U.S. SECURITIES AND EXCHANGE
COMMISSIONWashington, D.C. 20549

FORM
10-KSB

| | [x] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934
| | --- | ------------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2001

| | [  ] | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934
| | ---- | ----------------------------------------------------------------------------------------

For the transition period from __________ to
__________.

Commission file number: 0-27219

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FAMOUS FIXINS, INC.(Name of small business issuer in its
charter)

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| | NEW YORK(State or other
      jurisdiction ofincorporation or organization) |  | 13-3865655(I.R.S.
      EmployerIdentification No.) | 
| | --------------------------------------------------------------------------- |  | --------------------------------------------------- | 

| | 250 W. 57th Street, Suite 1112, New York, New York(Address of principal executive offices) |  | 10107(Zip Code) | 
| | ------------------------------------------------------------------------------------------ |  | --------------- | 

Issuer's telephone number: (212) 245-7773

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

| | Title of each classN/A |  | Name of each exchange on which
      registeredN/A | 
| | ---------------------- |  | -------------------------------------------------- | 

Securities registered pursuant to Section 12(g) of
the Exchange Act: Common Stock(Title of Class)

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 90 past 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. [ ]

State issuer's revenues for its most recent fiscal
year: $1,451,4651.

The aggregate market value
of voting and non-voting stock of the issuer held by non-affiliates on December
31, 2001, was $118,080, based on the closing bid price of the issuers
common stock on December 31, 2001 of $0.01.

As of February 1, 2002,
14,197,903 shares of the issuers common stock were issued and outstanding.

DOCUMENTS INCORPORATED BY
REFERENCE

None.

Transitional Small Business Disclosure Format
(check one): YES [ ] NO [X]

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FAMOUS FIXINS, INC.

TABLE OF CONTENTS

|         |  |                                                                                                                             | Page
|-------- |  | --------------------------------------------------------------------------------------------------------------------------- | ----
|PART I   |  |                                                                                                                             |     
|         |  |                                                                                                                             |     
|Item 1.  |  | Description of Business                                                                                                     | 3   
|Item 2.  |  | Description of Property                                                                                                     | 11  
|Item 3.  |  | Legal Proceedings                                                                                                           | 11  
|Item 4.  |  | Submission of Matters to a Vote of
      Security Holders                                                                   | 11  
|         |  |                                                                                                                             |     
|PART II  |  |                                                                                                                             |     
|         |  |                                                                                                                             |     
|Item 5.  |  | Market for Common Stock and Related
      Stockholder Matters                                                               | 12  
|Item 6.  |  | Management's Discussion and Analysis
      or Plan of Operation                                                             | 14  
|Item 7.  |  | Financial Statements                                                                                                        | 19  
|Item 8.  |  | Changes In and Disagreements With
      Accountants on Accounting and Financial Disclosure                                  | 46  
|         |  |                                                                                                                             |     
|PART III |  |                                                                                                                             |     
|         |  |                                                                                                                             |     
|Item 9.  |  | Directors, Executive Officers,
      Promoters and Control Persons; Compliance With Section 16(a) of the
      Exchange Act | 47  
|Item 10. |  | Executive Compensation                                                                                                      | 49  
|Item 11. |  | Security Ownership of Certain
      Beneficial Owners and Management                                                        | 53  
|Item 12. |  | Certain Relationships and Related
      Transactions                                                                        | 55  
|Item 13. |  | Exhibits and Reports on Form 8-K                                                                                            | 59  
|         |  |                                                                                                                             |     

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`PART I

ITEM 1. DESCRIPTION OF BUSINESS

(a) BUSINESS DEVELOPMENT

We are a New York corporation known as Famous Fixins, Inc. We were originally
incorporated on February 9, 1984 under the laws of the State of Utah as Straw
Dog, Inc. Pursuant to a registration with the Utah Securities Division effective
September 26, 1984, 1,000,000 shares of our common stock were sold to the public
at a price of $.02 per share. On November 4, 1985, we changed our name to
Tinderblock, Inc.

On July 31, 1995, we reincorporated under the laws of the State of Nevada by
merging with Spectrum Resources, Inc. Under the terms of the merger and
incorporation, all of the 7,666,666 outstanding shares of our common stock were
exchanged for shares of the common stock of Spectrum Resources, Inc. at the rate
of 1 share of Spectrum Resources for 3 of our shares. Following the
reincorporation, there were 2,555,887 shares of our common stock issued and
outstanding. On October 20, 1995, the Board of Directors approved a 1 for 10
reverse split of our stock, after which we had 255,588 shares of common stock
issued and outstanding.

On January 12, 1996, pursuant to a resolution of the Board of Directors, we
issued 354,930 shares of common stock to Phoenix Pacific Property Trust. Those
shares were valued at approximately $5,111 on the date of issuance. The shares
were given as consideration for services and costs that they incurred to
maintain our status as an active corporation and for providing business and
financing consulting advice to us. Our present management and Board of Directors
do not know how the securities issued to Phoenix Pacific Property Trust were
valued, but reasonably estimates a value of $5,111 based on a price of $.0144
per share, based on the following factors:

     o    the shares were restricted common stock;
     o    there was no active trading market at the time for the securities;
     o    there were no contemporaneous transactions of which our present
          management and Board are aware of that were transacted at a greater
          price per share; and
     o    we did not have active business operations or material net worth at
          the time of issuance.

We did not engage in any substantive business activity from approximately April
6, 1996 to May 28, 1998.

On May 28, 1998, we acquired Famous Fixins, Inc., a privately-held New York
corporation formed on November 29, 1995 ("FFNY"), in a transaction viewed as a
reverse acquisition. FFNY was a promoter and marketer of celebrity endorsed
consumer products. It commenced business activities in 1995 and began sales
operations in March 25, 1997. Pursuant to a Plan and Agreement of
Reorganization, we issued 5,494,662 shares of common stock to Jason Bauer, as
trustee for certain shareholders of FFNY, in exchange for 97% of the outstanding
common stock of FFNY. Pursuant to the reorganization, the controlling
shareholders became our controlling shareholders and officers and directors.
FFNY became a majority-owned subsidiary of our company.

On June 8, 1998, we changed our name to Famous Fixins, Inc. under the laws of
the State of Nevada.

On November 16, 1998, we reincorporated under the laws of the State of New York
by merging into our wholly-owned subsidiary, Famous Fixins Holding Company,
Inc., a corporation formed for the purpose of reincorporation. On November 20,
1998, we merged with our New York subsidiary, FFNY. On November 20, 1998, we
changed our name to Famous Fixins, Inc. under the laws of the State of New York.
We operate as a single entity under the laws of the State of New York.

As of December 31, 2001, we had 14,197,903 shares of our common stock issued and
outstanding.

We have not been subject to bankruptcy, receivership or any similar proceedings.`

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`(b)  BUSINESS OF ISSUER

We are a promoter and marketer of celebrity endorsed consumer products. Our
business plan has been to develop, market and sell licensed consumer products
based on the diverse professional, cultural and ethnic backgrounds of various
celebrities. We promote and market our products directly to supermarket chain
stores, mass merchandisers, drugstore chains, and specialty stores. We enlist
third party manufacturers to produce our consumer products.

PRINCIPAL PRODUCTS AND SERVICES

We developed and sold consumer products which included salad dressings, candy
products, lip balm, and adhesive bandages, and breakfast cereals endorsed by
professional entertainers, athletes and sports teams. Examples of our current
products include Olympia Dukakis' Greek Salad Dressings, Marvel Comics Liquid
Candy, Jolly Rancher Lip Balm, O-Town Lip Balm, and Dream Lip & Body Glitter.

On April 7, 1999, we launched Internet sales of our products. Famous Fixins.com,
our Internet marketing division intended to be an online supermarket for
celebrity endorsed consumer products. Through this web site, consumers are able
to purchase individual items. This electronic commerce service allow us to reach
consumers in regions of the United States where our products are not carried in
supermarkets.

DISTRIBUTION METHODS OF THE PRODUCTS AND SERVICES

We presently employ a direct method of distribution for most our sales, whereby
the product is shipped directly from the manufacturing facility to the
supermarket chain's warehouses. As a secondary form of distribution, in cases
where the direct distribution method is impracticable, we use a distributor,
whereby the product is shipped to independent distribution companies who bear
the responsibility for delivery to the retail stores. The latter method of
distribution increases the retail price to the consumer by approximately 30%.

STATUS OF ANY PUBLICLY ANNOUNCED NEW PRODUCT OR SERVICE

Not applicable.

COMPETITIVE BUSINESS CONDITIONS

We face intense competition in our businesses against some large corporations
and smaller specialized businesses, that have the name recognition to attract
well-known celebrities and sell celebrity endorsed food products. We face
day-to-day competition from numerous competitors who produce and market consumer
products endorsed by celebrities. The range of competitors runs from large
corporations to smaller competitors. Those corporations have far greater
financial resources and business experience than we do. The range of products
runs across the food category from sports drinks, soda, salad dressings to
cereals, desserts and candy bars. Any celebrity endorsed product similar to our
products sold in an ordinary supermarket is competition to us.

Because we are significantly smaller than our national competitors, we may lack
the financial resources needed to capture increased market share. Many of our
existing competitors and potential new competitors have:

     -    longer operating histories;
     -    greater name recognition;
     -    larger customer bases;
     -    more financial resources;
     -    more and larger facilities; and
     -    significantly greater financial, technical and marketing resources.`

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`If we compete with them for the same geographical markets, their financial
strength could prevent us from capturing those markets. Because of their
resources, our competitors may offer more attractive financial terms to
celebrities than we can to endorse products. They may also devote greater
resources than we can to the development, promotion and sale of their products.
They may develop products that are superior to or have greater market acceptance
than ours. Our competitors may also conduct more extensive research and
development, run more marketing campaigns, adopt more aggressive pricing
policies and provide more attractive services to our customers than we do.

Many other companies offer consumer products similar to ours, including Mars,
Incorporated and Whitehall-Robins Healthcare, to smaller competitors. Many other
companies in competition with us have resources and experience far greater than
we do. In addition, additional companies may seek to enter this business if we
succeed in developing a successful business of developing and marking celebrity
endorsed consumer products.

PRINCIPAL SUPPLIERS

We engage third-party, private-label manufacturers to produce our products
according to the specifications and product formulas provided by us to such
manufacturer. We have not experienced and do not anticipate any difficulty in
meeting our current and anticipated sales objectives. Manufacturing facilities
are subject to regulations promulgated by the Food and Drug Administration. The
Food and Drug Administration and state regulatory agencies inspect the
facilities of manufacturers on a routine basis for regulatory compliance. We
cannot assure you that the third-party manufacturers can satisfy these
requirements. The table below lists the manufacturers that we utilized for our
products in 2001.

Manufacturer            Location                Consumer product
------------            --------                ----------------
Marzetti Foods          Canton, Ohio            salad dressing
Amurol Confections      Yorksville, Illinois    bubble gum
Oralabs                 Englewood, Colorado     lip balm, sour drops and
                                                body glitter

DEPENDENCE ON MAJOR CUSTOMERS

Although we target our products to a large number of supermarkets and upon a
broad customer base, to each of whom is sold relatively small quantities of our
products, in fiscal year 2001, Albertsons and CBI Distributing Corp. accounted
for about 28% and 16% of our sales, respectively. Our other customers purchased
our products in blocks and there is no on-going agreement for these customers to
purchase our products. We do not believe that loss of any one of these customers
would have a material adverse affect on our operations.

LICENSE AGREEMENTS

Dukakis Licensing Agreement
---------------------------

We entered into a licensing agreement dated as of March 22, 2001 with Olympia
Dukakis and T. Marzetti Company pursuant to which, as of April 1, 2001, Marzetti
has the exclusive right to use the name, photograph, depiction,
characterization, likeness, voice, image, and biographical data of Dukakis and
the trademarks, logos, copyrights and all other authorized material owned or
controlled by Ms. Dukakis in connection with the development, manufacture,
distribution, promotion and sale of Greek specialty food products. The original
license agreement between Famous Fixins and Olympia Dukakis, dated March 1,
1997, whereby we were the exclusive licensee of such rights, is terminated. As
part of the March 2001 licensing agreement, we assigned rights related to
Olympia Dukakis' Greek Salad Dressings under the original license agreement to
Marzetti. Under the March 2001 licensing agreement, Marzetti paid us an amount
equal to our cost for inventory of the licensed products on April 1, 2001, plus
a $6,000 deposit we had paid Marzetti to store such inventory. Under the March
2001 licensing agreement, Marzetti is to pay us an amount equal to two percent
of all monies Marzetti receives as revenues from the sale of the licensed
products. Either Dukakis or Marzetti may terminate the March 2001 licensing
agreement upon forty-five days written notice under certain conditions. We have
the ability to assign our interest to the March 2001 licensing agreement under
certain circumstances.`

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`O-Town License Agreement
------------------------

We entered into a non-exclusive merchandise license agreement, dated as of March
15, 2001, with MTV Networks, Trans Continental Television Productions, Inc. and
Trans Continental Records, Inc. Under the license, we have the right to
manufacture, distribute, sell and advertise the O-Town name, trademark and logo,
and the names, images, likeness, symbols, and designs of the musical group
O-Town in connection with lip balm and sour sprays or sour drops. The license
territory is the United States. As consideration, we are to pay royalty on a
quarterly basis equal to ten percent of net sales, without deduction for our
costs. The guaranteed minimum royalty payment is $15,000, of which $8,000 was
payable upon execution of the license agreement and $7,000 is payable by
December 31, 2002, which are to be credited against royalty payments. The
license term expires on May 31, 2003. The license may be earlier terminated if
we are in default of certain provisions of the license agreement, which includes
for the following reasons:

     o    we fail to actively manufacture, advertise, distribute or sell the
          licensed products;
     o    we fail to make a payment or furnish a sales report;
     o    we fail to comply with the approval, quality, and safety requirements
          under the license or the products do not comply with such requirement,
          or the products become the subject matter of adverse or negative
          publicity due to such failure;
     o    we fail to comply with any other of the material obligations under the
          license agreement or we breach any warranty or representation we made
          in the license agreement;
     o    we sell or otherwise dispose of all or substantially all of our
          business or assets to a third party, or control or ownership of Famous
          Fixins is changed or transferred;
     o    we sell or cause others to sell the products outside of the authorized
          channels of distribution outside of the United States;
     o    we fail to obtain or maintain the requisite insurance;
     o    we contest or assist others to contest the licensor's rights or
          interests in the licensed property;
     o    we fail to comply with any provision of any other agreement with the
          licensor;
     o    if a petition in bankruptcy is filed by or against us;
     o    we are adjudicated bankrupt;
     o    we make any assignment for the benefit of creditors or becomes
          insolvent;
     o    we are placed in the hands of a trustee or receiver;
     o    we fail to satisfy any judgment against us; or
     o    we are unable to pay our debts as they become due.

Under the license, we agreed to indemnify the other parties, and their
respective officers, directors and employees harmless from and against any and
all claims, damages, liabilities, costs and expenses, including reasonable
counsel fees, arising out of or relating to any breach or alleged breach by
Famous Fixins of any representation, warranty or undertaking made herein, or out
of any defect, latent or patent, in the licensed products. We may not assign,
sublicense or otherwise transfer the license without the prior approval of the
licensor.

Dream License Agreement
-----------------------

We entered into a license agreement, dated May 15, 2001, with BRAVADO
INTERNATIONAL GROUP INC., a duly authorised licensee of certain intellectual
property and all merchandising rights relating to the artists known
professionally as Dream. Under the license, we have the exclusive right to use
symbols, emblems, logos, designs, photographs names, professional names, and
visual images or representations based on the real life image of Dream in
connection with the manufacture, retail sale and distribution of lip balm and
glitter in the United States, Canada and Mexico. The lip balm and glitter,
including all rights and goodwill associated the products, remain the property
of Bravado.`

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`As consideration, we are to pay Bravado royalties equal to eleven percent of the
gross selling price of the products, without deduction or set off or withholding
for sales taxes or our costs. We paid a $10,000 non-refundable advance when we
entered into the license and are to pay an additional $5,000 advance by May 15,
2001.

The license term is May 15, 2001 to May 15, 2003. The license may be earlier
terminated, including for the following reasons:

     o    we fail to make any payment or deliver any sales statements;
     o    we fail to comply with any material obligation under the agreement or
          breach any warranty;
     o    we sell or otherwise dispose of all or a substantial part of its
          business or assets to a third party, or direct or indirect control of
          our company is transferred to a third party;
     o    we cease or notify Bravado of our intention to cease to carry on
          business;
     o    we challenge the validity of any of the licensed property or the
          licensor's rights in the licensed property;
     o    an order is made or a provisional liquidator is appointed for our
          company;
     o    an administration order is made or a receiver is appointed for our
          company; or
     o    we are unable to pay our debts.

Under the license, we are to indemnify Bravado and any of its associated
companies and the individual members of Dream from and against any and all
claims, damages, loss, liabilities, costs and expenses arising out of or in any
manner connected with the license, or the use or possession of the licensed
products, or any of the products.

We may not assign, sublicense or otherwise transfer the license without the
prior written consent of Bravado.

Hershey License Agreement
-------------------------

We entered into a non-exclusive license agreement, dated May 30, 2001, and as
amended July 31, 2001, with Hershey Foods Corporation. Under the license, we
have the right to use the names, symbols, trademarks and associated trade dress
colors, copyrighted material and logos of "Hershey's" and "Jolly Rancher" in
connection with the manufacture, retail sale and distribution of lip balm. The
license territory is the United States, its territories and possessions, and
Canada. As consideration, we are to pay Hershey royalty equal to seven percent
of net sales, without deduction for our costs. The minimum royalty payment is
$5,000 and we paid a $2,500 non-refundable advance when we entered into the
license, which is credited against royalty payments. The license term is June 1,
2001 to May 31, 2003. The license may be earlier terminated, including for the
following reasons:

     o    we fail to make any royalty payment or deliver any sales statements or
          to perform any term or condition of the license;
     o    we use the licensed property in a manner likely to deceive or mislead
          the public or endanger the validity of the licensed property;
     o    any transfer of our interest in the license is made by execution or
          similar legal process;
     o    a petition is filed to adjudicate us a bankrupt or insolvent, or for a
          corporate reorganization or any arrangement with our creditors;
     o    a receiver or trustee is appointed for our business or assets;
     o    we make an assignment or deed of trust for the benefit of our
          creditors; or
     o    our interest under this license shall pass to another by operation of
          law.

Under the license, we agreed to indemnify Hershey from, and to be solely
responsible for, any claims, demands, suits, causes of action, loss or damage
arising out of the design, use, manufacture, sale, storage or advertising of the
licensed articles. Either party may renew the license for an additional twelve
months upon thirty days notice, subject to the other party's right to reject,
provided that the license was not already terminated and we have paid royalty
payments of at least the minimum royalty payment for the term just ended. If we
do not begin commercial production within 180 days from entering the agreement,
Hershey has the right to terminate this license. We may not assign, sublicense
or otherwise transfer the license.`

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`Marvel License Agreement
------------------------

We entered into a non-exclusive license agreement, effective as of June 30,
2001, with Marvel Enterprises, Inc. and Marvel Characters, Inc. Under the
license, we have the right to use certain property of Marvel in connection with
the manufacture, promotion, sale and distribution of liquid candy drops. The
property of Marvel that we can use includes: certain X-Men characters, certain
Spider Man and Friends characters, certain Generation X characters, certain
Fantastic Four characters, The Incredible Hulk, The Avengers, Captain America,
Iron Man and Friends, Thor and Friends, and certain other Marvel characters. The
license territory is the United States and Canada. As consideration, we are to
pay Marvel royalty, payable each quarter, equal to 7.5% of net sales, without
deduction for our costs. The minimum royalty payment is $25,000, of which a
nonrefundable advance of $10,000 was due with the execution of the license
agreement, $7,500 is due by March 1, 2002, and $7,500 is due by December 15,
2002. The license term expires December 31, 2003. The license may be earlier
terminated, including for the following reasons:

     o    we fail to make any royalty payment or furnish any royalty reports;
     o    we become insolvent or fail to pay our debts and obligations on a
          current basis;
     o    we make an assignment for the benefit of creditors;
     o    we become involved in a receivership, bankruptcy or other insolvency
          or debtor relief proceedings, or any similar proceedings, voluntary or
          forced;
     o    we cease to do business;
     o    we attempt to assign any of our rights under the license;
     o    if the license agreement is held invalid or unenforceable by the
          determination of any government or any court of competent
          jurisdiction; or
     o    if any licensed articles become the subject of a recall by the Federal
          Consumer Product Safety Commission or any corresponding state or
          federal agency and Licensee fails to take immediate action to recall
          such products.

Under the license, we agreed to defend, indemnify and hold Marvel, its parents,
subsidiaries, associate and affiliate companies, harmless of, from and against
any charges, suits, damages, costs, expenses, judgments, penalties, claims,
liabilities or losses of any kind or nature, which may be sustained or suffered
by or secured against Marvel in connection with the licensed articles, or
arising out of the unauthorized use of any patent, trade secret, process, idea,
method or device, or any copyright or trademark, other than under this license,
or the packaging, distribution, promotion, sale or exploitation of the licensed
articles, any actual or alleged defect in the licensed articles or their
packaging, including failure of said licensed articles or their packaging,
distribution, promotion, sale or exploitation to meet any Federal, State or
local, or other applicable laws or standards; or any other actual or alleged
unauthorized action of Famous Fixins, including a breach of any term of the
license agreement. Marvel agreed to defend, indemnify and hold us harmless of,
from and against any charge, suits, damages, costs, expenses, judgments,
penalties, claims, liabilities or losses of any kind or nature, which may be
sustained or suffered by or secured against us based upon or arising out of any
actual or alleged trademark or copyright infringement arising solely out of the
use by us of the licensed property. Marvel has the rights to any of the artwork
that we use in connection with the license agreement. We may not assign,
sublicense or otherwise transfer the license.

Seventeen License Agreement
---------------------------

We entered into a non-exclusive license agreement, effective July 31, 2001 with
PRIMEDIA Magazines, Inc. and PRIMEDIA Magazines Finance, Inc. Under the license,
we have the right to use the names, symbols, designs, logos, artwork,
copyrights, trade dress and trademarks associated with SEVENTEEN in connection
with the distribution, sale and marketing of candles. The license territory is
the United States and Canada. As consideration, we are to pay Primedia royalty,
to be paid quarterly, equal to eight percent of net sales, without deduction for
our costs. The minimum royalty payment is $20,000, of which a nonrefundable
advance payment of $10,000 was due upon signing the license agreement, $5,000 is
due September 1, 2002, and $5,000 is due June 30, 2003. The minimum royalty is
to be credited against royalty payments. The license agreement provides that we
must maintain minimum net sales per annual period of $125,000 with a minimum
royalty per unit sold of $.092. The license term is through December 31, 2003.`

---

`The license may be earlier terminated by Primedia, including for the following
reasons:

     o    we fail to make any payment;
     o    we discontinue our business;
     o    we make any assignment for the benefit of creditors;
     o    we file any petition under Chapters 10, 11 or 12 of Title 11, United
          States Code;
     o    we file a voluntary petition in bankruptcy;
     o    we are adjudicated a bankrupt or insolvent;
     o    if any receiver is appointed for our business or property;
     o    if any trustee in bankruptcy, or insolvency is appointed under the
          laws of the United States government or of the several states;
     o    we fail to maintain minimum net sales;
     o    we fail to perform any other material term or condition of the
          license;
     o    we fail to diligently and commercially distribute and sell the product
          for any three month period; or
     o    we do not begin the bona fide manufacture, distribution and sale of
          the product on a national basis on or before January 2002.

Under the license, each party agreed to hold the other harmless and indemnify
the other, its controlling persons and their respective officers, directors,
employees and agents from and against any and all losses, claims, damages,
liabilities and expenses incurred in the investigating, preparing, or defending
any litigation, proceeding, investigation or governmental inquiry, commenced
threatened or any claim arising out of a material breach of the license
agreement. We assigned all of our rights to any of the artwork that we use in
connection with the license agreement to Primedia. We may not assign or
sublicense the license.

The Doors License Agreement
---------------------------

In September 2001, we entered into a non-exclusive license agreement with
Signatures Network, Inc. as agent for members of the musical group The Doors .
Under the license, we have the right to use the names, symbols, images and
likenesses of The Doors in connection with the distribution, sale and marketing
of disposable lighters in the United States. As consideration, we are to pay
Signatures Network royalty, to be paid quarterly, equal to twelve percent of net
sales. The minimum royalty payment is $20,000, inclusive of an advance of
$20,000, of which a nonrefundable advance payment of $10,000 was due upon
signing the license agreement, and $10,000 is due by June 30, 2003. The license
term expires on June 30, 2003.

The license may be earlier terminated by Signatures Network, including for the
following reasons:

     o    we make, sell, offer for sale, use or distribute any product without
          prior written approval or continue to make, sell, offer for sale, use
          or distribute any product after receipt of notice withdrawing
          approval;
     o    we become subject to any voluntary or involuntary order of any
          government agency involving the recall of any of the products because
          of safety, health or other hazard or risks to the public;
     o    we fail to immediately discontinue the advertising, distribution or
          sale of products which do not contain the appropriate legal legend or
          notice;
     o    we breach any of the provisions of the license relating to the
          unauthorized assertion of rights in the licensed subject matter;
     o    we fail to make timely royalty payments;
     o    we fail to obtain or maintain insurance;
     o    we fail to distribute, ship and sell the product by December 1, 2001,
          and to use best efforts in distribution, shipment and sale;
     o    we fail to timely submit preliminary samples of the product for
          approval;
     o    a petition in bankruptcy is filed by or against us; we are adjudicated
          bankrupt or insolvent, or make an assignment for the benefit of
          creditors or an arrangement pursuant to any bankruptcy law; we
          discontinue our business; or a receiver is appointed for us or our
          business and such receiver is not discharged within 30 days;`

---

`o    our corporation or any of our controlling shareholders, officers,
          directors or employees take any actions in connection with the
          manufacture, sale, distribution or advertising of the product which
          damages or reflects adversely upon licensor or the licensed subject
          matter; or
     o    we violate any of our other obligations or breach any of our
          covenants, agreements, representations or warranties.

The licensor is to indemnify, hold harmless and defend us and our affiliates,
officers, directors and employees against any claims, liabilities, demands, and
expenses arising solely out of our use of the licensed subject matter. It is not
liable for any consequential damages or loss of profits that we may suffer from
the use of the licensed subject matter. We are to indemnify and hold harmless
the licensor, including its respective parents, subsidiaries, affiliates,
officers, directors, representatives, employees and agents from and against any
and all claims, liabilities, demands, causes of action, judgments, settlements
and expenses that arises in connection with the design, manufacture, packaging,
distribution, shipment, advertising, promotion, sale, or exploitation of the
products, our breach of any representation, warranty, or covenant, or our
failure to perform any covenants or obligations contained in the license. The
intellectual property rights in the product and the marketing materials that use
the licensed subject matter belong to the licensor. We may not assign the
license unless otherwise previously agreed in writing by the licensor.

NEED FOR GOVERNMENT APPROVAL

Not applicable.

GOVERNMENT REGULATION

Not applicable.

RESEARCH AND DEVELOPMENT

Not applicable.

COMPLIANCE WITH ENVIRONMENTAL LAWS

Not applicable.

EMPLOYEES

We have three full-time employees and one part time employee.`

---

`ITEM 2.  DESCRIPTION OF PROPERTY

We maintain our executive offices in approximately 1,341 square feet at New
York, New York, pursuant to a lease expiring on April 30, 2005. The annualized
rent will be $42,912 for the term September 2001 through June 2003 and $46,935
for the term July 2003 through April 2005. We believe that our facility is
suitable as our executive offices and we have no present intentions to renovate
or improve our facility or seek new facilities. Our facility is adequately
covered by insurance.

ITEM 3.  LEGAL PROCEEDINGS.

We are not a party to, and none of our property is subject to, any pending or
threatened legal or governmental proceedings that will have a materially adverse
affect upon our financial condition or operation.

On or about June 2000, Site2Shop.com, Inc. commenced an action against us in the
Circuit Court of the 17th Judicial Circuit, in and for Broward County, Florida,
in which Site2Shop claims that it is entitled to payment of $19,700 pursuant to
a written agreement for advertising services, plus interest, costs and
attorneys' fees. We interposed an answer denying the claim, and intended to
contest the action. Subsequently, in August 2001, we entered into an agreement
to settle the matter for $6,000. We agreed to pay the amount in installments,
and, to date, have paid part of the agreed amount.

In October 2000, we commenced an action before the New York Supreme Court,
County of New York, against SKR Resources, Inc. alleging breach of contract and
conversion. On or about March 13, 2000, we entered into a contract with SKR
Resources in which we agreed to sell, indemnify, and transfer title to SKR
$457,104 worth of our products, and SKR agreed to establish a trade credit for
our benefit in the amount of $457,104. Additionally, SKR Resources promised to
place advertisements in several specific magazines, key to the launches of
several of our products. In the complaint, we alleged that SKR Resources failed
and neglected to perform the conditions of the contract by failing to establish
the trade credit for $457,104, and that SKR Resources also breached the contract
by not placing ads in several specific magazines. In the complaint, we also
alleged that SKR Resources converted the property by failing to establish a
trade credit in the amount of $457,104. In the proceeding, we seek a judgment
against SKR Resources in the sum of $457,104, together with interest from May
22, 2000, the costs and disbursements of the action, and for such other and
further relief. SKR Resources interposed an answer, and, prior to commencement
of discovery procedures, the parties discussed settlement of the action whereby
SKR stated its intention to provide the trade credits to which we were entitled.
We anticipate that we may receive the use of the trade credits through the
present settlement discussions. If those discussions do not resolve the matter,
we believe we may prevail in the proceeding in whole or in part; however, we
cannot express any range of possible recovery.

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

Not applicable.`

---

`PART II

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

GENERAL

Our authorized capital stock consists of 25,000,000 shares of common stock, par
value $.001 per share. As of December 31, 2001, we had 14,197,903 shares of
common stock issued and outstanding.

In October 2000, we entered into financing arrangements pursuant to which we
issued 4% convertible debentures with a principal amount of $1.5 million and we
established an equity line of credit for up to $5 million. The debentures
matured in August 2001 and we have not repaid the principal or interest. We may
be required to issue a significant number of shares in the event of conversion
of debentures or draw downs on the equity line, which number may exceed our
authorized capital. In order to do so, we would need to conduct a shareholders'
meeting to authorize an increase in our authorized capital.

COMMON STOCK

The holders of the common stock are entitled to cast one vote for each share
held of record on all matters presented to stockholders. The holders of common
stock do not have cumulative voting rights, which means that the holders of more
than 50% of the outstanding shares voting for the election of our directors can
elect all of the directors, and in such an event, the holders of the remaining
shares will be unable to elect any of our directors. Our certificate of
incorporation does not provide that the holders of common stock have any
preemptive right.

DIVIDENDS

We have not paid any cash dividends on our common stock and do not expect to
declare or pay any cash dividends in the near future. After paying interest on
our outstanding 5% convertible debentures, and after repaying principal and
interest on our outstanding 4% convertible debentures, which matured in August
2001 without repayment, future cash dividends, if any, will be at the discretion
of our Board of Directors and will depend upon, among other things, our future
operations and earnings, capital requirements and surplus, general financial
condition, contractual restrictions, and such other factors as the Board of
Directors may deem relevant.

MARKET INFORMATION

The table below sets forth for the periods indicated, the high and low closing
bid prices for the common stock as reported by the OTC Bulletin Board.

Fiscal Year       Quarter Ended             High              Low
-----------       -------------             ----              ---
2000              March 31, 2000            $0.6875           $0.1875
                  June 30, 2000             $0.51             $0.17
                  September 30, 2000        $0.203            $0.045
                  December 31, 2000         $0.0938           $0.0156
2001              March 31, 2001            $0.469            $0.0156
                  June 30, 2001             $0.06             $0.02
                  September 30, 2001        $0.03             $0.01
                  December 31, 2001         $0.02             $0.01

The foregoing quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission, and may not necessarily represent actual transactions.`

---

`HOLDERS

The approximate number of holders of record of our common stock as of December
31, 2001 was 89. We estimate that there were approximately 1,571 beneficial
holders of our common stock as of that date.

SALE OF UNREGISTERED SECURITIES

Not applicable.`

---

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

"FORWARD-LOOKING" INFORMATION

This report on Form 10-KSB contains certain "forward-looking statements" within
the meaning of Section 21E of the Securities Exchange Act of 1934. Generally,
the words "anticipates," "expects," "believes," "intends," "could," "may," and
similar expressions identify forward looking statements. Forward- looking
statements involve risks and uncertainties. We caution you that while we believe
any forward-looking statement are reasonable and made in good faith,
expectations almost always vary from actual results, and the differences between
our expectations and actual results may be significant.

The following discussion and analysis of our results of operations and our
financial condition should be read in conjunction with the information set forth
in the audited financial statements for the year ended December 31, 2001.

RESULTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2001

Sales for the year ended December 31, 2001 decreased to $1,451,465 from
$2,599,923 as compared to the same period in 2000, a decrease of approximately
44%. The decrease in sales during the fiscal year 2001 resulted from the
revamping of our product lines which included the discontinuation of four
product lines in 2001.

Cost of goods sold for the year ended December 31, 2001 was $919,276,
approximately 63% of sales, as compared to $1,622,810, approximately 62% of
sales, for the comparable period in 2000. The decrease in total cost of goods
sold can be attributed to the discontinuation of four product lines in 2001.
Total cost of goods sold for our current product lines are expected to continue
to remain relatively constant, or decrease slightly, as a percentage of total
sales as our sales volume grows, because we expect the costs of manufacture and
the direct costs of selling our products to remain relatively at the same level
as in 2001. We expect our cost of goods sold to increase in the near future as
we incur expenses associated with the development and the introduction of up to
six new products in fiscal year 2002.

Gross profit on sales for the year ended December 31, 2001 was $532,189, a
decrease of 46% as compared to the year ended December 31, 2000 of $977,113.
Gross profit was approximately 37% of sales for the year ended December 31, 2001
as compared to gross profit as a percentage of sales for the year ended December
31, 2000 of 38%. The decrease in gross profit is attributable to less sales
resulting from the discontinuation of four product lines in the year ended
December 31, 2001. The negligible decrease in gross profit as a percentage of
sales is attributable to a discontinuation of less profitable product lines.

For the year ended December 31, 2001, as compared to the year ended December 31,
2000, operating expenses decreased to $1,553,155 from $2,271,400, which
represents a 32% decrease in operating expenses, and which represents, as
compared to the year ended December 31, 2000, an increase to 107% of sales from
87% of sales. The decrease in our operating expenses in the year ended December
31, 2001 is due mainly to a decrease in selling expenses associated with the
discontinuation of four product lines in the year ended December 31, 2001, to
$314,512 for the year ended December 31, 2001, from $1,051,765 for the year
ended December 31, 2000. Operating expenses are expected to increase over the
next twelve months as we introduce up to six new product lines; however,
operating expenses are expected to decrease as a percentage of total sales over
time as our sales volume grows and as we incur less marketing and selling
expenses as a percentage of sales for a particular product line.`

---

`For the year ended December 31, 2001, we operated at a net loss of $1,100,630,
or a loss of $0.078 per share basic, as compared to net loss of $2,802,434, or a
loss of $0.021 per share basic, for the year ended December 31, 2000. The
decrease in net loss for the year ended December 31, 2001 as compared to the
year ended December 31, 2000 is mainly due to a decrease in selling expenses
from $1,051,765 for the year ended December 31, 2000 to $314,512 for the year
ended December 31, 2001, and due to a decrease in other income charges from
$1,507,737 for the year ended December 31, 2000 to $79,084 for the year ended
December 31, 2001. The decrease in other income charges for the year ended
December 31, 2001 is associated with the decrease in several non-cash charges to
income related to interest expense and financing costs aggregating approximately
$68,000 as compared to approximately $1,492,000 for the year ended December 31,
2000. There is no assurance that additional interest expense and financing costs
will not be incurred for future transactions. We anticipate the continuance of
these types of charges against earnings when we make additional financing
arrangements.

In the year ended December 31, 2001, we entered into six new license agreements
for the introduction of six new products. In fiscal year 2001, we reorganized
our company personnel and our product offerings, including discontinuance of
four product lines. While the addition of new product lines may also create
liquidity issues and demands on our limited resources, it is anticipated that
our focus on products that have potentially broad territorial appeal and
licenses with longer license periods may have a favorable impact on income and
liquidity.

Our food sales business is not seasonal in nature. Inflation is not deemed to be
a factor in our operations.

FINANCIAL CONDITION OR LIQUIDITY AND CAPITAL RESOURCES
FOR THE YEAR ENDED DECEMBER 31, 2001

Financing Activities
--------------------

To date, we have funded our operations through a line of credit, bank
borrowings, and borrowings from, and issuances of warrants and sales of
securities to, stockholders, and from operating revenues. Our inability to
obtain sufficient credit and capital financing has limited our operations and
growth from inception.

In October 1999, we entered into agreements pursuant to which certain investors
agreed to purchase an aggregate of $550,000 principal amount of 5% convertible
debentures due October 19, 2002 and 139,152 warrants to purchase shares of our
common stock. At the initial closing date, we received gross proceeds of
$450,000, and in February 2000, we received the remaining $100,000 when a
registration statement in connection with the resale of the underlying common
stock became effective. The warrants are exercisable between October 30, 1999
and October 30, 2004 at a purchase price of $.494 per share, which was 125% of
the market price on the closing date. Through September 30, 2001, debenture
holders have converted debentures with an aggregate of $526,032 in principal and
interest into 3,136,279 shares of common stock.

In March 2000, we entered into an agreement pursuant to which certain investors
agreed to purchase an aggregate of $1,000,000 principal amount of 0% convertible
debentures due March 13, 2005 and warrants to purchase 2,500,000 shares of our
common stock. We received gross proceeds of $1,000,000 from the transaction. The
holders of the convertible debentures were entitled to convert the debentures
into shares of common stock at a conversion price of $.40 per share. The
warrants are exercisable before March 13, 2005 at a purchase price of $.75 per
share. In October 2000, we entered into an agreement for the sale of $1,500,000
principal amount of 4% convertible debentures pursuant to which the outstanding
principal amount of the 0% convertible debentures were surrendered.`

---

`In October 2000, we entered into an agreement pursuant to which certain
investors agreed to purchase an aggregate of $1,500,000 principal amount of 4%
convertible debentures and warrants to purchase 250,000 shares of common stock.
The principal amount of the 4% convertible debentures of $1,500,000, consists of
principal in the amount of $500,000 and the surrender of outstanding 0%
convertible debentures with a principal amount of $1,000,000 issued in March
2000. The warrants are exercisable before November 7, 2003 at a purchase price
per share of $0.0588. At the closing of the transaction, we received gross
proceeds of $500,000, less payment to the escrow agent of $10,000 for the
investors' legal, administrative and escrow costs, and less payment of a 10%
placement agent fee. We also issued to the placement agent 75,000 shares of
restricted common stock and a warrant to purchase 100,000 shares of common stock
as part of the placement agent fee. The warrants are exercisable before November
7, 2003 at a purchase price per share of $0.0588.

The 4% convertible debentures matured unpaid on August 7, 2001 with a 5% premium
on the principal and the accrued unpaid interest. To date, we have not paid any
accrued interest in cash.

The 4% debenture holders have the right to convert the interest into shares of
common stock based on the average of the 5 lowest closing bid prices of the
common stock over a 22 trading day period immediately prior to the interest
payment date. We agreed to enter into an equity line of credit type of
transaction within 10 days of this transaction. If we are unable to pay the
amounts due on the maturity date but we can draw down on the equity line of
credit, we are to draw down the maximum amount each draw down period to pay the
investors the full amount due. To date, we are unable to draw down upon the
equity line of credit.

Beginning August 7, 2001, the 4% debenture holders may convert the 4%
convertible debentures into shares of common stock because a registration
statement for the equity line of credit was not effective on the maturity date
and because we are not able to draw down the maximum amount permitted each month
under the equity line under an effective equity line of credit registration
statement. The conversion price shall equal the lesser of $0.054 or 85% of the
average of the 5 lowest closing bid prices during the 22 trading days preceding
the applicable conversion date. At the 4% debenture holders' election, we shall
redeem the 4% convertible debentures, including interest and a redemption
premium of 30%, using up to 50% of the net proceeds received pursuant to the
equity line of credit and any other equity financing permitted under the
agreement, and all proceeds received in an equity financing not permitted under
the future financing restrictions.

In October 2000, we entered into an agreement for the future issuance and
purchase of shares of our common stock which establishes what is sometimes
termed an equity line of credit or an equity drawdown facility. In general, the
drawdown facility operates as follows: the investor has committed to provide us
with up to $5 million as we request it over a 24 month period, in return for
shares of common stock we issue to the investor.

Subject to a maximum of 16 draws, once every 29 trading days, we may request a
draw of up to $5 million of that money, however, no single draw can exceed $5
million. We must wait at least 7 trading days after each 22 trading day drawdown
period before requesting another drawdown. The maximum amount we actually can
draw down upon each request will be determined by 4.5% of the volume-weighted
average daily price of our common stock for the 3 month period prior to our
request and the total trading volume for the 3 months prior to our request. Each
draw down must be for at least $100,000. The number of shares registered under
the registration statement for the resale of the common stock upon each drawdown
may limit the amount of money we receive under the common stock purchase
agreement. Moreover, the funds we may receive could be further limited by a
provision of the common stock purchase agreement that prevents us from issuing
shares to the investor to the extent the investor would beneficially own more
than 9.9% of our then outstanding common stock. At the end of a 22-day trading
period following the drawdown request, the final drawdown amount is determined
based on the volume-weighted average stock price during that 22-day period. We
then use the formulas contained in the common stock purchase agreement to
determine the number of shares we will issue to the investor in return for that
money. The per share dollar amount the investor pays for our common stock for
each drawdown includes a 17.5% discount to the average daily market price of our
common stock for the 22-day period after our drawdown request, weighted by
trading volume. We will receive the amount of the drawdown less an escrow agent
fee equal to $1,500 per drawdown and less a 10% placement fee.`

---

`In lieu of making a commitment to the investor to draw a minimum aggregate
amount, on October 31, 2000, we issued to the investor a stock purchase warrant
to purchase up to 500,000 shares of our common stock and we also agreed to issue
additional warrants to purchase a number of shares equal to 50% of the shares
purchased by the investor on the settlement date of each drawdown. The warrants
to purchase 500,000 shares of common stock have an exercise price of $0.0636 and
expire on October 31, 2003. The additional warrants issuable at each settlement
date will be exercisable for 35 calendar days and have an exercise price equal
to the weighted average of the purchase prices of the common stock during the
applicable settlement period.

At the closing of the equity line of credit transaction, we paid the escrow
agent $10,000 for the investor's legal, administrative and escrow costs. A
registration statement for the shares underlying the equity line of credit is
presently not effective. Until an effective registration statement is in place,
we cannot use and will not receive any funds from the equity line.

Barter Credits
--------------

In 1998, we issued shares of its common stock for a barter credit with an
initial amount of $125,000 in connection with future radio spot advertisements
and other services. We recovered $75,000 of the barter credit in 2000. In 2001,
we utilized $2,550 of the remaining barter credit balance of $50,000. We
estimate that we will be unlikely to utilize a portion of the remaining balance
of the credit. We recorded an impairment charge of $23,450 in 2001, representing
the difference between the carrying amount and the fair value, based on
management's estimate of the discounted cash flows, of the remaining credit. The
adjusted carrying amount of this credit as at December 31, 2001 is $24,000.

In March 2000, we entered into an agreement to sell certain merchandise products
in exchange for a $457,104 trade credit to purchase future television, radio and
other advertising mediums as well as such services as warehousing, hotel rooms,
airline tickets and office equipment on a barter basis over a maximum period of
four years. In April 2000, we delivered merchandise with an estimated fair value
of $302,471 to the barter company in connection with the trade credit
commitment. We recorded the credit on the basis of the $302,471 estimated fair
value of the transferred merchandise. In the third quarter of 2001, we recorded
an impairment charge of $157,285 to write-down the carrying amount of the unused
barter credit to a net realizable value of $145,186 based upon management's
estimate of the expected future discounted cash flows. Through December 31,
2001, no portion of the credit entitlement was used. The credit agreement
expires in March 2003.


In October 2000, we commenced a lawsuit against the barter company in which,
among other claims, we asserted that the barter company failed to establish the
$457,104 trade credit in our favor. The barter company interposed an answer, and
in early 2001, the parties discussed settlement of the action whereby the barter
company stated its intention to provide the trade credit to which we are
entitled. The current status of the litigation is that we agreed to hold further
prosecution of our claims in the pending litigation in abeyance, while the
parties seek to have the barter credits utilized, upon which usage in full, we
intend to discontinue the litigation.

We believe we will be able to utilize all of these barter credits prior to their
expiration, thereby realizing the benefit of the credits. We have obtained
documentation from the barter company outlining various vendors who are
participants in the barter program, a number of whom are expected to be utilized
by us either advertising or other programs. We assessed the viability of the
barter company by: (a) calling the Better Business Bureau to check the barter
company's status; (b) obtaining comfort with management integrity through
communications including confirmation of available balances; and (c) obtaining a
Dun & Bradstreet Credit report on the barter company.

Arrangements are presently underway between the parties pursuant to which an
advertising program of approximately $132,000 is being developed for utilization
in 2002. We are currently working with the barter company to make arrangements
to use the credits over a period of the remaining contract period by placing ads
with several publishing companies.`

---

`Future Outlook
--------------

In fiscal year 2002, we expect that we will be dependent on our revenues to help
support our product development and sales operations. However, it may be
necessary for us to obtain additional cash infusion from an outside source in
fiscal year 2002 to allow us to move forward with our new products.

We believe that our future growth is dependent on the degree of success of
current operations in generating revenues, borrowings under our current credit
facility, the ability to resolve our unfulfilled obligations under the
contractual terms of our existing debts, which matured on August 7, 2001 without
repayment, in part due to our inability to satisfy the contractual terms of, and
draw down on, a substantial portion of the $5 million equity line of credit, and
the ability to obtain additional credit facilities.

We believe that our cash reserves, in conjunction with revenues from our
operations, will be sufficient to fund our operations for the next two to three
months, subject to our ability to resolve the repayments due on maturity of
existing obligations. We are currently unable to draw down on the equity line of
credit and we may not be in a position to utilize it in the near future. If we
do not resolve the debts on the matured obligations, and if the creditors elect
to foreclose on existing debts, which is likely to occur, we will not have
sufficient funds to operate.

Going Concern Comment and Management's Plan of Action
-----------------------------------------------------

The auditors' report to our financial statements for the year ended December 31,
2001 cites factors that raise substantial doubt about our ability to continue as
a going concern. The factors include that we have incurred substantial operating
losses since inception of operations and as at December 31, 2001 reflect
deficiencies in working capital and stockholders' equity. The financial
statements do not include any adjustments that might result from the outcome of
these uncertainties.

The primary issues management will focus on in the immediate future to address
this matter include:

     o    initiating negotiations to secure short term financing through
          promissory notes on an as needed basis;
     o    initiating negotiations to secure short term financing through
          factoring of accounts receivables on an as needed basis;
     o    working with the holders of convertible debentures on a restructuring
          of the debt they hold, by means of extension of maturity dates,
          modifying repayment terms, exchange of debentures to other forms of
          debts or otherwise, which would ease our debt burden and allow for the
          raising of additional capital.

We will also explore various options to obtain financing and to resolve our
existing debt burden, including by means of merger, consolidation, sale of
assets, reorganization or restructuring. In September 2001, we hired a financial
advisor on an exclusive basis to assist us in strategic and financial planning
matters. While we are hopeful that an arrangement can be achieved, we can give
no assurance an agreement will be reached or that funding will materialize.`

---

`ITEM 7. FINANCIAL STATEMENTS.

                               FAMOUS FIXINS, INC.
                              FINANCIAL STATEMENTS
                          YEAR ENDED DECEMBER 31, 2001

                                TABLE OF CONTENTS
                                -----------------

Financial Statements:

Independent Auditors' Report                                          F-1
     Exhibit  "A"  -  Balance Sheets                                  F-2
     Exhibit  "B"  -  Statements Of Operations                        F-3
     Exhibit  "C"  -  Statements Of Cash Flows                        F-4 -F-5
     Exhibit  "D"  -  Statements Of Stockholders' Equity (Deficit)    F-6
     Notes To Financial Statements                                    F-7 - F-25`

---

`INDEPENDENT AUDITORS' REPORT
                          ----------------------------


To the Board of Directors and Stockholders of
Famous Fixins, Inc.:

     We have audited the accompanying balance sheets of Famous Fixins, Inc. as
of December 31, 2001 and 2000, and the related statements of operations, cash
flows and stockholders' equity (deficit) for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements based on our
audits.

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

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Famous Fixins, Inc. as of
December 31, 2001 and 2000, and the results of its operations and its cash flows
for the years then ended, in conformity with accounting principles generally
accepted in the United States.

     The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has incurred substantial losses from
operations and has deficiencies in working capital and stockholders' equity at
December 31, 2001, which raise substantial doubt about its ability to continue
as a going concern. Management's plans in regard to these matters are also
discussed in Note 1. The financial statements do not include any adjustments
that might result from the outcome of these uncertainties.




New York, New York
January 25, 2002

                                       F-1`

---

`FAMOUS FIXINS, INC.

                                 BALANCE SHEETS

                                                                 DECEMBER 31,
                                                           -----------------------
                                                              2001         2000
                                                           ----------   ----------
                                   A S S E T S
                                   -----------

CURRENT ASSETS
--------------

   Cash and cash equivalents                               $  233,906   $  343,164
   Accounts receivable, less $5,000 allowance
      for doubtful accounts                                    70,122      527,840
   Merchandise inventory                                      145,255      321,116
   Unused barter credits - current portion                    124,960       75,618
   Prepaid expenses                                            55,551       25,200
   Due from officer/stockholder                                21,570         --
   Investments in marketable equity trading securities           --         77,578
                                                           ----------   ----------

     TOTAL CURRENT ASSETS                                     651,364    1,370,516
                                                           ----------   ----------

PLANT AND EQUIPMENT
-------------------

   Furniture and fixtures                                      15,804       15,804
   Machinery and equipment                                     28,777       34,077
                                                           ----------   ----------
                                                               44,581       49,881
     Less: Accumulated depreciation                            21,329       17,165
                                                           ----------   ----------

     NET PLANT AND EQUIPMENT                                   23,252       32,716
                                                           ----------   ----------

OTHER ASSETS
------------

   Deferred debenture issuance costs, net of accumulated
      amortization ($3,365 in 2001; $3,175 in 2000)                33          723
   Unused barter credits - noncurrent portion                  20,226      226,853
   Security deposits                                            6,482        6,482
                                                           ----------   ----------

     TOTAL OTHER ASSETS                                        26,741      234,058
                                                           ----------   ----------


                                                           $  701,357   $1,637,290
                                                           ==========   ==========

The accompanying notes are an integral part of these financial statements.

                                       F-2`

---

`EXHIBIT "A"

                               FAMOUS FIXINS, INC.

                           BALANCE SHEETS (CONTINUED)

                                                               DECEMBER 31,
                                                        --------------------------
                                                            2001          2000
                                                        -----------    -----------

              LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
              ----------------------------------------------

CURRENT LIABILITIES
-------------------

   4% convertible debentures                            $ 1,575,000    $ 1,575,000
   5% convertible debentures, due October, 2002
      (principal amount - $33,975)                           33,850           --
   Accounts payable                                         226,473        272,401
   Accrued expenses                                         112,501         66,910
   Due to customers                                          30,772         39,567
   Deferred officer's compensation payable                  118,861        115,626
   Taxes payable - other than on income                        --           11,335
   Income taxes payable                                         580            580
   Short-term loan payable                                     --           46,385
                                                        -----------    -----------

     TOTAL CURRENT LIABILITIES                            2,098,037      2,127,804
                                                        -----------    -----------

LONG-TERM LIABILITIES
---------------------

   5% convertible debentures, due October, 2002
     (principal amount - $38,975 in 2000)                      --           37,600
   Deferred rent                                              3,160          8,777
                                                        -----------    -----------

     TOTAL LONG-TERM LIABILITIES                              3,160         46,377
                                                        -----------    -----------

STOCKHOLDERS' EQUITY (DEFICIT)
------------------------------

   Common stock, $.001 par value per share:
      Authorized       25,000,000 shares
      Issued and outstanding
              14,197,903 shares in 2001;
              13,941,264 shares in 2000                      14,197         13,940
   Additional paid-in capital                             4,116,803      3,905,379
   Accumulated deficit                                   (5,506,840)    (4,406,210)
                                                        -----------    -----------
                                                         (1,375,840)      (486,891)
      Less: Unused advertising barter
              credits issued in exchange
              for common stock                              (24,000)       (50,000)
                                                        -----------    -----------

     TOTAL STOCKHOLDERS' EQUITY (DEFICIT)                (1,399,840)      (536,891)
                                                        -----------    -----------

                                                        $   701,357    $ 1,637,290
                                                        ===========    ===========

The accompanying notes are an integral part of these financial statements.

                                      F-2A`

---

`EXHIBIT "B"

                               FAMOUS FIXINS, INC.

                            STATEMENTS OF OPERATIONS

                                                      YEAR ENDED DECEMBER 31,
                                                    --------------------------

                                                        2001           2000
                                                    -----------    -----------

NET SALES                                           $ 1,451,465    $ 2,599,923
                                                    -----------    -----------

COST OF GOODS SOLD
------------------
   Merchandise inventory at beginning of year           321,116         69,542
   Purchases                                            666,602      1,682,526
   Other direct costs                                    76,813        191,858
                                                    -----------    -----------
                                                      1,064,531      1,943,926
      Less: Merchandise inventory at end of year        145,255        321,116
                                                    -----------    -----------

TOTAL COST OF GOODS SOLD                                919,276      1,622,810
                                                    -----------    -----------

GROSS PROFIT                                            532,189        977,113
                                                    -----------    -----------

OPERATING EXPENSES
------------------
   Selling expenses                                     314,512      1,051,765
   General and administrative expenses                1,057,025      1,219,635
   Impairment charge - unused barter credits            180,735           --
   Loss on disposal of plant and equipment                  883           --
                                                    -----------    -----------

TOTAL OPERATING EXPENSES                              1,553,155      2,271,400
                                                    -----------    -----------

OPERATING LOSS                                       (1,020,966)    (1,294,287)
                                                    -----------    -----------

OTHER INCOME (EXPENSE)
----------------------
   Interest income                                        4,023         10,608
   Interest expense and financing costs                 (69,973)    (1,493,962)
   Realized and unrealized loss on investments in
      marketable equity trading securities              (13,134)       (24,383)
                                                    -----------    -----------

TOTAL OTHER INCOME (EXPENSE)                            (79,084)    (1,507,737)
                                                    -----------    -----------

LOSS BEFORE PROVISION FOR INCOME TAXES               (1,100,050)    (2,802,024)

PROVISION FOR INCOME TAXES                                  580            410
                                                    -----------    -----------

NET LOSS                                            $(1,100,630)   $(2,802,434)
                                                    ===========    ===========

BASIC NET LOSS PER COMMON SHARE                     $     (.078)   $     (0.21)
                                                    ===========    ===========

The accompanying notes are an integral part of these financial statements.

                                       F-3`

---

`EXHIBIT "C"

                               FAMOUS FIXINS, INC.

                            STATEMENTS OF CASH FLOWS

                                                                         YEAR ENDED DECEMBER 31,
                                                                       --------------------------

                                                                           2001           2000
                                                                       -----------    -----------

CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                            $(1,100,630)   $(2,802,434)
   Adjustments to reconcile net loss to net cash used in
      operating activities:
         Noncash items:
            Depreciation                                                     8,580          9,076
            Amortization and write-off of bond discounts and
               finance costs                                                   960        850,583
            Deferred rent expense                                           (5,617)         8,777
            Interest expense paid by issuance of common stock                  397          9,637
            Component of interest expense attributable to beneficial
               conversion feature of debentures issued                        --          473,149
            Component of interest expense attributable to premium
               on debentures issued                                           --           75,000
            Component of interest expense attributable to the cost
               of an equity line of credit                                    --           35,730
            Value of common stock issued for services
               received by the Company                                         360        217,799
            Value of warrants issued and amortized for services
               received by the Company                                     206,905        514,413
            Realized and unrealized loss on investments in
               marketable equity trading securities                         13,134         24,383
            Loss on disposal of plant and equipment                            883           --
            Recovered amount on barter credits                               2,550           --
            Impairment charge - unused barter credits                      180,735           --
            Unused barter credits                                             --         (302,471)
         Changes in working capital                                        585,996       (771,187)
                                                                       -----------    -----------

NET CASH USED IN OPERATING ACTIVITIES
   (CARRIED FORWARD)                                                      (105,747)    (1,657,545)
                                                                       -----------    -----------

The accompanying notes are an integral part of these financial statements.

                                       F-4`

---

`EXHIBIT "C"
                                                                     (CONTINUED)

                               FAMOUS FIXINS, INC.

                      STATEMENTS OF CASH FLOWS (CONTINUED)

                                                                  YEAR ENDED DECEMBER 31,
                                                                --------------------------

                                                                    2001           2000
                                                                -----------    -----------

NET CASH USED IN OPERATING ACTIVITIES
   (BROUGHT FORWARD)                                            $  (105,747)   $(1,657,545)
                                                                -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Proceeds from sale of marketable equity trading securities        64,444           --
   Loan to officer/stockholder                                      (21,570)          --
   Payments for plant and equipment additions                          --           (8,501)
                                                                -----------    -----------

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                  42,874         (8,501)
                                                                -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from issuance of convertible debentures, net               --        1,440,000
                                                                -----------    -----------
   Proceeds (repayment) of borrowing against investment in
      marketable equity trading securities                          (46,385)        46,385
   Proceeds of stock subscriptions receivable                          --           47,500
                                                                -----------    -----------

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                 (46,385)     1,533,885
                                                                -----------    -----------

NET DECREASE IN CASH AND CASH EQUIVALENTS                          (109,258)      (132,161)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                      343,164        475,325
                                                                -----------    -----------

CASH AND CASH EQUIVALENTS AT END OF YEAR                        $   233,906    $   343,164
                                                                ===========    ===========

The accompanying notes are an integral part of these financial statements.

                                       F-5`

---

`EXHIBIT "D"

                               FAMOUS FIXINS, INC.

                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

                        TWO YEARS ENDED DECEMBER 31, 2001

                                                                                                           UNUSED
                                                       COMMON STOCK         ADDITIONAL                 ADVERTISING
                                                   ---------------------     PAID-IN     ACCUMULATED      BARTER
                                       TOTAL         SHARES      AMOUNT      CAPITAL       DEFICIT       CREDITS
                                    -----------    ----------    -------   -----------   -----------     --------

BALANCE (DEFICIT) -                   $ (85,977)   10,462,624    $10,462    $1,557,337   $(1,603,776)    $(50,000)
JANUARY 1, 2000

Issuance of common shares for            217,799      575,000        575       217,224          --           --
services received

Issuance of common shares on             423,391    2,903,640      2,903       420,488          --           --
conversion of convertible
debentures, net

Value of warrants issued and             514,413         --         --         514,413          --           --
amortized for services received

Issuance of warrants and               1,160,187         --         --       1,160,187          --           --
beneficial conversion feature in
connection with
   convertible debentures issued

Issuance of warrants in                   35,730         --         --          35,730          --           --
connection with the cost of an
equity line of credit

Net loss for 2000                    (2,802,434)         --         --            --      (2,802,434)        --
                                    -----------    ----------    -------   -----------   -----------     --------


BALANCE (DEFICIT) - DECEMBER 31,       (536,891)   13,941,264     13,940     3,905,379    (4,406,210)     (50,000)
2000

Issuance of common shares on               4,416      232,639        233         4,183            --           --
conversion of 5% convertible
debentures, net

Issuance of common shares for                360       24,000         24           336            --           --
services received

Value of warrants issued and             206,905           --         --       206,905            --           --
amortized for services received

Net loss for 2001                    (1,074,630)           --         --            --    (1,100,630)      26,000
                                    -----------    ----------    -------   -----------   -----------     --------

BALANCE (DEFICIT) -
DECEMBER 31, 2001                   $(1,399,840)   14,197,903    $14,197   $ 4,116,803   $(5,506,840)    $(24,000)
                                    ===========    ==========    =======   ===========   ===========     ========


The accompanying notes are an integral part of these financial statements.

                                       F-6`

---

`FAMOUS FIXINS, INC.

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2001


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
        ------------------------------------------

            BUSINESS ACTIVITIES OF THE COMPANY
            ----------------------------------

               The Company is a promoter and marketer of celebrity endorsed
            consumer products for sale in supermarkets, other retailers and over
            the Internet. The Company develops, markets and sells licensed
            consumer products based on the diverse professional, cultural and
            ethnic backgrounds of various celebrities. The Company enters into
            licensing agreements with high profile celebrities and creates
            consumer products which include various product lines consisting of
            salad dressings, candy products, cosmetic products, adhesive
            bandages and other novelty products endorsed by the licensors. The
            Company sells directly to consumers and also utilizes a network of
            consumer products brokers to distribute its products throughout the
            United States and Canada. Third party manufacturers produce the
            Company's various consumer products.

               The accompanying financial statements have been prepared in
            conformity with accounting principles generally accepted in the
            United States which contemplates continuation of the Company as a
            going concern. The Company has incurred substantial operating losses
            since inception of operations and as at December 31, 2001 reflects
            deficiencies in working capital and stockholders' equity. These
            conditions indicate that the Company may be unable to continue as a
            going concern. Management believes that it can achieve profitable
            operations in the future and that it can continue to raise adequate
            capital and financing as may be required. However, there can be no
            assurance that future capital contributions and/or financing will be
            sufficient for the Company to continue as a going concern or that it
            can achieve profitable operations in the future. These financial
            statements do not include any adjustments that might result from the
            outcome of these uncertainties.

            USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS
            --------------------------------------------------

                The preparation of financial statements in conformity with
            accounting principles generally accepted in the United States
            requires management to make certain estimates and assumptions that
            affect the reported amounts of assets and liabilities and disclosure
            of contingent assets and liabilities at the dates of the financial
            statements and the reported amounts of revenues and expenses during
            the reporting periods. Actual results could differ from those
            estimates. Estimates are made when accounting for uncollectible
            accounts receivable, advertising barter credits, depreciation and
            amortization, income taxes, contingencies and valuation of warrants,
            among others. Estimates and assumptions are reviewed periodically
            and the effects of revisions are reflected in the financial
            statements in the period they are determined to be necessary.

                                       F-7`

---

`FAMOUS FIXINS, INC.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                                DECEMBER 31, 2001


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
        ------------------------------------------

            REVENUE RECOGNITION AND SALES RETURNS
            -------------------------------------

                Revenues are recognized when the earnings process is complete.
            This generally occurs when products are shipped in accordance with
            terms of agreements, title and risk of loss transfer to customers,
            collection is probable and pricing is fixed or determinable.

                Provision for uncollectible accounts is recorded, when
            appropriate. Provision for sales returns and allowances are recorded
            in the period in which the related revenue is recognized. When sales
            returns and allowances are in excess of customer receivable
            balances, such excess amount is reflected as a current liability
            under the category "Due To Customers".

            STOCK-BASED COMPENSATION - WARRANTS
            -----------------------------------

                The Company accounts for stock-based compensation using the
            fair-value based method prescribed in Statement of Financial
            Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
            Compensation". Compensation cost for all stock warrants issued by
            the Company is (a) measured at the grant date based on the fair
            value of the warrants and (b) recognized over the service period.
            See Note 10.

            OTHER COMPREHENSIVE INCOME
            --------------------------

                SFAS No. 130, "Reporting Comprehensive Income", established
            standards for reporting and display of comprehensive income and its
            components in the financial statements. Besides net income, SFAS No.
            130 requires the reporting of other comprehensive income, defined as
            revenues, expenses, gains and losses that under generally accepted
            accounting principles are not included in net income. As at December
            31, 2001 and 2000, the Company had no items of other comprehensive
            income and as a result, no additional disclosure is included in the
            financial statements.

                                       F-8`

---

`FAMOUS FIXINS, INC.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                                DECEMBER 31, 2001


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
        ------------------------------------------

            CONCENTRATIONS OF CREDIT RISK
           -----------------------------

                Financial instruments which potentially expose the Company to
            concentrations of credit risk, as defined by SFAS No. 105, consist
            of cash and cash equivalents, trade accounts receivable and
            investments in marketable equity trading securities.

                A.  CASH AND CASH EQUIVALENTS
                    -------------------------

                         The Company maintains its cash balances in one
                    financial institution located in New York, New York. The
                    balances are insured by the Federal Deposit Insurance
                    Corporation up to $100,000. As at December 31, 2001, there
                    are no cash balances in excess of such insurance.

                         The Company invests excess cash in high quality
                    short-term liquid money market instruments with maturities
                    of three months or less when purchased. Investments are made
                    only in instruments issued by or enhanced by high quality
                    financial institutions. The Company has not incurred losses
                    related to these investments.

               B.   ACCOUNTS RECEIVABLE
                    -------------------

                         The Company's customer base consists primarily of
                    supermarkets and other retailers located in the United
                    States and Canada. Credit limits, ongoing credit evaluations
                    and account monitoring procedures are utilized to minimize
                    the risk of loss. The Company does not generally require
                    collateral. In 2001, approximately 44% of the sales of the
                    Company were derived from two customers (2000 - 12% from one
                    customer). See Note 5B in connection with a lawsuit
                    instituted by the Company against the major 2000 customer.
                    Although the Company is directly affected by the well being
                    of the retail food industry, management does not believe
                    significant credit risk exists at December 31, 2001.

               C.   MARKETABLE EQUITY TRADING SECURITIES
                    ------------------------------------

                         The Company's marketable equity trading securities
                    consisted of shares in Chase Vista Equity Growth Class A
                    Fund. Trading securities are stated at fair value and
                    unrealized gains and losses are reported in income. Realized
                    gains and losses are determined on the specific
                    identification method and are reflected in income. The
                    balance of the Company's interests in marketable equity
                    trading securities were disposed of in 2001.

                                       F-9`

---

`FAMOUS FIXINS, INC.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                                DECEMBER 31, 2001


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
        ------------------------------------------

            MERCHANDISE INVENTORY
            ---------------------

                Merchandise inventory is stated at the lower of cost or market
            value on a first-in, first-out basis.

            PLANT AND EQUIPMENT
            -------------------

                Plant and equipment are stated at cost, less accumulated
            depreciation. The cost of major improvements and betterments to
            existing plant and equipment are capitalized, while maintenance and
            repairs are charged to expense when incurred. Upon retirement or
            other disposal of plant and equipment, the profit realized or loss
            sustained on such transaction is reflected in income. Depreciation
            is computed on the straight-line method as follows:

                                                        LIFE USED IN
                                                         COMPUTING
                                                          RATES OF
                        CLASSIFICATION                  DEPRECIATION
                        --------------                  ------------
                        Furniture and fixtures             7 years
                        Machinery and equipment            5 years

            IMPAIRMENT OF LONG-LIVED ASSETS
            -------------------------------

                The Company follows the provisions of SFAS No. 121, "Accounting
            for the Impairment of Long-Lived Assets and for Long-Lived Assets to
            Be Disposed Of". SFAS No. 121 establishes accounting standards for
            the impairment of long-lived assets, certain identifiable
            intangibles and goodwill related to those long-lived assets. Such
            long-lived assets include barter credits.

                Long-lived assets are reviewed for impairment whenever events or
            changes in circumstances indicate that the carrying amount of an
            asset may not be recoverable. If the sum of the undiscounted future
            net cash flows expected to be generated by the assets is less than
            the carrying amount of the assets, the Company recognizes an
            impairment loss. If such assets are considered to be impaired, the
            impairment to be recognized is measured by the amount by which the
            carrying amount of the assets exceeds the fair value of the assets.
            When fair values, such as quoted market prices, are not available,
            the Company estimates fair value using the expected future cash
            flows discounted at a rate commensurate with the risks associated
            with the recovery of the assets. Assets to be disposed of are
            reported at the lower of carrying amount or fair value less costs to
            sell. See additional information below and in Note 5 with regard to
            an impairment loss on barter credits.

                                      F-10`

---

`FAMOUS FIXINS, INC.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                                DECEMBER 31, 2001


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
        ------------------------------------------

            BARTER CREDITS
            --------------

                The Company entered into arrangements in 1998 and 2000, pursuant
            to which it received barter credit entitlements. Such credits
            generally relate to the Company's right to exchange its credits for
            future television, radio and other types of advertisements for its
            products. No additional payments of cash or other property is
            required on exercise of the barter credits and the value of the
            services to be received are deemed to be comparable to the
            utilization charges to be made against the barter credit. Upon
            utilization (receipt of services or goods in exchange for barter
            credits) of part or all of the barter credits, charges are made to
            income (substantially all to selling expenses) for the recovered
            carrying amount of the barter credits. The Company's policy for
            review of the barter credits with respect to possible impairment, is
            described above. Details of barter credit transactions are provided
            in Note 5.

            DERIVATIVE FINANCIAL INSTRUMENTS
            --------------------------------

                Beginning in the current year, all derivatives are accounted for
            in accordance SFAS No. 133, "Accounting for Derivatives and Hedging
            Activities," as amended by SFAS No. 137 and 138. All derivative
            instruments are to be recorded on the balance sheet at their fair
            value. Changes in the fair value of derivatives are recorded each
            period in current earnings, or other comprehensive income, depending
            on whether the derivative is designated as part of a hedge
            transaction and, if it is, the type of hedge transaction. The
            cumulative effect of the adoption of SFAS No. 133 had no impact on
            the Company's financial statements because the Company does not
            currently hold any derivative instruments.

            INCOME TAXES
            ------------

                Deferred income taxes result from the effects of temporary
            differences between the tax bases of assets and liabilities and
            their reported amounts in the financial statements, and for the
            expected future tax benefits to be derived from tax loss
            carryforwards. A valuation allowance is recorded to reflect the
            likelihood of realization of deferred tax assets.

                                      F-11`

---

`FAMOUS FIXINS, INC.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                                DECEMBER 31, 2001


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
        ------------------------------------------

            NEW ACCOUNTING PRONOUNCEMENTS
            -----------------------------

                In April 2001, the Emerging Issues Task Force (EITF) reached a
            consensus on Issue No. 00-25, "Vendor Income Statement
            Characterization of Consideration Paid to a Reseller of the Vendor's
            Products". Under this Issue, the EITF concluded that certain
            consumer and trade sales promotion expenses, such as coupon
            redemption costs, feature price discounts and in-store display
            incentives, should be classified as a reduction of sales rather than
            as marketing expenses. The Company has adopted this accounting
            guidance in the current year and has reclassified $22,952 of
            marketing expenses in 2000 to conform to the current presentation.
            As a reclassification, this change does not affect the Company's
            financial position or earnings.

                In August 2001, the Financial Accounting Standards Board issued
            SFAS No. 144, "Accounting for the Impairment or Disposal of
            Long-Lived Assets". This statement replaces both SFAS No. 121,"
            Accounting for the Impairment of Long-Lived Assets and for
            Long-Lived Assets to Be Disposed Of" and Accounting Principles Board
            (APB) Opinion No. 30, "Reporting the Results of Operations -
            Reporting the Effects of Disposal of a Segment of a Business and
            Extraordinary, Unusual and Infrequently Occurring Events and
            Transactions". SFAS No. 144 retains the basic provisions from both
            SFAS No. 121 and APB No. 30 but includes changes to improve
            financial reporting and comparability among entities. The provisions
            of SFAS No. 144 are effective for fiscal years beginning after
            December 15, 2001. The Company has not yet determined the impact
            SFAS No. 144 will have on its financial position or the results of
            its operations.

NOTE 2. 4% CONVERTIBLE DEBENTURES PAYABLE ($1,575,000)
        ----------------------------------------------

            In March 2000, the Company received $1,000,000 proceeds under a 0%
        Convertible Debenture and Warrant Purchase Agreement. Pursuant to the
        agreement, three investors acquired an aggregate of $1,000,000 principal
        amount of debentures due March 2005, convertible into the Company's
        common stock at a conversion price of $.40 per share ($.74 per share
        market value at the acquisition date) and warrants to purchase 2,500,000
        shares of common stock, exercisable between March 2000 and March 2005 at
        a price of $.75 per share.

            The beneficial conversion feature of the 0% $1,000,000 debentures
        and the fair market value of the warrants issued is $1,000,000 (such
        amount being limited to the amount of the proceeds received), all of
        which was credited in the accounts in March 2000 as additional
        paid-in-capital. The Company also allocated (a) $325,000 to the
        beneficial conversion feature, all of which was charged as a component
        of the year 2000 interest expense and (b) $675,000, the remainder, was
        accounted for as bond discount, to be reflected as a reduction of the
        carrying amount of the debentures, and amortizable as a component of
        interest expense over the term of the indebtedness.

                                      F-12`

---

`FAMOUS FIXINS, INC.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                                DECEMBER 31, 2001


NOTE 2. 4% CONVERTIBLE DEBENTURES PAYABLE ($1,575,000) (CONTINUED)
        ----------------------------------------------

            On October 27, 2000, the Company entered into another agreement with
        the three investors for the issuance of $1,500,000 4% Convertible
        Debentures and 250,000 warrants for shares of the Company's common
        stock. Under the terms of the agreement, the $1,500,000 principal amount
        of the 4% debentures was issued for cash of $500,000 and the surrender
        of the outstanding $1,000,000 of 0% Convertible Debentures described
        above. The entire issue of the $1,500,000 4% Convertible Debentures was
        due on August 7, 2001, with a 5% premium on principal, plus accrued
        interest. To date, payment of such amounts which are otherwise due have
        not been made. The debentures are convertible into common stock
        commencing on the maturity date at a conversion price of the lesser of
        $.054 per share or an amount computed under a formula, based on the
        discounted average of the lowest bid prices during a period preceding
        the conversion date.

            The conversion of the 4% debentures into common shares is subject to
        the condition that, no debenture holder may own an aggregate number of
        shares, including conversion shares, which is greater than 9.9% of the
        then outstanding common stock. Other provisions of the agreement,
        include default, merger and common stock sale restrictions on the
        Company. The debenture holders may cause the Company to redeem
        debentures, with interest and a 30% payment premium, from up to 50% of
        the net proceeds received under an equity line of credit type of
        agreement (See Equity Drawdown Facility described in Note 3 below) or
        other permitted financing. The equity line of credit agreement was a
        condition to the October 27, 2000, 4% Convertible Debenture and Warrants
        Purchase Agreement.

            Based upon a debenture conversion price of $.054 per share (and a
        market value of the Company's common stock of $.07 per share at the date
        of acquisition), the beneficial conversion feature of the additional
        $500,000 debentures issued for cash is $148,148. The fair market value
        of the 250,000 warrants is $12,039. The aggregate amount of $160,187 is
        credited in the accounts as additional paid in capital.

            Interest on the 4% convertible debentures is payable semi-annually,
        commencing December 1, 2000, and is convertible into common stock at the
        investors' option. Interest due in 2000 on the $1,500,000 4% debentures
        was not paid by the Company. Due to the non-payment of interest in 2000
        the debenture holders had the right to consider the debentures as
        immediately due and payable. Consequently, the Company made charges to
        its operations of $969,770 in the fourth quarter of 2000, reflecting
        under the category "interest expenses and financing costs", the
        following: (i) unamortized bond discount - $596,250; (ii) unamortized
        financing costs on debentures - $138,333; (iii) beneficial conversion
        feature on $500,000, 4% debentures - $148,148; (iv) fair market value of
        250,000 warrants - $12,039 and; (v) 5% bond premium - $75,000.

            The financial statements as at December 31, 2001 and 2000, reflect
        the principal amount of the 4% debentures of $1,575,000, (including the
        5% premium of $75,000) as a current liability. Interest on the
        indebtedness is accrued through December 31, 2001.

                                      F-13`

---

`FAMOUS FIXINS, INC.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                                DECEMBER 31, 2001


NOTE 3. EQUITY DRAWDOWN FACILITY
        ------------------------

            On October 31, 2000, the Company entered into an equity line of
        credit type of agreement for the future sale of shares of its common
        stock and warrants. Under the agreement, which is subject to various
        conditions, an investor has committed to provide up to $5 million, at
        the Company's request, over a 24 month period, to be applied to the
        purchase price of the Company's common stock. The Company may request at
        specified intervals, $100,000 minimum equity drawdowns, with maximum
        drawdown amounts at each request based on 4.5% of (i) the weighted
        average price of the Company's common stock for a prescribed period
        prior to the request multiplied by (ii) the total trading volume during
        such period. As at December 31, 2001 and 2000 the minimum drawdown
        requirement has not been met. Drawdowns may be further limited due to a
        provision in the agreement that prevents the Company from issuing shares
        to the extent that the investor would beneficially own more than 9.9% of
        the Company's then outstanding common stock. Under the agreement, the
        Company is required to file a Registration Statement with the Securities
        and Exchange Commission before the investor is obligated to accept a
        drawdown request by the Company. Consequently, until such Registration
        Statement is effective, the Company will not receive any funds under the
        agreement.

            The per share amount to be received by the Company for the sale of
        its common stock on each equity drawdown shall be reduced by a 17.5%
        discount on the market price of the shares (as defined in the
        agreement). The proceeds of sale will also be reduced by escrow agent
        fees and a 10% placement fee. At the October 31, 2000 closing, the
        Company issued a stock purchase warrant for up to 500,000 shares of
        common stock to the investor at an exercise price of $.0636 per share,
        such warrant to expire on October 31, 2003. The value of the 500,000
        stock warrant ($35,730) is charged to interest expense in 2000. The
        Company has also agreed to issue additional warrants for shares equal to
        50% of the shares purchased by the investor on each drawdown. There are
        various other conditions to the agreement, including the investor's
        right to terminate the agreement under specified events. At the closing,
        the Company paid $10,000 for the investor's legal and other expenses.
        See Note 3 in connection with an election by the holders of the 4%
        Convertible Debentures to apply a portion of the proceeds of the equity
        drawdowns to redeem their debentures.

                                      F-14`

---

`FAMOUS FIXINS, INC.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                                DECEMBER 31, 2001


NOTE 4. 5% CONVERTIBLE DEBENTURES PAYABLE
        ---------------------------------

            In October 1999, the Company entered into two Convertible Debenture
        and Warrants Purchase Agreements pursuant to which the investors agreed
        to purchase, for $550,000, an aggregate of $550,000 principal amount of
        5% Convertible Debentures (5% Debentures) convertible into common stock
        and Warrants to purchase 139,152 shares of the Company's common stock.
        The debentures mature in October 2002.

            The Company received the proceeds of the debentures in October 1999
        ($450,000 principal) and February 2000 ($100,000 principal) less $55,000
        of debt issuance costs. Such costs are amortized as a component of
        interest expense over the term of the 5% Debentures.

            The 5% Debenture holders are entitled to convert, at any time, any
        portion of the principal of the 5% Debentures to common stock at a
        conversion price for each share at the lower of (a) 80% of the market
        price at the conversion date or (b) $.55. The 5% Debentures include an
        option by the Company to exchange the Debentures for Convertible
        Preferred Stock.

            In accordance with the agreements, in 1999, the Company issued an
        aggregate of 139,152 Warrants for the purchase of the Company's common
        stock, exercisable between October 30, 1999 and October 30, 2004 at a
        purchase price of $.494 per share (125% of the market price on the
        closing date). The fair value of the Warrants in the amount of $63,968
        was accounted for as additional paid-in capital with the resulting
        discount reflected as a reduction of the carrying amount of the 5%
        Debentures. The discount is amortized as a component of interest expense
        over the term of the 5% Debentures.

            During 2001 and 2000, the Company issued 232,639 and 2,903,640
        shares of its common stock upon conversion of $5,000 and $511,025
        principal amount of such debentures (and unpaid interest of $397 and
        $9,637), resulting in $33,975 and $38,975 principal amount outstanding
        at December 31, 2001 and 2000, respectively. At the conversion dates,
        unamortized debt issuance and warrant costs related to the debt
        conversion were charged to additional paid-in capital.

            The following summarizes the outstanding balance of the 5%
        Debentures at December 31, 2001 and 2000:

                                                                2001       2000
                                                              -------    -------

           Outstanding principal amount of 5% Debentures      $33,975    $38,975
           Less: Unamortized discount for Warrants issued         125      1,375
                                                              -------    -------

           CARRYING AMOUNT                                    $33,850    $37,600
                                                              =======    =======

                                      F-15`

---

`FAMOUS FIXINS, INC.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                                DECEMBER 31, 2001


NOTE 5. BARTER CREDITS
        --------------

        A.  RECEIVED IN EXCHANGE FOR COMMON STOCK
            -------------------------------------

                In 1998, the Company issued shares of its common stock for a
            barter credit with an initial amount of $125,000 in connection with
            future radio spot advertisements and other services. The Company
            recovered $75,000 of the barter credit in 2000. The remaining barter
            credit balance of $50,000 was carried in the accounts as a contra to
            stockholders' equity inasmuch as the initial credit related to the
            issuance of the Company's common stock.

                In 2001, the Company utilized $2,550 of the remaining credit.
            The Company has estimated that it would be unlikely to utilize a
            portion of the remaining balance of the credit. The Company has
            recorded an impairment charge of $23,450 in 2001, representing the
            difference between the carrying amount and the fair value (based on
            management's estimate of the discounted cash flows) of the remaining
            credit. The adjusted carrying amount of this credit as at December
            31, 2001 is $24,000.

        B.  RECEIVED IN EXCHANGE FOR MERCHANDISE
            ------------------------------------

                In March 2000, the Company entered into an agreement to sell
            certain merchandise products in exchange for a $457,104 trade credit
            to purchase future television, radio and other advertising mediums
            as well as such services as warehousing, hotel rooms, airline
            tickets and office equipment on a barter basis over a maximum period
            of four years. In April 2000, pursuant to the agreement, the Company
            delivered merchandise with an estimated fair value of $302,471 to
            the barter company in connection with the aforementioned trade
            credit commitment. The Company recorded the credit on the basis of
            the $302,471 estimated fair value of the transferred merchandise. No
            portion of the credit entitlement was used in 2000. Accordingly, the
            carrying amount at December 31, 2000 was $302,471. The credit
            agreement expires in March 2003.

                                      F-16`

---

`FAMOUS FIXINS, INC.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                                DECEMBER 31, 2001

NOTE 5. BARTER CREDITS (CONTINUED)
        --------------

        C.  RECEIVED IN EXCHANGE FOR MERCHANDISE (CONTINUED)
            ------------------------------------

                The Company commenced a lawsuit in October 2000 against the
            barter company in which, among other claims, it asserted that the
            barter company failed to establish the $457,104 trade credit in
            favor of the Company. The barter company interposed an answer, and
            in early 2001, the parties discussed settlement of the action
            whereby the barter company stated its intention to provide the trade
            credit to which the Company is entitled. The Company has agreed to
            hold further prosecution of its claims in the litigation in
            abeyance, while the parties seek to have the barter credit utilized.
            Arrangements are presently underway between the parties pursuant to
            which an advertising program of approximately $132,000 is being
            developed for utilization in 2002.

                In September 2001, the Company recorded an impairment charge of
            $157,285 to write-down the carrying amount of the unused barter
            credit to a net realizable value of $145,186 based upon management's
            estimate of the expected future discounted cash flows. The carrying
            amount of $145,186 as at December 31, 2001 is classified in the
            balance sheet as follows: (i) $124,960 as a current asset (which
            management expects to use within one year) and (ii) $20,226 under
            the category, "other assets".

                               * * * * * * * * * *

                A summary of the Company's Barter activities is as follows:

                                                            RECEIVED IN     RECEIVED IN
                                                            EXCHANGE FOR    EXCHANGE FOR
                                                            COMMON STOCK    MERCHANDISE
                                                            ------------    ------------

                    INITIAL CARRYING AMOUNT (1998 and
                       2000, respectively)                     $125,000        $ 302,471
                    Credits Utilized                            (77,550)            --
                    Impairment Loss Charged to
                       "Operating Expenses"                     (23,450)        (157,285)
                                                              ---------       ----------

                    CARRYING AMOUNT - DECEMBER 31, 2001       $  24,000        $ 145,186
                                                              =========        =========

                    MEMORANDUM: TOTAL AVAILABLE
                       BARTER CREDIT AMOUNT - AS PER
                       AGREEMENTS - DECEMBER 31, 2001         $  47,450         $457,104
                                                              =========         ========

                                      F-17`

---

`FAMOUS FIXINS, INC.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                                DECEMBER 31, 2001


NOTE 6. ADVERTISING
        -----------

            The Company charges to expense all advertising costs as incurred.
        The aggregate advertising expense incurred by the Company was
        approximately $31,000 and $80,000 for the years ended December 31, 2001
        and 2000, respectively. See Note 5 for the details of unused advertising
        barter credits.

NOTE 7. INCOME TAXES
        ------------

            Deferred income taxes reflect the net tax effect of temporary
        differences between the carrying amounts of assets and liabilities for
        financial reporting purposes and the amounts used for income tax
        purposes and operating loss carryforwards. Significant items comprising
        the net deferred tax asset at December 31, 2001 are:

                Net operating loss carryforwards                     $825,000
                Other items                                            49,000
                                                                     --------
                Total deferred income tax assets                      874,000
                Less: deferred tax asset valuation allowance          874,000
                                                                     --------

                NET DEFERRED TAX ASSET                               $   --
                                                                     ========

            The elements comprising the differences in the income tax expense
        between the federal statutory rate and the Company's effective rate for
        the years ended December 31, 2001 and 2000 are shown as follows:

                                                           2001         2000
                                                        ---------     ---------

                 Income tax credit computed
                   at the statutory rate                 $(374,214)   $(952,800)
                 Permanent non-deductible expenses          71,672      608,900
                 Unrecorded tax benefits                   303,122      344,310
                                                        -----------   ---------

                 TOTAL INCOME TAX PROVISION             $      580    $     410
                                                        ==========    =========

            At December 31, 2001, the Company has net operating losses, for
        federal income tax purposes, of approximately $2,426,000 available to
        offset future taxable income, all of which expire by 2021. Realization
        is dependent on generating sufficient taxable income prior to expiration
        of the loss carryforwards. This and other components of the Company's
        deferred tax asset accounts are described above. As at December 31,
        2001, the Company has provided a valuation allowance to reduce its net
        deferred tax asset to zero. The amount of the deferred tax asset
        considered realizable, however, can be revised in the near term based
        upon future operating conditions during the carryforward period.

                                      F-18`

---

`FAMOUS FIXINS, INC.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                                DECEMBER 31, 2001


NOTE 8. NET LOSS PER COMMON SHARE
        -------------------------

            Net loss per common share was calculated under SFAS No. 128,
        "Earnings per Share". Basic net loss per share is computed by dividing
        the net loss by the weighted average outstanding shares of 14,098,970
        and 13,047,834 for the years ended December 31, 2001 and 2000,
        respectively. No effect has been given to the conversion of warrants and
        debentures to common stock inasmuch as such conversions would be
        anti-dilutive.

NOTE 9. COMMITMENTS AND CONTINGENCIES
        -----------------------------

            A.  ROYALTY CONTRACTS
                -----------------

                    The Company has various celebrity licensing agreements which
                generally cover worldwide sales of its products. The contracts
                generally specify that the Company shall pay royalties based on
                net annual merchandise sales and provide for certain minimum
                guarantees for the licensors. Minimum aggregate royalty
                guarantees (including the unearned cost of common stock
                warrants) are as follows:

                              YEAR ENDING
                              DECEMBER 31,         AMOUNT
                              ------------         -------

                                 2002              $45,991
                                 2003                5,000
                                                   -------

                                 TOTAL             $50,991
                                                   =======

                    Total royalty expense charged to operations (including the
                recognized portion of the cost of common stock warrants as
                described in Note 1) under the foregoing contracts for the years
                ended December 31, 2001 and 2000 were approximately $80,000 and
                $484,000, respectively.

                                      F-19`

---

`FAMOUS FIXINS, INC.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                                DECEMBER 31, 2001


NOTE 9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
        -----------------------------

        B.  REAL PROPERTY LEASE
            -------------------

                Rental commitments under a noncancellable operating lease for
            the Company's office facilities located in New York, New York are as
            follows:

                                   YEAR ENDING
                                   DECEMBER 31,            AMOUNT
                                   ------------           --------

                                      2002                $ 42,912
                                      2003                  44,923
                                      2004                  46,935
                                      2005                  15,645
                                                          --------

                                      TOTAL               $150,415
                                                          ========

                    Rent expense charged to operations, inclusive of common
                charges and utilities, was approximately $47,000 and $43,000 for
                the years ended December 31, 2001 and 2000, respectively.

        C.  TRANSPORTATION EQUIPMENT LEASE
            ------------------------------

                The Company is obligated under the terms of an operating lease
            for transportation equipment utilized by it. Future minimum annual
            payments under this noncancellable operating lease are as follows:

                                   YEAR ENDING
                                   DECEMBER 31,            AMOUNT
                                   ------------           --------

                                       2002               $ 10,618
                                       2003                 10,618
                                       2004                  5,309
                                                          --------

                                       TOTAL              $ 26,545
                                                          ========

                Total transportation equipment lease expense charged to
            operations was approximately $17,000 and $10,000 for the years ended
            December 31, 2001 and 2000, respectively.

                                      F-20`

---

`FAMOUS FIXINS, INC.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                                DECEMBER 31, 2001

NOTE 9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
        -----------------------------

            D.  AGREEMENTS WITH EXECUTIVE OFFICER
                ---------------------------------

                    Pursuant to an agreement with the Company's chief executive
                officer, if there is a "Change in Control" of the Company as
                defined in the agreement, the officer shall have the right to
                terminate such agreement and shall be entitled to a lump sum
                payment equal to 299% of his base amount as defined in Section
                280(G) of the Internal Revenue Code.

                    In addition, the officer has agreed to a temporarily
                deferral of the payment of a portion of his compensation, the
                amount of which is $118,861 and $115,626 at December 31, 2001
                and 2000, respectively.

            E.  LITIGATION
                ----------

                    In the normal course of business, the Company has lawsuits,
                claims and contingent liabilities. The Company does not expect
                that any sum it may have to pay in connection with any of these
                matters would have a material adverse effect on its financial
                position or results of operations. (See Note 5B for information
                in connection with a lawsuit instituted by the Company in 2000.)

NOTE 10. OUTSTANDING WARRANTS TO PURCHASE COMMON STOCK
         ---------------------------------------------

            The Company has issued warrants to purchase shares of its common
        stock to certain officers, employees and nonemployees. The objectives of
        the issuance of the warrants include attracting and retaining the best
        talent, providing for additional performance incentives and promoting
        the success of the Company by providing the opportunity to employees and
        nonemployees to acquire common stock. The Company has also issued
        warrants to certain investors in connection with the issuance of
        debentures and the sale of common stock. Outstanding warrants have been
        granted at exercise prices ranging from $.001 to $2.25 and expire as
        much as five years from the date of grant.

                                      F-21`

---

`FAMOUS FIXINS, INC.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                                DECEMBER 31, 2001


NOTE 10. OUTSTANDING WARRANTS TO PURCHASE COMMON STOCK (CONTINUED)
         ---------------------------------------------

            The status of the Company's warrants is summarized below as of
        December 31, 2001:

                                                                                WEIGHTED
                                                                  RANGE OF      AVERAGE
                                                   NUMBER OF      EXERCISE      EXERCISE
                                                    WARRANTS       PRICES        PRICE
                                                    --------   -------------   --------

        Outstanding at January 1, 1999              606,828    $ .90  - 2.25   $   1.02
        Granted in 1999                       (*) 2,844,152      .15  - 1.00        .32
        Expired in 1999                             (20,000)    1.00  - 1.50       1.25
                                                  ---------    -------------   --------
        Outstanding at December 31, 1999          3,430,980      .15  - 2.25        .43
        Granted in 2000                           4,284,000      .001 -  .75        .52
        Expired in 2000                             (20,000)    2.00  - 2.25       2.13
                                                  ---------    -------------   --------
        Outstanding at December 31, 2000          7,694,980      .001 - 1.00        .48
        Granted in 2001                      (**) 1,750,000      .011 -  .03        .03
        Cancelled in 2001                          (577,500)     .013 - 1.00        .23
                                                  ---------    -------------   --------

        OUTSTANDING AT DECEMBER 31, 2001          8,867,480    $ .001 - 1.00   $    .38
                                                  =========    =============   ========

        Weighted average remaining contractual term (years)             21/2
                                                                        ====

        Number of warrants exercisable at December 31, 2001        8,867,480
                                                                   =========

        Weighted average exercise price of warrants exercisable
           at December 31, 2001                                    $     .38
                                                                   =========

            The weighted average fair value per warrant granted was $.03 for
        2001, $.23 for 2000 and $.38 for 1999.

            (*)   Includes 1,500,000 warrants granted to the chief executive
                  officer for a period of five years at an exercise price of
                  $.30 per share. The warrants vest based upon the achievement
                  of certain corporate milestones including the receipt of a
                  specified number of new license agreements or the achievement
                  of specified levels of the Company's annual earnings
                  determined before interest, taxes, depreciation and
                  amortization.

            (**)  Includes 1,500,000 warrants granted to the chief executive
                  officer for a period of five years at an exercise price of
                  $.0303 per share. The warrants vest based upon the achievement
                  of certain corporate milestones including the receipt of a
                  specified number of new license agreements or the attainment
                  of specified levels of the Company's annual revenues.

                                      F-22`

---

`FAMOUS FIXINS, INC.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                                DECEMBER 31, 2001


NOTE 10. OUTSTANDING WARRANTS TO PURCHASE COMMON STOCK (CONTINUED)
         ---------------------------------------------

            As stated in Note 1, the Company accounts for stock-based
        compensation using the fair value method prescribed in SFAS No. 123
        "Accounting for Stock-Based Compensation", under which compensation cost
        for all stock warrants issued (both vested and non-vested) is measured
        at the grant date based on the fair value of the warrants. Such cost is
        recognized over the service period (the contract period).

            The fair value of each warrant issued is estimated on the date of
        grant using the Black-Scholes option pricing model with the following
        weighted-average assumptions used for the warrants issued: dividend
        yield of 0%, expected volatility between 150 to 174%, risk-free rate of
        6%, and expected lives ranging from 1 to 5 years.

            Stock-based compensation cost charged to operations was $206,905 and
        $550,143 for the years ended December 31, 2001 and 2000, respectively.

                                      F-23`

---

`FAMOUS FIXINS, INC.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                                DECEMBER 31, 2001


NOTE 11. CASH FLOW DATA
         --------------

            Cash and cash equivalents include cash on hand and investments with
        maturities of three months or less at the time of purchase. Working
        capital changes on the statements of cash flows were as follows:

                                                                 YEAR ENDED
                                                                DECEMBER 31,
                                                           ----------------------

                                                             2001         2000
                                                           ---------    ---------

(Increase) decrease in assets:
   Accounts receivable - net                               $ 457,718    $(351,365)
   Merchandise inventory                                     175,861     (251,574)
   Prepaid expenses                                          (30,351)      33,881
Increase (decrease) in liabilities:
   Accounts payable and accrued expenses                        (337)    (169,030)
   Due to customers                                           (8,795)    (150,471)
   Deferred officer's compensation payable                     3,235      115,626
   Taxes payable - other than on income                      (11,335)       1,791
   Income taxes payable                                         --            (45)
                                                           ---------    ---------

NET CHANGES IN WORKING CAPITAL                             $ 585,996    $(771,187)
                                                           =========    =========

Supplemental information about cash payments is as
   follows:
      Cash payments for interest                           $   1,005    $   1,386
      Cash payments for income taxes                       $     580    $     455

Supplemental disclosure of noncash financing activities:
      Issuance of warrants in connection with
         convertible debentures issued by the
         Company                                           $    --      $ 687,038
      Conversion of debentures to common
         stock - net                                       $   4,019    $ 413,753
      Issuance of warrants in connection with the
         cost of a line of credit                          $    --      $  35,730

                                      F-24`

---

`FAMOUS FIXINS, INC.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                                DECEMBER 31, 2001


NOTE 12. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
         -----------------------------------------------------

            The estimate of the fair value of each class of financial
        instruments for which it is practicable to estimate that value is based
        on the following methods and assumptions:

                CASH AND CASH EQUIVALENTS, INVESTMENTS IN MARKETABLE EQUITY
                TRADING SECURITIES, ACCOUNTS RECEIVABLE, DUE FROM
                OFFICER/STOCKHOLDER, 4% CONVERTIBLE DEBENTURES, 5% CONVERTIBLE
                DEBENTURES, SHORT TERM LOAN PAYABLE, ACCOUNTS PAYABLE AND
                ACCRUED LIABILITIES, DUE TO CUSTOMERS AND DEFERRED OFFICER'S
                COMPENSATION PAYABLE:

                The carrying amounts of these items are assumed to be a
            reasonable estimate of their fair value due to their short-term
            nature.

                                      F-25`

---

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

        Not applicable.`

---

`PART III

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

DIRECTORS AND EXECUTIVE OFFICERS

The following persons are our present directors and executive officers.

Name                Age       Position
----                ---       --------
Jason Bauer         32        Chairman of the Board, Chief Executive Officer,
                              President and Treasurer
Victor Bauer        58        Director


Our directors are elected to serve and hold office until the next annual meeting
of the shareholders and until their successors are elected and qualified. Our
officers are elected by the Board of Directors at the first meeting after each
annual meeting of our shareholders, and hold office until their death,
resignation or removal from office.

Victor Bauer became a director on February 12, 2001.

None of the directors are directors of other reporting companies.

Family relationships that exist among our present officers and directors are:
Victor Bauer, who serves on the Board of Directors, is the father of Jason
Bauer, our Chief Executive Officer, President and Chairman of the Board of
Directors.

None of our officers and directors have been involved in the past five years in
any of the following:

     o    bankruptcy proceedings;
     o    subject to criminal proceedings or convicted of a criminal act;
     o    subject to any order, judgment or decree entered by any court for
          violating any laws relating to the business, securities or banking
          activities; or
     o    subject to any order for violation of federal or state securities laws
          or commodities laws.

Famous Fixins established an Audit Committee. Because Famous Fixins is a small
business issuer, the Audit Committee presently consists of all of the members of
the Board of Directors. We formed the Audit Committee in fiscal year 2000, and
the Audit Committee did meet in connection with the fiscal year ended December
31, 2001. The function of the Audit Committee includes reviewing internal
financial information, monitoring cash flow, budget variances and credit
arrangements, reviewing the audit program of Famous Fixins, reviewing with
Famous Fixins's independent accountants the results of all audits upon their
completion, annually selecting and recommending independent accountants,
overseeing the quarterly unaudited reporting process and taking such other
action as may be necessary to assure the adequacy and integrity of all financial
information distribution by Famous Fixins. The audit committee includes one
non-employee director who is not an officer, employee, consultant, vendor, or
customer, of Famous Fixins.`

---

`MANAGEMENT PROFILES

JASON BAUER, Chief Executive Officer, President, Treasurer and Chairman of the
Board. Jason Bauer has served as our President, Treasurer and Chairman of the
Board since May 1998. In November 1995, he founded FFNY, which we acquired in
May 1998. From November 1995 to May 1998, he served as President and Chairman of
the Board of FFNY. He worked in the food and beverage industries throughout his
entire career. Before founding FFNY, from October 1994 through December 1996,
Mr. Bauer was Regional Sales Manager for Krinos Foods, and from December 1996
through March 1997, he was National Sales Manager for Paradise Products, a
manufacturer and distributor of foods products in the United States. His
expertise includes new product introduction as well as implementation of sales
and marketing programs. From 1991 through 1994, Mr. Bauer was Sales Manager for
Tri-County Distributors, a beverage wholesaler, where he was responsible for
sales of over 100 beverage products. Mr. Bauer received a Bachelor of Science
degree in marketing and finance from Boston University in 1991.

VICTOR BAUER, Director. Victor Bauer became a director on February 12, 2001.
Since January 2000, Victor Bauer has been President of Frosty Bites, an ice
cream manufacturer located in New York, New York. From June 1995 through January
2000, Victor Bauer served as President of City Dots, an ice cream distributor
located in St. James, New York. From January 1991 through May 1994, Victor Bauer
was President of Tri-County Distributors, a beverage distributor located in
Melville, New York.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Based upon a review of filings with the SEC and written representations that no
other reports were required, we believe that all of our directors and executive
officers and all persons who own more than 10% of our common stock complied
during the fiscal year 2001 with the reporting requirements of Section 16(a) of
the Securities Exchange Act.`

---

`ITEM 10. EXECUTIVE COMPENSATION.

EXECUTIVE COMPENSATION SUMMARY TABLE

The following table sets forth information concerning the annual and long-term
compensation during our last three fiscal years, 2001, 2000 and 1999, of our
Chief Executive Officer, our only executive officer in fiscal year 2001 (the
"Named Executive Officer").

                                                                         Long Term
                                                                        Compensation
                                                                      ----------------
                                           Annual Compensation             Awards
                                    --------------------------------  ----------------
                                                                         Securities
                                                                         Underlying       All Other
Name and Principal Position         Year      Salary        Bonus          Options       Compensation
----------------------------------  ----   ------------  -----------  ----------------  --------------
Jason Bauer                         2001   $184,108      $84,611 (1)     1,500,000 (2)  $18,529 (3)(4)
President, Secretary and Treasurer  2000   $153,238 (5)  $76,619 (6)             0      $12,342 (3)
                                    1999   $112,532 (7)  $     0         1,500,000 (8)  $15,712 (3)
----------------------------------  ----   -------- ---  ------- ---  ------------ ---  ------- ------

(1) Includes $76,242 in bonus compensation owed to Bauer, which Bauer has agreed
    to defer receipt of until after the 2001 fiscal year.
(2) Under an amended employment agreement, we granted Bauer options to purchase
    1,500,000 shares of our common stock, valued at approximately $39,326 at the
    time of grant. These options are exercisable for five years from grant at
    $.03 per share.
(3) Refers to the costs to Famous Fixins of automobile lease payments and
    insurance premiums under a life insurance policy and disability insurance
    policy.
(4) Excludes the benefit of a $21,570 non-interest bearing loan by Famous
    Fixins to Bauer. The loan is payable upon demand.
(5) Includes $9,007 in deferred compensation, which was paid in 2001.
(6) Includes $34,000 in deferred bonus compensation, which as paid in 2001. Also
    includes $42,619 in bonus compensation owed to Bauer, which Bauer has agreed
    to defer receipt of until after the 2001 fiscal year.
(7) Includes $30,000 in deferred compensation, which was paid in 2001. Bauer was
    entitled to deferred compensation of $48,309 in fiscal year 1999. He waived
    $18,309 of such compensation.
(8) Under an employment agreement, we granted Bauer options to purchase
    1,500,000 shares of our common stock, valued at approximately $522,450 at
    the time of grant. These options are exercisable for five years from grant
    at $.30 per share.`

---

`OPTION GRANTS

The table below sets forth information concerning stock options granted during
the fiscal year ended December 31, 2001 to the Named Executive Officer. The
percentage of total stock options is based 164,502 stock options and warrants
granted to officers, directors, and employees during the 2001 fiscal year.

-----------  --------------------  ------- ----------------  -----------  ---------------
             Number of Securities  Percent of Total Options
              Underlying Options   Granted to Employees in   Exercise of
                   Granted             Fiscal Year           Base Price   Expiration Date
Name                 (#)                                        ($/Sh)
-----------  --------------------  ------------------------  -----------  ---------------
Jason Bauer      1,500,000                     86%             $0.03025       5-12-06
-----------  --------------------  ------------------------  -----------  ---------------

OPTION EXERCISES AND VALUES FOR FISCAL 2001

The table below sets forth information concerning the value of unexercised stock
options as of December 31, 2001 for the Named Executive Officer.

None of the options held by the Named Executive Officer were exercised in fiscal
year 2001.

None of the options are deemed in-the-money in the table below because the fair
market value of a share of common stock as of December 31, 2001 was less than
the exercise price of the warrants. The last sale price of a share of our common
stock of $0.01 on December 31, 2001 as reported by OTC Bulletin Board.

For purposes of the table below, options to purchase 1,500,000 granted pursuant
to an amended employment agreement in March 2001 are deemed vested as of
December 31, 2001.

-----------  ----------------  --------  --------------------------  --------------------------
                                           Number of Unexercised       Value of Unexercised
                 Number of                 Securities Underlying       In-the-Money Options
             Shares Acquired    Value    Options at Fiscal Year End     at Fiscal Year End
Name            on Exercise    Realized
                                         --------------------------  --------------------------
                                         Exercisable  Unexercisable  Exercisable  Unexercisable
-----------  ----------------  --------  -----------  -------------  -----------  -------------
Jason Bauer         0             $0       3,000,000        0             $0           $0
-----------  ----------------  --------  -----------  -------------  -----------  -------------

DIRECTOR COMPENSATION

We have never compensated members of the Board of Directors for their services,
and have never reimbursed directors for their reasonable out-of-pocket expenses
incurred in connection with their attendance at board meetings and for other
expenses incurred in their capacity as directors.

We presently do not have a defined compensation plan for members of our Board of
Directors. We reserve the right to compensate members of the Board of Directors
for their services on the Board at reasonable rates, including by issuing stock
options, and reimbursement of expenses for their attendance at each Board
meeting.`

---

`EMPLOYMENT AGREEMENTS WITH NAMED EXECUTIVE OFFICER

In April 1999, we entered into an employment agreement with Jason Bauer to serve
as President and Chief Executive Officer for a term of five years ending April
11, 2004. The agreement provided for an annual salary of $150,000, with
cost-of-living adjustments tied to the Consumer Price Index. Beginning in the
third year of the employment term, his base annual salary was to increase by an
amount equal to one percent of our earnings before interest, taxes, depreciation
and amortization in the most recent fiscal year.

Under the April 1999 agreement, he was granted options to purchase 1,500,000
shares of our common stock, exercisable for five years at $.30 per share and to
vest only after we achieve certain corporate milestones. Options to purchase
1,200,000 shares vested as of April 2000, and options to purchase an additional
300,000 vested as of December 31, 2001 due to the achievement of the vesting
criteria. These options are cumulative and are subject to anti-dilution rights.

He was also to receive an annual performance bonus equal to up to fifty percent
of his base salary, or such other amount as the Board of Directors may
determine. He was also entitled to certain other benefits.

In March 2001, we amended his employment agreement, effective as of April 12,
2001, for a term of five years ending in April 2006. The agreement provides for
an annual salary of $175,000, with annual adjustments equal to the greater of
$10,000 or cost-of-living adjustments tied to the Consumer Price Index.
Beginning in the second year of the employment term, his base annual salary is
to increase by an amount equal to one percent of our earnings before interest,
taxes, depreciation and amortization in the most recent fiscal year. He is also
entitled to additional compensation equal to one percent of gross sales.

Under the March 2001 agreement, he was granted additional options to purchase an
additional 1,500,000 shares of our common stock. The exercise price for the
options is $.03025 per share, based on 110% of the trading price of $0.0275 of
the common stock on March 23, 2001. The options are to vest only after we
achieve certain corporate milestones as follows:

    o   options to purchase 1,000,000 shares shall vest immediately upon the
        first to occur of Famous Fixins obtaining two or more new celebrity,
        entity, athlete or company licenses or new products, since January 1,
        2001, or upon the occurrence of a fiscal year in which Famous Fixins's
        revenues exceed $3,000,000; and
    o   additional options to purchase 500,000 additional shares shall vest
        immediately upon the first to occur of Famous Fixins obtaining a further
        two or more new celebrity, entity, athlete or company licenses or new
        products or upon the occurrence of a fiscal year in which Famous
        Fixins's revenues exceed $3,500,000.

These options are cumulative and are subject to anti-dilution rights. If any of
these milestones are achieved in the same year, all of the options vest at the
time the milestones are achieved. As of December 31, 2002, all 1,500,000 options
granted pursuant to the amended employment agreement are deemed vested.`

---

`He is also to receive an annual performance bonus equal to up to fifty percent
of his base salary, or such other amount as the Board of Directors may
determine. He is also entitled to:

    o   death benefits of $100,000;
    o   medical and dental insurance;
    o   six weeks vacation;
    o   a fifteen year term life insurance policy with a face amount of benefit
        of $1,000,000 and a beneficiary as designated by him;
    o   an automobile for his exclusive use;
    o   reimbursement for reasonable travel and other business related expenses;
        and
    o   other bonuses to be determined by the Board of Directors.

If we undergo a change of control, he is to receive a golden parachute payment
equal to 299% of his base salary, and he has the right to terminate his
employment agreement. A change of control refers to any of the following
situations:

    o   a change in our ownership or management that would be required to be
        reported in response to certain provisions of the Securities Exchange
        Act of 1934;
    o   an acquisition by a person or entity of 25% or more of our common stock
        or our then outstanding voting securities;
    o   a change in a majority of the current Board of Directors, other than in
        connection with an actual or threatened proxy contest;
    o   completion of a reorganization, merger, consolidation or sale of a
        majority of our assets; or
    o   the approval by our stockholders of our complete liquidation or
        dissolution.`

---

`ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT.

(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The table below sets forth, as of February 1, 2002, the shares of our common
stock beneficially owned by each person, excluding management, known to us to be
the beneficial owner of more than 5% of the outstanding shares of common stock.

All persons named in the table have the sole voting and dispositive power,
unless otherwise indicated, with respect to common stock beneficially owned.
Beneficial ownership of shares of common stock that are acquirable within 60
days upon the exercise or conversion of convertible securities are listed
separately, and for each person named in the table, the calculation of percent
of class gives effect to those acquirable shares.

The following factors about certain shareholders should also be considered in
reviewing the table:

    o   Each of Roseworth Group, Austost Anstalt Schaan, Balmore Funds, AMRO
        International, and Folkinburg Investments may not own more than 9.9% of
        our common stock at any time. That 9.9% limit on ownership is given
        effect to for purposes of beneficial computing ownership in the table
        below. The conversion rate of the debentures varies with the market
        price of our common stock, so the debentures could be converted into a
        substantially larger number of shares as the market price of our common
        stock drops. Each of the named shareholders could acquire a substantial
        additional number of shares upon the conversion of convertible
        debentures if the 9.9% limit does not apply.
    o   Roseworth Group is deemed a beneficial owner of 1,108,333 shares
        acquirable upon the exercise of common stock purchase warrants and
        451,703 shares acquirable upon the conversion of a portion of 4%
        convertible debentures with a principal amount of $650,000.
    o   Balmore Funds is deemed a beneficial owner of 973,142 shares acquirable
        upon the exercise of common stock purchase warrants and 586,894 shares
        acquirable upon the conversion of a portion of 4% convertible debentures
        with a principal amount of $475,000.
    o   Austost Anstalt Schaan is deemed a beneficial owner of 706,475 shares
        acquirable upon the exercise of common stock purchase warrants and
        853,561 shares acquirable upon the conversion of a portion of 4%
        convertible debentures with a principal amount of $375,000.
    o   AMRO International is deemed a beneficial owner of 101,202 shares
        acquirable upon the exercise of common stock purchase warrants and up to
        1,458,834 shares acquirable upon the conversion of a portion of 5%
        convertible debentures with a principal amount of $38,975.

---------------------------------- ------------------- -------------------- --------
Name and Address                    Amount and Nature   Additional Shares   Percent
of Beneficial Owner                of Beneficial Owner Acquirable Within 60 of Class
                                                               days
---------------------------------- ------------------- -------------------- --------
Roseworth Group Limited                     0               1,560,036         9.9%
     c/o Beacon Capital Management
     Harbour House
     2nd Floor
     Waterfront Drive
     Road Town, Tortola
     BVI
Balmore Funds, S.A.                         0               1,560,036         9.9%
     Trident Chambers
     Road Town, Tortola
     BVI
Austost Anstalt Schaan                      0               1,560,036         9.9%
     Landstrasse 163
     9494 Furstenweg
     Vaduz, Liechtenstein
AMRO International, S.A.                    0               1,560,036         9.9%
     Grossmuensterplatz 6
     Zurich, CH-8022, Switzerland
Peter Zorich                            2,409,747               0            17.0%
     418 Valley Rd.
     Montclair, NJ
---------------------------------- ------------------- -------------------- --------`

---

`(b) SECURITY OWNERSHIP OF MANAGEMENT

The table below sets forth, as of February 1, 2001, the shares of our common
stock beneficially owned by each officer, by each director, and by all of our
officers and directors as a group.

All persons named in the table have the sole voting and dispositive power,
unless otherwise indicated, with respect to common stock beneficially owned.
Beneficial ownership of shares of common stock that are acquirable within 60
days upon the exercise or conversion of convertible securities are listed
separately, and for each person named in the table, the calculation of percent
of class gives effect to those acquirable shares.

---------------------------------- ------------------- -------------------- --------
Name and Address                    Amount and Nature   Additional Shares   Percent
of Beneficial Owner                of Beneficial Owner Acquirable Within 60 of Class
                                                               days
---------------------------------- ------------------- -------------------- --------
Jason Bauer                              2,389,747          3,000,000         31.3%
Victor Bauer                                   200                  0            *
All present officers and directors
  as a group (2 persons)                 2,389,947          3,000,000         31.3%
---------------------------------- ------------------- -------------------- --------
* Represents less than 1%.

The address of each of the persons named in the table above is Famous Fixins,
Inc., 250 West 57th Street, Suite 1112, New York, New York 10701.

(c) CHANGES IN CONTROL

There is no arrangement which may result in a change in control of Famous
Fixins.`

---

`ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

On May 28, 1998, we completed the acquisition of FFNY, a privately-held New York
corporation formed on November 29, 1995 in a transaction viewed as a reverse
acquisition. Immediately prior to the acquisition, Jason Bauer was the
President, Chairman of the Board, and a principal of FFNY, and Peter Zorich was
the Executive Vice President, Secretary, a director, and a principal of FFNY.
Pursuant to a Plan and Agreement of Reorganization, we issued 5,494,662 shares
of common stock to certain shareholders of FFNY which included the controlling
shareholders of FFNY, Jason Bauer and Peter Zorich, in a transaction deemed to
be exempt under Section 4(2) of the Securities Act of 1933. Pursuant to the
reorganization, Jason Bauer, Peter Zorich, Michael Simon, and certain
non-affiliates of FFNY, exchanged their shares of FFNY for an aggregate of
5,494,662 shares of our common stock, on a pro-rata basis. Pursuant to the
acquisition, our officers and directors resigned and elected the FFNY nominees
in their places, and FFNY become a majority-owned subsidiary of Famous Fixins.
Jason Bauer, Peter Zorich, and Michael Simon had acquired their 95, 95 and 5
common shares, respectively, of FFNY on August 21, 1996 for a total cost of less
than $10. On October 29, 1997, FFNY authorized, and on January 23, 1998, FFNY
filed, a Certificate of Amendment of the Certificate of Incorporation to change
and increase the authorized capital stock of FFNY from 200 common shares, no par
value, into 20,000,000 shares of common stock, par value $.001. All the
shareholders of FFNY exchanged their collective 200 common shares with no par
value, proportionately, for a total of 4,000,000 shares of common stock, par
value $.001 per share, of FFNY. Pursuant to our acquisition of FFNY, Jason
Bauer, Peter Zorich, Michael Simon, and certain non-affiliates exchanged their
collective 4,104,328 shares of FFNY, representing approximately 97% of the
outstanding shares of FFNY, for an aggregate of 5,494,662 shares of Famous
Fixins.

On May 28, 1998, we exchanged all of the 246,828 warrants of FFNY outstanding
for 246,828 of our warrants on a one for one basis. As part of the exchange of
warrants, we issued to Olympia Dukakis 100,000 warrants, valued at $91,994, to
purchase shares of our common stock, exercisable for five years at $1.00 per
share, in exchange for her 100,000 five year warrants to purchase the common
stock of FFNY at $1.00 per share. She acquired her warrants pursuant to license
arrangements. At that time, she served on our Board of Directors, and previously
had been a director of FFNY. Olympia Dukakis resigned from our Board of
Directors on July 6, 1999.

On June 2, 1998, we issued 300,000 warrants to purchase shares of our common
stock to Michael Simon for publicity services valued at $275,982 to be rendered
to us over a five year period, in a transaction deemed to be exempt under
Section 4(2) of the Securities Act of 1933. Michael Simon was our Vice President
of Publicity, in a non-officer capacity, at the time of the issuance. The
warrants are exercisable for six years at $1.00 per share, subject to vesting at
a rate of 60,000 per year and subject to other conditions of performance of
services to us. On July 8, 1999, Michael Simon became an officer and director of
Famous Fixins and resigned in October 2000.

Jason Bauer and Peter Zorich have been parties to a certain voting agreement
that provides which each of Bauer and Zorich shall vote his shares for the
election of the other as a director of Famous Fixins. For the election of any
additional director, Bauer and Peter Zorich shall vote his shares for the
election of each other's designee, provided that at least two directorships
shall need to be filled. The agreement also provided that they will vote for the
election of Jason Bauer as President and Chief Executive Officer and Peter
Zorich as Executive Vice President of Famous Fixins. The agreement expires on
June 30, 2001, unless earlier terminated by written agreement signed by both
parties. In connection with Zorich's resignation as an officer and director in
October 2000, Zorich has agreed to waive the terms of the voting agreement that
require Bauer to vote his shares to elect Zorich as a director and as Executive
Vice President of Famous Fixins. They also agreed not to offer to sell, sell,
transfer, assign, hypothecate, pledge or otherwise dispose of any beneficial
interest in their voting shares except subject to the terms of the voting
agreement, unless prior written consent is obtained from the other party that
such shares shall not be subject to the voting agreement or unless the shares
are sold to an independent third party in an arms'-length transaction for fair
market value. The voting agreement was terminated in its entirety in March 2001.`

---

`On April 12, 1999, we granted Jason Bauer, pursuant to an employment agreement
to serve as President and Chief Executive Officer, 5-year options to purchase up
to 1,500,000 shares of our common stock, proportioned to vest only after we
achieve certain corporate milestones. The options are exercisable at $.30 per
share. These options are cumulative and are subject to anti-dilution rights. If
any milestones are achieved in the same year, all such options shall vest at the
time such milestone is achieved. These options were valued at approximately
$522,450 at the time of issuance.

On October 19, 1999, we entered into agreements with AMRO International, S.A.,
Austost Anstalt Schaan and Balmore Funds, S.A. for the sale of a total of
$550,000 five percent convertible debentures and warrants to purchase 139,152
shares of common stock in transactions deemed to be exempt under Section 4(2) of
the Securities Act of 1933. We received gross proceeds of $450,000 in October
1999, and an additional $100,000 in February 2000. The interest on the
convertible debentures is payable quarterly and accrues from the date of
issuance on the principal amount of the convertible debentures. The convertible
debentures are due October 30, 2002. At our option, we may pay the interest on
the convertible debentures in cash or in registered shares of common stock. The
holders of the convertible debentures are entitled to convert the debentures
into shares of common stock at a conversion price equal to the lower of 80% of
the market price of the common stock or $0.55. If the conversion price of the
common stock is less than $0.20 per share on any conversion date, we may elect
to redeem the debentures in their entirety or to deliver to the holders either
cash or common stock or a combination of cash and common stock. The amount of
cash to be delivered upon such redemption or conversion shall equal the closing
ask price on the conversion date or the date we give notice of redemption
multiplied by the number of shares of common stock that would have been issued
at the conversion price upon such conversion or redemption. The warrants are
exercisable before October 30, 2004 at a purchase price of $.494 per share,
which is 125% of the market price of the common stock on the closing date. At
our expense, we filed a registration statement, which was declared effective on
February 8, 2000, under the Securities Act of 1933 for the resale of the shares
of common stock issuable upon the conversion of the debentures and the exercise
of the warrants, which registration statement is no longer current. Although we
may so in the future, we are not presently in the process of preparing and
seeking effectiveness of a current registration statement for the resale of
shares underlying the debentures. Debentures with a principal of $38,975 remain
outstanding. None of the warrants have been exercised.

We entered into an agreement, dated as of March 7, 2000, with Roseworth Group,
Ltd., Austost Anstalt Schaan and Balmore Funds, S.A. for the sale of a total of
0% convertible debentures, convertible at $0.40 per share, with a principal
amount of $1,000,000 due March 13, 2005 and warrants to purchase 2,500,000
shares of common stock in transactions deemed to be exempt under Section 4(2) of
the Securities Act of 1933. We received gross proceeds of $1,000,000 from the
sales. The warrants are exercisable before March 13, 2005 at a purchase price of
$.75 per share. In October 2000, we entered into an agreement for the sale of
$1,500,000 principal amount of 4% convertible debentures pursuant to which the
outstanding principal amount of the 0% convertible debentures were surrendered.

On March 13, 2000, Jason Bauer sold 15,000 shares at $0.60 per share and 5,000
shares at $0.61 per share in the open market.

We entered into agreements, dated as of October 27, 2000, for the sale of 4%
convertible debentures with a principal amount of $1,500,000 and warrants to
purchase 250,000 shares of common stock with Roseworth Group Ltd., Austost
Anstalt Schaan and Balmore S.A., in transactions deemed to be exempt under
Section 4(2) of the Securities Act of 1933. The transaction closed on November
7, 2000. We made a determination that the three investors were sophisticated
investors with enough knowledge and experience in business to evaluate the risks
and merits of the investment. The principal amount of the 4% convertible
debentures is $1,500,000, consisting of:

o             principal in the amount of $500,000, of which $250,000 was
              provided by Roseworth Group, $125,000 was provided by Austost
              Anstalt Schaan, and $125,000 was provided by Balmore Funds; and
o             the surrender of outstanding 0% convertible debentures with a
              principal amount of $1,000,000, issued pursuant to the Convertible
              Debenture and Warrants Purchase Agreement, dated March 7, 2000, of
              which a principal amount of $400,000 was held by Roseworth Group
              Ltd., a principal amount of $250,000 was held by Austost Anstalt
              Schaan, and a principal amount of $350,000 washeld by Balmore
              Funds.`

---

`The 4% convertible debentures were due on August 7, 2001 with a 5% premium on
the principal and the accrued unpaid interest. We have not yet paid the
principal or interest. Semi-annual interest payments are due and payable on
December 1 and June 1 of each year, commencing with December 1, 2000. We entered
into an equity line of credit transaction on October 31, 2000, for which the
shares issuable upon drawdowns on the equity line are the subject of this
registration statement. If we are unable to pay the amounts due on the maturity
date but we can draw down on the equity line of credit, we are to draw down the
maximum amount each draw down period to pay the investors the full amount due.
On or after the maturity date, the investors may convert the 4% convertible
debentures into shares of common stock if a registration statement covering the
shares underlying the debentures is not effective on the maturity date or if we
do not draw down the maximum amount permitted each drawdown period under the
equity line after this registration statement is effective. The conversion price
shall equal the lesser of $0.054 or 85% of the average of the 5 lowest closing
bid prices during the 22 trading days preceding the applicable conversion date.
The maximum number of shares of common stock that may be received upon the
conversion of the debentures by any one holder is 9.9% of our then-outstanding
common stock after the conversion, including any other shares of common stock
held by the holder. The warrants to purchase 250,000 shares of common stock are
exercisable before November 7, 2003 at a purchase price of per share of $0.0588.
Of these warrants, Roseworth Group owns warrants to purchase 108,333 shares,
Austost Anstalt Schaan owns warrants to purchase 62,500 shares, and Balmore
Funds owns warrants to purchase 79,167 shares. At the closing of the
transaction, we received gross proceeds of $500,000, less payment to the escrow
agent, Epstein Becker & Green P.C., of $10,000 for the investors' legal,
administrative and escrow costs, and less payment of a 10% placement agent fee
to Union Atlantic, L.C., which placement agent fee is net of payment to the
escrow agent, Epstein Becker & Green P.C., of $5,000 for the investors' legal,
administrative and escrow costs. We also issued to Union Atlantic, L.C. 75,000
shares of restricted common stock and a warrant to purchase 100,000 shares of
common stock as part of the placement agent fee. The warrants are exercisable
before November 7, 2003 at a purchase price per share of $0.0588. We agreed to
include such securities to the placement agent in the registration statement for
the resale of the common stock underlying the 4% convertible debentures and
warrants. Under the agreements, we agreed to prepare and file a registration
statement under the Securities Act for shares of common stock issuable upon the
conversion of the convertible debentures and the warrants within 45 days of the
closing date of the transaction. We agreed to use our best efforts to cause the
registration statement to become effective within 90 days of the closing date or
5 days of SEC clearance to request acceleration of effectiveness. Although we
submitted a registration statement in a timely matter, the registration
statement was not declared effective. Although we may so in the future, we are
not presently in the process of preparing and seeking effectiveness of a current
registration statement for the resale of shares underlying the debentures and
warrants.`

---

`We signed a common stock purchase agreement with Folkinburg Investments Limited,
dated as of October 31, 2000, for the future issuance and purchase of shares of
our common stock in a transaction deemed to be exempt under Section 4(2) of the
Securities Act of 1933. We made a determination that Folkinburg Investments was
a sophisticated investor with enough knowledge and experience in business to
evaluate the risks and merits of the investment. The common stock purchase
agreement establishes what is sometimes termed an equity line of credit or an
equity drawdown facility. In general, the drawdown facility operates as follows:
the investor, Folkinburg Investments, has committed to provide us with up to $5
million as we request it over a 24 month period, in return for shares of common
stock we issue to Folkinburg Investments. Subject to a maximum of 16 draws, once
every 29 trading days, we may request a draw of up to $5 million of that money,
however, no single draw can exceed $5 million. We must wait at least 7 trading
days after each 22 trading day drawdown period before requesting another
drawdown. The maximum amount we actually can draw down upon each request will be
determined by 4.5% of the volume-weighted average daily price of our common
stock for the 3 month period prior to our request and the total trading volume
for the 3 months prior to our request. Each draw down must be for at least
$100,000. At the end of a 22-day trading period following the drawdown request,
the final drawdown amount is determined based on the volume-weighted average
stock price during that 22-day period. We then use the formulas contained in the
common stock purchase agreement to determine the number of shares we will issue
to Folkinburg Investments in return for that money. The per share dollar amount
Folkinburg Investments pays for our common stock for each drawdown includes a
17.5% discount to the average daily market price of our common stock for the
22-day period after our drawdown request, weighted by trading volume. Under the
credlit line, we could receive the amount of the drawdown less an escrow agent
fee equal to $1,500 per drawdown and less a 10% placement fee payable to the
placement agent, Union Atlantic, L.C., which introduced Folkinburg Investments
to us. In lieu of making a commitment to Folkinburg Investments to draw a
minimum aggregate amount, on October 31, 2000, we issued to Folkinburg
Investments a stock purchase warrant to purchase up to 500,000 shares of our
common stock and we also agreed to issue additional warrants to purchase a
number of shares equal to 50% of the shares purchased by Folkinburg Investments
on the settlement date of each drawdown. The warrants to purchase 500,000 shares
of common stock have an exercise price per share of $0.0636, which equals 110%
of the volume-weighted average share price for the trading day prior to the date
the warrants were issued, and expire on October 31, 2003. The additional
warrants issuable at each settlement date will be exercisable for 35 calendar
days and have an exercise price equal to the weighted average of the purchase
prices of the common stock during the applicable settlement period. We agreed to
file a registration statement under the Securities Act for shares of common
stock issuable under the equity line of credit, including shares underlying
warrants issued in connection with the equity line of credit, within 45 days of
the closing date of the transaction. We agreed to use our best efforts to cause
the registration statement to become effective within 90 days of the closing
date or 5 days of SEC clearance to request acceleration of effectiveness.
Although we submitted a registration statement in a timely matter, the
registration statement was not declared effective. Although we may so in the
future, we are not presently in the process of preparing and seeking
effectiveness of a current registration statement for the resale of shares
underlying the credit line agreement. At the closing of the transaction, we paid
the escrow agent, Epstein Becker & Green P.C., $10,000 for Folkinburg
Investments' legal, administrative and escrow costs.

On March 2001, we granted Jason Bauer, pursuant to an amended employment
agreement, effective April 12, 2001, to serve as President and Chief Executive
Officer, 5-year options to purchase up to 1,500,000 shares of our common stock,
proportioned to vest only after we achieve certain corporate milestones. The
options are exercisable at $.03 per share. These options are cumulative and are
subject to anti-dilution rights. If any milestones are achieved in the same
year, all such options shall vest at the time such milestone is achieved.

Between September 2001 and December 2001, we loaned Jason Bauer an aggregate of
$21,570. The loan does not bear interest and is payable upon demand.`

---

`ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits

Exhibits required to be filed by Item 601 of Regulation SB are included in
Exhibits to this Report as follows:

Exhibit     Description
-------     -----------

2.1         Plan and Agreement of Reorganization between Spectrum Resources,
            Inc. and Famous Fixins, Inc. (Incorporated by reference to Exhibit 1
            of Registration Statement on Form 10-SB/A (Amendment No. 3) filed on
            December 10, 1999.)
2.2         Agreement and Plan of Merger between Famous Fixins, Inc., a Nevada
            corporation, and Famous Fixins Holding Company, Inc., a New York
            corporation (Incorporated by reference to Exhibit 2 of Registration
            Statement on Form 10-SB/A (Amendment No. 3) filed on December 10,
            1999.)
2.3         Agreement and Plan of Merger between Famous Fixins, Inc., a New York
            corporation, and Famous Fixins Holding Company, Inc., a New York
            corporation (Incorporated by reference to Exhibit 3 of Registration
            Statement on Form 10-SB/A (Amendment No. 3) filed on December 10,
            1999.)
3(i)(1)     Articles of Incorporation of Spectrum Resources, Inc. (Incorporated
            by reference to Exhibit 4 of Registration Statement on Form 10-SB/A
            (Amendment No. 3) filed on December 10, 1999.)
3(i)(2)     Certificate of Incorporation of Famous Fixins Holding Company, Inc.
            (Incorporated by reference to Exhibit 5 of Registration Statement on
            Form 10-SB/A (Amendment No. 3) filed on December 10, 1999.)
3(i)(3)     Articles of Merger for Famous Fixins, Inc., a Nevada corporation,
            and Famous Fixins Holding Company, Inc., a New York corporation
            (Incorporated by reference to Exhibit 6 of Registration Statement on
            Form 10-SB/A (Amendment No. 3) filed on December 10, 1999.)
3(i)(4)     Certificate of Merger of Famous Fixins Holding Company, Inc., a New
            York corporation, and Famous Fixins, Inc., a Nevada Corporation
            (Incorporated by reference to Exhibit 7 of Registration Statement on
            Form 10-SB/A (Amendment No. 3) filed on December 10, 1999.)
3(i)(5)     Certificate of Merger of Famous Fixins, Inc., a New York
            corporation, and Famous Fixins Holding Company, Inc. (Incorporated
            by reference to Exhibit 8 of Registration Statement on Form 10-SB/A
            (Amendment No. 3) filed on December 10, 1999.)
3(i)(6)     Certificate of Amendment of the Certificate of Incorporation of
            Famous Fixins Holding Company, Inc. (Incorporated by reference to
            Exhibit 9 of Registration Statement on Form 10-SB/A (Amendment No.
            3) filed on December 10, 1999.)
3(ii)       By-Laws (Incorporated by reference to Exhibit 10 of Registration
            Statement on Form 10-SB/A (Amendment No. 3) filed on December 10,
            1999.)
4.1         Convertible Debenture and Warrants Purchase Agreement between Famous
            Fixins, Inc. and AMRO International, S.A. dated as of October 19,
            1999 (Incorporated by reference to Exhibit 14 of Registration
            Statement on Form 10-SB/A (Amendment No. 3) filed on December 10,
            1999.)
4.2         Convertible Debenture and Warrants Purchase Agreement between Famous
            Fixins, Inc. and Austost Anstalt Schaan and Balmore Funds, S.A.
            dated as of October 19, 1999 (Incorporated by reference to Exhibit
            15 of Registration Statement on Form 10-SB/A (Amendment No. 3) filed
            on December 10, 1999.)
4.3         Convertible Debenture and Warrants Purchase Agreement between Famous
            Fixins, Inc. and Roseworth Group Ltd., Austost Anstalt Schaan, and
            Balmore Funds, S.A. dated as of March 7, 2000 Incorporated by
            reference to Exhibit 4.6 of Annual Report on Form 10-KSB filed on
            March 29, 2000.
4.4         Convertible Debenture and Warrants Purchase Agreement, dated as of
            October 27, 2000, between Famous Fixins, Inc. and Roseworth Group
            Ltd., Austost Anstalt Schaan and Balmore Funds, S.A. (Incorporated
            by reference to Exhibit 10.1 of Quarterly Report on Form 10-QSB/A
            filed on December 15, 2000.)
4.5         Common Stock Purchase Agreement, dated as of October 31, 2000,
            between Famous Fixins, Inc. and Folkinburg Investments Limited
            (Incorporated by reference to Exhibit 10.2 of Quarterly Report on
            Form 10-QSB/A filed on December 15, 2000.)`

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`10.1        Employment Agreement for Jason Bauer (Incorporated by reference to
            Exhibit 17 of Registration Statement on Form 10-SB/A (Amendment No.
            3) filed on December 10, 1999.)
10.2        Amended Employment Agreement of Jason Bauer (Incorporated by
            reference to Exhibit 10.19 of Form 10-KSB filed on March 30, 2001).
10.3**      Form of Stock Option Agreement of Jason Bauer
10.4        Warrant Certificate of Michael Simon (Incorporated by reference to
            Exhibit 12 of Registration Statement on Form 10-SB/A (Amendment No.
            3) filed on December 10, 1999.)
10.5        Employment Agreement with Jody King-Cheifetz (Incorporated by
            reference to Exhibit 10.15 of Registration Statement on Form SB-2
            filed on July 20, 2000.)
10.6**      Form of Stock Option Agreement of Jody King-Cheifetz
10.7**      Form of Warrant Certificate of Jody King-Cheifetz
10.8**      Form of Warrant Certificate of Rich Seery
10.9**      Form of Warrant Certificate of Rich Seery
10.10       Lease Agreement (Incorporated by reference to Exhibit 18 of
            Registration Statement on Form 10-SB/A (Amendment No. 3) filed on
            December 10, 1999.)
10.11       Famous Fixins Corporation Media Trade Program Agreement
            (Incorporated by reference to Exhibit 10 of Quarterly Report on Form
            10-QSB filed on August 11, 2000).
10.12       License Agreement with Olympia Dukakis (Incorporated by reference to
            Exhibit 19 of Registration Statement on Form 10-SB/A (Amendment No.
            3) filed on December 10, 1999.)
10.13       Licensing Agreement between Famous Fixins, Inc., Olympia Dukakis and
            T. Marzetti Company (Incorporated by reference to Exhibit 10.2 of
            Form 10-QSB filed on May 15, 2001).
10.14       License Agreement with Hershey Foods Corporation, as Amended
            (Incorporated by reference to Exhibit 10.1 of Form 10-QSB filed on
            December 4, 2001).
10.15       License Agreement with MTV (Incorporated by reference to Exhibit
            10.2 of Form 10-QSB filed on December 4, 2001).
10.16       License Agreement with Marvel (Incorporated by reference to Exhibit
            10.3 of Form 10-QSB filed on December 4, 2001).
10.17       License Agreement with PRIMEDIA Magazine (Incorporated by reference
            to Exhibit 10.4 of Form 10-QSB filed on December 4, 2001).
10.18       License Agreement with Signatures Network, Inc. (Incorporated by
            reference to Exhibit 10.5 of Form 10-QSB filed on December 4, 2001).
10.19       License Agreement with Signatures Network, Inc. (Incorporated by
            reference to Exhibit 10.5 of Form 10-QSB filed on December 4, 2001).
10.20**     License Agreement with Bravado International Group Inc.
11**        Statement Concerning Computation of Per Share Earnings is hereby
            incorporated by reference to "Financial Statements" contained in
            this Form SB-2.
------
** Filed herewith


(b) Report on Form 8-K

None.`

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`SIGNATURES

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

                                       FAMOUS FIXINS, INC.

                                       By:  /s/ Jason Bauer
                                            ------------------------------
                                               Jason Bauer
                                               Chief Executive Officer
and President

Dated:  February 25, 2002


    In accordance with the Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated:

SIGNATURES          TITLE                                  DATE

/s/ Jason Bauer     Chairman of the Board, President,      February 25, 2002
---------------
Jason Bauer         Chief Executive Officer and Treasurer

/s/ Victor Bauer    Director                               February 25, 2002
----------------
Victor Bauer`

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