MIKES ORIGINAL INC, 424B2, 1997-08-06

MIKES ORIGINAL INC
424B2, 1997-08-06
ICE CREAM & FROZEN DESSERTS

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<PAGE> 1
As Filed Pursuant to Rule 424(b)(2)
Registration No. 333-21575

PROSPECTUS

MIKE'S ORIGINAL, INC.
700,000 UNITS

Mike's Original, Inc. (the "Company"), a Delaware corporation, is offering
700,000 units (the "Units"). Each Unit consists of one share of common stock
(the "Common Stock"), $.001 par value, and two Redeemable Common Stock Class A
Purchase Warrants (the "Warrants" or "Class A Warrants"). The Common Stock and
the Class A Warrants comprising each Unit will not trade separately from the
Unit until the earlier of ninety (90) days from the date of this Prospectus or
the determination by Millennium Securities Corp. ("Millennium"), in its sole
discretion, to permit such separate trading. At the time such separate trading
is permitted, the Units may be delisted from separate trading on the OTC
Bulletin Board. See "Description of Securities."

The Class A Warrants shall be exercisable commencing on the date of this
Prospectus. Each Class A Warrant entitles the holder to purchase one share of
Common Stock, at $5.00 per share, during the three year period commencing on the
date of this Prospectus. See "Description of Securities." The Warrants are
redeemable by the Company, for $.01 per Warrant, on not less than thirty (30)
nor more than sixty (60) days' written notice if the average closing bid price
per share of Common Stock is at least $10.00 per share during a period of twenty
(20) consecutive trading days ending not earlier than three (3) days on the date
the Warrants are called for redemption. Any redemption of the Warrants during
the one year period commencing on the date of this Prospectus shall require the
consent of Millennium. See "Description of Securities."

Prior to this offering, there has been no public market for the Units,
Common Stock or Warrants. The price of the Units, Common Stock and exercise
price of the Warrants have been determined by negotiations between the Company
and IAR Securities Corp. (the "Representative"), as representative of the
underwriters (the "Underwriters"). For additional information regarding the
factors considered in determining the initial public offering prices, see
"Underwriting."

The Company has applied for listing its Units, Common Stock and Warrants on
the OTC Bulletin Board. There can be no assurance that an active trading market
will develop in these securities. See "Risk Factors."

The registration statement of which this Prospectus forms a part also covers
the offering of an aggregate of 461,250 shares of Common Stock (the "Second
Private Placement Shares") owned by certain private placement investors
(collectively referred to as the "Second Private Placement Lenders"), and an
aggregate of 399,917 shares of Common Stock which are owned by other selling
securityholders (the "Investors", and together with the Second Private Placement
Lenders the "Selling Securityholders"). See "Selling Securityholders." The
shares of Common Stock owned by certain of the Selling Securityholders and
registered hereunder may not be sold or transferred for twenty-four (24) months
from the date of this Prospectus, subject to earlier release at the sole
discretion of the Millennium. Pursuant to Rule 415 of the Securities Act of
1933, as amended, the shares of Common Stock owned by the Selling
Securityholders may be offered on a continuing or delayed basis in the future.
See "Selling Securityholders" and "Description of Securities."
------------------------

AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK AND IMMEDIATE SUBSTANTIAL DILUTION IN THE SECURITIES OFFERED HEREBY. SEE
"RISK FACTORS" ON PAGE 8 AND "DILUTION" ON PAGE 15.
------------------------

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

<TABLE>
<CAPTION>
=========================================================================================================
UNDERWRITING DISCOUNTS AND
PRICE TO PUBLIC COMMISSIONS(1) PROCEEDS TO COMPANY(2)
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Per Unit................... $6.20 $.62 $5.58
- ---------------------------------------------------------------------------------------------------------
Total...................... $4,340,000 $434,000 $3,906,000
=========================================================================================================
</TABLE>

(1) Does not include additional compensation to be received by the
Representative in the form of (a) a non-accountable expense allowance of
three percent of the gross proceeds of this offering ($130,200) and (b) a
security, purchasable at a nominal price, giving it the right to acquire
70,000 Units at $8.06 per Unit (the "Representative's Purchase Option"). In
addition, the Company has agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended (the "Act"). See "Underwriting."

(2) Before deducting other offering expenses payable by the Company estimated at
$430,000, including the Representative's non-accountable expense allowance
in the amount of $130,200. See "Use of Proceeds" and "Underwriting."

The securities are offered, subject to prior sale, when, as and if accepted
by the Representative named herein and subject to approval of certain legal
matters by counsel for the Representative. It is expected that the delivery of
the certificates representing Common Stock and Class A Warrants will be made on
or about August 6, 1997 at the offices of IAR Securities Corp.

IAR SECURITIES CORP. MILLENNIUM SECURITIES CORP.

The date of this Prospectus is July 31, 1997
<PAGE> 2

[PHOTOGRAPHS OF THE COMPANY'S PRODUCTS, PACKAGING AND ADVERTISING]

2
<PAGE> 3

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE EFFECT THE PRICE OF THE UNITS, COMMON
STOCK AND/OR THE CLASS A WARRANTS, INCLUDING STABILIZING TRANSACTIONS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

The Company holds the registered trademarks and service marks under the
names "Mike's Original(R)", "GRAMWICH(R)", and "Graham Cracker Delight(R)". The
Company has common law trademarks for "Strawberry Fantasy(TM)" and "Chocolate
Tidbits(TM)". All trademarks and service marks appearing herein that do not
relate to the Company's products are the property of their respective holders.

The Company intends to furnish its shareholders and holders of Class A
Warrants with annual reports containing audited financial statements, examined
by an independent public accounting firm, and such interim reports as it may
determine to furnish or as may be required by law.

3
<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Unless otherwise indicated, the information in
this Prospectus does not give effect to the exercise of any other options,
warrants or other convertible securities. All references herein to the Company
include its predecessor unless the context otherwise requires. Except where
otherwise indicated, this Prospectus gives effect to the .153846-for-1 reverse
stock split of the Common Stock effective in June 1996 and the .667-for-1
reverse stock split of the Common Stock effective in February 1997. Except for
historical information contained in this Prospectus, the matters discussed are
forward looking statements that involve risks and uncertainties. Among the
factors that could cause actual results to differ materially are the following:
the effect of business and economic conditions; the impact of competitive
products and pricing; capacity and supply constraints or difficulties; product
development, commercialization or technological difficulties; and the regulatory
and trade environment.

THE COMPANY

Mike's Original, Inc. (the "Company") markets, sells and distributes Mike's
Original(R) Cheesecake Ice Cream, an innovative all natural blend of
super-premium ice cream with cheesecake ingredients. This product line is
offered in a variety of flavors mainly to supermarkets and grocery stores and
also, to a lesser extent, to convenience stores, food service outlets and
warehouse clubs. The Company's products are presently sold in approximately
fourteen (14) states, including New York, California, Pennsylvania and New
Jersey, with sales generally concentrated on the East and West coasts of the
United States. The Company believes, based on an internal study, that it
incentivizes retailers to continue purchasing its products through a pricing
strategy designed to provide retailers with a higher retail profit per linear
foot as compared to other competitive products based on the suggested retail
price.

In October 1995, the Company entered into an agreement with the Kraft Pizza
Company ("Kraft-Pizza"), formerly Tombstone Pizza Corporation, a division of
Philip Morris Corporation, for the exclusive distribution of the Company's
products for the Northeastern and Western regions of the United States (the
"Kraft-Pizza Agreement"). The Kraft-Pizza Agreement provides the Company's
products with the opportunity to gain access to the thousands of existing retail
outlets already buying Tombstone Pizza, together with the use of Kraft-Pizza's
commission sales force to oversee the sales and in-store presentation of the
Company's products.

In April 1996, the Company entered into an agreement with Kraft Foods, Inc.
("Kraft Military"), also a division of Philip Morris Corporation, to represent
the Company in the sale of its products to military facilities throughout the
world (the "Kraft Military Agreement"). Military contracts exist with DeCA
(Defense Commissary Agency) and sales to the military commenced in the third
quarter of 1996.

Since October 1996, the Company has restructured its management. In this
regard, Michael Rosen has replaced Daniel Kelly as President, Mr. Kelly having
resigned in September 1996. The Company also has hired a Vice
President -- Finance and has entered into an agreement to hire a
Vice-President -- Marketing and Sales on completion of this offering, and has
retained two frozen food and ice cream consultants with a combined fifty years
of experience in the sales and marketing of ice cream. These persons have
redirected the Company's selling efforts to substantially increase sales in the
approximately 3,200 retail outlets selling the Company's products and to expand
market penetration on the East and West coasts into the institutional and food
service segments. By concentrating on existing locations and segments requiring
limited up-front fees, the Company intends to substantially reduce one of the
major costs associated with its past operations. The Company currently has five
(5) employees.

Net sales for the three month period ended March 31, 1997 were $356,000, a
decrease of 34% from the three month period ended March 31, 1996. This decrease
resulted from a build-up of inventory by Kraft-Pizza in 1996 as well as the
Company's severely limited working capital in 1997 which has adversely impacted
its ability to purchase products from its manufacturer to fill customer orders
and has further limited its ability to engage in marketing and advertising
programs to promote additional sales.

4
<PAGE> 5

Net sales for the year ended December 31, 1996 were approximately
$2,392,000, an increase of 3% from the previous nine (9) month period ended
December 31, 1995 and a decrease of 8% from the twelve (12) month period ended
December 31, 1995. The increase as compared to the shorter period was
significantly reduced, and the decrease as compared to the prior twelve (12)
month period was, in each case, because of an initial build-up of inventory by
Kraft-Pizza in the fourth quarter of calendar 1995 which reduced sales to
Kraft-Pizza in 1996, an unusually cool summer in the Northeast during 1996, a
temporary work stoppage at the primary facility which manufactured the Company's
products and the withdrawal by the Company from certain test markets which
proved to be unprofitable. The Company's limited operating resources to date
also has prevented the Company's participation in certain discount promotions
and in-store programs which has caused continuing reduced sales by a reduction
in reorders throughout its distribution network. The proceeds from this offering
should enable the Company to substantially increase sales in its existing retail
outlets through participation in these programs. The Company's products are
currently manufactured by one independent facility located in Buffalo, New York,
which has exclusive East coast manufacturing rights for the Company's products.
Upon completion of this offering, the Company may use additional manufacturing
facilities as well as re-establish its relationships with former manufacturers
of its products on the West coast.

The Company was incorporated in New York in March 1993 and reincorporated
in Delaware in May 1994. It maintains its principal offices at 131 Jericho
Turnpike, Jericho, New York 11753 and its telephone number is (516) 334-8500.

SEE "RISK FACTORS", "MANAGEMENT" AND "CERTAIN TRANSACTIONS" FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN EVALUATING THE
COMPANY AND ITS BUSINESS.

5
<PAGE> 6

THE OFFERING

<TABLE>
<S> <C>
Securities Offered by the Company(1)......... 700,000 Units
Price Per Unit............................... $6.20
Shares of Common Stock Outstanding After
Offering(2)(3)............................. 3,229,929 shares
Use of Proceeds.............................. For repayment of notes issued in a private
placement and other indebtedness, marketing
expenses, and for working capital and
general corporate purposes. See "Use of
Proceeds."
Proposed OTC Bulletin Board Symbols(4)
Units...................................... MIKSU
Common Stock............................... MIKS
Warrants................................... MIKSW
Risk Factors................................. Purchase of Units being offered hereby
involves a significant degree of risk,
including intense competition, rapid
growth, and dependence on key personnel and
major distributors, among others. See "Risk
Factors."
</TABLE>

- ---------------
(1) Does not include (a) 461,250 Second Private Placement Shares offered by
Selling Securityholders, which securities were acquired in connection with a
private placement financing of the Company from June through September 1996
and (b) 399,917 shares of Common Stock owned by the Investors. See "Selling
Securityholders."
(2) Assumes no exercise of: (i) the Class A Warrants offered hereby as part of
the Units; (ii) the Representative's Purchase Option to purchase up to
70,000 Units; (iii) the Class A Warrants purchasable by the Representative
upon exercise of the Representative's Purchase Option; (iv) outstanding
options under the Company's 1995 Long Term Incentive Plan; (v) outstanding
options under the Company's 1996 Non-Qualified Stock Option Plan; and (vi)
outstanding warrants in connection with interim loans. Gives effect to
conversion of debt and accrued interest into an aggregate of 320,288 shares
of Common Stock, which occurred in April, May and June 1997 and the issuance
of 280,000 shares of Common Stock in April and May 1997. See "Description of
Securities", "Underwriting" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
(3) See "Dilution."
(4) Although the Company's Units, Common Stock and Class A Warrants have been
approved for listing on the OTC Bulletin Board, there can be no assurance
that the Company will be able to continue to meet the requirements for
continued quotation or that a public trading market will develop or be
sustained. See "Risk Factors -- Absence of Public Market; Negotiated
Offering Price."

(5) The Common Stock and the Class A Warrants comprising each Unit will not
trade separately from the Unit until the earlier of 90 days from the date of
this Prospectus or the determination by Millennium, in its sole discretion,
to permit such separate trading. At the time such separate trading is
permitted, the Units may be delisted from separate trading on the OTC
Bulletin Board.

6
<PAGE> 7

SUMMARY FINANCIAL INFORMATION

The following summary financial information concerning the Company has been
derived from the financial statements included elsewhere in this Prospectus and
should be read in conjunction with such financial statements and the notes
thereto. The financial information as of and for the periods ended December 31,
1996 and 1995 and March 31, 1995 has been derived from audited financial
statements. The financial information as of March 31, 1997 and the three months
ended March 31, 1997 and 1996 has been derived from information prepared by the
Company. See "Financial Statements."

BALANCE SHEET DATA:

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, DECEMBER 31, MARCH 31,
1997 1996 1995 1995
----------- ------------ ------------ ---------
<S> <C> <C> <C> <C>
Total assets............................... $ 620,032 $ 443,232 $ 400,014 $ 555,132
Current liabilities........................ 3,360,826 2,897,727 1,901,644 704,978
Long-term liabilities net of current
portion(1)............................... 961,394 541,916 255,722 288,333
Stockholders' deficit...................... (3,702,188) (2,996,411) (1,757,352) (438,179)
</TABLE>

STATEMENT OF OPERATIONS DATA:

<TABLE>
<CAPTION>
FISCAL
THREE MONTHS ENDED FISCAL YEAR NINE MONTHS YEAR
--------------------------- ENDED ENDED ENDED
MARCH 31, MARCH 31, DECEMBER 31, DECEMBER 31, MARCH 31,
1997 1996 1996 1995 1995
----------- ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Net sales.................... $ 356,314 $ 543,174 $ 2,392,258 $ 2,312,144 $1,086,106
Net loss..................... (1,485,217)(2) (516,974) (4,050,547)(3) (1,614,858) (719,380)
Loss per Common Share(4)..... $(0.54) $(0.23) $(1.65) $(0.74) $(0.43)
Weighted Average Common
Shares Outstanding(4)...... 2,774,113 2,231,298 2,461,244 2,180,536 1,654,908
</TABLE>

- ---------------
(1) Includes long term portion of notes to related parties with the related
accrued interest, capital lease obligations and certain expense accruals not
currently due.
(2) Includes approximately $1,004,000 of non-cash items, $225,000 of which is
attributable to the value of issuances of stock for professional services
rendered, and $779,000 of which is attributable to the value of additional
stock issuable on conversion of certain outstanding indebtedness.
(3) Includes approximately $1,400,000 of non-cash compensation attributable to
the issuances of stock for professional services rendered to the Company and
consulting fees to related parties attributable to stock options and
contractual obligations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
(4) As adjusted to give effect to a .153846-for-1 reverse stock split effected
in June 1996 and a .667-for-1 reverse stock split effected in February 1997.

7
<PAGE> 8

RISK FACTORS

The securities offered hereby are speculative and involve a high degree of
risk. Only those persons able to lose their entire investment should purchase
these securities. Prospective investors, prior to making an investment decision,
should carefully read this prospectus and consider, along with other matters
referred to herein, the following risk factors:

Substantial Historical Operating Losses; No Assurance of
Profitability. The Company has been incurring losses from operations since its
inception in 1993 and at March 31, 1997 had an accumulated deficit,
stockholders' equity deficit and working capital deficit of $8,124,220,
$3,702,188 and $3,064,976, respectively. The Company also will continue to have
a deficit in stockholders' equity after this offering. A significant portion of
the Company's losses were incurred during the fiscal year ended December 31,
1996 as a result of intense marketing by the Company, including payment for
introductory programs to supermarket and other food chain retailers incurred in
connection with entering new markets and maintaining existing markets of
approximately $622,000, and product advertising, promotion and marketing
expenses aggregating approximately $1,526,000. Losses have continued through the
three months ended March 31, 1997 primarily because of the Company's lack of
working capital which has adversely impacted its ability to purchase products
from its manufacturer to fill customer orders and the impact of higher product
costs and sales to certain retailers at reduced prices. Although the Company
believes that its business expansion will be successful, and that the Company
will become profitable, no assurance can be given in this regard. See
"Business."

Going Concern Issues in Independent Auditor's Report. As a result of the
Company incurring continuing losses since inception, its deficiency in working
capital at December 31, 1996 and other factors, the Company's independent
certified public accountants have included an explanatory paragraph in their
report on the Company's financial statements, regarding having substantial doubt
about the Company's ability to continue as a going concern. Management's plans
in this regard are described in Note B of Notes to Financial Statements.

Limited Operating History. The Company has a limited operating history.
The Company is subject to all the general risks inherent in, and the problems,
expenses, difficulties, complications and delays frequently encountered in
connection with, establishing any new business and operations. The Company is
currently operating with inadequate working capital which, among other things,
has impaired its selling efforts, and is substantially dependent on the proceeds
of this offering to maintain operations. There is still no assurance that the
Company, even with such funds, will successfully maintain operations at a level
sufficient for an investor to obtain a return on the Units, Common Stock or
Class A Warrants.

Dependence on Kraft-Pizza Agreement. While the Company delivers products
through certain regional distributors in the Midwest and elsewhere, the major
portion of the Company's revenues are derived from the Kraft-Pizza Agreement.
Kraft-Pizza accounted for approximately 79% of the Company's sales for the year
ended December 31, 1996 and approximately 76% for the three months ended March
31, 1997. The Kraft-Pizza Agreement is terminable by either party on sixty (60)
days' prior written notice. If the Kraft-Pizza Agreement is terminated the
Company may be unable to retain other comparable distributors willing to
distribute ice cream in the exclusive areas, and the operations of the Company
may be adversely affected. While the Company believes that the price at which
its ice cream is sold to Kraft-Pizza is competitive with the prices generally
paid by distributors for superpremium ice cream in the areas of distribution, it
cannot predict whether it will be able to secure and maintain alternative
satisfactory distribution in the marketplace. See "Business -- Distribution and
Marketing."

Security Interest by a Former Manufacturer in the Company's Assets. The
Company is presently indebted to one of its former manufacturers in the sum of
approximately $931,825. Pursuant to agreements, as amended, with this
manufacturer, $710,000 of this indebtedness is collateralized by all of the
assets of the Company. Approximately $595,000 of this indebtedness is payable
from the proceeds of this offering. Approximately $135,000 is due in December
1997, and the balance is payable in December 1998. Without this offering, it is
unlikely that cash generated from operations will be sufficient to fully repay
this indebtedness. If this debt is not paid, this secured party could foreclose
on all of the assets of the Company which would materially adversely affect the
Company's business plans and financial condition. See Note H of Notes to the
Financial Statements and "Use of Proceeds."

8
<PAGE> 9

Substantial Introductory Program Expenses Required to Enter New, and
Maintain Existing, Markets. The Company has been required to incur substantial
promotional and advertising expenses to gain access to shelf space to enter new
markets, sell to new retail stores and maintain existing stores or markets.
While the Company believes, based on an internal study, that its products
provide retailers with a substantial profit per linear foot as compared to its
competitors' products, there is no assurance that even after incurring these
expenses, retail stores will continue to sell the Company's products.

Dependence on Single Ice Cream Manufacturer. The Company's products are
manufactured by one independent United States Food and Drug Administration
("FDA") approved facility located in Buffalo, New York, under an exclusive
manufacturing agreement through March 20, 1999 for distribution East of the
Mississippi River. Two facilities on the West coast have recently suspended
manufacturing the Company's products due to the financial position of the
Company; however, each such facility has informed the Company that it will
reconsider manufacturing the Company's products upon completion of this offering
and payment by the Company of all amounts owing to such manufacturer. Upon
completion of this offering, the Company may use additional facilities as well
as re-establish its relationships with former manufacturers located on the West
coast. See "Use of Proceeds." While the Company believes that other
manufacturers are available, the Company entered into an exclusive agreement
for, among other reasons, the fact that changing to a new facility would result
in manufacturing delays which could temporarily impair the Company's ability to
deliver products to its customers, and extended delivery delays could
substantially impair the Company's available shelf space in certain retail
establishments. See "Business -- Distribution and Marketing."

Possible Need for Additional Financing. The Company believes that the
proceeds of this offering will enable it to maintain its operations and working
capital requirements for at least the next twelve (12) months, without taking
into account any internally generated funds from operations. However, the
Company may require additional funds thereafter to maintain or expand its
operations. Adequate funds for this purpose on terms favorable to the Company,
whether through equity financing, debt financing, or other sources, may not be
available when needed. The Company's inability to obtain adequate financing
could have a material adverse effect on the Company. Furthermore, the Company
has granted a security interest on its assets to a third party, which could
adversely impact its ability to so finance its operations.

No Additional Credit Facility. The Company has no additional credit
facility or other access to debt financing. Accordingly, the Company's business
could be materially adversely affected in the event that it has a need for funds
that it may not be able to obtain through a debt or equity financing.

Uncertainties Regarding Marketing of the Company's Products. The Company
intends to market its cheesecake ice cream nationally and internationally. There
is no assurance that the Company's products will continue to be accepted by
consumers. Further, there is no assurance that the U.S. market will provide
sufficient revenue and earnings to permit on-going operations or that the
Company will be able to successfully penetrate existing non-U.S. markets for
these products.

Competition. The super-premium ice cream market is highly competitive and
the Company faces substantial competition in connection with the marketing and
sales of its products. Among its competitors are Haagen-Dazs, Inc.,
("Haagen-Dazs") owned by The Pillsbury Company, Ben & Jerry's Homemade, Inc.
("Ben & Jerry's") and other numerous regional ice cream companies. Many of these
competitors are well established and have substantially greater financial and
other resources than the Company. Additionally, Haagen-Dazs and Ben & Jerry's
manufacture their own ice cream. In the ice cream novelty segment, the Company
competes with several well-known brands including Haagen-Dazs and Dove Bars(R),
manufactured by a division of Mars, Inc.

Achieving wide distribution in the ice cream business is difficult due to
the substantial expenses of a national marketing program and the limitations on
available space in the freezer compartments of supermarkets and other retail
customers. The Company's products also may be considered to be in competition
with all ice cream and other frozen desserts for discretionary food dollars. The
ability of the Company to increase its market share will be dependent upon
several factors, among which are the quality and price of its products,
advertising and the availability of sufficient capital for product expansion.

9
<PAGE> 10

Possible Adverse Impact of Higher Prices for Raw Materials. The primary
raw materials used in the Company's operations are dairy products, including
cream cheese and milk. The Company believes that such products are readily
available from many sources, though the prices thereof may fluctuate. In this
regard, the Company's profit margins were reduced from May 1996 through November
1996 primarily as a result of an increase in the price for dairy products,
although at the end of 1996, these prices dropped significantly. The Company
believes that prices for dairy products are cyclical, and no assurance can be
given that prices for dairy products will not increase. In the event that prices
of raw materials increase and remain high indefinitely and if the Company is
unable to pass such prices on to its customers, the Company's business
operations and financial condition could be materially adversely affected.

Seasonality. The ice cream industry generally experiences its highest
volume during the spring and summer months and the lowest volume in the winter
months. See "Business -- Seasonality."

Product Liability. The Company's business exposes it to potential
liability which is inherent in the marketing and distribution of food products.
The Company currently maintains $2,000,000 of product liability insurance. The
Company also maintains $1,000,000 of general and personal injury insurance per
occurrence and $5,000,000 in the aggregate. If any product liability claim is
made and sustained against the Company and is not covered by insurance, the
Company's business and prospects could be materially adversely affected. See
"Business -- Insurance."

Discretion In Application of Proceeds. Management of the Company has
certain discretion over the use and expenditure of $1,458,314 of the proceeds of
this offering, which represents 41.9% of the gross proceeds received by the
Company from this offering. The Company intends to use the funds raised in this
offering for repayment of indebtedness, promotion of its products, and for
working capital and general corporate purposes. Although the Company does not
contemplate changes in the allocated use of proceeds, to the extent the Company
finds changes are necessary or appropriate in order to address changed
circumstances and/or opportunities, management may find it necessary to adjust
the use of the Company's capital, including the proceeds of this offering. As a
result of the foregoing, the success of the Company may be substantially
dependent upon the discretion and judgment of the management of the Company with
respect to the application and allocation of the net proceeds hereof. See "Use
of Proceeds."

Control by Present Stockholders. As of the date of this Prospectus, the
current officers and directors (the "Management Stockholders") and 5%
stockholders own 65.1% of the outstanding shares of Common Stock and, after
completion of this offering, will own 52.5% of the outstanding shares of Common
Stock. Accordingly, although there are no relationships or agreements between
the non-officer 5% stockholders and the officers and directors of the Company,
these stockholders will be able to significantly influence the election of the
Company's directors, any increase in the Company's authorized and outstanding
capital stock and the other policies of the Company. See "Principal
Stockholders."

Dependence on Key Personnel. The Company's business expansion plans are
dependent in part upon the abilities of Michael Rosen, its Chairman, President
and Chief Executive Officer. Although Mr. Rosen has entered into an employment
agreement with the Company, there can be no assurance that he will remain in the
employ of or continue to provide services to the Company. The loss of his
services could have an adverse effect on the Company. The Company maintains a
$1,000,000 life insurance policy with respect to the life of Michael Rosen, the
proceeds of which are payable to the Company. See "Management -- Employment
Agreements."

Current Litigation against the Company. The Company is currently involved
in one legal matter with an aggregate potential liability of approximately
$60,000. If decisions unfavorable to the Company result from this matter, the
Company's working capital will be negatively impacted by the payment of this
judgment. The Company has recently negotiated a settlement with J.W. Messner,
Inc. on a $125,000 claim, $40,000 of which is payable from the proceeds of this
offering, $43,000 is due June 1998, and $43,000 is due December 1998. See
"Business -- Legal Matters."

Lack of Independent Directors; No Audit and Compensation Committees. Two
of the four current members of the Company's Board of Directors, Michael Rosen
and Frederic D. Heller are executive officers

10
<PAGE> 11

of the Company. In addition, another director, Martin Pilossoph, is the
father-in-law of Michael Rosen. Upon completion of this offering, Myron Levy, a
person who will be considered a non-employee director, has agreed to serve as a
member of the Board of Directors. Thus, upon completion of this offering, two of
the five directors of the Company will be non-employee directors who have no
family relationship with any other directors. Accordingly, although there are no
agreements or understandings to do so, Messrs. Rosen, Heller and Pilossoph, if
voting as a group, will constitute a majority of the Board of Directors, and
thus will be able to exert substantial influence over the Company's policies. In
addition, the Company has no standing audit or compensation committee. Thus, the
Board of Directors performs the functions normally delegated to such committees.
In this regard, the Board of Directors has chosen, and in the future will
choose, the Company's independent auditors. Also, the Board of Directors has
decided in the past, and will continue in the future, to decide compensation
matters such as salaries, bonuses and stock option grants which are awarded to
the Company's employees. See "Management."

Absence of Public Market; Negotiated Offering Price. Prior to the
offering, there has been no market for the Units, Common Stock or Class A
Warrants. Although the Company has applied for listing its Units, Common Stock
and Class A Warrants for quotation on the OTC Bulletin Board, there can be no
assurance that an active market will develop for the Units, Common Stock or the
Class A Warrants or, if developed, that it can be maintained. The Common Stock
and the Class A Warrants comprising each Unit will not trade separately from the
Unit until the earlier of 90 days from the date of this Prospectus or the
determination by Millennium in its sole discretion, to permit such trading. At
the time such separate trading is permitted, the Units may be delisted from
separate trading on the OTC Bulletin Board. The initial public offering price of
the Units and Common Stock and the exercise price of the Class A Warrants have
been established by negotiations between the Company and the Representative and
will not necessarily bear any relationship to the Company's book value, assets,
past operating results, financial condition, or other established criteria of
value. See "Underwriting."

Dependence of Warrant Holders on Maintenance of Current Registration
Statement; Possible Loss of Value of Warrants. In order for holders of the
Class A Warrants to exercise such warrants there must be a current registration
statement (or an exemption therefrom) in effect with the Securities and Exchange
Commission ("Commission") and with the various state securities authorities in
the States where warrant holders reside. The Company has undertaken to use its
best efforts to keep (and intends to keep) the registration statement effective
with respect to the Class A Warrants for as long as the Class A Warrants remain
exercisable. However, maintenance of an effective registration statement will
subject the Company to substantial continuing expenses for legal and accounting
fees, and there can be no assurance that the Company will be able to maintain a
current registration statement through the period during which the Class A
Warrants remain exercisable. The Class A Warrants may become unexercisable and
deprived of value by the Company's inability to maintain an effective
registration statement (or an exemption therefrom) with respect to the
underlying shares or by the non-qualification of the underlying shares in the
jurisdiction of such holder's residence. See "Description of Securities -- Class
A Warrants."

Potential Adverse Effect of Redemption of Class A Warrants. The Class A
Warrants may be redeemed by the Company at a price of $.01 per warrant, at any
time, on not less than thirty (30) days' nor more than sixty (60) days' prior
written notice provided that the average closing bid price of the Common Stock
for all twenty (20) consecutive trading days ending within three (3) days of the
notice of redemption has equaled or exceeded $10.00 and further provided that
any redemption during the one year period commencing on the date of this
Prospectus shall require the consent of Millennium. Redemption of the Class A
Warrants could force the warrant holders to exercise the warrants at a time when
it may be disadvantageous for the holders to do so or to sell the Class A
Warrants at their then current market price when the holders might otherwise
wish to hold the Class A Warrants for possible appreciation. Any holders who do
not exercise warrants prior to their expiration or redemption, as the case may
be, will forfeit the right to purchase the shares of Common Stock underlying the
Class A Warrants. See "Description of Securities -- Class A Warrants."

Substantial and Immediate Dilution. Purchasers of the Common Stock offered
hereby will incur immediate substantial dilution in the net tangible book value
of approximately $6.14 or 102% per share. The present shareholders of the
Company have acquired their respective equity interests at a cost substantially

11
<PAGE> 12

below the offering price. Accordingly, the public investors will bear a
disproportionate risk of loss per share. See "Dilution."

No Dividends on Common Stock. The Company has never declared or paid any
dividends on its shares of Common Stock. The Company intends to utilize its
earnings, if any, to facilitate the expansion of its business for the
foreseeable future. Accordingly, it has no intention of declaring or paying
dividends on its Common Stock for the foreseeable future. Further, pursuant to a
credit agreement with one of its former manufacturers, the Company is prohibited
from paying dividends until the full repayment of its indebtedness thereunder.
See "Dividend Policy."

Possible Dilutive Effect of the Issuance of Substantial Amounts of
Additional Shares Without Stockholder Approval. After this offering, the
Company will have an aggregate of approximately 13,988,388 shares of Common
Stock authorized but unissued and not reserved for specific purposes including
2,781,683 shares of Common Stock unissued but reserved for issuance pursuant to
(i) exercise of the Class A Warrants, (ii) the Company's Long Term Incentive
Plan, (iii) the Company's 1996 Non-Qualified Stock Option Plan, (iv) exercise of
the Representative's Purchase Option, (v) the exercise of certain warrants to
purchase 122,500 shares of Common Stock, and (vi) the possible issuance of up to
115,850 shares to the Company's former product manufacturers and a product
advertiser. All of such shares may be issued without any action or approval by
the Company's shareholders. Any shares issued would further dilute the
percentage ownership of the Company held by the investors in this offering. The
terms on which the Company could obtain additional capital during the life of
these securities may be adversely affected because of such potential dilution
and because the holders thereof might be expected to convert or exercise them if
the market price of the Common Stock exceeds their conversion or exercise price.
See "Description of Securities", "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Underwriting."

Potential Anti-Takeover Effects of Delaware Law and Certificate of
Incorporation; Possible Issuances of Preferred Stock. Certain provisions of
Delaware law and the Company's Certificate of Incorporation and By-laws could
make more difficult a merger, tender offer or proxy contest involving the
Company, even if such events could be beneficial to the interests of the
stockholders. These provisions include Section 203 of the Delaware General
Corporation Law, the classification of the Company's Board of Directors into
three classes and the requirement that 66 2/3% of the stockholders of the
Company entitled to vote thereon approve certain transactions, including mergers
and sales or transfers of all or substantially all the assets of the Company.
Such provisions could limit the price that certain investors might be willing to
pay in the future for shares of the Company's Common Stock or preferred stock.
In addition, the Company's Certificate of Incorporation allows for the issuance
of up to 500,000 shares of preferred stock by the Board of Directors without
stockholder approval on such terms as the Board may determine. The rights of the
holders of Common Stock and preferred stock will be subject to, and may be
adversely affected by, the rights of the holders of additional or other classes
of preferred stock that may be issued in the future. Moreover, although the
ability to issue other classes of preferred stock may provide flexibility in
connection with possible acquisitions and other corporate purposes, such
issuance may make it more difficult for a third party to acquire, or may
discourage a third party from acquiring, a majority of the voting stock of the
Company. The Company has not issued any shares of preferred stock and has no
current plans to issue any shares of any classes of capital stock other than as
described herein. See "Description of Capital Stock."

Limitations on Personal Liability of Directors. The Company's Certificate
of Incorporation and By-laws contain provisions which reduce the potential
personal liability of directors for certain monetary damages and provide for
indemnity of directors and other persons. The Company is unaware of any pending
or threatened litigation against the Company or its directors that would result
in any liability for which such director would seek indemnification or similar
protection. The Company has entered into Indemnification Agreements with certain
of its officers and directors. The Indemnification Agreements provide for
reimbursement for all direct and indirect costs of any type or nature whatsoever
(including attorneys' fees and related disbursements) actually and reasonably
incurred in connection with either the investigation, defense or appeal of a
proceeding, (as defined) including amounts paid in settlement by or on behalf of
an indemnitee thereunder. See "Description of Securities -- Certain Provisions
of the Certificate of Incorporation."

12
<PAGE> 13

Governmental Regulation. As a marketer and distributor of ice cream, the
Company's products are subject to regulation by the FDA and other government
agencies relating to the safety of its product. While the Company believes that
its marketing and distributing operations comply with all existing applicable
laws and regulations, no assurance can be given that compliance with such laws,
regulations or other restrictions, as well as any new laws or regulations, will
not impose additional costs on the Company which could adversely affect its
financial performance and results of operations. See "Business -- Government
Regulation."

Unspecified Acquisitions. After this offering, the Company will have
approximately $1,458,314 for working capital and general corporate purposes.
Although the Company has no present intention to do so, the Company has the
right to use these funds for possible unspecified acquisitions. Stockholders
will not vote upon any acquisition nor will stockholders have any opportunity to
review the financial status of any potential acquisition. See "Use of Proceeds."

Penny Stock Regulation. The Securities and Exchange Commission (the
"Commission") has adopted rules that regulate broker-dealer practices in
connection with transactions in "penny stocks." Penny stocks generally are
equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the NASDAQ
system, provided that current price and volume information with respect to
transactions in such securities is provided by the exchange or system). The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document prepared by the Commission that provides information about
penny stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with other information. In
addition, the penny stock rules require that prior to a transaction in a penny
stock not otherwise exempt from such rules, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for a stock that becomes subject to the
penny stock rules. If the Company's Units, Common Stock or Warrants becomes
subject to the penny stock rules, investors in this offering may find it more
difficult to sell such securities in the event it becomes otherwise freely
resalable.

13
<PAGE> 14

USE OF PROCEEDS

The net proceeds to the Company from the sale of the Units offered hereby
(after deducting underwriting discounts and estimated offering expenses) are
estimated to be $3,476,000. These proceeds, excluding the exercise price of any
Warrants, are intended to be utilized substantially as follows:

<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
APPLICATION OF PROCEEDS AMOUNT PERCENTAGE
------------------------------------------------------------ ----------- -----------
<S> <C> <C>
Working capital and general corporate purposes(1)........... $ 1,458,314 41.9%
Repayment of Indebtedness(2)................................ $ 2,017,686 58.1%
---------- -----
$ 3,476,000 100.0%
========== =====
</TABLE>

- ---------------
(1) It is presently anticipated that the balance of the proceeds attributable to
working capital will be used to fund current operations through calendar
1997, at which time the Company anticipates being able to generate positive
cash flow from operations. These proceeds can also be used by the Company
for future unspecified acquisitions, even though the Company has no present
intention to make any such acquisition. See "Business" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

(2) Includes the repayment of various promissory notes with interest accrued to
March 31, 1997 and certain accounts payable as follows: (i) $595,795 for
open accounts payable, including payments to present product manufacturer;
(ii) $264,804 to Steven A. Cantor, the Company's largest stockholder
including interest at 8% per annum; (iii) $133,951 to holders of Second
Private Placement Notes including interest at 12% per annum; (iv) $6,772 in
payment of interest on the Convertible Notes; (v) $594,163 to a product
manufacturer including interest at 9.25% per annum; (vi) $140,749 to a
product manufacturer including interest at 10% per annum; (vii) $15,805 to a
product manufacturer including interest at 8% per annum; (viii) $27,939 to a
product advertiser including interest at 10%; (ix) salaries to a former
employee of $12,500 accrued through March 31, 1997; and (x) $25,208 in
payment of a short-term loan received in March 1997; (xi) $150,000 in
payment of three interim loans received in May and June 1997; and (xii)
$50,000 in payment of an interim demand loan received during May 1997. See
"Certain Transactions."

The amounts set forth above, other than for repayment of indebtedness are
estimates. The actual amount expended to finance any category of expenses may be
increased or decreased by the Company's Board of Directors, in its discretion,
if required by the operating experience of the Company or if a reapportionment
or redirection of funds, including acquisitions consistent with the business
strategy of the Company, is deemed to be in the best interest of the Company.
The Company has no specific plans, arrangements, understandings or commitments
with respect to any such acquisition at the present time. See "Risk
Factors -- Discretion in Application of Proceeds."

All proceeds of debt incurred by the Company during the one year period
prior to the date of this Prospectus (approximately $1,189,000), were used for
working capital purposes, including payment of then existing trade payables.
Approximately $683,000 of this indebtedness will be paid from these proceeds.

The net proceeds to the Company from this offering are expected to be
adequate to fund the Company's working capital needs for at least the next
twelve (12) months. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources." Pending
use of the proceeds from this offering as set forth above, the Company may
invest all or a portion of such proceeds in short-term, interest-bearing
securities, U.S. Government securities, money market investments and short-term,
interest-bearing deposits in major banks.

14
<PAGE> 15

DILUTION

As of March 31, 1997, the net negative tangible book value of the Company
was ($4,002,576) or ($2.07) per share of Common Stock. Net negative tangible
book value per share represents the amount the liabilities exceed the amount of
total tangible assets divided by 1,929,641, the number of shares of Common Stock
outstanding on March 31, 1997, (after giving effect to a .153846-for-1 reverse
stock split in June 1996 and a .667-for-1 reverse stock split in February 1997).
See "Capitalization." Thus, as of March 31, 1997, the net negative tangible book
value per share of Common Stock owned by the Company's current stockholders
would have increased by $3,724,207 or $1.93 per share after giving effect to
this offering without any additional investment on their part and the purchasers
of the Units offered hereby would have incurred an immediate dilution of $6.14
per share from the offering price. The following table illustrates this per
share dilution:

<TABLE>
<S> <C> <C>
Public offering price per share of Common Stock offered hereby....... $6.00
Net tangible book value per share before offering.................... (2.07)
Increase per share attributable to new investors................... 1.93
-----
Adjusted net tangible book value per share after this offering....... $(.14)
-----
Dilution per share to new investors(1)............................... $6.14
=====
</TABLE>

The following table summarizes the relative investments of investors
pursuant to this offering and the current stockholders of the Company:

<TABLE>
<CAPTION>
CURRENT PUBLIC
STOCKHOLDERS INVESTORS TOTAL
------------ ---------- ----------
<S> <C> <C> <C>
Number of Shares of Common Stock Purchased..... 1,929,641 700,000 2,629,641
Percentage of Outstanding Common Stock After
Offering..................................... 73.4% 26.6% 100%
Gross Consideration Paid....................... $ 4,232,860 $4,200,000 $8,432,860
Percentage of Consideration Paid............... 50.2% 49.8% 100%
Average Consideration Per Share of Common
Stock(1)..................................... $2.19 $6.00 $3.21
</TABLE>

- ---------------
(1) Assumes that $6.00 of the purchase price of the Units is attributable to the
Common Stock.

(2) Assumes no exercise of (i) the Class A Warrants offered hereby; (ii) the
Representative's Purchase Option to purchase up to 70,000 Units; (iii) the
Class A Warrants purchasable by the Representative upon exercise of the
Representative's Purchase Option; or (iv) any options to purchase shares of
Common Stock granted under the Company's 1995 Incentive Plan or the 1996
Non-Qualified Plan. See "Description of Securities", "Management" and
"Underwriting." Does not give effect to conversion of debt and accrued
interest into an aggregate of 320,288 shares of Common Stock, which occurred
in April, May and June 1997 and the issuance of 280,000 shares of Common
Stock in April and May 1997. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

15
<PAGE> 16

CAPITALIZATION

The following table sets forth the cash and capitalization of the Company
as of March 31, 1997 and the as adjusted capitalization which gives effect to
the consummation of this offering as if it occurred on March 31, 1997. This
table should be read in conjunction with the financial statements and related
notes included elsewhere in this prospectus.

<TABLE>
<CAPTION>
MARCH 31, 1997
------------------------------
ACTUAL AS ADJUSTED(1)
----------- --------------
<S> <C> <C>
Cash and cash equivalents........................................ $ 15,636 1,833,950(5)
Short-term borrowings and current portion of capital lease
obligations
Accounts payable............................................... 862,350 426,515
Accrued Expenses............................................... 740,423 683,686
Convertible notes(2)(3)........................................ 325,000 325,000
Notes payable(2)............................................... 50,000 25,000
Notes payable to related parties............................... 407,500 30,000
Obligations under capital leases............................... 9,861 9,861
Notes payable trade............................................ 932,388 180,787
Line of credit................................................. 22,251 22,251
Accrued interest on notes...................................... 11,053 0
----------- -----------
Total short-term borrowings and current portion of capital
lease obligations........................................... 3,360,826 1,703,140
----------- -----------
Long term notes payable and capital lease obligations
Notes payable to related parties............................ 486,250 486,250
Accrued interest............................................ 61,656 61,656
Notes payable............................................... 413,486 413,486
Obligations under capital leases............................ -- --
----------- -----------
Total long term notes payable and capital lease obligations.... $ 961,392 $ 961,392
----------- -----------
Stockholders' deficit:
Preferred stock, $.01 par value; 500,000 shares authorized, no
shares issued or outstanding (actual and as adjusted)....... -- --
Common stock, $.001 par value; 20,000,000 shares authorized,
1,929,641 shares (actual) and 2,604,641 shares, as
adjusted(2)(3)(4)(6)........................................ 1,929 2,604
Additional paid-in capital....................................... 4,420,103 7,895,430
Accumulated deficit.............................................. (8,124,220) (8,124,220)
----------- -----------
Total stockholders' equity (deficit)........................ $(3,702,188) $ (226,186)
----------- -----------
Total capitalization................................... $ 620,030 $ 2,438,348
=========== ===========
</TABLE>

- ---------------
(1) Adjusted to give effect to the consummation of this offering as if it
occurred on March 31, 1997.

(2) Does not include (i) the conversion of a $100,000 Convertible Note in April
1997 which was converted into 78,431 shares of Common Stock, and (ii) the
conversion of a $25,000 of short-term loan in April 1997, which was
converted into 12,500 shares of Common Stock.

(3) Does not include the conversion during April 1997 of (i) a $225,000
Convertible Note into 200,000 shares of Common Stock and (ii) $32,100 of
notes payable and accrued interest owed as of March 31, 1997 into 16,050
shares of Common Stock.

(4) Adjusted to give effect to a .153846-for-1 reverse stock split effected in
June 1996 and a .667-for-1 reverse stock split effected in February 1997.

(5) Does not include the receipt of $150,000 in short-term loans received in May
and June 1997 which has been included under "Use of Proceeds."

(6) Does not include the issuance in April and May 1997 of (i) 150,000 shares of
Common Stock to Steven A. Cantor as consideration for the termination of his
consulting agreement, (ii) 30,000 shares of Common Stock to the Company's
current product manufacturer in connection with its manufacturing agreement
and (iii) 100,000 shares of Common Stock to the Company's legal counsel.

16
<PAGE> 17

DIVIDEND POLICY

Holders of the Company's Common Stock are entitled to dividends when, as
and if declared by the Board of Directors out of funds legally available
therefor. The Company has never declared or paid any cash dividends and
currently does not intend to pay cash dividends in the foreseeable future on the
shares of Common Stock. Further, pursuant to a credit agreement with one of its
former manufacturers, the Company is prohibited from paying dividends on any of
its capital stock until the indebtedness to such manufacturer is repaid. The
Company intends to retain earnings, if any, to finance the development and
expansion of its business. Payment of future dividends on the Common Stock will
be subject to the discretion of the Board of Directors and will be contingent
upon future earnings, if any, the Company's financial condition, capital
requirements, general business conditions and other factors. Therefore, there
can be no assurance that any dividends on the Common Stock will ever be paid.

17
<PAGE> 18

SELECTED FINANCIAL DATA

The following selected financial information concerning the Company has
been derived from the financial statements included elsewhere in this Prospectus
and should be read in conjunction with such financial statements and the notes
thereto. The financial information as of and for the periods ended December 31,
1996 and 1995 and March 31, 1995 has been derived from audited financial
statements. The financial information as of March 31, 1997 and the three months
ended March 31, 1997 and 1996 has been derived from information prepared by the
Company. See "Financial Statements."

The selected financial data should be read in conjunction with and is
qualified in its entirety by, the Company's financial statements, related notes
and other financial information included elsewhere in this Prospectus.

BALANCE SHEET DATA:

STATEMENT OF OPERATIONS DATA:

<TABLE>
<CAPTION>
THREE MONTHS
ENDED FISCAL YEAR NINE MONTHS FISCAL YEAR
MARCH 31, ENDED ENDED ENDED
------------------------- DECEMBER 31, DECEMBER 31, MARCH 31,
1997 1996 1996 1995 1995
----------- --------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Net sales................... $ 356,314 $ 543,174 $ 2,392,258 $ 2,312,144 $ 1,086,106
Net loss.................... (1,485,217)(2) (516,974) (4,050,547)(3) (1,614,858) (719,380)
Loss per Common Share(4).... $(0.54) $(0.23) $(1.65) $(0.74) $(0.43)
Supplemental net loss per
common share(4)(5)........ $(0.42) -- $(1.27) -- --
Weighted Average Common
Shares Outstanding(4)..... 2,774,113 2,231,298 2,461,244 2,180,536 1,654,908
</TABLE>

18
<PAGE> 19

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the historical
financial statements of the Company included elsewhere in this Prospectus.

RESULTS OF OPERATIONS

The Company has incurred losses from operations since its inception in 1993
and at March 31, 1997 had an accumulated deficit and working capital deficit of
$8,124,220 and $3,064,976, respectively. A significant portion of these amounts
were incurred during the year ended December 31, 1996 as a result of intense
marketing by the Company, including payment of introductory programs in
connection with the entry by the Company into new markets and expansion of
existing markets of approximately $672,000 to supermarket and other food chain
retailers and product advertising, promotion and marketing expenses of
approximately $1,687,000. Losses have continued through the three months ended
March 31, 1997 primarily because of the Company's lack of working capital and
its inability to purchase products from its manufacturer to fill customer orders
and the impact of higher product costs and sales to certain retailers at reduced
prices. The Company will continue to sustain losses at least until the closing
of this offering since its limited working capital without the proceeds of this
offering has adversely impacted its ability to purchase products from its
manufacturer to fill customer orders.

Effective December 31, 1995, the Company changed its fiscal year end from
March 31 to December 31. Consequently, set forth below is a table illustrating
the Company's results of operations for its fiscal year ended December 31, 1996
compared to its nine month "fiscal year" ended December 31, 1995, as well as
compared to the twelve (12) month calendar year ended December 31, 1995, which
twelve (12) month comparison the Company believes more accurately reflects the
trends in, and seasonality of, the Company's business.

PROFIT AND LOSS ANALYSIS

<TABLE>
<CAPTION>
THREE THREE FISCAL NINE TWELVE
MONTHS ENDED MONTHS ENDED YEAR ENDED MONTHS ENDED MONTHS ENDED
MARCH 31, MARCH 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1996 1995 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Sales....................... $ 356,314 $ 543,174 $ 2,392,258 $ 2,312,144 $ 2,593,077
Cost of Sales................... 305,364 380,688 1,439,635 1,312,792 1,498,411
------------ ------------ ------------ ------------ ------------
Gross Profit.................... 50,950 162,486 952,623 999,352 1,094,666
Operating Expenses
Selling and Shipping.......... 249,765 459,367 2,596,500 1,864,890 2,175,619
General and Administrative.... 442,681 203,933 2,193,602 717,315 1,006,182
Research and Development...... 9,720 12,214 70,632 19,529 19,529
------------ ------------ ------------ ------------ ------------
Total Operating Expenses........ 702,166 675,514 4,860,734 2,601,734 3,201,330
------------ ------------ ------------ ------------ ------------
Loss from Operations............ (651,216) (513,028) (3,908,111) (1,602,382) (2,106,664)
Net Interest Expense............ 834,001 3,946 142,436 12,476 30,458
------------ ------------ ------------ ------------ ------------
Net Loss........................ $(1,485,217) $ (516,974) $ (4,050,547) $(1,614,858) $(2,137,122)
============ ============ ============ ============ ============
</TABLE>

19
<PAGE> 20

<TABLE>
<CAPTION>
AS PERCENT OF SALES
------------------------------------------------------------------------
THREE THREE FISCAL NINE TWELVE
MONTHS ENDED MONTHS ENDED YEAR ENDED MONTHS ENDED MONTHS ENDED
MARCH 31, MARCH 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1996 1995 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Sales................................. 100.00% 100.00% 100.00% 100.00% 100.00%
Cost of Sales............................. 85.70% 70.09% 60.18% 56.78% 57.79%
------------ ------- ------- ------ ------
Gross Profit.............................. 14.30% 29.91% 39.82% 43.22% 42.21%
Operating Expenses
Selling and Shipping.................... 70.10% 84.57% 108.54% 80.66% 83.90%
General and Administrative.............. 124.24% 37.54% 91.70% 31.02% 38.80%
Research and Development................ 2.73% 2.25% 2.95% 0.84% 0.75%
------------ ------- ------- ------ ------
Total Operating Expenses.................. 197.06% 124.36% 203.19% 112.52% 123.46%
------------ ------- ------- ------ ------
Loss from Operations...................... (182.76)% (94.45)% (163.36)% (69.30)% (81.24)%
Net Interest Expense...................... 234.06% 0.73% 5.95% 0.54% 1.17%
------------ ------- ------- ------ ------
Net Loss.................................. (416.83)% (95.18)% (169.32)% (69.84)% (82.42)%
============ ======= ======= ====== ======
</TABLE>

20
<PAGE> 21

Three Months Ended March 31, 1997 Compared to Three Months Ended March 31,
1996

Net sales for the three months ended March 31, 1997 were approximately
$356,000, a decrease of 34.4% from approximately $543,000 for the three months
ended March 31, 1996. This decrease resulted from the initial fill of product
into the distributors inventory pipeline which took place early in 1996 as well
as the Company's limited working capital in 1997 which adversely impacted its
ability to purchase product from its manufacturer to fill existing customer
orders and limited its ability to engage in marketing and advertising programs
to promote additional sales. The proceeds from this offering should enable the
Company to substantially increase sales in its existing retail outlets through
advertising, marketing and promoting the product to its customer base.

Gross profit for the three months ended March 31, 1997 declined 69% to
$51,000 from $162,000 for the three months ended March 31, 1996. Gross profit as
a percentage of sales for the three months ended March 31, 1997 declined to 14%
of net sales compared to 30% for the three months ended March 31, 1996. The
decrease in gross profit dollars is primarily attributable to the decline in net
sales and gross profit percentage. Gross profit as a percentage of net sales
declined partly as a result of higher raw material costs associated with the
manufacture of the Company's ice cream products and reduced selling prices to
certain area retailers. The Company expects this trend to reverse itself due to
a recent decline in the cost of raw materials as well as the Company
concentrating its efforts on sales to retailers at higher gross profit margins.

General and administrative expenses ("G&A") for the three months ended
March 31, 1997 increased 117% to $443,000 from $204,000 for the three months
ended March 31, 1996. This increase was principally from professional fees
incurred during the three months ended March 31, 1997 in the form of Common
Stock to be issued to legal counsel for services rendered to the Company which,
although restricted, has been valued by the Company at $225,000 based upon a 25%
discount from the public offering price. The Company continues to incur
significant general and administrative expenses in support of its efforts to
introduce and market its products in the retail marketplace and to gain market
share.

Selling and shipping expenses for the three months ended March 31, 1997
decreased 45% to $250,000 from $459,000 for the three months ended March 31,
1996. The decrease was primarily from decreases in retail introductory programs
from $235,000 to $50,000 and store and media price reduction coupons and media
events from $151,000 to $84,000 offset by increases in advertising programs with
store chains from $11,000 to $66,000. The Company continues to incur significant
selling and shipping expenses in support of its efforts to introduce and market
its products in the retail marketplace and to gain market share.

Interest expense, net of interest income, for the three months ended March
31, 1997 increased to $834,000 from $4,000 for the three months ended March 31,
1996. The increase was primarily attributable to non-cash charges of $779,000 in
the three months ended March 31, 1997 for the convertibility of short term loans
and notes to various vendors into the Company's Common Stock and the issuance of
Common Stock to a vendor and a lender in connection with the obligations to them
as well as additional borrowings from related parties subsequent to March 31,
1996 and the conversion of open accounts payable into interest-bearing notes.

Net loss for the three months ended March 31, 1997 increased to $1,485,000
as compared to a net loss of $517,000 for the three months ended March 31, 1996.
The net loss is attributed to the aforementioned increases in general and
administrative expenses, higher interest expense as well as lower net sales and
gross profits offset by the decrease in selling and shipping expenses.

21
<PAGE> 22

Fiscal Year Ended December 31, 1996 Compared to Nine Months Ended December 31,
1995.

Net sales for the year ended December 31, 1996 were approximately
$2,392,000, an increase of 3% from the nine month period ended December 31,
1995. This increase was significantly reduced due to an initial build-up of
inventory by Kraft-Pizza in the fourth quarter of calendar 1995 which reduced
sales to Kraft-Pizza in 1996, an unusually cool summer in the Northeast during
calendar 1996, a temporary work stoppage at one of the facilities which
manufactures the Company's products during calendar 1996 and the withdrawal by
the Company from certain test markets which proved to be unprofitable. The
Company's limited operating resources to date also has prevented the Company's
participation in certain discount promotions and in-store programs which has
caused a reduction in reorders throughout its distribution network. The proceeds
from this offering should enable the Company to substantially increase sales in
its existing retail outlets through participation in these programs. The
Company's products are currently manufactured by one independent facility.

Gross profit for the year ended December 31, 1996 declined 5% to $953,000
from $999,000 for the nine months ended December 31, 1995. Gross profit as a
percentage of net sales for the year ended December 31, 1996 declined to 40% of
net sales compared to 43% for the year ended December 31, 1995. The decrease in
gross profit dollars was primarily attributable to the decline in net sales and
gross profit percentage. Gross profit as a percentage of net sales declined as a
result of higher dairy raw material costs associated with the manufacture of the
Company's ice cream products. However, as of the end of 1996, the prices of
these raw materials have dropped significantly.

General and administrative expenses ("G&A") for the year ended December 31,
1996 increased 206% from $717,000 for the nine months ended December 31, 1995 to
$2,193,000. The increase was primarily as a result of the following: increases
in salaries and payroll taxes from $289,000 to $361,000, increases in
professional fees from $93,000 to $457,000, increases in consulting fees from
$140,000 to $1,134,000, and increases in rent, telephone and other
administrative expenses from $195,000 to $241,000. $364,000 of the professional
fees incurred during the year ended December 31, 1996 was in the form of Common
Stock issued to professionals for services rendered to the Company. $1,013,000
of the consulting fees incurred during the year ended December 31, 1996
represented non-cash compensation attributable to stock options, shares of
Common Stock issued to a consultant, and the release of shares previously held
in escrow to the Company's largest stockholder, Steven A. Cantor. (See Notes K
and L to Notes to Financial Statements.) The Company continues to incur
significant general and administrative expenses in support of its efforts to
introduce its products in the retail marketplace and to gain market share.

Selling and shipping expenses for the year ended December 31, 1996
increased 39% from $1,865,000 for the nine months ended December 31, 1995 to
$2,597,000. The increase was primarily as a result of the following: increases
in advertising programs with store chains from $91,000 to $346,000, increases in
store and media price reduction coupons from $172,000 to $402,000, increases in
the cost of product demonstrations and media events from $163,000 to $299,000,
increases in brokerage commissions and freight from $218,000 to $350,000 and
increases in samples and other selling expenses from $153,000 to $276,000. The
Company continues to incur significant selling and shipping expenses in support
of its efforts to introduce products in the retail marketplace and to gain
market share.

Interest expense, net of interest income, for the year ended December 31,
1996 increased to $142,000 from $12,500 for the nine months ended December 31,
1995. The increase was primarily attributed to an additional borrowing from
related parties, and the conversion of open accounts payables due to two
principal product manufacturers into interest bearing notes.

Net loss for the year ended December 31, 1996 increased to $4,051,000 as
compared to a net loss of $1,615,000 for the nine months ended December 30,
1995. The net loss is attributed to the aforementioned increases in selling,
shipping, general and administrative expenses, as well as lower gross profits
and net sales and higher interest expense.

Impact of New Accounting Standards. The Financial Accounting Standards
Board has issued Statement of Financial Accounting Standards No. 128, Earnings
Per Share, which is effective for financial

22
<PAGE> 23

statements issued after December 15, 1997. Early adoption of the new standard is
not permitted. The new standard eliminates primary and fully diluted earnings
per share and requires presentation of basic and diluted earnings per share
together with disclosure of how the per share amounts were computed. The effect
of adopting this new standard has not been determined.

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 129 ("SFAS No. 129"), Disclosure of Information About
Capital Structure. The Company does not anticipate that SFAS No. 129 will have a
material impact on the financial statements.

Fiscal Year Ended December 31, 1996 Compared to Twelve Months Ended December
31, 1995.

Net sales for the year ended December 31, 1996 were $2,392,000, a decrease
of 8% from the twelve month period ended December 31, 1995. This decrease was
due to an initial build-up of inventory by Kraft-Pizza in the fourth quarter of
calendar 1995 which reduced sales to Kraft-Pizza in 1996, an unusually cool
summer in the Northeast during calendar 1996, a temporary work stoppage at one
of the facilities which manufactures the Company's products during calendar 1996
and the withdrawal by the Company from certain test markets which proved to be
unprofitable. The Company's limited operating resources to date also has
prevented the Company's participation in certain discount promotions and
in-store programs which has caused a reduction in reorders throughout its
distribution network. The proceeds from this offering should enable the Company
to substantially increase sales in its existing retail outlets through
participation in these programs.

Gross profit for the year ended December 31, 1996 declined 13% to $953,000
from $1,095,000 for the twelve months ended December 31, 1995. Gross profit as a
percentage of net sales for the year ended December 31, 1996 declined to 40% of
net sales compared to 42% for the twelve months ended December 31, 1995. The
decrease in gross profit dollars was primarily attributable to the decline in
net sales and gross profit percentage. Gross profit as a percentage of net sales
declined as a result of higher dairy raw material costs associated with the
manufacture of the Company's ice cream products. However, as of the end of 1996,
the prices of these raw materials have dropped significantly.

G & A expenses for the year ended December 31, 1996 increased 118% from
$1,007,000 for the twelve months ended December 31, 1995 to $2,193,000. The
increase was primarily as a result of the following: increases in professional
fees from $209,000 to $457,000 and increases in consulting fees from $161,000 to
$1,134,000. $364,000 of the professional fees incurred during the year ended
December 31, 1996 was in the form of Common Stock issued to professionals for
services rendered to the Company. $1,013,000 of the consulting fees incurred
during the year ended December 31, 1996 represented non-cash compensation
attributable to stock options, shares of Common Stock issued to a consultant,
and the release of shares previously held in escrow to the Company's largest
stockholder, Steven A. Cantor. (See Notes K and L to Notes to Financial
Statements.) The Company continues to incur significant general and
administrative expenses in support of its efforts to introduce its products in
the retail marketplace and to gain market share.

Selling and shipping expenses for the year ended December 31, 1996
increased 19% from $2,176,000 for the twelve months ended December 31, 1995 to
$2,597,000. The increase was primarily as a result of the following: increases
in advertising programs with chain stores from $125,000 to $346,000, increases
in store and media price reduction coupons from $172,000 to $402,000, increases
in product demonstration and media events from $194,000 to $299,000, increases
in brokerage commissions and freight from $256,000 to $350,000 and increases in
samples and other selling expenses from $210,000 to $276,000. The Company
continues to incur significant selling and shipping expenses in support of its
efforts to introduce products in the retail marketplace and to gain market
share.

Interest expense, net of interest income, for the twelve months ended
December 31, 1996 increased to $142,000 from $30,000 for the twelve months ended
December 31, 1995. The increase was primarily attributed to an additional
borrowing from related parties, and the conversion of open accounts payables to
two principal product manufacturers into interest bearing notes.

Net loss for the year ended December 31, 1996 increased to $4,051,000 as
compared to a net loss of $2,137,000 for the twelve months ended December 30,
1995. The net loss is attributed to the aforementioned

23
<PAGE> 24

increases in selling, general and administrative expenses, as well as lower
gross profits and net sales and higher interest expenses, reduced by an
extraordinary credit to income from the forgiveness by related parties of
accrued salaries and consulting fees.

Nine Months Ended December 31, 1995 Compared to Year Ended March 31, 1995.

Net sales for the nine months ended December 31, 1995 increased 113% to
$2,312,000 as compared to $1,086,000 for the twelve months ended March 31, 1995.
The increase in net sales was primarily attributable to increased market
penetration and to a greater number of supermarket and food chain retailers
selling the Company's products as well as a material change in the way the
Company distributes is products. In October 1995, the Company entered into an
agreement with Kraft-Pizza for the exclusive distribution of the Company's
products for the northeastern and western regions of the United States. This
agreement provided the Company with access to thousands of existing retail
outlets already buying Tombstone Pizza, together with the use of Kraft-Pizza's
commissioned sales force to oversee the sales and store presentation of the
Company's products.

Gross profit for the nine months ended December 31, 1995 increased 102% to
$999,000 from $494,000 for the twelve months ended March 31, 1995. Gross profit
as a percentage of net sales for the nine months ended December 31, 1995
decreased to 43% of net sales compared to 45% for the twelve months ended March
31, 1995. The increase in gross profit was primarily attributable to the
increase in net sales. The decline in gross profit as a percentage of net sales
was the result of increases in certain dairy raw materials utilized in the
Company's products as well as the redesign to a higher quality of the Company's
retail packaging material.

Selling, shipping, general and administrative expenses increased 116% to
$2,582,000 for the nine months ended December 31, 1995 as compared to $1,198,000
for the twelve months ended March 31, 1995. The increase in selling, general and
administrative expenses was primarily attributable to increased net sales an
increased expenses associated with the Company's sales and marketing efforts,
which management believes will facilitate future growth.

Interest expense net of interest income for the nine months ended December
31, 1995 decreased to $12,000 from $15,000 for the twelve months ended March 31,
1995. The decrease in interest expenses was primarily attributable to a decrease
in average principal loan balances outstanding during the nine months ended
December 31, 1995 as compared to the twelve months ended March 31, 1995.

Net loss for the nine months ended December 31, 1995 increased to
$1,615,000 from $719,000 for the twelve months ended March 31, 1995. The
increase in net loss was attributable to the aforementioned increase in selling,
general and administrative expenses, offset by an increase in net sales and
gross profits, coupled with a decrease in interest expense.

Seasonality

The Company typically experiences more demand for its products during the
summer than during the winter. The ice cream industry generally experiences its
highest volume during the spring and summer months and the lowest volume in the
winter months. In this regard, according to statistics published by the
International Ice Cream Association, 35.5% of sales of novelty ice cream
products and 29.5% of sales of packaged ice cream products were made during the
third quarter (July -- September) of calendar 1996 while only 18.0% of sales of
novelty ice cream products and 22.4% of sales of packaged ice cream were made
during the first quarter (January -- March) of calendar 1996. Similarly, the
Company's quarterly sales for calendar year 1996 followed a seasonal pattern.
Sales were stronger in the second and third quarters of 1996 and weaker in the
cooler months of the first and fourth quarters.

Several factors negatively impacted sales on a quarterly basis. During the
first quarter of 1996 the Company's distribution was in transition to its new
distributor. In the second quarter, extensive marketing and initial product fill
at store level was occurring to boost sales. In third quarter the Company's East
coast manufacturer endured a work stoppage, limiting the quantities of product
available while simultaneously the Company halted much of its marketing efforts
due to its poor financial condition. In the fourth quarter the

24
<PAGE> 25

continued lack of consumer marketing and the Company's decision to withdraw from
certain test markets caused a sharp decline in sales.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash requirements have been significantly exceeding its
resources due to the substantial promotional expenses incurred in connection
with the entry by the Company into new markets and expansion into new locations
in existing markets, which historically have not resulted in sales sufficient to
offset these expenditures. As a result of the Company's limited operating
resources, the Company also has been unable to participate in certain programs
which may have increased sales. This offering is an integral part of the
Company's plans to meet its cash requirements. Until the Company completes this
offering, the Company will be dependent on short-term borrowings, to the extent
available, and other sales of securities to continue its operations. The Company
believes that based upon its current plans, its resources, including the
proceeds of this offering, will be sufficient to meet its cash requirements for
at least the next twelve (12) months. The Company also believes that certain
long-term indebtedness due on December 31, 1998 (approximately $413,000) will be
payable from internally generated funds, if any, or debt financing or from the
sale of additional debt or equity securities. Other than this offering, the
Company has no commitments or arrangements for any future financing and there
can be no assurance that financing can otherwise be obtained on satisfactory
terms, if at all. In the event that the offering is delayed, management
recognizes that the Company must generate additional resources to enable it to
continue operations. Management's plans include consideration of the additional
sale of additional equity securities to private investors under appropriate
market conditions or other similar capital raising transactions which would
generate sufficient resources to assure continuation of the Company's
operations.

The Company has historically raised capital through the private equity
markets, and through debt financing and short-term loans, and will continue to
pursue these opportunities, if necessary. Prior transactions have involved
officers, directors, stockholders and affiliates of the Company, as may future
transactions.

In May and June 1997, the Company received $150,000 in short-term loans
evidenced by three promissory notes; one in the principal amount of $100,000 and
two each in the principal amount of $25,000. In connection therewith, each
noteholder received warrants to purchase shares of Common Stock at an exercise
price of $3.00 per share; 50,000 warrants for the $100,000 loan and 12,500
warrants for each $25,000 loan.

In May and June 1997, the Company issued 13,307 shares of Common Stock to
three vendors in exchange for $39,921 of indebtedness.

In April and May 1997, the Company reached agreements with three vendors to
extend obligations totalling $347,550 until December 31, 1998. These obligations
are convertible, in whole or in part, into 115,850 shares of Common Stock.

In March 1997, the Company entered into a two-year exclusive manufacturing
agreement expiring in March 1999. The manufacturing agreement, dated as of March
20, 1997, provides that Fieldbrook shall be the exclusive supplier of all
products manufactured by Fieldbrook and distributed by the Company East of the
Mississippi River for a period of two years. As partial consideration for this
agreement, the Company has issued to Fieldbrook 35,000 shares of Common Stock.
While Fieldbrook is obligated to sell existing products to the Company, it is
not obligated to manufacture or sell new or different products. In the event
Fieldbrook declines to manufacture, sell or produce any new product, the Company
is free to obtain such product from another supplier. The manufacturing
agreement further provides for payment to Fieldbrook of $150,000 for open
accounts which, since not paid by April 30, 1997, caused the Company to issue an
additional 30,000 shares of Common Stock to Fieldbrook. The Company's present
credit line with Fieldbrook is $250,000, for which 21-day credit terms have been
provided. As of May 31, 1997, $179,232 of the credit line has been used. This
credit line shall be redetermined by the parties at the time of the Company's
initial public offering, based upon the Company's creditworthiness.

25
<PAGE> 26

In March 1997, the Company received a $50,000 short-term loan which was
evidenced by a promissory note in the principal amount of $50,000 and in
connection therewith, the Company issued 2,000 shares of Common Stock to the
noteholder. In April 1997, one-half of this loan was converted into 12,500
shares of Common Stock.

In December 1996 and January 1997, the Company issued two convertible
promissory notes to two investors bearing interest at the rate of 8% per annum
in the principal amount of $225,000 and $100,000, respectively, (individually,
"Convertible Note" or collectively, the "Convertible Notes"). The Convertible
Notes were payable in full the earlier of five days after the closing date of an
initial public offering or December 31, 1997 and January 31, 1998, respectively.
In lieu of receiving payment, the investors had the right to convert the
Convertible Notes within five (5) days of the closing of such initial public
offering into 200,000 and 78,431 shares of Common Stock, respectively. In April
1997, the Convertible Notes were converted into 278,431 shares of Common Stock.

In December 1996, the Company issued two additional promissory notes in the
aggregate amount of $56,680 in exchange for certain trade accounts payable.

In October 1996, the Company issued 19,231 shares of Common Stock to two
consultants as payment for services rendered during the year ended December 31,
1996. These shares were valued at $3.00 per share, the estimated fair market
value of the Common Stock at the date of issuance.

On August 20, 1996, the Company issued a promissory note in the amount of
$289,482 in exchange for certain trade accounts payable and inventories. The
note, as amended, bears interest at the rate of 10% per annum. $134,283 with
accrued interest is payable on the earlier of (i) July 20, 1997 or the closing
of this offering. The balance is payable in December 1998.

On August 28, 1996, the founder of the Company was issued a promissory note
in the principal amount of $206,250. The funds that the founder loaned the
Company were the proceeds of a sale by the founder to an investor of 183,333
shares of his Common Stock at a price of $1.12 per share. This loan bears
interest at a rate of 8% and initially was payable the earlier of (i) thirteen
months from the date of the loan, or (ii) the date the Company successfully
consummates an initial public offering of securities of the Company, but only to
the extent that the over-allotment option is exercised in such offering and only
from the proceeds received by the Company from the exercise of the
over-allotment option. In September 1996, the maturity date of this promissory
note was revised to September 30, 1998. In addition, the revised promissory note
provides that one-half of the outstanding principal amount of the note will be
paid with accrued interest thereon in the event the Company successfully
consummates an initial public offering of securities of the Company, but only to
the extent that the over-allotment option is exercised in such offering and only
from the proceeds received by the Company from the exercise of the
over-allotment option.

In August, September and October 1996, the Company received three loans
from the Company's largest stockholder aggregating $253,750. A portion of the
funds that this stockholder loaned the Company was a result of the stockholder
selling shares of his Common Stock to an investor. In August 1996, this
shareholder sold 38,889 shares of his Common Stock at a price of $1.12 per
share. In September 1996, this shareholder sold 23,333 shares of his Common
Stock at a price of $1.50 per share. These loans, which were consolidated into
one note in September 1997, bear interest at a rate of 8% and are payable the
earlier of (i) June 1, 1997, or (ii) with respect to $130,000 of the principal
amount, the date the Company successfully consummates an initial public offering
of securities of the Company, but only to the extent that the over-allotment
option is either exercised in such offering, or ninety (90) days after the
Representative elects not to exercise the over-allotment option.

In September 1996, the Company completed a private placement offering
pursuant to Rule 506 of the Securities Act of 1933, as amended (the "Securities
Act") consisting of the sale of 61.5 units (the "Second Private Placement
Units"), with each Second Private Placement Unit consisting of $2,500 principal
amount of 12% promissory notes due on the earlier of July 31, 1997 or the
closing date of an initial public offering of securities of the Company
(provided that in the event of a default as defined therein, the entire sum will
be accelerated), and 7,500 shares of the Company's Common Stock at an offering
price of $25,000 per Second

26
<PAGE> 27

Private Placement Unit. As of September 30, 1996, the Company issued a total of
461,250 shares of Common Stock and notes payable of $153,750, for which it
received proceeds of an aggregate $1,537,500. In April 1997, the holders of
$30,000 of such notes converted the principal and accrued interest into 16,050
shares of Common Stock.

On May 30, 1996, the Company received loans totaling $100,000 from two
stockholders. The loans bear interest at an annual rate of 10% and initially
were due on demand. In September 1996, the maturity date of these promissory
notes was revised to occur the earlier of (i) May 30, 1998 or (ii) the date the
Company successfully consummates an initial public offering of securities of the
Company, but only to the extent that the over-allotment option is exercised in
such offering and only from the proceeds received by the Company from the
exercise of the over-allotment option.

On May 30, 1996, the Company issued 50,000 shares of its Common Stock to
certain individuals for services rendered on behalf of the Company. These shares
were valued at $3.00 per share, the fair market value of the Common Stock at the
date of issuance.

In April 1996, the Company issued a promissory note (the "Penn Note") in
exchange for certain trade accounts payable of $830,275. As of March 31, 1997,
this outstanding balance was $710,275. $595,000 together with accrued interest
is payable from the proceeds of this offering and the balance is payable in
December 1997. If such initial public offering does not occur on or before July
31, 1997, the Penn Note is due in full on that date. Interest on the Penn Note
accrues at the prime rate plus 1% per annum. The Penn Note is collateralized by
all of the assets of the Company.

In February 1996, the Company issued $325,000 of 12% convertible promissory
notes which were payable on the earlier of August 31, 1996 or upon the
consummation of an interim financing as contemplated by a Letter of Intent with
an investment banker for an initial public offering of the Company's securities.
In June 1996, in lieu of receiving payment in such event, the holders of the
notes exchanged the notes, based on a conversion price determined by the notes,
into Second Private Placement Units.

During November 1994 through May 1995, the Company completed a private
placement offering of the Company's Common Stock pursuant to Rule 504 of the
Securities Act. During the nine month period ended December 31, 1995 and the
year ended March 31, 1995 the Company issued a total of 27,487 and 62,824 units,
respectively, at $9.75 per unit, each unit consisting of two shares of Common
Stock and one warrant. All such warrants expired on January 10, 1997.

In April 1995, the Company issued 5,128 shares of its Common Stock to a
consultant in consideration of his efforts in assisting in various matters for
the Company during the fiscal years ended March 31, 1994 and 1995. These shares
were valued at $2.45 per share, the estimated fair market value of the Common
Stock at the date the Company committed to issue the shares.

In September 1995, the Company issued 7,179 shares of its Common Stock to
certain individuals for services rendered on behalf of the Company during the
nine month period ending December 31, 1995. These shares were valued at $4.88
per share, the estimated fair market value of the Common Stock at the date of
issuance.

During the fiscal year ended March 31, 1995, the Company issued two
promissory notes of $25,000 each to an investor, who is related to the founder
of the Company, which were originally due in November and December 1998,
respectively. The Company repaid one of these notes in April 1995. In September
1995, the maturity date of the outstanding promissory note was revised to occur
the earlier of the date on which the Company receives proceeds from a securities
offering or June 1, 1996. In April 1996, the maturity date of the outstanding
promissory note was revised to occur subsequent to the repayment of the Penn
Note issued in April 1996. In September 1996, the maturity date of this
promissory note was revised to occur the earlier of: (i) February 1, 1998 or
(ii) upon the occurrence of events defined by the note as a "Change in Control."
Interest accrues at an annual rate of 6% and is payable at the maturity of the
note.

In May 1994, the Company issued 30,769 and 5,128 shares of its Common Stock
to its legal counsel and an independent consultant, respectively, for services
rendered. These shares are valued at $.001 per share, the

27
<PAGE> 28

estimated fair market value of the Common Stock as determined by the Company's
Board of Directors at the date of issuance.

During the fiscal year ended March 31, 1994, the Company borrowed $100,000
from a relative of the Company's largest stockholder. The loan, which was
originally due on demand, was formalized in the form of a promissory note during
September 1995. In April 1996, the maturity date of the $100,000 obligation was
revised to occur subsequent to the repayment of the Penn Note issued in April
1996. The loan was non-interest bearing through April 1994. From May 1994
through maturity interest accrues at an annual rate of 6% and is payable upon
maturity. In September 1996, the maturity date of this promissory note was
revised to occur the earlier of (i) February 1, 1998 or (ii) upon the occurrence
of events defined by the note as a "Change in Control." During the fiscal year
ended March 31, 1995, the Company borrowed an additional $100,000 from the same
relative of the Company's largest stockholder. The loan was due on demand with
interest at an annual rate of 6%. The Company repaid $50,000 of this loan in
March 1995, and repaid the remaining $50,000 during April 1995.

The following schedule lists the principal and interest payments due during
the twelve month period immediately following the date of this Prospectus:

<TABLE>
<CAPTION>
PRINCIPAL PAYMENT
DUE DATE INTEREST BALANCE OWING AFTER REPAYMENT TERMS
OF NOTE RATE AT 3/31/97 OFFERING NEXT 12 MONTHS
---------- -------- ---------- ----------- -----------------------
<S> <C> <C> <C> <C> <C>
Penn Traffic Company... See Terms Prime +1% $ 710,275 $ 115,275 $595,000 principal
balance with accrued
interest is payable on
July 31, 1997 or from
proceeds of offering;
balance, including
interest, is payable in
December 1997

Crystal Cream & See Terms 10.00% $ 230,283 $ 96,000 $134,283 principal
Butter............... balance with accrued
interest is payable on
July 31, 1997 or from
proceeds of offering;
balance, including
interest, is payable in
December 1998
DariGold, Inc.......... 5/1/97 8.00% $ 30,000 0 Payable $5,000 per
month including
interest, balance due
May 1, 1997 or from
proceeds of offering

PIA Merchandising...... See Terms 10.00% $ 8,497 $ 8,497 Payable $1,000 per
month including
interest until paid in
full (assumed February
1998)

Demo Deluxe............ See Terms 10.00% $ 27,318 0 Payable in full from
proceeds of offering

News America FSI, See Terms 10.00% $ 60,000 $ 30,000 $30,000 principal
Inc. ................ balance with accrued
interest is payable
from the proceeds of
this offering; balance,
including interest, is
payable in December
1998.
</TABLE>

28
<PAGE> 29

Annette Cantor......... 2/1/98 6.00% $ 100,000 $ 100,000 Payable at due date
together with accrued
interest

Elizabeth Pilossoph.... 2/1/98 6.00% $ 25,000 $ 25,000 Payable at due date
together with accrued
interest

Steven A. Cantor....... See Terms 8.00% $ 253,750 0 $123,750 is payable
from proceeds of
offering. The balance
is due from net
proceeds of
over-allotment option,
if any, or if not
exercised, ninety (90)
days after offering

Suzanne Frank.......... 7/31/97 10.00% $ 25,000 0 Payable at due date
together with accrued
interest or from
proceeds of offering

Alan Brooks............ 7/31/97 12.00% $ 100,000 0 Payable at due date
together with accrued
interest or from
proceeds of offering

Jeffrey Streader....... 7/31/97 12.00% $ 25,000 0 Payable at due date
together with accrued
interest or from
proceeds of offering

Mr. and Mrs. Ronald
Nilson............... 7/31/97 12.00% $ 25,000 0 Payable at due date
together with accrued
interest or from
proceeds of offering
</TABLE>

29
<PAGE> 30

BUSINESS

GENERAL

The Company markets, sells and distributes Mike's Original(R) Cheesecake
Ice Cream, an innovative all natural blend of super-premium ice cream with
cheesecake ingredients. This product line is offered in a variety of flavors
mainly to supermarkets and grocery stores and also, to a lesser extent, to
convenience stores, food service outlets and warehouse clubs. The Company's
products are presently sold in approximately fourteen (14) states, including New
York, California, Pennsylvania and New Jersey, with sales generally concentrated
on the East and West coasts of the United States. The Company believes, based on
an internal study, that it incentivizes retailers to continue purchasing its
products through a pricing strategy designed to provide retailers with a higher
retail profit per linear foot as compared to other competitive products based on
the suggested retail price.

In October 1995, the Company entered into the Kraft-Pizza Agreement for the
exclusive distribution of the Company's products for the Northeastern and
Western regions of the United States. The Kraft-Pizza Agreement provides the
Company's products with the opportunity to gain access to the thousands of
existing retail outlets already buying Tombstone Pizza, together with the use of
Kraft-Pizza's commission sales force to oversee the sales and in-store
presentation of the Company's products.

In April 1996, the Company entered into an agreement with Kraft Foods,
Inc., pursuant to which Kraft Foods, Inc. has agreed to represent the Company in
the sale of its products to military facilities throughout the world. Military
contracts exist with DeCA (Defense Commissary Agency) and sales to the military
commenced in the third quarter of 1996.

Since October 1996, the Company has restructured its management. In this
regard, Mr. Rosen has replaced Daniel Kelly as President, Mr. Kelly having
resigned in September 1996. The Company also has hired a Vice
President -- Finance and has entered into an agreement to hire a
Vice-President -- Marketing and Sales on completion of this offering, and has
retained two frozen food and ice cream consultants with a combined fifty years
of experience in the sales and marketing of ice cream. These persons have
redirected the Company's selling efforts to substantially increase sales in the
approximately 3,200 retail outlets selling the Company's products and to expand
market penetration on the East and West coasts into the institutional and food
service segments. By concentrating on existing locations and segments requiring
limited up-front fees, the Company intends to substantially reduce one of the
major costs associated with its prior operations.

Net sales for the year ended December 31, 1996 were approximately
$2,392,000, an increase of 3% from the previous nine month period ended December
31, 1995 and a decrease of 8% from the twelve month period ended December 31,
1995. The increase as compared to the shorter period was significantly reduced,
and the decrease as compared to the prior twelve month period was, in each case,
because of an initial build-up of inventory by Kraft-Pizza in the fourth quarter
of calendar 1995 which reduced sales to Kraft-Pizza in 1996, an unusually cool
summer in the Northeast during 1996, a temporary work stoppage at the primary
facility which manufactures the Company's products and the withdrawal by the
Company from certain test markets which proved to be unprofitable. The Company's
limited operating resources to date also has prevented the Company's
participation in certain discount promotions and in-store programs which has
caused continuing reduced sales by a reduction in reorders throughout its
distribution network. The proceeds from this offering should enable the Company
to substantially increase sales through participation in these programs. The
Company's products are currently manufactured by one independent facility
located in Buffalo, New York, which has exclusive East coast manufacturing
rights for the Company's products. Upon completion of this offering, the Company
may use additional manufacturing facilities as well as to re-establish its
relationships with former manufacturers of its products on the West coast.

30
<PAGE> 31

PRESENT AND FUTURE PRODUCTS

According to the International Ice Cream Association, ice cream was part of
a $10.5 billion nationwide frozen dessert industry in 1995 and has wide appeal,
with over 93% of households in the United States consuming these products. The
super-premium ice cream category in particular has grown dramatically in recent
years despite diet conscious consumers. This has been proven in the marketplace
by an increase in the market share of the super-premium ice cream segment of 94%
from 1985 to 1994. In 1995, sales of ice cream in pints increased by 4%, from
$282 million in 1994 to $293 million in 1995, in contrast to a 4% decrease in
the sales of frozen yogurt pints, which decreased from $115 million in 1994 to
$107 million in 1995. In the first six months of 1996, ice cream sales in pints
increased by 4.6% to $149 million, in contrast with sales of frozen yogurt sales
pints, which declined 7.1% to $51 million. With respect to novelty ice cream
products, premium ice cream bars represented the largest dollar market share
with sales approximating $270 million in 1995, of which 96% of these sales were
classified "regular" while only 4% were classified as reduced fat or diet
products. In the first six months of 1996, premium ice cream bars had sales of
$126 million of which 93.3% were classified as "regular" while only 6.7% were
classified as "reduced or nonfat." Premium ice cream bars were the second
largest dollar segment during this period. Ice cream sandwiches represented the
third largest market share of novelty products with sales of $210 million in
1995, of which 88.5% of these sales were classified "regular" compared to only
11.5% classified as reduced fat or diet. In the first six months of 1996, ice
cream sandwiches had sales of $121 million, an increase of 14%. 86.3% of these
sales remained classified as "regular" compared to 13.7% classified as "reduced
fat or nonfat."

Super-premium ice cream is generally characterized by a greater richness
and density than other kinds of ice cream with a butter fat content of at least
14%. This category of ice cream was created in 1959 by Ruben Mattus, founder of
Haagen-Dazs, and expanded by Ben & Jerry's. According to available information,
Haagen-Dazs had annual sales in 1994 exceeding $900 million with Ben & Jerry's
reporting sales in 1995 in excess of $155 million.

The Company competes in the packaged ice cream category with three flavors
of pints. The three flavors of cheesecake ice cream offered in pints are Graham
Cracker Delight(R), Strawberry Fantasy(TM) and Chocolate Tidbits(TM). The
Company also competes in the novelty category of premium ice cream bars and ice
cream sandwiches. Its premium ice cream bar products are all cheesecake ice
cream with either a graham cracker crunch coating or strawberry sorbet coating,
using high quality California strawberries. The Company's newest product is a
sandwich version trademarked GRAMWICH(R), which is cheesecake ice cream
surrounded by two specially made graham cracker wafers. The GRAMWICH(R) is
available in four-pack as well as twenty-four count "bulk" pack for retail
single serve sales. The Company also produces an eighteen (18) count "bulk" pack
of both the graham cracker crunch and strawberry sorbet bars for warehouse club
stores and single serve sales. The Company has four-ounce Dixie cups and 1.5
gallon drum containers of the three pint flavors for future expansion into food
service and ice cream parlor opportunities.

The Company plans to expand its product line to include additional
variations of its existing products, a variety of retail sizes and creative food
service applications. While the Company makes no representations that it will be
marketing and selling other products, the potential product types include:

- A deluxe line of pints featuring a broader variety of flavors
- "Lite" or reduced calorie extensions of existing products
- Additional fruit coatings for novelty sticks
- Additional GRAMWICH(R) flavors
- Bon-bon style products
- Premium novelty cone products

In this regard, the Company has recently created a new line of pint
products which is marketed under the tradename "Sorbet Blends." The "Sorbet
Blends" consist of a nearly equal mixture of sorbet and cheesecake

31
<PAGE> 32

ice cream and have been introduced in two flavors, "Raspberry Romance" and
"Lemon Lace." These products have approximately half the calories and fat
content of the Company's other pint varieties, and are being test marketed in
California.

MANUFACTURING AGREEMENT

The Company's products are presently manufactured by Fieldbrook Farms
("Fieldbrook"), an independent FDA approved facility located in Buffalo, New
York, under a two-year exclusive manufacturing agreement expiring in March 1999.
The manufacturing agreement, dated as of March 20, 1997, provides that
Fieldbrook shall be the exclusive supplier of all products manufactured by
Fieldbrook and distributed by the Company East of the Mississippi River for a
period of two years. As partial consideration for this agreement, the Company
has issued to Fieldbrook 35,000 shares of Common Stock. While Fieldbrook is
obligated to sell existing products to the Company, it is not obligated to
manufacture or sell new or different products. In the event Fieldbrook declines
to manufacture, sell or produce any new product, the Company is free to obtain
such product from another supplier. The manufacturing agreement further provides
for payment to Fieldbrook of $150,000 for open accounts which, since not paid by
April 30, 1997, has caused the Company to issue an additional 30,000 shares of
Common Stock to Fieldbrook. The Company's present credit line with Fieldbrook is
$250,000, for which 21-day credit terms have been provided. As of May 31, 1997,
$179,232 of the credit line has been used. This amount shall be redetermined by
the parties after the Company's initial public offering based upon the Company's
creditworthiness.

Two facilities on the West coast have recently suspended manufacturing the
Company's products due to the financial position of the Company, however, each
such facility has informed the Company that they will reconsider manufacturing
the Company's products upon completion of this offering and payment by the
Company of all amounts owing to such manufacturer. Upon completion of this
offering, the Company may use additional facilities as well as reestablish its
relationships with its former manufacturers on the West coast. See "Use of
Proceeds." The Company's products have been certified as Kosher by the Kuf-K,
the Company having adhered to strict standards for both its ingredients and
processing procedures.

DISTRIBUTION AND MARKETING

The Company, through its officers, consultants and other representatives,
currently markets the Company's products to supermarkets and grocery stores and
also, to a lesser extent, to convenience stores, food service outlets and
warehouse clubs in an effort to obtain authorization for sale in these various
retail outlets. The Company has incurred substantial promotional expenses for
freezer space in connection with entering new markets, maintaining existing
markets, entering new retailers and maintaining shelf space in existing
retailers. The Company receives no assurance that these retailers will continue
to allocate freezer space for the Company's products even after the payment of
these fees. Once the Company obtains authorization from retailers and satisfies
the substantial initial promotional expenses, the Company then directs
Kraft-Pizza to distribute the Company's products to the appropriate authorized
retailers.

In October 1995, the Company entered into the Kraft-Pizza Agreement
pursuant to which Kraft-Pizza serves as the Company's exclusive distributor in
nine northeastern states, including New York, New Jersey and Pennsylvania, in
California, Oregon and in parts of Washington and Nevada. The Kraft-Pizza
Agreement commenced on October 1, 1995, automatically renews, and is terminable
by either party on sixty (60) days' prior written notice. Under the terms of the
Kraft-Pizza Agreement, the Company will pay Kraft-Pizza 25% of a previously
agreed upon suggested wholesale price for all sales of the Company's products
sold by Kraft-Pizza. The Company believes that the Kraft-Pizza Agreement has
provided an opportunity for the Company to sell its products in thousands of
retail locations presently serviced by Kraft-Pizza as well as "hands on"
servicing of these locations by Kraft-Pizza employees. Additional distributors
may be retained as the Company continues to expand its market penetration.

In April 1996, the Company entered into the Kraft-Military Agreement with
Kraft Military pursuant to which Kraft Military acts as a broker with respect to
the Company's products for sales to the United States military facilities
throughout the world. Kraft Military is presently the largest worldwide supplier
of food

32
<PAGE> 33

products to military facilities. The Kraft Military Agreement commenced on April
1, 1996, continues for a period of one year, and is renewable for consecutive
one year periods unless terminated by either party on thirty (30) days prior
written notice. The Company pays a commission of 5% of net sales, as defined in
the Kraft Military Agreement, for sales made by Kraft Military to military
customers.

The Company promotes its products through trade and consumer advertising,
trade show participation, in-store demonstrations, circular advertisements and
special event sampling/couponing. Print advertising is the primary vehicle used
by the Company with its initial approach being to target regional areas of
distribution. The Company's products have also been promoted on the radio
through means such as the sponsorship of Shadow Traffic(R) reports on various
stations in the New York metropolitan area, Southern California and
Philadelphia.

In December 1996, Mike's Original(R) Cheesecake Ice Cream was featured in
New York magazine. In 1994, the Company's products were mentioned on CBS-TV's
"This Morning" show and America's Talking, a nationally syndicated show,
featured Mike's Original(R) products in their daily morning show called "What's
New?". The TV Food Network also invited the Company's founder, Mr. Rosen to
introduce the Company's product line on TVFN's "Food, News & Views" show. In
1995, Mr. Rosen was chosen by Dairy Field Magazine as one of the year's top
twenty "movers and shakers" in the industry. Mr. Rosen was also featured in the
November 1996 issue of Entrepreneur Magazine.

COMPETITION

The super-premium ice cream market is highly competitive and the Company
faces substantial competition in connection with the marketing and sales of its
products. Among its competitors are Haagen-Dazs, owned by The Pillsbury Company,
Ben & Jerry's and numerous other regional ice cream companies. Many of these
competitors are well established and have substantially greater financial and
other resources than the Company. Additionally, Haagen-Dazs and Ben & Jerry's
manufacture their own ice cream. In the ice cream novelty segment, the Company
competes with several wellknown brands including Haagen-Dazs and Dove Bars(R),
manufactured by a division of Mars, Inc.

Achieving wide distribution in the ice cream business is difficult due to
the substantial expense of a national marketing program and the limitations on
available space in the freezer compartments of retailers. The Company's products
also may be considered in competition with all ice cream and other frozen
desserts for discretionary food dollars.

The ability of the Company to increase its market share will be dependent
upon several factors, among which are consumer acceptance of the products, the
quality and price of its products, advertising and the availability of
sufficient capital for product expansion.

GOVERNMENT REGULATION

The Company is subject to regulation by various governmental agencies
regarding the distribution and sale of food products, including the FDA and
various state agencies. The Company believes that its marketing and distributing
operations comply with all existing applicable laws and regulations.

The Company cannot predict the impact of possible changes that may be
required in response to future legislation, rules or inquiries made from time to
time by governmental agencies. FDA regulations may, in certain circumstances,
affect the ability of the Company, as well as others in the industry, to develop
and market new products. However, the Company does not presently believe that
existing applicable legislative and administrative rules and regulations will
have a significant impact on its operations.

TRADEMARKS AND PATENTS

The Company owns registered trademarks and service marks under the names
"Mike's Original(R)", "GRAMWICH(R)" and "Graham Cracker Delight(R)". The Company
has common law trademarks for "Strawberry Fantasy(TM)", "Chocolate Tidbits(TM)",
"Sorbet Blends(TM)", "Raspberry Romance(TM)" and "Lemon Lace(TM)." It also has
filed a patent application on its formulated process to manufacture cheesecake
ice cream.

33
<PAGE> 34

INSURANCE

The Company's business exposes it to potential liability which is inherent
in the marketing and distribution of food products. The Company currently
maintains $2,000,000 of product liability insurance. The Company also maintains
$1,000,000 of general and personal injury insurance per occurrence and
$5,000,000 in the aggregate. If any product liability claim is made and
sustained against the Company and is not covered by insurance, the Company's
business and prospects could be materially adversely affected.

EMPLOYEES

The Company employs five full time employees, all of whom are located in
the Company's Jericho, New York headquarters and serve in selling and
administrative capacities. None of the Company's employees are represented by a
labor union. The Company has never had a work stoppage and considers its
relationships with its employees to be satisfactory.

SEASONALITY

The ice cream industry generally experiences its highest volume during the
spring and summer months and the lowest volume in the winter months. In this
regard, according to statistics published by the International Ice Cream
Association, 35.5% of sales of novelty ice cream products and 29.5% of sales of
packaged ice cream products were made during the third quarter
(July -- September) of calendar 1996 while only 18.0% of sales of novelty ice
cream products and 22.4% of sales of packaged ice cream were made during the
first quarter (January -- March) of calendar 1996. Similarly, the Company's
quarterly sales for calendar year 1996 followed a seasonal pattern. Sales were
stronger in the second and third quarters of 1996 and weaker in the cooler
months of the first and fourth quarters.

LEGAL MATTERS

In December 1996, the Company entered into a stipulation of entry of
judgment with Crystal Cream & Butter Co. ("Crystal Cream"), whereby the Company
acknowledged an obligation in the amount of $539,482 to Crystal Cream. Entry of
the judgment has been stayed as long as the Company continues to make payments
with respect to this obligation. Based on payments made to date, this obligation
has been reduced to $230,283 (excluding $15,500 of open accounts payable) of
which $134,283 is due and payable from the proceeds of this offering and the
balance is payable in December 1998. See "Note N" of Notes to Financial
Statements.

In December 1996, Suiza Dairy Corp. ("Suiza") commenced an action in the
United States District Court for the District of Puerto Rico. Suiza seeks
damages in the amount of $61,510 plus interest accrued, costs and attorneys fees
arising from advertising and promotion services which Suiza claims to have
performed for the Company. The Company has not been formally served with a
summons and complaint. When, and if, the Company is served, the Company intends
to file an answer denying the allegations of the complaint, claiming, among
other things, that any services performed by Suiza were without authorization
from the Company.

Except as set forth above, the Company is not involved in any material
pending legal proceedings.

34
<PAGE> 35

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The By-Laws of the Company provide for a Board of Directors of between
three and nine members classified into three classes as nearly equal in number
as possible, whose terms expire in successive years.

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

<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH THE COMPANY
- --------------------------------- --- ---------------------------------------------
<S> <C> <C>
Michael Rosen.................... 39 Chairman of the Board, Chief Executive
Officer, President and Director

Michael Mitchell................. 57 Vice-President -- Marketing and Sales
(nominee)

Frederic D. Heller............... 59 Vice-President -- Finance, Chief Financial
Officer and Director

Rachelle Rosen................... 37 Secretary and Treasurer

Martin Pilossoph................. 66 Director

Arthur G. Rosenberg.............. 57 Director

Myron Levy....................... 56 Director (nominee)
</TABLE>

Michael Rosen has been the Chief Executive Officer of the Company and a
director since its inception in March 1993 and President since September 1996.
For six years prior to the formation of the Company, Mr. Rosen was President and
sole shareholder of Progressive Personnel, Inc., a career search firm in New
York City. Mr. Rosen graduated from the State University of New York, Brockport
with a Bachelor of Science degree in Business and Sports Administration. Mr.
Rosen is the husband of Rachelle Rosen and the son-in-law of Martin Pilossoph.

Michael Mitchell has been appointed as Vice-President -- Marketing and
Sales effective on the closing of this offering. From 1989 to date, Mr. Mitchell
has been an independent consultant under the name Mitchell Associates. From 1986
to 1989, Mr. Mitchell was Vice President of Dunkirk Ice Cream in Dunkirk, New
York. From 1980 to 1985, he served in various capacities for Atlantic
Processing, including Sales and Operations Manager of their ice cream division.
From 1979 to 1980, Mr. Mitchell was Vice President -- Sales and Marketing for
Schraffts Ice Cream. Mr. Mitchell has over thirty years experience in the ice
cream industry and has specialized in successfully developing troublesome
operations.

Frederic D. Heller has been Vice President of Finance and director of the
Company since January 1997. Mr. Heller is a CPA licensed in the State of New
York for over the last ten years. Prior to joining the Company, from November
1994 through January 1997, he practiced as an independent financial consultant
including rendering such services to the Company in that capacity from August
1996 to January 1997. From September 1992 through October 1994, Mr. Heller was
Vice President of Finance and director of Vasomedical, Inc., formerly Future
Medical Products, Inc., a publicly owned business involved in the merchandising
of certain medical technology. From October 1990 through September 1992, Mr.
Heller was president and chief operating officer of FDH Enterprises, Inc., a
company rendering financial consulting services to business clients.

Martin Pilossoph has been a director of the Company since September 1995.
For the past five years, Mr. Pilossoph has been a Senior Sales Executive of the
Ingram Companies, a national video wholesaler. Mr. Pilossoph is the father of
Rachelle Rosen and the father-in-law of Michael Rosen.

Arthur G. Rosenberg has been a director of the Company since September
1995. Mr. Rosenberg has been a practicing attorney for more than the past ten
years. Since June 1, 1987, he has been Vice President of Acquisitions of The
Associated Companies, a residential land and commercial developer located in
Bethesda, Maryland. Mr. Rosenberg also is a director of EcoTyre Technologies,
Inc., a publicly owned manufacturer of remolded tires.

35
<PAGE> 36

Myron Levy has been elected a director of the Company to take office upon
the closing of this offering. Since June 1993, Mr. Levy has been President of
Herley Industries, Inc., a publicly owned designer and manufacturer of flight
instrumentation products. From May 1991 to June 1993, Mr. Levy served as
Executive Vice President and Treasurer of Herley Industries, Inc. Mr. Levy also
has been a director of Herley since 1992.

Rachelle Rosen has been Secretary and Treasurer of the Company since its
formation in 1993. Ms. Rosen served as a director of the Company from 1993 until
January 1997. It was Ms. Rosen's cheesecake that gave her husband, Mike, the
idea and concept for Mike's Original(R) Cheesecake Ice Cream. She received a
Bachelor of Science degree from Queens College. Ms. Rosen is the daughter of
Martin Pilossoph and the wife of Michael Rosen.

The Company's Board of Directors is classified into three classes. The
directors in each class serve for three year terms. Arthur Rosenberg is a member
of Class I which serves until the Company's 1997 Annual Meeting of Stockholders.
Martin Pilossoph is a member of Class II which serves until the Company's 1998
Annual Meeting of Stockholders and Myron Levy has been elected to serve as a
member of Class II upon completion of this offering. Michael Rosen and Frederic
D. Heller are members of Class III which serves until the Company's 1999 Annual
Meeting of Stockholders. Directors who are not employees of the Company, of
which there are presently two, and upon consummation of this offering will be
three, receive no cash compensation for their services to the Company as
directors, but are reimbursed for expenses actually incurred in connection with
attending meetings of the Board of Directors. All members of the Board of
Directors are eligible to participate in the Company's stock option plans. Each
director attended or participated in at least 75% of the meetings of the Board
of Directors during his or her tenure in fiscal 1996.

Pursuant to the terms of the Underwriting Agreement relating to this
offering, the Representative has the right to nominate either one member of the
Board of Directors or a non-voting observer for the year after the Closing Date
of this offering. The Representative has informed the Company that it does not
intend to exercise this right upon consummation of this offering or in the near
future. See "Underwriting."

EXECUTIVE COMPENSATION

The following table sets forth the cash and other compensation paid or
accrued by the Company during the year ended December 31, 1996, the nine months
ended December 31, 1995 and the fiscal year ended March 31, 1995 to the
Company's Chief Executive Officer and former president. No other executive
officer earned over $100,000 in any fiscal year.

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ------------
------------------------------------------------ SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION(2) OPTIONS COMPENSATION
- ------------------------- ------- -------- ----- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Michael Rosen............ 1996 $112,250(1) -- -- 200,000(3) --
Chairman of the Board, 9/30/95(4) 81,000(1) -- -- -- --
President, Chief 3/31/95(5) 9,000(1) -- -- -- --
Executive Officer

Daniel B. Kelly(6)....... 1996 $104,166 -- -- 29,530(6) --
Former President 9/30/95(4) 93,750 -- -- -- --
3/31/95(5) 25,833 -- -- -- --
</TABLE>

- ---------------
(1) Does not include an aggregate of $62,648 of salary which was accrued and not
paid to Mr. Rosen during the period from inception through September 30,
1996, to which Mr. Rosen has waived all rights.

(2) The value of all perquisites provided to the Company's officers did not
exceed the lesser of $50,000 or 10% of the officer's salary and bonus.

(3) Represents ten-year options granted in May 1996 and September 1996 pursuant
to the Company's 1995 Long Term Incentive Plan.

(4) Represents the nine month period ended December 31,1995.

36
<PAGE> 37

(5) Represents the fiscal year ended March 31, 1995.

(6) Mr. Kelly resigned as an officer and director of the Company on September
16, 1996. His long-term compensation represents ten year options granted in
February 1995 which were terminated due to his resignation.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

The following table sets forth all stock options granted to the executive
officers named in the Executive Compensation table during the fiscal year ended
December 31, 1996.

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO
OPTIONS/SARS EMPLOYEES IN EXERCISE OR BASE
NAME GRANTED(#) FISCAL YEAR PRICE ($/SH) EXPIRATION DATE
- -------------------------- ------------ ------------ ---------------- ------------------
<S> <C> <C> <C> <C>
Michael Rosen............. 33,333 12.5% $ 3.00 May 31, 2006(1)
166,667 62.5% $ 1.50 September 11, 2006(2)
</TABLE>

- ---------------
(1) Represents ten year options granted in May 1996, pursuant to the Company's
1995 Long Term Incentive Plan. Options became fully vested on November 30,
1996.

(2) Represents ten year options granted in September 1996, pursuant to the
Company's 1995 Long Term Incentive Plan. Options vest on March 12, 1997.

EMPLOYMENT AGREEMENTS

Michael Rosen

The Company has entered into an employment agreement with Michael Rosen
pursuant to which Mr. Rosen has agreed to serve as Chairman of the Board and
Chief Executive Officer of the Company, at an annual base salary of $100,000 for
the first year of the agreement and an annual base salary of $125,000 for each
of the remaining five years of the agreement. Mr. Rosen is also entitled to a
$50,000 bonus for each of the third through sixth years of the Agreement in the
event the Company's pretax income for such year exceeds $1,000,000. Mr. Rosen's
employment agreement is for six (6) years, which commenced on June 1, 1995. The
employment agreement provides that Mr. Rosen may be terminated only for a
material breach of the terms of the agreement which is not cured after he
receives five (5) days written notice.

Mr. Rosen's employment agreement restricts him from engaging in competition
with the Company for the term thereof and contains provisions protecting the
Company's proprietary rights and information, including the use of the name
"Mike's Original(R)". The agreement also provides for the payment to Mr. Rosen
of three times his previous year's total compensation, less $1.00, upon the
termination of his employment in the event of a change in control of the
Company. For those purposes, a change in control is defined to mean (a) change
in control as such term is defined on Regulation 240.12b-2 of the Securities
Exchange Act of 1934, as amended or (b) if during the term of the agreement,
individuals who at the beginning of such agreement constitute the board of
directors of the Company cease for any reason to constitute at least a majority
thereof, unless the election of each director who is not a director at the
beginning of such period has been approved in advance by the directors
representing at least two-thirds of the directors then in office who were
directors at the beginning of the term of the agreement.

Michael Mitchell

The Company also has entered into an employment agreement with Michael
Mitchell. This agreement provides that Mr. Mitchell will serve as Vice President
of the Company, and will receive as compensation therefor an annual base salary
of $115,000 per year, up to $25,000 in travel expenses, plus an incentive bonus
equal to 3% of the Company's pre-tax income, as defined. This agreement is for
an initial term which terminates one year from the effective date of this
offering and provides that if Mr. Mitchell is terminated after the initial term
other than for "cause" (as defined), or dies or becomes permanently disabled,
the Company

37
<PAGE> 38

will pay to him certain severance. This agreement contains the same change of
control provision as set forth in Mr. Rosen's employment agreement and also
restricts Mr. Mitchell from engaging in competition with the Company for the
term thereof and for one year thereafter and contains provisions protecting the
Company's proprietary rights and information.

Frederic D. Heller

The Company has entered into an employment agreement with Frederic D.
Heller pursuant to which Mr. Heller has agreed to serve as Vice
President -- Finance of the Company, at an annual base salary of $95,000 for the
first year of the agreement and an annual base salary of $105,000 for the
remaining year of the agreement. In addition, pursuant to this agreement, Mr.
Heller received options to purchase 25,000 shares of Common Stock with an
exercise price of $1.50 per share. Mr. Heller's employment agreement is for two
years, which commenced on March 1, 1997. The employment agreement provides that
Mr. Heller may be terminated only for a material breach of the terms of the
agreement which is not cured after he receives thirty (30) days written notice.

Mr. Heller's employment agreement restricts him from engaging in
competition with the Company for the term thereof and contains provisions
protecting the Company's proprietary rights and information. The agreement also
provides for the payment to Mr. Heller of three times his previous year's total
compensation, less $1.00, upon the termination of his employment in the event of
a change in control of the Company. For those purposes, a change in control is
defined to mean (a) change in control as such term is defined on Regulation
240.12b-2 of the Securities Exchange Act of 1934, as amended or (b) if during
the term of the agreement, individuals who at the beginning of such agreement
constitute the board of directors of the Company cease for any reason to
constitute at least a majority thereof, unless the election of each director who
is not a director at the beginning of such period has been approved in advance
by the directors representing at least two-thirds of the directors then in
office who were directors at the beginning of the term of the agreement.

CONSULTING AGREEMENTS

The Company has entered into a consulting agreement with Alma Management
Corp. ("Alma"), as of November 1, 1996. Under this agreement, which is for an
initial term of one year, Alma has agreed to cause its two principals (the
"Principals"), to provide sales and marketing advisory and consulting services
to the Company. Alma receives an annual consulting fee of $50,000 payable in
equal installments over the term of the agreement. In addition, Alma has
received options to purchase 133,333 shares of Common Stock at an exercise price
of $1.50 per share. One-third of the options vest on May 1, 1997, one-third six
months thereafter and the balance vest on May 1, 1998. The Company may terminate
the services of either Principal under the consulting agreement with Alma if
such Principal cannot adequately perform his duties thereunder because of mental
or physical disability, death or for "Just Cause" (as defined). The consulting
agreement provides that if one of the Principals is terminated by the Company,
the consulting fee paid to Alma will be reduced by one half and if both
Principals are terminated by the Company, no further compensation will be paid
to Alma. The consulting agreement with Alma expires in May 1998 and restricts
Alma and the Principals from engaging in competition with the Company for the
term thereof and for one year thereafter and contains provisions protecting the
Company's trade secrets and proprietary rights and information.

1995 LONG TERM INCENTIVE PLAN

In August 1995, the Company adopted The Mike's Original, Inc. 1995 Long
Term Incentive Plan (the "1995 Incentive Plan") in order to motivate qualified
employees of the Company, to assist the Company in attracting employees and to
align the interests of such persons with those of the Company's stockholders.

The 1995 Incentive Plan provides for the grant of "incentive stock options"
within the meaning of the Section 422 of the Internal Revenue Code of 1986, as
amended, "non-qualified stock options," restricted

38
<PAGE> 39

stock, performance grants and other types of awards to officers, key employees,
consultants and independent contractors of the Company and its affiliates.

The 1995 Incentive Plan, which is administered by the Board of Directors,
authorizes the issuance of a maximum of 433,333 shares of Common Stock. If any
award under the 1995 Incentive Plan terminates, expires unexercised, or is
canceled, the Common Stock that would otherwise have been issuable pursuant
thereto will be available for issuance pursuant to the grant of new awards. To
date, the Company has granted an aggregate of 306,667 options to purchase Common
Stock under the 1995 Incentive Plan, of which 250,000 options have been granted
to Michael Rosen, the Company's Chairman of the Board and Chief Executive
Officer. 33,333 of these options are exercisable for ten years from the date of
grant at a price of $3.00 per share and 216,667 of these options are exercisable
for ten years from the date of grant at a price of $1.50 per share. Another
56,667 options have been granted to Steven A. Cantor. Each of the options
granted to Mr. Cantor are exercisable for a ten year term at a price of $1.50
per share. As of the date of this Prospectus, none of these options had been
exercised.

1996 NON-QUALIFIED STOCK OPTION PLAN

In October 1996, the Company's Board of Directors approved a 1996
Non-Qualified Stock Option Plan (the "Non-Qualified Plan") which covers 500,000
shares of the Company's Common Stock. The options become exercisable in
installments as determined at the time of grant by the Board of Directors. As of
the date of this Prospectus, the Company had granted 478,333 options to purchase
shares of Common Stock under the Non-Qualified Plan at an exercise price of
$1.50 per share. Arthur G. Rosenberg, Martin Pilossoph and Myron Levy have been
granted options to purchase 23,333 shares of Common Stock each at the exercise
price of $1.50 per share pursuant to the Non-Qualified Plan. Frederic D. Heller
has been granted options to purchase 58,333 shares of Common Stock at the
exercise price of $1.50 per share pursuant to the Non-Qualified Plan. Alma has
been granted options to purchase 133,333 shares of Common Stock at an exercise
price of $1.50 per share pursuant to the Non-Qualified Plan. Steven A. Cantor
has been granted options to purchase 76,667 shares of Common Stock at an
exercise price of $1.50 per share. As of the date of this Prospectus, none of
these options had been exercised.

PERSONAL LIABILITY AND INDEMNIFICATION OF DIRECTORS

The Company's Certificate of Incorporation and By-laws contain provisions
which reduce the potential personal liability of directors for certain monetary
damages and provide for indemnity of directors and other persons. The Company is
unaware of any pending or threatened litigation against the Company or its
directors that would result in any liability for which such director would seek
indemnification or similar protection.

Such indemnification provisions are intended to increase the protection
provided directors and, thus, increase the Company's ability to attract and
retain qualified persons to serve as directors. Because directors liability
insurance is only available at considerable cost and with low dollar limits of
coverage and broad policy exclusions, the Company does not currently maintain a
liability insurance policy for the benefit of its directors, although the
Company may attempt to acquire such insurance in the future. The Company
believes that the substantial increase in the number of lawsuits being
threatened or filed against corporations and their directors and the general
unavailability of directors liability insurance to provide protection against
the increased risk of personal liability resulting from such lawsuits have
combined to result in a growing reluctance on the part of capable persons to
serve as members of boards of directors of companies, particularly of companies
which intend to become public companies. The Company also believes that the
increased risk of personal liability without adequate insurance or other
indemnity protection for its directors could result in overcautious and less
effective direction and management of the Company. Although no directors have
resigned or have threatened to resign as a result of the Company's failure to
provide insurance or other indemnity protection from liability, it is uncertain
whether the Company's directors would continue to serve in such capacities if
improved protection from liability were not provided.

The provisions affecting personal liability do not abrogate a director's
fiduciary duty to the Company and its stockholders, but eliminate personal
liability for monetary damages for breach of that duty. The provisions

39
<PAGE> 40

do not, however, eliminate or limit the liability of a director for failing to
act in good faith, for engaging in intentional misconduct or knowingly violating
a law, for authorizing the illegal payment of a dividend or repurchase of stock,
for obtaining an improper personal benefit, for breaching a director's duty of
loyalty (which is generally described as the duty not to engage in any
transaction which involves a conflict between the interests of the Company and
those of the director) or for violations of the federal securities laws. The
provisions also limit or indemnify against liability resulting from grossly
negligent decisions including grossly negligent business decisions relating to
attempts to change control of the Company.

The provisions regarding indemnification provide, in essence, that the
Company will indemnify its directors against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with any action, suit or proceeding arising out of the
director's status as a director of the Company, including actions brought by or
on behalf of the Company (stockholder derivative actions). The provisions do not
require a showing of good faith. Moreover, they do not provide indemnification
for liability arising out of willful misconduct, fraud, or dishonesty, for
"short-swing" profits violations under the federal securities laws, or for the
receipt of illegal remuneration. The provisions also do not provide
indemnification for any liability to the extent such liability is covered by
insurance. One purpose of the provisions is to supplement the coverage provided
by such insurance. However, as mentioned above, the Company does not currently
provide such insurance to its directors, and there is no guarantee that the
Company will provide such insurance to its directors in the near future,
although the Company may attempt to obtain such insurance.

These provisions diminish the potential rights of action which might
otherwise be available to stockholders by limiting the liability of officers and
directors to the maximum extent allowable under Delaware law and by affording
indemnification against most damages and settlement amounts paid by a director
of the Company in connection with any stockholders derivative action. However,
the provisions do not have the effect of limiting the right of a stockholder to
enjoin a director from taking actions in breach of his fiduciary duty, or to
cause the Company to rescind actions already taken, although as a practical
matter courts may be unwilling to grant such equitable remedies in circumstances
in which such actions have already been taken. Also, because the Company does
not presently have directors liability insurance and because there is no
assurance that the Company will procure such insurance or that if such insurance
is procured it will provide coverage to the extent directors would be
indemnified under the provisions, the Company may be forced to bear a portion or
all of the cost of the director's claims for indemnification under such
provisions. If the Company is forced to bear the costs for indemnification, the
value of the Company's stock may be adversely affected.

The Company has entered into Indemnification Agreements with certain of its
officers and directors. The Indemnification Agreements provide for reimbursement
for all direct and indirect costs of any type or nature whatsoever (including
attorneys' fees and related disbursements) actually and reasonably incurred in
connection with either the investigation, defense or appeal of a Proceeding, (as
defined) including amounts paid in settlement by or on behalf of an indemnitee
thereunder.

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

40
<PAGE> 41

PRINCIPAL STOCKHOLDERS

The following table sets forth the beneficial ownership of the Company's
Common Stock as of June 6, 1997 (taking into effect a .153846-for-1 reverse
stock split effected in June 1996 and a .667-for-1 reverse stock split effected
in February 1997) of (i) each person known by the Company to beneficially own 5%
or more of the Company's outstanding Common Stock, (ii) each of the Company's
executive officers, directors and director nominees, and (iii) all of the
Company's executive officers and directors as a group. Except as otherwise
indicated, all shares of Common Stock are beneficially owned, and investment and
voting power is held, by the persons named as owners.

<TABLE>
<CAPTION>
PERCENTAGE
OWNERSHIP(8)
AMOUNT AND ---------------------
NATURE OF SHARES BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED* OFFERING OFFERING
- --------------------------------------------------------- ------------------- -------- --------
<S> <C> <C> <C>
Michael Rosen(1)......................................... 283,333(2) 10.4% 8.3%
Rachelle Rosen(1)........................................ 283,333(3) 10.4% 8.3%
Steven A. Cantor(1)...................................... 432,295(4) 16.2% 12.9%
Annette Cantor........................................... 298,650 11.9% 9.2%
Frederic D. Heller(1).................................... 16,667 * *
Michael Mitchell......................................... 0(5) * *
Arthur G. Rosenberg(1)................................... 23,333(6) * *
Martin Pilossoph(1)...................................... 23,333(6) * *
Myron Levy(1)............................................ 24,167 1.0% *
Louis P. Solferino(9).................................... 180,034 7.1% 5.6%
Michael Jones(10)........................................ 146,342 5.8% 4.5%
The Moshe Isaac Foundation(11)........................... 200,000 7.9% 6.2%
Food Commodities Limited(12)............................. 266,667 10.5% 8.3%
All officers and directors as a group (6 persons)........ 370,833(7) 13.4% 10.7%
</TABLE>

- ---------------
* less than one percent (1%) unless otherwise indicated.

(1) The address for each of these persons is 131 Jericho Turnpike, Jericho, New
York 11753.

(2) Includes options to purchase 33,333 shares of Common Stock granted under
the 1995 Incentive Plan in May 1996 and options to purchase 166,667 shares
of Common Stock granted under the 1995 Incentive Plan in October 1996. Does
not include options to purchase 50,000 shares of Common Stock granted under
the 1995 Incentive Plan in May 1997, which are not exercisable within sixty
(60) days from the date hereof.

(3) Represents Common Stock and options to purchase Common Stock owned by
Michael Rosen, Ms. Rosen's husband. Rachelle Rosen otherwise owns no shares
of Common Stock.

(4) Includes options to purchase 56,667 shares of Common Stock granted under
the 1995 Incentive Plan and options to purchase 76,666 shares of Common
Stock granted under the Non-Qualified Plan.

(5) Does not include options to purchase 66,667 shares of Common Stock granted
under the 1996 Non-Qualified Plan, which are not exercisable within sixty
(60) days from the date hereof.

(6) Includes options to purchase 23,333 shares of Common Stock granted under
the Non-Qualified Plan.

(7) Includes 246,667 shares issuable upon the exercise of options granted
pursuant to the Company's stock option plans.

(8) Assumes no exercise of the over-allotment option.

(9) The address for Mr. Solferino is 115 Blue Spruce Road, Levittown, New York
11756.

(10) The address for Mr. Jones is 86 West Main Street, East Islip, New York
11730.

(11) The address for The Moshe Isaac Foundation is c/o Teaneck Nursing Center,
1104 Teaneck Road, Teaneck, New Jersey 07666. The principal of this entity
is Michael Koenig.

(12) The address for Food Commodities Limited is Bel Royal House, Hilgrove
Street, St. Helier, Jersey JE24WG, British Isles. The principal of this
entity is Robert S. Fraley.

41
<PAGE> 42

CERTAIN TRANSACTIONS

In April 1997, the Company issued 150,000 shares of Common Stock to Steven
A. Cantor, the Company's largest stockholder, as consideration for the
termination of his three year consulting agreement providing for payments of
$125,000 annually, which would have commenced on the closing of this offering.

In December 1996, the Company issued a convertible promissory note to The
Moshe Isaac Foundation bearing interest at the rate of 8% per annum in the
principal amount of $225,000 (the "Convertible Note"). The Convertible Note was
to paid in full the earlier of five days after the closing date of an initial
public offering or December 31, 1997. In lieu of receiving payment, the holder
of the Convertible Note has the right to convert within five (5) days of the
closing of such initial public offering into 200,000 shares of Common Stock. In
April 1997, such note was converted into 200,000 shares of Common Stock.

In October 1996, the Company issued 16,667 shares of Common Stock to
Frederic D. Heller, the Company's Vice President-Finance, Treasurer and a
director, as payment for services rendered during the year ended December 31,
1996. These shares were valued at $3.00 per share, the estimated fair market
value of the Common Stock at the date of issuance.

On August 28, 1996, Michael Rosen, the Company's Chairman of the Board,
President and Chief Executive Officer was issued a promissory note in the
principal amount of $206,250. The funds that Mr. Rosen loaned the Company were
the proceeds of a sale by Mr. Rosen to investors of 183,333 shares of his Common
Stock at a price of $1.12 per share. This loan bears interest at a rate of 8%
and initially was payable the earlier of (i) thirteen (13) months from the date
of the loan, or (ii) the date the Company successfully consummates an initial
public offering of securities of the Company, but only to the extent that the
over-allotment option is exercised in such offering and only from the proceeds
received by the Company from the exercise of the over-allotment option. In
September 1996, the maturity date of this promissory note was revised to
September 30, 1998. In addition, the revised promissory note provides that
one-half of the outstanding principal amount of the note will be paid with
accrued interest thereon in the event the Company successfully consummates an
initial public offering of securities of the Company, but only to the extent
that the over-allotment option is exercised in such offering and only from the
proceeds received by the Company from the exercise of the over-allotment option.

In August, September and October 1996, the Company received three loans
from Steven A. Cantor aggregating $253,750. A portion of the funds that this
stockholder loaned the Company was a result of the stockholder selling shares of
his Common Stock to an investor. In August 1996, this shareholder sold 38,889
shares of his Common Stock at a price of $1.12 per share. In September 1996,
this shareholder sold 23,333 shares of his Common Stock at a price of $1.50 per
share. These loans, which were consolidated into one note in September 1997,
bear interest at a rate of 8% and are payable the earlier of (i) June 1, 1997,
or (ii) with respect to $123,750 of the principal amount, the date the Company
successfully consummates an initial public offering of securities of the
Company, but only to the extent that either the over-allotment option is
exercised in such offering or within ninety (90) days after the underwriter
elects not to exercise the over-allotment option.

On May 30, 1996, the Company received loans of $50,000 each from Louis P.
Solferino and Michael P. Jones. The loans bear interest at an annual rate of 10%
and initially were due on demand. In September 1996, the maturity date of these
promissory notes was revised to occur the earlier of (i) May 30, 1998 or (ii)
the date the Company successfully consummates an initial public offering of
securities of the Company, but only to the extent that the over-allotment option
is exercised in such offering and only from the proceeds received by the Company
from the exercise of the over-allotment option. In addition, the Company issued
6,667 shares of its Common Stock to each of Mr. Solferino and Mr. Jones. These
shares were valued at $3.00 per share, the fair market value of the Common Stock
at the date of issuance.

In February 1996, the Company issued $150,000 and $75,000 of 12%
convertible promissory notes to Mr. Solferino and Mr. Jones, respectively, which
were payable on the earlier of August 31, 1996 or upon the consummation of an
interim financing as contemplated by a letter of intent with an investment
banker for an initial public offering of the Company's securities. In June 1996,
in lieu of receiving payment in such event,

42
<PAGE> 43

the holders of the notes exchanged the notes, based on a conversion price
determined by the notes, into Second Private Placement Units. In April 1997, Mr.
Solferino and Mr. Jones converted $16,050 and $8,025 of the principal and
accrued interest into 8,025 and 4,013 shares of Common Stock, respectively.

During the fiscal year ended March 31, 1995, the Company issued two
promissory notes of $25,000 each to Elizabeth Pilossoph, who is the mother of
Rachelle Rosen, the mother-in-law of Michael Rosen, and the wife of Martin
Pilossoph. See "Management". These notes were originally due in November and
December 1998, respectively. The Company repaid one of these notes in April
1995. In September 1995, the maturity date of the outstanding promissory note
was revised to occur the earlier of the Company receiving proceeds from a
securities offering or June 1, 1996. In April 1996, the maturity date of the
outstanding promissory note was revised to occur subsequent to the repayment of
the Penn Note issued in April 1996. In September 1996, the maturity date of this
promissory note was revised to occur the earlier of (i) February 1, 1998 or (ii)
upon the occurrence of events defined by the note as a "Change in Control."
Interest accrues at an annual rate of 6% and is payable at the maturity of the
note.

During the fiscal year ended March 31, 1994, the Company borrowed $100,000
from the mother of Steven A. Cantor. See "Principal Stockholders". The loan,
which was originally due on demand, was formalized in the form a promissory note
during September 1995. In April 1996, the maturity date of the $100,000
obligation was revised to occur subsequent to the repayment of the Penn Note
issued in April 1996. The loan was non-interest bearing through April 1994. From
May 1994 through maturity interest accrues at an annual rate of 6% and is
payable upon maturity. In September 1996, the maturity date of this promissory
note was revised to occur the earlier of: (i) February 1, 1998 or (ii) upon the
occurrence of events defined by the note as a "Change in Control." During the
fiscal year ended March 31, 1995, the Company borrowed an additional $100,000
from Ms. Cantor. The loan was due on demand with interest at an annual rate of
6%. The Company repaid $50,000 of this loan in March 1995, and repaid the
remaining $50,000 during April 1995.

During the fiscal year ended March 31, 1994, the Company obtained loans
from Rachelle Rosen and issued promissory notes of $40,000 and $15,000 which are
payable in May and June 1998, respectively. Interest accrues at an annual rate
of 8% and is payable at the maturity date of the notes.

As a general rule, all transactions among the Company and its officers,
directors or stockholders have been, and in the future will be, made on terms no
less favorable to the Company than those available from unaffiliated parties.

43
<PAGE> 44

SELLING SECURITYHOLDERS

This Prospectus may also be used for the possible offering of additional
shares of Common Stock owned by the Selling Securityholders. Certain Selling
Securityholders have agreed that the shares of Common Stock owned by such
persons registered for resale hereunder may not be sold for twenty-four (24)
months from the date of this Prospectus without the prior written consent of
Millennium. The Company will not receive any proceeds from such sales.
Millennium may release such restriction at any time after completion of this
offering, although there are no understandings or arrangements in this regard.
The resale of the securities by the Selling Securityholders is subject to
Prospectus delivery and other requirements of the Securities Act.

The Shares are being offered by the following persons in the amounts set
forth below:

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP NUMBER OF SHARES BENEFICIAL OWNERSHIP
STOCKHOLDER PRIOR TO OFFERING OFFERED AFTER OFFERING*
- ---------------------------------------- -------------------- ---------------- --------------------
<S> <C> <C> <C>
Dental Investment Study Group........... 52,500 52,500 --
James C. LaVigne........................ 30,000 30,000 --
Paul Greenstein......................... 30,000 30,000 --
Ashok Chaudhari......................... 15,000 15,000 --
Paul A. Kaye, Family Trust.............. 15,000 15,000 --
Gregory J. and Toni Marie Shottenkirk... 15,000 15,000 --
Achyut Sahasra.......................... 15,000 15,000 --
Bruce Evanter........................... 7,500 7,500 --
Steven Watson........................... 7,500 7,500 --
Marvin and Ellen Ochs................... 7,500 7,500 --
Lawrence A. Rosenstadt.................. 7,500 7,500 --
Richard Rubenstein...................... 7,500 7,500 --
Marvin and Linda Watsky................. 7,500 7,500 --
Michael Ring............................ 7,500 7,500 --
Grahm de la Garza Grahm Limited
Family Partnership.................... 7,500 7,500 --
Robert G. Morris, DDS, Inc. Pension..... 7,500 7,500 --
Marque of Distinction, Inc. Retirement
Trust................................. 7,500 7,500 --
Gulfstream Asset Management Corp.
Retirement Trust...................... 7,500 7,500 --
Ted Cohen............................... 7,500 7,500 --
Paul E. Gavin........................... 7,500 7,500 --
Alan Bush............................... 33,333 33,333 --
Sally Miglio............................ 15,000 15,000 --
Paul Rubin.............................. 7,500 7,500 --
Barry Weintraub......................... 7,500 7,500 --
J. Scott Murphy......................... 7,500 7,500 --
Raymond Hancock......................... 7,500 7,500 --
Jane Kirschner.......................... 3,750 3,750 --
David and Elaine Johnson................ 3,750 3,750 --
Glenn Koebel............................ 3,750 3,750 --
Irving Wagner........................... 3,750 3,750 --
</TABLE>

44
<PAGE> 45

- ---------------
* less than 1% unless otherwise indicated

(1) See "Legal Matters."

(2) See "Management" and "Principal Stockholders."

(3) See "Principal Stockholders" and "Certain Transactions."

The securities offered hereby may be sold from time to time directly by the
Selling Securityholders. Alternatively, the Selling Securityholders may from
time to time offer such securities through underwriters, dealers or agents. The
distribution of securities by the Selling Securityholders may be effected in one
or more transactions that may take place on the over-the-counter market,
including ordinary broker's transactions, privately-negotiated transactions or
through sales to one or more broker-dealers for resale of such shares as
principals, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the Selling
Securityholders in connection with such sales of securities. The Selling
Securityholders and intermediaries through whom such securities are sold may be
deemed "underwriters" within the meaning of the Securities Act with respect to
the securities offered, and any profits realized or commissions received may be
deemed underwriting compensation. The Company is not aware of any present
intentions of any Selling Stockholders to engage in any transactions with either
of the Representatives of this offering.

At the time a particular offer of securities is made by or on behalf of a
Selling Securityholder, to the extent required, a prospectus will be distributed
which will set forth the number of shares being offered and the terms of the
offering, including the name or names of any underwriters, dealers or agents, if
any, the purchase price paid by any underwriter for shares purchased from the
Selling Securityholder and any discounts, commissions or concessions allowed or
reallowed or paid to dealers, and the proposed selling price to the public.

Under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and the regulations thereunder, any person participating in a distribution of
the securities of the Company offered by this Prospectus may not simultaneously
engage in market-making activities with respect to such securities of the
Company during the applicable restricted period (one or five business days)
before the day of pricing of this offering, and until the distribution is over.
In addition, and without limiting the foregoing, the Selling Securityholders
will be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including without limitation, Regulation M, and Rules
100 through 105 thereunder, in connection with transactions in such securities,
which provisions may limit the time of purchases and sales of such securities by
the Selling Securityholders.

Sales of securities by the Selling Securityholders or even the potential of
such sales would likely have an adverse effect on the market prices of the
securities offered hereby. As of the date of this Prospectus, the freely
tradeable securities of the Company (the "public float") will be (i) 700,000
shares of Common Stock, and (ii) 1,400,000 Class A Warrants.

45
<PAGE> 46

DESCRIPTION OF SECURITIES
CAPITAL STOCK

The Company's authorized capital stock consists of 20,000,000 shares of
Common Stock, $.001 par value per share and 500,000 shares of Preferred Stock,
$.01 par value per share.

Units

The securities offered hereby consist of Units, with each Unit including
one share of the Company's Common Stock and two redeemable Class A Warrants.
Prior to this offering, there has been no public market for the Units, Common
Stock or Class A Warrants. The Common Stock and the Class A Warrants comprising
each Unit will not trade separately from the Unit until the earlier of 90 days
from the date of this Prospectus or the determination by Millennium, in its sole
discretion, to permit such separate trading. At the time such separate trading
is permitted, the Units may be delisted from separate trading on the OTC
Bulletin Board.

Common Stock

General. The Company has 20,000,000 authorized shares of Common Stock,
2,529,929 of which were issued and outstanding prior to the offering. All shares
of Common Stock currently outstanding are validly issued, fully paid and
non-assessable, and all shares which are the subject of this Prospectus, when
issued and paid for pursuant to this offering, will be validly issued, fully
paid and non-assessable.

Voting Rights. Each share of Common Stock entitles the holder thereof to
one vote, either in person or by proxy, at meetings of stockholders. The
Company's Board consists of three classes each of which serves for a term of
three years. At each annual meeting of the stockholders the directors in only
one class will be elected. The holders are not permitted to vote their shares
cumulatively. Accordingly, the holders of more than fifty percent (50%) of the
issued and outstanding shares of Common Stock can elect all of the directors of
the Company. See "Principal Stockholders."

Dividend Policy. All shares of Common Stock are entitled to participate
ratably in dividends when and as declared by the Company's Board of Directors
out of the funds legally available therefor. Any such dividends may be paid in
cash, property or additional shares of Common Stock. The Company has not paid
any dividends since its inception and presently anticipates that all earnings,
if any, will be retained for development of the Company's business and that no
dividends on the shares of Common Stock will be declared in the foreseeable
future. Further, pursuant to a credit agreement with one of its former
manufacturers, the Company is prohibited from paying dividends on any of its
capital stock until the repayment of the indebtedness thereunder. Payment of
future dividends will be subject to the discretion of the Company's Board of
Directors and will depend upon, among other things, future earnings, the
operating and financial condition of the Company, its capital requirements,
general business conditions and other pertinent facts. Therefore there can be no
assurance that any dividends on the Common Stock will be paid in the future. See
"Dividend Policy."

Miscellaneous Rights and Provisions. Holders of Common Stock have no
preemptive or other subscription rights, conversion rights, redemption or
sinking fund provisions. In the event of the liquidation or dissolution, whether
voluntary or involuntary, of the Company, each share of Common Stock is entitled
to share ratably in any assets available for distribution to holders of the
equity of the Company after satisfaction of all liabilities, subject to the
rights of holders of Preferred Stock.

Shares Eligible for Future Sale. Upon completion of this offering, the
Company will have 3,229,929 shares of Common Stock outstanding. Of these shares,
the 700,000 shares sold in this offering will be freely tradeable without
restriction or further registration under the Securities Act, except for any
shares purchased by an "affiliate" of the Company (in general, a person who has
a control relationship with the Company) which will be subject to the
limitations of Rule 144 adopted under the Securities Act. Another 861,167 shares
are registered under the registration statement of which this Prospectus forms a
part and are freely saleable under the Securities Act, but may not be
transferred for twenty-four (24) months from the date of this Prospectus (except
for approximately 300,000 shares owned by participants in the Company's Second
Private Placement for which the holding period is eighteen (18) months and
200,000 shares for which the holding period is twelve (12) months) or at such
earlier

46
<PAGE> 47

date as may be permitted by the Representative. All of the remaining shares are
deemed to be "restricted securities," as that term is defined under Rule 144
promulgated under the Securities Act.

In general, under Rule 144 as effective on April 29, 1997, subject to the
satisfaction of certain other conditions, commencing ninety (90) days after the
effective date of the registration statement of which this prospectus is a part,
a person, including an affiliate of the Company (or persons whose shares are
aggregated), who has owned restricted shares of Common Stock beneficially for at
least one year is entitled to sell, within any three-month period, a number of
shares that does not exceed the greater of 1% of the total number of outstanding
shares of the same class or the average weekly trading volume of the Company's
Common Stock on all exchanges and/or reported through the automated quotation
system of a registered securities association during the four calendar weeks
preceding the date on which notice of the sale is filed with the Commission.
Sales under Rule 144 are also subject to certain manner of sale provisions,
notice requirements and the availability of current public information about the
Company. A person who has not been an affiliate of the Company for at least the
three months immediately preceding the sale and who has beneficially owned
shares of Common Stock for at least two years is entitled to sell such shares
under Rule 144 without regard to any of the limitations described above.

809,772 of the shares of restricted stock presently outstanding have been
held at least one year. Accordingly, commencing three months following the
completion of the offering these shares would be eligible for resale pursuant to
Rule 144. However, pursuant to the terms of the Underwriting Agreement, certain
Selling Securityholders owning an aggregate of 861,167 shares of Common Stock
have agreed not to sell any of their shares for a period of twelve (12) to
twenty-four (24) months following the date of this Prospectus, as previously set
forth, without the prior written consent of Millennium. The sale of any
substantial number of these shares in the public market could adversely affect
prevailing market prices following the offering.

No predictions can be made as to the effect, if any, that sales of shares
under Rule 144 or otherwise or the availability of shares for sale will have on
the market, if any, prevailing from time to time. Sales of substantial amounts
of the Common Stock pursuant to Rule 144 or otherwise may adversely affect the
market price of the Common Stock or the Warrants offered hereby.

Class A Warrants

The Class A Warrants included in the Units offered hereby will be issued in
registered form under a warrant agreement (the "Warrant Agreement") between the
Company and American Stock Transfer & Trust Company, as Warrant Agent (the
"Warrant Agent"). The following summary of the provisions of the Warrants is
qualified in its entirety by reference to the Warrant Agreement, a copy of which
is filed as an exhibit to the registration statement of which this Prospectus is
a part.

Rights to Purchase Common Stock. Following the earlier of 90 days after
the date of this Prospectus or earlier if permitted by Millennium in its sole
discretion, each Class A Warrant will be separately transferable. Each Class A
Warrant will entitle the registered holder thereof to purchase one share of
Common Stock (subject to adjustment as described below) for a period of three
years commencing on the effective date of this Prospectus at a price of $5.00
per share of Common Stock. A holder of Class A Warrants may exercise such
warrants by surrendering the certificate evidencing such warrants to the Warrant
Agent, together with the form of election to purchase on the reverse side of
such certificate properly completed and executed and the payment of the exercise
price and any transfer tax. If less than all of the warrants evidenced by a
warrant certificate are exercised, a new certificate will be issued for the
remaining number of warrants. Following the earlier of 90 days after the date of
this Prospectus or earlier if permitted by Millennium in its sole discretion,
holders of the Class A Warrants may sell the Class A Warrants if a market exists
rather than exercise them. However, there can be no assurance that a market will
develop or continue as to such Class A Warrants.

For a holder of a warrant to exercise the Class A Warrants, there must be a
current registration statement on file with the Commission and various state
securities commissions. The Company will be required to file post-effective
amendments to the registration statement when events require such amendments.
While it is the Company's intention to file post-effective amendments when
necessary, there is no assurance that the registration statement will be kept
effective. If the registration statement is not kept current for any reason, the

47
<PAGE> 48

Class A Warrants will not be exercisable, and holders thereof may be deprived of
value. Moreover, if the shares of Common Stock underlying the Class A Warrants
are not registered or qualified for sale in the state in which a Class A Warrant
holder resides, such holder might not be permitted to exercise the Class A
Warrants. If the Company is unable to qualify the Common Stock underlying such
Class A Warrants for sale in certain states, holders of the Company's Class A
Warrants in those states will have no choice but to either sell such Class A
Warrants or allow them to expire.

The Company has authorized and reserved for issuance a number of underlying
shares of Common Stock sufficient to provide for the exercise of the Class A
Warrants. When issued, each share of Common Stock will be fully paid and
nonassessable.

Class A Warrant holders will not have any voting or other rights as
shareholders of the Company unless and until Class A Warrants are exercised and
shares issued pursuant thereto.

Redemption Rights. Any or all of the Class A Warrants may be redeemed by
the Company at a price of $.01 per warrant, upon the giving of not less than
thirty (30) days' nor more than sixty (60) days' written notice at any time
after the date of this Prospectus, provided that the average closing bid price
of the Common Stock for twenty (20) consecutive trading days ending three (3)
days of the notice of redemption has equaled or exceeded $10.00 per share. The
right to purchase the Common Stock represented by the Class A Warrants so called
for redemption will be forfeited unless the Class A Warrants are exercised prior
to the date specified in the foregoing notice of redemption. Any redemption of
the Class A Warrants during the one year period commencing on the date of this
Prospectus shall require the consent of the Representative.

Adjustments. The exercise price and the number of shares of Common Stock
issuable upon the exercise of each Class A Warrant are subject to adjustment in
the event of a stock dividend, recapitalization, merger, consolidation or
certain other events.

For the life of the Class A Warrants, the holders thereof are given the
opportunity, at nominal cost, to profit from a rise in the market price of the
Common Stock of the Company. The exercise of the Class A Warrants will result in
the dilution of the then book value of the Common Stock of the Company held by
the public investors and would result in a dilution of their percentage
ownership of the Company. The terms upon which the Company may obtain additional
capital may be adversely affected through the period that the Class A Warrants
remain exercisable. The holders of these Class A Warrants may be expected to
exercise them at a time when the Company would, in all likelihood, be able to
obtain equity capital on terms more favorable than those provided for by the
Class A Warrants.

Second Private Placement

From June through September 1996, the Company issued an aggregate of 61.5
Second Private Placement Units, each Second Private Placement Unit consisting of
a $2,500 principal amount of Second Private Placement Notes and 7,500 Second
Private Placement Shares. The proceeds from the sale of the Second Private
Placement Units were used to pay promotional expenses incurred in connection
with entering new markets and maintaining existing markets and to fund working
capital. The Company has registered under the registration statement of which
this prospectus forms a part all of the 461,250 Second Private Placement Shares
included in the Second Private Placement Units. The Second Private Placement
Shares are not transferable until a minimum of eighteen (18) months following
the date of this Prospectus or at such earlier date as may be permitted by the
Representative. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Underwriting."

The Second Private Placement Notes bear interest at a rate equal to 12% per
annum, payable one year after the issuance of the Second Private Placement Notes
and monthly in arrears thereafter. The Second Private Placement Notes mature on
the earlier of (i) July 31, 1997, or (ii) the closing date of this offering;
provided, that the maturity of the Second Private Placement Notes will be
accelerated upon an Event of Default (as defined therein).

The purchasers of the Second Private Placement Units also received 7,500
shares of Common Stock for each $2,500 principal amount of Second Private
Placement Units purchased. These shares of Common Stock

48
<PAGE> 49

are registered for resale hereunder and also have piggyback registration rights
with respect to all other registration statements filed by the Company with the
SEC (other than on forms S-4 or S-8), subject to customary underwriter's or
board of director's rights to limit such participation. However, all holders of
Second Private Placement Shares are prohibited from selling these Second Private
Placement Shares for a minimum of eighteen (18) months after the date of this
Prospectus, subject to the prior consent of the Representative.

Preferred Stock

The Company's Certificate of Incorporation, as amended, authorizes the
issuance of up to 500,000 shares of preferred stock, par value $.01 per share.
Currently there are no shares of preferred stock issued or outstanding.

The issuance of Preferred Stock by the Board of Directors could adversely
affect the rights of holders of shares of Common Stock by, among other things,
establishing preferential dividends, liquidation rights or voting power. The
issuance of Preferred Stock could be used to discourage or prevent efforts to
acquire control of the Company through the acquisition of shares of Common
Stock.

CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION

The Company's Certificate of Incorporation contains certain provisions
which may be deemed to be "anti-takeover" in nature in that such provisions may
deter, discourage or make more difficult the assumption of control of the
Company by another entity or person. In addition to the ability to issue
Preferred Stock, these provisions are as follows:

A vote of 66 2/3% of the stockholders is required by the Certificate of
Incorporation in order to approve certain transactions including mergers and
sales or transfers of all or substantially all of the assets of the Company.

The Company's By-laws provide that the members of the Board of Directors of
the Company be classified into three classes: Class I (which consists of Arthur
G. Rosenberg) will serve until the Company's 1997 Annual Meeting of
Stockholders. Class II (which consists of Martin Pilossoph) will serve until the
Company's 1998 Annual Meeting of Stockholders. Class III (which consists of
Michael Rosen and Frederic D. Heller) will serve until the Company's 1999 Annual
Meeting of Stockholders. After their initial staggered terms, the term of each
class will run for three years and expire at successive annual meetings of
stockholders. Accordingly, it is expected that it would take a minimum of two
annual meetings of stockholders to change a majority of the Board of Directors.
Further, directors may only be removed for cause prior to the expiration of
their term of office. Upon completion of this offering, Myron Levy will be a
director in Class II, to serve until the Company's 1998 Annual Meeting of
Stockholders.

The Delaware General Corporation Law further contains certain anti-takeover
provisions. Section 203 of the Delaware General Corporation Law provides, with
certain exceptions, that a Delaware corporation may not engage in any of a broad
range of business combinations with a person who owns 15% or more of the
corporation's outstanding voting stock (an "interested stockholder") for a
period of three years from the date that such person became an interested
stockholder unless: (i) the transaction resulting in a person's becoming an
interested stockholder, or the business combination is approved by the board of
directors of the corporation before the person becomes an interested
stockholder; (ii) the interested stockholder acquires 85% or more of the
outstanding voting stock of the corporation (excluding shares owned by persons
who are both officers and directors of the corporation, and shares held by
certain employee stock ownership plans); or (iii) the business combination is
approved by the corporation's board of directors and by the holders of at least
66 2/3% of the corporation's outstanding voting stock at an annual or special
meeting, excluding shares owned by the interested stockholder.

Transfer Agent

The transfer agent and registrar for the Company's Common Stock is American
Stock Transfer and Trust Company, 6201 15th Avenue, Brooklyn, New York 11219.

49
<PAGE> 50

UNDERWRITING

Subject to the terms and conditions contained in the underwriting agreement
between the Company and the underwriters named below (the "Underwriters"), for
which IAR Securities Corp. is acting as Representative (a copy of which
agreement is filed as an exhibit to the Registration Statement of which this
Prospectus forms a part), the Company has agreed to sell to each of the
Underwriters named below, and each of such Underwriters has severally agreed to
purchase the number of Units set forth opposite its name. All 700,000 Units
offered must be purchased by the several Underwriters if any are purchased. The
Units are being offered by the Underwriters subject to prior sale, when, as and
if delivered to and accepted by the Underwriters and subject to approval of
certain legal matters by counsel and to certain other conditions.

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF UNITS
--------------------------------------------------------------------------- --------
<S> <C>
Millennium Securities Corp................................................. 523,000
IAR Securities Corp........................................................ 117,000
VTR Capital, Inc........................................................... 60,000
-------
700,000
=======
</TABLE>

The Representative has advised the Company that the Underwriters propose to
offer the Units to the public at the offering price set forth on the cover page
of this Prospectus. The Representative has further advised the Company that the
Underwriters propose to offer the Units to selected dealers who are members of
the National Association of Securities Dealers, Inc. ("NASD"), at that price
less concessions of not more than $.31 per Unit. The public offering price, the
concession to selected dealers, and the reallowance may be changed by the
Representative.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments it may be required to make in respect thereof. It is the position of
the Commission that indemnification for liabilities under the Securities Act is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.

The Company has agreed to pay the Underwriters a non-accountable expense
allowance of 3% of the aggregate offering price (of which $50,000 has already
been received) with respect to the Units offered hereby.

The Company has also agreed to pay the Underwriters a consulting fee of
$40,000 for financial consulting services to be performed over a period of four
(4) years.

Upon the exercise after one year following the date of this offering of any
Warrant included in the Units, the Company has agreed to pay the Underwriters a
fee of 5% of the aggregate exercise price of such warrant if (i) the market
price of the Company's Common Stock is greater than the exercise price of such
Warrant on the date of exercise; (ii) the exercise of such Warrant was solicited
by the Representative and the holder of such Warrant so states in writing and
designates in writing that the Representative is entitled to receive such
compensation, (iii) such Warrant is not held in a discretionary account; and
(iv) the solicitation of such Warrant was not in violation of Regulation M, and
Rules 100 through 105 thereunder promulgated under the Exchange Act.

The Company has agreed to sell to the Representative or its designees the
Representative's Purchase Option to purchase 70,000 Units at an exercise price
of $8.06 per Unit. Other than a higher exercise price and the redemption
feature, the Warrants offered to the public hereby will be treated pari passu
with the public Warrants. The Warrants issuable upon exercise of the
Representative's Warrants will entitle the holder to purchase shares of Common
Stock at a price of $7.80 per share or 130% of the price of the Common Stock
offered to the public hereby, for a period of three years commencing on the date
hereof. The Representative's Warrants will not be transferable for one year from
the date hereof except to officers and partners of the Underwriters or members
of the selling group and are exercisable during the four year period commencing
one year from the date of this Prospectus. Any profit realized upon any resale
of the Representative's Warrants or upon the sale of the underlying securities
thereof may be deemed to be an additional underwriter's

50
<PAGE> 51

compensation. The Company has agreed to register (or file a post-effective
registration amendment with respect to any registration statement registering)
the securities underlying the Representative's Purchase Option under the
Securities Act at its expense on one occasion during the five years following
the date of this Prospectus and at the expense of the holders thereof. The
Company has also agreed to "piggy-back" registration rights for the securities
underlying the Representative's Purchase Option at the Company's expense during
the six (6) years following the date of this Prospectus.

The Company has also agreed, for a period of not less than two years
commencing on the date of this offering, at the request of the Representative,
to nominate and use its best efforts to elect a designee of the Representative
to the Board of Directors of the Company or to appoint a designee of the
Representative as a non-voting observer of the Board of Directors. The
Representative has informed the Company that it does not intend to exercise this
right upon consummation of this offering or in the near future.

The foregoing does not purport to be a complete statement of the terms and
conditions of the Underwriting Agreement and related documents, copies of which
are on file at the offices of the Representative, the Company and the
Commission, and forms of which have been filed as an exhibit to the Registration
Statement of which this Prospectus is a part.

The Representative has informed the Company that the Representative does
not intend to confirm sales to any accounts over which it exercises
discretionary authority.

The Company, and its officers and directors, have agreed not to offer,
pledge, sell, contract to sell, grant any option for the sale of, or otherwise
dispose of, directly or indirectly, any securities of the Company for a period
of twenty-four (24) months after the date of this Prospectus, without the prior
written consent of Millennium, except for the exercise of the Warrants or
currently outstanding stock options.

Prior to this offering, there has been no market for the Units, Common
Stock or the Warrants. Although the Company will apply to list the Units, Common
Stock and the Warrants on the OTC Bulletin Board, there can be no assurance that
an active trading market will develop for the Common Stock or the Warrants, or,
if developed, that it will be maintained. The Common Stock and the Class A
Warrants comprising each Unit will not trade separately from the Unit until the
earlier of 90 days from the date of this Prospectus or the determination by
Millennium, in its sole discretion, to permit such separate trading. At the time
such separate trading is permitted, the Units may be delisted from separate
trading on the OTC Bulletin Board.

The initial public offering price has been arbitrarily determined by
negotiations between the Company and the Representative. Among the factors
contained in determining the initial public offering price, in addition to
prevailing market conditions, were the Company's capital structure, estimates of
its business potential and earnings prospects, an assessment of its management,
and the consideration of the above factors in relation to market valuation of
companies in related businesses.

In connection with the Second Private Placement, the Company paid
Millennium Securities Corp., one of the underwriters, as Placement Agent, 3% of
the gross proceeds of the entire offering as a non-accountable expense allowance
and a 10% commission on the sales of the Second Private Placement Units.

51
<PAGE> 52

LEGAL MATTERS

The validity of the issuance of the securities offered hereby will be
passed upon for the Company by the law firm of Blau, Kramer, Wactlar &
Lieberman, P.C., Jericho, New York. The law firm of Beckman & Millman, P.C., New
York, New York will pass on certain aspects of this offering on behalf of the
Representative. Employees of Blau, Kramer, Wactlar & Lieberman, P.C. own an
aggregate of 193,269 shares of Common Stock, and options to purchase 73,334
shares of Common Stock issued under the 1996 Non-Qualified Stock Option Plan.

EXPERTS

The audited financial statements of the Company for the fiscal year ended
December 31, 1996 and the nine month period ended December 31, 1995, are
included herein and in the registration statement in reliance upon the report,
which report includes an emphasis paragraph regarding the ability of the Company
to continue as a going concern, of Grant Thornton LLP, independent certified
public accountants, appearing elsewhere herein, and upon the authority of said
firm as experts in accounting and auditing.

CHANGE IN ACCOUNTANTS

Price Waterhouse LLP served as the Company's independent auditors for the
fiscal years ended March 31, 1994 and March 31, 1995 and the nine month period
ended December 31, 1995. On September 23, 1996, Price Waterhouse LLP advised the
Company that they had resigned as the Company's independent auditors.
Subsequently, the Company's Board of Directors replaced Price Waterhouse LLP in
favor of Grant Thornton LLP as its independent certified public accountants.
Price Waterhouse LLP's report on the Company's financial statements for the
fiscal years ended March 31, 1994 and March 31, 1995 and the nine-month period
ended December 31, 1995, did not contain an adverse opinion or a disclaimer of
opinion, nor was it qualified or modified as to uncertainty, audit scope, or
accounting principles, except that the opinion included an explanatory paragraph
that there were conditions that raise substantial doubt about the Company's
ability to continue as a going concern. During this period there was no
disagreement with Price Waterhouse LLP on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreement, if not resolved to Price Waterhouse's LLP's satisfaction, would
have caused Price Waterhouse LLP to make reference to the subject matter of the
disagreement in connection with its report.

AVAILABLE INFORMATION

The Company has filed with the Commission a registration statement on Form
SB-2, pursuant to the Securities Act, with respect to the securities offered by
this Prospectus. This Prospectus does not contain all of the information set
forth in said registration statement, and the exhibits thereto. For further
information with respect to the Company and the securities offered hereby,
reference is made to said registration statement and exhibits which may be
inspected without charge at the Commission's principal office at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.

As of the date of this Prospectus, the Company will be subject to the
informational requirements of the Securities Exchange Act of 1934, as amended,
and, in accordance therewith, shall file reports and other information with the
Commission. Such reports and other information can be inspected and copied at
the public reference facilities maintained by the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at its following regional
offices: Suite 788, 1375 Peachtree St. N.E., Atlanta, Georgia 30367,
Northwestern Atrium Center, 500 W. Madison Street, Suite 1400, Chicago, Illinois
60621-2511 and 7 World Trade Center, 13th Floor, New York, New York 10048. Also,
copies of such material can be obtained at prescribed rates from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, or at the Commission's Web site located at
http://www.sec.gov.

52
<PAGE> 53

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Certified Public Accountants.............................. F-2
Financial Statements
Balance Sheets................................................................ F-3
Statements of Operations...................................................... F-4
Statement of Changes in Stockholders' Deficit................................. F-5
Statements of Cash Flows...................................................... F-6
Notes to Financial Statements................................................. F-7-F-22
</TABLE>

F-1
<PAGE> 54

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Stockholders
Mike's Original, Inc.

We have audited the accompanying balance sheets of Mike's Original, Inc. as
of December 31, 1996 and 1995 and the related statements of operations, changes
in stockholders' deficit and cash flows for the year ended December 31, 1996 and
for the nine-month period ended December 31, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Mike's Original, Inc. as of
December 31, 1996 and 1995 and the results of its operations and its cash flows
for the year ended December 31, 1996 and for the nine-month period ended
December 31, 1995 in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company incurred a net loss of $4,050,547 during the year ended December 31,
1996, and, as of that date, the Company's current liabilities exceeded its
current assets by $2,539,788 and the Company's stockholders' deficit was
$2,996,411. These factors, among others, as discussed in Note B to the financial
statements, raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note B. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

GRANT THORNTON LLP

Melville, New York
April 17, 1997 (except for Note H, as to
which the date is June 20, 1997,
and Note C-10, as to which the
date is July 21, 1997)

F-2
<PAGE> 55

MIKE'S ORIGINAL, INC.

BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ---------------------------
1997 1996 1995
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS
Cash........................................................ $ 15,636 $ 32,523 $ 15,716
Accounts receivable, less allowance for doubtful accounts of
$20,751 (unaudited), $20,751 and $6,888 at March 31, 1997,
December 31, 1996 and 1995, respectively.................. 191,417 61,219 153,402
Inventories................................................. 88,797 247,608 176,885
Other receivables........................................... -- 16,589 --
-------- -------- --------
Total current assets................................. 295,850 357,939 346,003
FIXED ASSETS, NET............................................. 11,724 14,478 25,494
OTHER ASSETS
Deferred offering costs..................................... 294,592 45,000 --
Trademarks and organizational costs, net of accumulated
amortization of $12,713 (unaudited) $11,787 and $8,085 at
March 31, 1997, December 31, 1996 and 1995,
respectively.............................................. 5,798 6,724 10,426
Security deposits........................................... 12,068 18,091 18,091
Other....................................................... -- 1,000 --
-------- -------- --------
$ 620,032 $ 443,232 $ 400,014
======== ======== ========

LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable............................................ $ 862,350 $ 1,104,336 $ 1,468,610
Accrued expenses and other liabilities...................... 740,423 140,629 249,772
Notes payable to related parties............................ 253,750 253,750 125,000
Subordinated notes payable -- stockholders.................. 153,750 153,750 --
Note payable -- convertible................................. 325,000 225,000 --
Notes payable -- trade...................................... 932,388 980,821 49,114
Note payable................................................ 50,000 -- --
Accrued interest payable to related parties................. 11,053 5,978 --
Line of credit.............................................. 22,251 23,506 --
Obligations under capital lease............................. 9,861 9,957 9,148
-------- -------- --------
Total current liabilities............................ 3,360,826 2,897,727 1,901,644
ACCRUED COMPENSATION EXPENSE.................................. -- -- 158,333
OBLIGATIONS UNDER CAPITAL LEASE............................... -- 3,611 13,567
NOTES PAYABLE -- TRADE........................................ 413,486 -- --
NOTES PAYABLE TO RELATED PARTIES.............................. 486,250 486,250 55,000
ACCRUED INTEREST PAYABLE TO RELATED PARTIES................... 61,658 52,055 28,822
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Preferred stock, $.01 par value; 500,000 shares authorized;
no shares issued or outstanding........................... -- -- --
Common stock, $.001 par value; 20,000,000 shares authorized;
1,929,641 shares (unaudited), 1,892,641 shares and
1,362,160 shares issued and outstanding at March 31, 1997,
December 31, 1996 and 1995, respectively.................. 1,929 1,892 1,362
Additional paid-in capital.................................. 4,420,103 4,000,700 829,742
Deferred financing costs.................................... -- (360,000) --
Accumulated deficit......................................... (8,124,220) (6,639,003) (2,588,456)
-------- -------- --------
(3,702,188) (2,996,411) (1,757,352)
-------- -------- --------
$ 620,032 $ 443,232 $ 400,014
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these statements.

F-3
<PAGE> 56

MIKE'S ORIGINAL, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS
MARCH 31, YEAR ENDED ENDED
------------------------- DECEMBER 31, DECEMBER 31,
1997 1996 1996 1995
----------- --------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Sales, net............................. $ 356,314 $ 543,174 $ 2,392,258 $ 2,312,144
Cost of sales.......................... 305,364 380,688 1,439,635 1,312,792
----------- --------- ----------- -----------
Gross profit......................... 50,950 162,486 952,623 999,352
Operating expenses
Selling and shipping................. 249,765 459,367 2,596,500 1,864,890
General and administrative........... 442,681 203,933 2,193,602 717,315
Research and development............. 9,720 12,214 70,632 19,529
----------- --------- ----------- -----------
702,166 675,514 4,860,734 2,601,734
----------- --------- ----------- -----------
Loss from operations................. (651,216) (513,028) (3,908,111) (1,602,382)
Interest expense....................... (834,604) (4,358) (142,983) (12,954)
Interest income........................ 603 412 547 478
----------- --------- ----------- -----------
NET LOSS............................. $(1,485,217) $(516,974) $ (4,050,547) $ (1,614,858)
----------- --------- ----------- -----------
Net loss per share..................... $ (.54) $ (.23) $ (1.65) $ (.74)
----------- --------- ----------- -----------
Weighted average common shares
outstanding.......................... 2,774,113 2,231,298 2,461,244 2,180,536
=========== ========= =========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-4
<PAGE> 57

MIKE'S ORIGINAL, INC.

STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT

<TABLE>
<CAPTION>
ADDITIONAL DEFERRED TOTAL
NUMBER PAID-IN FINANCING ACCUMULATED STOCKHOLDERS'
OF SHARES AMOUNT CAPITAL COSTS DEFICIT DEFICIT
--------- ------ ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at April 1, 1995............. 1,294,878 $1,295 $ 534,124 $ (973,598) $ (438,179)
Issuance of common stock for services
rendered........................... 12,307 12 47,488 47,500
Sale of common stock to investors,
net of issuance costs of $19,815... 54,975 55 248,130 248,185
Net loss............................. (1,614,858) (1,614,858)
--------- ------ ---------- ----------- ----------- -----------
Balance at December 31, 1995......... 1,362,160 1,362 829,742 (2,588,456) (1,757,352)
Issuance of common stock for services
rendered........................... 69,231 69 207,623 207,692
Sale of common stock to investors,
net of issuance costs of
$330,437........................... 461,250 461 1,052,853 1,053,314
Compensation attributable to the
issuance of stock options.......... 812,000 812,000
Compensation attributable to the
release of shares held in escrow... 265,000 265,000
Compensation attributable to the
transfer of common stock owned by
the founder for services
rendered........................... 100,000 100,000
Waiver of compensation payable to
stockholders and founders.......... 358,482 358,482
Imputed interest -- convertible
debt............................... 375,000 $ (375,000)
Amortization of imputed interest --
convertible debt................... 15,000 15,000
Net loss............................. (4,050,547) (4,050,547)
--------- ------ ---------- ----------- ----------- -----------
Balance at December 31, 1996......... 1,892,641 1,892 4,000,700 (360,000) (6,639,003) (2,996,411)
Amortization of imputed interest --
convertible debt (unaudited)....... 360,000 360,000
Imputed interest -- convertible
debt -- (unaudited)................ 252,940 252,940
Issuance of common stock for imputed
interest (unaudited)............... 37,000 37 166,463 166,500
Net loss (unaudited)................. (1,485,217) (1,485,217)
--------- ------ ---------- ----------- ----------- -----------
Balance at March 31, 1997
(unaudited)........................ 1,929,641 $1,929 $4,420,103 $ -- $(8,124,220) $ (3,702,188)
========= ====== ========== =========== =========== ===========
</TABLE>

The accompanying notes are an integral part of this statement.

F-5
<PAGE> 58

MIKE'S ORIGINAL, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS
MARCH 31, YEAR ENDED ENDED
------------------------- DECEMBER 31, DECEMBER 31,
1997 1996 1996 1995
----------- ----------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net loss........................................... $(1,485,217) $ (516,974) $(4,050,547) $(1,614,858)
Adjustments to reconcile net loss to net cash used
in operating activities
Imputed interest................................. 779,440 -- 15,000 --
Depreciation and amortization...................... 3,680 3,644 14,718 10,114
Provision for doubtful accounts.................... -- -- 13,863 21,378
Compensation expense attributable to the issuance
of common stock for services rendered............ -- -- 207,692 47,500
Compensation expense attributable to the release of
common stock from escrow account................. -- -- 265,000 --
Compensation expense attributable to the issuance
of stock options................................. -- -- 812,000 --
Compensation expense attributable to the transfer
of common stock by the founder for services
rendered......................................... -- -- 100,000 --
Changes in operating assets and liabilities
Accounts receivable.............................. (130,198) 9,597 78,320 (33,513)
Inventories...................................... 158,811 87,510 (70,723) 10,043
Prepaid expenses................................. -- -- (4,500) 22,941
Other current assets............................. 16,589 (16,589) --
Accounts payable................................. 163,330 159,958 812,163 975,711
Accrued expenses and other liabilities........... 374,472 (10,217) 79,717 240,629
----------- ----------- ----------- -----------
Net cash used in operating activities....... (119,093) (266,482) (1,743,886) (320,055)
----------- ----------- ----------- -----------
Cash flows from investing activities
Intangible assets.................................. -- -- -- (916)
Security deposit................................... 6,023 -- -- (14,023)
Other assets....................................... 1,000 -- (1,000) --
----------- ----------- ----------- -----------
Net cash used in investing activities....... 7,023 -- (1,000) (14,939)
----------- ----------- ----------- -----------
Cash flows from financing activities
Proceeds from convertible note payable............. 100,000 325,000 225,000 --
Proceeds from 12% subordinated notes payable --
stockholders..................................... -- -- 153,750 --
Net proceeds from issuance of common stock......... -- -- 1,053,314 248,185
Proceeds from notes payable........................ 50,000 -- -- --
Proceeds from notes payable to related parties..... -- -- 560,000 --
Payment of notes payable to related parties........ -- -- -- (75,000)
Payment of capital lease obligations............... (3,707) (2,215) (9,147) (5,682)
Payment of notes payable........................... (40,263) -- (244,730) --
Proceeds from line of credit....................... -- -- 24,134 --
Payment of line of credit.......................... (1,255) -- (628) --
Payment of deferred offering costs................. (9,592) -- -- --
----------- ----------- ----------- -----------
Net cash provided by financing activities... 95,183 322,785 1,761,693 167,503
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH............. (16,887) 56,303 16,807 (167,491)
Cash at beginning of period.......................... 32,523 15,716 15,716 183,207
----------- ----------- ----------- -----------
Cash at end of period................................ $ 15,636 $ 72,019 $ 32,523 $ 15,716
=========== =========== =========== ===========
</TABLE>

The accompanying notes are in integral part of these statements.

F-6
<PAGE> 59

MIKE'S ORIGINAL, INC.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995

(INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED
MARCH 31, 1997 AND 1996 IS UNAUDITED)

NOTE A -- ORGANIZATION OF BUSINESS

Mike's Original, Inc. (the "Company") was incorporated in Delaware in May
1994 as successor to Melanie Lane Farms, Inc. ("Melanie Farms"), a New York
corporation formed in 1993. In June 1994, Melanie Farms was merged into the
Company. As both entities were under common control, the merger has been
accounted for in a manner similar to a pooling of interests.

Effective December 31, 1995, the Company changed its fiscal year-end from
March 31 to December 31.

Since April 1, 1993, the Company has been engaged in the marketing and
distribution of super-premium ice cream products. The Company markets, sells and
distributes Mike's Original(R) Cheesecake Ice Cream, a blend of ice cream and
cheesecake ingredients. This product line is offered in a variety of flavors
mainly to supermarkets and grocery stores and also, to a lesser extent, to
convenience stores, food service outlets and warehouse clubs. The Company's
products are sold in approximately fourteen states, including New York,
California, Pennsylvania and New Jersey with sales generally concentrated on the
East and West Coasts of the United States. (See Note M.)

NOTE B -- BASIS OF PRESENTATION

The Company has incurred losses from operations since its inception in 1993
and, at March 31, 1997, has a stockholders' deficit and a working capital
deficit of $3,702,188 (unaudited) and $3,064,976 (unaudited), respectively. At
December 31, 1996, the Company had a stockholders' deficit and a working capital
deficit of $2,996,411 and $2,539,788, respectively. A significant portion of
these amounts was incurred during the year ended December 31, 1996 as a result
of intense marketing by the Company, including the payment for introductory
programs with supermarkets and other food chain retailers of approximately
$622,000 and product advertising, promotion and marketing of approximately
$1,526,000. Further, the Company is continuing to incur losses from operations.

In addition, the Company has incurred both short- and long-term debt in
order to finance its continuing operations. A substantial portion of these
borrowings is currently due or is past due. The Company is currently negotiating
with its creditors in order to defer payment of these obligations to future
periods.

In the event these creditors do not continue to extend credit to the
Company, the Company's ability to operate would be further hampered.

As described further in Note H, a creditor of the Company amended the terms
of a loan agreement to permit the Company to be in compliance with the agreement
at December 31, 1996. At March 31, 1997 and December 31, 1996, the balance of
this obligation to this creditor was $710,275.

As described in Note N, the Company maintains an unsecured line of credit
aggregating $25,000, of which $22,251 (unaudited) and $23,506 was outstanding at
March 31, 1997 and December 31, 1996, respectively. The Company has no
additional credit facility.

The Company has signed a letter of intent with an investment banker for a
proposed public offering (the "Offering") by the Company of $4,340,000. It is
the underwriters' intent, immediately prior to the effective date of the
Offering to enter into a "firm commitment" Underwriting Agreement with the
Company and, upon execution thereof, to immediately commence a public offering
of shares. It is anticipated that the net proceeds of this Offering of
$3,476,000 will be used for the repayment of certain debt and working capital
needs, including marketing and product line expansions. The net proceeds to the
Company from this Offering are

F-7
<PAGE> 60

MIKE'S ORIGINAL, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED
MARCH 31, 1997 AND 1996 IS UNAUDITED)

expected to be adequate to fund the Company's working capital needs for the
twelve months following the Offering.

In the event that the Offering is delayed, management recognizes that the
Company must generate additional resources to enable it to continue operations.
Management's plans include consideration of the sale of additional equity
securities to private investors under appropriate market conditions or other
business transactions which would generate sufficient resources to assure
continuation of the Company's operations. On January 25, 1997, the Company
obtained additional debt financing in the amount of $100,000. On March 13, 1997,
the Company obtained additional debt financing in the amount of $50,000 and in
connection therewith, issued 2,000 shares of the Company's common stock. On
April 3, 1997, the holder of such note converted $25,000 of principal into
12,500 shares of the Company's common stock. (See Note H.) In May and June 1997,
the Company obtained additional debt financing in the amount of $150,000. (See
Note H.)

NOTE C -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. USE OF ESTIMATES IN FINANCIAL STATEMENT PREPARATION

The preparation of these financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in these financial statements and
related notes. Actual results could differ from these estimates.

2. REVENUE RECOGNITION

Revenue from the sale of ice cream products is recognized upon shipment.
Effective October 1, 1995, a significant portion of the Company's sales are made
to one distributor pursuant to a distribution agreement which provides for the
payment of distribution fees based upon a percent of sales, price protection and
certain rights of return on product unsold by third parties. Net sales are
presented net of distribution fees of $93,824 (unaudited) $142,011 (unaudited),
$527,540 and $129,373 for the three months ended March 31, 1997 and 1996, the
year ended December 31, 1996 and the nine months ended December 31, 1995,
respectively. A provision for such costs is made as revenue is recognized;
however, costs relating to price protection and returned product have not been
material to date.

3. INVENTORIES

Inventories are stated at the lower of cost or market value, with cost
determined on a first-in, first-out basis.

4. FIXED ASSETS

Fixed assets are stated at cost less accumulated depreciation. Depreciation
of fixed assets is recorded on a straight-line basis over their estimated useful
lives ranging from three to five years. Certain leased computer equipment with
future rental payments for periods through 1998 has been capitalized. These
amounts are included in fixed assets within the accompanying balance sheets and
are being depreciated over the estimated useful life of the equipment or the
term of the lease, whichever is shorter.

5. OTHER ASSETS

Costs relating to trademark and organizational expenditures have been
deferred and are being amortized on a straight-line basis over five years. Costs
relating to the Company's planned initial public offering have

F-8
<PAGE> 61

MIKE'S ORIGINAL, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED
MARCH 31, 1997 AND 1996 IS UNAUDITED)

been deferred and will be applied against the proceeds of the Offering. In the
event the Offering is unsuccessful, such costs will be charged to operations.

6. RESEARCH AND DEVELOPMENT

Research and development expenditures primarily for product development are
expensed as incurred.

7. INTRODUCTORY PROGRAMS

Payments for introductory programs are made to certain customers
(supermarkets and other food chain retailers) in exchange for the Company
obtaining retail shelf space and are charged to operations when the Company
initially ships products to customers under such agreement. No costs of
introductory programs are deferred as of March 31, 1997, and December 31, 1996
and 1995.

8. ADVERTISING

Advertising costs are charged to operations when incurred. Advertising
costs charged to operations were $66,331 (unaudited), $10,500 (unaudited),
$346,000 and $92,000 for the three months ended March 31, 1997 and 1996, the
year ended December 31, 1996 and the nine months ended December 31, 1995.

9. INCOME TAXES

Deferred income taxes are recognized for temporary differences between the
financial statement and income tax bases of assets and liabilities and loss
carryforwards for which income tax benefits are expected to be realized in
future years. A valuation allowance has been established to offset the deferred
tax assets as it is more likely than not that such deferred tax assets will not
be realized. The effect on deferred taxes of a change in tax rates is recognized
in income in the period that includes the enactment date.

10. PER SHARE INFORMATION

In May 1996, the Company approved a 1-for-6.5 reverse stock split and, in
February 1997, the Company approved a 2-for-3 reverse stock split. Accordingly,
all share and per share amounts have been retroactively restated for these
transactions.

Net loss per common share is based on the weighted average number of common
shares outstanding during the periods. Considered in the calculation of earnings
per share are options to purchase 718,332 shares of the Company's common stock
with an average exercise price of $1.57 issued within a one-year period
preceding the Company's planned initial public offering, warrants to purchase
75,000 shares of the Company's common stock with an exercise price of $3.00 and
422,831 shares issuable upon the conversion of notes payable (Notes H and O).

The incremental common equivalent shares of 869,139 considered outstanding
for all periods presented have been determined using the treasury stock method
and an estimated initial public offering price of $6.00. All other options and
warrants have been excluded as their inclusion would be antidilutive. Further,
certain shares previously held in escrow (Note K) have been excluded from the
calculation of net loss per common share during such period.

As described more fully in Note B, the Company signed a letter of intent
with an investment banker for a proposed public offering by the Company of
700,000 units (the "Units"). Each Unit consists of one share of common stock,
$.001 par value and two redeemable common stock purchase warrants. Had the
proposed

F-9
<PAGE> 62

MIKE'S ORIGINAL, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED
MARCH 31, 1997 AND 1996 IS UNAUDITED)

public offering occurred on January 1, 1996, the reported net loss per common
share for the three months ended March 31, 1997 would have decreased $.12 to
$.42 and for the year ended December 31, 1996 would have decreased $.38 to
$1.27, after giving effect to the issuance of additional shares of common stock
and the application of $964,466 of proceeds to reduce outstanding indebtedness.

11. NEW ACCOUNTING STANDARDS

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 128, Earnings Per Share, which is effective for
financial statements issued after December 15, 1997. Early adoption of the new
standard is not permitted. The new standard eliminates primary and fully diluted
earnings per share and requires presentation of basic and diluted earnings per
share together with disclosure of how the per share amounts were computed. The
effect of adopting this new standard has not been determined.

12. INTERIM FINANCIAL INFORMATION

The interim financial data as of March 31, 1997 and for the three-month
periods ended March 31, 1997 and 1996, is unaudited. The information reflects
all adjustments, consisting only of normal recurring adjustments that, in the
opinion of management, are necessary to present fairly the financial position
and results of operations of the Company for the periods indicated. Results of
operations for the interim periods are not necessarily indicative of the results
of operations for the full year.

NOTE D -- SUPPLEMENTAL CASH FLOW INFORMATION

During the period ended December 31, 1995, the Company purchased fixed
assets of $28,397 pursuant to a lease which has been accounted for as a capital
lease.

Cash paid for interest was $733 (unaudited), $1,383 (unaudited), $64,685
and $1,468 during the three months ended March 31, 1997 and 1996, the year ended
December 31, 1996 and the nine-month period ended December 31, 1995,
respectively. Noncash financing and investing activity included the conversion
of trade accounts payable to notes payable of $405,316 (unaudited), $1,176,437
and $53,114 during the three months ended March 31, 1997, the year ended
December 31, 1996 and the nine month period ended December 31, 1995,
respectively. In addition, during the three months ended March 31, 1997 and the
year ended December 31, 1996, $240,000 (unaudited) and $45,000, respectively, of
accrued costs associated with the initial public offering were deferred and will
be deducted from the proceeds of the Offering.

NOTE E -- INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
MARCH 31, -------- --------
1997
-----------
(UNAUDITED)
<S> <C> <C> <C>
Finished goods.................................... $11,508 $ 97,536 $176,885
Raw materials..................................... 77,289 150,072 --
------- -------- --------
$88,797 $247,608 $176,885
======= ======== ========
</TABLE>

F-10
<PAGE> 63

MIKE'S ORIGINAL, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED
MARCH 31, 1997 AND 1996 IS UNAUDITED)

NOTE F -- FIXED ASSETS

Fixed assets consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
MARCH 31, -------- --------
1997
-----------
(UNAUDITED)
<S> <C> <C> <C>
Computer equipment................................ $29,447 $ 29,447 $ 29,447
Office equipment.................................. 6,000 6,000 6,000
------- -------- --------
35,447 35,447 35,447
Less accumulated depreciation..................... 23,723 20,969 9,953
------- -------- --------
$11,724 $ 14,478 $ 25,494
======= ======== ========
</TABLE>

NOTE G -- NOTES PAYABLE TO RELATED PARTIES

During the fiscal year ended March 31, 1994, the Company obtained loans
from the founder and issued promissory notes of $40,000 and $15,000 which are
payable in May and June 1998, respectively. Interest accrues at an annual rate
of 8% and is payable at the maturity date of the notes. Accrued interest payable
related to these notes amounts to $15,657 (unaudited), $14,557 and $10,157 at
March 31, 1997, and December 31, 1996 and 1995, respectively.

During the fiscal year ended March 31, 1994, the Company borrowed $100,000
from a stockholder of the Company. The loan, which was originally due on demand,
was formalized in the form of a promissory note during September 1995. In April
1996, the maturity date of the $100,000 obligation was revised to occur
subsequent to the repayment of the promissory note issued in April 1996 as
further described in Note H. The loan was noninterest bearing through April
1994. From May 1994 through maturity, interest accrues at an annual rate of 6%
and is payable upon maturity. In September 1996, the maturity date of this
promissory note was revised to occur the earlier of: (i) February 1, 1998 or
(ii) upon the occurrence of events defined by the note as a "Change in Control."
Accrued interest payable related to this note amounts to $22,991 (unaudited),
$21,491 and $15,491 at March 31, 1997, December 31, 1996 and 1995, respectively.
During the fiscal year ended March 31, 1995, the Company borrowed an additional
$100,000 from the same stockholder. The loan was due on demand with interest at
an annual rate of 6%. The Company repaid $50,000 of this loan in March 1995, and
repaid the remaining $50,000 during April 1995.

During the fiscal year ended March 31, 1995, the Company issued two
promissory notes of $25,000 each to an investor, who is related to the founder
of the Company, which were originally due in November and December 1998,
respectively. The Company repaid $25,000 of these notes in April 1995. In
September 1995, the maturity date of the outstanding promissory note was revised
to occur the earlier of the Company receiving proceeds from a securities
offering or June 1, 1996. In April 1996, the maturity date of the outstanding
promissory note was revised to occur subsequent to the repayment of the
promissory note issued in April 1996 as further described in Note H. In
September 1996, the maturity date of this promissory note was revised to occur
the earlier of: (i) February 1, 1998 or (ii) upon the occurrence of events
defined by the note as a "Change in Control." Interest accrues at an annual rate
of 6% and is payable at the maturity date of the note. Accrued interest payable
related to this note amounts to $5,049 (unaudited), $4,674 and $3,174 at March
31, 1997, and December 31, 1996 and 1995, respectively.

In February 1996, the Company issued $325,000 of 12% promissory notes which
were payable on August 31, 1996 or convertible into units upon the consummation
of the Company's Second Private

F-11
<PAGE> 64

MIKE'S ORIGINAL, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED
MARCH 31, 1997 AND 1996 IS UNAUDITED)

Placement. Such notes were converted into thirteen units pursuant to the terms
of the Company's Second Private Placement. (See Note K.)

On May 30, 1996, the Company received loans aggregating $100,000 from two
stockholders. The loans were originally due on demand and bear interest at a
rate of 10%. In September 1996, the maturity date of these promissory notes was
revised to occur the earlier of: (i) twenty-four months from the date of the
loans, or (ii) the date the Company successfully consummates an initial public
offering of securities of the Company, but only to the extent that the
overallotment option is exercised in such offering and only from the proceeds
received by the Company from the exercise of the overallotment option. Accrued
interest payable related to these notes amounts to $8,334 (unaudited) and $5,833
at March 31, 1997 and December 31, 1996, respectively.

In August and September 1996, the Company received three loans from a
stockholder aggregating $253,750. A portion of the funds that this shareholder
loaned the Company was a result of the shareholder selling shares of his stock
to investors. In August 1996, this shareholder sold 38,889 shares of his stock
at a price of $1.12 per share. In September 1996, this shareholder sold 23,333
shares of his stock at a price of $1.50 per share. These loans each bear
interest at a rate of 8% per annum and were originally payable the earlier of:
(i) thirteen months from the date of the loans, or (ii) the date the Company
successfully consummates an initial public offering, but only to the extent that
the overallotment option is exercised in such offering and only from the
proceeds received by the Company from the exercise of the overallotment option.
In September 1996, the maturity date of these promissory notes was revised to
June 1, 1997. In the event that the Company successfully consummates an initial
public offering prior to June 1, 1997, $123,750 will be payable from such
proceeds and $130,000 will be payable 90 days therefrom. In the event the
underwriter exercises its overallotment option, the balance otherwise payable in
90 days will be payable from such proceeds. The Company has not, to date,
renegotiated the terms of this loan with the lender and such amounts remain
outstanding. Accrued interest payable related to these borrowings amounts to
$11,053 (unaudited) and $5,978 at March 31, 1997 and December 31, 1996,
respectively.

On August 28, 1996, the founder of the Company issued an additional
promissory note of $206,250. The funds that the founder loaned the Company were
a result of the founder selling 183,333 shares of his stock to an investor at a
price of $1.12 per share. This loan bears interest at a rate of 8% and was
originally payable the earlier of: (i) thirteen months from the date of the
loan, or (ii) the date the Company successfully consummates an initial public
offering of securities of the Company, but only to the extent that the
overallotment option is exercised in such offering and only from the proceeds
received by the Company from the exercise of the overallotment option. In
September 1996, the maturity date of this promissory note was revised to occur
twenty-four months from September 30, 1996. In addition, the revised promissory
note provides that one-half of the note will be paid with accrued interest in
the event the Company successfully consummates an initial public offering of
securities of the Company, but only to the extent that the overallotment option
is exercised in such offering and only from the proceeds received by the Company
from the exercise of the overallotment option. Accrued interest related to this
borrowing amounts to $9,625 (unaudited) and $5,500 at March 31, 1997 and
December 31, 1996, respectively.

Required principal payments on notes payable to related parties are
$253,750 in 1997 and $486,250 in 1998.

NOTE H -- NOTES PAYABLE

In 1995, the Company issued several promissory notes due in monthly
installments through October 1996 in exchange for certain trade accounts payable
aggregating $53,114. Interest on these notes accrues at annual

F-12
<PAGE> 65

MIKE'S ORIGINAL, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED
MARCH 31, 1997 AND 1996 IS UNAUDITED)

rates ranging from prime to 10% and is payable monthly. The balance of these
notes was $510 (unaudited), $4,583 and $49,114 at March 31, 1997, December 31,
1996 and 1995, respectively. Accrued interest payable related to these
borrowings amounts to $445 at March 31, 1997 and December 31, 1996 and is
included in accrued expenses. These notes were due to be paid in full by
November 1, 1996. At March 31, 1997, the remaining outstanding balance is due to
one lender. The Company has not, to date, renegotiated the terms of this loan
with the lender and such amounts remain outstanding.

In April 1996, the Company issued a promissory note in the amount of
$830,275 in exchange for certain trade accounts payable. The Company was
required to make payments in monthly installments beginning May 1996 consisting
of: (i) accrued interest, and (ii) principal in the amount of $12,000. In
addition to these monthly installments, the Company was required to pay
additional amounts upon the occurrence of certain events.

In the event the Company did not complete an initial public offering, the
note was due in full on December 31, 1996. Interest on the promissory note
accrues at the prime rate plus 1% per annum. This note is collateralized by
substantially all of the assets of the Company. The balance of this note was
$710,275 at March 31, 1997 and December 31, 1996. Accrued interest payable
related to this note amounts to $19,163 (unaudited) and $2,738 at March 31, 1997
and December 31, 1996, respectively, and is included in accrued expenses. As the
Company has not completed an initial public offering, the note was payable on
December 31, 1996. However, the lenders involved have amended the terms of the
original loan agreement to permit the Company to be in compliance with the
agreement at December 31, 1996. The amended terms, as of April 1997, provide for
payments to the lender from the proceeds of the Company's initial public
offering in the amount of $575,000 and $135,275 payable December 31, 1997. In
the event that the initial public offering is not completed by June 1, 1997, all
amounts outstanding will then become immediately due and payable in full.
Further, in April 1997, the Company issued a $221,550 convertible note due
December 31, 1998 in exchange for a like amount of trade payables. The
convertible note bears interest at 10% per annum, payable at maturity, and is
convertible by the holder into the Company's common stock at a conversion rate
of $3.00 principal amount for each share of common stock at the option of the
holder at any time prior to maturity. In June 1997, the Company renegotiated the
terms of this agreement as the initial public offering was not completed by June
1, 1997. The renegotiated terms provide that if the initial public offering is
not completed by July 15, 1997, all amounts will then become immediately due and
payable in full. In addition, the balance due to the lender from the proceeds of
the Company's initial public offering was increased to $595,000 and the
principal balance of the convertible note due December 31, 1998 was reduced to
$201,000. The remaining balance of $135,275 is payable on December 31, 1997.

On August 20, 1996, the Company issued a promissory note in the amount of
$289,482 in exchange for certain trade accounts payable and inventories. The
note bears interest at a rate of 10% per annum and was payable on or before
November 15, 1996. The balance of this note was $210,283 at March 31, 1997 and
December 31, 1996. Accrued interest payable related to this note amounts to
$6,467 (unaudited) and $876 at March 31, 1997 and December 31, 1996,
respectively, and is included in accrued expenses. On December 31, 1996, the
Company was not in compliance with the terms of the subject loan agreement.
However, the lender involved has amended the agreement to permit the Company to
be in compliance with such terms at December 31, 1996. In February 1997, the
Company issued a promissory note in the amount of $20,000 in exchange for a like
amount of trade payables. In April 1997, the lender agreed to extend the due
date of such notes to the earlier of June 1, 1997 or the closing of the
Company's initial public offering. In the event the Company completes its
initial public offering by June 1, 1997, the lender agreed to extend the due
date of $96,000 of principal to December 31, 1998. If such amount is extended,
the lender has the right to convert

F-13
<PAGE> 66

MIKE'S ORIGINAL, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED
MARCH 31, 1997 AND 1996 IS UNAUDITED)

such amount into 32,000 shares of the Company's common stock at any time prior
to maturity. The lender agreed to extend the maturity date of the promissory
notes originally due on June 1, 1997 to July 31, 1997.

In December 1996, the Company issued two additional short-term promissory
notes in exchange for certain trade accounts payable aggregating $56,680. One
promissory note bears interest at the rate of 10% per annum. Principal and
interest are payable in installments as follows: the sum of $500, or more,
semimonthly beginning on December 5, 1996, and payable thereafter on the 20th
and 5th day of each month, until principal and interest have been paid in full.
The second promissory note bears interest at the rate of 8% per annum. Payment
of principal will be made at the rate of $5,000 per month commencing on January
1, 1997 and monthly thereafter until the earlier of: (i) May 1, 1997 or (ii) the
date the Company successfully consummates an initial public offering of
securities of the Company, at which time this note will be paid in full with
interest. The Company has not, to date, renegotiated the terms of the second
promissory note with the lender. The balance of these notes was $38,497
(unaudited) and $55,680 at March 31, 1997 and December 31, 1996, respectively.
Accrued interest payable related to these borrowings amounts to $1,255
(unaudited) and $285 at March 31, 1997 and December 31, 1996, respectively, and
is included in accrued expenses.

In December 1996, the Company issued a $225,000 promissory note to an
investor bearing interest at the rate of 8% per annum. This note is payable in
full the earlier of: (i) December 31, 1997 or (ii) five days after the closing
date of an initial public offering. In lieu of receiving payment, the investor
has the right to convert this promissory note within five days of the closing of
such initial public offering into 200,000 shares of common stock of the Company,
par value $.001 per share. Accrued interest payable related to this note amounts
to $938 at December 31, 1996. Imputed interest resulting from the difference
between the estimated fair value of the Company's common stock and the
conversion price has been provided for and will be charged to operations over
the period this note first becomes convertible. Interest expense of $360,000 was
recognized by the Company during the three months ended March 31, 1997 which
represented the amortization of the imputed interest associated with this
transaction. In April 1997, the investor elected to convert such note.

In January 1997, the Company issued a convertible promissory note to an
investor bearing interest at the rate of 8% per annum in the principal amount of
$100,000. This convertible note will be paid in full the earlier of five days
after the closing of an initial public offering or January 31, 1998. In April
1997, the investor converted the note into 78,431 shares of the Company's common
stock. Interest expense of $252,940 representing the difference between the
estimated fair value of the Company's common stock and the conversion price was
recognized during the three months ended March 31, 1997.

In March 1997, the Company issued a $50,000 promissory note to an investor
bearing interest at the rate of 10% per annum. This note is payable on demand on
or after May 12, 1997. As additional consideration for this loan, the Company
issued the lender 2,000 shares of its common stock. These shares were valued at
$4.50 per share, the estimated fair market value of the stock at the date of
issuance. On April 3, 1997, the lender converted $25,000 of the outstanding note
balance into 12,500 shares of the Company's common stock. An interest charge of
$31,250 representing the difference between the estimated fair value of the
Company's common stock and the value the Company ascribed to these shares on the
date of issuance was recognized by the Company upon conversion. In June 1997,
the lender agreed to extend the maturity date of the outstanding note balance to
the earlier of July 31, 1997 or the completion of the Company's proposed initial
public offering.

In May 1997, the Company negotiated with a creditor in connection with
trade accounts payable balances owed to this creditor aggregating $60,000. This
creditor agreed that the Company would repay $30,000 of this balance upon
completion of an initial public offering. The Company issued a convertible
promissory note for the remaining outstanding balance of $30,000 bearing
interest at the rate of 10% per annum. The note is

F-14
<PAGE> 67

MIKE'S ORIGINAL, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED
MARCH 31, 1997 AND 1996 IS UNAUDITED)

payable in full on December 31, 1998. In lieu of receiving payment, the creditor
has the right to convert this promissory note, at any time prior to the maturity
date, into 10,000 shares of common stock of the Company.

In May and June 1997, the Company issued three promissory notes to
investors bearing interest at the rate of 12% per annum in the aggregate
principal amount of $150,000. These notes are payable in full the earlier of:
(i) July 31, 1997 or (ii) on the date of an initial public offering. In
connection with these transactions, the Company issued an aggregate of 75,000
warrants, expiring July 31, 2000, to these investors to purchase 75,000 shares
of the Company's common stock at a price of $3.00 per share.

NOTE I -- ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities include the following:

<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ---------------------
1997 1996 1995
----------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
Accrued payroll................................... $ 49,267 $ 28,000 $ 95,399
Accrued distribution fee.......................... 45,869 7,921 129,373
Distributors' deposits............................ 48,545 46,739 --
Accrued interest payable -- other................. 47,229 12,969 --
Professional fees payable......................... 549,513 45,000 25,000
-------- -------- --------
$ 740,423 $140,629 $249,772
======== ======== ========
</TABLE>

NOTE J -- INCOME TAXES

A reconciliation between actual income tax (benefit) and the amount
computed by applying the statutory Federal income tax rate to the loss before
taxes is as follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED PERIOD ENDED
MARCH 31, DECEMBER 31,
----------------------- -------------------------
1997 1996 1996 1995
--------- --------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Tax expense (benefit) at statutory
Federal income tax rates........ $(505,000) $(176,000) $(1,377,000) $(669,000)
Nondeductible compensation........ -- -- 128,000 --
Net operating loss not currently
utilizable...................... 505,000 176,000 1,249,000 669,000
--------- --------- ----------- ---------
$ -- $ -- $ -- $ --
========= ========= =========== =========
</TABLE>

F-15
<PAGE> 68

MIKE'S ORIGINAL, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED
MARCH 31, 1997 AND 1996 IS UNAUDITED)

The tax effects of temporary differences and loss carryforwards giving rise
to deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, -------------------------
1997 1996 1995
----------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Net operating loss and other carryforwards... $ 2,084,000 $ 1,814,000 $ 835,000
Bad debts.................................... 7,000 7,000 2,000
Depreciation/amortization.................... 2,000 2,000 1,000
Deferred compensation........................ 276,000 276,000 32,000
Other deferred assets........................ 45,000 20,000 --
----------- ----------- ---------
Gross deferred tax asset..................... 2,414,000 2,119,000 870,000
Deferred tax asset valuation allowance....... (2,414,000) (2,119,000) (870,000)
----------- ----------- ---------
Net deferred tax asset....................... $ -- $ -- $ --
=========== =========== =========
</TABLE>

The Company anticipates that for the foreseeable future it will continue to
be required to provide a 100% valuation allowance for the tax benefit of its net
operating loss carryforward and temporary differences as the Company cannot
presently predict when it will generate sufficient taxable income to utilize
such deferred tax assets.

At March 31, 1997 and December 31, 1996, the Company had net operating
losses available to carry forward of approximately $6,113,000 (unaudited) and
$5,320,000, respectively, for tax purposes. Such net operating loss
carryforwards expire through the year ending 2012. No benefit has been recorded
for such loss carryforwards since realization cannot be assured. The Company's
use of its net operating loss carryforwards is limited as the Company is deemed
to have undergone an ownership change as defined in Internal Revenue Code
Section 382.

NOTE K -- STOCKHOLDERS' EQUITY

In May 1994, the Company issued 30,769 and 5,128 shares of its common stock
to its legal counsel and an independent consultant, respectively, for services
rendered. These shares are valued at $.0015 per share, the fair market value as
determined by the Company's Board of Directors at the date of issuance.

During November 1994 through May 1995, the Company completed the First
Private Placement. During the nine-month period ended December 31, 1995 and the
year ended March 31, 1995, the Company issued a total of 27,487 and 62,824
units, respectively, at $9.75 per unit, each unit consisting of two shares of
common stock and one warrant. Each warrant, which is antidilutive, entitled the
holder to purchase one share of the Company's common stock on or after August 1,
1995 through January 1997. At December 31, 1996, 151,159 of these warrants are
outstanding and are exercisable at $29.13 per share and none have been
exercised. These warrants expired on January 10, 1997.

In April 1995, the Company issued 5,128 shares of its common stock to a
consultant in consideration of his efforts in assisting in various matters for
the Company during the fiscal years ended March 31, 1995 and 1994. These shares
were valued at $2.45 per share, the estimated fair market value of the stock at
the date the commitment to issue the shares was made and, accordingly, $12,500
was charged to operations.

In September 1995, the Company issued 7,179 shares of its common stock to
certain individuals for services rendered on behalf of the Company during the
nine-month period ended December 31, 1995. These

F-16
<PAGE> 69

MIKE'S ORIGINAL, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED
MARCH 31, 1997 AND 1996 IS UNAUDITED)

shares were valued at $4.88 per share, the estimated fair market value of the
stock at the date of issuance and, accordingly, $35,000 was charged to
operations.

In September 1995, pursuant to a Shareholders' Agreement and associated
Escrow Agreement, a shareholder of the Company placed 88,513 shares of his
common stock in an escrow account. The Escrow Agreement was terminated in
February 1996 and the subject shares were returned to the shareholder.
Compensation expense of $265,000 was recognized based upon the estimated fair
value of the shares by the Company upon the release of the shares from escrow.

On May 30, 1996, the Board of Directors authorized a reverse stock split in
the ratio of one common share for every six and one-half common shares
outstanding as of that date. In addition, on such date, the Board of Directors
approved an amendment to the Company's Certificate of Incorporation increasing
the number of authorized shares of the Company's common stock from 3,076,923 to
20,000,000 shares. The reverse stock split and changes in authorized capital
have been retroactively reflected for all periods presented.

In May 1996, the Company issued 50,000 shares of its common stock to
certain individuals for services rendered on behalf of the Company. These shares
were valued at $3.00 per share, the estimated fair value of the stock at the
date of issuance and, accordingly, $150,000 was charged to operations.

During June 1996 through September 1996, the Company completed a Private
Placement Offering pursuant to Rule 506 of the Securities Act of 1933 consisting
of the sale of 61.5 units (the "Second Private Placement"). Each unit consisted
of a $2,500, 12% subordinated promissory note and 7,500 shares of common stock
at an offering price of $25,000 per unit. The note balance at March 31, 1997 and
December 31, 1996 which resulted from this Second Private Placement was
$153,750. These notes mature on the earlier of: (i) July 31, 1997, or (ii) the
closing date of the initial public offering, provided that the maturity of the
notes will be accelerated upon an Event of Default. Accrued interest payable
related to these notes amounts to $12,301 (unaudited) and $7,688 at March 31,
1997 and December 31, 1996, respectively. Subsequent to December 31, 1996,
$30,000 of such notes, as well as $2,100 of accrued interest, were converted to
16,050 shares of the Company's common stock.

In September 1996, the founder of the Company transferred 33,333 shares of
his common stock to certain individuals for services rendered on behalf of the
Company. These shares were valued at $3.00 per share, the estimated fair value
of the stock at the date of the transfer. As the Company implicitly benefited
from this transaction, the value of the shares transferred was reflected as an
expense in the accompanying financial statements with a corresponding credit to
additional paid-in capital.

In October 1996, the Company issued 19,231 shares of its common stock to
certain individuals for services rendered during the year ended December 31,
1996. These shares were valued at $3.00 per share, the estimated fair market
value of the stock at the date of issuance.

On February 6, 1997, the Board of Directors authorized a reverse stock
split in the ratio of two common shares for every three common shares
outstanding as of February 7, 1997. The reverse stock split has been
retroactively reflected for all periods presented.

In March 1997, the Company, in connection with entering into a two-year
exclusive East coast manufacturing agreement, issued 35,000 shares of its common
stock. These shares were valued at $4.50 per share, the estimated fair market
value of the stock at the date of issuance. Pursuant to the agreement, the
manufacturer has agreed to provide $250,000 of 21-day trade credit terms.
Further, the Company is obligated to pay the manufacturer $150,000 against
existing amounts owed by April 30, 1997. In the event such amount

F-17
<PAGE> 70

MIKE'S ORIGINAL, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED
MARCH 31, 1997 AND 1996 IS UNAUDITED)

is not paid, the Company will be obligated to issue an additional 30,000 shares
of its common stock to the manufacturer. These additional shares were issued to
the manufacturer in May 1997.

NOTE L -- STOCK OPTION PLANS

At December 31, 1996, the Company has two stock-based compensation plans,
which are described below. The Company applies APB Opinion 25, Accounting for
Stock Issued to Employees, and related interpretations in accounting for stock
options issued to employees. The Company applies Statement of Financial
Accounting Standards No. 123 ("SFAS No. 123"), Accounting for Stock-Based
Compensation, in accounting for stock options issued to nonemployees. The
compensation cost that has been charged against income for stock options issued
to nonemployees was $812,000 for the year ended December 31, 1996.

Had compensation cost for employees been determined based on the fair value
at the grant dates consistent with the methodology of SFAS No. 123, the
Company's net loss and net loss per share would have been increased to the pro
forma amounts indicated below:

<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1997 1996
------------------ ------------
(UNAUDITED)
<S> <C> <C>
Net loss
As reported........................................ $ (1,485,217) $ (4,050,547)
Pro forma.......................................... (1,673,799) (4,581,047)
Net loss per share
As reported........................................ $ (.54) $ (1.65)
Pro forma.......................................... (.60) (1.86)
</TABLE>

The Company's net loss and net loss per share for the three months ended
March 31, 1996 and the nine-month period ended December 31, 1995 would not have
been impacted as no stock options were issued by the Company durin these
periods.

In August 1995, the Company formally adopted a Long-Term Incentive Plan
(the "1995 Plan"), which provides that the Company may grant certain key
employees or consultants either stock options, stock appreciation rights,
restricted stock, performance grants or other types of awards to acquire shares
of the Company's common stock or other company securities (the "Awards"). The
1995 Plan, as amended, authorizes the issuance of a maximum of 433,333 shares of
common stock. As of December 31, 1996, the Company has granted an aggregate of
256,667 options to purchase common stock with exercise prices ranging from $1.50
to $3.00 under the 1995 Plan. At December 31, 1996, 33,333 options to purchase
common stock at an exercise price of $3.00 were exercisable. None of these
options have been exercised to date. During the year ended December 31, 1996,
compensation cost recognized in income for the issuance of options under the
1995 Plan to nonemployees totaled $119,000. (See Note O for issuance of
additional stock options in May 1997.)

On October 15, 1996, the Company's Board of Directors approved a 1996
Nonqualified Stock Option Plan ("Nonqualified Plan") for officers, directors,
employees and consultants of the Company. The Plan, as amended, authorizes the
issuance of up to 500,000 shares of common stock. As of December 31, 1996, the
Company has granted 396,666 options to purchase shares of common stock under the
Nonqualified Plan at an exercise price of $1.50 per share. None of the stock
options granted in 1996 were exercisable at December 31, 1996. During the year
ended December 31, 1996, compensation cost recognized in income for the issuance
of options under the Nonqualified Plan to nonemployees totaled $693,000. (See
Note O for cancellation of stock options in June 1997.)

F-18
<PAGE> 71

MIKE'S ORIGINAL, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED
MARCH 31, 1997 AND 1996 IS UNAUDITED)

On January 24, 1997, the Company granted an outside director nominee and
its Vice President-Finance stock options of 23,333 and 33,333, respectively,
under the 1996 Nonqualified Stock Option Plan. These options have an exercise
price of $1.50 per share, the estimated fair market value at the date of the
grant. These options are exercisable six months from the date of grant and
expire ten years from the date of grant.

In March of 1997, the Company granted options to purchase 25,000 shares of
its common stock at an exercise price of $1.50 to its Vice President -- Finance.

A summary of stock option activity related to the Company's Plans is as
follows:

<TABLE>
<CAPTION>
WEIGHTED 1996
1995 PLAN AVERAGE NONQUALIFIED PLAN
----------------------- EXERCISE -----------------------
SHARES PRICE RANGE PRICE SHARES PRICE RANGE
------- ----------- -------- ------- -----------
<S> <C> <C> <C> <C> <C>
Outstanding at 1/1/96......... -- --
Granted....................... 256,667 $ 1.50-3.00 $ 1.69 396,666 $1.50
------- -------
Outstanding at 12/31/96....... 256,667 1.50-3.00 1.69 396,666
Granted (unaudited)........... -- 81,666 1.50
------- -------
Outstanding at 3/31/97
(unaudited)................. 256,667 1.50-3.00 1.69 478,332 1.50
======= =======
Exercisable at 3/31/97
(unaudited)................. 256,667 1.50-3.00 1.69 --
======= =======
</TABLE>

NOTE M -- FAIR VALUE OF FINANCIAL INSTRUMENTS AND CONCENTRATION OF
CREDIT RISK

The carrying amounts of cash, accounts receivable, accounts payable and
other accrued liabilities are estimated to approximate their fair value. The
Company believes that it is not practicable to estimate the fair value of its
debt obligations due to its current financial condition.

Concentrations of credit risk with respect to trade accounts receivable
exist as the Company sells products primarily to one distributor. The Company
performs periodic credit evaluations of its customers' financial condition and
does not require collateral or other security. The distributor referred to in
Note C accounted for approximately 76% (unaudited), 79% (unaudited), 79% and 22%
of the Company's sales for the three months ended March 31, 1997 and 1996, the
year ended December 31, 1996 and the nine months ended December 31, 1995,
respectively. This distributor accounted for 81% (unaudited), 57% and 94% of the
Company's net accounts receivable at March 31, 1997, December 31, 1996 and 1995,
respectively.

A second customer accounted for approximately 10% of the Company's sales
for the nine months ended December 31, 1995.

The Company's products have historically been manufactured by independent
facilities. Certain of these facilities have ceased manufacturing on behalf of
the Company due to the fact that these facilities are owed substantial sums of
money by the Company and the Company's products are currently manufactured at
only one facility. If this manufacturer elects to suspend the manufacturing of
the Company's products, the Company's operating results may be adversely
affected.

F-19
<PAGE> 72

MIKE'S ORIGINAL, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED
MARCH 31, 1997 AND 1996 IS UNAUDITED)

NOTE N -- COMMITMENTS AND CONTINGENCIES

LEASE COMMITMENTS

Future minimum payments under a capital lease and noncancellable operating
leases for office space, equipment and vehicles, with initial terms of one or
more years, consist of the following at December 31, 1996:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASE LEASES
------- ---------
<S> <C> <C>
Twelve months ending December 31,
1997.......................................................... $10,728 $29,912
1998.......................................................... 3,676 15,836
1999.......................................................... 11,025
2000.......................................................... 2,023
2001..........................................................
------- -------
Total minimum lease payments.................................... $14,404 $58,796
=======
Less amounts representing interest.............................. 836
-------
Present value of net minimum lease payments..................... $13,568
=======
</TABLE>

EMPLOYMENT CONTRACTS

During the year ended December 31, 1996, the Company hired a Vice President
of Sales and Marketing. The Company has entered into an employment agreement
with this individual. The agreement provides for an annual base salary of
$100,000, plus an incentive bonus. This agreement is for an initial term of one
year from the earlier of the effective date of an initial public offering of the
Company's securities or March 1, 1997. (See Note O for resignation of this
employee effective June 20, 1997.)

In addition, the Company has employment agreements with the founder and
another employee which provide for annual base salaries of $125,000 and $40,000,
respectively, and expire, as amended, in June 2001 and June 1998, respectively.
During the year ended December 31, 1996, these individuals voluntarily waived
all rights to receive the accrued salaries payable to them aggregating $110,565
and, accordingly, such amount has been presented as a contribution to the
Company's additional paid-in capital. Further, in April 1997, the founder agreed
to waive an additional $27,333 of accrued salary through February 28, 1997.

In March of 1997, the Company entered into a two-year employment agreement
with its Vice-President -- Finance which provides for an annual base salary of
$95,000 for the first year and $105,000 for the second year.

CONSULTING AGREEMENTS

On March 1, 1994, the Company entered into a consulting agreement with an
investor (the "Investor"), whereby the Company shall pay the Investor $75,000
for the first year ended on March 31, 1995, $100,000 for the second year and
$125,000 for the third year. The Company recorded accrued consulting expense of
$89,585 during the year ended December 31, 1996 and $75,000 for the nine months
ended December 31, 1995. In September 1996, this investor voluntarily waived all
rights to receive the consulting fee payable to him and, accordingly, the
aggregate amount waived, $247,917, has been reflected as a contribution to
additional paid-in capital.

F-20
<PAGE> 73

MIKE'S ORIGINAL, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED
MARCH 31, 1997 AND 1996 IS UNAUDITED)

In November 1996, this consulting agreement was superseded by a new
agreement. The new agreement provides that beginning January 1, 1997, the
Company will pay the Investor an annual salary at the rate of $125,000 per annum
for a three-year period. However, no monies will be paid to this Investor until
such time as the Company shall consummate a private or public offering of its
securities for not less than $2,000,000 in gross proceeds.

In April 1997, the November 1996 consulting agreement was terminated and,
in consideration for such termination, the Company issued 150,000 shares of its
common stock to the consultant. At March 31, 1997, accrued compensation payable
to this consultant aggregated approximately $31,000 In April 1997 the Company
recognized a charge to operations of approximately $644,000 based upon the
estimated fair market value of the shares issued to the consultant.

During the year ended December 31, 1996, the Company entered into a
consulting agreement with an entity that will provide sales and marketing
advisory and consulting services to the Company. This entity will receive an
annual consulting fee of $50,000 and has received options to purchase 133,333
shares of the Company's common stock at $1.50 per share expiring October 15,
2006. One third of such options become exercisable at the end of each successive
six-month period.

LINE OF CREDIT

In December 1995, the Company obtained an unsecured line of credit for
$25,000. Borrowings under this line bear interest at 15% per annum. Borrowings
made under this line aggregated $22,251 (unaudited) and $23,506 at March 31,
1997 and December 31, 1996, respectively.

LEGAL PROCEEDINGS

The Company is subject to various legal proceedings, claims and liabilities
which arise in the ordinary course of its business. In the opinion of
management, the amount of ultimate liability with respect to these actions will
not have a material adverse effect on the Company's results of operations, cash
flow or financial position.

In addition, the Company is subject to a proceeding that arose due to the
Company's present financial condition and its delinquent payments to certain
creditors. Specifically, in December 1996, the Company entered a Stipulation of
Entry of Judgment with a former manufacturer, whereby the Company acknowledged
an obligation in the amount of $539,482 to this manufacturer. Entry of the
judgment, however, has been stayed as long as the Company continues to make
payments with respect to this obligation. Pursuant to this judgment with this
manufacturer, the Company is continuing to make payments to reduce this
obligation, the balance of which was $245,783 (unaudited) and $276,283 at March
31, 1997 and December 31, 1996, respectively.

Furthermore, the Company is subject to an action in which the plaintiff
seeks damages in the amount of $61,510 plus interest accrued, costs and
attorneys fees arising from advertising and promotion services which the
plaintiff claims to have performed for the Company. Although no assurances can
be given, the Company believes it has meritorious defenses to this action and
will defend itself vigorously.

In the opinion of management, the amount of any additional liability in
connection with the aforementioned matters, in excess of amounts provided for in
the normal course of business, will not materially affect the Company.

F-21
<PAGE> 74

MIKE'S ORIGINAL, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED
MARCH 31, 1997 AND 1996 IS UNAUDITED)

TERMINATION OF EMPLOYMENT CONTRACT AND ASSOCIATED STOCK OPTIONS

The Company had an employment agreement with its President which provided
for an annual base salary and bonuses. The agreement also provided for the
granting of 5,101 of immediately exercisable and fully vested options to
purchase shares of the Company's common stock at an exercise price of $3.00.
This agreement expires in February 1999. In addition, the President was granted
an incentive stock option to purchase 73,205 shares of the Company's common
stock at an exercise price of $3.00, which vested ratably over three years
beginning February 1995.

On September 15, 1996, the President resigned his employment with the
Company. At the time of the resignation, 29,530 options to purchase shares of
the Company's common stock at an option price of $3.00 per share were
exercisable and the balance was cancelled. The exercisable options expired on
December 15, 1996, three months from the date of the President's resignation.

NOTE O -- SUBSEQUENT EVENTS

On May 2, 1997, the Company granted its President 50,000 stock options
under the Long-Term Incentive Plan. These options have an exercise price of
$1.50. The options are exercisable on November 1, 1997 and expire ten years from
the date of the grant.

In May 1997, the Company issued 100,000 shares of its common stock to its
legal counsel for services rendered during March and April of 1997. These shares
were valued at $4.50 per share, the estimated fair value of the stock at the
date of issuance and, accordingly, $225,000 was charged to operations during the
three months ended March 31, 1997. An additional charge of $225,000 will be
charged to operations during the second quarter of 1997.

On May 28, 1997, the Company entered into a Stipulation and Order of
Settlement in connection with an action that was commenced against the Company
in the United States District Court for the Eastern District of New York. As
part of this settlement, the Company acknowledged that it is indebted to the
plaintiff in an amount equal to $125,936 plus interest. The settlement
establishes a schedule for the Company's payment of the outstanding balance to
the plaintiff. The Company had accrued for amounts owed to the plaintiff in this
matter. At December 31, 1996, such accrual amounted to approximately $119,000
and was included in accounts payable. At March 31, 1997, approximately $86,000
of this balance was reclassified as noncurrent based on the terms of the
settlement agreement.

In June 1997, the Company issued 13,307 shares of its common stock to
certain individuals in settlement of amounts owed to these individuals
aggregating $39,921. An interest charge of approximately $20,000 representing
the difference between the estimated fair value of the Company's common stock
and the value the Company ascribed to these shares on the date of issuance will
be recognized by the Company in the second quarter of 1997.

Effective June 20, 1997, the Vice President of Sales and Marketing resigned
his employment with the Company. At the time of the resignation, 66,667 options
to purchase shares of the Company's common stock at an option price of $1.50
were cancelled. These cancelled options have not been included in the
calculation of net loss per common share. (See Note C-10.)

On June 11, 1997, the Company's Board of Directors approved the appointment
of an individual to act as Vice President -- Marketing commencing on the
effective date of the Company's initial public offering.

F-22
<PAGE> 75

======================================================

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. ANY INFORMATION OR PRESENTATIONS
NOT HEREIN CONTAINED, IF GIVEN OR MADE, MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES
OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE SECURITIES BY ANY PERSON IN ANY JURISDICTION
WHERE SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON
MAKING SUCH OFFER IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. THE DELIVERY OF THIS PROSPECTUS
SHALL NOT, UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 4
Risk Factors.......................... 8
Use of Proceeds....................... 14
Dilution.............................. 15
Capitalization........................ 16
Dividend Policy....................... 17
Selected Financial Data............... 18
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 19
Business.............................. 30
Management............................ 35
Principal Stockholders................ 41
Certain Transactions.................. 42
Selling Securityholders............... 44
Description of Securities............. 46
Underwriting.......................... 50
Legal Matters......................... 52
Experts............................... 52
Change in Accountants................. 52
Available Information................. 52
Index to Financial Statements......... F-1
Independent Auditor's Report.......... F-2
</TABLE>

Until October 30, 1997 (90 days after the commencement of the offering),
all dealers effecting transactions in the Units, Common Stock or Warrants,
whether or not participating in this distribution, may be required to deliver a
Prospectus. This delivery requirement is in addition to the obligation of
dealers to deliver a Prospectus when acting as Underwriters and with respect to
their unsold allotments or subscriptions.

======================================================

700,000 UNITS

MIKE'S ORIGINAL, INC.
--------------------
PROSPECTUS
--------------------

IAR SECURITIES CORP.
MILLENNIUM
SECURITIES CORP.

JULY 31, 1997

======================================================