<PAGE>

<PAGE>



                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                    FORM 10-QSB

           (X) Quarterly Report Pursuant to Section 13 or 15(d) of the
                   Securities Exchange Act of 1934

               For the quarterly period ended March 31 1997
                                              -------------
                                       or

           ( ) Transition Report Pursuant to Section 13 or 15(d) of the
                   Securities Exchange Act of 1939
               For the transition period from __________ to __________

 Commission File Number: 1-13984

                  WILLIAM GREENBERG JR. DESSERTS & CAFES, INC.
        (Exact name of small business issuer as specified in its charter)

             New York                                      13-3832215
 ------------------------------                       ----------------------
 (State or other jurisdiction of                        (I.R.S. Employer
 incorporation or organization)                       Identification Number)

                        222 New Road Parsippany, N J 07054
                          -----------------------------
                    (Address of principal executive offices)

Issuer's telephone number, including area code:    (201) 808-8248
                                                   --------------

Check whether the icauer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

                                Yes X     No
                                   ---      ---
 Indicate the number of Shares  outstanding  of each of the Issuer's  classes of
 common stock, as of the latest practicable date.

                Class                              Outstanding at May 13. 1997
     --------------------------                    ---------------------------
 
 Common Stock, par value $0.001
   per share                                                  3,155,500









<PAGE>

<PAGE>


                                     INDEX
<TABLE>
<S>                        <C>                                                              <C>
Part I.  Financial information

              Item 1.       Condensed consolidated financial statements:

                            Balance sheet as of March 31, 1997                              F-2

                            Statement of operations for the three months
                            ended March 31, 1997 and 1996                                   F-3

                            Statement of cash flows for the three months
                            ended March 31, 1997 and 1996                                   F-4

                            Notes to condensed consolidated financial
                            statements                                                  F-5 - F-15

              Item 2.       Management's discussion and analysis of
                            financial condition

Part II.  Other information
</TABLE>

Signatures




<PAGE>

<PAGE>



         WILLIAM GREENBERG JR. DESSERTS AND CAFES, INC. AND SUBSIDIARIES

              CONDENSED CONSOLIDATED BALANCE SHEET - MARCH 31, 1997
                                   (Unaudited)
<TABLE>
<CAPTION>

                                     ASSETS

<S>                                                                                         <C>  
Current assets:

  Cash                                                                                      $   800,229
  Accounts receivable, less allowance for doubtful
   accounts of $18,500                                                                          331,711
  Notes receivable, related party                                                                60,000
  Interest receivable                                                                            13,160
  Inventory                                                                                     390,390
  Prepaid insurance                                                                              70,448
  Prepaid expenses and other current assets                                                      42,318
                                                                                            -----------
    Total current assets                                                                      1,708,256
                                                                                            -----------
Property and equipment                                                                        1,288,928
                                                                                            -----------
Other assets:
  Covenant not to compete, net of amortization                                                   81,250
  Goodwill, net of amortization                                                               1,228,635
  Security deposits                                                                             144,921
                                                                                            -----------
                                                                                              1,454,806
                                                                                            -----------
                                                                                            $ 4,451,990
                                                                                            ===========
                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
  Current portion of long-term debt                                                         $    17,000
  Notes payable, bank                                                                            74,772
  Accounts payable                                                                              946,792
  Estimated liability for restructuring                                                         450,000
  Accrued payroll:
    Stockholders/officers                                                                       343,653
    Other                                                                                        31,521
  Accrued expenses nd other current liabilities                                                 367,879
                                                                                                -------
    Total current liabilities                                                                 2,231,617
                                                                                              ---------
Deferred rent                                                                                    79,192
                                                                                              ---------
Long-term debt, net of current portion                                                            2,357
                                                                                              ---------

Commitments and contingencies

Stockholders' equity (deficiency):

  Preferred stock, $.001 par value, authorized 2,000,000
   shares, none outstanding

  Common stock, $.001 par value, authorized 10,000,000
   shares, issued and outstanding 3,155,500 shares in

   1997 and 3,060,000 in 1996                                                                     3,156
  Additional paid in capital                                                                 10,230,260
  Deficit                                                                                  (  8,094,592)
                                                                                            -----------
                                                                                              2,138,824
                                                                                            -----------
                                                                                            $ 4,451,990
                                                                                            ===========

</TABLE>




            See notes to condensed consolidated financial statements.

                                                                            F-2




<PAGE>

<PAGE>



         WILLIAM GREENBERG JR. DESSERTS AND CAFES, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

                   THREE MONTHS ENDED MARCH 31, 1997 AND 1996
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                          1997               1996
                                                          ----               ----
<S>                                                    <C>                <C>       
Net sales                                             $1,682,786          $1,633,335
Cost of sales                                          1,307,612           1,117,292
                                                      ----------          ----------
Gross profit                                             375,174             516,043
Operating expenses                                     1,516,623           1,003,215
                                                       ----------         ----------
Loss from operations                                  (1,141,449)         (  487,172)
                                                      ----------          ----------
Other income (charges):
  Interest income                                          5,777              31,639
  Interest expense                                    (    4,063)         (    2,976)
                                                      ----------          ----------
                                                           1,714              28,663
                                                       ----------         ----------
Net loss before income taxes                          (1,139,735)         (  458,509)
Provision for income taxes                                     0                   0
                                                       ----------         ----------
Net loss                                             ($1,139,735)          ($458,509)
                                                      ==========          ==========
Net loss per common share                            ($     0.21)          ($   0.12)
                                                      ----------          ----------
Weighted average number of common shares
 outstanding                                           5,363,203           3,802,703
                                                      ----------          ----------


</TABLE>





            See notes to condensed consolidated financial statements.

                                                                            F-3




<PAGE>

<PAGE>



         WILLIAM GREENBERG JR. DESSERTS AND CAFES, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

                   THREE MONTHS ENDED MARCH 31, 1997 AND 1996
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                   1997               1996
                                                                   ----               ----
<S>                                                            <C>                <C>
Cash flows from operating activities:
  Net loss                                                     ($1,139,735)       ($  458,509)
  Adjustments to reconcile net income to net
   cash provided by operating activities:
     Depreciation                                                   27,680             44,276
     Amortization                                                    6,250             41,351
     Compensatory element of issuance of warrants                  421,730
   Changes in other operating assets and liabilities:
     Accounts receivable                                           167,727        (     1,556)
     Inventory                                                 (    40,587)       (    67,187)
     Interest receivable                                       (       750)       (     1,500)
     Prepaid expenses and other current assets                      16,070        (    25,390)
     Accounts payable                                          (       658)       (    44,433)
     Accrued expenses and other current liabilities                201,450             48,769
     Deferred rent                                                  10,590              8,277
                                                                ----------         ----------
     Net cash used in operating activities                     (   330,233)       (   455,902)
                                                                ----------         ----------
Investing activities:
  Purchase of subsidiary                                       (   900,000)
  Purchase of property and equipment                                              (   335,085)
  Decrease in note receivable, related party                                           75,000
  Increase in rent security deposits                           (       825)       (    36,000)
                                                                ----------         ----------
     Net cash used in investing activities                     (   900,825)       (   296,085)
                                                                ----------         ----------
Financing activities:
  Proceeds from issuance of common stock and
   warrants                                                      1,747,500
  Payment of debt                                              (     4,478)       (    78,920)
                                                                ----------         ----------
     Net cash provided by (used in) financing
      activities                                                 1,743,022        (    78,920)
                                                                ----------         ----------
Net increase in cash                                               511,964        (   830,907)
Cash, beginning of period                                          288,265          3,097,161
                                                                ----------         ----------
Cash, end of period                                             $  800,229         $2,266,254
                                                                ==========         ==========

Supplemental disclosures:
  Cash paid during the year for:

    Interest                                                    $    4,063         $    3,069
                                                                ==========         ==========
    Income taxes                                                $        0         $        0
                                                                ==========         ==========

Supplemental schedule of non-cash investing activities
 and financing activities:
    Issuance of common stock and warrants
     regarding acquisition of subsidiary                        $1,315,000
                                                                ==========         ==========



</TABLE>

            See notes to condensed consolidated financial statements.

                                                                             F-4




<PAGE>

<PAGE>



         WILLIAM GREENBERG JR. DESSERTS AND CAFES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.      The accompanying unaudited financial statements have been prepared in
         accordance with generally accepted accounting principles for interim
         financial information and with the instructions to Form 10-QSB.
         Accordingly, they do not include all of the information and footnotes
         required by generally accepted accounting principles for complete
         financial statements.  In the opinion of management, all adjustments
         considered necessary for a fair presentation have been included.  The
         results of operations for the three months ended is not necessarily
         indicative of the results to be expected for the full year. For further
         information, refer to the consolidated financial statements and
         footnotes thereto included in the Company's annual report for the year
         ended December 31, 1997 included in its Annual Report filed on Form 10-
         KSB.


2.      Organization of the Company:

        William Greenberg Jr. Desserts and Cafes, Inc. (the "Company") was
         incorporated in the State of New York on November 12, 1993. Since its
         inception through July 10, 1995, the Company was a development stage
         enterprise and did not generate any revenues and did not carry on any
         significant operations. Management's efforts were directed toward the
         development and implementation of a plan to generate sufficient
         revenues in the bakery industry to cover all of its present and future
         costs and expenses. On July 10, 1995, the Company acquired the net
         operating assets of Greenberg Desserts Associates Limited Partnership
         ("Greenberg's - L.P.") at which time the Company commenced operations
         and ceased being a development stage enterprise. The deficit
         accumulated during the development stage aggregated $100,112.

        The Company, on January 17, 1997 purchased all of outstanding capital
         stock of J.M. Specialties, Inc. ("JMS") in an acquisition to be
         accounted for as a purchase (the "Acquisition"). The total purchase
         price aggregated $2,215,000 of which $900,000 was paid in cash and the
         remaining $1,315,000 through the issuance of 500,000 shares of the
         Company's common stock at fair market value of $1.75 per share and
         purchase warrants valued at fair market value of $1.10 per warrant to
         acquire 400,000 shares of the Company's common stock at an exercise
         price of $2.50 per share. JMS offers a line of batter and frozen
         finished cakes, brownies and muffins.

        In connection with the above described subsequent transactions, the
         Company transferred all of its business assets to a newly formed
         wholly-owned subsidiary, WGJ Desserts and Cafes, Inc., in exchange for
         all of the issued and outstanding shares of common stock of such entity
         (the "Subsidiary"). As a result, the Company will act as a holding
         company with two wholly-owned subsidiaries. JMS and WGJ Desserts and
         Cafes, Inc. Subject to obtaining consent of the Company's stockholders,
         the Company changed its name to Creative Bakeries, Inc.

                                                                             F-5




<PAGE>

<PAGE>



         WILLIAM GREENBERG JR. DESSERTS AND CAFES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3.      Principles of consolidation:

       The consolidated financial statements of William Greenberg Jr. Desserts
        and Cafes, Inc. and subsidiaries include the accounts of all significant
        wholly owned subsidiaries, after elimination of all significant
        intercompany transactions and accounts.  The accounts of J.M.
        Specialties, Inc. and WGJ Desserts and Cafes, Inc. are included as the
        subsidiaries of William Greenberg Jr. Desserts and Cafes, Inc.

4.      Acquisition of Greenberg Dessert Associates Limited Partnership:

        On June 2, 1995, the Company entered into an agreement to purchase the
         operating assets (net of $155,700 in assumed liabilities), properties
         and rights of Greenberg Dessert Associates Limited Partnership
         (Greenberg's - L.P.) for $2,000,000, consisting of $1,967,300 in cash
         and a promissory note in the amount of $32,700. This Acquisition, which
         was consummated on July 10, 1995, was accounted for as a purchase. The
         excess of the purchase price over the value of the net assets acquired
         was recorded as goodwill. In addition, the Company incurred legal fees
         of $26,000, which related to the Greenberg's - L.P. acquisition.

        The net assets purchased and the liabilities assumed of Greenberg's -
         L.P. are summarized below:

        Assets purchased:

           Furniture, fixtures and leasehold improvements            $1,130,000
           Inventories                                                   40,000
           Covenant not to compete                                      125,000
                                                                     ----------
                                                                      1,295,000
        Liabilities assumed:
           Note payable - bank                                      (   123,000)
           Rent payable                                             (    32,700)
                                                                     ----------
        Net assets acquired                                           1,139,300
        Purchase price, including $73,500 of acquisition costs        2,073,500
                                                                     ----------
        Excess of purchase price over net assets acquired           ($  934,200)
                                                                     ==========




        The business acquired from Greenberg's - L.P. was founded in 1946 and is
         a recognized provider of premium quality baked goods and desserts. The
         Company currently owns and operates six (6) retail bakery stores
         located in Manhattan, N.Y. All baking is done at its main commercial
         bakery which is located on West 47th Street, N.Y., N.Y. From this
         location, it services commercial and catering customers as well as
         supplying all baked goods to its six retail stores.

        The Company entered in consulting and/or employment agreements with a
         partner and three (3) key members of Greenberg's - L.P. management (see
         Note 11).

                                                                            F-6




<PAGE>

<PAGE>



         WILLIAM GREENBERG JR. DESSERTS AND CAFES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

4.      Acquisition of Greenberg Dessert Associates Limited Partnership
         (continued):

        In order to finance this acquisition, on July 10, 1995 the Company
         obtained $2,000,000 from InterEquity Capital Partners, L.P.,
         ("InterEquity") in the form of (i) an amortizing note in the aggregate
         amount of $1,999,000 (the "Amortizing Note") and (ii) a $1,000 note
         which was convertible into shares of common stock of the Company or a
         warrant to acquire shares of the Company's stock (the "Convertible
         Note" and together with the Amortizing Note, the "Notes"). Interest on
         the Note was 14.5% per annum. The Company also paid InterEquity a
         commitment fee of $50,000. The Notes were collateralized by a security
         interest in the Company's assets as well as a collateral assignment of
         all of the Company's leases and a pledge of an aggregate of 1,025,000
         shares of common stock owned by the two founding stockholders and the
         Company's President. The Amortizing Note was payable on or prior to
         July 31, 2000, with interest only for the first 12 months and 48 equal
         monthly installments of principal and interest commencing July 31, 1996
         through June 30, 2000. The Convertible Note was payable in full on July
         31, 2000 with interest only payable monthly commencing July 31, 1995.
         This financing agreement allowed InterEquity to convert the Convertible
         Note into shares of the Company's capital stock or a warrant to acquire
         shares of stock of the Company in a number sufficient to equal up to
         11% of the Company's then outstanding preferred and/or common shares of
         stock.

        The Notes were repaid in full in October 1995 from the proceeds of the
         sale to the public of the Company's common stock which was consummated
         in October 1995. InterEquity exercised its option under the terms of
         the Convertible Note to purchase a warrant for $1,000 to acquire shares
         equal to 6% of the Company's outstanding preferred and common shares.
         The warrant expires in October, 2001 and contains anti-dilutive
         provisions which entitle InterEquity to 6% of the Company's capital
         stock on the date the warrant is converted into capital stock. The loan
         agreement also requires the Company to keep in reserve shares
         sufficient to satisfy the required amount to be issued to InterEquity
         upon conversion. The holder of any shares issued pursuant to such
         conversion may demand, under certain conditions, that the Company
         purchase such capital shares for an amount equal to a multiple of
         earnings as defined or the fair value of the shares as determined by
         independent appraisal. Such put is only available to the holder(s) of
         such shares from July 10, 2000 through July 31, 2005 and then only if
         the Company's classes of capital stock subject to the put are not
         listed for trading on a national securities exchange and/or are not
         quoted on an automated quotation system.

                                                                            F-7




<PAGE>

<PAGE>



         WILLIAM GREENBERG JR. DESSERTS AND CAFES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

4.      Acquisition of Greenberg Dessert Associates Limited Partnership
         (continued):

        The $856,871 difference between the fair value of the 163,404 shares of
         the Company's common stock reserved for issuance under the warrant and
         the $1,000 proceeds from the warrant was charged to operations in 1995.
         Management ascribed a fair value of $5.25 per common share which
         approximated the market value of the Company's common stock at the date
         InterEquity purchased the warrant. As a result of the Company's
         issuance of 61,500 common shares during 1996, InterEquity is entitled
         to 3,925 additional shares of the Company's common stock based upon the
         anti-dilutive provision of its warrant. Accordingly, $11,775 was
         charged to operations in 1996 which represented the market value of the
         warrants on the date the warrants were issued.

5.      Acquisition of J.M. Specialties, Inc.:

        On January 23, 1997, the Company purchased 100% of the outstanding
         common stock of J.M. Specialties, Inc. ("JMS") in a transaction to be
         accounted for as a purchase (the "Acquisition"). The purchase price of
         $2,215,000 consisted of (i) $900,000 in cash, (ii) 500,000 shares of
         the Company's common stock valued at fair market value of $1.75 per
         share (aggregating $875,000), and (iii) 400,000 purchase warrants
         valued at fair value of $1.10 per warrant (aggregating $440,000) to
         acquire 400,000 shares of the Company's common stock at $2.50 per
         share. The warrants are in the same form as those described below.

        JMS, which was founded in 1984, offers a line of both batter and frozen
         finished cakes, brownies and muffins - with muffins constituting
         approximately 90% of sales. These products are produced in batches
         using partially automated equipment and its facility in Parsippany, New
         Jersey. The product is sold to wholesale customers as well as
         supermarket distribution centers and is marketed primarily through food
         distribution companies in New Jersey and New York. In turn, according
         to JMS's management, the distributor sells approximately forty percent
         of the product to supermarkets and sixty percent to food service
         customers, such as hospitals, colleges, restaurants and corporate
         dining rooms.

        In connection with the Acquisition, the Company entered into an
         employment agreement with the selling shareholder pursuant to which he
         will serve as a director and chief executive officer of the Company at
         an annual salary level of $250,000 for the first year and a minimum of
         $150,000 thereafter. In addition, the Company agreed to provide
         $600,000 to JMS for working capital.

                                                                            F-8




<PAGE>

<PAGE>



         WILLIAM GREENBERG JR. DESSERTS AND CAFES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

5.      Acquisition of JMS Specialties, Inc.:

        In connection with the acquisition, the Company transferred all of its
         then owned business assets to a newly formed wholly-owned subsidiary in
         exchange for all of the issued and outstanding shares if common stock
         of WGJ Desserts and Cafes, Inc. As a result, the Company currently acts
         as a holding company with two wholly-owned subsidiaries, JMS and WGJ.
         Subject to obtaining the Company's stockholders, the Company intends to
         change its name to Creative Bakeries, Inc.

        In order to finance the Acquisition, the Company sold in a private
         placement 1,875,500 common stock purchase warrants ("the Placement
         Warrants") at a net price to the Company (after expenses of $315,000)
         of $1,747,500. Each Placement Warrant entitles the holder thereof to
         purchase one common share, par value $.001 per share, of the common
         stock of the Company at an exercise price per share of $2.50 for a term
         which will expire on December 31, 2000.

        The Company has the right to redeem the Placement Warrants, in
         installments, at a redemption price of $.10 per warrant commencing six
         months after the date of issuance if the stock trades at a designated
         level for a least five trading days prior to the month preceding the
         date on which the redemption right may be exercised.

        The holders of the Placement Warrants have a put option pursuant to
         which for a 60 day period prior to their expiration date, the holder
         has the right to require the Company to repurchase the Placement
         Warrants for a consideration consisting of $.10 per warrant plus 40% of
         a share of common stock. In addition, the Placement Warrants have
         standard anti-dilution protection.

        The assets acquired and the liabilities assumed at December 31, 1996, in
         connection with the Acquisition, are as follows:
<TABLE>
<S>                                                                   <C>              <C>   
                    Assets:
                      Cash                                            $ 84,129
                      Accounts receivable                              224,378
                      Notes receivable                                  60,000
                      Inventories                                      274,803
                      Prepaid expenses                                  14,063
                      Property and equipment                           483,608
                      Other assets                                      27,999
                                                                      --------
                                                                                       $1,168,980
                    Liabilities:
                      Long-term debt                                    23,607
                      Notes payable - bank                              75,000
                      Accounts payable and accrued expenses            123,938
                                                                      --------
                                                                                          222,545
                                                                                        ---------
                    Excess of net assets acquired over

                     liabilities assumed                                                  946,435

                    Goodwill                                                            1,268,565
                                                                                        ---------
                                                                                       $2,215,000
                                                                                       ==========
</TABLE>


                                                                            F-9




<PAGE>

<PAGE>



         WILLIAM GREENBERG JR. DESSERTS AND CAFES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6.      Property and equipment:

        The Company's baking equipment, furniture and fixtures and leasehold
         improvements were deemed to be impaired and written down to managements
         estimate of their fair value at December 31, 1996. Fair value, was
         determined by management's estimation of the net sales value if the
         property assets were offered for sale. An impairment loss in the amount
         of $797,559 was charged to operations during the fourth quarter of
         1996.

        The following is a summary of property and equipment at March 31, 1997:

                    Baking equipment                       $1,162,419
                    Furniture and fixtures                     96,991
                    Leasehold improvements                    586,564
                                                           ----------
                                                            1,845,974

                    Less:  Accumulated depreciation
                            and amortization                  557,046
                                                           ----------
                                                           $1,288,928
                                                           ==========
7.      Intangible assets:

        The acquisition agreement of Greenberg's - L.P. contained a provision
         for a covenant not to compete of $125,000 which management is
         amortizing over its five year term. Amortization of the covenant
         charged to operations was $6,250 in 1997 and 1996.

        The excess cost over the fair value of the net assets acquired from
         Greenberg's - L.P. aggregated $934,200.  This goodwill has been
         amortized over its estimated useful life of fifteen years. Amortization
         charged to operations in 1996 was $15,578.

        Continuing operating losses has caused management to reevaluate the
         goodwill acquired in the purchase of Greenberg's - L.P. In the first
         quarter of 1997, management completed its reevaluation and determined
         that the goodwill had no continuing value and the unamortized portion
         of $840,780 was charged to operations in the fourth quarter of 1996.

        On December 30, 1993, John McDonough, a fifty percent shareholder in J.
         M. Specialties, Inc., sold 100 shares of the Company's common stock to
         Philip Grabow, making Mr. Grabow the owner of all of the Company's
         outstanding shares. As part of this transaction, J. M. Specialties,
         Inc. entered into a covenant not to compete with Mr. McDonough, whereby
         Mr. McDonough agreed not to manage, operate, join, control, or
         participate, in or be consulted as an officer, employee, sole
         proprietor, partner, shareholder or otherwise, with or for any business
         which in any such matter, directly or indirectly, has competed or will

                                                                          F-10




<PAGE>

<PAGE>



         WILLIAM GREENBERG JR. DESSERTS AND CAFES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

7.  Intangible assets (continued):

        compete with J. M. Specialties, Inc. As consideration for entering into
         this agreement, the Company agreed to pay Mr. McDonough $1,000 per
         week, commencing the first week of January, 1994 and continuing through
         December 31, 1998 until a total of $260,000 has been paid. Because no
         interest rate was stated in this agreement, $29,358 was deemed to be
         interest, as per Accounting Principles Board Opinion No. 21, leaving a
         value of $230,642 to be assigned to the covenant not to compete.

        In April of 1996, Mr. McDonough passed away, leaving the remaining
         balance of the note to his estate.  In October of 1996, J. M.
         Specialties, Inc. negotiated with the Estate of Mr. John McDonough and
         paid the remaining balance of the note of $147,179 with a lump sum
         payment of $115,000 leaving an extraordinary gain of $32,179 on the
         extinguishment of the debt as of December 31, 1996.

        Amortization  expense amounted to $11,375 for the period ended March 31,
         1996.

8.      Long-term debt:

        Note payable, secured by machinery and equipment with a cost of $91,000
         and payable in monthly installments of $1,417, excluding interest. The
         note matures in 1998.

9.      Deferred rent:

        The accompanying financial statements reflect rent expense on a
         straight-line basis over the life of the lease. Rent expense charged to
         operations differs with the cash payments required under the terms of
         the real property operating leases because of scheduled rent payment
         increases throughout the term of the leases. The deferred rent
         liability is the result of recognizing rental expense as required by
         generally accepted accounting principles.

10.     Capital stock:

        (a)  Common stock:

        In November 1996, the Company issued 11,000 shares of its common stock
         to two (2) employees valued at $33,000 for services rendered. In
         November and December 1996, the Company issued an aggregate of 26,000
         shares of its common stock valued at $54,510 to two law firms in
         settlement of amounts owed for legal services.

                                                                           F-11




<PAGE>

<PAGE>



         WILLIAM GREENBERG JR. DESSERTS AND CAFES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

10.     Capital stock (continued):

        (a)  Common stock (continued):

        In November 1996, 25,000 shares of common stock were issued to a
         consultant pursuant to an exercise of an option at $2.00 per share
         resulting in a charge to operations of $50,000 which represented the
         value of his services.

        On January 17, 1997, the Company issued 500,000 shares of its common
         shares pursuant to a stock purchase agreement of J.M. Specialties, Inc.
         (see Notes 2 and 4).

        (b)  Warrants:

               (i)  Warrants issued in 1995:

               In order to obtain financing for the acquisition of Greenberg's -
                  L.P. (see Note 2), the Company sold to the lender for $1,000,
                  a Convertible Note which in accordance with the terms of the
                  conversion agreement, was converted by the lender into a
                  warrant to acquire shares of stock of the Company in a number
                  sufficient to equal 6% of the Company's then outstanding
                  preferred and common stock (163,404 shares of common stock).
                  The warrant expires on July 31, 2001. The warrant contains
                  anti-dilutive provisions throughout its six (6) year life
                  which entitles the holder to its applicable percentages of the
                  Company's capital stock on the date the warrant is exercised.
                  Based upon the issuance 534,000 shares of common stock and
                  2,425,000 warrants during 1997, the lender is entitled to an
                  additional 179,229 shares of common stock. Accordingly, the
                  financial statements include a charge to operations of
                  $197,230 which represents the market value of the stock at the
                  time the 179,229 warrants were issued by the Company.

               (ii)  Other warrants issued in 1997:

               Aspart of the Acquisition, the Company issued on January 17,
                  1997, 350,000 warrants to JMS's former owner and 50,000
                  warrants to certain of its employees.

               Concurrent with the Acquisition on January 17, 1997, the Company
                  issued 50,000 warrants to each of the three (3) of the
                  Company's directors. Two (2) of which are also officers of the
                  Company.

               Inorder to finance the Acquisition, the Company sold to
                  accredited investors 1,875,000 Placement Warrants at a
                  purchase price to the Company of $1,747,500 (after offering
                  costs of $315,000).

                                                                           F-12




<PAGE>

<PAGE>



         WILLIAM GREENBERG JR. DESSERTS AND CAFES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

10.     Capital stock (continued):

        (b)  Warrants (continued):

               (ii)  Other warrants issued in 1997 (continued):

               All of the warrants issued in 1997, including the Placement
                  Warrants, aggregating 2,425,000 entitles the holder thereof to
                  purchase one common share, par value $.001 per share, of the
                  common stock of the Company at an exercise price per share of
                  $2.50 for a term of which will expire on December 31, 2000.

               The Company has the right to redeem the warrants, in
                  installments, at a redemption price of $.10 per warrant
                  commencing six months after the date of issuance if the stock
                  trades at a designated level for at least five trading days
                  prior to the month preceding the date on which the redemption
                  right may be exercised.

               The holders of the warrants have a put option pursuant to which
                  for a 60 day period prior to their expiration date, the holder
                  has the right to require the Company to repurchase the
                  warrants for a consideration consisting of $.10 per warrant
                  plus 40% of a share of common stock. In addition, the warrants
                  have standard anti-dilution protection.

11.     Commitments and contingencies:

        Employment Agreements:

               On March 20, 1997, the Company entered in to an employment
                  contract with the former owners of a company that produced
                  low-fat and fat-free cookies. Pursuant to the contracts, both
                  individuals received a signing bonus aggregating $68,000 and
                  will each receive a salary of $25,000 per annum with an
                  opportunity to earn an additional $50,000 each based on sales
                  performance. In addition, both individuals will be entitled to
                  warrants to acquire an aggregate of 50,000 shares of the
                  Company's common stock in the event that sales volume exceeds
                  $750,000 per annum.

                                                                           F-13




<PAGE>

<PAGE>



         WILLIAM GREENBERG JR. DESSERTS AND CAFES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

11.  Commitments and contingencies (continued):

        Employment Agreements (continued):

        In order to supplement its cash flow, in August 1996, the Company
         reduced payments to all employees under contract by 50%. The unpaid
         portion at March 31, 1997 aggregating $343,653 has been accrued and
         will be paid at such time as the Company has sufficient funds.

        License Agreement:

        On May 18, 1995, the Company entered into an agreement with Macy's East,
         Inc. (the "licensor"), pursuant to which it granted the Company a
         license consisting of the right to operate a cafe in its store located
         on 34th Street, New York, NY. The cafe offers for sale fresh baked
         pastries and desserts as well as soups, salads, sandwiches, coffees,
         teas and other non-alcoholic beverages to the general public. Under the
         license agreement, the Company must pay the Licensor a fee equal to ten
         percent (10%) of net sales relating to the cafe. Such license fee
         charged to operations amounted to $5,069 in 1995. In addition, the
         Company must spend for advertising an amount equal to three percent
         (3%) of its net sales. The license commenced in November 1995 and ends
         on the Saturday nearest to July 31, 1996. The agreement, which has been
         renewed for the one year, is automatically renewed for successive
         periods of one year unless either party gives notice to the other at
         least ninety (90) days prior to the expiration of the initial term or
         any renewal term that the agreement shall not be renewed.

        As an addendum to the above agreement, during 1996 the Company opened a
         second cafe in the Macy's 34th Street store and has placed four (4)
         kiosks in various Macy's locations outside New York City. The
         additional locations all operate under the provisions of the original
         agreement described above.

12.     Related party transactions:

        The Company shares warehouse facilities with J. P. Veggies, Inc.  Mr.
         Grabow and his family, own 40 percent of J. P. Veggies, Inc.  The
         Company charges J.P. Veggies, Inc. for the manufacturing and packing of
         product and for certain sales and administrative support provided by
         J. M. Specialties, Inc.  These billings were included in the Company's
         net sales and amounted to $26,888 in 1997 and $24,759 in 1996.

        The Company has a demand note receivable with a related party that
         carries interest at five percent. The balance at March 31, 1997
         amounted to $60,000.

                                                                            F-14




<PAGE>

<PAGE>


         WILLIAM GREENBERG JR. DESSERTS AND CAFES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

13.  Reconciliation of shares used in computation of earnings per share.

                                                       1997             1996
                                                       ----             ----

         Weighted average of shares actually
            outstanding                              3,060,000       3,060,000

         Common stock purchase warrants              2,303,203         742,703
                                                     ---------       ---------
         Primary and fully diluted weighted
            average common shares outstanding        5,363,203       3,802,703
                                                     =========       =========




14.     Subsequent events:

        On March 17, 1997, the Company signed a letter of intent to acquire all
         of the capital stock of a bakery. Financial statements of Chatterly
         Elegant Desserts, Inc. have not been provided since the proposed
         acquisition does not meet the test for a significant subsidiary as
         required under Regulation SX 210-02(w). The combined investment in and
         advances at the proposed acquisition date did not exceed 10% of
         consolidated assets at March 31, 1997.

        As of April 1, 1997, pursuant to settlement discussions, the employment
         of Stephen Fass, a director and President of the Subsidiary, Maria
         Marfuggi, a director and President of JMS, and Seth Greenberg,
         President of the Subsidiary's baking division, terminated. At the
         present time, the respective parties have not yet concluded their
         settlement discussions. Management intends to seek an amicable
         settlement with the named parties as a result of such terminations;
         however, each of the named parties have an employment agreement with
         the Company. No contingency loss has been charged to operations insofar
         as counsel does not know the extent of the liability, if any, to the
         Company.

        During the period from January 1997 through March 1997 six (6) of the
         Company's vendors have each commenced actions which seek payment of
         delinquent accounts payable balances aggregating approximately $80,000.
         The Company is attempting to settle these matters without litigation,
         however, there has been no final settlements to date.

                                                                           F-15





<PAGE>

<PAGE>

    Item 2. Management's Discussion and Analysis of Financial Condition and Plan
    of Operation


 a. General:

    The Company was incorporated in November 1993 and was in the development
    stage through July 1995. From April 1994 through June 1995, the Company
    assembled its core management, raised approximately $600,000 from equity
    financing, and negotiated a definitive agreement to purchase the operating
    assets and business of Greenberg's - L.P. In July 1995, the Company
    completed the acquisition for a purchase price of $1,967,300 in cash and a
    promissory note for $32,700. In connection with the acquisition, the
    Company obtained a $2,000,000 term loan and applied a portion of the net
    proceeds from its initial public offering, consummated in October 1995 to
    pay in full the principal and accrued interest under the term loan. The
    acquisition was accounted for as a purchase and the excess of the purchase
    price over the value ofthe net assets acquired was recorded as goodwill.

    At March 31, 1997 to the extent the Company may have taxable income in
    future periods, there is available a net operating loss for federal income
    tax purposes of approximately $5,600,000 which can be used to reduce the
    tax on income up to that amount through the year 2011.

 b. Results of Operations:

     Historical:


    The Company from its inception on November 12, 1993 through July 10, 1995
    was in the developmental stage and did not carry on any significant
    operations nor generate any revenues. Management's efforts were directed
    towards the development and implementation of a plan to generate sufficient
    revenues in the baking industry to cover all of its costs and expenses. The
    Company did not generate any revenues until July 10, 1995 when it acquired
    the operating assets of Greenberg's -L.P.

    The Company consolidated revenues aggregated $1,682,786 and $1,633,335 for
    the three months ended March 31, 1997 and 1996, respectively. The cost of
    goods sold was $1,307,612 in 1997 and $1,117,292 in 1996. Operating
    expenses were $1,516,623 in 1997 and $1,003,215 in 1996. As a result, the
    loss from operations for the months ended March 31, 1997 and 1996 was
    $1,141,449 and $487,172.

    During the first quarter of 1997, the Company incurred costs associated with
    issuance of the warrants. These costs, for services rendered and loan fees
    to Interequity, were charged to operating costs and amounted to
    approximately

                                        1



<PAGE>

<PAGE>


 $425,000. In addition, one of the Company's subsidiaries, JM Specialties, Inc.,
 paid one time signing bonuses to two employees amounting to $68,000.

 For the three months ended March 31, 1996, the Company earned interest income
 of $31,639 which arose mainly from investing a portion of the net proceeds it
 received upon the consummation of the initial public offering in liquid cash
 equivalents.

 The 1997 statements of operations reflect a charge in the amount  of $197,230,
 which represents the fair market value of 179,299 warrants, issued to a lender
 in order to satisfy the obligation under a written  agreement. These warrants
 were valued at $1.10.

 The resulting net loss  aggregated $1,139,735 for 1997 ($.21) per share and
 $458,509 for 1996 ($.12)  per share.

 The increase in cost of sales as a percentage of sales for 1997 as compared to
 1996 is attributable to (i) an increase in baking personnel and labor rates,
 (II) increased costs in the development of new baked products, and (iii)
 increase in the cost of ingredients and packaging materials. The Company was
 unable to pass most of these increased costs on to its customers.

 The retail division and wholesale divisions of the Parent Company, William
 Greenberg Jr. Desserts and Cafes, Inc., sell similar products which are baked
 at the company's centralized baking facility. Costs are allocated to each
 division based upon the standard costs of the items sold. Such costs consist of
 ingredients, direct labor and overhead. Since the acquisition of the Greenberg-
 L.P., management has concentrated their efforts on running the wholesale
 segment as a separate business.

 J.M. Specialties, Inc., offers a line of batter and frozen finished cakes,
 brownies, and muffins. J.M Specialties, Inc.'s financial records and affairs
 are kept separate from the parent but included in the consolidated financial
 statements at March 31, 1997 and 1996.

 Selling, general and administrative expenses of the retail segment consist of
 (i) expenses incurred in each of the five retail stores and (ii) expenses
 allocated from the Company's centralized operating facility which are based
 primarily on sales volume. The increase in selling, general and administrative
 expenses as a percentage of sales during 1997, as compared to 1996, was
 primarily the result of the effect of the issuance of common stock purchase
 warrants for services rendered, salaries, and fees ($425,000).

 The decrease in depreciation and amortization for 1997 as compared to 1996 is
 attributable to depreciation and amortization from assets written down or
 written off for the year ended December 31, 1996

                                        2




<PAGE>

<PAGE>


 C. PLAN OF OPERATION:

 (i) REORGANIZATION OF NEW YORK CITY BAKING OPERATIONS:

 During the first 3-1/2 months of 1997 management has taken numerous steps to
 restructure its New York City baking operation in a concentrated effort to
 reduce operating costs. Their plans, already in progress, involve a
 restructuring of the entire management team. Duties have been divided between
 manufacturing, wholesale, and retail operations. The commissary at 47th Street,
 New York City has been redesigned with resulting savings in labor and overhead.
 Purchasing has been centralized which has also resulted in savings. Leases have
 been renegotiated, employment contracts, which have seriously impacted the
 Company's cash flows, have been either renegotiated or terminated.

 In connection with the restructuring plan, management has written down its
 baking equipment, leasehold improvements and fixtures as of December 31, 1996,
 by approximately $800,000 due to impairment in their value. In addition,
 management has determined unamortized goodwill of approximately $840,000 has
 no continuing value and accordingly it was written off during 1996. Finally,
 the Company had charged 1996 with a $450,000 provision for actions aimed at
 restructuring the Company. This restructuring charge is predominantly comprised
 of costs associated with the elimination of certain positions and provisions
 for lease obligations on certain retail stores. By taking the above-mentioned
 actions, future periods, will not be burdened with the amortization or
 depreciation of these costs.

 Management feels that as a result of the restructuring and elimination of
 costs, savings for the fiscal year 1997 will be in excess of $1,000,000.

 (II)    ACQUISITION OF J.M. SPECIALTIES INC.:

        On January 17, 1997, the Company entered into a stock purchase agreement
        ("Stock Purchase Agreement") with Philip Grabow ("Grabow"), pursuant to
        which, January 23, 1997, the Company consummated the purchase from
        Grabow of all the outstanding shares of J.M. Specialties, Inc., a New
        Jersey Corporation ("JMS Subsidiary"), in exchange for (I) $900,000 in
        cash, (ii) 500,000 shares (the "Shares") of the Common Stock of the
        Company and (iii) 400,000 warrants (the "Warrants") exercisable for
        shares of Common Stock of the Company (the "Transaction"). Each warrant
        entitles Grabow to purchase one share of Company common stock at the
        exercise price of $2.50 per share until December 31, 2000. In
        connection with the Stock Purchase Agreement, Grabow and the Company
        also entered (i) a registration rights agreement, dated as of January
        23, 1997, regarding the terms of the registration of the
 
                                        3






<PAGE>

<PAGE>

 Shares of Common Stock of the Company issuable upon exercise of the Warrants,
 and (ii) and employment agreement dated January 23, 1997. Pursuant to the
 employment agreement, Grabow will serve as president and Chief Executive
 Officer of the Company at the annual salary level of $250,000 for the first
 year, and a minimum of $150,000 thereafter. Also in connection with the
 Transaction, effective January 23, 1997, Grabow was elected to serve as a
 director of the Company as a result of the Transaction, Grabow beneficially
 owns 850,000 shares (or 24.5%) of the stock of the Company.

 With the acquisition of the JMS subsidiary, the Company now also offers a line
 of batter in frozen- finished cakes, brownies, and muffins, which constitute
 approximately 90% of the JMS Subsidiary's sales. These products are
 manufactures in batches using partially automated equipment at the JMS
 Subsidiary's facility in Parsippany, NJ. The products are sold to wholesale
 customers as well as supermarket distribution centers and are marketed
 primarily through food distribution companies in New York and New Jersey. The
 management of the Company believes that distributors sell approximately 40% of
 the products to supermarket and 60% to food service customers.

 To develop new accounts, JMS Subsidiary personnel present the products at food
 shows, contact possible customers directly to have them order the product from
 their distributor an through direct mailings to customers. The JMS Subsidiary's
 current food distribution include SYSCO Foods, Alliant Foods, Rykoff-Sexton and
 over 75 other accounts consisting of supermarket distribution centers, Food
 service distributors, and independent bakery distributors. The product
 ultimately ends up at Food Service accounts such as the Museum Of Natural
 History, Various colleges, Hospitals, corporate feeders, and retailers, such as
 Shop Rite, Path Mark, A&P etc..

 The JMS Subsidiary started business in October 1994 as a company making gourmet
 batter product. The product line was then extended to Sugar Free then Fat-Free
 and finally frozen finished baked product.

 According to the Company's management, this change reflects the change in the
 marketplace where consumers wanted more Fat -Free products and customers wanted
 frozen - finished products to minimize customer time to bake and finish batter
 product.

 Management of the JMS Subsidiary believes that the reputation of the JMS
 Subsidiary has grown considerably as a result of the product's taste, texture,
 and price value. The product has no preservatives, hydrogenated oil or
 chemicals: rather it uses natural ingredients.

 In connection with the Transaction, the Company provided $600,000 to the JMS
 Subsidiary for working capital purposes. The payment of the cash 

                                        4


<PAGE>

<PAGE>

 portion of the purchase price for the EMS Subsidiary and such working capital
 aggregated $1,500,000, was funded through net proceeds received from the sale
 by the Company of $1,875,000 common stock purchase warrants (the "Private
 Placement Warrants") at a price of $1.10 per Private Placement warrant to a
 limited number of purchasers that qualify as "accredited investors" under the
 Securities Act of 1933.The terms of the Private Placement Warrants are
 substantially similar to the Warrants.

 (III) OTHER ACQUISITIONS:

 On March 20, 1997, the Company entered into an employment contract with the
 former owners of a company that produced low-fat and fat-free cookies. Pursuent
 to the contract both individuals received a signing bonus aggregating $68,000
 and will each receive a salary of $25,000 per annum with an opportunity to
 earn an additional $50,000 each based on performance. In addition both
 individuals will be entitled to an aggregate of $50,000 warrants in the event
 that sales volume exceeds $750,000 per annum.

 Currently, a contract has been signed to produce fat free cookies for Safeway
 Supermarkets under their Healthy Advantage label. This contract is estimated to
 take effect July 1997. The Company is also pursuing other contracts with
 various Supermarket chains.

 (IV) PENDING NEGOTIATIONS:

 On March 17, 1997, the Company signed a letter of intent to acquire the Stock
 of a bakery. The acquisition if consummated, will be accounted for as a pooling
 of interests.

 Plans call for closing the JMS facility and merging it with the bakery with
 which the letter of intent has been signed. This merger will result in
 estimated savings of between $400,000.00 and $600,000.00 per year. These
 savings are in addition to the estimated savings from the restructuring. There
 can be no assurance that a definitive agreement will be reached or, if reached
 that a closing thereunder will occur.

 (D) LIQUIDITY AND CAPITAL RESOURCES:

 Since its inception the Company's only source of working capital has been the
 $7,460,000 received from the issuance of its securities.

 In June 1995, The Company issued 180,000 shares of common stock to unrelated
 parties for $600,000 and in August 1995, the Company issued 60,000 shares of
 its common stock to unrelated parties for $200,000. In connection with the
 acquisition of Greenberg's-L.P., the Company received 

                                        5



<PAGE>

<PAGE>



 $2,000,000 from the sale of two notes to InterEquity Capital Partners, L.P.
 ("InterEquity"). During October 1995, the Company received net proceeds of
 $4,900,000 from the sale of 1,150,000 shares of its common stock in an initial
 public offering. Of the $5,700,000 proceeds from the aforementioned stock
 sales: (i) $2,125,000 was issued to repay the InterEquity debt including
 interest; (ii) $2,615,000 was used in operations; (iii) $765,00 was used to
 purchase property, equipment and leaseholds; and (iv) $195,000 was used for
 general corporate purposes. 


 As of March 31, 1997, the Company has a negative working capital of
 approximately $523,361 as compared to $1,134,000 at December 31, 1996. During
 the first quarter of 1997, management took actions aimed at restructuring the
 Company in order to reduce operating costs and enhance the Company's focus and
 efficiency. Pursuant to the restructuring a new management team was put into
 place, executive contracts and leases were renegotiated and certain positions
 were eliminated. The Company expects that the aforementioned actions will stop
 the cash outflows, which it has experienced since inception.

     Selling, general and administrative expenses of the retail segment consist
 of (i) expenses incurred in each of the five retail stores and (ii) expenses
 allocated from the Company's centralized operating facility which are based
 primarily on sales volume. The increase in selling, general and administrative
 expenses as a percentage of sales during 1997 as compared to 1996 was primarily
 the result of the effect of the issuance of common stocks purchase warrants for
 services rendered, salaries, and fees ($425,000).

 The decrease in depreciation and amortization for 1997 as compared to 1996, is
 attributable to depreciation and amortization from assets written down or
 written off for the year ended December 31, 1996.

                                        6


<PAGE>

<PAGE>



                                 SIGNATURES





In accordance with the requirements of the Securities Exchange Act  of 1934, the
registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.







                               WILLIAM GREENBERG JR. DESSERTS AND CAFES, INC.


Date: May 14, 1997             PHILIP GRABOW                Philip Grabow
                              ---------------------------------------------
                                            Chairman of the Board
                                     Chief Executive Officer and Officer
                                   (Principal Financial Officer and Officer
                             duly authorized to sign on behalf of the Registrant



<PAGE>