<PAGE>


                     U.S. SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

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

                  For the fiscal year ended: December 31, 2000

                         Commission File Number: 0-18711


                             Creative Bakeries, Inc.
                     --------------------------------------
                 (Name of Small Business Issuer in Its Charter)


           New York                                     13-3832215
-------------------------------                    ---------------------
(State or Other Jurisdiction of           (I.R.S. Employer Identification No.)
Incorporation or Organization)

20 Passaic Avenue, Fairfield, NJ                            07004
----------------------------------------             -------------------
(Address of Principal Executive Offices)                  (Zip Code)

Issuer's telephone number:   (973) 808-8248

Securities registered under Section 12(b) of the Exchange Act:

                                                 Name of Each Exchange on
Title of Each Class                                  Which Registered
-------------------                                  ----------------
Common Stock, $.001 per share                             NASDAQ

Securities registered under Section 12 (g) of the Exchange Act:  None

     Check whether the issuer (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

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

     Issuer's revenue for its most recent fiscal year was $4,377,601. As of
December 31, 2000 there were 5,245,250 shares of Company's Common Stock, par
value $.001 per share, outstanding. The aggregate market value of the voting
stock of the issuer on December 31, 2000 was approximately 629,430.00.




<PAGE>


           Transitional Small Business Disclosure Format (check one):

                    Yes                        No  X
                       ---                        ---

                                     PART I

ITEM 1. DESCRIPTION OF THE BUSINESS

GENERAL

     Creative Bakeries, Inc. ("Creative"), offers a broad line of premium
quality pastries, cakes, pies, cookies and other assorted desserts which are
produced at its baking facility. Such baked goods are marketed and distributed
on a wholesale basis to supermarkets, restaurants and institutional dining
facilities.

     Creative was incorporated in November 1993. The Company's executive offices
are located at 20 Passaic Avenue, Fairfield, NJ 07004 and its telephone number
is (973) 808-8248.

     The company had two subsidiaries. The William Greenberg Jr. subsidiary has
been sold and it now has one subsidiary known as Batter Bake - Chatterley (BBC).

BUSINESS STRATEGY

     The Company's business strategy is comprised of the following:

     Retail: Over the past two years the company has eliminated its retail
operations.

     Institutional/Wholesale: The Company plans to increase its penetration in
the institutional/wholesale food market by expanding its marketing efforts to
restaurants, hotels and corporate dining facilities and by offering its products
to supermarkets on a national basis. The Company plans to expand both its
product line and geographic distribution through the following strategies:

     Expand geographic distribution by acquiring new food distributors in the
Connecticut and Philadelphia areas as well as key distributor areas throughout
the United States. To do this, the Company intends to appoint food brokers in
various states to handle sales on a commission-only basis.

     Continue to expand the fat-free product line targeting existing customers
as well as new customers; and

     Enter into co-packing arrangements whereby the Company would introduce
private label products of other bakery operations.

     Kosher Foods. The Company also is seeking to benefit from the growth of the
kosher food industry. According to Prepared Foods, the kosher food industry
generated approximately $33 billion in sales in 1994 and has been growing at a
rate of approximately 15% per annum. The company's BBC Subsidiary has a kosher
certification and the Company believes that it can benefit from the projected
growth of this market.

BUSINESS PHILOSOPHY




<PAGE>


     High Quality Ingredients. The Company believes that developing and
maintaining premium quality products is the key to its future success. The
Company uses fresh ingredients in its products including, AA creamy butter,
fresh eggs, premium fruits, nuts, and chocolates blended for the Company's
unique recipes. The Company seeks to maintain rigorous standards for freshness,
quality, and consistency.

     Customer Service. The Company's goal is to provide its customers with warm,
courteous and efficient service. The Company depends on and enjoys a high rate
of repeat business. The Company believes that the quality of the relationship
between its employees and its customers is critical to its success. The Company
strives to hire and train well-qualified, highly motivated employees committed
to providing superior levels of customer service.

PRODUCTS

Baked Goods

     The BBC Subsidiary markets a full line of premium quality baked products
such as cheese cakes, mousse cakes and tart shells. Additionally the Company has
now expanded its offerings to include a line of frozen batter and baked products
such as a variety of Gourmet Frozen Muffin Batter products, No Sugar Added
Batters as well as a selection of Fully Baked Thaw & Sell muffins and cakes. The
Company continues to develop new products and welcomes customer requests.

Kosher Foods

     Kosher foods generally are consumed by persons of the Jewish faith as well
as Muslims, Seven Day Adventists and others who perceive kosher certification as
a seal of purity. Kosher is a biblical term originally used to denote that which
is "fit" and "proper".

     The Company's subsidiary has kosher certification and the Company believes
that it can capitalize on the projected growth of this market. The Company
believes that its kosher certifications will enable it to better penetrate
certain market areas. The Company's products are not kosher for Passover.

CUSTOMERS

RETAIL

     The WGJ Subsidiary which sold its products directly to individual consumers
has been sold to a retail operator.

INSTITUTIONAL/WHOLESALE

     This market is mainly served through the BBC Subsidiary. With the
acquisition of Chatterley the Company now offers its institutional and wholesale
customers an expanded line of baked goods, batter and frozen-finished cakes,
brownies and muffins.

                                       3




<PAGE>


     The BBC Subsidiary sells its products through food distributors to hotels,
hospitals and institutional feeders such as coffee shops, Marriott, Restaurant
Associates, etc. The products are also sold retail through food distributors and
direct to supermarket distribution centers.

INGREDIENTS AND PRINCIPAL SUPPLIERS

     The Company seeks to use only the highest quality ingredients available.
The Company has a policy of inspecting all raw ingredients before their intended
use.

     The ingredients used by the Company consist primarily of flour, eggs,
sugar, butter and chocolate. The WGJ Subsidiary obtains its principal
ingredients from three suppliers in each of their respective industries. All
ingredients used by the Company are subject to substantial price fluctuations.
The Company historically has been able to pass any significant price increases
in its ingredients through to its customers. However, no assurance can be given
that the Company will be able to continue this practice in the future. Any
substantial increase in the prices of ingredients used by the Company could, if
not offset by a corresponding increase in product prices, have a material
adverse effect on its business, financial condition or results of operations.
The Company does not believe the loss of any of its suppliers would have a
material adverse effect on its business and believes that other suppliers could
readily provide such products if necessary.

DISTRIBUTION AND MARKETING

     The WGJ Subsidiary no longer operates the commissary and does not directly
operate any retail stores either. Instead it has licensed its name to a an
operator who runs retail and wholesale operations.

     The BBC Subsidiary bakes all of its products at its 30,000 square foot
facility in Fairfield, New Jersey. Although utilization of the facility varies
based on seasonal fluctuation, the facility is operated on the basis of two
shifts, five days a week. The Company believes that the BBC Subsidiary has the
capacity to meet future requirements, including those arising out of the
consolidation with the Company. The BBC Subsidiary delivers 90% of its products
by truck to its institutional/wholesale customers. About 10% of its customers
pick up their orders directly at the bakery and utilize their own distribution
networks.

     Historically, the Company has relied upon word-of-mouth and customer
satisfaction to market its products to new customers and to make existing
customers aware of new products.

COMPETITION

     The baking industry is a highly competitive and highly fragmented industry.
The Company competes with national, regional and local bakeries as well as
supermarket chains that have in-store bakeries. Many of these competitors are
larger, more established and have greater financial and other resources than the
Company. Competition in both the retail and institutional/wholesale baking



                                       4



<PAGE>


industry is based on product quality, brand name loyalty, price and customer
service.

     The WGJ Subsidiary competes with all restaurants and beverage outlets that
serve bakery items and/or coffee, including a growing number of specialty coffee
stores in the New York City metropolitan area, although its main business
continues to be as a full service bakery servicing wholesale and retail
clientele. The specialty coffee/cafe business has become increasingly
competitive and relatively few barriers exist to entry. Some of the WGJ
Subsidiary's major competitors include Au Bon Pain, Brothers Gourmet Coffees,
Eclair, New World Coffee, Starbucks and Timothy's Coffee of the World. Some of
the BBC Subsidiary's major competitors include Karps, Bake-N-Joy, Pillsbury, and
Quaker Oats. Competitors with significant economic resources in the baking
industry or existing non-specialty and specialty coffee/cafe businesses could,
at any time, enter the institutional/wholesale or retail bakery/cafe business.

TRADEMARKS

     The JMS Subsidiary has a trademark and design registered with the United
States Patent and Trademark office for The Healthy BakeryTM (US Registration No.
1,644,559). While the Company believes that the trademarks are valid and
enforceable, there can be no assurance as to the degree of protection its
registered trademarks will afford the Company.

GOVERNMENT REGULATION

     The Company is subject to numerous state regulations relating to the
preparation and sale of food. It is also subject to federal and state laws
governing the Company's relationship with employees, including minimum wage
requirements, overtime, working and safety conditions, and citizenship
requirements. The failure to obtain or retain required food licenses or to be in
compliance with applicable governmental regulations, or any increase in the
minimum wage rate, employee benefits costs (including costs associated with
mandated health insurance coverage) or other costs associated with employees,
could adversely affect the business, results of operations or financial
condition of the Company.

EMPLOYEES

     As of April 1, 2001, the BBC Subsidiary together with Creative had
approximately 41 full-time employees, of whom 36 are employed in production, 2
in sales, 1 in administration and 2 in executive positions. The BBC Subsidiary
does not have a union and the Company believes that it has good relations with
its employees.


ITEM 2.  DESCRIPTION OF PROPERTY

     As of April 1, 2001, the Company leases in Fairfield, New Jersey 29,362
square feet for its baking facilities. The Company believes that its existing
lease will be renewed when it expires in 2004 or alternative properties can be
leased on acceptable terms. The Company believes that its present facilities are



                                       5



<PAGE>


well maintained, in good condition and are suitable for the Company to continue
to operate and meet its production needs in the foreseeable future. The Company
is also considering subcontracting certain of its production requirements.

PLAN OF OPERATION

     In connection with the restructuring plan, management had written down its
baking equipment, leasehold improvements and fixtures as of December 31, 1996,
by approximately $ 850,000 in 1996 and to $35,000 in 1998 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, of which $370,159 was
actually incurred as of December 31, 2000. This charge mainly comprises
write-down of leasehold improvements on stores that have been closed down,
provisions for lease obligations on certain retail stores, and charges for
consultants involved in the restructuring. By taking the above actions, future
periods will not be affected by amortization, depreciation or expense of these
costs.

Future mergers and acquisitions:

     The Company continues to seek business in markets it does not currently
serve and is continuing to pursue mergers and acquisition opportunities.

                                       6



<PAGE>



ITEM 3.  LEGAL PROCEEDING

                  There are no pending legal proceedings.




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

         None.


                                       7



<PAGE>



                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The Company's Common Stock is quoted on the Nasdaq Small Cap Market under
the symbol "CBAK" and the Boston Exchange under the Trading symbol "BYK". The
following table sets forth the range of quarterly high and low bid prices, as
reported on the NASDAQ SmallCap Market, during the last two fiscal years through
March 31, 2001.

<TABLE>
<CAPTION>
Period                                      High               Low
------------------------------------------------------------------
<S>                                         <C>              <C>
FISCAL YEAR 1999:
First Quarter                               1 1/2            3/4
Second Quarter                              13/16            5/8
Third Quarter                               1/2              3/8
Fourth Quarter                              9/16             3/8
Fiscal Year 2000:
First Quarter                               11/16            7/16
Second Quarter                              7/8              1/2
Third Quarter                               3/4              1/2
Fourth Quarter                              1/8              .12
</TABLE>


     The number of shareholders of record of the Common Stock on February 28,
2001 was 30 excluding 2,655,778 shares of Common Stock held by Cede & Co. The
Company believes that it has in excess of 500 shareholders.

     The Company has never paid cash dividends on its Common Stock and does not
anticipate paying dividends in the foreseeable future. The payment of future
cash demands by the Company on its Common Stock will be at the discretion of the
Board of Directors and will depend upon the Company's earnings (if any), general
financial condition, cash flows, capital requirements and other considerations
deemed relevant by the Board of Directors.

Item 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN
         OF OPERATIONS

General

     The Company had licensed William Greenberg Jr. to a retail operator. During
the 4the quarter of 2000 the company also sold the license to the same operator.

     At December 31, 2000 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 7,897,694 which can be used to reduce the tax on
income up to that amount through the year 2018.

                                       8



<PAGE>


Results of Operations

     The Company's consolidated revenues from continuing operations aggregated
$4,377,601 and $4,500,405 for the years ended December 31, 2000 and 1999
respectively, a decrease of 2%. The cost of goods sold was $3,606,332 and
$3,485,812 for 2000 and 1999 respectively, an increase of 4%. Operating expenses
were $1,053,350 and $1,123,732 for 2000 and 1999 respectively, a decrease of 6%.
As a result, the loss from continuing operations was $282,081 and $109,139 for
2000 and 1999 respectively, an increase of 259%.

     The deterioration resulted from lower sales and increased cost of sales due
to increased material costs and unfavourable product mix.

     Depreciation and amortization for 2000 decreased as compared to 1999 due to
assets written down or written off for the year ended December 31, 2000.

     The company's consolidated revenues from its discontinued operation, the
WGJ subsidiary were $0 in 2000 and in 1999. The WGJ subsidiary showed a gain
from operations of $48,701 in 2000 vs a loss of $109,139 in 1999. The gain in
2000 was derived from interest income on note receivable and sale of William
Greenberg Jr. license.


SEGMENT INFORMATION: Not applicable since retail operations were discontinued.


LIQUIDITY AND CAPITAL RESOURCES

LIQUIDITY

     Since its inception the Company's only source of working capital has been
the $8,455,000 received from the issuance of its securities.

     As of December 31, 2000, the Company had a negative working capital from
continuing operations of approximately $182,731 as compared to a negative
working capital of $196,106 at December 31, 1999.

CAPITAL RESOURCES:

     On January 23, 1997, the Company purchased JMS for $900,000 in cash,
500,000 shares of the Company's common stock



                                       9



<PAGE>


valued at $875,000 and $400,000 purchase warrants valued at $440,000.

     In order to finance the acquisition, the Company sold in a private
placement 1,875,500 common stock purchase warrants at a net price to the Company
of $1,747,500.

     In October 1997 the Company raised $883,000 in connection with the exercise
of the warrants from the private placement related to the purchase of JMS.

     If and when the market price of the Company's stock increases and exceeds
the exercise price of the warrants previously issued, the Company may receive
additional funds upon the exercise of its warrants to operate and fund future
expansion and acquisitions. The Company is looking for opportunities to acquire
other companies which would improve its cash flow and capital positions in both
the short- and long-term. Management believes that funds for such acquisition
can be raised in transactions similar to the sale of stock purchase warrants
which funded the JMS acquisition.

     Although the Company has previously been successful in obtaining sufficient
capital funds through issuance of common stock and warrants, there can be no
assurance that the Company will be able to do so in the future.

INFLATION AND SEASONALITY:

     Increased material costs have narrowed the company's margins.

     The Company's revenues are affected by seasons with higher revenues during
holiday seasons such as Thanksgiving, Christmas, Jewish New Year, Easter and
Passover.

STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

     This annual report contains certain forward-looking statements with respect
to the financial condition, results of operations and business of the Company
including statements relating to the cost savings, revenue enhancements and
marketing and other advantages that are expected to be realized from the
Company's plans to



                                       10



<PAGE>


restructure and consolidate its operations and grow through strategic
acquisitions. Such forward-looking statements involve certain risks and
uncertainties that could cause actual results to differ materially from those
contemplated by such forward-looking statements. Such risks and uncertainties
include, without limitation: (1) expected cost savings from the restructured or
consolidated operations cannot be fully realized; (2) difficulties relating to
the integration of new businesses that may be acquired; (3) the impact of
competition on revenues and margins; (4) increases in the costs of ingredients;
and (5) other risks and uncertainties as may be detailed from time to time in
the Company's public announcements and Commission filings.


ITEM 7.  FINANCIAL STATEMENTS

<TABLE>
<S>                                                                                                              <C>
Index to Financial Statement....................................................................................F-1

Independent Accountants' Report.................................................................................F-2

Financial Statements:

         Balance Sheets as at December 31, 2000 and 1999........................................................F-3

         Statement of Operations For the Years Ended December 31, 2000 and 1999.................................F-4

         Statements of Stockholders' Equity (Deficiency) For the Years Ended December 31, 2000 and 1999.........F-5

         Statements of Cash Flows For the Years Ended December 31, 2000 and 1999................................F-6

         Notes to Financial Statements.................................................................F-7  to F-23
</TABLE>

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

Not Applicable

                                       11



<PAGE>


                                    PART III

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

Information Concerning the Board of Directors and Executive Officers

         The following table sets forth certain information concerning the Board
of Directors,  persons nominated to be elected as directors and executive
officers of the Company:

<TABLE>
<CAPTION>
Name of Director or
Executive Officer,                        Principal Occupation                         Date of Initial Election
Age and Position                          For Previous Five Years                      as Director
Held with Company                         -----------------------                      -----------
-----------------
<S>                                     <C>                                            <C>
Philip Grabow, 60, President and          Chief Executive Officer, October 1985 to     January 23, 1997
Director                                  January 1997 of JMS

Richard Fechtor, 69, Director             Founder of and since 1974 Executive Vice     July 11, 1996
                                          President of Fechtor, Detwiler & Co.,
                                          Inc., the representative of the
                                          underwriters in the Company's initial
                                          public offering; Director of Vascular
                                          Laboratories since 1989

Raymond J. McKinstry, 52,                 Investment manager with Astair & Partners,   August 1995
Director                                  Limited, a London based brokerage company,
                                          1987 to present

Kenneth Sitomer, 53,                      Chief Operating Officer of Sam and Libby,    July 1997
Director                                  Inc., a publicly held company, 1993 to
                                          present; private consultant to footwear
                                          industry 1992 to March 1993; President and
                                          Chief Executive Officer of Russ Togs,
                                          Inc., a publicly held company listed on
                                          the New York Stock Exchange, 1989 to
</TABLE>

                                       12



<PAGE>


<TABLE>
<CAPTION>
Name of Director or
Executive Officer,                        Principal Occupation                         Date of Initial Election
Age and Position                          For Previous Five Years                      as Director
Held with Company                         -----------------------                      -----------
-----------------
<S>                                     <C>                                            <C>
                                          1992.

Karen Brenner, 46,                        President of Fortuna Advisors, Inc., an      July 1997
Director                                  investment advisory firm in California
                                          1993 to present; founder and President of
                                          Karen Brenner, Registered Investment
                                          Advisor, the predecessor to Fortuna
                                          Advisors, Inc., 1984 to 1993; Managing
                                          Partner of F.C. Partners, a California
                                          limited partnership, April 1996 to
                                          present; Director on DDL Electronics,
                                          Inc., a publicly held company, July 1996
                                          to present; Director of Krug International
                                          Corp., a publicly held company, July 1996
                                          to present.

Yona Abrahami, 51                         Founder and President of Chatterley          August 1997
Director
</TABLE>


     All directors hold office until the next annual meeting of shareholders or
until their successors are elected and qualified. For a period of five years
from October 12, 1995, Fechtor Detwiler & Co., Inc. (the "Representative") has
the right to nominate one member to the Company's Board of Directors. Mr.
Fechtor is the Representative's current nominee to the Board of Directors. There
are no family relationships among any of the directors and executive officers of
the Company.

     Officers are appointed by the Board of Directors and serve at the
discretion of the Board.


Compliance With Section 16(a) of the Securities Exchange Act of 1934



                                       13



<PAGE>



     The Securities and Exchange Commission (the "Commission") has comprehensive
rules relating to the reporting of securities transactions by directors,
officers and shareholders who beneficially own more than 10% of the Company's
Common Shares (collectively, the "Reporting Persons"). These rules are complex
and difficult to interpret. Based solely on a review of Section 16 reports
received by the Company from Reporting Persons, the Company believes that no
Reporting Person has failed to file a Section 16 report on a timely basis during
the most recent fiscal year.

ITEM 10. EXECUTIVE COMPENSATION

Compensation of Directors

     Directors of the Company who are not salaried officers receive a fee of
$500 for attending each meeting of the Board of Directors or a committee
thereof. In addition, all directors are reimbursed for their reasonable
out-of-pocket expenses incurred in connection with attending such meetings.

Executive Compensation in 2000

     The following table sets forth compensation paid to the Chief Executive
Officer and to executive officers of the Company, excluding those executive
officers who did not receive an annual salary and bonus in excess of $100,000 in
the fiscal year ended December 31, 2000.

<TABLE>
<CAPTION>
Name and                                                                                      Other Annual
Principal Position                        Year        Salary ($)           Bonus ($)           Compensation
------------------                        ----        ----------           ---------           ------------
<S>                                       <C>          <C>                   <C>                    <C>
Philip Grabow, CEO                        2000         $150,000              $0.00                  $0.00
Yona Abrahami, VP                         2000         $100,000              $0.00                  $0.00
</TABLE>

     No other executive officer received a salary and bonus in excess of
$100,000 for the year ended December 31, 2000. The Company has not granted any
stock options, stock appreciation rights or long-term incentive awards to any
executive officer of the Company since its inception.

Employment Agreements



                                       14



<PAGE>


     Simultaneously with the acquisition of Chatterley, the Company entered into
employment agreements with Yona Abrahami and David Abrahami. David Abrahami's
contract has since been terminated. These agreements were filed as exhibits B
and C respectively with the Form 8-K/A on November 17, 1997.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth the number and percentage of Common Shares
beneficially owned, as of the date of this Amendment to the Annual Report, by:
(i) all persons known by the Company to be the beneficial owner of more than 5%
of the outstanding shares of Common Stock; (ii) each director of the Company;
(iii) each of the "named executive officers" as defined under the rules and
regulations of the Securities Act of 1933, as amended; and (iv) all directors
and executive officers of the Company as a group (7 persons):

<TABLE>
<CAPTION>
                                            Number of
                                            Shares           Percentage
                                            Beneficially     Beneficially
Name                                        Owned(1)         Owned(2)
----                                        --------         --------
<S>                                       <C>                 <C>
Yona Abrahami(3) ....................      1,100,000           21.3%

Philip Grabow(4) ....................        800,000           14.6%

Richard Fechtor(5) ..................        142,933            2.8%

Raymond J. McKinstry(6) .............         50,000             *

InterEquity Capital Partners, L.P.(7)        378,390            6.8%

Kenneth Sitomer(8) ..................           --              --

Karen Brenner(9) ....................           --              --

Ashwin R. Shah(10) ..................           5000            --

Willa Abrahamson(11) ................        400,000            7.7%

Fortuna Investment Partners(12) .....        550,000            9.6%
100 Wilshire Blvd ...................
Suite 1500
Santa Monica, CA 90401

Baileys Family Trust ................        606,250           10.5%
</TABLE>


                                       15



<PAGE>


<TABLE>
<S>                                          <C>            <C>
P.O. Box 9109
Newport Beach, CA 92658

All executive officers
and directors as a group ............      2,097,519           19.1%
(7 persons)(14)
</TABLE>

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

*        Less than 1%.

(1)  Unless otherwise noted, the Company believes that all persons named in the
     table have sole voting power with respect to all shares beneficially owned
     by them. A person is deemed to be the beneficial owner of securities that
     can be acquired by such person within 60 days from the date hereof upon the
     exercise of warrants or options.

(2)  Assumes 5,161,750 shares of Common Stock outstanding as of the March 31,
     1998. Each beneficial owner's percentage ownership is determined by
     assuming that options or warrants that are held by such person (but not
     those held by any other person) and which are exercisable within 60 days
     from the date hereof have been exercised.

(3)  Ms. Abrahami's address is c/o 20 Passaic Avenue, Fairfield, New Jersey
     07004.

(3)  Mr. Grabow's business address is c/o 20 Passaic Avenue, Fairfield, New
     Jersey 07004. Includes 500,000 Common Shares and currently exercisable
     warrants to purchase an additional 300,000 shares of Common Stock. See
     "Certain Relationships and Related Transactions."

(5)  Mr. Fechtor's business address is 155 Federal Street, Boston, Massachusetts
     02110. Upon the conversion of a certain note, InterEquity Capital Partners,
     L.P., received a six-year warrant exercisable until October 2001 to
     purchase, on one occasion, 6% of the issued and outstanding capital shares
     of the Company on a fully diluted basis as of the date of exercise. Certain
     persons associated with the Representative, received an aggregate 17.5%
     interest in such warrant, including Mr. Fechtor, who received a 5% interest
     in such warrant. As of March 31, 1998, there are 7,644,250 shares of Common
     Stock outstanding on a fully diluted basis, 6% of which equals 458,655
     shares of Common Stock. Accordingly, Mr. Fechtor's ownership as shown in
     the table includes 22,933 shares issuable upon exercise of such warrant.
     See "Certain Relationships and Related Transactions." Also includes 120,000
     shares of Common Stock. Excludes 5,500 shares of Common Stock owned by Mr.
     Fechtor's wife, of which he disclaims beneficial ownership.

(6)  Mr. McKinstry's business address is 40 Queen Street, London EC4R 1DD,
     England. Includes currently exercisable warrants to purchase 50,000 Common
     Shares.



                                       16



<PAGE>


(7)  InterEquity's business address is 220 Fifth Avenue, New York, New York
     10001. Includes an 82.5% interest in a six-year warrant exercisable to
     purchase, on one occasion, 6% of the issued and outstanding capital shares
     of the Company on a fully diluted basis as of the date of exercise. As of
     March 31, 1998, there are 7,644,250 shares of Common Stock outstanding, 6%
     of which equals 458,655 shares of Common Stock. Accordingly, InterEquity's
     ownership as shown in the table includes 378,390 shares issuable upon
     exercise of such warrant. The warrant is currently exercisable and expires
     in October 2001.

(8)  Mr. Sitomer's address is 303 East 57th Street, New York, New York 10022.

(9)  Ms. Brenner's address is P.O. Box 9109, Newport Beach, California 92660.

(10) Mr. Shah's address is c/o 20 Passaic Avenue, Fairfield, New Jersey 07004.

(11) Mr. Abrahamson's address is 1800 NE 115th Street, Miami, FL 53181.

(12) Includes currently exercisable warrants to purchase 550,000 shares.

(13) Includes currently exercisable warrants to purchase 606,250 shares.

(14) Includes the shares of Common Stock beneficially owned by Ms. Abrahami, Mr.
     Grabow, Mr. Fechtor, Mr. McKinstry, Mr. Sitomer, Ms. Brenner and Mr. Shah.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The JMS Acquisition

     On January 17, 1997, the Company entered into a stock purchase agreement
(the "Stock Purchase Agreement") with Philip Grabow ("Grabow"), pursuant to
which, on January 23, 1997, the Company consummated the purchase from Grabow of
all the outstanding shares of J.M. Specialties, Inc., a New Jersey corporation
(the "JMS Subsidiary"), in exchange for (i) $900,000 in cash, (ii) 500,000
shares (the "JMS Shares") of the Common Stock of the Company and (iii) 350,000
warrants (the "JMS Warrants") exercisable for shares of Common Stock of the
Company (the "JMS Transaction"). Each JMS Warrant entitles Grabow to purchase
one Common Share of the Company 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 Common Shares of issuable upon
exercise of the JMS Warrants,



                                       17



<PAGE>


and (ii) an employment agreement dated as of January 23, 1997. Pursuant to the
employment agreement, Grabow will serve as President 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. Also in connection with the JMS Transaction,
effective January 23, 1997, Grabow was elected to serve as a director of the
Company.

JMS Acquisition Indebtedness

     The payment of the cash portion of the purchase price for the JMS
Subsidiary and such working capital, was funded through the net proceeds
received from the sale by the Company of 1,500,000 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 qualified as
"accredited investors" under the Securities Act of 1933. The terms of the
Private Placement Warrants are substantially similar to the JMS Warrants.

The Chatterley Acquisition

     On August 28, 1997 the Company entered into a stock purchase agreement with
Yona Abrahami pursuant to which the Company purchased from Ms. Abrahami all the
outstanding shares of Chatterley Elegant Desserts, Inc., a New Jersey
Corporation, in exchange for 1,300,000 shares of the Company's common stock.
Such stock purchase agreement was subsequently amended and Ms. Abrahami agreed
to reduce the purchase price by surrendering 200,000 shares of common stock back
to the Company.


                                       18



<PAGE>


                                     PART IV

ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K

(a)      Financial Statements

     The financial statements filed as part of the Company's Form 10-KSB are
listed in Item 7. Financial Statements are included in Part IV hereof at page
F-1.

(b)      Reports on Form 8-K

     On September 11, 1997, the Company filed a Current Report on Form 8-K
announcing completion of the Chatterley acquisition.

(c)      Listing of Exhibits

    **2.1 Purchase and Sale Agreement, dated June 2, 1995, by and among the
          Company, Greenberg Dessert Associates Limited Partnership, SMG Baking
          Enterprises, Inc. and its limited partners.

   ***2.2 Stock Purchase Agreement, dated as of January 17, 1997, by and
          between the Company and Philip Grabow, without exhibits.

    **3.1 Restated Certificate of Incorporation.

    **3.2 Amended and Restated By-laws.

    **4.1 Form of certificate for shares of Common Stock.

    **4.2 Form of Representatives Warrant.

    **4.3 Loan Agreement, dated July 10, 1995, by and between InterEquity
          Capital Partners, L.P. and the Company.

   **10.1 Employment Agreement, dated July 10, 1995, by and between the
          Company and Stephen Fass.

   **10.2 Employment Agreement, dated as of July 10, 1995, by and between the
          Company and Willa Rose Abramson.

                                       19



<PAGE>


   **10.3 Employment Agreement, dated as of July 10, 1995, by and between the
          Company and Maria Maggio Marfuggi.

   **10.4 Employment Agreement and Consulting Agreement, dated July 10, 1995,
          by and between the Company and Seth Greenberg.

   **10.5 Consulting Agreement, dated July 10, 1995, by and between the
          Company and William Greenberg Jr.. and Carol Greenberg.

   **10.6 Departmental License Agreement effective February 1995 by and
          between the Company and Macy's East, Inc.

   **10.8 Form of Warrant for InterEquity Capital Partners, L.P.

   **10.9 1995 William Greenberg Jr. Desserts and Cafes, Inc. Stock Option
          Plan

  **10.10 Lease Agreement dated July 1995 between the Company and Murray
          Greenstein.

  **10.11 Lease Agreement dated January 1994 between Schnecken Baking Realty
          Corp. and Gerel Corporation.

  **10.12 Assignment and Assumption of Lease dated July 1995 between the
          Company and Schnecken Baking Realty Corp.

  **10.13 Lease dated April 1991 between Greenberg's 35th Street Baking Co.,
          Inc. and Rugby Managed Asset Fund.

  **10.14 Assignment and Assumption of Lease dated July 1995 between the
          Company and Greenberg's 35th Street Baking Co.

  **10.15 Lease dated May 1989 as modified in January 1991 between
          Greenberg's Triple S. Baking Co., Inc. and Stahl Real Estate Co.

  **10.16 Assignment and Assumption of Lease dated July 1995 between the
          Company and Greenberg's Triple S. Baking Co., Inc.

                                       20



<PAGE>


    **10.17 Consulting Agreement, dated July 10, 1995, by and between the
            Company and Marilyn Miller.

    **10.18 Form of Indemnity Agreement.

    **10.19 Sublease dated December 1995 between Timothy's Coffees of the
            World, Inc., and the Company.

  ****10.20 Lease dated March 8, 1995 between Harran Holding Corp., c/o A. J.
            Clarke Management and the Company.

  ****10.21 Agreement dated January 13, 1996 by and between the Company and
            Barry Kaplan Associates.

 *****10.22 Employment Agreement, dated January 23, 1997, by and between the
            Company and Philip Grabow.

 *****10.23 Form of Warrant for the Private Placement made in conjunction
            with the JMS Subsidiary acquisition.

******10.24 Stock Purchase Agreement dated August 28, 1997, between the
             Company and Yona Abrahami.

******10.25 Employment Agreement dated August 28, 1992 between the Company
            and Yona Abrahami.

******10.26 Employment Agreement dated August 28, 1992 between the Company and
            David Abrahami.

     *10.27 Amendment to Stock Purchase Agreement dated March 10, 1997, between
            the Company and Yona Abrahami.

      *21.1 List of Subsidiaries of the Company, the state of incorporation of
            each, and the names under which such subsidiaries do business.

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

*    Filed Herewith.

**   Incorporated by reference to the Company's Registration Statement on Form
     SB-2 Registration Number 33-96094.

***  Incorporated by reference to Schedule 13-D filed by Philip Grabow on SEC
     File Number 005-48185.



                                       21



<PAGE>


   **** Incorporated by reference to the Company's Annual Report for the fiscal
        year ended December 31, 1995, on Form 10-KSB Commission File Number
        1-13984.

  ***** Incorporated by reference to the Company's Annual Report for the fiscal
        year ended December 31, 1996, on Form 10-KSB Commission.

 ****** Incorporated by reference to the Company's Current Report on Form 8-K,
        dated September 11, 1997 and Form 8-K/A, dated November 17, 1997.


                                       22



<PAGE>


                                   SIGNATURES

     In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the
registrant duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized on April 14, 1999.

                                CREATIVE BAKERIES, INC.

                                By: /s/ Philip Grabow
                                    ------------------------------
                                        Philip Grabow
                                        President and Chief
                                        Executive Officer

     In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities
indicated on March 31, 2000.


<TABLE>
<CAPTION>
Signatures                                                  Title
                                                            -----

<S>                                                        <C>
/s/Philip Grabow                                            President, Chief Executive Officer/Director
--------------------------------
Philip Grabow


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


                                                            Director
--------------------------------
Richard Fechtor


/s/Raymond J. McKinstry                                     Director
--------------------------------
Raymond J. McKinstry

/s/Kenneth Sitomer                                          Director
--------------------------------
Kenneth Sitomer


/s/Karen Brenner                                            Director
--------------------------------
Karen Brenner

                                       23



<PAGE>


/s/Yona Abrahami                                            Director
--------------------------------
Yona Abrahami

                                       24




<PAGE>



                             CREATIVE BAKERIES, INC.

                          YEAR ENDED DECEMBER 31, 2000


                                    CONTENTS

                                                                        Page

Independent auditors' report                                             F-1

Consolidated financial statements:

  Balance sheet                                                          F-2

  Statement of income (loss)                                             F-3

  Statement of stockholders' equity                                      F-4

  Statement of cash flows                                             F-5 - F-6

Notes to consolidated financial statements                            F-7 - F-15




<PAGE>



                    [LETTERHEAD OF ZELLER WEISS & KAHN, LLP]

                          INDEPENDENT AUDITORS' REPORT

Board of Directors
Creative Bakeries, Inc.

      We have audited the accompanying consolidated balance sheet of Creative
Bakeries, Inc. as of December 31, 2000, and the related consolidated statements
of income (loss), stockholders' equity, and cash flows for the years ended
December 31, 2000 and 1999. These consolidated 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 audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Creative Bakeries, Inc. as
of December 31, 2000, and the results of its operations and cash flows for the
years ended December 31, 2000 and 1999, in conformity with generally accepted
accounting principles.

      The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As shown in the
accompanying financial statements, the Company incurred significant losses from
operations for the years ended December 31, 2000 and 1999 and as of December 31,
2000 has a working capital deficiency in the amount of $182,731, which raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are discussed in the notes to the
financial statements. The accompanying financial statements do not include any
adjustments that might result from the outcome of this uncertainty.


                                                    ZELLER WEISS & KAHN, LLP

March 16, 2001


                                                                             F-1




<PAGE>



                             CREATIVE BAKERIES, INC.

                 CONSOLIDATED BALANCE SHEET - DECEMBER 31, 2000

                                     ASSETS
Current assets:
  Cash and cash equivalents                                        $    129,320
  Accounts receivable, less allowance for doubtful
   accounts of $15,500                                                  345,781
  Inventories                                                           241,126
  Prepaid expenses and other current assets                              49,446
                                                                   ------------
    Total current assets                                                765,673
                                                                   ------------
Property and equipment, net                                             489,820
                                                                   ------------
Other assets:
  Goodwill, net of amortization                                         809,029
  Security deposits                                                       5,464
                                                                   ------------
                                                                        814,493
                                                                   ------------
                                                                   $  2,069,986
                                                                   ============
                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Note payable, bank                                               $    107,270
  Accounts payable                                                      621,182
  Accrued expenses                                                      219,952
                                                                   ------------
    Total current liabilities                                           948,404
                                                                   ------------
Other liabilities:
  Deferred rent                                                         116,031
  Net liabilities of discontinued operations
   less assets to be disposed of                                        356,256
                                                                   ------------
                                                                        472,287
                                                                   ------------
Stockholders' equity:
  Preferred stock $.001 par value, authorized 2,000,000
   shares, no shares issued and outstanding
  Common stock, $.001 par value, authorized 10,000,000
   shares, issued and outstanding 5,245,250 shares                        5,245
  Additional paid in capital                                         11,364,073
  Deficit                                                           (10,600,994)
                                                                   ------------
                                                                        768,324
  Common stock held in treasury, 208,500 shares                        (119,029)
                                                                   ------------
                                                                        649,295
                                                                   ------------
                                                                   $  2,069,986
                                                                   ============

               See notes to consolidated financial statements.


                                                                             F-2




<PAGE>



                             CREATIVE BAKERIES, INC.

                     CONSOLIDATED STATEMENT OF INCOME (LOSS)

                     YEARS ENDED DECEMBER 31, 2000 AND 1999

                                                       2000           1999
                                                       ----           ----
Net sales                                           $4,377,601     $4,500,405
Cost of sales                                        3,606,332      3,485,812
                                                   -----------    -----------
Gross profit                                           771,269      1,014,593
Selling, general and administrative expenses         1,053,350      1,123,732
                                                   -----------    -----------
Loss from operations                                  (282,081)      (109,139)
                                                   -----------    -----------
Other income (expenses):
  Sale of marketable securities                                         3,216
  Gain (loss) from sale of disposition of assets         5,750           (800)
  Interest income                                        3,876          8,506
  Miscellaneous income                                     872
  Interest expense                                     (14,491)       (13,926)
                                                   -----------    -----------
                                                        (3,993)        (3,004)
                                                   -----------    -----------
Loss from continuing operations                       (286,074)      (112,143)
Discontinued operations:
  Income (loss) from operations of New York
   facility to be disposed of                           48,701        (39,713)
                                                   -----------    -----------
Loss before extraordinary items                       (237,373)      (151,856)
                                                   -----------    -----------
Extraordinary items:
  Gain on extinguishment of debt, continuing
   operations                                                          30,000
  Gain on extinguishment of debt, discontinued
   operations                                                         240,435
                                                                  -----------
                                                                      270,435
                                                                  -----------
Net income (loss)                                  $  (237,373)   $   118,579
                                                   ===========    ===========
Earnings per share information:
  Basic earnings:
    Continuing operations                          $     (0.05)   $     (0.02)
    Discontinued operations                               0.01          (0.01)
      Extraordinary items:
        Continuing operations                                            0.01
        Discontinued operations                                          0.04
                                                   -----------    -----------
Net income per share                               $     (0.04)   $      0.02
                                                   ===========    ===========
  Diluted earnings:
    Continuing operations                                 (.05)   $     (0.02)
    Discontinued operations                                .01          (0.01)
      Extraordinary items:
        Continuing operations
        Discontinued operation                                           0.03
                                                   -----------    -----------
Net income per share                                      (.04)   $      0.00
                                                   ===========    ===========

                 See notes to consolidated financial statements.


                                                                             F-3




<PAGE>



                             CREATIVE BAKERIES, INC.

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                     YEARS ENDED DECEMBER 31, 2000 AND 1999


</TABLE>
<TABLE>
<CAPTION>
                                                      Common stock
                                                 -----------------------
                                                   Number                Additional                                  Total
                                                     of                   Paid in     Accumulated    Treasury    Stockholders'
                                                   Shares      Amount      Capital       Deficit       Stock        Equity
                                                 ----------  ----------  -----------  ------------ ------------   ----------
<S>                                               <C>        <C>         <C>          <C>             <C>         <C>
Balance at December 31, 1998                      5,101,750      $5,102  $11,206,588  $(10,482,200)   $(247,369)   $ 482,121
Exercise of warrants on January 26, 1999            150,000         150      187,350                                 187,500
Common stock issued in settlement of accrued
 obligations                                         53,500          53      111,760                                 111,813
Cancellation of shares regarding the purchase
 of Chatterley Elegant Desserts, Inc.               (60,000)        (60)          60
Fair market value of warrant to acquire 8,610
 shares of common stock issued to a lender in
 order to obtain financing for the purchase of
 the operating assets of Greenberg Desserts
 Associates Limited Partnership, valued at
 $.500 per share                                                                4,305                                  4,305
Purchase of treasury stock                                                                               (95,625)    (95,625)
Treasury stock issued in settlement of accrued
 obligations                                                                                               8,750       8,750
Net income for the year ended December 31, 1999                                            118,579                   118,579
                                                  ---------      ------  -----------  ------------    ---------    ---------
Balance at December 31, 1999                      5,245,250       5,245   11,510,063   (10,363,621)    (334,244)     817,443
Purchase of treasury stock                                                                             (112,774)    (112,774)
Treasury stock issued upon exercise of warrants                             (145,990)                   327,989      181,999
Net loss for the year ended December 31, 2000                                             (237,373)                 (237,373)
                                                  ---------      ------  -----------  ------------    ---------    ---------
Balance at December 31, 2000                      5,245,250      $5,245  $11,364,073  $(10,600,994)   $(119,029)   $ 649,295
                                                  =========      ======  ===========  ============    =========    =========
</TABLE>

                 See notes to consolidated financial statements.


                                                                             F-4




<PAGE>



                    CREATIVE BAKERIES, INC. AND SUBSIDIARIES

                             STATEMENT OF CASH FLOWS

                     YEARS ENDED DECEMBER 31, 2000 AND 1999

                                                            2000         1999
                                                            ----         ----
Operating activities:
  Loss from continuing operations                        $(286,074)   $(112,143)
  Income from extraordinary items                                        30,000
  Adjustments to reconcile income from
   continuing operations to cash provided
   from continuing operations:
     Depreciation and amortization                         208,716      195,629
     Gain on sale of marketable securities                               (3,216)
     (Gain) loss on sale of fixed assets                    (5,750)         800
     Compensatory element of issuance of warrants                         4,305
     Changes in other operating assets and
      liabilities from continuing operations:
        Accounts receivable                                (31,642)     (51,663)
        Inventory                                           42,158      (47,692)
        Prepaid expenses and other current assets           38,284      (15,913)
        Accounts payable                                   105,588      (10,048)
        Accrued expenses and other current liabilities    (114,398)     (20,102)
        Deferred rent                                      (21,555)     (13,752)
                                                         ---------    ---------
        Net cash used in operating activities              (64,673)     (43,795)
        Net cash provided by (used in) discontinued
         operations                                         35,214     (119,306)
                                                         ---------    ---------
        Net cash used in operating activities              (29,459)    (163,101)
                                                         ---------    ---------
Investing activities:
  Proceeds from sale of marketable securities                             4,533
  Proceeds from sale of fixed assets                        25,000        5,000
  Purchase of property and equipment                       (10,150)     (25,027)
                                                         ---------    ---------
        Net cash provided by (used in)
         investing activities                               14,850      (15,494)
        Net cash used in investing activities
         from discontinued operations                       (1,250)      73,750
                                                         ---------    ---------
        Net cash provided by investing activities           13,600       58,256
                                                         ---------    ---------
Financing activities:
  Proceeds from issuance of common stock and warrants      182,000      187,500
  Purchase of treasury stock                              (112,774)     (95,625)
  Payment of debt                                          (39,018)     (47,241)
                                                         ---------    ---------
        Net cash provided by financing activities           30,208       44,634
                                                         ---------    ---------

               See notes to consolidated financial statements.


                                                                             F-5




<PAGE>



                    CREATIVE BAKERIES, INC. AND SUBSIDIARIES

                       STATEMENT OF CASH FLOWS (CONTINUED)

                     YEARS ENDED DECEMBER 31, 2000 AND 1999

                                                         2000        1999
                                                         ----        ----

Net increase (decrease) in cash and cash equivalents     14,349     (60,211)
                                                        -------    --------
Cash and cash equivalents, beginning of period          114,971     129,626
Cash and cash equivalents, discontinued operations,
 beginning of period                                                 45,556
                                                        -------    --------
                                                        114,971     175,182
                                                        -------    --------
Cash and cash equivalents, end of period                129,320     114,971
Cash and cash equivalents, discontinued operations,
 end of period                                                0           0
                                                       --------    --------
                                                       $129,320    $114,971
                                                       ========    ========
Supplemental disclosures:
  Cash paid during the year for:
    Interest paid during the year
      Continuing operations                            $ 14,028    $ 15,042
                                                       ========    ========
      Discontinued operations                          $      0    $      0
                                                       ========    ========
    Income taxes paid during the year
      Continuing operations                            $      0    $      0
                                                       ========    ========
      Discontinued operations                          $      0    $      0
                                                       ========    ========

               See notes to consolidated financial statements.


                                                                             F-6




<PAGE>



                    CREATIVE BAKERIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2000 AND 1999

1.    Realization of assets - going concern:

      Although the Company is currently operating its businesses, the
      continuation of such business as going concerns is contingent upon, among
      other things, the continued forbearance by the Company's creditors from
      exercising their rights in connection with delinquent accounts payable and
      payroll obligations. Management has indicated its plan to meet its
      obligations is dependent upon cash flows, if any, generated from JMS and
      Chatterley Elegant Desserts, Inc. and the acquisition of additional
      businesses. These conditions, among others, raise substantial doubt about
      the Company's ability to continue as a going concern. The accompanying
      financial statements do not include any adjustments relating to the
      recoverability and classification of asset carrying amounts of the amount
      and classification of liabilities that might result should the Company be
      unable to continue as a going concern.

      William Greenberg Jr. Desserts and Cafes, Inc. was incorporated in the
      State of New York on November 12, 1993. In 1997, the Company transferred
      all of its business assets and liabilities to a newly formed wholly-owned
      subsidiary, WGJ Desserts and Cafes, Inc. At this time the Company's name
      was changed to Creative Bakeries, Inc. WGJ Desserts and Cafes, Inc.
      operated a number of retail locations as well as operating a bakery
      facility, all located in New York City. As of June 1998, WGJ Desserts and
      Cafes, Inc. shut down its manufacturing facility and effective November
      1998, sold its final retail store. Although the Company has not vacated
      its manufacturing facilities, all operations have ceased.

      During the year ended December 31, 2000, the Company incurred a loss from
      continuing operations in the amount of $286,074 and net loss of $237,373,
      and as of December 31, 2000 had a net working capital deficiency of
      $182,731. During 1998, the Company discontinued operations of its two
      remaining retail stores. In June, 1998, the Company also closed its
      manufacturing plant in New York.

      During 1997, the Company incurred restructuring costs in the form of
      consulting fees, salary settlement costs and losses incurred on the
      abandonment of assets at the retail facilities closed late in the year.
      These costs amounted to $369,458 and were offset against the estimated
      restructuring costs recorded at the end of 1996.

      In connection with the restructuring plan, the Company determined the
      carrying value of its baking equipment, furniture and fixtures and
      leasehold improvements exceeded their fair market value. Therefore, in
      accordance with SFAS No. 121 "Accounting for the Impairment of Long-Lived
      Assets", a provision for impairment losses aggregating $305,066 was
      charged and included as part of other expenses in the accompanying
      statement of operations for the year ended December 31, 1998. Such
      impairment loss represents the excess of the carrying value of $340,066
      over management's estimate of the fair market value of the assets of
      $35,000.


                                                                             F-7




<PAGE>



                    CREATIVE BAKERIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2000 AND 1999

1.    Realization of assets - going concern (continued):

      In view of these matters, management believes that actions presently being
      taken to revise the Company's operating and financial requirements provide
      the opportunity for the Company to continue as a going concern.

2.    Accounting policies:

      Principles of consolidation:

      The accompanying consolidated financial statements include the account of
      the Company and all of its wholly owned subsidiaries. Intercompany
      transactions and balances have been eliminated in consolidation.

      Cash and cash equivalents:

      For the purpose of the statement of cash flows, the Company considers all
      short-term debt securities purchased with a maturity of three months of
      less to be cash equivalents.

      Inventories:

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

      Property and equipment:

      The cost of property, plant and equipment is depreciated over the
      estimated useful lives of the related assets. The cost of leasehold
      improvements is depreciated over the lesser of the length of the related
      leases or the estimated useful lives of the assets. Depreciation is
      computed on the straight-line method for financial reporting purposes and
      on the modified cost recovery system method for income tax basis.

      Intangible assets:

      Goodwill represents the excess of the cost of companies acquired over the
      fair value of their net assets at the dates of acquisition and is being
      amortized on the straight-line method over forty years.

      The Company's covenant not to compete is being amortized over a period of
      five years.

      Deferred rent:

      The accompanying consolidated 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 expenses as required by generally accepted
      accounting principles.

      Comprehensive income:

      There were no items of other comprehensive income in 2000 and 1999, and
      thus, net income is equal to comprehensive income for each of those years.


                                                                             F-8




<PAGE>



                    CREATIVE BAKERIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2000 AND 1999

3.    Nature of operations, risks and uncertainties:

      The Company is a manufacturer of baking and confectionery products which
      are sold to supermarkets, food distributors, educational institutions,
      restaurants, mail order and to the public. Although the Company sells its
      products throughout the United States, its main customer base is on the
      East Coast of the United States.

      The process of preparing financial statements in conformity with generally
      accepted accounting principles requires the use of estimates and
      assumptions regarding certain types of assets, liabilities, revenues and
      expenses. Such estimates primarily relate to unsettled transactions and
      events as of the date of the financial statements. Accordingly, upon
      settlement, actual results may differ from estimated amounts.

      The Company maintains all of its cash balances in New Jersey financial
      institutions. The balances are insured by the Federal Deposit Insurance
      Company (FDIC) up to $100,000. At December 31, 2000, the Company had
      uninsured cash balances of $62,177.

4.    Accounts receivable:

      Following is a summary of receivables at December 31, 2000:

          Trade accounts                               $361,281
          Less allowance for doubtful accounts          (15,500)
                                                       --------
                                                       $345,781
                                                       ========

      At December 31, 2000, accounts receivable in the amount of $361,281 was
      pledged as collateral in connection with the Company's line of credit.

5.    Inventories:

      Inventories at December 31 consist of:

          Finished goods                               $ 84,058
          Raw materials                                  67,363
          Supplies                                       89,705
                                                       --------
                                                       $241,126
                                                       ========

6.    Property and equipment:

      The Company's baking equipment, furniture and fixtures and leasehold
      improvements were deemed to be impaired and written down to management's
      estimate of their fair value as determined by management's estimation of
      the net sales value if the property assets were offered for sale.


                                                                             F-9




<PAGE>



                    CREATIVE BAKERIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2000 AND 1999

6.    Property and equipment (continued):

      The following is a summary of property and equipment at December 31, 2000:

             Baking equipment                         $1,280,226
             Furniture and fixtures                       78,864
             Leasehold improvements                      180,422
                                                      ----------
                                                       1,539,512
             Less:  Accumulated depreciation
                     and amortization                  1,049,692
                                                      ----------
                                                      $  489,820
                                                      ==========

      Depreciation expense charged to operations was $102,803 and $114,717 in
      2000 and 1999, respectively.

      Machinery and equipment with a cost of $197,000 is pledged as collateral
      for the Company's line of credit.

      The useful lives of property and equipment for purposes of computing
      depreciation are:

                                                           Years
                                                           -----

             Machinery and equipment                        10
             Furniture and computers                         5
             Leasehold improvements                        10-15

7.    Intangible assets:

      The excess cost over the fair value of the net assets acquired from J.M.
      Specialties, Inc. aggregated $1,213,565. This goodwill has been amortized
      over its estimated useful life of fifteen years. Amortization charged to
      operations amounted to $80,912 in 2000 and 1999.

8.    Note payable, bank:

      As of December 31, 2000, the Company had an available revolving line of
      credit with Hudson United Bank in the amount of $150,000, of which
      $107,270 had been utilized at December 31, 2000. The interest rate at
      December 31, 2000 was 11.0%.


                                                                            F-10




<PAGE>



                    CREATIVE BAKERIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2000 AND 1999

9.    Commitments and contingencies:

      The Company is obligated under a triple net lease for use of 29,362 square
      feet of office and plant space in New Jersey with the lease expiring on
      December 31, 2004.

      The minimum future rentals on the baking facility is as follows:

                                                  Facility
                                                  --------

                December 31, 2001                 $200,000
                December 31, 2002                  200,000
                December 31, 2003                  200,000
                December 31, 2004                  230,000
                                                  --------
                                                  $830,000
                                                  ========

      Rent expense amounted to $209,466 in 2000 and $210,120 in 1999 and
      includes straight-line amortization of rent adjustments discussed in Note
      2.

      The Company also leases two vehicles under operating lease agreements that
      expire in January and November 2004. Total lease expense for 2000 was
      $1,288. Future minimum rentals are as follows:

                December 31, 2001             $11,328
                December 31, 2002              11,328
                December 31, 2003              11,328
                December 31, 2004               6,944
                                              -------
                                              $40,928
                                              =======

10.   Income taxes:

      The Company accounts for income taxes in accordance with Statement of
      Financial Accounting Standards ("SFAS No. 109") "Accounting for Income
      Taxes", which requires an asset and liability approach to financial
      accounting and reporting for income taxes. Deferred income tax assets and
      liabilities are computed annually for differences between the financial
      statement and income tax basis of assets and liabilities that will result
      in taxable or deductible amounts in the future based on enacted tax laws
      and rates applicable to the periods in which the differences are expected
      to affect taxable income.


                                                                            F-11




<PAGE>



                    CREATIVE BAKERIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2000 AND 1999

10.   Income taxes (continued):

      Valuation allowances are established when necessary to reduce deferred tax
      assets to the amount expected to be realized. Income tax expense is the
      tax payable or refundable for the period, plus or minus the change during
      the period in deferred tax assets and liabilities. There was no cumulative
      effect of adoption or current effect in continuing operations mainly
      because the Company has accumulated a net operating loss carryforward of
      $7,897,694. The Company has made no provision for a deferred tax asset due
      to the net operating loss carryforward because a valuation allowance has
      been provided which is equal to the deferred tax asset. It cannot be
      determined at this time that a deferred tax asset is more likely that not
      to be realized.

      The Company has a loss carryforward of $7,897,694 that may be offset
      against future taxable income. The carryforward losses expire at the end
      of the years 2006 through 2018.

11.   Capital stock:

      (a) Common stock:

      In January 1999, the Company issued 40,000 shares in settlement of certain
      accrued obligations due a former shareholder.

      In January 1999, the Company issued 150,000 shares of its common stock at
      $1.25, for total proceeds of $187,500.

      In May 1999, the Company issued 13,500 shares of its common stock in
      settlement of certain obligations due a former employee of William
      Greenberg, Jr. Desserts and Cafes, Inc. The total amount of the settlement
      was $11,813.

      In December 1999, the Company cancelled 60,000 shares of its common stock
      regarding the purchase of Chatterley Elegant Desserts, Inc.

      In March 2000, the Company issued 350,000 shares of its common stock at
      $.52, for total proceeds of $187,500.

      (b) Warrants:

      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 of 143,500 shares of common
      stock in 1999, the lender was entitled to an additional 8,610 shares of
      common stock. Accordingly, the financial statements include a charge to
      operations of $4,305 for 1999 which represents the market value of the
      stock at the time the warrants were issued by the Company.


                                                                            F-12




<PAGE>



                    CREATIVE BAKERIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2000 AND 1999

12.   Earnings per share:

      Primary earnings per share is computed based in the weighted average
      number of shares actually outstanding plus the shares that would have been
      outstanding assuming conversion of the common stock purchase warrants
      which are considered to be common stock equivalents. However, according to
      FASB 128, effective for financial statements issued and annual periods
      issued after December 15, 1997, entities with a loss from continuing
      operations, the exercise of any potential shares increases the number of
      shares outstanding and results in a lower loss per share. Thus, potential
      issuances are excluded from the calculation of earnings per share. These
      common stock purchase warrants amounted to 1,689,575 in 1999.

      Reconciliation of shares used in computation of earnings per share:

                                                         2000         1999
                                                         ----         ----
          Weighted average of shares actually
           outstanding                                 5,245,250    5,288,280
          Common stock purchase warrants                            1,689,575
                                                       ---------    ---------
          Primary and fully diluted weighted
           average common shares outstanding           5,245,250    6,977,855
                                                       =========    =========

13.   Supplemental schedule of non-cash investing and financing activities:

                                                         2000        1999
                                                         ----        ----
        Issuance of common shares in consideration
         of legal, consulting fees and other
         obligations                                      $0        $53,500
                                                          --        -------
                                                          $0        $53,500
                                                          ==        =======

14.   Discontinued operations:

      In 1998, the Company adopted a formal plan to close WGJ Desserts and
      Cafes, Inc., its New York manufacturing facility, which was done in July
      of 1998 and to dispose of its one remaining retail store, which was
      accomplished in November 1998. The New Jersey facility was unaffected and
      still continues to sell and manufacture.

      The sale of the final retail location resulted in a selling price of
      $405,000 which includes a note receivable with a balance of $147,500 at
      December 31, 2000.


                                                                            F-13




<PAGE>



                    CREATIVE BAKERIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2000 AND 1999

14.   Discontinued operations (continued):

      On November 3, 1998, the Company sold its one remaining retail facility
      for $405,000 which represented disposition of equipment and a license to
      sell under the "William Greenberg, Jr. Desserts and Cafes" name. The
      agreement called for a cash down payment of $110,000 with the remainder
      being paid on a note receivable due in semi-annual installments of $36,875
      plus interest at prime.

      On December 28, 2000, the Company sold all trademarks relating to "William
      Greenberg Jr.," "Wm. Greenberg Jr.", "William Greenberg Jr. Desserts", and
      "William Greenberg Jr. Desserts & Cafes", as well as the trade name and
      know how, for $75,000 which is included in other income. The agreement
      called for a cash down payment of $25,000, with the remainder being paid
      on March 31, 2001. The Company received the down payment of $25,000
      January 5, 2001.

      The maturities of the notes are as follows:

               December 31, 2001                       $148,750
               December 31, 2002                         73,750
                                                       --------
                                                       $222,500
                                                       ========

      In the event that the licensee opens and operates any additional retail
      store(s) utilizing the license (other than the original retail store) and
      the annual gross retail sales of any such store(s) exceeds $400,000, then
      the licensee shall pay the licensor (the Company) a five percent royalty
      on all sales in excess of the $400,000 of sales in each store. The
      licensee shall pay the licensor a royalty on a semi-annual basis of 3% of
      all mail order sales in excess of $100,000.

      Net liabilities, less assets to be disposed of, of WGJ Desserts, Inc.
      consisted of the following as of December 31, 2000:

           Liabilities:
             Accounts payable                          $176,288
             Accrued expenses                           403,912
                                                       --------
                                                        580,200
                                                       --------
           Assets:
             Notes receivable                           222,500
             Interest receivable                          1,444
                                                       --------
                                                        223,944
                                                       --------
                                                       $356,256
                                                       ========


                                                                            F-14




<PAGE>



                    CREATIVE BAKERIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2000 AND 1999

14.   Discontinued operations (continued):

      Information relating to discontinued operations for WGJ Desserts and
      Cafes, Inc. for the year ended December 31, 2000 and 1999 is as follows:

                                                 2000        1999
                                                 ----        ----
         Operating expenses                    $ 43,347    $ 35,664
                                               --------    --------
         Net loss from operations               (43,347)    (35,664)
                                               --------    --------
         Loss on sale of fixed assets                       (25,500)
         Sale of Trademark                       75,000
         Interest income                         17,048      21,450
                                               --------    --------
                                                 92,048      (4,050)
                                               --------    --------
         Net income (loss)                     $ 48,701    $(39,714)
                                               ========    ========

15.   Extraordinary items:

      During 1999, the Company recognized an extraordinary gain of $30,000
      ($0.00 per share) from continuing operations and an extraordinary gain of
      $240,435 ($0.03 per share) from discontinued operations. The extraordinary
      gains resulted from forgiveness of certain accrued liabilities and
      obligations under an operating lease.


                                                                            F-15