "Principal
Shareholders."

LIMITATIONS ON DIRECTORS' AND OFFICERS' LIABILITY

As permitted pursuant to the corporate law of the State of New Jersey, the
Company's state of incorporation, the Company's Amended and Restated Certificate
of Incorporation (the "Charter") and Amended and Restated By-Laws (the
"By-Laws") require that the Company indemnify its directors and officers against
certain liabilities incurred in their service in such capacities. In addition,
the Charter provides that the personal liability of directors and officers of
the Company to the Company and its shareholders shall be limited under certain
circumstances. See "Management -- Limitation of Liability and Indemnification
Matters."

POTENTIAL ADVERSE EFFECT OF CERTAIN ANTI-TAKEOVER PROVISIONS

The corporate law of the State of New Jersey, the Company's state of
incorporation, and the Company's Charter, contain provisions that may discourage
proposals or bids to acquire the Company. Such provisions authorize the issuance
of a maximum of 4,000,000 shares of Preferred Stock (of which 1,352,503 shares
were outstanding as of July 31, 1996) on terms which may be fixed by the
Company's Board of Directors without shareholder action. The terms of any series
of Preferred Stock, which may include priority claims to assets and dividends,
and special voting rights, could adversely affect the rights of holders of the
Common Stock. The issuance of Preferred Stock could make the takeover of the
Company or the removal of management of the Company more difficult, discourage
hostile bids for control of the Company in which shareholders may receive
premiums for their shares of Common Stock, or otherwise dilute the rights of
holders, and the market price of the Common Stock. See "Description of
Securities -- Preferred Stock."

12
<PAGE> 16

DILUTION

Dilution represents the difference between the public offering price per
share paid by investors who purchase in this Offering and the pro forma net
tangible book value per share immediately after completion of the Offering. Pro
forma net tangible book value per share is determined by dividing the difference
between total tangible assets and total liabilities by the total number of
outstanding shares of Common Stock. At April 30, 1996, after giving effect to
the closing of the Private Placements the Company's net tangible book value per
share of Common Stock was $0.10.

After giving effect to the Private Placements, the sale of the 600,000
Company Shares offered hereby, and the initial application of the estimated net
proceeds therefrom as described at "Use of Proceeds," the adjusted pro forma net
tangible book value per share of Common Stock would have been $0.80 at April 30,
1996 (after deducting underwriting discounts and commissions and estimated
expenses of the Company in connection with the Offering in the aggregate amount
of $660,000). Investors purchasing Common Stock in the Offering therefore will
experience immediate dilution of $5.20 in the net tangible book value of their
Common Stock, while existing shareholders will benefit from an immediate
increase of $0.70 per share in the net tangible book value of their Common
Stock.

The following table illustrates the foregoing calculations:

<TABLE>
<S> <C> <C>
Assumed public offering price per share...................................... $6.00
Net tangible book value per share before Offering...................... $0.10
Increase in net tangible book value per share attributable to new
investors............................................................ $0.70
-----
Pro forma net tangible book value per share after Offering................... $0.80
-----
Dilution per share to new investors(1)....................................... $5.20
=====
</TABLE>

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

(1) If the Underwriters' over-allotment option is exercised in full, the
adjusted pro forma net tangible book value after the issuance and sale of
the Common Stock would be $0.88 per share, which would result in dilution
to new investors in the Offering of $5.12 per share.

The following table sets forth, as of April 30, 1996, the number of shares
purchased from the Company, the total consideration paid, the average price per
share paid by existing holders of Common Stock and the price per share to be
paid by purchasers in the Offering, based on an assumed initial public offering
price of $6.00 per Share. See "Capitalization" and "Underwriting."

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- --------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing common shareholders................ 3,735,200 85.7% $3,360,136 48.3% $0.90
Purchasers in the Offering(2)............... 624,000 14.3% 3,600,240 51.7% $5.77
--------- ------ --------- ------
Total.................................. 4,359,200 100.0% $6,960,376 100.0%
========= ====== ========= ======
</TABLE>

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

(2) Includes 24,000 shares issued to the Underwriters in connection with the
Underwritten offering.

13
<PAGE> 17

USE OF PROCEEDS

The net proceeds to the Company from the sale of the Shares offered hereby
are estimated to be $2,940,000 ($3,395,000 if the Underwriter's over-allotment
option is exercised in full). The Company intends to apply the net proceeds
approximately as follows:

(i) $325,000, or 11.1%, for the mandatory redemption of shares of
Preferred Stock redeemable 30 days after the completion of this Offering.

(ii) $400,000, or 13.6%, to open two additional Company-owned flagship
stores;

(iii) $350,000, or 11.9%, to expand or relocate the Company's Lodi, NJ
commissary;

(iv) $250,000, or 8.5%, to expand the Company's inventory of equipment
for resale;

(v) $150,000, or 5.1%, to relocate the Company's corporate
headquarters in order to consolidate and integrate the Company's facilities
at one location;

(vi) $100,000, or 3.4%, for marketing, promotional, advertising and
public relations activities directed toward both retail customers and
potential franchisees;

(vii) $250,000, or 8.5%, to reduce accounts payable and accrued
expenses; and

(viii) $1,115,000, or 37.9%, for working capital and general corporate
purposes, which may include, among other things, salaries of additional
management personnel and the costs of possible acquisition of businesses
complementary to the Company's operations. Currently, the Company has no
plans, intentions, commitments, understandings or arrangements with respect
to any such acquisitions.

The Company anticipates, based on current plans and assumptions relating to
its operations, that the proceeds of this Offering, together with existing
resources and cash generated from operations, if any, will be sufficient to
satisfy the Company's contemplated cash requirements for at least the 12-month
period subsequent to completion of the Offering. There can be no assurance,
however, that the Company's cash requirements during this period will not exceed
its available resources. See "Risk Factors -- Need for Additional Working
Capital."

The allocation of the net proceeds of this Offering set forth above
represents the Company's best estimates based upon its current plans and certain
assumptions regarding industry and general economic conditions and the Company's
future revenues and expenditures. If any of these factors changes, the Company
may find it necessary or advisable to reallocate some of the proceeds within the
above-described categories or to use a portion thereof for other purposes. See
"Risk Factors -- Discretion in Use of Proceeds Designated for Working Capital."

Proceeds not immediately required for the purposes described above will be
invested in short-term United States government securities, short-term bank
certificates of deposit, money market funds or other investment grade
short-term, interest bearing instruments.

14
<PAGE> 18

CAPITALIZATION

The following table sets forth the actual capitalization of the Company at
April 30, 1996, and as adjusted to give effect to the sale of the Common Stock
offered hereby and application of the net proceeds of the Offering as set forth
at "Use of Proceeds." This table should be read in conjunction with the
Consolidated Financial Statements and the Notes thereto included elsewhere in
this Prospectus.

<TABLE>
<CAPTION>
APRIL 30, 1996
(UNAUDITED)
-----------------------------
ACTUAL AS ADJUSTED(1)
----------- --------------
<S> <C> <C>
Current liabilities (including current portion of long-term
debt)........................................................... $ 1,054,760 $ 804,760
Long term debt and other liabilities (excluding current
portion)........................................................ $ 250,960 $ 250,960
Redeemable preferred stock, no par value; Series A, 40,000 shares
issued and outstanding (actual) and 0 shares issued and
outstanding (as adjusted); Series B, 120,000 shares issued and
outstanding (actual), 60,000 shares issued and outstanding (as
adjusted)(2).................................................... $ 707,540 $ 207,540
Non-redeemable convertible preferred stock, no par value; Series
A, 150,000 shares authorized, 150,000 shares issued and
outstanding (actual) and 75,000 shares issued and outstanding
(as adjusted)(2); Series B 180,000 shares authorized, 60,000
shares issued and outstanding; Series C, 1,600,000 shares
authorized, 982,503 shares issued and outstanding............... $ 393,043 $ 561,214
Common Stock, no par value; 10,000,000 shares authorized,
3,735,200 shares issued and outstanding, actual; 4,359,200
shares outstanding, as adjusted(1).............................. $ 3,360,136 $ 6,300,136
Retained (deficit)................................................ $(3,064,857) $ (3,064,857)
Total common stock, non-redeemable preferred stock and other
stockholders' equity............................................ $ 688,322 $ 3,796,493
=========== ===========
</TABLE>

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

(1) Gives effect to the sale of 600,000 Shares of Common Stock in this Offering,
net of expenses, the application of the estimated net proceeds therefrom,
the issuance of the Underwriters' Shares. The Charter has been amended to
authorize a total of 20,000,000 shares of Common Stock.

(2) The Company is obligated to redeem 40,000 shares of Series A Preferred Stock
and 60,000 shares of Series B Preferred Stock at a redemption price of
$5.00 per share within 30 days following completion of the Offering. Up to
an additional 60,000 shares of Series B Preferred Stock are redeemable at a
redemption price of $5.00 per share 24 months following completion of the
Offering. See "Use of Proceeds" and "Description of Securities." On August
12, 1996, the Company and Howard Goldberg entered into a Modification and
Settlement Agreement pursuant to which, among other things, Mr. Goldberg
agreed to convert 65,000 shares of Series A Preferred Stock to an equal
number of shares of Common Stock and to surrender his remaining Series A
Shares. See "Business -- Renegotiation of Certain Acquisition Terms."

DIVIDEND POLICY

The Company has not paid any cash or other dividends on its Common Stock
since its inception and does not anticipate paying any such dividends in the
foreseeable future. The Company intends to retain any earnings for use in the
Company's operations and to finance the expansion of its business. See "Risk
Factors -- No Dividends."

15
<PAGE> 19

SELECTED FINANCIAL DATA

The following information is qualified by reference to, and should be read
in conjunction with, the Company's Consolidated Financial Statements and the
Notes thereto and "Management's Discussion and Analysis or Plan of Operation"
contained elsewhere in this Prospectus.

STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
THREE
MONTHS YEAR ENDED SIX MONTHS ENDED THREE MONTHS ENDED
NINE MONTHS ENDED JANUARY 31, APRIL 30, APRIL 30,
YEAR ENDED ENDED JANUARY 31, 1996 ------------------------- -----------------------
JANUARY 31, OCTOBER 31, 1996 (AGGREGATED)(1)/ 1996 1995 1996 1995
1995 1995 (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ----------- ----------- ---------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Store
sales...... $ 1,178,638 $ 1,422,341 $ 305,992 $ 1,728,333 $ 646,317 $1,045,246 $ 340,325 $ 514,581
Franchising
revenue.... 0 377,201 29,949 407,150 195,639 0 165,690 0
Equipment and
product
sales...... 804,340 550,726 157,483 708,209 296,999 289,481 139,516 145,682
---------- ---------- ---------- ----------- ----------- ----------- ----------- -----------
1,982,978 2,350,268 493,424 2,843,692 1,138,955 1,334,727 645,531 660,263
Operating
expenses:
Cost of
sales --
equipment
costs and
store
operations,
exclusive
of
depreciation
and
amortization... 1,602,538 1,739,147 327,685 2,066,832 735,268 1,147,907 407,583 582,762
Cost of
sales --
franchising
activities... 0 213,408 0 213,408 0 0 0
Selling,
general and
administrative
expenses..... 1,100,919 1,146,365 422,277 1,568,642 893,430 728,223 471,153 272,537
Depreciation
and
amortization... 197,347 211,463 59,195 270,658 126,592 154,696 67,397 71,479
Acquisition
costs........ 74,256 170,352 56,784 227,136 113,568 113,568 56,784 56,784
Impairment of
assets....... 676,038 0 0 0 0 0 0 0
---------- ---------- ---------- ----------- ----------- ----------- ----------- -----------
3,651,098 3,480,735 865,941 4,346,676 1,868,858 2,144,394 1,002,917 983,562
---------- ---------- ---------- ----------- ----------- ----------- ----------- -----------
Operating
loss......... (1,668,120) (1,130,467) (372,517) (1,502,984) (729,903) (809,667) (357,386) (323,299)
Interest
expense...... 38,651 21,078 13,188 34,266 23,051 46,989 9,863 18,001
---------- ---------- ---------- ----------- ----------- ----------- ----------- -----------
Loss before
extraordinary
item......... $(1,706,771) $(1,151,545) $ (385,705) $ (1,537,250) $ (752,954) $ (856,656) $ (367,249) $ (341,300)
Extraordinary
item -- Gain
from
extinguishment
of debt...... 644,150 0 0 0 0 0 0 0
---------- ---------- ---------- ----------- ----------- ----------- ----------- -----------
Net loss....... $(1,062,621) $(1,151,545) $ (385,705) $ (1,537,250) $ (752,954) $ (856,656) $ (367,249) $ (341,300)
Net loss per
share........ $ (0.28) $ (0.30) $ (0.11) $ (0.41) $ (0.39) $ (0.20) $ (0.28) $ (0.09)
Weighted
average
number of
common shares
outstanding... 3,857,237 3,777,370 3,777,370 3,777,370 3,777,975 4,196,271 3,778,593 3,777,570
BALANCE SHEET
DATA:

<CAPTION>
1/31/95 10/31/95 1/31/96 4/30/95 4/30/96
---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Working capital
(Deficit).... (539,020) (902,720) (903,338) (758,359) 181,282
Total assets... 1,743,561 1,338,794 1,820,082 1,656,902 2,701,582
Total
liabilities... 1,170,207 1,386,967 1,493,960 1,324,848 1,305,720
Redeemable
preferred
stock........ 0 0 0 0 707,540
Common stock... 1,277,000 876,150 1,606,150 874,400 3,360,136
Non-redeemable
preferred
stock........ 54,000 1,022,580 1,052,580 656,600 393,043
Additional paid
in capital... 365,000 365,000 365,000 365,000 0
Accumulated
deficit...... (1,122,646) (2,311,903) (2,697,608) (1,563,946) (3,064,857)
</TABLE>

- ---------------
(1) Represents the total of results for the nine-month fiscal period ended
October 31, 1995 and the three-month interim period ended January 31, 1996.

16
<PAGE> 20

MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion and analysis should be read in conjunction with
the Company's Consolidated Financial Statements and the Notes thereto included
elsewhere in this Prospectus. The discussion of results, causes and trends
should not be construed to imply any conclusion that such results or trends will
necessarily continue in the future. For purposes of the following discussion,
the Company's results for the nine months ended October 31, 1995, as reflected
in its audited financial statements for the period then ended, have been
combined with its unaudited, interim results for the three months ended January
31, 1996 to reflect results for the 12-month period ended January 31, 1996
("Fiscal 1996"), which have been compared to the results for the full fiscal
year ended January 31,1995 ("Fiscal 1995").

RESULTS OF OPERATIONS -- THREE-MONTH PERIODS ENDED APRIL 30, 1996 AND 1995

Sales revenues for the three months ended April 30, 1996 (the "1996
Quarter") were $645,531, a decrease of $14,732, or 2%, from $660,263 for the
three months ended April 30, 1995 (the "1995 Quarter"). This decrease is
attributable to (i) a decrease in store sales of $174,256, or 34%, to $340,325
in the 1996 Quarter from $514,581 in the 1995 Quarter, as a result of a
reduction from five to four stores operated by the Company and (ii) a decrease
in equipment sales of $54,367, or 41%, to $79,854 in the 1996 Quarter from
$134,221 in the 1995 Quarter, primarily due to the fact that, during 1996, the
Company has focused on franchising activities rather than on sales of equipment
to unaffiliated purchasers, which decreases were substantially offset by (iii)
an increase in commissary sales of $48,201, or 320%, to $59,662 in the 1996
Quarter from $11,461 in the 1995 Quarter and (iv) the commencement of
franchising activities during 1996, which resulted in franchising revenues of
$165,690 during the 1996 Quarter, consisting of $153,700 of initial,
non-recurring market development fees and $11,990 of ongoing royalties.

Management anticipates that future equipment and commissary sales will be
dependent upon the Company's franchising activities rather than on sales to
unaffiliated purchasers and that such sales will increase or decrease in direct
proportion to the Company's success in expanding its system of franchise stores.

Cost of sales decreased by $175,179, or 30%, to $407,583 in the 1996
Quarter from $582,762 in the 1995 Quarter, primarily as a result of decreased
store and equipment sales, and, to a lesser extent, to a shift in the mix of the
Company's revenues, as decreased store and equipment sales were partially
replaced by franchise fees. Cost of sales as a percentage of product sales
decreased to 85% in the 1996 Quarter from 88% in the 1995 Quarter, reflecting
the net effect of a decrease in cost of sales attributable to the sale of two
Company-owned stores (partially offset by the opening of one additional store)
and an increase attributable to the upgrading of the Company's Lodi, New Jersey
commissary and production facility and increases in payroll and fixed overhead
costs associated with expansion of this facility.

Selling, general and administrative expenses increased by $198,616, or 73%,
to $471,153 in the 1996 Quarter from $272,537 in the 1995 Quarter. This increase
is primarily due to (i) an increase in salaries and related costs of $116,687,
or 170%, to $185,271 in the 1996 Quarter from $68,584 in the 1995 Quarter as a
consequence of expansion of the Company's workforce and, to a lesser degree,
increases in compensation to its continuing employees and (ii) an increase in
selling expenses of $35,408, or 55%, to $99,715 in the 1996 Quarter from $64,307
in the 1995 Quarter, primarily due to increased travel expenses related to
franchise sales efforts, visits to proposed retail locations and provision of
on-site store training and assistance.

In the future, management anticipates that selling expenses will continue
to be directly related to the level of the Company's franchising activities.

Depreciation and amortization decreased by $4,082, or 6%, to $67,397 in the
1996 Quarter from $71,479 in the 1995 Quarter, primarily as a consequence of the
fact that the Company owned and operated one fewer store during the 1996 Quarter
than during the 1995 Quarter.

Interest expense decreased by $8,138, or 45%, to $9,863 in the 1996 Quarter
from $18,001 in the 1995 Quarter as a consequence of a reduction in the
Company's outstanding debt between those two periods.

The net loss for the 1996 Quarter was $367,249, which represented an
increase of 8%, as compared to the net loss of $341,300 for the 1995 Quarter. To
date, the Company has operated at a loss as a result of the application of
resources in excess of revenues to develop its operating infrastructure in
anticipation of additional franchise sales, Company-store growth and commissary
sales. Consequently, total revenues are not yet sufficient to support the
Company's overhead. Management anticipates that, during the fiscal year ending
October 31, 1996, the Company's revenues will increase due to additional
franchise sales, increased royalty

17
<PAGE> 21

income from existing, as well as new, franchises, increased commissary revenues
generated by sales to franchise stores, increased sales in existing
Company-owned stores and sales revenues from newly opened, Company-owned stores.
There can be no assurance, however as to whether, and to what extent, the
Company will actually experience additional revenues from any of these sources.
The Company's ability to operate profitably in the future is substantially
dependent upon its ability to sell store and area development franchises and to
open additional franchise stores. See "Risk Factors -- Limited Operating
History; Operating Losses," "-- Expansion," "-- Dependence on Franchisees" and
"Business -- Plan of Operations."

RESULTS OF OPERATIONS -- SIX-MONTH PERIODS ENDED APRIL 30, 1996 AND 1995

Sales revenues for the six months ended April 30, 1996 (the "1996 Half")
were $1,138,955, a decrease of $195,772, or 15%, from $1,334,727 for the six
months ended April 30, 1995 (the "1995 Half"). This decrease is attributable to
(i) a decrease in store sales of $398,929, or 38%, to $646,317 in the 1996 Half
from $1,045,246 in the 1995 Half, as a result of a reduction from five to three
stores operated by the Company during the first three months and from five to
four stores operated by the Company during last three months of the 1996 Half,
and (ii) a decrease in equipment sales of $84,834, or 33%, to $172,180 in the
1996 Half from $257,014 in the 1995 Half, primarily due to the fact that, during
1996, the Company has focused on franchising activities rather than on sales of
equipment to unaffiliated purchasers, which decreases were substantially offset
by (i) the commencement of franchising activities during 1996, which resulted in
franchising revenues of $195,639 during the 1996 Half, consisting of initial,
non-recurring franchise and market development fees of $22,500 and $153,700,
respectively, and $19,439 of ongoing royalties and (ii) an increase in
commissary sales of $92,352, or 284%, to $124,819 during the 1996 Half from
$32,467 in the 1995 Half, as a consequence of a greater number of franchise
stores and a concomitant increase in demand for product during the 1996 Half.

Management anticipates that future equipment and commissary sales will be
dependent upon the Company's franchising activities rather than on sales to
unaffiliated purchases and that such sales will increase or decrease in direct
proportion to the Company's success in expanding its system of franchise stores.

Cost of sales decreased by $412,639, or 36%, to $735,268 in the 1996 Half
from $1,147,907 in the 1995 Half. This decrease is primarily due to decreased
store and equipment sales. Cost of sales as a percentage of product sales
decreased to 79% in the 1996 Half from 86% in the 1995 Half, reflecting the net
effect of a decrease in equipment sales and an increase attributable to the
upgrading of the Company's Lodi, New Jersey commissary and production facility
and increases in payroll and fixed overhead costs associated with expansion of
this facility. To the extent that future increases in the Company's total
revenues are attributable to franchise fees, market development fees and
franchise royalties, cost of sales can be expected to decrease as a percentage
of revenues.

Selling, general and administrative expenses increased by $165,207, or 23%,
to $893,430 in the 1996 Half from $728,223 in the 1995 Half. This increase is
primarily due to (i) an increase in salaries and related costs of $130,644, or
62%, to $341,010 in the 1996 Half from $210,346 in the 1995 Half and (ii) an
increase in selling expenses of $38,084, or 27%, to $181,404 in the 1996 Half
from $143,320 in the 1995 Half, primarily due to increased travel expenses
related to franchise sales efforts, visits to proposed retail locations and
provision of on-site store training and assistance.

Depreciation and amortization decreased by $28,104, or 18%, to $126,592 in
the 1996 Half from $154,696 in the 1995 Half, primarily as a consequence of the
fact that the Company owned and operated two fewer stores during first three
months and one fewer store during the last three months of the 1996 Half than
during the comparable periods of 1995 Half.

Interest expense decreased by $23,938, or 51%, to $23,051 in the 1996 Half
from $46,989 in the 1995 Half as a consequence of a reduction in the Company's
outstanding debt between those two periods.

The net loss for the 1996 Half was $752,954, which represented a decrease
of 12%, as compared to the net loss of $856,656 for the 1995 Half. To date, the
Company has operated at a loss as a result of the application of resources in
excess of revenues to develop its operating infrastructure in anticipation of
additional franchise sales, Company-store growth and commissary sales.
Consequently, total revenues are not yet sufficient to support the Company's
overhead. Management anticipates that, during the fiscal year ending October 31,
1996, the Company's revenues will increase due to additional franchise sales,
increased royalty income from existing, as well as new, franchises, increased
commissary revenues generated by sales to franchise stores,

18
<PAGE> 22

increased sales in existing Company-owned stores and sales revenues from newly
opened, Company-owned stores. There can be no assurance, however as to whether,
and to what extent, the Company will actually experience additional revenues
from any of these sources. The Company's ability to operate profitably in the
future is substantially dependent upon its ability to sell store and area
development franchises and to open additional franchise stores. See "Risk
Factors -- Limited Operating History; Operating Losses," "-- Expansion,"
"-- Dependence on Franchisees" and "Business -- Plan of Operations."

RESULTS OF OPERATIONS -- 12-MONTH PERIODS ENDING JANUARY 1996 AND 1995

Sales revenues for Fiscal 1996 were $2,843,692, an increase of $860,714, or
43%, from revenues of $1,982,978 for Fiscal 1995. This increase is primarily
attributable to the commencement of franchising activities during Fiscal 1996,
resulting in revenues of $407,150 in that year (consisting of initial,
non-recurring market development and single unit franchise fees of $117,824 and
$30,000, respectively; initial, non-recurring revenues from the sale of Company
stores to franchisees in the amount of $247,777; and ongoing royalties of
$11,549), and to an increase of $708,362, or 60% ($1,887,000 in Fiscal 1996 from
$1,178,638 in Fiscal 1995) as a consequence of having a full year of retail and
wholesale operations under the Company's ownership in Fiscal 1996, as compared
to only four months of operations under the Company's ownership subsequent to
the acquisition of the Sammy's stores on September 29, 1994 in Fiscal 1995.
These increases were partially offset by a decrease in revenues from equipment
sales to $549,542 in Fiscal 1996 from $804,340 in Fiscal 1995. This decrease of
$254,798, or 32%, is attributable primarily to the fact that, during Fiscal
1996, the Company focused on franchising activities rather than on sales of
equipment to unaffiliated purchasers. During Fiscal 1996, the Company entered
into 11 single-store franchise agreements and three multi-unit Market
Development Agreements, representing commitments to build an aggregate of 28
stores over a period of 60 months. See "Business -- Franchising."

Cost of sales increased by $677,702, or 42%, to $2,280,240 in Fiscal 1996
(including $213,408 attributable to cost of sales in connection with franchising
activities) from $1,602,538 in Fiscal 1995. This increase is primarily due to
increased product sales. In addition, cost of sales as a percentage of product
sales increased to 85% in Fiscal 1996 from 81% in Fiscal 1995 as a consequence
of (i) the write down of certain equipment inventory below cost in the amount of
$107,000 to reflect current market value and (ii) the upgrading of the Company's
Lodi, New Jersey commissary and production facility and increases in payroll and
fixed overhead costs associated with expansion of this facility.

Selling, general and administrative expenses increased by $467,723, or 43%,
to $1,568,642 in Fiscal 1996 from $1,100,919 in Fiscal 1995. This increase is
primarily due to (i) an increase in salaries and related costs of $226,513, or
73%, to $536,500 in Fiscal 1996 from $309,987 in Fiscal 1995 as a consequence of
expansion of the Company's workforce during Fiscal 1996 and, to a lesser degree,
increases in compensation to its continuing employees; (ii) an increase in
occupancy costs of $133,806, or 90%, to $284,344 in Fiscal 1996 from $148,538 in
Fiscal 1995, due to the rental of new and larger administrative offices and
additional storage space, and the payment of a full year of rent for the
Company-owned stores and Lodi, New Jersey commissary for Fiscal 1996; and (iii)
an increase in selling expenses of $36,218, or 12%, to $347,390 in Fiscal 1996
from $311,172 in 1995, primarily due to increased travel expenses related to
franchise sales efforts, visits to proposed retail locations and provision of
on-site store training and assistance.

Depreciation and amortization increased by $73,331, or 37%, to $270,658 in
Fiscal 1996 from $197,347 in Fiscal 1995 and deferred acquisition costs
increased by $152,880, or 206%, in Fiscal 1996 as compared to $74,256 in Fiscal
1995. Both of these increases are directly attributable to the fact that the
Company's operations for Fiscal 1996 included a full year of operations of
Sammy's, while in Fiscal 1995 the Company operated Sammy's for only four months.

During Fiscal 1995, the Company recognized an impairment of certain
long-lived assets acquired in connection with the acquisition of the Goldberg
Companies in September 1993, resulting in a charge to operations of $676,038.
Also during Fiscal 1995, the Company recorded an extraordinary item in the
amount of $644,150, resulting from the early extinguishment of debt. This debt
originally was issued in connection with the acquisition of the Goldberg
Companies and was renegotiated during Fiscal 1995 as a consequence of the
impairment of certain assets acquired in that transaction. See
"Business -- History of the Company" and "-- Renegotiation of Certain
Acquisition Terms." The Company recorded no comparable impairment or early
extinguishment during Fiscal 1995.

19
<PAGE> 23

The net loss for Fiscal 1996 was $1,537,250, which represented an increase
of 45%, as compared to the net loss of $1,062,621 for Fiscal 1995. To date, the
Company has operated at a loss as a result of the application of resources in
excess of revenues to develop its operating infrastructure in anticipation of
additional franchise sales, Company-store growth and commissary sales.
Consequently, total revenues are not yet sufficient to support the Company's
overhead. Management anticipates that, during the fiscal year ending October 31,
1996, the Company's revenues will increase due to additional franchise sales,
increased royalty income from existing, as well as new, franchises, increased
commissary revenues generated by sales to franchise stores, increased sales in
existing Company-owned stores and sales revenues from newly opened,
Company-owned stores. There can be no assurance, however as to whether, and to
what extent, the Company will actually experience additional revenues from any
of these sources. The Company's ability to operate profitably in the future is
substantially dependent upon its ability to sell store and area development
franchises and to open additional franchise stores. See "Risk Factors -- Limited
Operating History; Operating Losses," "-- Expansion," "-- Dependence on
Franchisees" and "Business -- Plan of Operations."

In addition, management anticipates that the costs and expenses of
operating the Company and its business will increase with the expansion of the
business. While management anticipates that most of such costs will increase in
proportion to increased sales and other business activity and, in some instances
may decline as a consequence of the Company's ability to avail itself of volume
discounts for both products and services, certain expenses may be expected to
increase more than proportionately. In particular, members of senior management
historically have been compensated at levels that the Company deems appropriate
for a development stage enterprise, but that management believes are
substantially below compensation levels in operating companies in the Company's
business. See "Management -- Executive Compensation." As the Company grows, it
is anticipated that executive compensation will be increased to levels
competitive with those of senior executives in operating companies comparable in
size to the Company.

LIQUIDITY AND CAPITAL RESOURCES

The Company requires significant capital to fund its working capital needs
and its planned expansion. Revenues are not yet sufficient to support the
Company's operating expenses and are not expected to reach such levels during
the next year. Cash used by operating activities for the 1996 Half was $844,940.
Cash and cash equivalents at April 30, 1996 aggregated $896,132 and the Company
had working capital of $181,282.

The aggregate amount of accounts payable and accrued expenses was $852,366
at April 30, 1996. It is the Company's policy to pay its vendors within 30 days
(unless alternative payment terms are available on advantageous terms). The
Company has been able to purchase inventory as required.

Since its formation in 1993, the Company has funded its operations and
capital expenditures primarily through capital contributions from its founders
and private placements of its equity securities and by utilizing vendor credit.

In April 1996, the Company completed private placements of its Common Stock
(the "Private Placements") pursuant to which it received proceeds of $2,413,986,
net of expenses of $48,514. Of the net proceeds, $410,000 consisted of property
in the form of two unopened retail bagel stores in the final stages of
construction. The proceeds from the Private Placements to date have been used to
fund (i) the Company's operations; (ii) the voluntary redemption of shares of
the Company's Preferred Stock; (iii) a reduction in trade payables; and (iv) the
acquisition of capital assets. The Company intends to apply the remainder of
these proceeds for working capital purposes.

The Company intends to apply the net proceeds from this Offering, estimated
to be $2,940,000 ($3,395,000 if the Underwriters' over-allotment option is
exercised in full) to redeem Preferred Stock ($325,000), open additional
Company-owned flagship stores ($400,000), expand or relocate its commissary
($350,000), expand the Company's equipment inventory ($250,000), relocate its
headquarters ($150,000), expand its marketing and promotional activities
($100,000), reduce accounts payable and accrued expenses ($250,000) and for
working capital and general corporate purposes ($1,115,000). See "Use of
Proceeds."

20
<PAGE> 24

BUSINESS

OVERVIEW

All American Food Group, Inc. (together with its wholly owned subsidiaries,
the "Company") franchises two distinct bagel store concepts, distributes bagel
bakery equipment and currently operates four retail bagel stores. All of the
Company's bagels are prepared using the Company's proprietary bagel mix and
dough conditioner, in the "Old World" style, by first boiling and then baking
the dough using the Company's own bagel kettle and bagel oven. The Company
believes that this process and the use of its proprietary ingredients and its
equipment ensure the consistent preparation of premium quality bagels with a
shine, crust, texture and overall flavor that distinguish its products from
those of its competitors.

As of July 31, 1996, the Company's retail system consisted of five
Goldberg's and six Sammy's stores located in four states, including two
Goldberg's stores and two Sammy's stores owned and operated by the Company and
three Goldberg's and four Sammy's stores operated under franchise or license
arrangements with the Company. As of July 31, 1996, one additional Goldberg's
and two additional Sammy's stores to be operated under franchise or license
arrangements with the Company, and one Company-owned Goldberg's store, were
under development and expected to open by October 31, 1996.

The Company also distributes and services its bagel bakery equipment for
use by its franchisees and by unaffiliated purchasers. During the years 1990
through 1995, the Company or its predecessor provided equipment and other
services to over 100 separate stores. The Company specializes in providing
equipment and services to restaurants and bakeries utilizing the "Old World"
method of boiling then baking bagels utilizing revolving tray ovens. Management
believes that the Company is the only franchiser of bagel stores that provides
its equipment to its franchisees.

PLAN OF OPERATIONS

The Company anticipates increasing its revenue, thereby generating
operating cash flow in the future, by implementing the following actions:

- Expanding franchise operations. The Company expects to increase the
sale of franchises by (i) advertising in national and regional publications
and business magazines and (ii) upgrading its promotional material. In
addition, depending upon the availability and utilization of existing
personnel, the Company may hire additional sales personnel. The Company
also expects to increase its sale of franchises by opening additional
Company-owned flagship stores to generate interest from experienced
multi-store developers to enter into multi-unit Market Development
Agreements. Management anticipates that the sale of additional franchise
territories and the opening of additional stores in such territories should
result in increases in franchise revenues.

- Increasing product sales. The Company intends to open new
Company-owned retail stores and expects increased sales from its commissary
to new franchise stores. The Company continuously develops new products,
which management believes will lead to increased sales as the variety of
products grows. The Company has retained an advertising firm to help
increase store revenues, increase franchise sales and promote brand name
recognition. See "-- Advertising."

21
<PAGE> 25

- Making acquisitions. The Company intends to acquire other bagel
stores or complementary outlets which provide entry into new markets.
Management anticipates that, over a period of time, these acquisitions will
increase revenues significantly. However, the Company currently has no
plans, intentions, commitments, understandings or arrangements with respect
to any such acquisitions.

HISTORY OF THE COMPANY

The Company was formed for the purpose of establishing a chain of
franchised bagel restaurants using the recipes, procedures, experience and
expertise of an existing, well-seasoned bagel restaurant and bakery operation.
In October 1993, the Company acquired all the assets of Howberg Bakery Equipment
Co., Inc. (the "Equipment Company"), Bagels of New Milford, Inc. and Goldberg's
Famous Bagels of Orangeburg, Inc. (together, the "Goldberg Companies"), each a
retail and wholesale bagel and related foodstuff company. (The Goldberg family
continues to operate ten bagel stores that are not affiliated with the Company
and, subject to certain noncompetition covenants, may open additional stores in
the future.) See "-- Renegotiation of Certain Acquisition Terms."

The assets of the Goldberg Companies consisted of two bagel stores operated
by the Goldberg family of Westwood, New Jersey (one of which subsequently was
sold), including the exclusive franchise rights to the recipes, flour, mixes and
proprietary equipment used in these stores. The Goldberg family has been
operating retail bagel shops for over 50 years under variations of the Goldberg
name.

The Equipment Company was engaged in the manufacture, assembly, sale and
service of equipment used in the production of bagels. In connection with the
sale of equipment, the Equipment Company also provided consulting services in
the area of store design, equipment layout, training, food preparation and
virtually all other aspects of the retail food business. The Company currently
operates the business of the Equipment Company under the name "All American
Equipment Company."

On September 29, 1994, the Company completed the acquisition of 100% of the
outstanding stock of four interrelated corporations operating three retail
stores (one of which subsequently was sold) and a commissary under the trade
name "Sammy's New York Bagels."

Since its acquisition of the Goldberg's and Sammy's stores, the Company has
engaged in an extensive process of analyzing, standardizing and documenting all
aspects of its retail bagel operations, preparing franchise materials and
developing its franchise system and program. In addition, it retrofitted one of
the Goldberg's locations to serve as a prototype store for purposes of marketing
franchises and training personnel.

The Company was incorporated as a subsidiary of Jutland Enterprises Inc.
under the laws of the State of New Jersey on September 27, 1993, under the name
"Jutland Food Group, Inc." and changed its name to "All American Food Group,
Inc." on October 24, 1995.

Shortly after the Company's incorporation in 1993, Jutland Enterprises
Inc., a Delaware corporation ("Enterprises"), acquired 937,500 shares of the
Company's Common Stock for consideration consisting of $300,000 in cash and
$277,000 in assets. At the same time, Andrew Thorburn, then Chairman, President,
Chief Executive Officer of both Enterprises and the Company, and a principal
owner of Enterprises, acquired an additional 312,500 shares of the Company's
Common Stock in exchange for 400,000 shares of Enterprises Common Stock.
Enterprises subsequently distributed to its stockholders the shares of the
Company's Common Stock issued to it in 1993 and no longer is a shareholder of
the Company.

The Company's executive offices are located at 9 Law Drive, Fairfield, New
Jersey 07006 and its telephone numbers are (201) 244-9336 or (800) 922-4350.

THE BAGEL BUSINESS

Management believes that food service franchising in general, and the
franchising of bagel restaurants in particular, present a unique opportunity for
success in the current consumer and franchise markets. According to industry and
government statistics, U.S. per capita bagel consumption currently is growing at
the rate of 8% annually and U.S. per capita consumption (currently an average of
eight bagels per person annually) rose 45%

22
<PAGE> 26

over the last five years. Management believes that this historical growth rate
has been sustained, if not increased, since 1993. Management also believes that
this increased demand for bagels arises primarily from increased consumer demand
for healthier, low-fat food products and that the versatility, convenience and
relatively low price of bagels add to their appeal. In keeping with this growing
consumer demand, bagel shops were selected by Entrepreneur magazine as among the
"hottest new franchises" for both 1995 and 1996.

Inasmuch as most flavors of bagels have no fat or cholesterol, they
represent an attractive alternative to doughnuts, pastries and other breakfast
baked goods, while at the same time offering substantially more versatility and
variety than more traditional bread products. Further, because bagels can be
used in sandwiches, bagel restaurants can be expected to attract customers
throughout the day. Management believes that lunch time business accounts for
approximately 40% of a typical bagel store's daily business. And, since
customers frequently desire to purchase bagels for home consumption, bagel
restaurants also can rely upon take-out trade for a significant portion of their
revenues.

While bagels historically have been a staple ethnic food along the East
Coast and in certain other urban areas throughout the country, management
believes that there is a substantial potential market in smaller urban and
suburban areas. Further, until recently the retail bagel industry has been
composed almost exclusively of one and two-store operations and a few larger
regional chains, some of which have indicated the intention to expand to a
national scope. Management believes that there is a significant market for high
quality bagels and that there is a significant market niche for companies able
to provide such bagels on a consistent basis through a nationwide system of
retail outlets. The Company believes that its system of producing bagels in each
store using proprietary ingredients and its equipment is the optimal method for
delivering fresh, consistently high quality products to a large and
geographically dispersed market.

COMPETITIVE STRENGTHS

Management believes that the Company has a unique combination of
characteristics that will help it to successfully build a nationwide chain of
franchised bagel restaurants under both of its concepts. The Company's key
competitive strengths include the following:

Quality Products. Management believes that the key to the Company's
success lies with the quality of its products. Therefore, all of the
Company's bagels are prepared, in the "Old World" style, using the
Company's proprietary bagel mix and dough conditioner, by first boiling and
then baking the dough using the Company's bagel kettle and bagel oven. The
Company believes that this process and the use of its proprietary
ingredients and its equipment results in premium quality bagels with a
shine, crust, texture and overall flavor that distinguish its products from
those of its competitors. Bagels sold in Goldberg's restaurants are
produced on-site, in order to provide continuous availability of oven-fresh
products. In order to ensure full compliance with the requirements for
kosher certification, the Company produces pre-formed, uncooked bagels for
its Sammy's stores at its central commissary in Lodi, New Jersey and ships
such bagels frozen to the stores on a weekly basis for on-site preparation.
See "-- Kosher Certification and Supervision."

Experience. The Company's products and operating systems were
developed based on the experience of the Goldberg family of Westwood, New
Jersey during the 58 years of operation of its family-owned bagel shops.
Based on this half century of experience and management's experience in
operating and franchising other food concepts, the Company has analyzed,
standardized and documented all aspects of its retail bagel operations to
develop its operating and franchise systems. See "-- Franchising" and
"Management."

Complementary Concepts. Management believes that the Company's
franchise program is unique in offering two complementary bagel
concepts -- Goldberg's, which offers a traditional bagel/ delicatessen
menu, and Sammy's, which offers bagels and related dairy items in a kosher
store. Management believes that the availability of these two complementary
concepts uniquely positions the Company to benefit from economies of scale
in purchasing, while permitting it to penetrate distinct segments of the
bagel market.

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<PAGE> 27

Kosher Concept and Production Facilities. Management believes that
Sammy's is the only franchised food chain subject to national kosher
certification currently available in the United States. Kof-K Kosher
Supervision estimates that the kosher market currently generates over $2
billion in sales annually from 20,000 certified kosher products. With over
6 million Jews nationally, another 6 million Muslims and Seventh Day
Adventists subject to similar dietary restrictions, and a significant
segment of the secular market that views kosher certification as a sign of
high quality, authenticity and careful preparation, this market has
experienced average annual sales growth of 20% or more since 1990. In order
to ensure consistency in the quality of its products and achieve economies
in kosher supervision, the Company operates a central commissary from which
all Sammy's stores receive frozen pre-formed, uncooked bagels on a weekly
basis for on-premises preparation. Management anticipates that, in the
future, it will utilize this facility for the production of bagels for sale
to Goldberg's as well as Sammy's franchisees. See "-- Properties."

Equipment Business. Management believes that the Company is unique in
designing and distributing its bagel bakery proprietary equipment and in
its ability to provide consulting services in all areas of the retail bagel
business, including store design, equipment layout, training and food
preparation. Management also believes that these unique capabilities
provide the Company with a distinct advantage in equipping and advising its
franchised outlets and in ensuring the quality of its products. In
addition, since the Company continues to provide equipment to unaffiliated
bagel shops and bakeries, equipment sales represent an additional source of
revenue to the Company. Management believes that equipment sales will
benefit from continued demand for bagels nationwide. See "-- Plan of
Operations" and "-- The Bagel Business."

MENUS AND FORMAT

The Company's aim is to provide consumers with superior products,
consisting primarily of fresh bagels, spreads, salads and complementary items,
and superior service in a pleasant and attractive environment. All of the
Company's bagels are prepared using the Company's proprietary bagel mix and
dough conditioner, in the "Old World" style, by first boiling and then baking
the dough, using the Company's bagel kettle and bagel oven. The Company believes
that this process and the use of its proprietary ingredients and its equipment
ensures the consistent preparation of premium quality bagels with a shine,
crust, texture and overall flavor that distinguish its products from those of
its competitors.

Goldberg's offers a traditional bagel/delicatessen menu, consisting of a
variety of flavors of bagels, spreads, sandwiches (served on freshly baked
bagels), salads, soups and "appetizing" bakery items. Sammy's offers bagels and
related dairy items in a kosher store, under National Kof-K Kosher Supervision.
Goldberg's bagels are prepared on-site "from scratch" and Sammy's bagels are
prepared from frozen pre-formed dough delivered to the stores weekly and baked
on the premises, in each case providing a continuous supply of fresh product and
permitting customers to enjoy the aroma of freshly baked bagels. Both concepts
also offer an array of hot and cold beverages including coffee, tea, juices and
soft drinks. Depending upon local competitive and other conditions, Goldberg's
and Sammy's stores generally are open between the hours of 6 a.m. and 6 p.m.
seven days a week.

The Company's restaurants typically are located in strip-style neighborhood
and community shopping centers or other high-traffic areas and consist of an
overall area of between 750 and 2,000 square feet, including a dining area
providing seating for between eight and 30 customers, a take-out counter, and
kitchen, food preparation and storage areas. Decor is intended to evoke a 1938
bagel shop, and includes an original photo montage of New York City scenes from
that era, additional vintage photographs and memorabilia, wainscoting and a tin
ceiling.

KOSHER CERTIFICATION AND SUPERVISION

All of the Sammy's stores have earned certification from the
internationally recognized Kof-K Kosher Supervision ("Kof-K"), ensuring that
they operate in strict compliance with Kashruth, the Orthodox Jewish laws
pertaining to the content and preparation of kosher foods and related matters.

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<PAGE> 28

Kof-K, headquartered in Teaneck, New Jersey, is one of two universally
recognized and accepted organizations responsible for certifying kosher products
and establishments. Founded almost 30 years ago, Kof-K employs more than 150
experts in Kashruth and food service, as well as an international network of
regional and local coordinators and Rabbinical representatives.

Prior to certifying an establishment as meeting Kashruth requirements,
Kof-K supervises and inspects the cleaning of the proposed site and obtains a
complete list of all products and ingredients to be used, as well as all food
handling and preparation procedures to be followed. Once Kof-K has established
that each relevant item complies with the requirements of Kashruth, it issues an
initial certification for the store. Throughout preopening preparations, Kof-K
works with the local religious community to enlist support for the new store and
to provide assurance that it will meet the Kashruth requirements. After opening,
Kof-K representatives inspect the store on a regular basis to ensure continued
compliance with Kashruth standards.

Management believes that the kosher status of the Sammy's stores places
them in a unique niche as the only franchised food chain subject to national
kosher certification currently available in the United States.

FRANCHISING

Neither the following discussion, nor the other information contained in
this Prospectus, constitutes, and neither shall be construed as, an offer to
sell a Goldberg's or Sammy's franchise. Such offers may be made only by an
Offering Circular in compliance with applicable state law and the Federal Trade
Commission Disclosure Rule. The description of the franchises set forth in this
Prospectus is not intended to be a complete description of a Goldberg's or
Sammy's franchise business.

The Company offers single-unit franchises, as well as Market Development
Agreements covering a number of stores to be opened in a designated area within
a specified period of time. The Company currently may sell its franchises in 29
states and expects to receive authorization to sell in an additional 21 states
by October 31, 1996. The Company has entered into a Market Development Agreement
for the State of Ohio, covering 15 retail stores, a Market Development Agreement
for the State of Arizona, covering 15 retail stores, a Market Development
Agreement covering a portion of the State of New York covering 37 retail stores
and a licensing agreement covering the country of Israel.

Franchise revenue includes the sale of single unit franchises pursuant to
Single Unit Agreements, the sale of Company-owned stores to franchisees, the
sale of market development franchises pursuant to Market Development Agreements
and ongoing royalty and advertising fees.

Single Unit Agreements provide for payment of a nonrefundable initial
franchising fee (an "Initial Franchise Fee"), a weekly royalty on gross sales,
and a weekly cooperative advertising fund contribution. The Company's material
obligations under the terms of all Single Unit Agreements are assisting in site
selection and franchisee training. Initial Franchise Fees under Single Unit
Agreements are recognized as revenues when the Company has no further material
obligations in respect of the establishment of such franchise, which occurs upon
the opening of the store.

Market Development Agreements provide for the payment, by the Market
Developer, of a nonrefundable initial fee (a "Market Development Fee") based on
the size, population and overall market potential of the territory subject to
the Market Development Agreement (the "Market Area"). The Market Developer
assumes substantially all of the responsibilities that otherwise would be
assumed by the Company, as franchiser within the Market Area. In exchange, the
Market Developer receives (i) the exclusive right to build stores for the Market
Developer's own account or to seek third party franchisees within the Market
Area and (ii) the right to share with the Company, on a 50/50 basis, initial and
ongoing single store fees within the Market Area. The Market Development
Agreement includes a development schedule setting forth the number of stores to
be developed by the Market Developer during the term of the Agreement. If the
Market Developer fails to maintain the store development, the Market Developer
loses the exclusive right to develop the Market Area. Under Market Development
Agreements, the Company's obligations in respect of the development of single
unit franchises within the Market Area are limited to (i) approval of
franchisees presented by the Market Developer and (ii) approval of store sites.
The Company has no further material

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<PAGE> 29

obligations in respect of a Market Development Agreement at the time of
execution of the Agreement. Market Development Fees paid in cash or by
promissory notes fully collateralized by liquid assets or as to which the
Company has obtained an independent third-party valuation, are recognized as
revenues by the Company upon execution of the Market Development Agreement and
payment of the fee. In the absence of such collateral or valuation, the Company
recognizes Market Development Fees on a cash basis as payments on such notes are
received.

The Company's portion of the Initial Franchise Fee on single unit
franchises sold within a Market Developer's Market Area is recognized as
revenues when the Company has no further material obligations in respect of the
establishment of such franchise, which occurs upon opening of the store.

The Company seeks franchisees committed to the Company's high standards of
product quality and customer service. All franchised stores must operate in
strict compliance with the standards and procedures set out in the Company's
operations manuals. Each store must be under the management of a manager who has
completed the Company's training program, although franchisees are not required
to participate in the day-to-day management of their stores. The Company
conducts regular inspections (both scheduled and unannounced) to ensure that
franchises are operating in accordance with Company standards and procedures.
The Company provides support to its franchisees covering equipment and technical
issues 24 hours a day and seven days a week through a toll-free hotline.

Exclusivity. Each franchise agreement provides the franchisee with an
exclusive area, within which the Company is not permitted to sell another
franchise. Such exclusive areas, which are determined on a unit-by-unit basis
based on population density, traffic patterns and other relevant considerations,
generally range from a radius of four blocks in densely populated urban areas to
one mile or more in suburban locations.

Market Development Agreements provide that, if the franchisee meets his
store opening schedule, the Company will not sell other franchises within the
developer's territory ("Market Area").

Real Estate and Local Regulation. Franchisees are obligated to purchase or
lease (for a term of at least ten years) the sites for their units. Franchisees
may designate a specific location or a locality in which they wish to operate,
subject to the exclusivity rights of other Goldberg's and Sammy's franchisees.
The Company provides assistance and guidance in site selection and lease
negotiation, and must approve all sites prior to lease execution. In addition,
the Company provides plans and specifications for a prototype store, as well as
assistance in obtaining financing, permits and licenses, and with construction
of leasehold improvements. Franchisees are expected to bear the expense of any
modification of the prototype plans and specifications required to meet local
building, fire or health codes and lease and other similar requirements, as well
as the costs of remodeling, fireproofing or other leasehold improvements.
Franchises also are responsible for, and expected to bear the expense of, local
licensing matters related to occupancy and operation of the business.

Financing. The Company does not offer direct or indirect financing in
connection with its franchises. Similarly, it does not guarantee the debt, lease
or other obligations of any franchisee. The Company will, however, render
assistance in arranging financing and negotiating leases.

Training and Field Support. Prior to opening, each franchisee (or an owner
thereof) and at least one manager of each franchised Goldberg's or Sammy's
restaurant must complete a 13-day training program including approximately 35
and 70 hours of classroom and on-the-job training, respectively, covering areas
essential to the management and operation of both a retail and wholesale bagel
business, including bagel preparation and production; store operating
procedures; accounting and cost control; employee matters; in-and out-of-store
marketing; ordering; catering; equipment maintenance; and sanitation matters.
All training is conducted by senior Company personnel at the Company's corporate
headquarters in Fairfield, New Jersey, or in nearby Company-owned stores. As of
the date of this Prospectus, the Company had not established a permanent
schedule for its training courses, but instead schedules such courses as needed
to meet the opening schedules of new stores. The Company does not charge for
this training and provides all participants with their midday meal, but
franchisees are expected to defray living expenses for themselves and their
employees during the training sessions. Similar training is required of all new
managers subsequently hired and is provided by the Company.

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<PAGE> 30

Refresher and ongoing training is available to franchisees on an
individualized basis, through consultative meetings at franchise sites, at
corporate stores and at corporate headquarters.

The Company provides on-site and other supervisory guidance and assistance
in connection with the opening of each Goldberg's and Sammy's store. Once open,
the Company conducts regular operational visits and provides ongoing guidance
and assistance based upon the results of such visits and review of reports
submitted to it. Such guidance and assistance may relate to standards, methods
and operating procedures; preparation of authorized food, beverages and other
products and services; selection, purchase and preparation of food, beverage and
other products, as well as fixtures, equipment, signs, materials and supplies;
formulation and implementation of advertising and promotional programs; and
establishment and operation of administrative, bookkeeping, accounting,
inventory control, sales and general operating procedures.

The Company periodically distributes operational bulletins and newsletters
to its franchisees and provides ongoing assistance with technical and equipment
problems through its 24-hour hotline, as well as personal consultations either
at the franchise site or at the Company's executive offices.

Pricing. Prices are set by individual franchisees, pursuant to guidelines
provided by the Company, in light of local competitive and market conditions.

Purchasing. Franchisees are required to purchase bagel mix and/or dough
conditioner, in the case of Goldberg's stores, and prepared dough, in the case
of Sammy's stores, directly from the Company. In addition, all franchisees are
required to purchase the Company's bagel kettle and bagel oven. Management
believes that purchase of these items from the Company is essential to
maintaining the Company's quality control standards, and to ensuring the
consistent high quality of the bagels offered at all of its Goldberg's and
Sammy's stores.

With respect to other items used in the operation of its stores, the
Company designates approved types and brands of products. In certain instances
the Company may designate a single supplier or a limited group of suppliers for
a product or brand of product, in order to increase the volume of purchases from
suppliers and permit the Company's franchisees as a whole to benefit from
discounts associated with quantity purchasing.

In the event that a franchisee proposes to purchase any brand or type of
product not previously approved for purchase by the Company or to purchase
approved items from a supplier not previously approved, the franchisee is
required to submit to the Company information regarding the manufacturer's or
supplier's business reputation, delivery and service performance, reliability,
financial condition and credit worthiness. In addition, in the case of
previously unapproved products, the franchisee must submit samples for review by
the Company to determine compliance with the Company's specifications and
standards. The Company then reviews the submission and, within 30 days, makes a
determination whether or not to approve the supplier or product.

The Company provides its franchisees with operational and accounting forms
for use in the operation of their stores. The Company also provides its
franchisees with promotional and advertising materials and other marketing
tools.

Advertising. Each franchisee is responsible for developing local
advertising and promotional materials, all of which are subject to prior review
and approval by the Company. In addition, the Company administers promotional
funds for the benefit of all of its Goldberg's and Sammy's franchisees.
Franchisees are obligated to contribute to the applicable fund a promotional fee
equal to 1% of gross sales. Franchisees also may be required to participate in
local or regional advertising cooperatives. Contributions to such cooperatives
will be at least 1% of gross sales, and will be controlled by the local
cooperative. See "-- Advertising." Stores owned and operated by the Company are
required to contribute to the promotional funds and to participate in
advertising cooperatives on the same basis as franchised stores.

Franchise Fees and Royalty Payments. Current franchise agreements provide
for an initial single unit payment of $25,000 for either a Goldberg's or a
Sammy's store. If a franchisee opens additional stores, either under a Market
Development Agreement or pursuant to additional single-unit franchise
arrangements, the initial payment is $17,500 per unit. In addition, franchisees
of both concepts pay a bi-weekly royalty and

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<PAGE> 31

service fee equal to 5% of gross sales. Franchisees also must contribute a
minimum of 1% of gross sales to a local or regional advertising cooperative.

Start-Up Time and Costs. Franchisees are required to enter into a lease
within 60 days of execution of a franchise agreement and to open within 120 days
following first possession of the leased premises. Subject to such factors as
the time to obtain a lease, financing or building permits, zoning and local
ordinances, weather conditions and availability of materials and equipment,
franchise stores generally can be expected to open within four to six months
following execution of a franchise agreement.

While costs vary based on location and type of store, the Company currently
estimates that the cost to a new franchisee to open a typical Goldberg's or
Sammy's restaurant, including initial franchise fees, equipment, signs, opening
inventory and other start-up costs, but exclusive of real estate costs (purchase
price, lease payments and/or improvements) generally is in the range of $105,000
to $177,500 for either a Goldberg's or Sammy's store. In addition, the Company
estimates that rent for a typical Goldberg's or Sammy's store currently is
between $12,000 and $45,000 annually and that a new franchisee will incur
between $30,000 and $80,000 in real estate related expenses with respect to each
store.

Term and Termination. Each franchise agreement runs for an initial term of
ten years, subject to renewal for up to two additional five-year terms upon
agreement of the franchisee to refurbish and redecorate or secure new premises.
The Company has the right to terminate franchise agreements for a variety of
reasons, including failure to open a restaurant or complete training; loss or
surrender of restaurant premises; material misrepresentation; conviction of a
felony; failure to attend required training programs; unauthorized assignment of
a restaurant; unauthorized use of trademarks or confidential information;
failure to comply with Company specifications or procedures; failure to make
payments due to third parties; failure to make payments due to the Company or to
submit required reports; and sanitation problems.

STORE LOCATIONS

The following table sets forth, by location, the number of Company owned,
franchised and licensed Goldberg's and Sammy's restaurants open or under
development, as of July 31, 1996:

COMPANY-OWNED STORES:

<TABLE>
<CAPTION>
DATE OPENED
LOCATION CONCEPT (PROJECTED)
------------------------------------------------------------- ----------- -----------
<S> <C> <C>
60 Dutch Hill Road, Orangeburg, NY........................... Goldberg's 1/93
1443 Queen Anne Road, Teaneck, NJ............................ Sammy's 3/93
40 N. James Road, Columbus, OH............................... Sammy's 11/94
197 Bleecker Street, New York, NY(1)......................... Goldberg's 2/96
Rockland Plaza Space #25, Nanuet, NY(1)...................... Goldberg's (9/96)
</TABLE>

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

(1) Acquired in exchange for shares of Common Stock in the 1996 Private
Placements. The Nanuet, New York store is projected to open no later
than September 30. Completion of this store is expected to require
additional expenditures of approximately $20,000. The Company currently
has sufficient resources to complete and open this store. See
"Management's Discussion and Analysis or Plan of Operation -- Liquidity
and Capital Resources."

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<PAGE> 32

FRANCHISED AND LICENSED STORES:

<TABLE>
<CAPTION>
DATE OPENED
LOCATION CONCEPT (PROJECTED)
------------------------------------------------------------- ----------- -----------
<S> <C> <C>
134 North Avenue, New Rochelle, NY........................... Sammy's 3/92
4951 East Grant Road, Tucson, AZ............................. Goldberg's 9/95
Lane Avenue Shopping Center, Columbus, OH.................... Sammy's 12/95
6449 Oracle Avenue, Tucson, AZ............................... Goldberg's 1/96
21A Wyckoff Avenue, Waldwick, NJ............................. Goldberg's 6/96
Columbus, OH................................................. Sammy's 6/96
1312 Grandview Avenue, Grandview, OH......................... Sammy's 7/96
7111 East 22nd Street, Tucson, AZ............................ Goldberg's (9/96)
Dempster Street, Skokie, IL.................................. Sammy's (9/96)
White Plains, NY............................................. Sammy's (10/96)
</TABLE>

TRADEMARKS AND SERVICE MARKS

The Company has filed registration applications to register the trademarks
"Goldberg's Original Old World Bagels" and "Goldberg's New York Bagels est.
1938" on the United States Patent and Trademark Office principal register. Those
applications currently are pending. Members of the Goldberg family currently
operate ten independent bagel bakeries using the name "Goldberg" in northern New
Jersey and Rockland County, New York, which are not affiliated with the Company.

Management believes that, in the food service industry, trademarks and
service marks are most effectively protected by constant, continued and evolving
use of various distinctive identifying symbols. The Company is not dependent
upon particular registered marks and does not believe that the registration of
such marks would materially enhance its competitive position, business or
prospects.

The Company provides bagel ovens and kettles and other bagel bakery
equipment to its franchisees and to unaffiliated purchasers and believes that
this equipment is uniquely suited to the production of high quality bagels.
Although the Company modifies and installs this equipment in a proprietary
manner, the Company does not believe these modifications and refinements are
patentable. It is the Company's practice to protect its proprietary dough
conditioner, bagel mix and bagel dough by relying on trade secret laws and
confidentiality agreements. There can be no assurance that the confidentiality
of its trade secrets will be maintained or that others will not independently
develop or obtain access to the same, comparable or improved recipes and
formulas. See "Risk Factors -- Lack of Trademark and Patent Protection."

COMPETITION

The Company competes, and can be anticipated to compete, against well
established food service companies with greater product and name recognition and
with larger financial, marketing and distribution capabilities than the
Company's, as well as innumerable local food establishments that offer similar
products. The food service industry in general, and the take-out sector in
particular, are intensely competitive with respect to food quality, concept,
location, service and price.

The bagel industry is highly fragmented and has traditionally been
dominated by "mom and pop" operators, which, management believes, creates a
unique growth opportunity for the Company's expansion. In addition, there is a
growing number of national, regional and local chains, operating both owned and
franchised bagel stores, including a number of such chains that have indicated
the intention to expand to a national scope. The Company believes that its most
direct competitors are Manhattan Bagel Company, Inc. ("Manhattan"), Einstein
Brothers Bagel, Inc. ("Einstein Brothers"), Bruegger's Corporation
("Bruegger's") and Chesapeake Bagels ("Chesapeake"). Management believes that
Manhattan's retail system currently consists of approximately 160 company owned,
franchised and licensed stores in 15 states; Einstein Brothers' retail system
consists of over 100 company owned and franchised stores in 14 states;
Bruegger's owns and operates 40 retail bagel bakeries with an additional 235
franchised bakeries, and Chesapeake has approximately 119 owned units in
operation.

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<PAGE> 33

Recently, the bagel industry has witnessed both rapid expansion and entry
from large companies not traditionally in the bagel industry. Boston Chicken,
Inc. provided a convertible loan to Einstein Brothers, which under certain
conditions can be converted into a majority equity interest in Einstein
Brothers. Further, Einstein Brothers recently acquired Noah's New York Bagels, a
West Coast chain consisting of approximately 40 stores, and announced plans for
a public offering. Quality Dining Inc. also recently announced its plan to
acquire Bruegger's and BAB Holdings Inc. of Chicago, which owns the Big Apple
Bagels chain ("Big Apple"), recently agreed to acquire Chesapeake.

There are also several regional bagel chains with well under 100 units, all
of which may be expected to compete with the Company, including Big Apple, Big
City Bagel and Bon Jour Bagel Cafe. The Company's stores also compete with
take-out and fast-food restaurants, delicatessens and prepared food stores,
bakeries, supermarkets and convenience stores. The Company believes that the
start-up costs associated with opening a retail food establishment offering
similar products on a stand-alone basis are competitive with the start-up costs
associated with commencing a Goldberg's or Sammy's store and accordingly, such
start-up costs are not an impediment to entry into the retail bagel business.
See "Risk Factors -- Competition; Ease of Entry into Business."

As a franchiser, the Company competes for qualified franchisees with a wide
variety of other investment opportunities both within and outside of the food
service industry. Management believes that the consistent quality of its
products, the efficiency of its operating systems, its proprietary ingredients,
its equipment and its franchisee support arrangements will permit it to compete
effectively, particularly against other franchisers of bagel stores.

ADVERTISING

The Company presently advertises and plans to continue advertising, its
franchises in current stores, franchise trade shows, newspapers and business
opportunity magazines. The Company and its franchisees also advertise products
in newspapers, through direct mailing and on radio and television. See
"-- Franchising."

The Company administers promotional funds ("Promotional Funds") to support
promotion and marketing programs designed to expand awareness of and demand for
Goldberg's and Sammy's products. Each Promotional Fund furnishes Goldberg's or
Sammy's franchisees, as the case may be, with promotional, advertising and
marketing materials, which may include such items as direct mail pieces, media
materials and brochures. The Company retains sole discretion over creative
concepts, materials and endorsements used in the Promotional Funds' programs and
over associated geographic, market and media placement and allocation. The
Promotional Funds may pay the cost of preparing materials, employing advertising
agencies and administering regional and local promotional and advertising
programs and public relations activities.

Franchisees are obligated to contribute to the appropriate Promotional Fund
a promotional fee equal to 1% of gross sales.

In the future, franchisees also may be required to participate in local or
regional advertising cooperatives. The cooperatives are expected to be made up
of franchisees within a given Designated Market Area for the purpose of pooling
advertising funds in order to purchase advertising effectively and efficiently.
Each franchisee will be entitled to one vote within the cooperative for each
store owned, and advertising purchases will be determined by majority vote.
Contributions will be determined by the members of each cooperative, and will
range from a required minimum of 1% of gross sales. Stores owned and operated by
the Company are required to contribute to the promotional funds and to
participate in advertising cooperatives on the same basis as franchised stores
within the same Designated Market Areas.

Each franchisee is responsible for developing local advertising and
promotional materials, all of which are subject to prior review and approval by
the Company.

RENEGOTIATION OF CERTAIN ACQUISITION TERMS

Total consideration for the acquisition of the Goldberg Companies consisted
of cash, a two-year promissory note, stock, and a two-year consulting contract
with Howard Goldberg. In connection with this

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<PAGE> 34

acquisition, the Company also agreed to lease certain premises owned by Mr.
Goldberg for use as its equipment warehouse and executive offices, and Mr.
Goldberg entered into a noncompetition agreement with the Company for a term
extending for two years after the termination or expiration of his consulting
agreement with the Company. See "-- History of the Company."

Subsequent to the acquisition of the Goldberg Companies by the Company,
various elements of the transaction were renegotiated by the parties. This
renegotiation reflected a number of intervening events, including Mr. Goldberg's
default under the mortgage on the property occupied by the Company pursuant to
the original acquisition agreement, various financial disputes between the
Company and Mr. Goldberg, Mr. Goldberg's desire to decrease his time commitment
to the Company, and the Company's desire to extend the term of Mr. Goldberg's
noncompetition agreement with the Company.

An additional renegotiation of matters relating to the acquisition of the
Goldberg Companies or arising in connection therewith was concluded in October
1995. The terms of this reconciliation included the satisfaction of certain
alleged defaults by the Company to Mr. Goldberg, the satisfaction of certain
defaults by Mr. Goldberg under the mortgage on the property occupied by the
Company, the reconciliation and settlement of outstanding financial matters,
certain modifications of Mr. Goldberg's consulting Agreement and an extension of
Mr. Goldberg's noncompetition agreement with the Company to December 31, 1997.

On August 12, 1996, the Company and Mr. Goldberg entered into certain
additional agreements, reflected in a Modification and Settlement Agreement,
addressing all matters relating to the acquisition of the Goldberg Companies or
arising in connection therewith. Among other things, pursuant to this
Modification and Settlement Agreement Mr. Goldberg has agreed to convert 65,000
shares of his Series A Preferred Stock to an equal number of shares of the
Company's Common Stock and to surrender for cancellation the remaining 115,000
shares of Series A Preferred Stock currently held by him no later than five
business days following the closing of the Offering and the Company has agreed
to pay to Mr. Goldberg the amount of $25,000 and to assign certain claims to and
provide indemnification for certain claims that may be made against Mr. Goldberg
and the Goldberg Companies. In addition, the parties have agreed to (i) a
restatement and extension to three years of Mr. Goldberg's noncompetition
agreement and a restatement of prior agreements relating to use of trade dress;
(ii) the grant of mutual releases; and (iii) the termination of the franchise
and consulting agreements currently in effect between the Company and Mr.
Goldberg.

GOVERNMENT REGULATION

The Company and its franchisees are required to comply with federal, state,
and local government regulations applicable to consumer food service businesses
generally, including those relating to the preparation and sale of food, minimum
wage requirements, overtime, working and safety conditions, and citizenship
requirements, as well as regulations relating to zoning, construction, health,
business licensing and employment. The Company believes that it and its
franchisees are in material compliance with these provisions. Continued
compliance with this broad federal, state and local regulatory network is
essential and costly and the failure to comply with such regulations may have an
adverse effect on the Company and its franchisees. See "Risk
Factors -- Government Regulation."

The Company's franchise operations are subject to regulation by the Federal
Trade Commission ("FTC") in compliance with the FTC's rule entitled "Disclosure
Requirements and Prohibitions Concerning Franchising and Business Opportunity
Ventures," which requires, among other things, that the Company prepare and
update periodically a comprehensive disclosure document, known as the Uniform
Franchise Offering Circular ("UFOC"), in connection with the sale and operation
of its franchises. In addition, some states require a franchiser to register its
franchise with the state before it may offer the franchise. The Company believes
that its UFOC, together with any applicable state versions or supplements,
complies with both the FTC guidelines and all applicable state laws regulating
franchising in those states in which it has offered franchises.

In addition to the rules governing the offer and sale of franchises, the
Company is also subject to a number of state laws, as well as foreign laws (to
the extent it offers franchises outside of the United States), that regulate
substantive aspects of the franchiser-franchisee relationship, including, but
not limited to, those

31
<PAGE> 35

concerning termination and non-renewal. Currently, 18 states, the District of
Columbia, Puerto Rico and the Virgin Islands, have franchise termination and
non-renewal laws. These laws govern the termination and/or non-renewal of the
franchise agreement and, by and large, require the franchiser to have good
cause, reasonable cause or just cause in order to terminate the franchise
agreement or not to renew the franchise agreement. In addition, some of these
laws provide for longer cure periods than currently contemplated by the
Company's franchise agreements.

Each store will be subject to regulation by federal agencies and to
licensing and regulation by state and local health, sanitation, safety, fire and
other departments. Difficulties in obtaining or the failure to obtain required
licenses or approvals could delay or prevent the opening of a new store. The
Company believes that it is in substantial compliance with the applicable laws
and regulations governing its operations.

While the Company intends to comply with all federal, state and foreign
laws and regulations, there can be no assurance that it will continue to meet
the requirements of such laws and regulations, which, in turn, could result in a
withdrawal of approval to franchise in one or more jurisdictions. Any such loss
of approval would have a material adverse effect upon the Company's ability to
successfully market its franchises. Violations of franchising laws and/or state
laws and regulations regulating substantive aspects of doing business in a
particular state could subject the Company and its affiliates to rescission
offers, monetary damages, penalties, imprisonment and/or injunctive proceedings.
The state laws and regulations concerning termination and non-renewal of
franchisees are not expected to have a material impact on the Company's
operations. In addition, under court decisions in certain states absolute
vicarious liability may be imposed upon franchisers based upon claims made
against franchisees. The Company currently does not carry insurance against such
claims although it intends to obtain coverage in the future. However, there can
be no assurance that the Company will be able to obtain such coverage or that
such coverage will be sufficient to cover claims against the Company. Further,
there can be no assurance that existing or future franchise regulations will not
have an adverse effect on the Company's ability to expand its franchise program.

PROPERTIES

The Company's executive offices are located at 9 Law Drive, Fairfield, New
Jersey 07006. The Company first occupied this location on January 1, 1995. The
headquarters consist of approximately 3,425 square feet. The Company's lease on
its headquarters location commenced January 1, 1995 and expires on February 28,
2000. The lease provides a renewal option of one five-year term. The Company
also rents 3,800 square feet of industrial space in Lodi, New Jersey, for use as
a bagel producing commissary, and for the distribution and assembly of its
equipment. The commissary operates under kosher supervision and produces bagels
for all Company-owned and franchised Sammy's stores. See "-- Kosher
Certification and Supervision." The Company believes the commissary is adequate
to its production needs through the end of 1996, but thereafter will be
inadequate to fulfill such needs.

The Company purchases bagel bakery equipment from outside vendors for
distribution to Company-owned and franchised stores either directly from the
manufacturer or in one consolidated shipment from the Company's Lodi warehouse.
The Lodi facility currently is operating at full capacity, and management
expects that additional space will be needed for the Company to continue to
effectively distribute equipment to its franchisees.

The Company intends to consolidate its current executive offices,
commissary operations, and equipment warehousing, in one central facility as
soon as practicable after the completion of the Offering described herein. The
Company is now investigating several suitable sites in the central New Jersey
area, and expects to lease a facility of approximately 15,000 square feet, of
which 5,000 will be devoted to executive offices, 8,000 to the bagel commissary,
and 2,000 to the warehousing of bagel equipment. Such a facility is expected to
be adequate to the Company's needs for the foreseeable future. See "Use of
Proceeds."

32
<PAGE> 36

The following table sets forth the location, size and certain information
pertaining to the lease, on each of the Company's three Goldberg's stores (two
of which are operating and one of which is under development and projected to
open no later than September 30, 1996), two Sammy's stores and its commissary.

<TABLE>
<CAPTION>
LEASE TERMS
AREA --------------------------------------
LOCATION CONCEPT (SQ. FT.) COMMENCEMENT EXPIRATION RENEWALS
- --------------------------------------- ----------- --------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
1443 Queen Anne Road, Teaneck, NJ...... Sammy's 750 08/01/91 07/31/03 None
60 Dutch Hill Road, Orangeburg, NY..... Goldberg's 1,400 06/01/92 05/31/97 One five
year term
40 N. James Road, Columbus, Ohio....... Sammy's 2,600 11/01/93 10/31/03 None
10 Dell Glen Avenue, Lodi, NJ.......... Commissary 3,800 10/01/93 04/30/98 One five
year term
197 Bleecker Street, New York, NY...... Goldberg's 1,260 11/01/94 10/31/03 None
Rockland Plaza Space #25, Nanuet, NY... Goldberg's 1,961 07/01/95 06/30/05 None
</TABLE>

EMPLOYEES

At July 31, 1996, the Company had 76 employees, consisting of 44 full-time
and 32 part-time employees. The Company has never experienced a work stoppage
and no employees are represented by any labor union. The Company believes that
its employee relations are good.

LEGAL PROCEEDINGS

From time to time the Company is involved in litigation arising in the
ordinary course of its business. The Company is not currently engaged in any
legal proceedings which are expected, individually or in the aggregate, to have
a material adverse effect on the Company.

33
<PAGE> 37

MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY PERSONNEL

The current directors, executive officers and key personnel of the Company
are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH THE COMPANY
- -------------------------------------------------- --- ----------------------------------------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
Andrew Thorburn................................... 54 Chairman of the Board, President and
Chief Executive Officer
Chris R. Decker................................... 49 Director, Executive Vice President, CFO
and Chief Administrative Officer
John Chitvanni.................................... 47 Director
Anthony G. Foster................................. 39 Chief Operating Officer
Guy McNeil........................................ 37 Vice President, Operations
KEY PERSONNEL
Raymond Johnson................................... 30 District Manager
Larry Wiese....................................... 30 Director of Design and Equipment
Tom Lisker........................................ 64 Consulting Advertising Director
</TABLE>

Each director is elected to hold office until the next annual meeting of
shareholders and until his successor is elected and qualified or until his
earlier resignation or removal. All officers serve at the discretion of the
Board of Directors.

The following sets forth certain biographical information with respect to
the directors, executive officers and key employees of the Company.

DIRECTORS AND EXECUTIVE OFFICERS

ANDREW THORBURN has been President, Chief Executive Officer and Chairman of
the Board of Directors of the Company since October 1993. From 1987 until
October 1993, he was President of All American Enterprises, Inc., Somerset, New
Jersey, an unrelated company that was the franchiser of Treats Bakery Stores
("Treats") and Perkits Frozen Yogurt ("Perkits"). From December 1994 to February
23, 1996, he served as Chairman of the Board of Blue Chip Computerware, Inc.
("Blue Chip"), which became a shareholder of the Company on July 1, 1994. See
"Principal Shareholders." He also has served as Chairman, President and Chief
Executive Officer of Jutland Enterprises Inc., founder of the Company,
commencing in March 1988. He has been in the food industry since 1985. Prior to
1985, he was Chief Marketing Officer of H.C. Copeland and Associates, Inc., a
subsidiary of the Travelers Insurance Company, which he helped to develop from a
start-up venture into a national sales company with 600 employees.

CHRIS R. DECKER became Chief Financial and Administrative Officer of the
Company in May 1995, after serving for two years, first as a Divisional
Controller and later Assistant Corporate Controller, for Leslie Fay Corporation,
a leading apparel manufacturer. Previously, Mr. Decker, a certified public
accountant, worked with Mr. Thorburn as a consultant to various franchised food
operations, including Arby's and Schlotsky's. From 1988 to 1993, he and Mr.
Thorburn were chief operating officers and franchisers of Treats and Perkits.
Prior to that time, Mr. Decker had worked for eight years at Deloitte & Touche,
where he served as an audit supervisor during his last two years.

JOHN CHITVANNI joined the Company's Board of Directors in March 1994. He
has been President of National Restaurant Search, a national search firm in the
hospitality industry, since 1981. He has 25 years of experience in the food
industry and previously was employed by Brigham's, Inc. and as a Regional
Manager for Dunkin Donuts Corp. Mr. Chitvanni attended Boston State College. He
has served as a guest speaker at industry conventions, written articles for
various industry publications and was a contributing author for the book "Dining
in Corporate America."

ANTHONY G. FOSTER has been Chief Operating Officer of the Company since
January 1, 1996. Prior to that time, he spent five years with Arby's Inc., where
he had most recently been Vice President of Franchising and he previously served
as National Franchise Director for McMaid, Inc. and United Consumers Club of

34
<PAGE> 38

Mericille, Indiana. From 1982 to 1986, Mr. Foster was with the 7-Eleven Division
of Southland Corporation, where he was responsible for all franchise development
in New England and approximately 40% of the personnel function for the 425
stores and corporate offices in the Northeast Division. He received his BS in
Management and Industrial Relations from the University of Bridgeport.

GUY MCNEIL became Vice President, Operations, of the Company in November
1995. From October 1994 until November 1995, Mr. McNeil was a consultant in the
food service industry and actively involved in personal business ventures for
his own account. Until October, 1994, he was Director of Operations for Mrs.
Field's Cookies, where he supervised 142 stores and 12 district managers in the
Northeastern U.S. and Canada. From 1984 through 1989, he was the East Coast
Director of Village Inn Restaurants, where he was responsible for 26 stores and
four area managers in Eastern and Central Florida. Mr. McNeil earned his
business degree at Muskingum College in New Concord, Ohio.

In addition to the foregoing directors, for a period of five years
following completion of the Offering, the Underwriter has the right, at its
option, to designate one member of the Board of Directors or a nonvoting
representative to the Board. As of the date hereof, the Underwriter had not made
any such designation. See "Underwriting."

KEY PERSONNEL

RAYMOND JOHNSON has been with the Company as District Manager since March
25, 1996. His prior food service experience includes the development and
successful operation of restaurants under the Rainbow Cafe (Charlotte, NC), T.G.
Armadillos (Harrisonburg, VA) and Ball Meade (Harrisonburg, VA) concepts between
1986 and 1995. Mr. Johnson attended James Madison University where he majored in
Hotel and Restaurant Management.

LARRY WIESE has been with the Company as Director of Design and Equipment
since its formation and, from 1990 until 1993 was employed by the Howberg
Equipment Company, one of the Company's predecessor companies, where he was
responsible for purchasing, shipping, and scheduling for construction and
installation of bagel equipment nationally.

TOM LISKER has been associated with the Company and its predecessors since
1986 in his capacity as a principal of LGS, Inc., an advertising agency located
in New York City. Mr. Lisker serves as a consultant to the Company on
advertising and promotional campaigns, public relations and the development of
store design and concepts. He has extensive experience in the food service
industry and has provided advertising, public relations and promotional advice
for a number of clients within the industry, including General Foods, General
Mills, Howard Johnson's and Lum's Restaurants.

DIRECTORS' COMPENSATION

Directors of the Company currently receive no compensation for their
service as such.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

As permitted pursuant to the corporate law of the State of New Jersey, the
Company's state of incorporation, the Charter and By-Laws require that the
Company indemnify its directors and officers against certain liabilities
incurred in their service in such capacities to the fullest extent permitted by
applicable law. These provisions would provide indemnification for liabilities
arising under the federal securities laws to the extent that such
indemnification is found to be enforceable under, and to be in accordance with
applicable law. In addition, as permitted by New Jersey law, the Charter
eliminates the personal liability of the directors and officers to the Company
or its shareholders for monetary damages for breaches of such director's or
officer's duty of care or other duties as a director or officer; except
liabilities for any breach of duty based upon an act or omission (a) in breach
of such person's duty of loyalty to the corporation or its shareholders, (b) not
in good faith or involving a knowing violation of law or (c) resulting in
receipt by such person of an improper personal benefit. This limitation on
liability could have the effect of limiting directors' and officers' liabilities
for violations of the federal securities laws.

35
<PAGE> 39

OMNIBUS STOCK PLAN

The Company has adopted the All American Food Group, Inc. Omnibus Stock
Plan (the "Plan") to promote the long-term growth and profitability of the
Company by (i) providing key directors, officers and employees of the Company
and its subsidiaries with incentives to improve shareholder value and contribute
to the growth and financial success of the Company and (ii) enabling the Company
to attract, retain and reward the best available persons for positions of
substantial responsibility. As described more fully below, the Plan provides for
grants of options to purchase specified numbers of shares of Common Stock at
predetermined prices.

The following discussion represents only a summary of certain of the Plan
terms and is qualified in its entirety by reference to the complete Plan, a copy
of which has been filed as an exhibit to the Registration Statement of which
this Prospectus forms a part.

Shares Available; Maximum Awards; Participants. A total of 150,000 shares
of the Company's Common Stock has been reserved for issuance pursuant to options
granted pursuant to the Plan. The Plan allows the Company to grant options to
employees, officers and directors of the Company and its subsidiaries; provided
that only employees of the Company and its subsidiaries may receive incentive
stock options under the Plan. The Company has not granted, and prior to
completion of the Offering does not expect to grant, any options.

Stock Option Features. Under the Plan, options to purchase the Company's
Common Stock may take the form of incentive stock options ("ISOs") under Section
422 of the Internal Revenue Code of 1986, as amended (the "Code") or
nonqualified stock options ("NQSOs"). As required by Section 422 of the Code,
the aggregate fair market value (as defined in the Plan) of shares of Common
Stock (determined as of the date of grant of the ISO) with respect to which ISOs
granted to an employee are exercisable for the first time in any calendar year
may not exceed $100,000. The foregoing limitation does not apply to NQSOs.

Initially, each option will be exercisable over a period, determined by the
Board of Directors or the Compensation Committee of the Board of Directors of
the Company, in its discretion, of up to ten years from the date of grant.
Options may be exercisable during the option period at such time, in such
amounts, and in accordance with such terms and conditions and subject to such
restrictions as are determined by the Board or the Compensation Committee and
set forth in option agreements evidencing the grant of such options; provided
that no option may be exercisable less than six months from its date of grant.

The exercise price of options granted pursuant to the Plan is determined by
the Board or the Compensation Committee, in its discretion; provided that the
exercise price of an ISO may not be less than 100% of the fair market value (as
defined in the Plan) of the shares of the Company Common Stock on the date of
grant. The exercise price of options granted pursuant to the Plan is subject to
adjustment as provided in the Plan to reflect stock dividends, splits, other
recapitalizations or reclassifications or changes in the market value of the
Company Common Stock. In addition, the Plan provides that, in the event of a
proposed change in control of the Company (as defined in the Plan), the Board or
the Compensation Committee is to take such actions as it deems appropriate to
effectuate the purposes of the Plan and to protect the grantees of options,
which action may include (i) acceleration or change of the exercise dates of any
option; (ii) arrangements with grantees for the payment of appropriate
consideration to them for the cancellation and surrender of any option; and
(iii) in any case where equity securities other than Common Stock are proposed
to be delivered in exchange for or with respect to Common Stock, arrangements
providing that any option shall become one or more options with respect to such
other equity securities. Further, in the event the Company dissolves and
liquidates (other than pursuant to a plan of merger or reorganization), then
notwithstanding any restrictions on exercise set forth in the Plan or any grant
agreement pursuant thereto (i) each grantee shall have the right to exercise his
option at any time up to ten days prior to the effective date of such
liquidation and dissolution; and (ii) the Board or the Compensation Committee
may make arrangements with the grantees for the payment of appropriate
consideration to them for the cancellation and surrender of any option that is
so canceled or surrendered at any time up to ten days prior to the effective
date of such liquidation and dissolution. The Board or the Compensation
Committee also may establish a different period (and different conditions) for
such exercise, cancellation, or surrender to avoid subjecting the grantee to
liability under Section 16(b) of the Exchange Act.

36
<PAGE> 40

The shares purchased upon the exercise of an option are to be paid for by
the optionee in cash or cash equivalents acceptable to the Compensation
Committee. In addition, the Plan provides for broker-assisted cashless exercises
in the discretion of the Compensation Committee.

Except as permitted pursuant to Rule 16b-3 under the Exchange Act, and in
any event in the case of an ISO, an option is not transferable except by will or
the laws of descent and distribution. In no case may the options be exercised
later than the expiration date specified in the option agreement.

Plan Administration. The Plan initially will be administered by the Board
of Directors or a Compensation Committee of the Board of Directors. At such
time, if any, as the Company is required to register pursuant to Section 12 of
the Exchange Act, the Plan will be administered by a Compensation Committee of
the Board of Directors, which will consist of at least two directors who are
"disinterested persons" within the meaning of Rule 16b-3, and "outside
directors" within the meaning of Section 162(m) of the Code. While members of
the Compensation Committee, directors are not permitted to receive discretionary
grants of options pursuant the Plan.

The Compensation Committee will decide when and to whom to make grants, the
number of shares to be covered by the grants, the vesting schedule, the type of
awards and the terms and provisions relating to the exercise of the awards. The
Compensation Committee may interpret the Plan and may at any time adopt such
rules and regulations for the Plan as it deems advisable. The Board of Directors
may at any time amend or terminate the Plan and change its terms and conditions,
except that, without shareholder approval, no such amendment may (i) materially
increase the maximum number of shares as to which awards may be granted under
the Plan; (ii) materially increase the benefits accruing to Plan participants;
or (iii) materially change the requirements as to eligibility for participation
in the Plan.

Accounting Effects. Under current accounting rules, neither the grant of
options at an exercise price not less than the current fair market value of the
underlying Common Stock, nor the exercise of options under the Plan, is expected
to result in any charge to the earnings of the Company.

Certain Federal Income Tax Consequences. The following is a brief summary
of certain Federal income tax aspects of awards under the Plan based upon the
Federal income tax laws in effect on the date hereof. This summary is not
intended to be exhaustive and does not describe state or local tax consequences.

Incentive Stock Options. An optionee will not realize taxable income upon
the grant of an ISO. In addition, an optionee will not realize taxable income
upon the exercise of an ISO, provided that such exercise occurs no later than
three months after the optionee's termination of employment with the Company
(one year in the event of a termination on account of disability). However, an
optionee's alternative minimum taxable income will be increased by the amount
that the fair market value of the shares acquired upon exercise of an ISO,
generally determined as of the date of exercise, exceeds the exercise price of
the option. If an optionee sells the shares of Common Stock acquired upon
exercise of an ISO, the tax consequences of the disposition depend upon whether
the disposition is qualifying or disqualifying. The disposition of the shares is
qualifying if made more than two years after the date the ISO was granted and
more than one year after the date the ISO was exercised. If the disposition of
the shares is qualifying, any excess of the sale price of the shares over the
exercise price of the ISO would be treated as long-term capital gain taxable to
the option holder at the time of the sale. If the disposition is not qualifying,
i.e., a disqualifying disposition, the excess of the fair market value of the
shares on the date the ISO was exercised over the exercise price would be
compensation income taxable to the optionee at the time of the disposition, and
any excess of the sale price of the shares over the fair market value of the
shares on the date the ISO was exercised would be capital gain.

Unless an optionee engages in a disqualifying disposition, the Company will
not be entitled to a deduction with respect to an ISO. However, if an optionee
engages in a disqualifying disposition, the Company generally will be entitled
to a deduction equal to the amount of compensation income taxable to the
optionee.

Nonqualified Stock Options. An optionee will not realize taxable income
upon the grant of an NQSO. However, when the optionee exercises the NQSO, the
difference between the exercise price of the NQSO and the fair market value of
the shares acquired upon exercise of the NQSO on the date of exercise is
compensation income taxable to the optionee. The Company generally will be
entitled to a deduction equal to the amount of compensation income taxable to
the optionee.

37
<PAGE> 41

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following summary compensation table sets forth certain information
regarding compensation paid during each of the indicated fiscal periods to the
person serving as the Company's Chief Executive Officer during the last year. No
executive officers received salary and bonus in an amount exceeding $100,000
during any of the fiscal periods.

<TABLE>
<CAPTION>
NAME AND FISCAL ANNUAL
PRINCIPAL POSITION PERIOD(1) SALARY
---------------------------------------------------------- --------- -------
<S> <C> <C>
Andrew Thorburn, Chief Executive Officer.................. 1996 $13,000
1995 $39,000
1994 $26,000
1993 $ 0
</TABLE>

- ---------------
(1) The Company's 1996 fiscal period was from November 1, 1995 to January 31,
1996, its 1995 fiscal period was from February 1, 1995 to October 31, 1995,
its 1994 fiscal period was from February 1, 1994 through January 31, 1995
and its 1993 fiscal period was from September 27, 1993 (inception) through
January 31, 1994.

CERTAIN TRANSACTIONS

During 1994, the Company entered into a series of capital transactions with
Blue Chip Computerware, Inc. ("Blue Chip"), then an unaffiliated third party, as
a consequence of which Blue Chip became the Company's principal shareholder. In
two transactions on July 1, 1994 and August 15, 1994, Blue Chip acquired a total
of 1,200,000 shares of the Company's Common Stock, representing approximately
44% of the Company's then-outstanding Common Stock, for total consideration
consisting of 100,000 shares of the common stock of Jutland Enterprises, Inc.,
previously acquired by Blue Chip from the Company's founder, 400,000 shares of
Blue Chip common stock and $50,000 cash. Thereafter, the Company sold the
400,000 shares of Blue Chip common stock to an unaffiliated purchaser for total
consideration of $650,000.

In December 1994, Andrew Thorburn, the Chairman, President and Chief
Executive Officer of the Company, was elected to the Board of Directors of Blue
Chip and shortly thereafter was elected as Chairman of the Blue Chip Board of
Directors, a non-executive position. Mr. Thorburn served in this capacity until
his resignation on February 23, 1996. Mr. Thorburn received no compensation for
his services as a member or Chairman of the Blue Chip Board of Directors.

In March of 1995, the Company exchanged 825,000 shares of its Series C
redeemable Convertible Preferred Stock for 825,000 shares of its Common Stock
owned by Blue Chip. Subsequently, during 1995, Blue Chip purchased an additional
475,000 shares of the Series C Preferred Stock for which the Company received
aggregate consideration of $475,000. During 1996, the Company voluntarily
redeemed 402,000 shares of the Series C Preferred Stock held by Blue Chip at a
price of $1.00 per share. See "Description of Securities -- Preferred Stock."

The Company believes the each of the foregoing transactions has been on
terms no less favorable to the Company than those that could have been obtained
from unaffiliated parties. It is the Company's intent that, in the future,
transactions with affiliated parties will be approved by a majority of the
Company's disinterested directors or otherwise as permitted by applicable law.
Any such future transactions are expected to be on terms no less favorable to
the Company than could be obtained from unaffiliated parties.

38
<PAGE> 42

PRINCIPAL SHAREHOLDERS

The following table sets forth, as of July 31, 1996, certain information as
to the beneficial ownership of Common Stock of each of the Company's directors,
all officers and directors as a group, and each person known by the Company to
be the beneficial owner of more than 5% of the Company's Common Stock.

<TABLE>
<CAPTION>
PERCENTAGE
AMOUNT AND NATURE OF OF COMMON STOCK
BENEFICIAL OWNERSHIP ------------------------
NAME AND ADDRESS OF IMMEDIATELY BEFORE BEFORE AFTER
BENEFICIAL STOCKHOLDER OFFERING(1)(2) OFFERING OFFERING(3)
----------------------- --------------------- -------- -----------
<S> <C> <C> <C>
Andrew Thorburn......................................... 702,399 18.80% 16.11%
9 Law Drive
Fairfield, NJ 07006
Chris R. Decker......................................... 200,421(4) 5.23% 4.49%
9 Law Drive
Fairfield, NJ 07006
John Chitvanni.......................................... 60,465(5) 1.60% 1.37%
910 West Lake Street
Roselle, IL 60172
Anthony G. Foster....................................... 10,000(6) * *
9 Law Drive
Fairfield, NJ 07006
Guy McNeil.............................................. 10,000(7) * *
9 Law Drive
Fairfield, NJ 07006
Blue Chip Computerware, Inc............................. 739,203(8) 17.47% 15.22%
33 Dubon Court
Farmingdale, NY 11735
Mario and Ann Caputo.................................... 200,000(9) 5.35% 4.59%
3 Libby Road
Norwalk, CT 06850
All officers and directors as a group (6 persons)....... 983,285(10) 25.31% 21.81%
</TABLE>

- ---------------
* Less than 1%.
(1) Except as otherwise indicated, each of the parties listed has sole voting
and investment power with respect to all shares of Common Stock indicated.
Beneficial ownership is calculated in accordance with Rule 13-d-3(d) under
the Exchange Act.
(2) Unless otherwise indicated, shares held are Common Stock.
(3) Assumes that the listed shareholders will continue to hold the shares
currently held thereby after completion of the Offering.
(4) Consists of 100,421 shares of Common Stock and currently exercisable
options (expiring January 1, 2001) to purchase 100,000 shares of Common
Stock at $1.00 per share.
(5) Consists of 465 shares of Common Stock and currently exercisable options
(expiring November 1, 2000) to purchase 50,000 shares of Common Stock at a
per share price of $1.00 held by Mr. Chitvanni and 10,000 shares of Common
Stock held jointly by Mr. Chitvanni and his spouse. The 10,000 jointly-held
shares are being offered for sale in the Concurrent Offering, subject to
Mr. Chitvanni's agreement to refrain from selling any such shares during
the 13-month period commencing with the date of this Prospectus except with
the consent of the Underwriter. In the event that all such shares were
sold, Mr. Chitvanni would beneficially own 50,465 shares of Common Stock,
representing 1.16% of the Common Stock outstanding immediately subsequent
to the Offering. See "Underwriting" and "Concurrent Offering."
(6) Does not include 13,000 shares of Common Stock owned by Mr. Foster's
mother-in-law, who shares Mr. Foster's residence. Mr. Foster disclaims
beneficial ownership of these shares. All of the shares owned by Mr. Foster
and his mother-in-law are being offered for sale in the Concurrent
Offering, subject to Mr. Foster's agreement to refrain from selling any of
the 10,000 shares owned directly by him during the 13-month period
commencing with the date of this Prospectus except with the consent of the
Underwriter. In the event that all such shares were sold, Mr. Foster would
beneficially own no shares of Common Stock. See "Underwriting" and
"Concurrent Offering."
(7) All such shares are being offered for sale in the Concurrent Offering,
subject to Mr. McNeil's agreement to refrain from selling any such shares
during the 13-month period commencing with the date of this Prospectus
except with the consent of the Underwriter. In the event that all such
shares were sold, Mr. McNeil would beneficially own no shares of Common
Stock. See "Underwriting" and "Concurrent Offering."
(8) Consists of 236,200 shares of Common Stock and 466,203 shares of Series C
Convertible Preferred Stock held by Blue Chip Computerware, Inc. and 5,900
shares of Common Stock and 30,900 shares of Series C Preferred Stock held
individually by the President of Blue Chip Computerware, Inc.
(9) Consists of 100,000 shares of Common Stock individually held by each of
Mario and Ann Caputo, husband and wife. All such shares are being offered
for sale in the Concurrent Offering. See "Concurrent Offering."
(10) Includes all shares reflected above as beneficially owned by Messrs.
Thorburn, Decker, Chitvanni, Foster and McNeil.

39
<PAGE> 43

DESCRIPTION OF SECURITIES

GENERAL

The authorized capital stock of the Company consists of an aggregate of
24,000,000 shares of capital stock, consisting of 20,000,000 shares of Common
Stock, no par value, and 4,000,000 shares of Preferred Stock, no par value. As
of April 30, 1996, there were outstanding 3,735,200 shares of Common Stock and
190,000, 180,000, and 982,503 shares of Series A, Series B and Series C
Preferred Stock, respectively.

COMMON STOCK

Holders of Common Stock have one vote per share on each matter submitted to
a vote of the shareholders. Holders of the Common Stock do not have preemptive
rights to purchase additional shares of Common Stock or other subscription
rights. The Common Stock carries no conversion rights and is not subject to
redemption or to any sinking fund provisions. All shares of Common Stock are
entitled to share equally in dividends from legally available sources as
determined by the Board of Directors, subject to any preferential dividend
rights of the Preferred Stock (described below). Upon dissolution or liquidation
of the Company, whether voluntary or involuntary, holders of the Common Stock
are entitled to receive assets of the Company available for distribution to the
stockholders, subject to the preferential rights of the Preferred Stock. As of
April 30, 1996, there were 297 holders of record of the Company's Common Stock.

PREFERRED STOCK

Preferred Stock may be issued from time to time in one or more series. The
Board of Directors is authorized to determine the rights, preferences,
privileges and restrictions granted to, and imposed upon any series of Preferred
Stock and to fix the number of shares of any series of Preferred Stock and the
designation of any such series, subject, to the consent of the existing holders
of preferred stock, in certain instances. The issuance of Preferred Stock could
be used, under certain circumstances, as a method of preventing a takeover of
the Company and could permit the Board of Directors, without any action of the
holders of the Common Stock to issue Preferred Stock which could have a
detrimental effect on the rights of holders of the Common Stock, including loss
of voting control. Anti-takeover provisions that could be included in the
Preferred Stock when issued may depress the market price of the Company's
securities and may limit stockholders' ability to receive a premium on their
shares of Common Stock by discouraging takeover and tender offer bids.

The Company has issued three series Preferred Stock, designated Series A
Partially Redeemable Convertible Preferred Stock ("Series A Preferred Stock"),
Series B Redeemable Convertible Preferred Stock ("Series B Preferred Stock") and
Series C Convertible Preferred Stock ("Series C Preferred Stock" and,
collectively with the Series A Preferred Stock and the Series B Preferred Stock,
"Convertible Preferred Stock").

Each share of Convertible Preferred Stock is convertible, at the election
of the holder thereof, into shares of the Common Stock of the Company on a
one-for-one basis, subject to adjustment in the event of certain events
including (i) stock dividends, splits and reverse splits; (ii)
reclassifications; (iii) issuances of warrants or rights to holders of Common
Stock at a price per share less than the then-current market price of the Common
Stock (as defined); (iv) other dividends or distributions to shareholders of
assets or evidences of indebtedness; and (v) mergers, consolidations, sales of
all or substantially all of the Company's assets, statutory exchanges of its
securities and similar transactions. The Convertible Preferred Stock has no
preference as to dividends, which are payable only as and when declared by the
Board of Directors, and need not be declared, notwithstanding the declaration of
dividends with respect to any other class or series of the Company's capital
stock. The Convertible Preferred Stock has no preference upon liquidation of the
Company, but instead participates pro rata, on a share-for-share basis, with
shares of Common Stock in respect of any funds otherwise available for
distribution to shareholders upon such liquidation. Holders of Convertible
Preferred Stock have no voting rights, except as required by applicable law.

The Company is obligated to redeem 40,000 shares (or such lesser number of
shares as is then outstanding) of the Series A Preferred Stock at a price of
$5.00 per share in the event that it engages in an

40
<PAGE> 44

underwritten initial public offering of its Common Stock yielding net proceeds
to the Company (after the deduction of offering costs, commissions, attorneys'
fees and other costs and expenses associated therewith) of more than $2,000,000.
However, on August 12, 1996, the Company and Howard Goldberg, the holder of
180,000 shares of Series A Preferred Stock, entered into a Modification and
Settlement Agreement pursuant to which, among other things, Mr. Goldberg agreed
to convert 65,000 shares of Series A Preferred Stock to an equal number of
shares of Common Stock and to surrender his remaining Series A shares. See
"Business -- Renegotiation of Certain Acquisition Terms."

The Company is obligated to redeem 60,000 shares (or such lesser number of
shares as is then outstanding) of the Series B Preferred Stock at a price of
$5.00 per share in the event that it receives a capital infusion of more than
$1,000,000 (net of any offering costs, commissions, attorneys' fees and other
costs and expenses associated therewith). Therefore, upon completion of the
Offering made hereby, the Company expects to redeem 60,000 such shares. See "Use
of Proceeds." In addition, if the Company engages in an initial public offering
of its Common Stock and shares of Series B Preferred Stock remain outstanding 24
months thereafter, the Company is obligated to redeem 60,000 such shares (or
such lesser number of shares as is then outstanding) at a price of $5.00 per
share. The Company, at its election, also may redeem some or all of the shares
of Preferred Stock outstanding at any time upon payment of a redemption price
equal to $5.00 plus a premium thereon equal to 6% per annum measured from
September 1994 to the effective date of such redemption.

The Series C Preferred Stock is not subject to mandatory redemption by
either the Company or at the election of the holders thereof.

UNDERWRITERS' SHARES

In connection with the completion of this Offering, for nominal
consideration the Company will sell to the Underwriters 24,000 shares of Common
Stock at $0.01 per share. The Company is registering the Underwriters' Shares
pursuant to the Registration Statement of which this prospectus forms a part.
The Underwriters have agreed not to sell any of the Underwriters' Shares for a
minimum of 12 months following completion of the Offering. See "Underwriting"
and "Concurrent Offering."

TRANSFER AGENT

The transfer agent for the Company's Common and Preferred Stock is
Continental Stock Transfer and Trust Company.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have outstanding an
aggregate of 4,359,200 shares of Common Stock which includes the 600,000 shares
offered hereby and the Underwriters' Shares. Upon completion of the Offering,
the 600,000 Shares issued in the Offering will be freely transferable without
restriction under the Securities Act (excluding any shares purchased in the
Offering by any person who is or thereby becomes an "affiliate" of the Company).
With respect to the Underwriters' Shares, so long as such shares remain subject
to an effective registration statement, and following any sale pursuant thereto,
such shares will be freely transferable without restriction under the Securities
Act (subject to a contractual limitation on sales of such securities within 12
months following completion of the Offering). All of the 3,735,200 shares
outstanding immediately prior to the Offering were issued in private placements
without registration under the Securities Act and, therefore, are "restricted
securities" as that term is defined in Rule 144 under the Securities Act.

41
<PAGE> 45

without restriction under the Securities Act (subject to a contractual
limitation on sales within six months following completion of the Offering). See
"Concurrent Offering." The remaining 1,961,300 shares of Common Stock
outstanding prior to this Offering are "restricted securities" as that term is
defined under Rule 144. In addition, 240,000 shares underlying currently
outstanding options will, upon issuance, be restricted securities and any shares
of Common Stock issued upon conversion of the 1,352,503 shares of Preferred
Stock outstanding prior to completion of the Offering, prior to the expiration
of the applicable holding period with respect thereto likewise will be
"restricted securities."

In general, under Rule 144, as currently in effect, a person (or persons
whose shares are aggregated) who has satisfied a two-year holding period may
sell within any three-month period a number of restricted shares which does not
exceed the greater of 1% of the then outstanding shares of such class of
securities or the average weekly trading volume during the four calendar weeks
prior to such sale. Sales under Rule 144 are also subject to certain
requirements as to the manner of sale, notice and the availability of current
public information about the Company. Rule 144 also permits, under certain
circumstances, the sale of shares by a person who is not an affiliate of the
Company with respect to restricted securities that satisfy a three-year holding
period, without regard to the volume or other resale limitations.

The Company is unable to predict the effect that sales of Private Placement
Shares, the Underwriters' Shares or sales under Rule 144 may have on the then
prevailing market price of the Common Stock, but such sales may have a
substantial depressing effect on such market price. However, holders of the
1,773,900 Private Placement Shares who are not officers or directors of the
Company have agreed not to sell, assign or transfer any of their shares of
Common Stock for at least six months from the effective date of the Registration
Statement of which this Prospectus forms a part, without the prior consent of
the Underwriter. The officers and directors of the Company have agreed not to,
directly or indirectly, sell, offer to sell, grant an option for the sale of,
transfer, assign, pledge, hypothecate or otherwise encumber any shares of the
Company's Common Stock currently held thereby for 13 months from the effective
date of the Registration Statement of which this Prospectus forms a part. The
Underwriters have agreed not to sell, assign or transfer any of the
Underwriters' Shares for 12 months from the effective date of the Registration
Statement. The remaining 1,961,300 shares of Common Stock that will be
"restricted securities" immediately subsequent to the Offering will become
eligible for sale at various times beginning in October 1996. See
"Underwriting."

UNDERWRITING

Westminster Securities Corporation and Myers, Pollack & Robbins, the
Underwriters, have severally agreed, subject to the terms and conditions
contained in the Underwriting Agreement, to purchase 400,000 and 200,000 Shares
of Common Stock, respectively. The Underwriters are committed to purchase and
pay for all of the Shares offered hereby if any are purchased. The Common Stock
is being offered by the Underwriters subject to prior sale, when, as and if
delivered to and accepted by the Underwriters and subject to approval of certain
legal matters by counsel and to certain other conditions, such as no adverse
changes in the Company and market conditions.

The Underwriters have advised the Company that they propose to offer the
Common Stock to the public at the initial public offering price set forth on the
cover page of this Prospectus. The Underwriters may allow to certain dealers who
are members of the NASD concessions, not in excess of $ per share, of which
not in excess of $ per share may be reallowed to other dealers who are
members of the NASD. After the commencement of the Offering, the public offering
price, concession and reallowance may be changed by the Underwriters.

The Company has granted the Underwriters an over-allotment option,
exercisable during the 30-day period commencing with the date of this
Prospectus, to purchase from the Company at the initial offering price less
underwriting discounts, up to an aggregate of 90,000 additional shares of Common
Stock for the sole purpose of covering overallotments, if any. The Company will
be obligated, pursuant to this over-allotment option, to sell such additional
shares to the Underwriters.

42
<PAGE> 46

The Company has agreed to pay to the Underwriters a non-accountable expense
allowance of 3% of the gross proceeds of the Offering, of which $55,000 has been
paid as of the date of this Prospectus. The Company has also agreed to pay all
expenses in connection with qualifying the Common Stock offered hereby for sale
under the laws of such states as the Underwriters may designate, including
expenses of counsel retained for such purpose by the Underwriters.

In connection with the Offering, the Company has agreed to sell to the
Underwriters, for nominal consideration, the Underwriters' Shares. The
Underwriters have agreed not to sell any of the Underwriters' Shares for a
minimum of 12 months following completion of the Offering.

The Company will retain Westminster Securities Corporation to provide
investment banking services for a period of 24 months following completion of
the Offering at a monthly fee of $3,000.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.

The Underwriters have informed the Company that they do not expect sales to
any accounts over which they exercise discretionary authority to exceed 5% of
the shares of Common Stock offered by the Company.

The holders of Common Stock outstanding as of the effective date of the
Registration Statement of which this Prospectus forms a part who are officers or
directors of the Company have agreed not to, directly or indirectly, sell, offer
to sell, grant an option for the sale of, transfer, assign, pledge, hypothecate
or otherwise encumber any of such shares of Common Stock (983,285 shares in the
aggregate) for a period of 13 months from the effective date of the Registration
Statement of which this Prospectus forms a part. See "Principal Shareholders."

The Company has agreed with the Underwriters that, except as described in
this Prospectus, for a period of 90 days from the date of this Prospectus, it
will not issue any securities or grant options or warrants to purchase any
securities of the Company without the consent of the Underwriters.

The foregoing does not purport to be a complete statement of the terms and
conditions of the Underwriting Agreement and related documents, copies of which
are on file at the offices of the Underwriters, the Company and the Commission.
See "Additional Information."

PRICING THE OFFERING

Prior to this Offering, there has been no public market for any of the
Company's securities. Consequently, the initial public offering price of the
Common Stock will be determined by negotiation between the Company and the
Underwriters. Factors to be considered in determining such price, in addition to
prevailing market conditions, include an assessment of the Company's prospects.
The public offering price of the Shares does not bear any relationship to the
Company's asset value, earnings, net financial condition, or other established
criteria of value applicable to the Company and should not be regarded as an
indication of the actual value or future market price of the Shares. Such prices
are subject to change as a result of market conditions and other factors, and no
assurance can be given that the Shares can be resold at its public offering
price.

CONCURRENT OFFERING

Concurrently with the offering, the Company is also registering for resale,
from time to time, on behalf of the owners thereof, the Selling Securityholder
Securities consisting of 1,773,900 shares of Common Stock acquired by the
holders thereof in the Company's Private Placements, subject to the contractual
restrictions that the Selling Securityholders who are not officers or directors
of the Company may not sell their shares for six months following completion of
the Offering. The Selling Securityholders who are officers and directors of the
Company have agreed that they will not, directly or indirectly, sell, offer to
sell, grant an option for the sale of, transfer, assign, pledge, hypothecate or
otherwise encumber any shares of the Company's Common Stock currently held
thereby for a period of 13 months from the date of this Prospectus. See
"Management's Discussion and Analysis or Plan of Operation -- Liquidity and
Capital Resources."

43
<PAGE> 47

The Company will not receive any proceeds from sale of securities by the
Selling Securityholders.

LEGAL MATTERS

The validity of the securities offered hereby has been passed upon for the
Company by Dwyer & Canellis. Charles Barkley, Esq., Charlotte, North Carolina
will pass upon certain legal matters for the Underwriters.

EXPERTS

The financial statements of the Company at January 31, 1995 and October 31,
1995 and for the fiscal periods then ended, appearing in this Prospectus and
Registration Statement of which this Prospectus forms a part have been audited
by DelSanto and DeFreitas, Certified Public Accountants, independent auditors,
as set forth in their report thereon appearing elsewhere herein and in the
Registration Statement, and are included in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Commission a registration statement under
the Securities Act with respect to the securities offered by this Prospectus. As
permitted by the rules and regulations of the Commission, this Prospectus does
not contain all the information set forth in the Registration Statement and the
exhibits thereto. For further information with respect to the Company and the
securities offered hereby, reference is made to the Registration Statement and
the exhibits thereto, which may be examined without charge at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 or at the Regional Offices of the Commission at 7 World
Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
may be obtained from the Public Reference Section of the Commission in
Washington, D.C. upon payment of the prescribed fees. Statements contained in
this Prospectus as to the contents of any contract or other documents referred
to herein are not necessarily complete, and in each instance reference is made
to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.

The Company will, upon completion of the Offering, be subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
and, in accordance therewith, will file reports and other information with the
Commission. Such reports and other information may be inspected and copied at
the public reference facilities of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of such materials can be obtained at prescribed
rates from the Commission at such address.

44
<PAGE> 48

ALL AMERICAN FOOD GROUP, INC., AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
AUDITED FINANCIAL STATEMENTS
Report of DelSanto & DeFreitas, Certified Public Accountants......................... F- 2
Consolidated Balance Sheets as of October 31, 1995 and January 31, 1995.............. F- 3
Consolidated Statements of Operations for the Nine Months Ended October 31, 1995 and
the Year Ended January 31, 1995.................................................... F- 4
Consolidated Statements of Cash Flows for the Nine Months Ended October 31, 1995 and
the Year Ended January 31, 1995.................................................... F- 5
Consolidated Statements of Stockholders' (Deficit) Equity for the Nine Months Ended
October 31, 1995 and the Year Ended January 31, 1995............................... F- 6
Notes to Consolidated Financial Statements........................................... F- 7
INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
Consolidated Balance Sheets as of April 30, 1996 and 1995............................ F-21
Consolidated Statements of Operations for the Six Months Ended April 30, 1996 and
1995............................................................................... F-22
Consolidated Statements of Operations for the Three Months Ended April 30, 1996 and
1995............................................................................... F-22
Consolidated Statements of Operations for the Three Months Ended January 31, 1996 and
1995............................................................................... F-22
Consolidated Statements of Cash Flows for the Six Months Ended April 30, 1996 and
1995............................................................................... F-23
Consolidated Statements of Common Stock, Non-Redeemable Preferred Stock and Other
Stockholders' Equity for the Six Months Ended April 30, 1996 and 1995.............. F-24
Notes to Consolidated Financial Statements........................................... F-25
</TABLE>

F-1
<PAGE> 49

REPORT OF CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
All American Food Group, Inc. and Subsidiaries
Fairfield, New Jersey

We have audited the accompanying consolidated balance sheets of All
American Food Group, Inc. (formerly Jutland Food Group, Inc.) and subsidiaries
(Note 1) as of January 31, 1995, and October 31, 1995 and the related
consolidated statements of operations and cash flows for the year ended January
31, 1995, and nine month period ended October 31, 1995 and the consolidated
statements of stockholders' (deficit) equity for the year ended January 31,
1995, and nine month period ended October 31, 1995.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our 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 the audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of All American
Food Group, Inc. and subsidiaries as of January 31, 1995 and October 31, 1995,
the consolidated statements of operations and cash flows and changes in
stockholders' (deficit) equity for the year ended January 31, 1995, and nine
month period ended October 31, 1995 in conformity with generally accepted
accounting principles.

/s/ DelSanto & DeFreitas

DelSanto & DeFreitas
Closter, New Jersey

July 1, 1996

F-2
<PAGE> 50

ALL AMERICAN FOOD GROUP, INC. (FORMERLY JUTLAND FOOD GROUP, INC.)
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
1995 1995
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash.................................................................... $ 53,703 $ 55,472
Accounts and notes receivable, net of allowances for possible losses of
$15,000 and $50,000, respectively...................................... 107,641 95,980
Inventories............................................................. 123,649 182,364
Note Receivable......................................................... 13,505 --
Prepaid expenses........................................................ 45,251 30,000
----------- -----------
Total Current Assets............................................... 343,749 363,816
Property, Plant and Equipment, at cost less accumulated depreciation and
amortization of $145,589 and $134,802, respectively....................... 517,902 711,686
Intangible Assets, net of accumulated amortization of $230,339 and $127,129
respectively.............................................................. 342,117 561,579
Acquisition Costs, net of accumulated amortization of $40,324 and $24,456
respectively.............................................................. 65,427 81,295
Security Deposits........................................................... 30,234 25,185
Note Receivable, long-term.................................................. 39,365 --
Investment in Jutland Enterprises Inc.'s common stock....................... -- --
----------- -----------
Total Assets....................................................... $ 1,338,794 $ 1,743,561
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable -- acquisition............................................ $ -- $ 200,000
Accounts payable and accrued expenses................................... 1,054,721 573,687
Deferred franchising revenue, current portion........................... 76,005 --
Capitalized lease obligations -- current maturities..................... 75,653 71,064
Loans from stockholders -- current maturities........................... 34,049 37,529
Current maturities of long-term debt.................................... 6,041 20,556
----------- -----------
Total Current Liabilities.......................................... 1,246,469 902,836
Notes payable -- acquisition................................................ -- --
Capitalized lease obligations............................................... 84,502 143,215
Loans from stockholders..................................................... 15,041 45,809
Deferred franchising revenue................................................ 39,365 --
Deferred tax liability...................................................... -- 78,000
Long-term debt.............................................................. 1,590 347
----------- -----------
Total Liabilities.................................................. 1,386,967 1,170,207
----------- -----------
Commitments and contingencies
Stockholders' (Deficit) Equity:
Common stock, no par value, 10,000,000 shares authorized, 1,891,300 and
2,711,300 shares issued and outstanding, respectively.................. 876,150 1,277,000
Convertible preferred stock, no par value, Series A, 190,000 shares
authorized, 190,000 and 120,000 shares issued and outstanding,
respectively; Series B, 180,000 shares authorized, 80,000 and 180,000
shares issued and outstanding, respectively; Series C, 1,600,000 shares
authorized, 1,369,500 and 0 shares issued and outstanding,
respectively........................................................... 1,022,580 54,000
Additional paid-in capital.............................................. 365,000 365,000
Accumulated deficit..................................................... (2,311,903) (1,122,646)
----------- -----------
(48,173) 573,354
----------- -----------
Total Liabilities and Stockholders' (Deficit) Equity............... $ 1,338,794 $ 1,743,561
=========== ===========
</TABLE>

The Accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.

F-3
<PAGE> 51

ALL AMERICAN FOOD GROUP, INC. (FORMERLY JUTLAND FOOD GROUP, INC.)
AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
OCTOBER 31, JANUARY 31,
1995 1995
----------- -----------
<S> <C> <C>
Revenues:
Retail store sales............................................ $ 1,422,341 $ 1,178,638
Franchising revenue........................................... 377,201 --
Equipment and product sales................................... 550,726 804,340
---------- -----------
2,350,268 1,982,978
---------- -----------
Operating expenses:
Cost of Sales -- equipment costs and store operations,
exclusive of depreciation and amortization................... 1,739,147 1,602,538
Cost of Sales -- franchising activities, exclusive of
depreciation and amortization................................ 213,408 --
Selling, general and administrative expenses.................. 1,146,365 1,100,919
Depreciation and amortization................................. 211,463 197,347
Acquisition costs............................................. 170,352 74,256
Impairment of assets.......................................... -- 676,038
---------- -----------
3,480,735 3,651,098
---------- -----------
Operating loss..................................................... (1,130,467) (1,668,120)
Interest expense................................................... 21,078 38,651
---------- -----------
Loss before extraordinary item..................................... (1,151,545) (1,706,771)
Extraordinary item -- Gain from extinguishment of debt............. -- 644,150
---------- -----------
Net loss........................................................... $(1,151,545) $(1,062,621)
========== ===========
Shares outstanding:
Weighted average number of common shares
outstanding................................................. 1,886,300 1,966,167
Additional shares............................................. 1,891,070 1,891,070
---------- -----------
Adjusted shares outstanding........................................ 3,777,370 3,857,237
========== ===========
Net loss per share before extraordinary item....................... $ (0.30) $ (0.44)
========== ===========
Net gain per share -- extraordinary item........................... -- $ 0.16
========== ===========
Net loss per share after extraordinary item........................ $ (0.30) $ (0.28)
========== ===========
</TABLE>

The Accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.

F-4
<PAGE> 52

ALL AMERICAN FOOD GROUP, INC. (FORMERLY JUTLAND FOOD GROUP, INC.)
AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
OCTOBER 31, JANUARY 31,
1995 1995
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss...................................................... $(1,151,545) $(1,062,621)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation and amortization............................ 211,463 197,347
Provision for possible losses on accounts receivable..... (35,000) 20,000
Gain on sale of subsidiary and retail store.............. (34,369) --
Issuance of common stock for services.................... 1,750 --
Impairment of assets..................................... -- 676,038
Early extinguishment of debt............................. -- (644,150)
Decrease (increase) in:
Accounts receivable................................. (26,661) 56,920
Inventories......................................... 58,715 (40,500)
Prepaid expenses.................................... (15,251) (20,000)
Security deposits................................... (16,800) (10,420)
Increase (decrease) in:
Accounts payable and accrued expenses............... 524,937 335,905
Deferred franchising revenue........................ 62,500 --
--------- -----------
Total adjustments.............................. 731,284 571,140
--------- -----------
Net cash (used in) operating activities........ (420,261) (491,481)
--------- -----------
Cash Flows from Investing Activities:
Capital expenditures.......................................... (43,503) (137,345)
Proceeds from sale of subsidiary and retail store, net of cash
balance of subsidiary........................................ 64,953 --
Payment for Sammy's stock acquisition......................... -- (75,000)
Acquisition costs paid........................................ -- (20,000)
--------- -----------
Net cash provided by (used in) investing activities...... 21,450 (232,345)
--------- -----------
Cash Flows from Financing Activities:
Proceeds from issuance of preferred stock..................... 541,480 --
Redemption of preferred stock................................. (100,000) --
Proceeds from sale of corporate stockholder's stock........... -- 700,000
Cash overdraft acquired as part of Sammy's acquisition........ -- (6,291)
Proceeds from capitalized lease obligations................... 17,843 20,361
Payments of capitalized lease obligations..................... (52,587) (20,814)
Proceeds from loans from stockholders......................... 33,250 --
Payments of loans from stockholders........................... (38,702) (17,129)
Proceeds from issuance of long-term debt...................... 3,250 --
Payments of long-term debt.................................... (7,492) (21,090)
Payments of acquisition indebtedness.......................... -- (150,000)
--------- -----------
Net cash provided by financing activities................ 397,042 505,037
--------- -----------
Net (decrease) in cash............................................. (1,769) (218,789)
Cash and cash equivalents -- beginning of period................... 55,472 274,261
--------- -----------
Cash and cash equivalents -- end of period......................... $ 53,703 $ 55,472
========= ===========
</TABLE>

The Accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.

F-5
<PAGE> 53

ALL AMERICAN FOOD GROUP, INC. (FORMERLY JUTLAND FOOD GROUP, INC.)
AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT) EQUITY

<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK ADDITIONAL
----------------------- ----------------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) TOTAL
--------- ---------- --------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 31,
1994.................... 1,250,000 $ 577,000 0 $ 0 $365,000 $ (60,025) $ 881,975
Year Ended January 31,
1995:
Common stock issuance..... 1,461,300 700,000 -- -- -- -- 700,000
Preferred stock
issuance................ -- -- 300,000 $ 54,000 -- -- 54,000
Net Loss.................. -- -- -- -- -- (1,062,621) (1,062,621)
--------- ---------- --------- ---------- -------- ----------- -----------
BALANCE AT JANUARY 31,
1995.................... 2,711,300 1,277,000 300,000 54,000 365,000 (1,122,646) 573,354
Nine Months Ended October
31, 1995:
Conversion of common stock
to preferred stock...... (825,000) (402,600) 825,000 402,600 -- -- 0
Common stock issuance for
services................ 5,000 1,750 -- -- -- 1,750
Preferred stock
issuance................ -- -- 614,500 565,980 -- 565,980
Preferred stock
redemption.............. -- -- (100,000) -- -- (100,000) (100,000)
Retained deficit of
subsidiary sold......... -- -- -- -- -- 62,288 62,288
Net Loss.................. -- -- -- -- -- (1,151,545) (1,151,545)
--------- ---------- --------- ---------- -------- ----------- -----------
BALANCE AT OCTOBER 31,
1995.................... 1,891,300 $ 876,150 1,639,500 $1,022,580 $365,000 $(2,311,903) $ (48,173)
========= ========== ========= ========== ======== =========== ===========
</TABLE>

The Accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.

F-6
<PAGE> 54

ALL AMERICAN FOOD GROUP, INC. (FORMERLY JUTLAND FOOD GROUP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1995

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

(a) ORGANIZATION --

All American Food Group, Inc. (the "Company"), was incorporated by Jutland
Enterprises Inc., ("Enterprises"), a Delaware corporation, on September 27, 1993
under the laws of the State of New Jersey. The Company was formed for the
purpose of acquiring and operating a retail bagel business and a bakery
equipment distribution and assembly business. At incorporation, Enterprises
acquired 937,500 shares of the Company's common stock in exchange for $300,000
and $277,000 of assets. During the fiscal year ended January 31, 1994,
Enterprises contributed $365,000 to the Company as additional paid-in capital.

Shortly after incorporation, Mr. Andrew Thorburn, Chief Executive Officer
of the Company and Chief Executive Officer of Enterprises, acquired 312,500
shares of the Company in exchange for 400,000 shares of Enterprises' common
stock. Since the transferor had no historical cost basis for his acquisition of
the Enterprises' stock, no value has been assigned to the shares transferred to
the Company.

The Company was incorporated under the name Jutland Food Group, Inc., and
changed its name to All American Food Group, Inc. on October 24, 1995.

Effective October 31, 1995 the Company changed its fiscal year end from
January 31st to October 31st.

Initial Acquisition --

On October 20, 1993, the Company completed the acquisition of substantially
all the assets of three interrelated companies, Howberg Bakery Equipment Co.,
Inc., Bagels of New Milford, Inc. and Goldberg's Famous Bagels of Orangeburg,
Inc., hereinafter referred to as the "Goldberg's acquisition," or the "Goldberg
assets," for approximately $1,612,000. Under the terms of the acquisition, the
purchase price consisted of cash consideration of $300,000, a $1,000,000 two
year note, (see Note 8), the assumption of a note in the amount of $35,000 and
$277,000 of consideration provided by Enterprises. In each case the seller of
the assets was Howard Goldberg, hereinafter referred to as "Goldberg."

In accordance with Accounting Principle Board Opinion No. 16, the
acquisition has been accounted for under the purchase method. Under such
accounting policy, the cost of the acquisition is reported on the basis of the
value of the consideration given or the estimated fair value of the net assets
acquired, whichever is more readily determinable.

The consideration given of $1,612,000 had been used for the assignment of
cost to the tangible and identifiable intangible assets with the excess assigned
to goodwill. This excess of the aggregate purchase price over the estimated fair
value of the net assets of the acquired business, in the approximate amount of
$408,000, was recognized as goodwill and was being amortized over 40 years. The
values assigned to identifiable assets and goodwill were subsequently
re-evaluated and adjusted as discussed below.

Simultaneously with the acquisition of the Goldberg assets, various other
agreements and covenants, including a consulting agreement, lease agreement,
security agreement, lease assignments, non-compete agreements, franchise and
tradename rights, consents to use corporate names, and mutual indemnifications
were also entered into by the parties.

During fiscal year ended January 31, 1995, the $1,000,000 note and other
aspects of the initial transaction were re-evaluated and re-negotiated as
discussed below and in Note 8.

F-7
<PAGE> 55

ALL AMERICAN FOOD GROUP, INC. (FORMERLY JUTLAND FOOD GROUP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OCTOBER 31, 1995

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

Goldberg Contract Re-negotiations and Preferred Stock Issuance --

On September 29, 1994, the Company completed a re-evaluation of the assets
acquired, a reconciliation of all outstanding indebtedness related to the
acquisition, and a re-negotiation of its contractual relationship with Goldberg
(the "Reconciliation Agreement"). As a result, certain provisions of the
original purchase agreement, the consulting agreement and the lease agreement
were modified. Further, as discussed in Note 1 (m), the Company recognized an
impairment to the values it had originally assigned to the assets it purchased.

Under the terms of the Reconciliation Agreement, the Company exchanged
indebtedness of approximately $886,000 for an immediate cash payment of $11,500,
an additional cash payment of $50,000 paid on January 10, 1995, 120,000 shares
of newly issued Series A Convertible Preferred Stock, and an assumption of a
note in the approximate amount of $126,250 representing the remaining mortgage
owed by Goldberg on the building then occupied by the Company (the "Citizen's
debt" or the "Citizen's mortgage"). Additionally the Company received from
Goldberg 240,000 shares of Enterprises common stock.

Each share of Series A Convertible Preferred Stock is convertible into one
share of common stock, can be redeemed by the Company for $5.00 a share, and
provides that in the event of a capital infusion of $2,000,000 or more into the
Company, 40,000 shares must be redeemed by the Company for $5.00 per share. The
Series A Preferred Stock was recorded at $54,000, approximating fair market
value at the reconciliation date.

Due to the absence of a readily ascertainable market value, the Company has
assigned no value to the 240,000 shares of Enterprises' common stock.

This re-negotiation has been accounted for as an early extinguishment of
debt, resulting in an extraordinary gain from the early extinguishment of debt
in the amount of $644,150.

Additional provisions of the Reconciliation Agreement include a security
interest by Goldberg in 937,000 shares of common stock of the company held by
Enterprises, a security interest by Goldberg in the two retail establishments,
the termination of the rent obligation under the lease, and an extension and
modification of the consulting agreement and non-compete agreement.

In October of 1995, further re-negotiations took place as a result of which
a) ownership of the Company's retail store in New Milford, NJ was transferred to
Goldberg, b) Goldberg's responsibilities under the consulting agreement were
reduced to three days a week and extended to December 31, 1996, c) the non-
compete and non-disclosure provisions were extended to December 31, 1997, d)
Goldberg assumed responsibility for the Citizen's debt, e) Goldberg assumed
responsibility for $25,000 of the Company's payables and f) and an additional
70,000 shares of Series A Preferred Stock, valued at $23,500, were issued to
Goldberg.

Subsequently, in January 1996, the Citizen's mortgage was satisfied by
Goldberg.

"Sammy's New York Bagels" Stock Acquisition --

On September 29, 1994, the company completed the acquisition, hereinafter
referred to as the "Sammy's acquisition," of 100% of the outstanding stock of
four interrelated corporations, Queen Anne Distributors, Inc., Rochelle
Distributors, Inc., G.I.D. Distributors, Inc., and Sammy's New York Bagels,
Inc., conducting business under the trade name "Sammy's New York Bagels,"
hereinafter referred to as "Sammy's."

Under the terms of the acquisition, the Company purchased the stock of the
Sammy's corporations in exchange for cash of $75,000, assumption of indebtedness
of approximately $441,000 and issuance of

F-8
<PAGE> 56

ALL AMERICAN FOOD GROUP, INC. (FORMERLY JUTLAND FOOD GROUP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OCTOBER 31, 1995

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

"Sammy's New York Bagels" Stock Acquisition -- (continued)
180,000 shares of newly issued Series B Convertible Preferred Stock. Each share
of the Series B Preferred Stock is convertible into one share of the Company's
common stock, can be redeemed by the Company for $5.00 a share, and must be
partially redeemed by the Company under certain circumstances as described
below.

The redemption provisions of the Series B Preferred Stock provide that
60,000 shares are redeemable at $5.00 per share within 30 days of a single
equity infusion of more than $1,000,000, and an additional 60,000 are redeemable
at $5.00 per share 24 months after an initial public offering of the Company's
common stock.

In accordance with Accounting Principle Board Opinion No. 16, the Sammy's
acquisition has been accounted for under the purchase method. The cost of the
acquisition is recorded at $516,000 based on the amount of the cash
consideration paid and the indebtedness assumed. No value has been assigned to
the Series B Preferred Stock issued as part of the consideration in the
acquisition. The accompanying consolidated financial statements include the
elimination of the investment in parent and equity in subsidiaries, and adjust
for the purchase of the assets acquired. The allocation of the assigned values
to the assets has been determined by management. The acquisition arrangement
provides for employment contracts and non-compete agreements.

(b) BUSINESS --

During the nine months ended October 31, 1995, the Company changed its
business focus and became principally engaged in the development of a retail
chain of franchised bagel stores, including the operation of Company-owned
stores for training and marketing and promotional activities, and the
distribution of bagel bakery equipment and related products to the franchise
system. The Company markets both single unit and market development franchise
agreements. The Company, in the normal course of business, also markets stores
it acquires to individuals who operate as franchisees. The Company franchises
its concepts under the names "Goldberg's Original Old World Bagels" and "Sammy's
New York Bagels." During the nine months ended October 31, 1995, the Company
ceased to be actively engaged in the sales of bagel bakery equipment to
independent retail operators.

The accompanying consolidated financial statements include the accounts of
All American Food Group, Inc. and its subsidiaries as disclosed above. The
acquisition of all subsidiaries, represented by the "Sammy's" transaction,
occurred on September 29, 1994. Accordingly, the consolidated balance sheet
includes the accounts of the subsidiaries as of October 31, 1995 and January 31,
1995. The accompanying consolidated statements of operations and cash flows only
include activities of the subsidiaries for the nine months ended October 31,
1995 and the period from September 29, 1994 (date of acquisition), through
January 31, 1995. All significant inter-company balances and transactions have
been eliminated.

(d) CASH AND CASH EQUIVALENTS --

At October 31, 1995 and January 31, 1995 cash represented monies on deposit
in financial institutions.

F-9
<PAGE> 57

ALL AMERICAN FOOD GROUP, INC. (FORMERLY JUTLAND FOOD GROUP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OCTOBER 31, 1995

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

(e) CONCENTRATION OF CREDIT RISK --

The Company maintains cash and cash equivalents with various financial
institutions. Company policy is designed to limit exposure with any one
institution. Credit risk with respect to trade accounts receivable is minimal,
due to the terms under which the Company transacts its business.

(f) INVENTORIES --

Inventories are stated at the lower of cost (first-in, first-out ("FIFO"))
or market.

(g) PROPERTY, PLANT AND EQUIPMENT --

Equipment, fixtures and leasehold improvements are recorded at cost.
Equipment under capital leases is recorded at the net present value of the
associated lease payments. Major replacements or improvements are capitalized.
Maintenance and repairs are charged to earnings as incurred. For financial
statement purposes, depreciation and amortization are computed using the
straight-line method over the estimated useful lives of the assets, which range
from three to ten years.

(h) INTANGIBLE ASSETS AND AMORTIZATION --

Intangible assets consist primarily of specifically identifiable items such
as a favorable lease agreement, a retail license, non-compete agreements,
customer lists, drawings and blueprints, a proprietary formula and kosher
certification. The values assigned to intangible assets are based on an
independent appraisal and management's estimates, and are being amortized on a
straight-line basis over the estimated useful lives of such assets, which range
from three and one-half to nine and one-half years.

(i) ACQUISITION COSTS --

Acquisition costs represent fees incurred in the Goldberg and Sammy's
acquisitions and are being amortized over their useful lives of five years.

(j) VALUATION OF NON-CURRENT INVESTMENTS --

The non-current portfolio of securities represented by the investment in
Enterprises' common stock is carried at zero value. Currently there is no market
for the shares. Any gain realized from the disposition of these securities will
be recognized at the time of disposition.

(k) FRANCHISE REVENUE RECOGNITION --

As discussed above, the Company began franchising activities during the
nine months ended October 31, 1995. Franchise revenue includes the sale of
single unit franchises, the sale of Company-owned stores to franchisees, the
sale of market development franchises and ongoing royalty and advertising fees.

Single unit franchise agreements ("Single Unit Agreements") provide for
payment of a nonrefundable initial franchise fee (an "Initial Franchise Fee"), a
weekly royalty on gross sales, and a weekly cooperative advertising fund
contribution. The Company's material obligations under the terms of all Single
Unit Agreements are assisting in site selection and franchisee training. Initial
Franchise Fees under Single Unit Agreements are recognized as revenues when the
Company has no further material obligations in respect of the establishment of
such franchise, which occurs upon the opening of the store. As of October 31,
1995, the

F-10
<PAGE> 58

ALL AMERICAN FOOD GROUP, INC. (FORMERLY JUTLAND FOOD GROUP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OCTOBER 31, 1995

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

(k) FRANCHISE REVENUE RECOGNITION -- (CONTINUED)

Company had deferred recognition of Initial Franchise Fees relating to four
stores, which management anticipates will open within the next year. See note 9.

Market Development Agreements provide for the payment, by the Market
Developer, of a nonrefundable initial fee (a "Market Development Fee") based on
the size, population and overall market potential of the territory subject to
the Market Development Agreement (the "Market Area"). The Market Developer
assumes substantially all of the responsibilities that otherwise would be
assumed by the Company, as franchiser within the Market Area. In exchange, the
Market Developer receives (i) the exclusive right to build stores for the Market
Developer's own account or to seek third party franchisees within the Market
Area and (ii) the right to share with the Company, on a 50/50 basis, initial and
ongoing single store fees within the Market Area. Under Market Development
Agreements, the Company's obligations in respect of the development of single
unit franchises within the Market Area are limited to (i) approval of
franchisees presented by the Market Developer and (ii) approval of store sites.
The Company has no further material obligations in respect of a Market
Development Agreement at the time of execution of the Agreement. Market
Development Fees paid in cash or by promissory notes fully collateralized by
liquid assets or as to which the Company has obtained an independent third-party
valuation, are recognized as revenues by the Company upon execution of the
Market Development Agreement and payment of the fee. In the absence of such
collateral or valuation, the Company recognizes Market Development Fees on a
cash basis as payments on such notes are received. The Company records
non-interest bearing notes with a term in excess of one year at a discount for
imputed interest thereon. As of October 31, 1995, the Company had deferred the
recognition of $52,870 of revenues relating to a note from a Market Developer.
See notes 3 and 8.

The Company recognizes revenues from the sale of Company-owned stores to
franchisees upon consummation of the sale transaction.

The Company recognizes franchise royalty revenue when it is earned.

Franchise revenue for the nine months ended October 31, 1995 of $377,201
consists of initial non-recurring franchise and market development fees of
$7,500 and $117,824, respectively, initial non-recurring revenues from the sale
of Company-owned stores of $247,777 and ongoing royalties of $4,100.

(l) NET LOSS PER SHARE --

Net loss per common share was determined by dividing net loss by the
weighted average number of common shares outstanding, as adjusted to reflect all
shares and options issued within the twelve months prior to May 3, 1996, (the
date the Company filed a registration statement for an initial public offering),
that were issued for consideration per share or at an exercise per share less
than the anticipated public offering price of $6.00 per share. These additional
shares have been treated as if they were outstanding for all periods presented.
The treasury stock method has been used to determine the net increase in the
number of shares outstanding. As such, the computation of fully diluted net loss
per share was anti-dilutive in each of the periods presented; therefore, the
amounts reported for primary and fully-diluted loss are the same.

F-11
<PAGE> 59

ALL AMERICAN FOOD GROUP, INC. (FORMERLY JUTLAND FOOD GROUP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OCTOBER 31, 1995

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

(m) LONG-LIVED ASSETS -- IMPAIRMENT OF ASSETS --

In accordance with SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," the Company
records impairment losses on long-lived assets used in operations, including
goodwill and intangible assets, when events and circumstances indicate that the
assets might be impaired and the fair value of these assets, determined by
reference to the discounted cash flows estimated to be generated by those
assets, are less than the carrying amounts of those assets. During the fiscal
year ending January 31, 1995, the application of SFAS No. 121 resulted in the
Company recognizing an intangible asset and goodwill impairment charge of
$676,038, representing the difference between the carrying amount of these
assets and their then-current fair value so determined. As disclosed in Note 1,
this adjustment was the result of the re-evaluation of the assets it had
purchased and a reconciliation of all outstanding indebtedness and contractual
obligations with Goldberg. This re-evaluation resulted in the Company reducing
the estimated cash flows attributed to the Goldberg assets. In determining the
magnitude of adjustment, the Company developed its best estimate of fair value
based on future discounted operating cash flows, and determined that these cash
flows would not be sufficient to recover the carrying value of the intangible
assets and goodwill. Consequently, the Company reduced the recorded value of
these assets to the estimated future discounted cash flows associated therewith,
and recognized an impairment loss equal to the difference between that amount
and the prior carrying value of these assets. As a result, goodwill has been
written off entirely, and the carrying value of the identifiable intangible
assets has been reduced by approximately $290,000, during the fiscal year ended
January 31, 1995.

(n) STOCK OPTIONS --

The Company has granted stock options to a key vendor with an exercise
price not less than fair market value per share of common stock on the date the
option was granted. The Company accounts for stock option grants in accordance
with APB Opinion No. 25, "Accounting for Stock Issued to Employees" and,
accordingly, recognizes no compensation or other expense for the stock option
grants.

2. INVENTORY:

A summary of inventory is as follows:

<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
1995 1995
----------- -----------
<S> <C> <C>
Equipment and parts.................................... $ 69,544 $ 166,364
Food and paper goods................................... 54,105 16,000
---------- ---------
Total inventories................................. $ 123,649 $ 182,364
========== =========
</TABLE>

3. NOTE RECEIVABLE:

Note receivable at October 31, 1995, represents the present value of the
unpaid portion of the Market Development Fee due in connection with the sale of
a Market Area. The note is non-interest bearing and is paid by the application,
by the Company, of fifty percent (50%) of all compensation otherwise due to the

F-12
<PAGE> 60

ALL AMERICAN FOOD GROUP, INC. (FORMERLY JUTLAND FOOD GROUP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OCTOBER 31, 1995

3. NOTE RECEIVABLE -- (CONTINUED)

Market Developer against the balance. Management estimates that $39,365 of the
balance will be collected after one year, as follows:

<TABLE>
<S> <C>
Note receivable (less unamortized discount based on an imputed
interest rate of 9%)............................................. $52,870
Less current portion............................................... 13,505
-------
Note receivable, long-term......................................... $39,365
=======
</TABLE>

4. FIXED ASSETS:

Fixed assets and accumulated depreciation consists of the following:

<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31, ESTIMATED
1995 1995 USEFUL LIVES
----------- ----------- --------------
<S> <C> <C> <C>
Machinery and equipment -- retail stores................ $ 333,237 $ 555,715 7 years
Office furniture and warehouse equipment................ 169,951 111,906 7 years
Trucks and delivery vehicle............................. 26,370 26,370 3 to 5 years
Leasehold improvements -- retail stores................. 133,933 152,497 Term of lease
----------- -----------
663,491 846,488
Accumulated depreciation and amortization............... (145,589) (134,802)
----------- -----------
Fixed assets net of accumulated depreciation............ $ 517,902 $ 711,686
=========== ===========
</TABLE>

As disclosed in Note 10, certain debt is secured by fixed assets.

5. INTANGIBLE ASSETS:

Identifiable intangible assets, recorded as a result of the Goldberg's and
Sammy's acquisitions, and accumulated amortization consist of the following:

<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31, ESTIMATED
1995 1995 USEFUL LIVES
----------- ----------- -------------
<S> <C> <C> <C>
Kosher certification....................... $ 145,771 $ 157,771 5 years
Favorable lease agreement.................. 6,250 22,500 3 1/2 years
Non-compete agreements..................... 192,507 214,507 4 years
Customer lists............................. 74,432 93,434 4 years
Proprietary formula........................ 107,338 121,338 5 years
Retail store license....................... -- 27,000 9 1/2 years
Drawings and blueprints.................... 46,158 52,158 5 years
----------- -----------
Total intangible assets.................... 572,456 688,708
Accumulated amortization................... (230,339) (127,129)
----------- -----------
Total intangible assets, net of accumulated
amortization............................. $ 342,117 $ 561,579
=========== ===========
</TABLE>

F-13
<PAGE> 61

ALL AMERICAN FOOD GROUP, INC. (FORMERLY JUTLAND FOOD GROUP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OCTOBER 31, 1995

6. ACQUISITION COSTS:

Acquisition costs represent fees incurred in consummating the Goldberg's
and Sammy's acquisitions. These costs are being amortized over an estimated
useful life of five years. Acquisition costs and accumulated amortization are as
follows:

<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
1995 1995
----------- -----------
<S> <C> <C>
Total acquisition costs................................ $ 105,751 $ 105,751
Accumulated amortization............................... (40,324) (24,456)
----------- -----------
Net acquisition costs.................................. $ 65,427 $ 81,295
======== ========
</TABLE>

7. INVESTMENT IN JUTLAND ENTERPRISES INC. COMMON STOCK:

The Company acquired stock in Enterprises from Andrew Thorburn as part of
its initial capitalization, as discussed in Note 1. Consistent with the
transferor's cost basis, this stock has been assigned no value by the Company.

The Company received additional shares of Enterprises in separate
transactions involving Blue Chip Computerware, Inc., discussed in Note 13, and
in the re-negotiations with Goldberg discussed in Note 1. Due to the absence of
a readily ascertainable market value, no value has been assigned to these
shares.

8. NOTE PAYABLE -- GOLDBERG ASSET ACQUISITION:

The Company issued a $1,000,000 two year note as part of the consideration
given in the purchase of the Goldberg assets as disclosed in Note 1.

As part of the 1994 Goldberg re-negotiation also discussed at Note 1, the
Company was obligated to Citizen's First National Bank of New Jersey for the
remaining Citizen's mortgage balance of approximately $126,250. The Company
defaulted on its obligation to pay such mortgage, and Citizen's brought an
action against various parties, including the Company, to foreclose on the
mortgage. The outstanding balance on the Citizen's mortgage, including unpaid
interest and late charges, of $150,000 and the balance due to Goldberg of
$50,000, are reflected as a current liability in the accompanying consolidated
financial statements at January 31, 1995. In October 1995 Goldberg re-assumed
responsibility for the Citizen's mortgage. Subsequent to October 31, 1995 the
mortgage was satisfied.

9. DEFERRED FRANCHISING REVENUE:

Deferred franchising revenue at October 31, 1995, represents Initial
Franchise Fees received in connection with single store franchises where the
stores have not yet opened and the present value of the portion of the Market
Development Fee paid by means of a non-interest bearing note as to which the
Company has not as yet recognized revenue, and are as follows:

<TABLE>
<S> <C>
Single store Initial Franchise Fees received, stores not yet
open............................................................. $62,500
Market Development Fees............................................ 52,870
-------
115,370
Less current portion............................................... 76,005
-------
Deferred franchising revenue, long-term............................ $39,365
=======
</TABLE>

F-14
<PAGE> 62

ALL AMERICAN FOOD GROUP, INC. (FORMERLY JUTLAND FOOD GROUP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OCTOBER 31, 1995

10. EQUIPMENT LEASE OBLIGATIONS:

The Company and its subsidiaries are obligated under various equipment
lease arrangements which have been capitalized in the accompanying financial
statements. Property, plant, and equipment presented on the consolidated balance
sheet includes approximately $259,000 of assets capitalized under these lease
arrangements. Accumulated depreciation recorded on these assets approximated
$54,000 at October 31, 1995. These lease obligations are due in monthly
installments including interest expense at annual interest rates ranging from
8.3% to 24.5%. The lease obligations are payable through dates ranging from
February 1996 through November 1999.

The future minimum payments required under the lease arrangements, with
their present value at October 31, 1995, are as follows:

<TABLE>
<CAPTION>
PRESENT INTEREST MINIMUM
YEAR ENDED OCTOBER 31, VALUE EXPENSE PAYMENTS
----------------------------------------------- -------- ------- --------
<S> <C> <C> <C>
1996........................................... $ 75,653 $23,976 $ 99,629
1997........................................... 58,828 9,784 68,612
1998........................................... 25,120 2,686 27,806
1999........................................... 554 6 560
-------- ------- --------
$160,155 $36,452 $196,607
======== ======= ========
</TABLE>

11. LOANS FROM STOCKHOLDERS:

Loans from stockholders primarily consist of obligations assumed in the
Sammy's acquisition. These loans are due in monthly installments including
interest expense at annual rates ranging from 5.0% to 16.76%. The loans are
payable through dates ranging from February 1996 through February 1999.

The future minimum payments required under the loans, with their present
value at October 31, 1995, are as follows:

<TABLE>
<CAPTION>
PRESENT INTEREST MINIMUM
YEAR ENDED OCTOBER 31, VALUE EXPENSE PAYMENTS
-------------------------------------------------- ------- ------- -------
<S> <C> <C> <C>
1996.............................................. $34,049 $2,245 $36,294
1997.............................................. 9,587 636 10,223
1998.............................................. 4,057 180 4,237
1999.............................................. 1,397 15 1,412
------- ------- -------
$49,090 $3,076 $52,166
======= ====== =======
</TABLE>

F-15
<PAGE> 63

ALL AMERICAN FOOD GROUP, INC. (FORMERLY JUTLAND FOOD GROUP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OCTOBER 31, 1995

12. LONG-TERM DEBT:

Long-term debt is summarized as follows:

<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
1995 1995
----------- -----------
<S> <C> <C>
Minimum payment on note payable to Tilden Financial
Corporation in monthly installments of $1,521
including interest, through October 1995, secured by
equipment............................................ -- $12,222
Minimum payment on note payable to Bank of New York in
monthly installments of $347 plus interest at the
bank's prime rate plus 1.5% per annum, through
February 1997, secured by equipment.................. $ 6,041 8,681
Notes payable to individual in monthly installments of
$153 including interest at the annual rate of 12.5%,
payable through September 1996....................... 1,590 --
--------- ---------
7,631 20,903
Current portion of long-term debt...................... 6,041 20,556
--------- ---------
Long-term debt......................................... $ 1,590 $ 347
========= =========
</TABLE>

13. BLUE CHIP COMPUTERWARE INC. STOCK SUBSCRIPTION:

On July 1, 1994 and August 15, 1994, the Company entered into two separate
stock purchase agreements with Blue Chip Computerware Inc. ("Blue Chip"), a
publicly traded company whose stock trades under the symbol BCHP. Under the
terms of the agreements, the Company issued a total of 1,460,000 newly issued
shares of common stock, of which 1,200,000 shares were issued to Blue Chip and
260,000 shares were issued to a financial services firm for arranging the
transaction. Consequently, Blue Chip became the owner of 44% of the then-issued
and outstanding common stock of the Company.

In exchange for the 1,460,000 shares, the Company received, in aggregate,
$50,000, 100,000 shares of Enterprises common stock owned by the Blue Chip, and
400,000 shares of Blue Chip common stock. The 400,000 shares of Blue Chip common
stock were subsequently sold in two separate transactions to a third party. The
aggregate proceeds from the sale of the 400,000 shares was $650,000.

In the accompanying consolidated financial statements, the value assigned
to the common stock issued to Blue Chip is $700,000, comprised of the $50,000
cash paid to the company by Blue Chip, and $650,000 paid for the 400,000 shares
of Blue Chip common stock sold. No value has been assigned to the 100,000 shares
of Enterprises, due to the absence of a readily ascertainable market value.

In February 1995, the Company exchanged 825,000 shares of the Company's
newly issued Series C Convertible Preferred Stock for 825,000 shares of the
common stock acquired by Blue Chip, reducing Blue Chip's holdings of common
stock to 19%. See Note 15.

14. INCOME TAXES:

The Company has adopted SFAS No. 109 and is a C Corporation subject to
federal and state income taxes. The Company has changed its fiscal year end to
October 31 for tax purposes. At October 31, 1995, there were consolidated net
operating loss carry-forwards of approximately $750,000 expiring in 2010. Due to
the current period operating loss, no amount has been provided for corporate
income taxes.

F-16
<PAGE> 64

ALL AMERICAN FOOD GROUP, INC. (FORMERLY JUTLAND FOOD GROUP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OCTOBER 31, 1995

14. INCOME TAXES -- (CONTINUED)

In accordance with SFAS No. 109, the difference between the tax bases and
the assigned value of the assets for financial reporting purposes of
approximately $650,000 resulting from the Goldberg and Sammy's acquisitions will
not result in taxable or deductible amounts in future years and no deferred
asset or liability has been recognized because of the magnitude of the net
operating loss carryforward. In the event the Company generates taxable income
in excess of the net operating loss carryforward, a deferred tax liability will
be recognized.

15. RELATED PARTY TRANSACTIONS:

As of January 31, 1995, Blue Chip held 44% of the Company's common stock.
In March 1995, Blue Chip and the Company entered into an agreement whereby Blue
Chip exchanged 825,000 shares of the Company's common stock for 825,000 shares
of the Company's Series C Convertible Preferred Stock, thereby reducing its
holdings of common stock to 19%. During the nine months ended October 31, 1995,
Blue Chip purchased an additional 425,000 shares of the Company's Series C
Preferred Stock at a price of $1.00 per share. Each share of the Series C
Preferred Stock may be redeemed by the Company for $5.00 a share, and can be
converted into one share of the Company's common stock. The Company has no
obligation to redeem any of the Series C Preferred shares.

Additionally, during this period, the Company's President purchased 70,000
shares of Series C Preferred Stock at the price of $1.00 per share.

16. EXTRAORDINARY ITEM -- GAIN FROM EXTINGUISHMENT OF DEBT:

On September 29, 1994, and as further explained in Note 1, the Company
completed a re-negotiation and reconciliation of all outstanding indebtedness
and contractual obligations with Goldberg. This reconciliation resulted in the
extinguishment of the unpaid remaining balance due of $874,400 on the original
$1,000,000 note issued in connection with the Goldberg acquisition in exchange
for the assumption of the Citizen's mortgage in the amount of $126,250, a
$50,000 payment to Goldberg, and the issuance of 120,000 shares of the Company's
Series A Preferred Stock valued at $54,000. For financial reporting purposes, an
extraordinary item consisting of a $644,150 gain from the extinguishment of debt
has been recognized. Due to the operating losses in excess of the gain, an
accrual for income taxes attributable to the gain has not been provided.

17. STOCK OPTIONS:

The Company has granted options to purchase 80,000 shares of the Company's
common stock to a supplier. The options were issued in two transactions; 30,000
options with an exercise price of $0.50 per share were issued on February 1,
1995 and 50,000 options with an exercise price of $1.00 per share were issued on
August 1, 1995. The options expire five years after their issue date and are
exercisable at any time during the period they are outstanding. The following
summarizes the activity during the periods presented:

<TABLE>
<CAPTION>
OPTION PRICE
SHARES PER SHARE
------ --------------
<S> <C> <C>
Options outstanding at January 31, 1995.............. None
Granted......................................... 80,000 $0.50 to $1.00
------
Options outstanding at October 31, 1995.............. 80,000 $0.50 to $1.00
======
</TABLE>

F-17
<PAGE> 65

ALL AMERICAN FOOD GROUP, INC. (FORMERLY JUTLAND FOOD GROUP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OCTOBER 31, 1995

18. SUPPLEMENTAL CASH FLOW INFORMATION:

<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
OCTOBER 31, JANUARY 31,
1995 1995
----------- -----------
<S> <C> <C>
Interest paid......................................... $ 21,078 $ 21,640
Income taxes paid..................................... $ 0 $ 0
Non-cash investing and financing activities:
Exchange of accounts receivable for note
payable -- acquisition.............................. $ 50,000 $ --
Issuance of preferred stock for debt.................. 23,500 54,000
Sale of Market Area for note receivable............... 52,870 --
Acquisition of Sammy's for assumption of debt......... -- 441,000
Issuance of common stock for assets................... -- --
Goldberg assets acquired for assumption and issuance
of debt............................................. -- --
---------- ----------
$ 126,370 $ 495,000
========== ==========
</TABLE>

19. COMMITMENTS AND CONTINGENCIES:

(a) SAMMY'S FRANCHISING FEES --

During the first sixty months after the Sammy's acquisition, the former
shareholders of the sellers are entitled to receive monthly payments equal to
10% of the single unit franchising fees paid to the Company and, during the
first twelve months after the acquisition and 20% of the fees collected on
international licensing or franchising. At October 31, 1995 $8,100 was due and
payable under this provision.

(b) LEASES --

The Company rents real and personal property under various non-cancelable
leases expiring at various dates through 2003. Certain of the leases include
renewal options and provisions for additional rental payments based on various
formulas such as cost of living adjustments, real estate tax and operating
expense escalations and escalations based on gross revenues. Total rent expense
charged to operations for the nine months ended October 31, 1995 approximated
$166,000. Included in this amount is approximately $7,000 of contingent rental
expense. Total rent expense charged to operations for the year ended January 31,
1995 approximates $148,000, all of which represented minimum rental obligations.

Minimum annual rental commitments under leases in effect at October 31,
1995 are summarized as follows:

<TABLE>
<CAPTION>
EQUIPMENT
YEAR ENDED OCTOBER 31, REAL ESTATE & OTHER
------------------------------------------------------- ----------- ---------
<S> <C> <C>
1996................................................... $ 134,000 $17,000
1997................................................... 129,000 1,000
1998................................................... 114,000 --
1999................................................... 113,000 --
2000................................................... 80,000 --
Later years............................................ 203,000 --
---------- --------
Total minimum lease payments........................... $ 773,000 $18,000
========== ========
</TABLE>

F-18
<PAGE> 66

ALL AMERICAN FOOD GROUP, INC. (FORMERLY JUTLAND FOOD GROUP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OCTOBER 31, 1995

19. COMMITMENTS AND CONTINGENCIES -- (CONTINUED)

In connection with the Goldberg acquisition the Company entered into a
consulting agreement which was modified in September of 1994, and further
re-negotiated in October 1995. The modified consulting agreement provides for
monthly consulting fees of $4,333 payable through December 1996, aggregating
$61,000 at October 31, 1995. Goldberg is prohibited from conducting any business
activity in competition with the operations of the Company through December
1996.

(d) EMPLOYMENT AGREEMENTS --

The Company entered into employment contracts with the three principal
former shareholders of Sammy's as part of the acquisition. The employment
contracts provide for annual salaries through December 31, 1996 and include
non-compete covenants through December 31, 1998. The Company's aggregate
obligation for future payments under these agreements was $237,000 at October
31, 1995.

Total compensation expenses under these contracts for the nine months ended
October 31, 1995 and the year ended January 31, 1995 were $170,352 and $74,256,
respectively and have been reflected as acquisition costs on the accompanying
Statement of Operations.

(e) OBLIGATION TO REDEEM PREFERRED STOCK --

The agreements governing the Sammy's and Goldberg's acquisitions contain
provisions under which the Company must redeem shares of convertible preferred
stock. Under the Sammy's agreement 60,000 shares of the Series B Preferred Stock
are redeemable at $5.00 per share within 30 days of a single equity infusion of
more than $1,000,000, and an additional 20,000 shares are redeemable at $5.00
per share within 24 months of an initial public offering. The Goldberg agreement
stipulates that the Company must redeem 40,000 shares of the Series A Preferred
stock at $5.00 per share after an initial public offering of at least
$2,000,000.

20. SUBSEQUENT EVENTS:

In addition to certain subsequent events disclosed above, the following
additional material events have occurred subsequent to the date of these
financial statements.

(a) PRIVATE PLACEMENTS --

Subsequent to October 31, 1995, the Company completed private placements
(the "Private Placements") of its common stock pursuant to which it received an
aggregate of $2,413,986, net of expenses of $48,514. Included in the proceeds
was property consisting of two retail bagel stores in the final stages of
construction, valued at $410,000. The proceeds from the Private Placements to
date have been used to (i) fund the Company's operations; (ii) the voluntary
redemption of shares of the Company's Preferred Stock; (iii) reduce trade
payables; and (iv) acquire capital assets. The Company intends to apply the
remainder of these proceeds for working capital purposes.

(b) PREFERRED STOCK TRANSACTIONS --

The Company sold 100,000 shares of Series B Preferred Stock to the former
owners of Sammy's for consideration of $1.00 per share. In connection with this
transaction the Company's obligation to redeem Series B Preferred Stock within
24 months an initial public offering increased from 20,000 shares to 60,000
shares.

F-19
<PAGE> 67

ALL AMERICAN FOOD GROUP, INC. (FORMERLY JUTLAND FOOD GROUP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OCTOBER 31, 1995

20. SUBSEQUENT EVENTS -- (CONTINUED)

The Company voluntarily redeemed 416,997 shares of Series C Preferred
Stock. Of this total, 401,997 shares were redeemed from an affiliate, Blue Chip,
for consideration of $1.00 per share, equivalent to the price Blue Chip paid to
acquire the shares. This was done in connection with the financial
reorganization of Blue Chip.

(d) STOCK OPTIONS --

The Company granted options to purchase 160,000 shares of the Company's
common stock; 10,000 options were granted to a customer, 50,000 options were
granted to a director and 100,000 options were granted to the Company's Chief
Financial Officer. The options are exercisable $1.00 per share and expire in
2001.

F-20
<PAGE> 68

ALL AMERICAN FOOD GROUP, INC. (FORMERLY JUTLAND FOOD GROUP, INC.)
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)

<TABLE>
<CAPTION>
APRIL 30,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash.................................................................... $ 896,132 $ 21,339
Accounts and notes receivable, net of allowances for possible losses of
$15,000 in 1996 and 1995............................................... 46,079 94,782
Notes Receivable........................................................ 69,846 --
Inventories............................................................. 97,485 170,664
Prepaid expenses........................................................ 126,500 30,000
----------- -----------
Total Current Assets............................................... 1,236,042 316,785
Property, Plant and Equipment, at cost less accumulated depreciation and
amortization of $197,426 and $162,868 respectively........................ 909,176 712,590
Intangible Assets, net of accumulated amortization of $294,522 and $165,254
respectively.............................................................. 277,934 523,454
Acquisition Costs, net of accumulated amortization of $50,899 and $29,744
respectively.............................................................. 54,852 76,007
Security Deposits........................................................... 30,435 28,066
Notes Receivable, long-term................................................. 193,143 --
Investment in Jutland Enterprises Inc.'s common stock....................... -- --
----------- -----------
Total Assets....................................................... $ 2,701,582 $ 1,656,902
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Notes payable -- acquisition............................................ $ -- $ 150,000
Accounts payable and accrued expenses................................... 852,366 763,778
Deferred franchising revenue, current portion........................... 109,846 --
Capitalized lease obligations -- current maturities..................... 73,377 92,074
Loans from stockholders -- current maturities........................... 14,425 56,038
Current maturities of long-term debt.................................... 4,746 13,254
----------- -----------
Total Current Liabilities.......................................... 1,054,760 1,075,144
Capitalized lease obligations............................................... 48,933 138,092
Loans from stockholders..................................................... 8,884 29,738
Deferred franchising revenue................................................ 193,143 --
Deferred tax liability...................................................... -- 78,000
Long-term debt.............................................................. -- 3,874
----------- -----------
Total Liabilities.................................................. 1,305,720 1,324,848
----------- -----------
Redeemable preferred stock, no par value Series A, 40,000 shares issued and
outstanding, Series B, 120,000 shares issued and outstanding.............. 707,540 --
----------- -----------
Commitments and contingencies
Common stock, no par value, 10,000,000 shares authorized, 3,735,200 and
1,886,300 shares issued and outstanding respectively...................... 3,360,136 874,400
Non-redeemable convertible preferred stock, no par value, Series A, 190,000
shares authorized, 150,000 and 120,000 shares issued and outstanding
respectively; Series B, 180,000 shares authorized, 60,000 shares and
80,000 shares issued and outstanding respectively; Series C, 1,600,000
shares authorized, 982,503 and 1,025,000 shares issued and outstanding
respectively.............................................................. 393,043 656,600
Other Stockholders' Equity:
Additional paid-in capital.............................................. -- 365,000
Accumulated deficit..................................................... (3,064,857) (1,563,946)
----------- -----------
688,322 332,054
----------- -----------
Total Liabilities and Stockholders' Equity.............................. $ 2,701,582 $ 1,656,902
=========== ===========
</TABLE>

The Accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.

F-21
<PAGE> 69

ALL AMERICAN FOOD GROUP, INC. (FORMERLY JUTLAND FOOD GROUP, INC.)
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED APRIL THREE MONTHS ENDED APRIL THREE MONTHS ENDED
30, 30, JANUARY 31,
------------------------ ------------------------ -----------------------
1996 1995 1996 1995 1996 1995
----------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Retail store sales............ $ 646,317 $1,045,246 $ 340,325 $ 514,581 $ 305,992 $ 530,665
Franchising revenue........... 195,639 -- 165,690 -- 29,949 --
Equipment and product sales... 296,999 289,481 139,516 145,682 157,483 143,799
----------- ---------- ----------- ---------- ---------- ----------
1,138,955 1,334,727 645,531 660,263 493,424 674,464
----------- ---------- ----------- ---------- ---------- ----------
Operating expenses:
Cost of Sales -- equipment
costs and store operations,
exclusive of depreciation
and amortization............ 735,268 1,147,907 407,583 582,762 327,685 565,145
Selling, general and
administrative expenses..... 893,430 728,223 471,153 272,537 422,277 455,686
Depreciation and
amortization................ 126,592 154,696 67,397 71,479 59,195 83,217
Acquisition costs............. 113,568 113,568 56,784 56,784 56,784 56,784
----------- ---------- ----------- ---------- ---------- ----------
1,868,858 2,144,394 1,002,917 983,562 865,941 1,160,832
----------- ---------- ----------- ---------- ---------- ----------
Operating loss.................... (729,903) (809,667) (357,386) (323,299) (372,517) (486,368)
Interest expense.................. 23,051 46,989 9,863 18,001 13,188 28,988
----------- ---------- ----------- ---------- ---------- ----------
Net loss.......................... $ (752,954) $ (856,656) $ (367,249) $ (341,300) $ (385,705) $ (515,356)
=========== ========== =========== ========== ========== ==========
Adjusted net loss for net loss per
common share calculation:
Net loss...................... $ (752,954) $ (856,656) $ (367,249) $ (341,300)
Increase in carrying amount of
redeemable preferred
stock....................... (707,540) -- (707,540) --
----------- ---------- ----------- ----------
Net loss attributable to
common stock................ $(1,460,494) $ (856,656) $(1,074,789) $ (341,300)
=========== ========== =========== ==========
Shares outstanding:
Weighted average number of
common shares outstanding... 1,886,905 2,305,201 1,887,523 1,886,500 1,886,300 2,710,437
Additional shares............. 1,891,070 1,891,070 1,891,070 1,891,070 1,891,070 1,891,070
----------- ---------- ----------- ---------- ---------- ----------
Adjusted shares outstanding....... 3,777,975 4,196,271 3,778,593 3,777,570 3,777,370 4,601,507
=========== ========== =========== ========== ========== ==========
Net loss per common share......... $ (0.39) $ (0.20) $ (0.28) $ (0.09) $ (0.11) $ (0.11)
=========== ========== =========== ========== ========== ==========
</TABLE>

The Accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.

F-22
<PAGE> 70

ALL AMERICAN FOOD GROUP, INC. (FORMERLY JUTLAND FOOD GROUP, INC.)
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30,
-----------------------
1996 1995
---------- ---------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss........................................................ $ (752,954) $(856,656)
Adjustments to reconcile net loss to net cash (used in) provided
by operating activities:
Depreciation and amortization.............................. 126,592 154,696
Provision for possible losses on accounts receivable....... -- (35,000)
Decrease (increase) in:
Accounts receivable................................... 61,562 129,563
Notes receivable...................................... 3,700 --
Inventories........................................... 26,164 21,780
Receivable from sale of common stock.................. 150,000
Prepaid expenses...................................... (81,249) (20,000)
Security deposits..................................... (200) (12,551)
Increase (decrease) in:
Accounts payable and accrued expenses................. (202,355) 278,611
Deferred franchising revenue.......................... (26,200) --
---------- ---------
Total adjustments................................ (91,986) 667,099
---------- ---------
Net cash (used in) operating activities.......... (844,940) (189,557)
---------- ---------
Cash Flows from Investing Activities:
Capital expenditures............................................ (33,109) (86,789)
---------- ---------
Net cash (used in) investing activities.................... (33,109) (86,789)
---------- ---------
Cash Flows from Financing Activities:
Proceeds from issuance of common stock.......................... 2,003,986 --
Proceeds from issuance of preferred stock....................... 200,000 200,000
Redemption of preferred stock................................... (416,997) (100,000)
Proceeds from capitalized lease obligations..................... -- 17,844
Payments of capitalized lease obligations....................... (37,845) (38,840)
Proceeds from loans from stockholders........................... -- 20,000
Payments of loans from stockholders............................. (25,781) (31,223)
Payments of long-term debt...................................... (2,885) (10,357)
---------- ---------
Net cash provided by financing activities.................. 1,720,478 57,424
---------- ---------
Net increase (decrease) in cash...................................... 842,429 (218,922)
Cash and cash equivalents -- beginning of period..................... 53,703 240,261
---------- ---------
Cash and cash equivalents -- end of period........................... $ 896,132 $ 21,339
========== =========
Supplemental information: Interest expense paid...................... $ 22,856 $ 21,640
Corporate income taxes paid.............. $ 0 $ 0
Supplemental schedule of non-cash investing and financing activities:
Non-cash transactions consisted of the exchange of common stock
for capital assets valued at $410,000 in 1996 and the sale of a
Market Area for a non-interest bearing note with a present
value of $213,819 in 1996.
</TABLE>

The Accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.

F-23
<PAGE> 71

ALL AMERICAN FOOD GROUP, INC. (FORMERLY JUTLAND FOOD GROUP, INC.)
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMMON STOCK, NON-REDEEMABLE PREFERRED
STOCK AND OTHER STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED APRIL 30, 1996
---------------------------------------------------------------------------------------------
COMMON STOCK PREFERRED STOCK ADDITIONAL
----------------------- ----------------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) TOTAL
--------- ---------- --------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at October 31, 1995..... 1,891,300 $ 876,150 1,639,500 $1,022,580 $365,000 $(2,311,903) $ (48,173)
Six Months Ended April 30, 1996:
Conversion of preferred stock to
common stock.................. 70,000 70,000 (70,000) (70,000) -- -- 0
Common stock issuance........... 1,773,900 2,413,986 -- -- -- -- 2,413,986
Preferred stock issuance........ -- -- 200,000 200,000 -- -- 200,000
Preferred stock redemption...... -- -- (416,997) (416,997) -- -- (416,997)
Increase in carrying amount of
redeemable preferred stock.... -- -- (160,000) (342,540) (365,000) -- (707,540)
Net Loss........................ -- -- -- -- -- (752,954) (752,954)
--------- ---------- --------- ---------- --------- ----------- ----------
Balance at April 30, 1996....... 3,735,200 $3,360,136 1,192,503 $ 393,043 $ 0 $(3,064,857) $ 688,322
========= ========== ========= ========== ========= =========== ==========

<CAPTION>
FOR THE SIX MONTHS ENDED APRIL 30, 1995
---------------------------------------------------------------------------------------------
COMMON STOCK PREFERRED STOCK ADDITIONAL
----------------------- ----------------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) TOTAL
--------- ---------- --------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at October 31, 1994..... 2,711,300 $1,277,000 300,000 $ 54,000 $365,000 $ (607,290) $1,088,710
Six Months Ended April 30, 1995:
Conversion of common stock to
preferred stock............... (825,000) (402,600) 825,000 402,600 -- -- 0
Preferred stock issuance........ -- -- 200,000 200,000 -- -- 200,000
Preferred stock redemption...... -- -- (100,000) -- -- (100,000) (100,000)
Net Loss........................ -- -- -- -- -- (856,656) (856,656)
--------- ---------- --------- ---------- --------- ----------- ----------
Balance at April 30, 1995....... 1,886,300 $ 874,400 1,225,000 $ 656,600 $365,000 $(1,563,946) $ 332,054
========= ========== ========= ========== ========= =========== ==========
</TABLE>

The Accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.

F-24
<PAGE> 72

ALL AMERICAN FOOD GROUP, INC. (FORMERLY JUTLAND FOOD GROUP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
APRIL 30, 1996

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

(a) BASIS OF PRESENTATION --

The consolidated financial statements included herein have been prepared by
All American Food Group, Inc. and subsidiaries (the "Company"). In the opinion
of management, the information furnished reflects all adjustments necessary for
a fair presentation of the results for the reported interim periods. Results of
operations for interim periods are not necessarily indicative of results for the
full year.

(b) ORGANIZATION --

The Company was incorporated under the name Jutland Food Group, Inc. on
September 27, 1993 under the laws of the State of New Jersey. On October 20,
1993, the Company acquired substantially all of the assets of Howberg Bakery
Equipment Co., Inc., Bagels of New Milford, Inc. and Goldberg's Famous Bagels of
Orangeburg, Inc., hereinafter referred to as the "Goldberg acquisition." The
assets acquired consisted of a bagel equipment business and two retail bagel
stores. On September 29, 1994, the Company acquired all of the outstanding stock
of four interrelated corporations all conducting business under the tradename
"Sammy's New York Bagels," hereinafter referred to as the "Sammy's acquisition."
The acquisition consisted of three certified kosher retail bagel stores and a
bagel production facility, all operating under rabbinical supervision. Both of
these acquisitions have been accounted for under the purchase method of
accounting in accordance with Accounting Principle Board Opinion No. 16.
Effective October 31, 1995 the company changed its fiscal year to October 31st.
The Company changed its name to All American Food Group, Inc. on October 24,
1995.

The Company is principally engaged in the development of a retail chain of
franchised bagel stores, including the operation of a certain number of
Company-owned stores for training and marketing and promotional activities, and
the distribution of bagel bakery equipment and related products to the franchise
system. The Company markets both single unit and market development franchise
agreements. The Company, in the normal course of business, also markets stores
it acquires to individuals who operate as franchisees. The Company franchises
its concepts under the names "Goldberg's Original Old World Bagels" and "Sammy's
New York Bagels."

The Company no longer actively engages in the sales of bagel bakery
equipment to independent retail operators.

(d) PRINCIPLES OF CONSOLIDATION --

The consolidated financial statements include the accounts of All American
Food Group, Inc. and its subsidiaries. All significant inter-company balances
and transactions have been eliminated in consolidation.

(e) CASH AND CASH EQUIVALENTS --

At April 30, 1996 cash represented monies on deposit in financial
institutions.

(f) CONCENTRATION OF CREDIT RISK --

The Company maintains cash and cash equivalents with various financial
institutions. Company policy is designed to limit exposure with any one
institution. Credit risk with respect to trade accounts and notes receivable is
minimal, due to the terms under which the Company transacts its business.

F-25
<PAGE> 73

ALL AMERICAN FOOD GROUP, INC. (FORMERLY JUTLAND FOOD GROUP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
APRIL 30, 1996

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

(g) INVENTORIES --

Inventories are stated at the lower of cost (first-in, first-out ("FIFO"))
or market.

(h) PROPERTY, PLANT AND EQUIPMENT --

(i) INTANGIBLE ASSETS --

The values assigned to intangible assets are based on an independent
appraisal and management's estimates, and are being amortized on a straight-line
basis over their estimated useful lives, which range from three and one-half to
five years.

(j) ACQUISITION COSTS --

Acquisition costs represent fees incurred in the Goldberg and Sammy's
acquisitions are being amortized over their useful lives of five years.

(k) VALUATION OF NON-CURRENT INVESTMENTS --

The non-current portfolio of securities represented by the investment in
the common stock of Jutland Enterprises Inc. ("Enterprises") is carried at zero
value. Currently there is no market for the shares. Any gain realized from the
disposition of these securities will be recognized at the time of disposition.

(l) FRANCHISE REVENUE RECOGNITION --

Franchise revenue includes the sale of single unit franchises, the sale of
Company-owned stores to franchisees, the sale of market development franchises
and ongoing royalty and advertising fees.

F-26
<PAGE> 74

ALL AMERICAN FOOD GROUP, INC. (FORMERLY JUTLAND FOOD GROUP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
APRIL 30, 1996

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

(l) FRANCHISE REVENUE RECOGNITION -- (CONTINUED)
and (ii) the right to share with the Company, on a 50/50 basis, initial and
ongoing single store fees within the Market Area. Under Market Development
Agreements, the Company's obligations in respect of the development of single
unit franchises within the Market Area are limited to (i) approval of
franchisees presented by the Market Developer and (ii) approval of store sites.
The Company has no further material obligations in respect of a Market
Development Agreement at the time of execution of the Agreement. Market
Development Fees paid in cash or by promissory notes fully collateralized by
liquid assets or as to which the Company has obtained an independent third-party
valuation, are recognized as revenues by the Company upon execution of the
Market Development Agreement and payment of the fee. In the absence of such
collateral or valuation, the Company recognizes Market Development Fees on a
cash basis as payments on such notes are received. The Company records
non-interest bearing notes with a term in excess of one year at a discount for
imputed interest thereon. As of April 30, 1996, the Company had deferred the
recognition of $262,989 of revenues relating to notes from Market Developers.
See notes 3 and 9.

The Company recognizes revenues from the sale of Company-owned stores to
franchisees upon consummation of the sale transaction.

The Company recognizes franchise royalty revenue when it is earned.

Franchise revenue for the six months ended April 30, 1996 of $195,639
consists of initial non-recurring franchise and market development fees of
$22,500 and $153,700, respectively, and ongoing royalties of $19,439. No
franchise revenue was recognized during the six months ended April 30, 1995.

(m) NET LOSS PER SHARE --

Net loss per common share was determined by dividing net loss, as adjusted,
by the weighted average number of common shares outstanding, as adjusted. The
net loss for the six months ended April 30, 1996 was adjusted by an increase of
$707,540 representing the increase in the carrying amount of redeemable
preferred stock. (See Note 11). The weighted average number of common shares
outstanding was adjusted by an increase of 1,891,070 shares for all periods
presented. These additional shares represent the number of shares and options
issued within the twelve months prior to May 3, 1996, when the Company filed a
registration statement for an initial public offering (IPO), that were issued
for consideration per share or at an exercise per share less than the
anticipated IPO price of $6.00 per share. The treasury stock method has been
used to determine the net increase in the number of shares outstanding. As such
the computation of fully diluted net loss per share was anti-dilutive in each of
the periods presented; therefore, the amounts reported for primary and fully
diluted loss are the same.

(n) LONG-LIVED ASSETS --

The Company retroactively adopted SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
effective February 1, 1994. The Company records impairment losses on long-lived
assets used in operations, including goodwill and intangible assets, when

F-27
<PAGE> 75

ALL AMERICAN FOOD GROUP, INC. (FORMERLY JUTLAND FOOD GROUP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
APRIL 30, 1996

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

(n) LONG-LIVED ASSETS -- (CONTINUED)

events and circumstances indicate that the assets might be impaired and the
discounted cash flows estimated to be generated by those assets are less than
the carrying amounts of those assets. The adoption of SFAS No. 121 had no
material impact on the Company's financial condition or results of operations
for the six months ended April 30, 1996 and 1995.

(o) STOCK OPTIONS --

The Company has granted stock options to an employee, a director, a key
vendor and a customer with an exercise price not less than fair market value per
share of common stock on the date the option was granted. The Company accounts
for stock option grants in accordance with APB Opinion No. 25, "Accounting for
Stock Issued to Employees" and, accordingly, recognizes no compensation or other
expense for the stock option grants.

2. INVENTORIES:

Inventories at April 30, consist of the following:

<TABLE>
<CAPTION>
1996 1995
------- --------
<S> <C> <C>
Food and paper products.................................. $39,872 $ 16,000
Equipment and parts...................................... 57,613 154,664
------- --------
Total inventories........................................ $97,485 $170,664
======= ========
</TABLE>

3. NOTES RECEIVABLE:

Notes receivable at April 30 1996, represent the present value of the
unpaid portion of the Market Development Fees due in connection with the sales
of Market Areas (including a sale to a shareholder of the Company).

The notes, which are non-interest bearing and have been discounted based on
an imputed interest rate of 9%, are as follows:

<TABLE>
<S> <C>
Note receivable, paid by the application of 50% of compensation
due to Market Developer......................................... $ 49,170
Note receivable, due in quarterly installments of $20,000......... 213,819
--------
262,989
Less current portion.............................................. 69,846
--------
Note receivable, long-term........................................ $193,143
========
</TABLE>

F-28
<PAGE> 76

ALL AMERICAN FOOD GROUP, INC. (FORMERLY JUTLAND FOOD GROUP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
APRIL 30, 1996

4. FIXED ASSETS:

Fixed assets and accumulated depreciation at April 30, consists of the
following:

<TABLE>
<CAPTION>
ESTIMATED
1996 1995 USEFUL LIVES
---------- --------- -------------
<S> <C> <C> <C>
Machinery and equipment -- retail
stores............................... $ 492,973 $ 555,715 7 years
Office furniture and warehouse
equipment............................ 171,500 140,876 7 years
Trucks and delivery vehicle............ 26,370 26,370 3 to 5 years
Leasehold improvements -- retail
stores............................... 233,931 152,497 Term of lease
Construction in progress............... 181,828 --
---------- ---------
1,106,602 875,458
Accumulated depreciation............... (197,426) (162,868)
---------- ---------
Fixed assets net of accumulated
depreciation......................... $ 909,176 $ 712,590
========== =========
</TABLE>

At April 30, 1996 certain debt is secured by approximately $259,000 of
fixed assets.

5. INTANGIBLE ASSETS:

Intangible assets and accumulated amortization at April 30, are as
following:

<TABLE>
<CAPTION>
ESTIMATED
1996 1995 USEFUL LIVES
--------- --------- ------------
<S> <C> <C> <C>
Kosher certification....................... $ 145,771 $ 157,771 5 years
Non-compete agreements..................... 192,507 214,507 4 years
Favorable lease agreement.................. 6,250 22,500 3 1/2 years
Customer lists............................. 74,432 93,434 4 years
Proprietary formula........................ 107,338 121,338 5 years
Retail store license....................... -- 27,000 9 1/2 years
Drawings and blueprints.................... 46,158 52,158 5 years
--------- ---------
Total intangible assets.................... 572,456 688,708
Accumulated amortization................... (294,522) (165,254)
--------- ---------
Total intangible assets, net............... $ 277,934 $ 523,454
========= =========
</TABLE>

6. ACQUISITION COSTS:

<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Acquisition costs....................................... $105,751 $105,751
Accumulated amortization................................ (50,899) (29,744)
-------- --------
Net acquisition costs................................... $ 54,852 $ 76,007
======== ========
</TABLE>

F-29
<PAGE> 77

ALL AMERICAN FOOD GROUP, INC. (FORMERLY JUTLAND FOOD GROUP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
APRIL 30, 1996

7. INVESTMENT IN JUTLAND ENTERPRISES INC. COMMON STOCK:

As part of its initial capitalization, the Company acquired 400,000 shares
of Enterprises common stock from Andrew Thorburn, the Chief Executive Officer of
Enterprises and subsequently the Chief Executive Officer of the Company.
Consistent with the transferor's cost basis, this stock has been assigned no
value by the Company.

The Company received 340,000 additional shares of Enterprises in separate
transaction involving Blue Chip Computerware, Inc., and in the re-negotiations
with Howard Goldberg. Due to the absence of a readily ascertainable market value
no value has been assigned to these shares.

8. DEFERRED FRANCHISING REVENUE:

Deferred franchising revenue at April 30, 1996, represents Initial
Franchise Fees received in connection with single store franchises where the
stores have not yet opened and the present value of the portion of the Market
Development Fee paid by means of non-interest bearing notes as to which the
Company has not as yet recognized revenue, and are as follows:

<TABLE>
<S> <C>
Single store Initial Franchise Fees received, stores not yet
open............................................................ $ 40,000
Market Development Fees........................................... 262,989
--------
302,989
Less current portion.............................................. 109,846
--------
Deferred franchising revenue, long-term........................... $193,143
========
</TABLE>

9. EQUIPMENT LEASE OBLIGATIONS:

The Company and its subsidiaries are obligated under various equipment
lease arrangements which have been capitalized in the accompanying financial
statements. Property, plant, and equipment presented on the consolidated balance
sheet includes approximately $259,000 of assets capitalized under these leasing
arrangements. Accumulated depreciation recorded on these assets approximated
$65,000 at April 30, 1996. These lease obligations are due in monthly
installments including interest expense at annual interest rates ranging from
8.3% to 24.5%. The lease obligations are payable through dates ranging from June
1996 through November 1999.

The future minimum payments required under the lease arrangements with
their present value at April 30, 1996 are as follows:

<TABLE>
<CAPTION>
PRESENT INTEREST MINIMUM
YEAR ENDED APRIL 30, VALUE EXPENSE PAYMENTS
----------------------------------------------- -------- ------- --------
<S> <C> <C> <C>
1997.................................... $ 73,377 $13,988 $ 87,365
1998.................................... 40,308 5,173 45,481
1999.................................... 8,625 368 8,993
-------- ------- --------
$122,310 $19,529 $141,839
======== ======= ========
</TABLE>

F-30
<PAGE> 78

ALL AMERICAN FOOD GROUP, INC. (FORMERLY JUTLAND FOOD GROUP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
APRIL 30, 1996

10. LOANS FROM STOCKHOLDERS:

The future minimum payments required under the loans, with their present
value at April 30, 1996, are as follows:

<TABLE>
<CAPTION>
PRESENT INTEREST MINIMUM
YEAR ENDED APRIL 30, VALUE EXPENSE PAYMENTS
-------------------------------------------------- ------- ------- -------
<S> <C> <C> <C>
1997....................................... $14,425 $1,083 $15,508
1999....................................... 5,433 303 5,736
1998....................................... 3,451 79 3,530
------- ------ -------
$23,309 $1,465 $24,774
======= ====== =======
</TABLE>

11. LONG-TERM DEBT:

Long-term debt at April 30, is summarized as follows:

<TABLE>
<CAPTION>
1996 1995
------ -------
<S> <C> <C>
Note payable to Tilden Financial Corporation payable in
monthly installments of $1,521 including interest,
through October 1995, secured by equipment............... $ -- $ 9,030
Note payable to bank payable in monthly installments of
$405 plus interest at 1.5% above the prime rate, through
February 1997, secured by equipment...................... 3,532 8,098
Note payable to individual in monthly installments of $153
including interest at the annual rate of 12.5%, payable
through September 1996................................... 1,214 --
------ -------
4,746 17,128
Less current portion....................................... 4,746 13,254
------ -------
Long-term debt............................................. $ -- $ 3,874
====== =======
</TABLE>

12. INCOME TAXES:

The Company has adopted SFAS No. 109 and is a C Corporation subject to
federal and state income taxes. The Company has changed its fiscal year end to
October 31 for tax purposes. At April 30, 1996, there were consolidated net
operating loss carryforwards of approximately $750,000 and $397,000 expiring in
2010 and 2011, respectively. Due to the current period operating loss, no amount
has been provided for corporate income taxes.

In accordance with SFAS No. 109, the difference between the tax bases and
the assigned value of the assets for financial reporting purposes of
approximately $525,000 resulting from the Goldberg and Sammy's acquisitions will
not result in taxable or deductible amounts in future years, and no deferred
asset or liability has been recognized because of the magnitude of the net
operating loss carryforward. In the event the

F-31
<PAGE> 79

ALL AMERICAN FOOD GROUP, INC. (FORMERLY JUTLAND FOOD GROUP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
APRIL 30, 1996

12. INCOME TAXES -- (CONTINUED)

Company generates taxable income in excess of the net operating loss
carryforward, a deferred tax liability will be recognized.

13. REDEEMABLE AND NON-REDEEMABLE PREFERRED CONVERTIBLE PREFERRED STOCK:

The Company issued 190,000 shares of Series A and 180,000 shares of Series
B Convertible Preferred Stock in connection with the Goldberg's and Sammy's
acquisitions, respectively. The Certificate of Designation stipulates that
certain of these shares are redeemable if certain events occur as follows:

Series A Shares:

In the event that the Company completes an underwritten initial public
offering of its common stock yielding net proceeds to the Company (after
deduction of offering costs, commissions, attorneys fees, or other costs and
expenses in connection with such offering) of more than $2,000,000, then within
30 days following the closing of such offering, the Company will offer to redeem
the lesser of 40,000 shares or the number of shares of Series A Preferred Stock
then outstanding, at a redemption price of $5.00 per share. The holder of Series
A Preferred Stock can accept the offer or can convert the shares held into an
equal number of shares of common stock of the Company.

Series B Shares:

In the event that the Company completes, in a single transaction, a capital
infusion of more than $1,000,000 (net of any offering costs, commissions,
attorneys fees, or other costs and expenses in connection with such equity
infusion), then within 30 days following the closing of such offering, the
Company shall offer to redeem the lesser of 60,000 shares or the number of
shares of Series B Preferred Stock then outstanding, at a redemption price of
$5.00 per share. The holder of Series B Preferred Stock can accept the offer or
can convert the shares held into an equal number of shares of the common stock
of the Company.

In the event that the Company completes an underwritten initial public
offering of its common stock and any shares of Series B Preferred Stock remain
outstanding 24 months following the effective date of the registration statement
filed with the Securities and Exchange Commission in respect of such initial
public offering, then within 3 days following the expiration of such 24 month
period, the Company shall offer to redeem the lesser of 60,000 shares, or the
number of shares of Series B Preferred Stock then outstanding, at a redemption
price of $5.00 per share. The holder of Series B Preferred Stock can accept the
offer or can convert the shares held into an equal number of shares of the
common stock of the Company.

At April 30, 1996 the present value of the amount necessary to redeem the
maximum number of shares of Series A and Series B Convertible Preferred Stock
has been reflected in the accompanying consolidated financial statements as
Redeemable Preferred Stock, Series A and Series B. In the calculation of these
amounts, it has been assumed the Company will complete its initial public
offering on August 31, 1996.

The following presents the previous carrying amounts of the Series A and
Series B Preferred Stock, the carrying amount at April 30, 1996, the accretion
(increase in the carrying amount) for the six months ended

F-32
<PAGE> 80

ALL AMERICAN FOOD GROUP, INC. (FORMERLY JUTLAND FOOD GROUP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
APRIL 30, 1996

13. REDEEMABLE AND NON-REDEEMABLE PREFERRED CONVERTIBLE PREFERRED
STOCK -- (CONTINUED)

Series B Shares -- (continued)

April 30, 1996 and the redemption amounts for the preferred shares. At April 30,
1996, the accretion created a charge to paid in capital of $365,000 and a charge
to non-redeemable preferred stock of $342,540.

<TABLE>
<CAPTION>
ACCRETION FOR
THE
CARRYING AMOUNT CARRYING AMOUNT SIX MONTHS ENDED REDEMPTION
AT OCTOBER 31, 1995 AT APRIL 30, 1996 APRIL 30, 1996 AMOUNT
------------------- ----------------- ---------------- ----------
<S> <C> <C> <C> <C>
Series A................... $54,000 $ 192,196 $192,196 $200,000
Series B................... -0- $ 515,344 $515,344 $600,000
---------- ------------ ------------ --------
$54,000 $ 707,540 $707,540 $800,000
========== ============ ============ ========
</TABLE>

The maturity schedule of the redemptions is as follows:

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30, AMOUNT
------------------------------------------------------------------ --------
<S> <C>
1997....................................................... $500,000
1999....................................................... 300,000
--------
800,000
Less deferred interest..................................... 92,460
--------
Carrying amount at April 30, 1996.......................... $707,540
========
</TABLE>

Series C Preferred Stock:

The Company has also issued a total of 982,503 shares of Series C
Non-redeemable Convertible Preferred stock in a series of transactions. The
Certificate of Designation for this series provides that the Company may, at its
sole option, redeem all or part of the stock for $5.00 a share, subject to the
holder's election to convert the shares into an equal number of common shares of
the Company. The shares have no conditions under which the Company must redeem
all or portion of theses shares.

As discussed in Note 12, Related Party Transactions, the Company agreed to
a voluntary redemption of 416,997 shares of this stock during the six months
ended April 30, 1996. The Company does not intend to voluntarily redeem any
additional shares of non-redeemable preferred stock.

14. RELATED PARTY TRANSACTIONS:

As described above, during the six months ended April 30, 1996 the Company
voluntarily redeemed 416,997 shares of Series C Preferred Stock. Of this total
401,997 shares were redeemed from an affiliate, Blue Chip Computerware, Inc.,
for consideration of $1.00 per share, equivalent to the price Blue Chip paid to
acquire the shares. This was done in connection with the financial
reorganization of Blue Chip.

15. STOCK OPTIONS:

The Company has granted options to purchase 240,000 shares of the Company's
common stock, consisting of 80,000 options granted to a key vendor, 50,000
options granted to a director, 10,000 options granted to a customer and 100,000
options granted to the Company's Chief Financial Officer. The options are

F-33
<PAGE> 81

ALL AMERICAN FOOD GROUP, INC. (FORMERLY JUTLAND FOOD GROUP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
APRIL 30, 1996

15. STOCK OPTION -- (CONTINUED)

exercisable at prices ranging from $.50 to $1.00 per share and expire five years
after they were issued on dates ranging from January 31, 2000 through January
31, 2001.

The options are exercisable at any time during the period they are
outstanding. The following summarized the activity during the periods presented.

<TABLE>
<CAPTION>
OPTION PRICE
SHARES PER SHARE
------- ----------------
<S> <C> <C>
Options outstanding at February 1, 1995............ None
Granted....................................... 30,000 $0.50
-------
Options outstanding at April 30, 1995.............. 30,000 $0.50
Granted....................................... 50,000 $1.00
-------
Options outstanding at October 31, 1995............ 80,000 $0.50 to $1.00
Granted....................................... 160,000 $1.00
-------
Options outstanding at April 30, 1996.............. 240,000 $0.50 to $1.00
=======
</TABLE>

16. COMMITMENTS AND CONTINGENCIES:

(a) SAMMY'S FRANCHISING FEES --

During the first sixty months after the Sammy's acquisition, the former
shareholders of the sellers are entitled to receive monthly payments equal to
10% of the single unit franchising fees paid to the Company, and during the
first twelve months after the acquisition and 20% of the fees collected on
international licensing or franchising. At April 30, 1996 there was no
outstanding liability under this provision.

(b) LEASES --

The Company rents real and personal property under various non-cancelable
leases expiring at various dates through 2003. Certain of the leases include
renewal options and provisions for additional rental payments based on various
formulas such as cost of living adjustments, real estate tax and operating
expense escalations and escalations based on gross revenues. Total rent expense
charged to operations approximated $114,000 and $111,000 for the six months
ended April 30, 1996 and 1995, respectively. These amounts included contingent
rental expense of approximately $6,000 and $3,000, respectively.

Minimum annual rental commitments under leases in effect at April 30, 1996
are summarized as follows:

<TABLE>
<CAPTION>
EQUIPMENT
YEAR ENDED APRIL 30, REAL ESTATE & OTHER
------------------------------------------------------ ----------- ---------
<S> <C> <C>
1997........................................... $ 186,000 $10,000
1998........................................... 171,000 --
1999........................................... 160,000 --
2000........................................... 156,000 --
2001........................................... 119,000 --
Later years.................................... 521,000 --
----------- --------
Total minimum lease payments................... $ 1,313,000 $10,000
=========== ========
</TABLE>

F-34
<PAGE> 82

ALL AMERICAN FOOD GROUP, INC. (FORMERLY JUTLAND FOOD GROUP, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
APRIL 30, 1996

16. COMMITMENTS AND CONTINGENCIES -- (CONTINUED)

The total compensation expense under these agreements for the six months
ended April 30, 1996 and for the six months ended April 30, 1995 was $113,568
and such amounts have been reflected as acquisition costs on the accompanying
Statement of Operations.

17. PRIVATE PLACEMENTS:

During the six months ended April 30, 1996, the Company completed private
placements (the "Private Placements") of its common stock pursuant to which it
received an aggregate of $2,413,986, net of expenses of $48,514. Included in the
proceeds was property consisting of two retail bagel stores in the final stages
of construction, valued at $410,000. The proceeds from the Private Placements to
date have been used to (i) fund the Company's operations; (ii) the voluntary
redemption of shares of the Company's Preferred Stock; (iii) reduce trade
payables; and (iv) acquire capital assets. The Company intends to apply the
remainder of these proceeds for working capital purposes.

18. SUBSEQUENT EVENTS:

(a) REGISTRATION STATEMENT --

On May 3, 1996, the Company filed a registration statement in connection
with an initial public offering of its common stock with the Securities and
Exchange Commission. The contemplated offering consists of 600,000 shares to be
sold at an initial price of $6.00 a share, through a firm commitment
underwriting by Westminster Securities Corporation and Myers, Pollack & Robbins.

(b) SETTLEMENT AGREEMENT --

On August 12, 1996, the Company entered into a Modification and Settlement
Agreement pursuant to which, among other things, Mr. Goldberg agreed to convert
65,000 shares of his Series A Preferred Stock to an equal number of shares of
Common Stock and to redeem his remaining 115,000 Series A Preferred shares.

F-35
<PAGE> 83

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

NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY, BY ANY
PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER,
SOLICITATION OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE OF THE PROSPECTUS.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
Dilution.............................. 13
Use of Proceeds....................... 14
Capitalization........................ 15
Dividend Policy....................... 15
Selected Financial Data............... 16
Management's Discussion and Analysis
or Plan of Operation................ 17
Business.............................. 21
Management............................ 34
Certain Transactions.................. 38
Principal Shareholders................ 39
Description of Securities............. 40
Shares Eligible for Future Sale....... 41
Underwriting.......................... 42
Concurrent Offering................... 43
Legal Matters......................... 44
Experts............................... 44
Additional Information................ 44
Index to Financial Statements......... F-1
</TABLE>

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

Until , 1996 (25 days after the date of this Prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligations of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.

600,000 SHARES

ALL AMERICAN FOOD GROUP, INC.

COMMON STOCK

------------------------
PROSPECTUS
------------------------

WESTMINSTER SECURITIES CORPORATION
MYERS, POLLACK & ROBBINS

, 1996

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 84

SUBJECT TO COMPLETION, DATED SEPTEMBER 5, 1996

ALTERNATIVE PROSPECTUS

1,773,900 SHARES

ALL AMERICAN FOOD GROUP, INC.

COMMON STOCK
------------------------
This Prospectus relates to 1,773,900 shares of the Common Stock, no par
value, of All American Food Group, Inc., a New Jersey corporation (the
"Company"), issued to the holders thereof in private placements by the Company.
The shares of Common Stock referred to above are sometimes referred to herein as
the "Selling Securityholder Securities" and the holders thereof as the "Selling
Securityholders."

The securities offered by the Selling Securityholders pursuant to this
Prospectus may be sold from time to time by the Selling Securityholders or by
their transferees. The distribution of the securities offered hereby by the
Selling Securityholders may be effected in one or more transactions that may
take place on the over-the-counter market, including ordinary brokers'
transactions, privately negotiated transactions or through sales to one or more
dealers for resale of such securities as principals, at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices. Usual and customary or specifically negotiated brokerage fees
or commissions may be paid by the Selling Securityholders.

The Selling Securityholders, and intermediaries through whom such
securities are sold, may be deemed underwriters within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
securities offered, and any profits realized or commissions received may be
deemed underwriting compensation. The Company has agreed to indemnify the
Selling Securityholders against certain liabilities, including liabilities under
the Securities Act.

On the date of this Prospectus, a registration statement under the
Securities Act with respect to an underwritten public offering by the Company
(the "Offering") of 600,000 shares of Common Stock, through Westminster
Securities Corporation and Myers, Pollack & Robbins (the "Underwriters"), was
declared effective by the Securities and Exchange Commission (the "Commission").
The Company will receive approximately $2,940,000 in net proceeds from the
Offering (assuming no exercise of the Underwriter's over-allotment option) after
payment of underwriting discounts and commissions and estimated expenses of the
Offering. The Company will not receive any proceeds from the sale of Selling
Securityholder Securities by the Selling Securityholders.

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

THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE AND INVOLVE A HIGH DEGREE
OF RISK AND SUBSTANTIAL DILUTION. INVESTMENT IN THESE SECURITIES SHOULD
BE MADE ONLY BY INVESTORS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE
INVESTMENT. POTENTIAL PURCHASERS SHOULD CAREFULLY CONSIDER THE
MATTERS SET FORTH UNDER "RISK FACTORS" BEGINNING ON PAGE 7.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this Prospectus is , 1996
<PAGE> 85

SELLING SECURITYHOLDERS

An aggregate of up to 1,773,900 shares of Common Stock may be offered for
resale by the Selling Securityholders.

The following table sets forth certain information with respect to each
Selling Securityholder for whom the Company is registering Common Stock for
resale to the public. Each of the Selling Securityholders is offering for sale
all of the Common Stock beneficially owned thereby, except that John W.
Chitvanni (a director of the Company) will retain ownership of 465 shares of
Common Stock and currently exercisable options (expiring November 1, 2000) to
purchase 50,000 shares of Common Stock, representing, in the aggregate,
approximately 1.16% of the aggregate number of shares of Common Stock
outstanding immediately subsequent to the Offering. The Company will not receive
any of the proceeds from the sale of Common Stock by the Selling
Securityholders.

Except as indicated, there are no material relationships between any of the
Selling Securityholders and the Company or any of its predecessors or
affiliates, nor have any such material relationships existed within the past
three years.

A-2
<PAGE> 86

<TABLE>
<CAPTION>
NUMBER OF SHARES
OF
COMMON STOCK OWNED
AND MAXIMUM NUMBER
SELLING SECURITYHOLDERS TO BE SOLD
- ------------------------------------------------------------------------- ------------------
<S> <C>
Eleven Congers Inc.(3)................................................... 91,100
Elliot Leffel............................................................ 3,000
Eugene Chitvanni(1)...................................................... 61,000
Frank McCenimen.......................................................... 250
Frank Tarantino.......................................................... 3,000
George Muraski........................................................... 1,000
George Watson............................................................ 2,500
Gerald A. Bardeson....................................................... 10,000
Gerald Gedney............................................................ 5,000
Glenn and Merilag Mendoza................................................ 2,000
Gregory S. Vojonvic...................................................... 5,000
Guy McNeil(2)............................................................ 10,000
Harold Greenberg......................................................... 25,000
Helen A. Pappas.......................................................... 10,000
Helga Wollman............................................................ 1,000
Henry Bareket............................................................ 2,000
Herbert L. and Francine Wilson........................................... 5,000
Markan Associates........................................................ 18,000
Howard Paul Cagen........................................................ 2,500
Irvin R. Goldstein....................................................... 2,500
James A. Ashbaugh........................................................ 2,000
James B. Yates........................................................... 150,000
James L. Benjamin........................................................ 5,000
Jay S. Youngerman........................................................ 5,000
Jeanne E. Harvey......................................................... 1,250
Joan H. Facelle M.D. Money Purchase Plan DTD 10-7-89..................... 8,000
Joan H. Facelle FBO Joan H. Facelle IRA.................................. 15,000
Joan Kalish.............................................................. 5,000
John Fitzpatrick, MD..................................................... 1,000
John Mocio............................................................... 1,000
John Mocio, Jr........................................................... 500
John W. and Valerie A. Chitvanni(2)...................................... 10,000
Joseph A. and Sonia E. Conti(3).......................................... 10,000
Joseph Zampella.......................................................... 100,000
Kenneth L. Terminini and Diane P. Cowell................................. 1,000
Kenneth S. Kopchik....................................................... 2,500
Klarberg Raiola and Associates........................................... 5,000
Larry Laimo.............................................................. 28,040
Lee Purser............................................................... 5,000
Lisker Group(4).......................................................... 71,250
Louis J. Eni............................................................. 11,500
Louis Starace............................................................ 3,000
Lynette S. Bardeson...................................................... 10,000
M&A Investment Partnership............................................... 10,000
Marc and Jodi Weintraub.................................................. 5,000
Maria Tina Ursini(5)..................................................... 13,000
Marie George............................................................. 2,750
Mario Caputo............................................................. 100,000
Mark Albahary............................................................ 4,000
Mark J. Meagher.......................................................... 10,000
Mary Anne Riordan........................................................ 10,000
Michael Brennock......................................................... 47,400
Michael Innerfield MD.................................................... 4,800
Michael J. and Adeline Brennock.......................................... 100,000
</TABLE>

A-3
<PAGE> 87

<TABLE>
<CAPTION>
NUMBER OF SHARES
OF
COMMON STOCK OWNED
AND MAXIMUM NUMBER
SELLING SECURITYHOLDERS TO BE SOLD
- ------------------------------------------------------------------------- ------------------
<S> <C>
Michael J. Bellich....................................................... 1,200
Myrna Mirow.............................................................. 12,500
Napoli Assurance Co...................................................... 15,000
Nelli and Illya Rabukhin(6).............................................. 1,000
Nicholas S. Vojnovic..................................................... 1,000
Nickolas Farese.......................................................... 1,000
Pamela D. and Thomas J. Chiatroni(7)..................................... 1,000
Patricia and Raymond Pistey Sr........................................... 3,900
Patricia M. Gedney....................................................... 5,000
Ramapo Valley Surgical Assoc. Retirement Trust DTD 10-1-89 FBO Bobb
Vladeck................................................................ 4,000
Ramapo Valley Surgical Assoc. Retirement Trust DTD 10-1-89 FBO Thomas L.
Facelle IRA............................................................ 20,000
Rebekah Hepworth......................................................... 9,000
Regina and Joseph Matties................................................ 1,000
Richard Bellich.......................................................... 5,000
Richard Hepworth......................................................... 2,500
Rick Stockton............................................................ 5,000
Riry Muhlrad............................................................. 4,800
Robert and Janice Rosenberg.............................................. 5,000
Robert E. Riodan and Francis A. Carille.................................. 25,000
Robert Goldberg, MD...................................................... 4,000
Rosemary Mocio........................................................... 32,035
Charles Rosenberg........................................................ 12,500
Ruth Dietz Eni........................................................... 11,500
Sandra K. and Gerald D. Bardeson......................................... 20,000
Sandra Silvia............................................................ 100,000
Scott Minuto............................................................. 2,000
Sheila E. Stein(6)....................................................... 10,000
Stephen and Lauri Hill................................................... 1,200
Steven and Janine Kolinsky............................................... 2,925
Steven Kolinsky and Stephen Hill......................................... 10,000
Sushi Bhardwaj........................................................... 2,000
Tamara Lund.............................................................. 500
Terri Shechtman.......................................................... 25,000
Thomas F. and Carolyn L. O'Rourke........................................ 3,000
Thomas L. Bumgardner..................................................... 7,000
Thomas L. Facelle Trustee FBO Thomas L. Facelle IRA...................... 15,000
Thomas L. Facelle, MD.................................................... 9,500
Thomas W. Bardeson....................................................... 10,000
Timothy E. Hibsman....................................................... 11,700
Timothy J. Riordan and Sheila O'Neill Riordan............................ 5,000
Victor D'Albora.......................................................... 1,000
</TABLE>

- ---------------
(1) Child of a director of the Company.
(2) Director or executive officer of the Company.
(3) Franchisee of the Company.
(4) Affiliate of an individual listed among "Key Personnel" of the Company.
(5) Mother-in-law of an executive officer of the Company.
(6) Employee of the Company.
(7) Sister of an executive officer of the Company.

A-4
<PAGE> 88

PLAN OF DISTRIBUTION

The sale of the Selling Securityholder Securities by the Selling
Securityholders may be effected from time to time in transactions (which may
include block transactions by or for the account of the Selling Securityholders)
in the over-the-counter market or in negotiated transactions, through the
writing of options on the securities, a combination of such methods of sale or
otherwise. Sales may be made at fixed prices which may be changed, at market
prices prevailing at the time of sale or at negotiated prices.

The Selling Securityholders may effect such transactions by selling their
securities directly to purchasers, through broker-dealers acting as agents for
the Selling Securityholders or to broker-dealers who may purchase shares as
principals and thereafter sell the securities from time to time in the
over-the-counter market in negotiated transactions or otherwise. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Securityholders or the purchasers
for whom such broker-dealers may act as agents or to whom they may sell as
principals or otherwise (which compensation as to a particular broker-dealer may
exceed customary commissions).

The Selling Securityholders holding shares of Common Stock who are not
officers or directors of the Company have agreed not to sell, assign,
hypothecate or otherwise transfer any such shares for a period of six months
following completion of the underwritten public offering. The officers and
directors of the Company have agreed not to, directly or indirectly, sell, offer
to sell, grant an option for the sale of, transfer, assign, pledge, hypothecate
or otherwise encumber any shares of the Company's Common Stock currently held
thereby for a period of 13 months following completion of the underwritten
public offering.

The Selling Securityholders and broker-dealers, if any, acting in
connection with such sale might be deemed to be underwriters within the meaning
of Section 2(11) of the Securities Act and any commission received by them and
any profit on the resale of the securities might be deemed to be underwriting
discounts and commissions under the Securities Act.

CONCURRENT PUBLIC OFFERING

On the date of this Prospectus, a Registration Statement was declared
effective under the Securities Act with respect to an underwritten offering by
the Company of 600,000 shares of Common Stock and up to 90,000 additional shares
of Common Stock to cover over-allotments, if any.

A-5
<PAGE> 89

[ALTERNATE PAGE]

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

NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF ANY
OFFER TO BUY, ANY SECURITIES OFFERED HEREBY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER, OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION HEREIN CONTAINED IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................
Risk Factors..........................
Dividend Policy.......................
Selected Financial Data...............
Management's Discussion and Analysis
or Plan of Operation................
Business..............................
Management............................
Certain Transactions..................
Description of Securities.............
Principal Shareholders................
Shares Eligible for Future Sale.......
Selling Securityholders...............
Plan of Distribution..................
Concurrent Public Offering............
Legal Matters.........................
Experts...............................
Additional Information................
Index to Financial Statements......... F-1
</TABLE>

1,773,900 SHARES

ALL AMERICAN FOOD
GROUP, INC.

COMMON STOCK
------------------------

PROSPECTUS
------------------------

, 1996

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

A-6
<PAGE> 90

ALL AMERICAN FOOD GROUP, INC.

PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 14A:3-5 of the New Jersey Business Corporation Act (the "NJBCA")
gives the Company power to indemnify each of its directors and officers against
expenses and liabilities in connection with any proceedings involving him by
reason of his being or having been a director or officer if (a) he acted in good
faith and in a manner he reasonably believed to be in, or not opposed to, the
best interests of the Company and (b) with respect to any criminal proceeding,
he had no reasonable cause to believe his conduct was unlawful. However, in a
proceeding by or in the right of the Company, there shall be no indemnification
in respect of any liabilities or expenses if the officer or director shall have
been adjudged liable to the Company unless the court in such proceeding
determines he is entitled to indemnification for such liabilities and/or
expenses. Furthermore, no indemnification shall be made to or on behalf of a
director or officer if a judgment or other final adjudication adverse to such
director or officer establishes that his acts or omissions (a) were in breach of
his duty of loyalty to the Company and its stockholders, (b) were not in good
faith or involved a knowing violation of law or (c) resulted in receipt by the
director or officer of an improper personal benefit. The NJBCA defines an act or
omission in breach of a person's duty of loyalty as an act or omission which
that person knows or believes to be contrary to the best interests of the
Company or its stockholders in connection with a matter in which he has a
material conflict of interest. If a director or officer is successful in a
proceeding, the statute mandates that the Company indemnify him against
expenses.

The Company's Restated Certificate of Incorporation, as permitted by New
Jersey law, eliminates the personal liability of the directors and officers to
the Company or its shareholders for monetary damages for breaches of such
director's or officer's duty of care or other duties as a director or officer;
except liabilities for any breach of duty based upon an act or omission (a) in
breach of such person's duty of loyalty to the corporation or its shareholders,
(b) not in good faith or involving a knowing violation of law or (c) resulting
in receipt by such person of an improper personal benefit. This limitation on
liability could have the effect of limiting directors' and officers' liability
for violations of the federal securities laws. In addition, the Company's
Restated Certificate of Incorporation and Restated By-Laws provide broad
indemnification rights to directors and officers so long as the director or
officer acted in a manner believed in good faith to be in or not opposed to the
best interest of the Company and with respect to criminal proceedings if the
director had no reasonable cause to believe his or her conduct was unlawful. The
Company believes that the protection provided by these provisions will help the
Company attract and retain qualified individuals to service as officers and
directors. These provisions would provide indemnification for liabilities
arising under the federal securities laws to the extent that such
indemnification is found to be enforceable under, and to be in accordance with,
applicable law and generally will limit the remedies available to a shareholder
who is dissatisfied with a Board decision protected by these provisions, and
such shareholder's only remedy may be to bring a suit to prevent the Board's
action.

II-1
<PAGE> 91

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following expenses will be incurred in connection with the proposed
offering hereunder. All of such expenses will be borne by the Company. With the
exception of the registration fees, all amounts shown are estimates:

<TABLE>
<S> <C>
SEC registration fees.......................................................... $ 5,227.15
NASD registration fee.......................................................... 2,016.00
Legal fees and expenses........................................................ 50,000.00
Underwriter's nonaccountable expense allowance................................. 108,000.00
Accounting fees and expenses................................................... 40,000.00
Blue sky fees and expenses (including counsel fees)............................ 25,000.00
Printing and engraving expenses................................................ 40,000.00
Transfer agent fees and expenses............................................... 2,500.00
Miscellaneous.................................................................. 27,256.85
-----------
Total.......................................................................... $300,000.00
===========
</TABLE>

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

The following sets forth certain information regarding sales of, and other
transactions with respect to, securities of the Company issued within the past
three years, which sales and other transactions were not registered pursuant to
the Securities Act of 1933, as amended (the "Securities Act"). All of such sales
and transactions were exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof or as otherwise indicated
herein.

In September 1993, in connection with the formation of the Company, Jutland
Enterprises Inc. ("Enterprises") acquired 937,500 shares of the Company's Common
Stock for consideration consisting of $300,000 in cash and $277,000 in assets.
Prior to January 31, 1994 (the end of the Company's first (partial) fiscal
year), Jutland contributed an additional $365,000 to the Company as additional
paid-in capital. Shortly after formation of the Company, Andrew Thorburn, the
Chief Executive Officer of the Company and of Enterprises, acquired 312,500
shares of the Company's Common Stock for consideration consisting of 400,000
shares of Enterprises common stock.

In July and August 1994, the Company entered into two separate stock
purchase agreements with Blue Chip Computerware, Inc. ("Blue Chip"). Under the
agreements, the Company issued 260,000 shares of Common Stock to a financial
services firm in exchange for its services in arranging the transaction and
1,200,000 shares of the Common Stock to Blue Chip in exchange for $50,000 in
cash, 100,000 shares of the common stock of Enterprises and 400,000 shares of
the common stock of Blue Chip. The Company subsequently sold the shares of Blue
Chip common stock for $650,000.

In September 1994 and October 1995, the Company issued 120,000 and 70,000
shares, respectively, of Series A Partially Redeemable Convertible Preferred
Stock to Howard Goldberg in connection with the Company's acquisition of the
assets of the Goldberg Companies and as part of the reconciliation of all
outstanding indebtedness and other obligations incurred in connection therewith.

In September 1994, as part of the consideration for the acquisition of four
corporations conducting business as "Sammy's New York Bagels," the Company
issued an aggregate of 180,000 shares of Series B Redeemable Convertible
Preferred Stock to the shareholders of the acquired corporations. Each share of
Preferred Stock currently is convertible into one share of Common Stock.

Effective February 1, 1995, the Company issued 825,000 shares of Series C
Convertible Preferred Stock to Blue Chip in exchange for 825,000 shares of
Common Stock held by Blue Chip. During the nine months ended October 31, 1995,
Blue Chip purchased 425,000 shares of Series C Convertible Preferred Stock at a
price of $1.00 per share. During the three-month period ended January 31, 1996,
Blue Chip purchased an additional 50,000 shares of Series C Convertible
Preferred Stock at the price of $1.00 per share.

In April 1995, Andrew Thorburn, the President of the Company purchased
70,000 shares of Series C Preferred Stock at a price of $1.00 per share.

II-2
<PAGE> 92

On August 4 and December 4, 1995, the Company sold 21,500 and 25,000
shares, respectively, of Series C Preferred Stock to an unaffiliated investor at
a price of $1.00 per share.

On October 31, 1995, the Company issued 5,000 shares of Common Stock to an
employee in lieu of compensation in the amount of $1,750.

December 4, 1995, the Company sold 25,000 shares of Series C Preferred
Stock to an unaffiliated investor at a price of $1.00 per share.

Between January 24, 1996 and April 29, 1996, the Company sold an aggregate
of 1,773,900 shares of Common Stock in two separate private placements at a
purchase price of either $1.00 or $2.00 per share. In connection with the
private placements, the Company has received $2,414,000 (net of expenses of
$48,000) including cash and other consideration valued at $410,000 which was
accepted in the form of two retail bagel stores in the final stages of
construction.

The Company initially issued a total of 120,000 shares of Common Stock to
the corporation (the "Bleecker Corporation") that owned the Goldberg's store on
Bleecker Street in New York, New York and 85,000 shares of Common Stock to the
corporation (the "Nanuet Corporation") that owned the Goldberg's store in
Nanuet, New York currently under development and scheduled to open no later than
September 30, 1996. At the request of these corporations, stock certificates
representing an aggregate of 205,000 shares then were issued in the amounts
indicated to the following persons, all of whom were shareholders in the
Bleecker Corporation and/or the Nanuet Corporation.

<TABLE>
<CAPTION>
NUMBER OF
SHAREHOLDER SHARES
- ---------------------------------------------------------------------------------- ---------
<S> <C>
Alexander Wollman................................................................. 1,000
Andrew Lefkowitz.................................................................. 5,000
Andrew and Susan Halpern.......................................................... 3,000
Anthony and Ellen Goneconti....................................................... 2,400
Austin Depalma.................................................................... 2,000
Bernard Karmel & Judith M. Gardner (JTWROS)....................................... 1,000
Catherine Bross................................................................... 8,000
Charles Glassman, MD.............................................................. 2,000
Charles Mayer..................................................................... 4,000
David and Lorraine Kiornblatt..................................................... 4,800
Dee Pornaro....................................................................... 1,800
Dr. Richard Saffran............................................................... 5,000
Edward and Therese Malone......................................................... 4,800
Elliot Leffel..................................................................... 3,000
Frank Tarantino................................................................... 3,000
Glenn and Merilag Mendoza......................................................... 2,000
Helga Wollman..................................................................... 1,000
Henry Bareket..................................................................... 2,000
Markan Associates................................................................. 18,000
Joan Kalish....................................................................... 5,000
John Fitzpatrick, MD.............................................................. 1,000
John Mocio........................................................................ 1,000
John Mocio, Jr.................................................................... 500
Larry Laimo....................................................................... 28,040
Lee Purser........................................................................ 5,000
Louis Starace..................................................................... 3,000
Mark Albahary..................................................................... 4,000
Michael Brennock.................................................................. 14,400
Michael Innerfield MD............................................................. 4,800
Nickolas Farese................................................................... 1,000
Rampo Valley Surgical Assoc. Retirement Trust DTD 10-1-89 FBO Bob Vladeck......... 4,000
Riry Muhirad...................................................................... 4,800
Robert Goldberg................................................................... 2,000
Robert Goldberg, MD............................................................... 2,000
</TABLE>

II-3
<PAGE> 93

<TABLE>
<CAPTION>
NUMBER OF
SHAREHOLDER SHARES
- ---------------------------------------------------------------------------------- ---------
<S> <C>
Rosemary Mocio.................................................................... 32,035
Scott Minuto...................................................................... 2,000
Stephen and Lauri Hill............................................................ 1,200
Steven and Janine Kolinsky........................................................ 2,925
Sushi Bhardwaj.................................................................... 2,000
Thomas Facelle.................................................................... 8,500
Thoms L. Facelle, MD.............................................................. 1,000
Victor D'Albora................................................................... 1,000
</TABLE>

ITEM 27. EXHIBITS.

The following exhibits are filed as part of this Registration Statement:

<TABLE>
<S> <C>
1.1* Form of Underwriting Agreement. (Revised).
3.1** Restated Certificate of Incorporation of the Company.
3.2** Certificate of Designations for Series A, B & C Preferred Stock.
3.3** Form of Second Restated Certificate of Incorporation of the Company. (Revised).
3.4** Amended and Restated By-Laws of the Company.
3.5** Form of Second Amended and Restated By-Laws of the Company. (Revised).
4.1** Form of Specimen of Common Stock Certificate.
5.1* Opinion of Counsel re: legality of securities being registered.
10.1** Form of Goldberg's Franchise Agreement.
10.2** Form of Sammy's Franchise Agreement.
10.3** Agreement dated January 12, 1993 with Kof-K Kosher Supervision.
10.4** All American Food Group, Inc. Omnibus Stock Plan.
10.5** Market Development Agreement covering the State of Arizona.
10.6** Market Development Agreement covering the State of Ohio.
10.7** Market Development Agreement, as amended, covering portions of the State of New
York.
10.8** Form of Market Development Agreement.
10.9** Modification and Settlement Agreement between the Company and Howard Goldberg.
11** Earnings per Share Calculation.
21.1** Subsidiaries of the Company. (Revised).
23.1* Consent of DelSanto & DeFreitas (contained in Part II).
23.2* Consent of Counsel (included in their opinion filed as Exhibit 5.1).
24.1** Powers of Attorney.
27.1** Financial Data Schedule.
</TABLE>

- ---------------
* Filed herewith.
** Previously filed.

ITEM 28. UNDERTAKINGS.

The undersigned registrant hereby undertakes:

(1) To file, during any period in which it offers or sales securities,
a post-effective amendment to this Registration Statement to;

(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Act");

II-4
<PAGE> 94

(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the Registration Statement;

(iii) Include any additional or changed material information on the
plan of distribution.

(2) For determining liability under the Act, to treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.

(3) To file a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.

Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission (the
"Commission") such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable.

The undersigned registrant hereby undertakes:

(1) For determining any liability under the Act, to treat the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the registrant under Rule 424(b)(1) ,or (4), or
497(h) under the Act as part of this Registration Statement as of the time
the Commission declared it effective.

(2) For determining any liability under the Act, to treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and the offering of the securities at that time as the initial
bona fide offering of those securities.

II-5
<PAGE> 95

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE COMPANY
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE
REQUIREMENTS FOR FILING ON FORM SB-2 AND HAS DULY CAUSED THIS AMENDMENT NO. 3 TO
THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED IN FAIRFIELD, NEW JERSEY, ON THIS 5TH DAY OF
SEPTEMBER, 1996.

ALL AMERICAN FOOD GROUP, INC.

By: /s/ Andrew Thorburn

------------------------------------
ANDREW THORBURN
CHAIRMAN, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
(PRINCIPAL EXECUTIVE OFFICER)

Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ --------------------------- -------------------
<C> <S> <C>
/s/ ANDREW THORBURN Chairman of the Board of September 5, 1996
- ------------------------------------------ Directors, President and
ANDREW THORBURN Chief Executive Officer

/s/ CHRIS R. DECKER Director, Executive Vice September 5, 1996
- ------------------------------------------ President and Chief
CHRIS R. DECKER* Financial Officer
(Principal Financial and
Accounting Officer)

/s/ JOHN CHITVANNI Director September 5, 1996
- ------------------------------------------
JOHN CHITVANNI*

/s/ ANDREW THORBURN
- ------------------------------------------
*ANDREW THORBURN
ATTORNEY-IN-FACT
</TABLE>

II-6
<PAGE> 96

CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS

We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated July 1, 1996 covering the financial statements for
the nine months ended October 31, 1995 and the year ended January 31, 1995, in
Amendment No. 3 to the Registration Statement on Form SB-2 of All American Food
Group, Inc. (No. 333-4990) to be filed with the Securities and Exchange
Commission on or about September 5, 1996, and the related Prospectus contained
therein.

/s/ DELSANTO AND DEFREITAS

--------------------------------------
DELSANTO AND DEFREITAS

Closter, New Jersey
September 5, 1996

II-7
<PAGE> 97

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NO. DOCUMENT PAGE NO.
- ----------- ---------------------------------------------------------------------- ----------
<C> <S> <C>
1.1* Form of Underwriting Agreement........................................
3.1** Restated Certificate of Incorporation of the Company..................
3.2** Certificate of Designations for Series A, B & C Preferred Stock.......
3.3** Form of Second Restated Certificate of Incorporation of the Company
(Revised).............................................................
3.4** Amended and Restated By-Laws of the Company...........................
3.5** Form of Second Amended and Restated By-Laws of the Company
(Revised).............................................................
4.1** Form of Specimen of Common Stock Certificate..........................
5.1* Opinion of Counsel re: legality of securities being registered........
10.1** Form of Goldberg's Franchise Agreement................................
10.2** Form of Sammy's Franchise Agreement...................................
10.3** Agreement dated January 12, 1993 with Kof-K Kosher Supervision........
10.4** All American Food Group, Inc. Omnibus Stock Plan......................
10.5** Market Development Agreement covering the State of Arizona............
10.6** Market Development Agreement covering the State of Ohio...............
10.7** Market Development Agreement, as amended, covering portion of the
State of New York.....................................................
10.8** Form of Market Development Agreement..................................
10.9** Modification and Settlement Agreement between the Company and Howard
Goldberg..............................................................
11** Earnings per Share Calculation........................................
21.1** Subsidiaries of the Company (Revised).................................
23.1* Consent of DelSanto & DeFreitas (contained in Part II)................
23.2* Consent of Counsel (included in their opinion filed as Exhibit 5.1)...
24.1** Powers of Attorney....................................................
27.1** Financial Data Schedule...............................................
</TABLE>

- ---------------
* Filed herewith.

** Previously filed.