UNIVERSAL FRANCHISE OPPORTUNITIES CORP, 10KSB, 1996-04-16

UNIVERSAL FRANCHISE OPPORTUNITIES CORP
10KSB, 1996-04-16
COMPUTER RENTAL & LEASING

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-KSB

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended: December 31, 1995
Commission File No.: 0-14221

UNIVERSAL FRANCHISE OPPORTUNITIES CORP.
- --------------------------------------------------------------------------------
(Exact name of Small Business Issuer in Its Charter)

DELAWARE 51-0339167
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(State of incorporation) (I.R.S. Employer ID No.)

705 Severn Road - Suite 1037
Wilmington, Delaware 19803
(302) 479-7733
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(Address of principal executive office and telephone number)

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

None

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

Class A Common Stock, par value $.025 per Share

---------------------------------------------------------------
Title of Class

Check whether the Issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months and (2) has been subject to such filing requirement for the
past 90 days.

Yes X No
--- ---

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

State Issuer's revenues for its most recent fiscal year: $459,391

As of March 29, 1996, the aggregate market value of the voting stock
held by non-affiliates of the registrant was $573,400, computed by reference to
the average of the closing bid and asked prices of Class A ($ 5/16 bid; $ 5/16,
asked) common stock and assuming all shares of Class B had been converted to
Class A on that date. Class B converts share for share into Class A. However,
prices for Class B shares are not quoted.

As of March 29, 1996, the outstanding number of shares of each class of
the Registrant's common stock was as follows:

Class A: 2,081,190
Class B: 731,790

Transitional Small Business Disclosure Format (check one):

Yes No X
--- ---
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UNIVERSAL FRANCHISE OPPORTUNITIES CORPORATION, INC.
ANNUAL REPORT ON FORM 10-KSB

PART I
ITEM 1. DESCRIPTION OF BUSINESS

GENERAL

Background and Business Segments

Universal Franchise Opportunities Corp., a Delaware corporation
("Registrant" or the "Company" (defined to include all consolidated
subsidiaries)), which, until 1989 and 1990, operated registered business schools
in New York City and Philadelphia, is currently engaged in the following
business segments:

(1) operating and developing opportunities in food-related and
franchise businesses through its wholly-owned subsidiary, Universal Franchise
Operations, Inc. ("UFOI") which currently is involved in developing its rights
to "Sir Pizza" and "Sir Subs & Pizza", which rights were previously held by S.P.
Unlimited ("SPU") another wholly owned subsidiary of the Company;

(2) manufacturing and marketing pizza carts through a newly organized
wholly-owned subsidiary, Custom Carts & Trailers, Inc., a Florida corporation
("Custom Carts");

(3) the development, marketing and manufacturing of nanocomposite
coatings through a newly organized subsidiary, Advanced Surface Engineering,
Inc. a Maryland corporation ("ASE"); and

(4) exploring the possibility of utilizing its cash resources to
diversify into other business opportunities; and

Until recently, the Company operated primarily in two distinct market
segments:

(1) It operated a business school in New York City until December 1989,
and, in Philadelphia, Pennsylvania until October 1990; and

(2) the Company's wholly-owned subsidiary, Commercial Programming
Unlimited Inc. ("CPU-NY") had purchased mainframe and peripheral computer
equipment which has been leased to various corporations. CPU-NY has not acquired
any additional computer equipment for lease since late 1985, although it
continued to receive revenues therefrom until August 1993, when payments under
the last outstanding lease ended.

The Company through Commercial Programming Unlimited, Inc. ("CPU-NY"),
a wholly owned subsidiary of the Company, also leased an aggregate of
approximately 37,500 square feet consisting of classroom and office space at the
premises 25 West 17th Street, New York, New York. The premises had previously
been used to conduct the Company's New York school operations. On May 24, 1990,
the Company received from its landlord permission to sublease approximately 60
percent of the premises to an unrelated third party for a term to run
substantially until the expiration date if the Company's lease with its
landlord. in addition,the Company also leased to the sublessee most of the
Company's equipment located at the premises. On January 27, 1995, the Sublessee
filed a Chapter 11 petition and moved to reject the aforementioned Sublease and
equipment rental contract On March 2, 1995, the Court issued an order rejecting
the Sublease and equipment rental contract. At December 31, 1994, after having
applied the security deposit of $56,000, there remained $60,856 of premises and
equipment rental due. This amount had been fully reserved in the 1994 financial
statement, and the applicable reserve and receivable have been written off in
January, 1995. On May 26, 1995, CPU-NY surrendered the premises to the landlord
and was released from all obligations related to the lease. As a result of such
surrender, improvements and equipment having a net book value of $155,244 were
written off. These operations, which had previously been

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presented as a separate market segment, have been presented, net of tax effect,
as discontinued operations in the financial statements.

As of December 31, 1995, the Company has total current assets of
$2,100,800 which included $1,986,747 of cash and marketable securities (See
"Consolidated Balance Sheets".)

History

The Company was organized under the name "Commercial Programming
Unlimited, Inc." in 1964, when it began operating a computer consulting firm and
a data processing school which emphasized courses in data entry. Until December
1989 CPU-NY operated a registered business school in Manhattan, and operated a
branch in Philadelphia from 1987 through October 1990, through Commercial
Programming Unlimited of Philadelphia, Inc. ("CPU-Philadelphia"), a
wholly-owned subsidiary of the Company.

In the Fall of 1989, the Philadelphia campus was redesignated as the
Company's main campus, and the New York campus was designated as a branch
campus. In December 1989, CPU-NY ceased conducting classed in New York. In
October 1990, the Company ceased conducting classes in Philadelphia. The
foregoing cessations primarily related to adverse rulings by, and difficulties
with, accreditation and regulatory bodies, and an adverse economic climate
related thereto.

As a result of the foregoing, in the Fall of 1989 CPU-NY began to seek
to sublease, or assign the lease of its current premises in Manhattan, and to
explore the possibilities of utilizing its cash resources to diversify into
other operating businesses. In May 1990 it subleased a major portion of its
Manhattan premises to SCS Business & Technical Institute, Inc. ("Sublessor"),
and , in July 1992 delivered possession of the balance of said premises to its
landlord on conditions described under "Description of Property--AMAC
Agreement:. However, in January 1995, the Sublessor abandoned such sublease (See
"Item 2. Description of Property: and "Item 3. "Legal Proceedings".)

On April 30, 1993, culminating an extensive search, a wholly-owned
subsidiary that was created for the Company's food service business, SPU,
acquired substantially all the assets of Premier Franchise Corporation (formerly
called the Salad Bar Corporation) and SPFC, Inc. As a result of such
acquisition, the Company moved its principal operating office to Florida, SPU
began developing the proprietary rights of the Sir Pizza chain of fast food
restaurants throughout the world; a process being continued by UFOI. See "Sir
Pizza".

Recently, the Company formed two wholly-owned subsidiaries Custom Carts
and ASE for the purpose of engaging in manufacturing and distributing of (a)
portable food carts, ovens and related products, and (b) self- lubricating
coatings, surface treatments and related products.

Reincorporation

Although the Company was organized in 1964 as a New York corporation,
on June 11, 1987 the Company adopted a Plan of Reincorporation (the "Plan"),
which provided for the exchange of all shares of Commercial Programming
Unlimited, Inc.,a New York corporation ("CPU-NY") for shares of Commercial
Programming Unlimited, Inc., a Delaware corporation ("CPU-Del") (which was
incorporated on May 22, 1987). The purpose

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of the Plan was to allow the Company certain benefits of Delaware corporate law
by changing the Company's state of incorporation from New York to Delaware, by
providing for all stockholders of CPU-NY thereby a wholly-owned subsidiary of
CPU-Del. On February 4, 1993, the Company filed with the Department of State of
the State of New York a Certificate of Exchange (the "Certificate") with regard
to such exchange and Plan.

Name Change

On July 21, 1994, at the Company's Annual Meeting of Stockholders, the
Company's Stockholders authorized and approved the change of the Company's name
from Commercial Programming Unlimited, Inc. to Universal Franchise Opportunities
Corp., in order to more accurately reflect the types of businesses in which the
Company was engaged.

SIR PIZZA

On April 30, 1993, a wholly-owned subsidiary that was created for the
Company's food service business, S.P. Unlimited, Inc., ("SPU") acquired
substantially all the assets of Premier Franchise Corporation ("PFC") (formerly
called the Salad Bar Corporation) and SPFC, Inc. consisting principally of
franchise rights, restaurant improvements and equipment for an aggregate
consideration of $498,000 (including $351,00 of cash and the assumption of
$147,000 of notes payable).

In addition, upon acquisition of the assets, SPU assumed the existing
lease on PFC's restaurant located in Miami Lakes, Florida. Such lease, expiring
December 31, 1998, provided for minimum annual rentals of $39,615 and a share of
the real estate taxes. The Company guaranteed the lease.

Except for the Sir Pizza restaurant located in Miami Lakes, which is
operated by SPU, UFOI now possesses the exclusive rights to develop the
proprietary rights of the Sir Pizza chain of fast food restaurants throughout
the world and in certain areas of the United States where Sir Pizza is not
currently represented. Such rights include the rights to franchise, open and
expand additional restaurants. SPU operated Sir Pizza restaurant in Miami Lakes,
Florida, also serves as a training unit for new franchises.

UFOI derives such development rights pursuant to a license agreement
with Sir Pizza International, Inc., the owner of the primary rights to the "Sir
Pizza" name and franchise. Such license agreement, among other things, requires
UFOI to pay certain amounts of royalties an open a certain minimum number of
restaurants per year (which have not been met), in order to maintain such
rights; failure to do so could result in the termination such rights, which
could have a material adverse effect on UFOI's business. Several disagreements
have arisen with Sir Pizza International, Inc., which the Company is trying to
resolve. Management is currently attempting to renegotiate such license
agreement to provide for more favorable terms.

Sir Pizza restaurants feature moderately-priced high quality pizza,
pasta, sandwiches and beverages, in restaurants characterized by a unique system
of style, food preparation, training, delivery and service. The Sir Pizza
Restaurants offer both table and delivery service.

Until mid-1994, the Company attempted to expand the Sir Pizza concept
by developing Sir Subs & Pizza Restaurants. Sir Pizza Subs & Pizza Restaurants
were typical fast Food Restaurants with counter service and drive- through
service and featured the Company's traditional thin crust pizza together with a
variety of subs and specialty items including gyros, chicken breast sandwiches,
spicy french fries, beverages, beer and wine. The Company closed its two Sir
Subs & Pizza Restaurants in mid-1994. Although the Sir Subs & Pizza Restaurants
remains an option, presently, the Company is attempting to further develop the
Sir Pizza restaurant concept domestically and internationally.

Internationally, the Company has franchised three Sir Pizza Restaurants
in Germany and three Sir Pizza Restaurants in El Salvador. It has also entered
into agreements (i) with "The Exhibition", a distribution company

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in Bahrain, pursuant to which the franchisee is required to open three Sir Pizza
restaurants in the Middle East, the first of which opened in Bahrain in January
1995; (ii) with Cariven S.A. de C.V. to establish Sir Pizza restaurants in
Caracas, Venezuela and the Island of Margarita pursuant to which one restaurant
was to have opened in each of 1994, 1995 and 1996. However, to date, no
restaurants have been opened; and (iii) in 1995, with Mapy International, Inc.,
pursuant to which the franchise is to establish restaurants in Lima, Peru. The
first such restaurant is scheduled to open in June, 1996.

CPU of Florida, Inc. purchased a site in North Palm Springs, Florida,
on which it intended to build a third Company owned restaurant. Management
subsequently discovered that a sewer line must be installed at a cost of $65,000
to $100,000. The Company has determined that, as a result of such cost, the cost
of opening would be in excess of what the Company had planned to spend, and has
offered the property for sale. In 1994, the Company sent a letter seeking
damages from the seller, or recision of such sale, although seller has rejected
the Company's demand and allegation. The Company, in addition to the acquisition
cost, spent $32,448 for improvements to the property and equipment, which amount
was written off in 1994 when the "Sir Subs and Pizza" concept was abandoned. The
Company sold the property in October 1995 for $120,000. (See "Description of
Property" and "Legal Proceedings").

The fast food restaurant business in the U.S. is extremely competitive.
The Company's entry into this market segment with Sir Pizza restaurants makes
these restaurants directly competitive with major fast food chains such as
McDonald's, Burger King, Arby's, Subway, Pizza Hut, Dominoes Pizza and others,
which have substantially greater resources and name recognition. The Company
presently has a very short history of operating only three of these prototype
restaurants, two of which were not successful. Sales in these types of fast food
restaurants are marketing and advertising driven. The Company's management
reports that it is currently developing a marketing strategy of a combination of
restaurants and mobile carts is being developed in order to compete in this
segment. Because of the foregoing, it is currently impossible to predict the
future success of this venture.

The Company, through it's subsidiaries, intends to continue to seek to
develop franchised stores under the names of Sir Pizza and Sir Subs and Pizza
throughout Florida, the United States and overseas.

The typical U.S. franchise agreement generally calls for franchise fees
of $20,000 per restaurant in addition to royalties of five per cent (5%) of
sales, although this may vary from agreement to agreement. In order to increase
the territories at a rapid pace an to keep corporate overhead to a minimum, the
Company has established master Franchise arrangement in California, Florida and
Illinois, which enables the Master Franchise to provide the service to the
subfranchisee. The fees in these types of arrangements are generally split
50/50. Similar arrangements have been entered into with the international
franchise.

A Master Franchise Agreement was entered into with Quality Food
Restaurants, Inc. in April 1994 for Dade County, Florida. The plan calls for the
opening of a minimum of ten units within a five year period. The first
restaurant opened in November of 1995.

The status of the aforesaid franchises is as follows:

The California and German Franchisee have defaulted; although the
Venezuela has commenced construction of a restaurant no restaurant has yet been
opened; the Florida franchise opened a restaurant in November 1995. An initial
Illinois operation was opened in 1995 and a second is planned for July, 1996.

During much of 1994, the Company's growth and development was adversely
affected by management disagreements, primarily relating to SPU and Gourmet
Carts. Several management changes were instituted in late 1994, as a reaction to
these disagreements, some of which have resulted in litigation, as described in
"Item 3--Legal Proceedings". Adverse resolution of such litigation could have a
material adverse effect on the Company.

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In particular, the Company terminated the employment of Donald Ryan,
the chief operating officer of SPU in January 1995. The Company's management
believes that such termination was for cause and in the best interests of the
Company. Mr. Ryan had been the principal person in charge of the development of
SPU's Sir Pizza rights. There is no assurance that results of the legal
proceedings relating to such termination will not materially and adversely
effect the Company. See "Item 3--Legal Proceedings".

GOURMET CARTS

In April, 1994, the Company entered into an agreement, with the
inventors (the "Inventors") of a battery driven, infra-red portable conveyor
pizza oven (the "oven"), to be carried on portable food carts. Pursuant to such
agreement, the Company and the Inventors formed Gourmet Carts, Inc., a Florida
corporation ("GCI" or "Gourmet Carts"), to produce and market the ovens the and
carts to carry same. Pursuant to such agreement, CPU of Florida, Inc., a
subsidiary of Registrant ("CPU-Florida"), owns 50% of the stock of GCI for which
it contributed $200,000 in capital and loaned to GCI $200,000. The Inventors own
the other 50% of GCI. Such Agreement provides that the Inventors are to receive
salary, employment benefits and up to $100,000 of royalties on sales of the
ovens, in addition to equivalent aggregate benefits to certain officers of
CPU-Florida. The Board of Directors of Gourmet Carts voted in December 1994 to
discontinue such payments to CPU-Florida, its officers or affiliates. Under such
agreement, GCI owns the exclusive rights for the oven, for which a patent was
applied for but not granted. GCI intended to market the oven and carts as a
franchise operation.

Through 1995, as a result of a dispute with the Inventors, the
Company's involvement in GCI has been in litigation with regard thereto, as
described under "Item 3--Legal Proceedings." On February 14, 1996, the Florida
Circuit Court issued a motion, notice and order of dismissal of the action
commenced by Gourmet Carts and the Inventors, without prejudice, for lack of
prosecution unless good cause can be shown for continuance.

OTHER ACTIVITIES

In 1989, the Company began to explore the possibility of utilizing its
cash resources to diversify into other business opportunities, including, but
not limited to, computer software, health-related, food-related and school-
related companies in the private sector. While management's primary efforts
through mid-1992 were concentrated on relieving the Company of the remainder of
its substantial lease obligation of its New York premises before making any
substantial commitment to another business, the Company in mid-1992 decided to
expand the scope of its search for business opportunities by opening an office
in the Southern United States, as described in the following paragraph. Once
such lease situation was solved, the Company's main efforts changed to seeking
one or more additional operating businesses.

After a substantial amount of time spent exploring business
opportunities, management concluded that the opportunities in the Northeast were
not as promising as those in the South. Consequently, the Board of Directors
authorized the Company to establish a subsidiary in Florida, in order to
increase is visibility, and ability to seek and respond to potential
opportunities in the South.

As a result of the interest generated by the Company's mobile pizza
cart, with a self contained power source, at the Pizza Trade Show in Las Vegas
in late February 1996, and at the International Trade Show convention in
Washington, D.C. in early March 1996, the Board of Directors decided that the
Company should open its own cart manufacturing plant. The Company is currently
in the process of manufacturing carts at its Florida facilities. The Company
intends to produce and market the pizza carts through Custom Carts.

In 1996, the Company decided to enter into a new business segment: the
development, marketing and production of nanocomposite coatings. ASE was formed
to operate this new line of business. Dr. Todd Schlesinger, stepson of the
Company's President and Chairman of the Board, became Vice-President of
Operations of ASE. Dr. Schlesinger was able to obtain from his previous employer
the patent rights to a self-lubricating coating which he had developed while
working on his doctorate and later for his employer. In addition to this self-

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lubricating coating, Dr. Schlesinger has also developed five other proprietary
coatings for use by ASE. The Company intends to market these coatings as soon as
the patent and trademark registrations have been completed.

The Company invests its liquid assets in interest-bearing accounts, and
instruments (primarily certificates of deposit with federally-insured banks and
treasury bills). Until its operations generate profits, or the Company finds a
business to generate sufficient operating profits, the Company will be unable to
report any material profits from operations on its financial statements.

Personnel

At December 31, 1995 the Company employed - 4 people. Two were officers
of the Company: Walter Small, was Chairman and Mohamad Al-Omari, was President
of the Company. Prior to December 31, 1995 the Company terminated the employment
of Donald Ryan and Ronald S. Berkley.

All of the foregoing employees are full-time, other than Myrna Small,
who does not devote full time to Company activities. The remaining employees
consist of one bookkeeper, three restaurant managers, and eleven restaurant
staff, of whom four are full-time and seven are part-time. The Company also
utilizes part-time employees from time to time, as needed. There are no
collective bargaining agreements with any employees and relations with employees
are considered good. See "Item 10--Executive Compensation" with regard to
Employment Agreement with Messrs. Small and Al-Omari. See also "Item 3--Legal
Proceedings" which respond to the Company's litigation regarding the termination
in January 1995 of Mr. Donald Ryan's employment with the Company.

Regulation and Accreditation

When the Company operated schools, it received funds under various
Federal and State governmental programs providing tuition assistance and loans
to students. Although no longer participating in such programs, governmental
authorities have the right to retrospectively audit the Company with regard to
such programs.

In January 1988, the Office of the State Comptroller issued a
preliminary report of its findings based on an audit of the Tuition Assistance
Programs ("TAP") certification for the academic years 1983-1984 through 1986-
1987. The preliminary findings recommend that the Higher Education Services
Corporation seek recovery of $316,105 from the Company arising out of the
alleged incorrect certification of 465 awards. The Company has submitted a
response to such findings and, upon advise of its special counsel, has not taken
any other action with regard thereto. According to management of the Company,
the Company received no further communications with regard to such findings up
to the date of filing of this Report.

ITEM 2. DESCRIPTION OF PROPERTY

Real Property Leases

Florida Properties

(a) In August 1994, Gourmet Carts, the 50% owned affiliate of the
Company, entered into a lease agreement for office space commencing October 1,
1994 and ending January 31, 1998. At the same time, the Company and Gourmet
Carts, Inc. entered into a sublease for a portion of the premises to coincide
with the term of the original lease. The Company had guaranteed up to $35,000 of
Gourmet Carts obligations under the original lease for a term from October 1,
1994 to November 30, 1995. In February 1995, Gourmet Carts, Inc. defaulted on
the lease. The Company continued to pay the affiliate's rent obligation to the
landlord. Effective April 1, 1995, the landlord released the Company from its
guarantee and terminated the lease with Gourmet Carts effective April 1, 1995,
Universal Franchise Operations, Inc. signed a lease with the landlord which
expires April 30, 1998. The lease requires minimum monthly payments of $2,000 -
$2,100 per month plus expenses.

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(b) In addition, upon acquisition of the assets of PFC, SPU assumed the
existing lease on the restaurant located in Miami Lakes, Florida. Such lease,
expiring December 31, 1998, provides for minimum annual rentals of $39,615 and a
share of the real estate taxes. The Company has guaranteed such lease.

SPU has entered into leases for two additional restaurants in Margate
and Oakland Park, Florida which provide for monthly rentals aggregating $5,000
plus all expenses of operating the properties. The two leases, which commenced
late in 1993, have five year terms with renewal options. In July 1994, SPU
closed the two aforementioned restaurants. In June 1995, SPU was released from
its obligations with respect to the Margate lease. SPU has surrendered the
Oakland Park premises to the landlord and has not paid the $3,000 plus expenses
monthly rental on the premises since May 1995. Management believes there will be
no attempt by the landlord of the Oakland Park premises to collect the rent
arrearage or future rent obligations.

(c) On October 20, 1993, CPU of Florida, Inc purchased, for $135,000, a
property in North Palm Springs, Florida which it had intended to convert into a
restaurant. Management subsequently discovered that a sewer line must be
installed at a cost of $65,000 to $100,000. The Company has determined that, as
a result of such expense, the cost of opening would be in excess of what the
Company has planned to spend, and has offered the property for sale. In 1994,
the Company sent a letter seeking damages from the seller, or recision of such
sale, although seller has rejected the Company's demand and allegation. (See
"Legal Proceedings"). The Company, in addition to the acquisition cost, spent
$32,448 for improvements to the property and equipment which amount was written
off in 1994 when the "Sir Subs and Pizza" concept was abandoned. The Company
sold this property in October, 1995 in consideration for $120,000.

New York Properties

(a) CPU-NY rented an office in an executive suite at 885 Third Avenue
in New York City, for a rental of $1,000 per month for three months commencing
January 1, 1995.

(b) The Company, through CPU-NY, leased an aggregate of approximately
37,500 square feet consisting of classroom and office space at the premises 25
West 17th Street, New York, New York. The premises had previously been used to
conduct the Company's New York school operations. On May 24, 1990, the company
received from its landlord permission to sublease approximately 60 percent of
the premises to an unrelated third party for a term to run substantially until
the expiration date of the Company's lease with its landlord. In addition, the
Company also leased to the sublessee most of the Company's equipment located at
the premises. On January 27, 1995, the Sublessee filed a Chapter 11 petition and
moved to reject the aforementioned Sublease and equipment rental contract. On
March 2, 1995, the Court issued an order rejecting the Sublease and equipment
rental contract. At December 31, 1994, after having applied the security deposit
of $56,000, there remained $60,856 of premises and equipment rental due. This
amount had been fully reserved in the 1994 financial statements, and the
applicable reserve and receivable have been written off in January 1995. On May
26, 1995, CPU-NY surrendered the premises to the landlord and was released from
all obligations related to the lease. As a result of such surrender,
improvements and equipment having a net book value of $155,244 were written off.
These operations, which had previously been presented as a separate market
segment, have been presented, net of tax effect, as discontinued operations in
the financial statements.

Delaware Properties

The Company maintains an executive office at Suite 1037, 705 Severn
Road, Suite 1037 Wilmington, Delaware 19803. Such premises are used solely for
administrative purposes. The costs in connection therewith are not material.

The aggregate future minimum annual rentals, excluding applicable
escalation clauses, with respect to all non-cancelable leases are as follows:

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For the year ending December 31,

Equipment and Personal Property

As of December 31, 1995, the Company maintains various office and
computer equipment at its Florida office.

ITEM 3. LEGAL PROCEEDINGS

In September, 1992 Robert Schultz, a stockholder of the Company, filed
in the United States District Court for the Southern District of New York a
stockholder's derivative action, individually and on behalf of the Company,
naming all of the Company's then directors as defendants, which complaint was
later amended to drop one of such directors, Jonathan Gubin, leaving Walter
Small and Prafulla Marfatia as defendants. Such action alleges (i) insider
trading in the Company's stock, (ii) breach of fiduciary duty in approving and
accepting compensation alleged to be excessive, and (iii) operating an
unregistered investment company. In addition to seeking unspecified monetary
damages on behalf of the Company, Plaintiff was seeking the appointment of a
trustee or receiver to dispose of the assets of the Company. An adverse
determination with regard to allegation (iii) above could have a material
adverse effect on the Company, in that the costs and burdens of compliance
therewith would be substantial. Appointment of trustee or receiver to dispose of
the assets of the Company would result in liquidation of the Company. The
Company and such defendants dispute Schultz's claims and have filed a motion to
dismiss the complaint on the following grounds: (i) that Schultz failed to make
any pre-suit demand on the Company's Board of Directors; (ii) that there is no
private right of action under the Investment Company Act of 1940 ("the Act"),
but that under any circumstances, as a matter of law, the Company is not an
investment company and, therefore, not required to register under the Act, and
(iii) that Schultz is an inadequate representative of the shareholders and
should not be permitted to prosecute the action on their behalf. This action has
been dismissed.

On October 20, 1993, CPU of Florida, Inc. purchased, for $135,000, a
property in North Palm Springs, Florida which it had intended to convert into a
restaurant. Management subsequently discovered that a sewer line must be
installed at a cost of $65,000 to $100,000. The Company demanded damages from
the seller, or recision of such sale, although seller has rejected the Company's
demand and allegation; however, no litigation has been commenced. However, since
the property was sold in October 1995; the Company has abandoned its efforts to
seek damages against the Seller.

On or about January 31, 1995, Donald J. Ryan ("Ryan"), the former
president of SPU, commenced an arbitration proceeding against SPU and the
Company before the American Arbitration Association in Miami, Florida, Claiming
that his employment agreement of April 30, 1993 was breached by virtue of
termination of his employment at SPU on January 6, 1995, and seeking damages as
a result of the termination. In response, on March 10, 1995, the Company, SPU,
and CPU-Florida commenced an action against Ryan, Gourmet Carts, Old World
ovens, Mario Quilietti and Vera Prosser in the Circuit Court in Palm Beach
County, Florida seeking, among other things, a stay of the arbitration
proceeding commenced by Ryan and requesting that such claims be litigated in the
Circuit Court. Ryan, in turn, moved to compel arbitration and stay the court
proceeding. The Florida Circuit Court entered an Order staying its proceedings
and requiring arbitration to proceed. In the arbitration proceeding, the Company
and SPU denied liability to Ryan for his termination from employment and the
Company, SPU and CPU of Florida, Inc. asserted counterclaims against Ryan for
damages. In December 1995, the Arbitrator (a) upheld the termination by the
Corporation of Ryan's employment for cause under the employment agreement, (b)
denied the Company's counterclaim and (c) awarded $5,150 to Ryan for damages for
not receiving 30 days' notice prior to

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termination. Pursuant to stipulation of the parties, the Arbitrator retained
jurisdiction to enter a Final Order based on his determination of entitlement to
and amount of attorneys' fees and costs.

On December 29, 1995, the Arbitrator entered his Final Award wherein he
awarded the Company and SPU $92,000 for attorneys' fees and costs as the
prevailing party.

The Company and SPU have filed with the Florida Circuit Court a motion
to confirm the Arbitration Award and to enter judgment against Ryan. The hearing
on the pending motions was due to take place in March 1996. Until the Court
rules on the Company's and SPU's motions to confirm, and the time period expires
for Ryan to file a motion to vacate the Arbitrator's Award, an unfavorable
outcome is still possible. The Company estimates that the range of any potential
loss is approximately $750,000 - $850,000.

On January 4, 1995, CPU of Florida, Inc. filed suit against Gourmet
Carts, claiming that Gourmet Carts defaulted under a note and security agreement
with the Company. Although the Company sought to recover possession of
collateral, which consisted of several pizza ovens, such motion was denied.

In 1994 SCS was in default under its sublease with CPU-NY and CPU-NY
commenced a proceeding in the New York City Civil Court pursuant to which the
parties entered into a stipulation of settlement fixing certain arrears in the
amount of $180,137.08, providing a payment schedule and granting other relief.
SCS defaulted under the stipulation and in January, 1995 abandoned the Premises.
On January 27, 1995, SCS filed a Chapter 11 petition in the United States
Bankruptcy Court for the Southern District of New York, and moved to reject the
Sublease. On March 2, 1995, the Court issued an order rejecting the Sublease. In
view of the bankruptcy, the lease rejection and SCS's reported failure to
maintain accreditation, it does not appear that CPU-NY will be able to recover
any monies. However, on May 26, 1995, CPU surrendered the premises to the
landlord.

In January 1995 the Company commenced a replevin action against its 50%
owned subsidiary Gourmet Carts, seeking possession of the assets of Gourmet
Carts, which are subject to the Company's security interest. Prior thereto, also
in January, Gourmet Carts, Mario Quilietti and Vera Prosser (the "Inventors"),
the owners of the other 50% interest in Gourmet Carts, commenced a separate
action against the Company, Walter Small and CPU-Florida, for declaratory and
other relief, seeking a declaration of rights and obligations (which
includes,without limitation, compensatory and punitive damages from the Company)
with regard to the agreements and relationships between the Company and
CPU-Florida, on one hand, and the Inventors, on the other hand, including, but
not limited to, alleged violations by the Company of its obligations under the
agreement for Gourmet Carts and certain property rights relating thereto. The
Company has asserted counter-claims in such action, alleging that Gourmet Carts
has been in default of their loan agreement, patent filing requirements and
other matters and seeks a court injunction to prevent further damage to the
Company. The two proceedings were consolidated. On February 14, 1996, the
Florida Circuit Court issued a motion, notice and order of dismissal of the
consolidated case without prejudice for lack of prosecution unless good cause
can be shown for continuance.

See "Business--Regulation and Accreditation" with regard to a 1988 TAP
audit, the finding of which were at that time challenged by the Company. As
stated therein, to management's knowledge, no further communications with regard
to such findings have been received by the Company up to the date of filing of
this Report.

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

None

10
<PAGE> 11
PART II

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

Until March 1996, the Company's Class A Common Stock has been
sporadically traded over the counter on The Nasdaq Small-Cap Market under the
symbol MENU. There is no established public trading market for the Company's
Class B Stock. The high and low bid quotations for 1993, 1994 and 1995 follow.
Such quotations have been obtained from the National Association of Security
Dealers Automated Quotations Service ("NASDAQ").

<TABLE>
<CAPTION>
Class A Class B
----------------- ---------------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
1993
First Quarter 1 1/8 13/16 No quotes
Second Quarter 1 3/16 7/8 No quotes
Third Quarter 1 1/8 3/4 No quotes
Fourth Quarter 1 1/8 13/16 No quotes

1994
First Quarter 1 5/8 1 1/16 No quotes
Second Quarter 1 5/16 1 No quotes
Third Quarter 1 1/16 1/2 No quotes
Fourth Quarter 5/8 3/8 No quotes

1995
First Quarter (through 3/10/95) 4/8 1/4 No quotes
Second Quarter .42 1/4 No quotes
Third Quarter 5/8 5/16 No quotes
Fourth Quarter 5/16 5/16 No quotes
</TABLE>

All of the quotations contained in the above represent inter-dealer
quotations, without adjustment for retail mark-ups, mark-downs or commissions,
and may not necessarily represent actual transactions. The past performance of
the Company's Class A and Class B Common Stock is not necessarily indicative of
future performance.

Owing to the inability of the Common Stock prices of the Company to
maintain a minimum bid price required for continued listing on the NASDAQ
Smallcap Market, NASDAQ issued notice on February 24, 1995 that effective at the
close of business on March 10, 1995 the Class A Common Stock would be de-listed
from the NASDAQ Smallcap Market. The Class A Common Stock presently trades on
the NASD's Electronic Bulletin Board.

Description of Securities

The Company has two classes of Common Stock outstanding, Class A Stock
and Class B Stock. Each share of Class B Stock is convertible at any time, at
the option of the holder thereof, into one share of Class A Stock, pursuant to
the procedures set forth in the Company's Certificate of Incorporation. The
Company is also authorized to issue on or more series of Preferred Stock, non of
which has been designated or issued.

The Company's Certificate of Incorporation provides that holders of
record of the issued and outstanding shares of Class B Stock are entitled,
exclusively and as a class, to elect a majority of the number of directors

11
<PAGE> 12
constituting the entire Board of Directors of the Company. The holders of record
of the issued and outstanding share of Class A Stock are entitled, exclusively
and as a class, to elect the remainder of the number of directors constituting
the entire Board of Directors of the Company.

Any amendment, change or modification in the Certificate of
Incorporation or By-Laws of the Company must be authorized and approved by a
majority vote of the holders of all outstanding shares of Capital Stock and a
majority vote of the holders of all outstanding shares of Class B Stock. Any
action taken, authorized or approved by the Board of Directors of the Company
must be authorized and approved by a majority of directors elected by the
holders of shares of Class B Stock, as well as a majority of all directors.

The relative rights of the Class A Stock and Class B Stock described
above ensure that the current Class B stockholders of the Company, and in
particular, Walter Small, will continue to control the management of the Company
and have the right to prevent any significant change in the structure, business
and affairs of the Company.

Other than as noted above and with regard to conversion rights, the
Company's Certificate of Incorporation provides that each share of Common Stock
has the same rights, privileges, interests, and attributes, including the right
to one vote on all matters and is subject to the same limitations as every other
share of Common Stock.

Dividends

The Company has never declared or paid, nor does it have any present
intention to declare or pay cash dividends on its Class A Stock or Class B
Stock.

Stockholders

As of March 31, 1996 the Company had 295 record holders of Class A
Common Stock and 15 record holders of Class B Common Stock.

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

The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of the
Company's results of operations and financial conditions. This discussion should
be read in conjunction with the consolidated financial statements and notes
thereto appearing elsewhere herein.

Discontinued Operations

The Company's wholly-owned subsidiary, CPU (NY) discontinued classed
and ceased New York school operations effective December 31, 1989. Another
wholly-owned subsidiary, Commercial Programming Unlimited of Philadelphia, Inc.
ceased operations at its Philadelphia school on October 15, 1990.

The Company had purchased mainframe and peripheral computer equipment
which had been leased to various corporations. The Company received revenues
therefrom until August, 1993 at which time the Company effectively ceased its
computer leasing business segment.

The leasing and subletting of the facility at the former New York
School Operation had been treated as a separate business segment. As a result of
the surrender of the New York premises to the landlord, and the granting by the
landlord of a release to CPU (NY) of all remaining obligations under the lease,
the Company effectively discontinued its premises and equipment leasing business
segment at its New York facility in May, 1995.

12
<PAGE> 13
As at December 31, 1995, the Company's only remaining business segment
is the food service and franchising business commenced in April, 1993.

Continuing Operations

The 1995 losses were principally attributable to the failure of the
Company's efforts to develop Company- owned stores, problems related to the
acquisition through investment and loans of a 50% ownership in Gourmet Carts,
Inc., and the legal fees incurred in the various law suits. The 1995 results of
operation are discussed below (see Discussion of Results of Continuing
Operations-1995 compared to 1994).

Despite the continuing losses, the Company still retains significant
liquid resources. Current assets at December 31, 1995 were $2,100,900 while
current liabilities were only $158,379. Cash, U.S. Treasury Securities,
marketable securities, and long-term certificates of deposit totalled $2,643,222
at December 31, 1995.

The Company, through its subsidiaries, intends to continue to seek to
develop franchised stores under the names of Sir Pizza and Sir Subs and Pizza
throughout Florida, the United States and overseas.

As a result of the interest generated by the Company's mobile pizza
cart, with a self-contained power source, at the Pizza Trade Show in Las Vegas
in late February, 1996, and at the International Trade Show convention in
Washington, D.C. in early March, 1996 the Board of Directors decided that the
Company should open its own cart manufacturing plant; the Company is currently
in the process of manufacturing the carts at its Florida facilities. The Company
intends to produce and market the pizza carts through a newly organized
wholly-owned subsidiary, Custom Carts.

In 1996, the Company decided to enter into a new business segment: the
development, marketing and production of nanocomposite coatings. ASE was formed
to operate this new line of business. Dr. Todd Schlesinger, stepson of the
Company's President and Chairman of the Board, became Vice-President of
Operations of ASE. Dr. Schlesinger was able to obtain from his previous employer
the patent rights to a self-lubricating coating which he had developed while
working for his doctorate and later for his employer. In addition to this self-
lubricating coating, Dr. Schlesinger has also developed five other proprietary
coatings for use by ASE. The Company intends to market these coatings as soon as
the patent and trademark registrations have been completed.

Discussion of Results of Continuing Operations - 1995 compared to 1994

In 1995, the Company sustained a gross profit(loss) on the one
remaining restaurant of ($61,393) compared to a gross profit (loss) of
($233,719) in 1994. Two of the Company-owned restaurants were closed in July,
1994. Other income from franchise fees, royalties and consulting fees aggregated
$94,054 for 1995, compared to $138,509 for 1994. Such decrease was primarily
attributable to the discontinuance in 1995 of consulting fees received in 1994
from the Company's 50% owned affiliated company, Gourmet Carts, Inc.

In July, 1994, the Company closed the two Margate and Oakland Park,
Florida restaurants and abandoned plans to build any additional restaurants. The
obligations for future occupancy costs and related expenses and the projected
loss on the improvements and equipment aggregated $567,226, which was reflected
as a loss in 1994. This provisions was increased by $11,626 in 1995 to reflect
the loss on sale of land at a proposed site in Palm Beach, Florida offset by
revisions to the aforementioned estimates.

In April, 1994, a wholly-owned subsidiary of the Company entered into
an agreement with the investors of a portable pizza oven to form a corporation,
Gourmet Carts, Inc. to produce and market the oven and related carts. The
Company's subsidiary acquired a 50% interest in Gourmet Carts, Inc. Gourmet
Carts, Inc. sustained an operating loss of $361,000 in 1994. As a result of
these losses, litigation with the investors, and other matters pertaining to the
oven, the Company in 1994 wrote off its investment in and advanced to Gourmet
Carts, Inc., sustaining a loss of $441,993.

13
<PAGE> 14
General and administrative expenses decreased in 1995 by 4.6% over
1994. This decrease is primarily the result of the decrease in general operating
expenses due to the downsizing of the operations, offset partially by the
increase over the 1994 period in legal fees incurred in connection with various
litigation involving Donald Ryan, SP Unlimited, Inc. and Gourmet Carts, Inc.

Depreciation and amortization decreased by $45,003 in 1995 over 1994
due to the closing of two restaurants in 1994.

Interest income declined from $215,333 in 1994 to $174,692 in 1995
primarily due to a decrease in available liquid resources.

Interest expense for 1995 decreased by $28,041 compared to 1994, since
the prior year was burdened by interest incurred in connection with a settlement
of prior tax liabilities.

A majority of the long-term certificates of deposit were redeemed
during 1995 and the proceeds were invested in U.S. Treasury securities. Charges
of $42,890 were incurred during the year as a result of such early redemptions.

The tax provisions for 1995 and 1994 reflect state and local taxes for
the current years. In 1995, a settlement of a prior tax obligation resulted in
$34,129 decrease in a previously recorded liability.

As a result of the foregoing, the after tax loss from continuing
operations was $890,621 compared to a loss of $2,074,333 in 1994.

Discussion of Results of Continuing Operations - 1994 compared to 1993

In 1994, the Company sustained a gross profit (loss) on the two
restaurant operations of ($233,719) compared to a gross profit (loss) of
($80,988) in 1993. Two of the Company-owned restaurants were closed in July
1994. Other income from franchise fees, royalties and consulting fees aggregated
$138,509 for 1994, compared to $98,761 for 1993. Such increase was primarily
attributable to consulting fees receiving from the Company's 50% owned
affiliated company, Gourmet Carts, Inc.

There were no computer equipment rentals in 1994, as a result of the
expiration in August 1993 of the Company's only remaining computer lease. The
equipment was sold in August 1993 and the Company realized a gain of $127,568 on
the disposition of the equipment.

In July 1994, the Company closed the two Margate and Oakland Park,
Florida restaurants and abandoned plans to build any additional restaurants. The
obligation for future occupancy costs and related expenses and the projected
loss on the improvements and equipment aggregated $567,226, which was reflected
in 1994.

In April 1994, a wholly-owned subsidiary of the Company entered into an
agreement with the inventors of a portable pizza oven to form a corporation,
Gourmet Carts, Inc. to produce and market the oven and related carts. The
Company's subsidiary acquired a 50% interest in Gourmet Carts, Inc. Gourmet
Carts, Inc. sustained an operating loss of $361,000 in 1994. As a result of
these losses, litigation with the inventors, and other matters pertaining to the
oven, the Company in 1994 wrote off its investment in and advances to Gourmet
Carts, Inc., sustaining a loss of $441,993.

General and administrative expenses increased in 1994 by 8.7% over
1993. This increase is primarily the result of the added expenses attributable
to the new restaurant and franchising business being conducted in Florida since
April 30, 1993.

14
<PAGE> 15
Depreciation and amortization increased by $33,156 in 1994 over 1993
due to the restaurant and franchising business operating for a full year as
opposed to only eight months in 1993.

Interest income declined from $277,343 in 1993 to $215,333 in 1994
primarily due to a decrease in available cash balances offset partially by an
increase in short-term interest rates.

The tax provision for 1994 reflects state and local taxes for the
current year.

As a result of the foregoing, the after tax loss from operations was
$2,130,496 compared to a loss of $297,013 in 1993.

Liquidity and Capital Resources

Cash increased during 1995 by $226,428 to $992,189. The net increase in
cash is principally attributed to cash provided by investing activities
($1,280,669) offset by cash used by operating activities $1,035,647).

The Company continues to invest its liquid assets in interest-bearing
accounts and instruments (primarily, U.S. Treasury Securities and certificates
of deposit with federally-insured banks). However, until the Sir Pizza
operations generate profits, or the Company finds other business opportunities
to generate profits, the Company will be unable to report any material profits
on its financial statements.

Inflation

Inflationary factors in recent years have not had a significant effect
on the Company's operations. As long as the Company continues to hold U.S.
Treasury Securities, certificates of deposit and other interest bearing
instruments, changes in interest rates will have a significant impact on such
interest income.

ITEM 7. FINANCIAL STATEMENTS

The financial statements are incorporated herein by reference and are
filed as a part of this Report.

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

None

PART III

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

Corporate Developments Subsequent to December 31, 1995

On February 20, 1996, Mr. Al-Omari resigned as President of the
company, and was replaced by Walter Small; Mr. Al-Omari became President of UFOI
and Custom Carts. At that time, Mr. Alan Wachtel was granted options to acquire
up to 200,000 shares of the Company's Class A shares at a price per share of
$.45. The options may be exercised on a cumulative basis at the rate of 40,000
per year over a five year period and are subject to certain other restrictions
and the execution and delivery of a Stock Option Agreement. The options were not
granted pursuant to the "Universal Franchise Opportunities Corp. Incentive Stock
Option Plan" (effective June 1, 1993).

In February, 1996, the Company decided to enter into a new business
segment: the development, marketing and production of nanocomposite coatings. A
new subsidiary, Advanced Surface Engineering, Inc. was formed to

15
<PAGE> 16
operate this new line of business. Dr. Todd Schlesinger, stepson of the
Company's president and Chairman of the Board, became Vice-President of
Operations of ASE. Dr. Schlesinger was able to obtain from his previous employer
the patent rights to a self-lubricating coating which he had developed before
being employed and constituted the subject matter of his doctoral thesis.
Subsequent work had been performed while working for his previous employer. In
addition to this self-lubricating coating, Dr. Schlesinger has also developed
five other proprietary coatings for use by ASE. The Company intends to market
these coatings as soon as the patent and trademark registrations have been
completed. Dr. Schlesinger's base remuneration ($60,000) is at the same rate at
which he was being compensated by his previous employer. He is to be paid
additional compensation predicated on the performance of this new business
segment.

On March 25, 1996, Mr. Al-Omari resigned as President of UFOI and
Custom Carts and was replaced by Mr. Walter Small. Mr. Al-Omari was elected
Executive Vice President of each of those subsidiary corporations.

As at December 31, 1995*, the Company's Directors, executive officers
and their respective ages are as follows:

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

*Prior to December 31, 1995 Mr. Gubin's term as a director expired and Mr.
Ronald Berkley's term as a director and officer of the Company was terminated.

16
<PAGE> 17
Name Age Position
---- --- --------

Walter Small 65 Chairman

Mohamad Al-Omari 37 President

Myrna Small 58 Vice President

Alan Wachtel 66 Director

Walter Small has served as a principal executive officer and as a
Director of the company since 1964 and has been President of the Company since
1967, and Chairman of SPU since 1993.

Mohamad Al-Omari, Vice President of SPU, was Director of Operations for
Premiere Franchise Corporation, the predecessor of SPU, from 1992 through its
acquisition by SPU in 1993. He has been a food industry veteran for the last 15
years. From 1980 to 1985 he held various management positions with Krystals in
Chattanooga, Tennessee. From 1985 to 1987 he was Director of Operations for
Shape Shop, a Canadian chain of sports shops. In 1987 he was named Operations
Manager for QSR, Inc. of Fort Lauderdale, Florida, a chain which became Miami
Subs. In 1990 he became a Master Franchisee for Miami Subs in New York City. He
joined Premier Franchise Corporation as Director of Operations for Sir Pizza in
1992. He participated in the opening of numerous fast food restaurants in the
past 4 years.

Myrna Small has served as a Vice President of the Company since
December 4, 1979 but only devoted a limited amount of her time to these
activities. Mrs. Small's services as a paid employee were terminated on December
31, 1994 in an effort to further reduce overhead costs. For more than the past
five years Mrs. Small has served as Chief Executive officer and sole shareholder
of Henry S. Nassberg, Inc., a insurance brokerage firm. Mrs. Small is the wife
of Walter Small.

Alan Wachtel, a Director of the Company since December 1994, has over
fifty years of various business experience including investment and ownership of
one of the earliest fast-food franchises in the country. For six years he was
connected with the Chock Full of Nuts Organization, and most recently, in 1972,
he founded the Wachtel Mechanical Devices Corp., which he continues to own and
direct.

The terms of office of all Directors of the Company are from the time
of election until the next Annual Meeting of Shareholders of the Company, as
provided in the Company's By-laws. All officers hold office at the pleasure of
the Board of Directors.

Compliance with Section 16 of the Act

Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers and persons who own more than ten
percent of a registered class of the Company's equity securities to file with
the Securities and Exchange Commission and the New York Stock Exchange initial
reports of ownership and reports of changes in ownership of Common Stock.
Directors, officers and greater than ten-percent stockholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file. Based on review of the copies of these forms furnished to the
Company, and representations that no Forms 5 were required, the Company believes
that during the past two fiscal years all Section 16(a) filing requirements
applicable to its officers, directors and greater than ten-percent beneficial
owners were complied with in 1995.

17
<PAGE> 18
ITEM 10. EXECUTIVE COMPENSATION

The following table sets forth, in summary form, the compensation paid
by the Company for the fiscal years ended December 31, 1995, 1994, and 1993 for
services rendered in all capacities to (a) the Company's Chief Executive Officer
and the other executive officers of the Company or its subsidiaries, servicing
as executive officers as of December 31, 1995; (b) the stock options granted to
such executives in 1995; and (3) exercise and year-end value information
pertaining to stock options rights granted to such executives. No stock
appreciation rights were granted by the Company.

<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
--------------------------------------------------------------------
Name of Individual or Year Salary Bonus(2) Option
Number of Persons in Group (1) & other Awards (4)
compensation(3) (No. of Shares)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Walter Small 1995 $139,878 0(6) 0
President, Treasurer 1994 282,913(5) 0(6) 0
and a Director 1993 279,273(5) 0(6) 0
Chairman of SPU

Mohamad Al-Omari 1995 $ 70,000 25,000(2)(7) 0
Vice President--Operations of SPU 1994 69,615 20,563(7) 0
1993 38,077 7,000(7) 100,000(4)

Myrna Small 1995 $ 678 0 0
Vice President 1994 17,164(8) 0 0
1993 17,500 0 0
</TABLE>

(1) Reflects salary actually paid in the year indicated, even if a portion
of the amount paid in such year relates to salary earned in a prior year.

(2) No bonuses of any type were granted or paid in or form 1995, 1994, or
1993, except that Mr. Al-Omari received a bonus of $6,125 in 1994 and $25,000 in
1995.

(3) None of the executive officers listed received pre-requisites or other
personal benefits, securities or property that exceeded the lesser of $50,000 or
10% of the salary for such officer if each year, except for the Stock Options
described in such table.

(4) Reflects Non-Qualified Stock Options granted to such officers under
Options granted to such officers under Option Agreements therewith, as described
below under "Option Agreements" and "Option Grants". The Company's Stockholders
also adopted an Incentive Option Plan at the Annual Meeting thereof on July 14,
1993 effective as of June 1, 1993, although no options have been granted
thereunder (See "Incentive Stock Option Plan" below).

(5) Excludes $17,500 paid by the Company to Myrna Small as compensation for
services rendered as a Vice president in each of 1994 and 1993.

(6) The Company owns a 1986 Mercedes 560 for the use of Mr. Small and pays
insurance, maintenance and all expenses related to such automobile. The Company
has allocated 10% ($845) of the annual cost of such car used by Mr. Small as
being for the personal use of Mr. Small for the year ended December 31, 1995.

18
<PAGE> 19
(7) During 1993 Mr. Al-Omari received $7,000 towards compensation earned or
to be earned from the consulting agreement with "The Exhibition" described below
under "Employment and other Agreements", $14,438 thereunder in 1994 and $988
thereunder in 1995 which amount represents the balance due from 1994. This
consulting agreement has expired. Mr. Al-Omari also received a bonus of $6,125
in 1994 and $25,000 in 1995. Mr. Al-Omari also receives a non-accountable
expense allowance of $300 per month to be applied towards, or in lieu of, rental
of an automobile for business purposes, which amount is not included in this
table. See "Employment and Other Agreements".

(8) Does not include premiums paid by the Company on insurance placed for
the Company by an insurance brokerage firm of which Myrna Small, a Vice
President and wife of Walter Small, is Chief Executive Officer and sole
shareholder in the amount of $12,003 in 1995, $11,134 in 1994 and $18,734 in
1993.

Option Grants

In February, 1996, Alan Wachtel was granted an option to acquire up to
200,000 shares of the Company's Class A Common Stock at a price of $.45 per
share; the options are exercisable on a cumulative basis as to 40,000 shares per
year; the options are subject to various restrictions. The following tables
summarize grants during 1995 of stock options and awards outstanding at year end
1995. For further information with regard thereto, see "Option Agreements"
below. None of such options were under the Company's Incentive Stock Option
Plan:

<TABLE>
<CAPTION>
% of Total Option
Option Granted to Exercise Market Price on Expiration
Granted Employees or Base (2) Grant Date Date (4)
Name (#)(1) in 1993 Price (S/Sh) ($/Sh) (3)
<S> <C> <C> <C> <C> <C>
Mohamad Al-Omari 100,000 28.6 $0.875 $1.5625 10/11/2003
Jonathan Gubin -- -- -- --
Donald Ryan 250,000(5) 71.4 $0.875 $1.5625 10/11/2003
</TABLE>

(1) The options were granted to a five-year vesting period, with 20% of the
options granted becoming exercisable on each anniversary of the grant date, for
five years.

(2) The exercise price obligations related to exercise may be paid by
deliver of already owned shares, subject to certain conditions. The aggregate
number of shares of Common Stock which may be purchased pursuant to the Options,
and the cash consideration payable per share on exercise of an Option, shall be
proportionally adjusted in the event of a subdivision or consolidation of shares
or other capital adjustment, the payment consolidation of shares or other
capital adjustment, the payment of a stock dividend, or other increase or
decrease of the number of shares of the Common Stock outstanding, without
receiving compensation therefor in money, services or property. The exercise
price of the options not yet vested and previously granted to Mr. Al-Omari's has
been reduced to $.45 per share.

(3) Represents the mean between the closing bid and asked prices of the
shares as quoted on NASDAQ on the date of grant.

(4) The options were granted for terms of 10 year, subject to earlier
termination upon the termination of an optionee's employment or retirement. If
the Company purchases or is purchased by any corporation in any merger, or
consolidation and if the holders of the Company's Common Stock receive cash or
debt securities not convertible into equity securities of the surviving or
resulting corporation, the Options shall terminate, except that in such event,
immediately prior to the consummation thereof, all Options granted may be
exercised.

19
<PAGE> 20
(5) These options were cancelled by the Company in 1995 in part because Mr.
Ryans' activities were determined by the Board of Directors not to be in the
best interest of the Company. See also "Item 3. Legal Proceedings".

Aggregate Option Exercises in 1995

No stock options were exercised by any executive in 1995.

Employment and Other Agreements

In July, 1993, the Company entered into a new Employment Agreement with Mr.
Small to become effective upon the expiration of his previous agreement on
October 1, 1993. Such Agreement provides for an annual salary of $279,292.78
(based on his then effective salary), plus increases to reflect increases in the
cost of living index and an incentive bonus equal to 2% of the Company's pre-tax
profits after the end of any fiscal year in which the Company's pre-tax profits
exceed $1,000,000. Mr. Small's agreement expires on September 30, 2000. In
January 1995 Mr. Small voluntarily agreed to reduce his base salary during 1995
to $200,000 per annum; in March 1995, Mr. Small's salary was further voluntarily
reduced to $100,000.

SPU entered into an Employment Agreement with Mohamad Al-Omari, as of May
1, 1993, pursuant to which the Company employed Mr.Al-Omari as Vice President of
Operations of SPU, for a salary of $5,000 per month, which was increased to
$5,833 as of January 2, 1994. Such Agreement entitles Mr. Al-Omari to the use of
an automobile for purposes of the Company's business; provided, however, that
the total cost thereof (including leasing or other payments) shall not exceed
$300 per month. Mr. Al-Omari's employment is on a month to month basis, and can
be terminated, without any additional compensation, either without cause upon
ninety days notice by either Mr. Al-Omari or the Company, or for cause, as
specified in such agreement (which, among other things, includes cessation of
the business of SPU). SPU also agreed to grant Mr. Al-Omari additional
compensation representing consulting fees with respect to the transaction with
"The Exhibition", which consulting arrangement has expired. During 1995 Mr.
Al-Omari received $9,188 representing the balance of consulting fees from such
arrangement in 1994, and a $25,000 bonus.

None of such employment agreements provides for any additional payments to
be made to any such employee upon termination of his employment, except for
accrued salary and any incentive bonus that he would otherwise be entitled to,
pro-rated through the date of termination. Each of such agreements provides that
the Board of Directors of the Company may grant annual bonuses in an amount the
Board of Directors deems reasonable and appropriate. Each of such Employees
shall be entitled to participate in such health and medical benefit programs of
the company, and such vacation time, as may be established by the Board of
Directors of the Company from time to time. In the past, the Board of Directors,
in making bonus determinations, has generally considered the accomplishments and
responsibilities of such executives, as well as the revenues, profits and losses
of the Company, during such year. Except for the foregoing and as mentioned in
the foregoing paragraphs with regard to incentive bonuses, in the event that the
criteria for profitability referred to therein are met, the company has no
formal plan or criteria for the granting of bonuses. No bonuses were granted for
1995, other than $25,000 to Mohamad Al- Omari.

Although Myrna Small, a Vice President, has received an annual salary of
$17,500 per year, such salary has been voluntarily waived in 1995, pursuant to a
resolution of the Board of Directors of the Company.

Until July, 1993, the Company had a policy of paying outside Directors $250
for each meeting attended. In July, 1993, the Directors superseded such policy,
by voting that Mr. Gubin be compensation for his services as a non-employee
director, at a rate of $5,000 per year, which includes all meetings and
activities by Mr. Gubin as a Director. Mr. Gubin received a total of
approximately $2,500 in 1995 as a result of the foregoing, together with
reimbursement of certain expenses.

Option Agreements

20
<PAGE> 21
share to purchase an aggregate of 250,000 shares of the Company's Class A Common
Stock, exercisable on a cumulative basis with regard to 50,000 shares each at
the end of each year for five years. Such options expire on April 30, 103,
unless otherwise terminated as provided therein. Piggy-back registration and
anti-dilution rights for the option shares were also granted pursuant to such
Agreement. As discussed above, Mr. Ryan's employment with the Company was
terminated, although Mr. Ryan as commenced an arbitration proceeding to
challenge such termination which resulted in an award to the Company. "Item
3-Legal Proceedings".

On October 12, 1993, the Company entered into a Stock Option Agreement with
Mohamad Al-Omari, pursuant to which the Company granted Mr. Al-Omari options, at
a price of $.875 per share (reduced to $.45 per share as to options that have
not yet vested) to purchase an aggregate of 100,000 shares of the Company's
Class A Common Stock, exercisable on a cumulative basis with regard to 20,000
shares each at the end of each year for five years. Such options expire on
October 12, 2003, unless otherwise terminated as provided therein. Piggy-back
registration and anti-dilution rights for the option shares were also granted
pursuant to such Agreement.

In February, 1996, the Company Alan Wachtel, a director of the Company,
options to purchase up to an aggregate of 200,000 shares of the Company's Class
A Common Stock at a price of $.45 per share. The options are exercisable on a
cumulative basis with regard to 40,000 shares each at the end of each year for
five years. The options are subject to certain restrictions, in the event of
liquidation and otherwise.

Stock Option Plan

On May 14, 1993, the Board of Directors of the Company adopted the
Company's Incentive Stock Option Plan (the "Plan"), effective June 1, 1993,
which Plan was approved by the stockholders at their Annual Meeting in July
1993.

The Plan provides for the grant to officers (including executive officers)
and key employees of the company and its subsidiaries of incentive stock options
("ISOs") and non-qualified stock options for the purchase of Class A Common
Stock. The purposes of the Plan are to aid the Company in attracting and
retaining highly capable employees and to enable selected key employees of the
Company and its subsidiaries to acquire or increase ownership interests in the
Company on a basis that will encourage them to use their best efforts to promote
the growth and profitability of the Company.

200,000 shares of Class A Common Stock have been reserved for issuance upon
exercise of options granted under the Plan. If an option terminates for any
reason without being exercised, then the shares represented by such option will
be available for the further grant of options. The authorized number of shares
of Class A Common Stock is subject to adjustment in the event of certain changes
in CPU's (now Universal Franchise Opportunities Corp. or "UFOC") capitalization.

Generally, all options are exercisable, commencing one year after the
respective dates of grant, to the extent of a cumulative 25% of the shares
subject to a particular option during each of the next four years, provided that
no option may be exercised prior to six months from the date of grant thereof.
The option price for each option granted under the Plan may not be less than
100% of the fair market value of the stock when the option is granted. For
purposes of the Plan, the fair market value of the shares of Class A Common
Stock on any date is generally the mean between the closing bid and asked prices
of the shares as quoted on NASDAQ on such date (or the average, on such date, of
the high and low sales prices of such shares in the principal market in which
such shares are traded, if they are not then quoted on NASDAQ). The number of
shares of Class A Common Stock covered by each Option and the Option Exercise
Price will be adjusted in the event of stock splits, stock dividends or other
capital adjustments. Payment for shares of Class A Common Stock upon the
exercise of options is to be made in full within 10 business days after the date
of exercise, in cash or in shares of Class A Common Stock owned by the optionee
having a fair market value on the exercise date equal to the option price for
the shares being purchased, or a combination thereof equal in the aggregate to
the option price for the shares being purchased.

21
<PAGE> 22
In the event that UFOC entered into one or more agreements to dispose of
all or substantially all of its assets, or UFOC stockholders dispose of or
become obligated to dispose of 50% or more of the outstanding capital stock of
UFOC other than to UFOC or one of its subsidiaries, in either case by means of a
sale (whether as a result of a tender offer or otherwise), merger,
reorganization or liquidation in one or a series of related transactions, then
the exercisability of each option outstanding under the Plan shall be
accelerated. In the event of such an acceleration event, any optionee with an
option other than an ISO who is subject to the filing requirements imposed under
Section 16(a) of the 1934 Act with respect to UFOC shall receive a payment of
cash equal to the difference between the aggregate fair value (as defined in the
Plan) of the Class A Common Stock subject to accelerated option and the
aggregate option exercise price of such shares. The foregoing payment to the
optionee shall be in lieu of and in full discharge of any and all obligations of
UFOC in respect of all subject options.

No option under the Plan may extend more than 10 years from the date of
grant and all options will terminate upon the optionee's termination of
employment with additional exercise periods in the case of retirement,
disability or death.

The Plan will terminate at such time as all shares of Class A Common Stock
available for the grant of options under the Plan have been acquired through
exercise of options or at such earlier time as the Board of Directors may
determine. No options may be granted under the Plan after May 31, 2003. The Plan
may be amended by the Board of Directors without stockholder approval, except
under certain specified circumstances.

The Plan is to be administered by an Option Committee, which has not yet
been established, consisting of three or more Directors to be designated by the
Board, who are not eligible to receive Options under the Plan. The powers of the
Option Committee would include the selection of participants to whom stock
options are granted, the determination of the number of shares of Class A Common
Stock which may be covered by stock options granted to any participant and the
purchase price thereof.

The Company has not granted any stock options under the Plan, but, as
described above under "Option Agreements" and under "ITEM 11. SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT", the Company has granted
non-qualified Stock Options to Messrs. Ryan, Al-Omari and Wachtel under the
terms described in the aforesaid section. The Company has terminated the
unexercised options previously granted to Mr. Ryan; however, see Item 3. Legal
Proceedings, for a discussion of the current status of the Company's litigation
with Mr. Ryan regarding his termination.

Indemnification Agreements

In connection with the Company's reincorporation as a Delaware corporation
in 1987, the Company entered into Indemnification Agreements with Messrs. Small
and Marfatia, pursuant to which the Company agreed to indemnify such officers in
the event of certain claims. The Board of Directors has also voted to
specifically indemnify the Company's officers, in the manner provided by the
Delaware General Corporation Law, in connection with certain legal actions which
were pending during 1992 (including the currently pending stockholder's
derivative action). In April 1993, the Board of Directors voted to provide
revised agreements to all of its officers and directors, which agreements were
entered into in July, 1993 with regard to the then serving directors. In
December 1994, similar agreements were entered into with Messrs. Berkley and
Wachtel. In 1996 similar indemnification was provided to Myrna Small and Dr.
Todd Schlesinger. All of such agreements provide for indemnification to the
fullest extent permissible under Delaware and federal law.

Directors Meetings

The Company held 16 meetings of its board of directors in 1995, at all of
which all Directors were present in person or by telephone, except that Mr.
Wachtel was not present at one meeting. The Board acted by written consent,
after telephonic consultation among directors, on 10 occasions.

22
<PAGE> 23
Until July, 1993, the Company had a policy of paying outside Directors $250
for each meeting attended. In July, 1993, the Directors superseded such policy,
by voting that Mr. Gubin be compensation for his services as a non-employee
director, at a rate of $5,000 per year, which includes all meetings and
activities by Mr. Gubin as a Director. Mr. Gubin received a total of
approximately $2,500 in 1995 as a result of the foregoing, together with
reimbursement of certain expenses. Mr. Gubin's term as a director expired on
July 1, 1995.

Certain Transactions

Termination of Employment

In January, 1995 Donald J. Ryan's employment with the Company and SPU was
terminated. Mr. Ryan has commenced an arbitration proceeding to challenge, and
seek damages in connection with, such termination. For further information with
regard to such termination; the arbitration resulted in an award in favor of the
Company. See "ITEM 3. Legal Proceedings" above. No termination or severance
payments were made to Mr. Ryan.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of March 31, 1995, the beneficial
ownership of the Company's Class A Stock and Class B Stock, as classes, and its
Capital Stock, in the aggregate, by (i) each person known by the Company to own
beneficially more than 5% of the Company's Class A Stock or Class B Stock, (ii)
each person who has been a director or officer of the Company since the
beginning of the last fiscal year, (iii) each Director of the Company, and (iv)
all directors and officers as a group.

23
<PAGE> 24
Amount and Nature of Beneficial Ownership of Common Stock (1)

<TABLE>
<CAPTION>
Class A Class B Combined (2)
------- ------- ------------

Name & Address Shares Percent of Number of Percent of Total Shares
of Beneficial Owned Class Owned Shares Owned Class Owned & Percent
Holder
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Walter Small 237,100 11,39% 551,900(4) 75.42% 789,000
300 E 56th Street 28.05%
Apt. 22L
N. Y., N.Y. 10022(3)

Myrna Small 50 (6) 100 (6) 150
300 E 56th Street
Apt. 22L
N. Y., N.Y. 10022(5)

Mohamad Al-Omari 250(7) (6) (6) 0 250
11211 S Military
Trail #2923
Boynton Bch,
Fl 33936

Alan Wachtel 128,700(8) 6.18% 0 0 128,700
78 Kings Court 4.6%
Fort Lee, NJ 07024

All Directors & 366,100(9) 17.60% 552,000 75.43% 918,100
Officers as a Group 32.6%
</TABLE>

(FOOTNOTES FROM PREVIOUS PAGE)

(1) Except as noted, all shares are beneficially owned, and the sole voting
and investment power is held by the persons named. For the purposes of this
table, a person is deemed to be the beneficial owner of shares which he has the
right to acquire through the exercise of options currently exercisable, and in
computing the percentage of the class owned by such person, such shares are
deemed to be outstanding.

(2) Combines the shares of Class A Stock and Class B Stock to be
outstanding for the purpose of calculating the percent owned.

(3) Does not include 50 shares of Class A Stock and 100 shares of Class B
stock owned by Myrna Small, Mr. Small's wife, and 25 shares of Class A Stock
owned by Deborah Small, Mr. Small's daughter, as to all of which Mr. Small
disclaims beneficial ownership. Also does not include 60,000 shares of Class B
Stock owned of record by Prafulla Marfatia, with respect to which Mr. Small has
been granted an irrevocable proxy. The numbers shown reflect the conversion of
200,000 shares of Class B Common Stock to Class A Common Stock by Mr. Small
during early 1995.

(4) Mr. Marfatia has granted an irrevocable proxy to Mr. Small with respect
to 60,000 shares of Class B Stock owned of record by Mr. Marfatia.

(5) Does not include 237,100 Shares of Class A Stock and 551,900 Shares of
Class B Stock owned by Walter Small, Ms. Small's husband, of which Ms. Small
disclaims beneficial ownership.

24
<PAGE> 25
(6) Less than one (1%) percent.

(7) Does not include stock options granted to Mr. Al-Omari to purchase an
aggregate of 100,000 shares of the Company's Class A Common Stock, as described
under "Option Agreements" below, none of which have yet vested. See "Option
Agreements" and "Item 10--Executive Compensation".

(8) Includes 2,200 shares held by Mr. Wachtel's wife, 9,400 held by
Wachtel's wife's IRA and 10,000 held by Mr. Wachtel's wholly-owned corporation,
with respect to all of which shares Mr. Wachtel disclaims beneficial ownership.
Does not include stock options granted to Mr. Wachtel in February, 1996 to
purchase an aggregate of 200,000 shares of the Company's Class A Common Stock,
as described under "Option Agreements" below, none of which have yet vested. See
"Option Agreements" below, none of which have yet vested.

Shareholder's Agreement

On November 7, 1985, the Company and Mr. Small and Prafulla Marfatia
entered into a Shareholders' Agreement. Pursuant to such agreement, Mr. Marfatia
has granted to Mr. Small an irrevocable proxy to vote the 128,040 shares (60,000
shares as of March 31, 1996) of the Company's Class B Stock owned by Mr.
Marfatia as of the date of such agreement, in Mr. Small's sole discretion. As
shares are sold to the public, they are released from this agreement and the
number subject to its terms will decrease.

Option Agreements

See "Option Agreements" above with regard to Stock Options granted to
Messrs. Ryan and Al-Omari.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

$12,003.87 in premiums was paid by the Company on insurance placed for the
Company by an insurance brokerage firm of which Mrs. Myrna Small, a Vice
President and wife of Walter Small, is Chief Executive Officer and sole
shareholder. See also "ITEM 11. EXECUTIVE COMPENSATION", and, in particular, the
footnotes thereto and the transactions and agreements described therein.

PART IV

ITEM 14(a): EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this report.

1. Financial Statements

(a) Consolidated Balance Sheets as at December 31, 1995

(b) Consolidated Statements of Income for the years ended December 31,
1994 and 1995

(d) Consolidated Statements of Stockholders' Equity

(e) Consolidated Statements of Cash Flows for the years ended December
31, 1994 and 1995

(f) Notes to Consolidated Financial Statements

25
<PAGE> 26
2. Exhibits

(a) Schedule of Compilation of Net Income Per Share for Years Ending
December 31, 1994 and 1995.

(b) Reports on Form 8-K. The following reports on Form 8-K were filed
during the last quarter of the period covered by this Report:

None

26
<PAGE> 27
Supplemental Information to be Furnished with Reports filed Pursuant to
Section 15(d) Of the Act by the Company which have not Registered Securities
Pursuant to Section 12 of the Act:

Neither annual report nor proxy statement for the year ending December 31,
1995, have been provided to security holders as of date hereof. The Company
intends to provide both to security holders prior to its annual meeting and will
furnish four copies of each to the Commission for its information as and if
provided to security holders.

27
<PAGE> 28
SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Universal Franchise Opportunities Corp.

By: s/Walter Small
----------------------------
Walter Small, President

Dated: April 15, 1996

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the Company and in the capacities and on the dated indicated.

Those signing below constitute a majority of the Directors of the Company.

s/Walter Small President, Treasurer & April 15, 1996
- --------------------------- Director (Principal Executive
(Walter Small) Officer and Principal financial
and Accounting Officer

s/Mohamad Al-Omari Director and Vice President April 15, 1996
- ---------------------------
(Mohamad Al-Omari)
<PAGE> 29
INDEPENDENT AUDITOR'S OPINION

Board of Directors
Universal Franchise Opportunities Corp.

We have audited the accompanying consolidated balance sheet of Universal
Franchise Opportunities Corp. and its wholly-owned subsidiaries, as at December
31, 1995 and the related consolidated statements of income, retained earnings,
stockholders' equity and cash flows for each of the two years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Universal
Franchise Opportunities Corp. and its wholly-owned subsidiaries as at December
31, 1995 and the results of their operations and their cash flows for each of
the two years then ended in conformity with generally accepted accounting
principles.

New York, New York
February 16, 1996

Goldman & Krinitz, CPA's, P.C.
Certified Public Accountants
<PAGE> 30
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS AT
DECEMBER 31, 1995

<TABLE>
<CAPTION>
<S> <C>
Current Assets
Cash (Notes 1(B) and 1(C)) $ 992,189
U.S. Treasury Securities 992,886
Marketable securities, at cost,
which approximates market value 1,672
Inventory (Note 1(F)) 8,477
Prepaid income taxes 6,153
Prepaid expenses 48,931
Other receivables 50,492
-----------
Total Current Assets 2,100,800
-----------
Property and Equipment (Notes 1(D) and 1(G))
Restaurant improvements and equipment 157,807
Vehicular and office equipment 74,936
-----------
232,743
Less: Accumulated depreciation and
amortization 108,295
-----------
Total Property and Equipment 124,448
-----------
Other Assets
Certificates of deposit, (Notes 1(B) and 1(C)) 656,475
Franchise rights, net of amortization
(Notes 1(D) and (H)) 292,264
Asset acquisition costs, net of amortization 13,262
Restaurant and vehicular equipment held for
resale (Note 4) 40,880
Security deposits 30,246
-----------
Total Other Assets 1,033,127
-----------
Total Assets $ 3,258,375
===========
</TABLE>

The accompanying notes to the financial statements are integral parts of this
report and should be read in conjunction herewith.
<PAGE> 31
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS AT
DECEMBER 31, 1995

<TABLE>
<CAPTION>
<S> <C>
Current Liabilities
Current portion of long-term debt (Note 3) $ 20,139
Accounts payable 118,240
Deferred income (Note 1(I)) 20,000
-----------
Total Current Liabilities 158,379

Long-term debt, less current portion
above (Note 3) 41,363
-----------
Total Liabilities 199,742
-----------

Commitments and Contingencies (Note 8)
Stockholders' Equity (Note 9)
Preferred stock, par value $.10
per share - authorized 100
shares - no shares issued and
outstanding -
Common stock, Class A par value,
$.025 per share - authorized
5,000,000 shares - 2,081,190
shares issued and outstanding 52,030
Common stock, Class B, par value,
$.025 per share - authorized
2,000,000 shares - 731,790
shares issued and outstanding 18,294
Additional paid in capital 3,356,135
Retained earnings (deficit) ( 367,826)
-----------
Total Stockholders' Equity 3,058,633
-----------
Total Liabilities and
Stockholders' Equity $ 3,258,375
===========
</TABLE>

The accompanying notes to the financial statements are integral parts of this
report and should be read in conjunction herewith.
<PAGE> 32
UNIVERSAL FRANCHISE OPPORTUNITIES CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------
1994 1995
---- ----
<S> <C> <C>
Operating Revenues
(excluding discontinued operations-Note 2)
Restaurant sales $ 698,222 $ 365,337
Franchise fees 56,155 60,347
Consulting fees - franchisees 16,661 33,413
Consulting fees - affiliated company 64,598 -
Other 1,095 294
---------- ----------
836,731 459,391
---------- ----------

Expenses (excluding discontinued operations Note 2)
General and administrative expense 1,046,157 997,884
Restaurant cost of sales 931,941 426,730
Depreciation and amortization -
restaurant improvements and
equipment 64,188 17,660
Amortization - franchise rights 23,700 23,700
Depreciation and amortization -
other 12,425 13,950
Provision for loss on store closings
(Note 4) 567,226 11,626
---------- ----------
2,645,637 1,491,550
---------- ----------

Operating profit (loss) ( 1,808,906) ( 1,032,159)
---------- ----------

Other Income (Expense)
Interest income 215,333 174,692
Interest expense ( 33,777) ( 5,736)
Charges on redemption of
certificates of deposit - ( 42,890)
Provision for doubtful accounts - ( 15,399)
Loss on investment in and advances to
Gourmet Carts, Inc., an affili-
ated company (Note 5) ( 441,993) -
---------- ----------
( 260,437) 110,667
---------- ----------
Loss before income and franchise
taxes (excluding discontinued operations) ( 2,069,343) ( 921,492)
Provision for income and franchise
taxes (Notes 1(E) and 6) 4,990 ( 30,871)
---------- -----------

Income (loss) from continuing operations ( 2,074,333) ( 890,621)
Income (loss) from discontinued operations,
net of income tax provisions of -0- ( 56,163) ( 241,499)
----------- ----------
Net income (loss) ($2,130,496) ($1,132,120)
========== ==========

Per Share of Common Stock (Note 10)
Income (loss) from continuing operations ($ 0.74) ($ 0.32)
========== ==========
Income (loss) from discontinued operations ($ 0.02) ($ 0.08)
========== ==========
Net Income (loss) ($ 0.76) ($ 0.40)
========== ==========
Average Common Shares Outstanding 2,812,980 2,812,980
========== ==========
</TABLE>

The accompanying notes to the financial statements are integral parts of this
report and should be read in conjunction herewith.
<PAGE> 33
UNIVERSAL FRANCHISE OPPORTUNITIES CORP.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (DEFICIT)

<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------
1994 1995
---- ----
<S> <C> <C>
Beginning of year $ 2,894,790 $ 764,294

Consolidated net income (loss) for year (2,130,496) (1,132,120)
----------- -----------

End of year $ 764,294 $ (367,826)
=========== ===========
</TABLE>

The accompanying notes to the financial statements are integral parts of this
report and should be read in conjunction herewith.
<PAGE> 34
UNIVERSAL FRANCHISE OPPORTUNITIES CORP.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
Capital Stock Additional
Number of Paid in Retained
Shares Amount Capital Earnings Total
------ ------ ------- -------- -----
<S> <C> <C> <C> <C> <C>
Balance - January
1, 1994 2,812,980 $ 70,324 $ 3,356,135 $ 2,894,790 $ 6,321,249

Net Income (Loss) -
1994 (2,130,496) (2,130,496)
----------- --------- ----------- ----------- -----------

Balance - December
31, 1994 2,812,980 70,324 3,356,135 764,294 4,190,753

Net Income (Loss) -
1995 (1,132,120) (1,132,120)
----------- --------- ----------- ----------- -----------

Balance - December
31, 1995 2,812,980 $ 70,324 $ 3,356,135 $ (367,826) $ 3,058,633
----------- --------- ----------- ----------- -----------
</TABLE>

The accompanying notes to the financial statements are integral parts of this
report and should be read in conjunction herewith.
<PAGE> 35
UNIVERSAL FRANCHISE OPPORTUNITIES CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------
1994 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($ 2,130,496) ($1,132,120)
Adjustments to reconcile
net income to net cash (used in) provided
by Operating Activities
Depreciation and amortization 164,808 66,999
Loss on abandonment of leasehold - 155,244
Amortization of discount on
U.S. Treasury securities - ( 59,466)
Provision for loss on investments in and
advances to Gourmet Carts, Inc., an
affiliated company 441,993 -
Provision for writedown of assets in
connection with store closings 476,025 13,909
Changes in certain current assets
and liabilities
Inventory 7,980 ( 3,944)
Prepaid income taxes 1,910 7,409
Prepaid expenses 9,378 ( 36,262)
Other receivables 91,431 38,830
Accounts payable 19,592 ( 54,791)
Income taxes payable 3,942 ( 31,455)
Deferred income 10,000 -
----------- ----------
Net Cash Provided (Used) by Operating
Activities ( 903,437) ( 1,035,647)
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of long-term certificates of deposit ( 967,837) -
Purchase of U.S. Treasury Securities - ( 1,911,075)
Maturity of U.S. Treasury Securities - 977,655
Redemption of certificates of deposit 293,000 2,095,726
Purchase of property, equipment and
construction in progress ( 158,920) ( 28,762)
Sale of restaurant equipment and land - 148,421
Investment in and advances to Gourmet
Carts, Inc., an affiliated company ( 441,993) -
Decrease (increase) in security
deposits ( 431) ( 1,296)
Increase (decrease) in tenants security
deposits payable ( 55,458) -
----------- ----------
Net Cash Provided (Used) by Investing
Activities ( 1,331,639) 1,280,669
----------- ----------
</TABLE>

The accompanying notes to the financial statements are integral parts of this
report and should be read in conjunction herewith.
<PAGE> 36
UNIVERSAL FRANCHISE OPPORTUNITIES CORP.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)

<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------
1994 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:

Reduction of long-term debt ($ 17,173) ($ 18,594)
Due to officer 150,000 -
Repayment of loan to officer ( 150,000) -
----------- ----------
Net Cash Provided (Used) by
Financing Activities ( 17,173) ( 18,594)
----------- ----------
Net Increase (Decrease) in Cash
and Certificates of Deposits ( 2,252,249) 226,428

Cash and Certificates of Deposit
at Beginning of Year 3,018,010 765,761
----------- ----------
Cash and Certificates of Deposit
at End of Year $ 765,761 $ 992,189
=========== ==========
Supplemental Cash Flow Information

Interest paid $ 33,777 $ 5,736
Income taxes paid (refunded) ($ 2,243) ($ 6,634)
</TABLE>

The accompanying notes to the financial statements are integral parts of this
report and should be read in conjunction herewith.
<PAGE> 37
UNIVERSAL FRANCHISE OPPORTUNITIES CORP.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows:

(A) Consolidation Policy

The consolidated financial statements include the accounts of the
Company's wholly-owned subsidiaries, Commercial Programming Unlimited,
Inc., (NY) ("CPU (NY)"), CPU of Florida, Inc., S.P. Unlimited, Inc.,
("SPU") and Universal Franchise Operations, Inc. (formerly S.P.
Acceptance Corporation). Material intercompany accounts and transactions
have been eliminated in consolidation.

(B) Cash and Cash Equivalents

The Company considers as cash equivalents all highly liquid investments
with an original maturity date of one year or less.

The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and certificates of deposit. The
Company's cash and certificates of deposits are placed with high quality
financial institutions. It is the Company's policy to limit the amount of
credit exposure to any one institution.

(D) Acquisition of Business

On April 30, 1993, the Company's wholly-owned subsidiary, S.P. Unlimited,
Inc., (SPU) acquired substantially all the assets of Premier Franchise
Corporation (formerly called the Salad Bar Corporation) and SPFC, Inc.,
consisting principally of franchise rights, restaurant improvements and
equipment for an aggregate consideration of $498,000 (consisting of
$351,000 of cash and the assumption of $147,000 of notes payable).

(E) Income Taxes

Taxes are provided for all items included in the statement of income
regardless of the period in which such items are reported for tax
purposes. Deferred taxes are provided on those items for which the period
and/or method of reporting for income tax purposes differs from that used
for financial reporting. Such differences relate primarily to
depreciation methods and the accounting for the provision for loss on
store closings and investment in affiliated companies.

At January 1, 1993, the Company adapted SFAS No. 109 "Accounting for
Income Taxes." Upon adaption of SFAS 109, there was no cumulative effect
on the Company's financial statements because the Company's deferred tax
assets exceeded its deferred tax liabilities and a valuation allowance
was recorded against the net deferred tax assets due to uncertainty
regarding realization of the related tax benefits.
<PAGE> 38
UNIVERSAL FRANCHISE OPPORTUNITIES CORP.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(F) Inventories

Inventories are stated at the lower of cost (first-in, first-out) or
market and consist of food, paper products and supplies.

(G) Property and Equipment

Property, equipment and leasehold improvements are carried at cost and
depreciated by the straight-line method over the estimated useful lives
of the assets. Maintenance, repairs and minor renewals are charged
against earnings as incurred. Additions and major renewals are
capitalized.

The principal lives (in years) used in determining depreciation rates of
various assets are: machinery and equipment (5-7); leasehold costs and
improvements (life of lease).

(H) Franchise Rights

The franchise rights acquired from Premier Franchise Corporation and
SPFC, Inc. are being amortized over fifteen years.

(I) Revenue Recognition

Revenue from Company-operated stores is recognized in the period that
related food and beverage products are sold. Revenue derived from initial
franchise fees and area development fees is recognized when the
agreements are signed, the fees are collected, and all material services
or conditions relating to the sale have been substantially performed by
the Company. Prior to the date of income recognition, such amounts are
recorded as deferred income. Royalties are recognized in the same period
related franchise store revenue is generated. The components of royalties
and franchise related fees are:

<TABLE>
<CAPTION>
December 31, December 31,
1994 1995
------------ ------------
<S> <C> <C>
Initial franchise and area development
fees $25,000 $20,000
Royalties 31,155 40,347
------- -------
Total royalties and franchise related
fees $56,155 $60,347
======= =======
</TABLE>
<PAGE> 39
UNIVERSAL FRANCHISE OPPORTUNITIES CORP.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(J) Reclassification
Certain items in the 1994 financial statements have been reclassified to
conform with the 1995 presentation.

NOTE 2 - DISCONTINUED OPERATIONS

The Company had historically operated in four distinct market segments:

(a) The Company had operated business schools in New York City and
Philadelphia, Pennsylvania, teaching courses of a general business nature with
an emphasis on data processing. New York City school operations were
discontinued as of December 31, 1989, and the Philadelphia school discontinued
operations on October 15, 1990.

(b) The Company had purchased mainframe and peripheral computer equipment
which had been leased to various corporations. The Company has not acquired any
additional equipment for lease since 1985, although it continued to receive
revenues therefrom until August, 1993.

(c) The Company leased an aggregate of approximately 37,500 square feet
consisting of classroom and office space at the premises 25 West 17th Street,
New York, New York. The premises had previously been used to conduct the
Company's New York school operations. On May 24, 1990, the Company received from
its landlord permission to sublease approximately 60 percent of the premises to
an unrelated third party for a term to run substantially until the expiration
date of the Company's lease with its landlord. In addition, the Company also
leased to the sublessee most of the Company's equipment located at the premises.
On January 27, 1995, the Sublessee filed a Chapter 11 petition and moved to
reject the aforementioned Sublease and equipment rental contract. On March 2,
1995, the Court issued an order rejecting the Sublease and equipment rental
contract. At December 31, 1994, after having applied the security deposit of
$56,000, there remained $60,856 of premises and equipment rental due. This
amount had been fully reserved in the 1994 financial statements, and the
applicable reserve and receivable have been written off in January, 1995. On May
26, 1995, CPU surrendered the premises to the landlord and was released from all
obligations related to the lease. As a result of such surrender, improvements
and equipment having a net book value of $155,244 were written off. These
operations, which had previously been presented as a separate market segment,
have been presented, net of tax effect, as discontinued operations in the
financial statements.

(d) The remaining market segment in which the Company operates is the
food service and franchising business commenced on April 30, 1993. (See Note
1(D)).
<PAGE> 40
UNIVERSAL FRANCHISE OPPORTUNITIES CORP.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 3 - LONG TERM DEBT

An unsecured note payable assumed on the acquisition of Premier Franchise
Corporation and SPFC, Inc. is repayable in monthly installments of $2,027
including interest at 8% per annum and matures in September, 1998.

Installments of the note mature as follows:

<TABLE>
<S> <C>
1996 $ 20,139
1997 21,813
1998 19,550
--------

$ 61,502
========
</TABLE>

NOTE 4 - PROVISION FOR LOSS ON STORE CLOSINGS

In July, 1994 SPU closed two of its company-owned restaurants in Margate
and Oakland Park, Florida. At the same time, SPU also abandoned its plans to
build any additional such restaurants. SPU was released from its lease
obligation in Margate in June, 1995 and has surrendered the premises in Oakland
Park back to the landlord. SPU has sold a portion of the equipment located in
the two restaurants and estimates that the remaining equipment will be sold for
$23,000. In connection with the aforesaid closings and abandonment, the
following losses and writedowns were reflected in the 1994 financial statements:

<TABLE>
<CAPTION>
<S> <C> <C>
Occupancy and related costs incurred through
December 31, 1994 $ 44,201
Additional estimated occupancy and related
costs projected to June 30, 1995 47,000
Cost of restaurant improvements $266,747
Cost of restaurant equipment 274,241
Site improvements and equipment for
proposed restaurant in Palm
Beach, Florida 32,448
--------
573,436

Less:
Accumulated depreciation and amortization
recorded to July, 1994 ( 47,411)
Estimated selling price of restaurant
equipment held for resale ( 50,000) 476,025
-------- --------

Total provision for loss on store closings $567,226
========
</TABLE>

The above provision was increased by $11,626 in 1995 to reflect the loss on sale
of land in Palm Beach, Florida, offset by revisions to the above estimates.
<PAGE> 41
UNIVERSAL FRANCHISE OPPORTUNITIES CORP.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 5 - INVESTMENT IN AFFILIATED COMPANY

In April, 1994, CPU of Florida, Inc. entered into an agreement with the
inventors of a portable pizza oven to form a corporation, Gourmet Carts, Inc.,
to produce and market the oven and related carts. CPU of Florida, Inc. acquired
a 50% interest in Gourmet Carts, Inc. for $200,000, and made loans and advances
to such corporation of an additional $241,993 through December 31, 1994. The
inventors, who also acquired a 50% interest in Gourmet Carts, Inc., contributed
a prototype oven. A patent has since been applied for. The investment in this
development stage company has been accounted for under the equity method.

Since the end of 1994, the Company's involvement with Gourmet Carts, Inc.
has been in litigation. See Note 8 for further discussion of such litigation.

Gourmet Carts, Inc. sustained an operating loss of $361,000 from its
inception in April, 1994 through December 31, 1994. As a result of the losses,
the litigation, and other matters pertaining to the oven, the Company in 1994
wrote off its total investment in and loans and advances to this affiliate.
Although the loans to Gourmet Carts, Inc. are secured by all the assets of the
company, the Company does not believe that the collateral has any net realizable
value.

For the year ended December 31, 1994, the Company engaged in the
following inter-company transactions with Gourmet Carts, Inc.:

<TABLE>
<CAPTION>
<S> <C>
Consulting fee income $ 59,698
Reimbursement of automobile expenses 4,900
Bookkeeping charges 1,120
Interest income 6,941
--------

Total Income $ 72,659
========

Occupancy costs $ 5,285
========
</TABLE>

In 1995, the company took possession of a truck which Gourmet Carts, Inc.
had purchased.

NOTE 6 - INCOME TAXES

The income tax provisions in the financial statements consist of:

<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------
1994 1995
---- ----
<S> <C> <C>
Federal tax provision $ - $ -
State and local tax provision 4,990 ( 30,871)
--------- ----------
$ 4,990 ($ 30,871)
========= ==========
</TABLE>
<PAGE> 42
UNIVERSAL FRANCHISE OPPORTUNITIES CORP.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 6 - INCOME TAXES (Continued)

Actual tax expense differs from "expected tax expense" (computed by applying
statutory Federal corporate rates of 34% for the years 1994 and 1995 to income
before taxes) as follows:

<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------
1994 1995
---- ----
<S> <C> <C>
Computed "expected" tax
expense (credit) from loss
from continuing operations ($ 703,577) ($ 313,307)
Adjustment of deferred taxes 703,577 313,307
Increase in income taxes
resulting from:
State and local income taxes,
net of federal income tax effect 4,990 3,258
Settlement of prior years' state
and local tax obligations, net of
federal income tax effect - ( 34,129)
----------- ---------
$ 4,990 ($ 30,871)
=========== =========
</TABLE>

For tax reporting purposes, the Company has net operating loss carryforwards of
approximately $3,500,000 expiring 2007-2010 to offset future taxable income. Due
to the uncertainty regarding realization of the tax benefits, a valuation
allowance was recorded against these net deferred tax assets.

NOTE 7 - RELATED PARTY TRANSACTIONS

Mrs. Myrna Small, Vice President and wife of the controlling stockholder
of the Company, owns an insurance brokerage corporation that placed various
insurance policies for the Company. The insurance premiums paid to the firm for
the years ended December 31, 1995 and 1994 were $12,003 and $11,134,
respectively.

During 1994, Mr. Small loaned the Company $150,000. Such loan was repaid
including interest of $1,989.

NOTE 8 - COMMITMENTS AND CONTINGENCIES

The Company's discontinued school operation had received the majority of
its funds under various governmental programs which provided for some form of
tuition assistance for students. The various governmental authorities have the
right to audit the Company for compliance with their specific regulations
notwithstanding the termination of the school operations. The Company believes
it was in compliance with all such regulations, and no provision has been made
in the financial statements for any possible penalties for non-compliance.
<PAGE> 43
UNIVERSAL FRANCHISE OPPORTUNITIES CORP.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 8 - COMMITMENTS AND CONTINGENCIES (Continued)

Upon acquisition of the food service assets, the Company's subsidiary, S.
P. Unlimited, Inc. (SPU) assumed the existing lease on the restaurant located in
Miami Lakes, Florida. Such lease, expiring December 31, 1998, provides for
minimum annual rentals of $39,615 and a share of the real estate taxes. The
lease is guaranteed by the Company.

SPU had entered into leases for two additional restaurants in Margate and
Oakland Park, Florida which provided for monthly rentals aggregating $5,000 plus
all expenses of operating the properties. The two leases, which commenced late
in 1993, had five year terms with renewal options. In July, 1994, SPU closed the
two aforementioned restaurants. In June, 1995, SPU was released from its
obligations with respect to the Margate lease. SPU has surrendered the Oakland
Park premises to the landlord and has not paid the $3,000 plus expenses monthly
rental on the premises since May, 1995. Management believes there will be no
attempt by the landlord of the Oakland Park premises to collect the rent
arrearages or future rent obligations.

In August, 1994, Gourmet Carts, Inc., the 50% owned affiliate of the
Company, entered into a lease agreement for office space commencing October 1,
1994 and ending January 31, 1998. At the same time, the Company and Gourmet
Carts, Inc. entered into a sublease for a portion of the premises to coincide
with the term of the original lease. The Company had guaranteed up to $35,000 of
Gourmet Carts, Inc. obligations under the original lease for a term from October
1, 1994 to November 30, 1995. In February, 1995, Gourmet Carts, Inc. defaulted
on the lease. The Company continued to pay the affiliate's rent obligation to
the landlord. Effective April 1, 1995, the landlord released the Company from
its guarantee and terminated the lease with Gourmet Carts, Inc. Effective April
1, 1995, Universal Franchise Operations, Inc. signed a lease with the landlord
which expires April 30, 1998. The lease requires minimum monthly payments of
$2,000 - $2,100 per month plus expenses.

The aggregate future minimum annual rentals, excluding applicable
escalation clauses, with respect to all non-cancellable leases are as follows:

For the year ending December 31,

<TABLE>
<CAPTION>
<S> <C>
1996 $100,823
1997 101,220
1998 65,547
--------

$267,590
========
</TABLE>

In July, 1993, the Company entered into an employment agreement with Mr.
Walter Small to become effective on October 1, 1993, when his previous agreement
expired. Mr. Small's agreement provides for an annual salary of $279,293 (based
on his then effective salary) plus increases to reflect increases in the cost of
living index, and an incentive bonus equal to 2% of the Company's pre-tax
profits after the end of any fiscal year in which the Company's pre-tax profits
exceed $1,000,000. Mr. Small's agreement expires on September 30, 2000. Mr.
Small has voluntarily agreed to reduce his compensation, on a temporary basis,
to the rate of $100,000 per year (subject to cost of living index adjustments).
<PAGE> 44
UNIVERSAL FRANCHISE OPPORTUNITIES CORP.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 8 COMMITMENTS AND CONTINGENCIES (Continued)

On April 30, 1993, in connection with the acquisition of the food service
business, SPU entered into an Employment Agreement with Donald J. Ryan, pursuant
to which Mr. Ryan was to act as President, Chief Operating Officer and a
Director of SPU, and a Director of the Company, for a compensation package which
included a salary of $100,000, an incentive bonus of $50,000 for any year in
which pre-tax earnings of the Company exceed $1,500,000, and the granting of
options at a price of $ .875 per share to purchase an aggregate of 250,000
shares of the Company's Class A Common Stock, with options for 50,000 shares
each vesting at the end of each year for five years.

On January 6, 1995, Mr. Ryan was terminated from his employment at SPU.
Shortly thereafter, Mr. Ryan commenced an arbitration proceeding against the
Company and SPU before the American Arbitration Association, claiming that his
employment agreement was breached by virtue of such termination and seeking
damages as a result. The Company asserted that Ryan's employment was terminated
for cause.

In response to the arbitration demand, the Company, SPU and CPU of
Florida, Inc. filed an action in the Florida Circuit Court asserting various
claims against Donald Ryan, and seeking to stay the arbitration proceedings
filed by Ryan. Ryan, in turn, moved to compel arbitration and stay the court
proceeding. The Florida Circuit Court entered an Order staying its proceedings
and requiring arbitration to proceed. In the arbitration proceeding, the Company
and SPU denied liability to Ryan for his termination from employment and the
Company, SPU and CPU of Florida, Inc. asserted counterclaims against Ryan for
damages. In December, 1995, the Arbitrator (a) upheld the termination by the
Company of Ryan's employment for cause under the employment agreement, (b)
denied the Company's counterclaim, and (c) awarded $5,150 to Ryan for damages
for not receiving 30 days' notice prior to termination. Pursuant to stipulation
of the parties, the Arbitrator retained jurisdiction to enter a Final Order
based on his determination of entitlement to and amount of attorneys' fees and
costs.

On December 29, 1995, the Arbitrator entered his Final Award wherein he
awarded the Company and SPU $92,000 for attorneys' fees and costs as the
prevailing party.

The Company and SPU have filed with the Florida Circuit Court a motion to
confirm the Arbitration Award and to enter judgment against Ryan, and a motion
to lift the stay of the litigation. The hearing on the pending motions is due to
take place in March, 1996. Until the Court rules on the Company's and SPU's
motions to confirm, and the time period expires for Ryan to file a motion to
vacate the Arbitrator's Award, an unfavorable outcome is still possible. The
range of any potential loss is approximately $750,000 - $850,000.

On January 4, 1995, CPU of Florida, Inc. filed suit against Gourmet
Carts, Inc. claiming that Gourmet Carts defaulted under a note and security
agreement with the Company. Although the Company sought to recover possession of
collateral, which consisted of several pizza ovens, such motion was denied.
<PAGE> 45
UNIVERSAL FRANCHISE OPPORTUNITIES CORP.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 8 COMMITMENTS AND CONTINGENCIES (Continued)

On January 13, 1995, Gourmet Carts, Inc. and the inventors filed suit in
Florida Circuit Court against the Company, CPU of Florida, Inc., SPU and Walter
Small seeking declaratory relief regarding the parties' rights and obligations
under the Gourmet Carts, Inc. stockholders agreement and under the security
agreement with respect to which the Company alleges Gourmet Carts, Inc. is in
default. Gourmet Carts alleged that the Company failed to cooperate in carrying
out the intentions of the stockholders agreement, raised issues concerning the
Company's right to appoint a substitute designee director, and also alleged that
the Company unlawfully took possession of two of Gourmet Carts, Inc.'s ovens.
The Company disputed all of the material allegations made by the plaintiffs. On
March 10, 1995, the Company, SPU and CPU of Florida, Inc. commenced an action in
the same venue against Gourmet Carts, Inc., Donald Ryan and the inventors of the
oven for damages and declaratory and injunctive relief claiming breach of
fiduciary duty, conversion, breach of contract and tortious interference with
contract. The two proceedings were consolidated. On February 14, 1996 the
Florida Circuit Court issued a motion, notice and order of dismissal of the
consolidated cases, without prejudice, for lack of prosecution unless good cause
can be shown for continuance.

In August, 1992, a purported stockholder of the Company filed in the
United States District Court for the Southern District of New York a
stockholder's derivative action on behalf of the Company, naming two of the
Company's directors as defendants and the Company as nominal defendant. Such
action alleged (i) alleged insider trading in Company's stock, (ii) alleged
breach of fiduciary duty in approving and accepting compensation alleged to be
excessive, and (iii) allegedly operating an unregistered investment company. In
addition to seeking unspecified monetary damages on behalf of the Company,
Plaintiff sought the appointment of a trustee or receiver to dispose of the
assets of the Company. On April 30, 1993, the Plaintiff filed a motion to
dismiss the action without prejudice and is waiting court determination as to
whether individual stockholder notification is required.

NOTE 9 - STOCK OPTIONS

On April 30, 1993, in connection with the PFC Acquisition, the Company
entered into a Stock Option Agreement with Donald Ryan, pursuant to which the
Company granted Mr. Ryan options, at a price of $.875 per share to purchase an
aggregate of 250,000 shares of Class A Common Stock, exercisable on a cumulative
basis with regard to 50,000 shares each at the end of each year for five years.
Such options expire on April 30, 2003. See Note 8 regarding the termination of
Mr. Ryan's employment in January, 1995.
<PAGE> 46
UNIVERSAL FRANCHISE OPPORTUNITIES CORP.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 9 - STOCK OPTIONS (Continued)

On October 12, 1993, the Company entered into a Stock Option Agreement
with Mohamad Al-Omari, pursuant to which the Company granted Mr. Al-Omari
options, at a price of $.875 per share, to purchase an aggregate of 100,000
shares of Class A Common Stock, exercisable on a cumulative basis with regard to
20,000 shares each at the end of each year for five years. In 1995, the option
price was reduced to $.45 per share on the 60,000 shares not already vested.
Such options expire on October 12, 2003.

On May 14, 1993, the Board of Directors of the Company adopted the
Universal Franchise Opportunities Corp. Incentive Stock Option Plan (the
"Plan"), effective June 1, 1993. The Plan was approved by the stockholders at
the Company's 1993 annual meeting. The Plan provides for the grant to officers
and key employees of the Company and its subsidiaries of incentive stock options
and non-qualified stock options for the purchase of Class A Common Stock. Two
hundred thousand shares of Class A Common Stock are reserved for issuance upon
exercise of options granted under the Plan. If an option terminates for any
reason without being exercised, then the shares represented by such option will
be available for the further grant of options. Generally, all options are
exercisable, commencing one year after the respective dates of grant, to the
extent of a cumulative 25% of the shares subject to a particular option during
each of the next four years, provided that no option may be exercised prior to
six months from the date of grant thereof. The option price for each option
granted under the Plan may not be less than 100% of the fair market value of the
stock when the option is granted. For purposes of the Plan, the fair market
value of the shares of Class A Common Stock on any date is generally the mean
between the closing bid and asked prices of the shares as quoted on NASDAQ on
such date (or the average, on such date, of the high and low sales prices of
such shares in the principal market in which such shares are traded, if they are
not then quoted on NASDAQ). No options have been granted under the plan.

No options have been exercised.

NOTE 10 - EARNINGS PER SHARE

No common stock equivalents were outstanding for purposes of calculating
primary and fully diluted earnings per share for the years ended December 31,
1995 and 1994. All calculations of primary and fully diluted earnings per share
were anti-dilutive.
<PAGE> 47
EXHIBIT INDEX

11 Schedule of Compilation of Net Income Per Share for Years Ending
December 31, 1994 and 1995.

27 Financial Data Schedule

<PAGE> 1
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES

SCHEDULE OF COMPUTATION OF NET INCOME PER SHARE

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1994 1995
---- ----
<S> <C> <C>
PRIMARY

Income (loss) from continuing operations......................... $(2,074,333) (590,621)

Income (loss) from discontinued operations....................... (56,163) (241,499)
----------- ----------
Net income (loss)................................................ $(2,130,496) (1,132,120)
=========== ==========

Weighted average number of common shares outstanding
during year..................................................... 2,812,980 2,812,980

Add: -- Common equivalent shares
(Determined using the "treasury stock" method) representing
shares issuable upon exercise of employee stock options......... N/A N/A
----------- ----------
Weighted average number of shares used in calculation of
income per share............................................. 2,812,980 2,812,980
----------- ----------
Per share of common stock

Income (loss) from continuing operations....................... $(0.74) $(0.32)

Income (loss) from discontinued operations..................... $(0.02) $(0.08)
----------- ----------
Income (loss) per common share................................. $(0.76) $(0.40)
=========== ==========
</TABLE>

As indicated in note 10 to financial statements, no common stock equivalents
were outstanding for purposes of calculating primary and fully diluted earnings
per share for the years ending December 31, 1995 and 1994. All calculations of
primary and fully diluted earnings per share were anti-dilutive.

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 992,189
<SECURITIES> 994,558
<RECEIVABLES> 50,492
<ALLOWANCES> 0
<INVENTORY> 8,477
<CURRENT-ASSETS> 2,100,800
<PP&E> 232,743
<DEPRECIATION> 108,295
<TOTAL-ASSETS> 3,258,375
<CURRENT-LIABILITIES> 158,379
<BONDS> 0
0
0
<COMMON> 70,324
<OTHER-SE> 3,356,135
<TOTAL-LIABILITY-AND-EQUITY> 3,258,375
<SALES> 365,337
<TOTAL-REVENUES> 459,391
<CGS> 426,730
<TOTAL-COSTS> 1,498,550
<OTHER-EXPENSES> 42,890
<LOSS-PROVISION> 15,399
<INTEREST-EXPENSE> 5,736
<INCOME-PRETAX> (921,492)
<INCOME-TAX> (30,871)
<INCOME-CONTINUING> (890,621)
<DISCONTINUED> (241,499)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,132,120)
<EPS-PRIMARY> (0.40)
<EPS-DILUTED> (0.40)

</TABLE>