<PAGE>
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                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-KSB

(Mark one)
|X|      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
         OF 1934 for the fiscal year ended December 31, 2000

| |      TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934 for the transition period from             to
                                                    -----------    -----------

                           Commission File No. 0-26682

                      TECHNOLOGY FLAVORS & FRAGRANCES, INC.
                 (Name of Small Business Issuer in its Charter)


               DELAWARE                                11-3199437
   (State or other Jurisdiction of                  (I.R.S. Employer
    Incorporation or Organization)               Identification Number)

                              10 EDISON STREET EAST
                           AMITYVILLE, NEW YORK 11701
                    (Address of Principal Executive Offices)

                                 (631) 842-7600
                (Issuer's Telephone Number, Including Area Code)

           Securities to be registered under Section 12(b) of the Act:
                          COMMON STOCK, $.01 PAR VALUE
                                (Title of Class)

           Securities to be registered under Section 12(g) of the Act:
                          COMMON STOCK, $.01 PAR VALUE
                                (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 past 90 days.

                           Yes     X     No
                               --------   ---------

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of the 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. | |

         The Issuer's revenues for the fiscal year ended December 31, 2000 were
$15,333,888.

         The aggregate market value of Registrant's voting stock (Common Stock)
held by non-affiliates on March 15, 2001 was approximately $9,570,000 based on
the closing sale price of the Common Stock on such date of U.S. $1.00 per share,
as reported by the American Stock Exchange.

         The number of shares outstanding of each class of the issuer's common
equity as of March 15, 2001 was:


                COMMON STOCK, $0.01 PAR VALUE            13,019,348
                           CLASS

         Documents Incorporated by Reference:  None

         Transitional Small Business Disclosure Format: Yes            No   X
                                                            -------       -----
================================================================================
<PAGE>

                     TECHNOLOGY FLAVORS & FRAGRANCES, INC.
                       2000 ANNUAL REPORT ON FORM 10-KSB

                               TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                          PAGE
                                                                          ----
<S>                                                                         <C>
PART I  ..................................................................  1
     ITEM 1       DESCRIPTION OF BUSINESS.................................  1
     ITEM 2       DESCRIPTION OF PROPERTY.................................  4
     ITEM 3       LEGAL PROCEEDINGS.......................................  4
     ITEM 4       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.....  4

PART II...................................................................  5
     ITEM 5       MARKETS FOR COMMON EQUITY AND RELATED STOCKHOLDER
                  MATTERS.................................................  5
     ITEM 6       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  CONDITION AND RESULTS OF OPERATIONS.....................  7
     ITEM 7       FINANCIAL STATEMENTS....................................  9
     ITEM 8       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                  ON ACCOUNTING AND FINANCIAL DISCLOSURE .................  9

PART III.................................................................. 10
     ITEM 9       DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
                  CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A)
                  OF THE EXCHANGE ACT..................................... 10
     ITEM 10      EXECUTIVE COMPENSATION.................................. 13
     ITEM 11      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                  OWNERS AND MANAGEMENT................................... 16
     ITEM 12      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......... 18
     ITEM 13      EXHIBITS AND REPORTS ON FORM 8-K ....................... 20

SIGNATURES................................................................ 21

FINANCIAL STATEMENTS...................................................... F-1
</TABLE>

                                      -i-

<PAGE>

                                     PART I

ITEM 1            DESCRIPTION OF BUSINESS

INTRODUCTION

         Technology Flavors & Fragrances, Inc. develops, manufactures and
markets flavors and fragrances that are incorporated by our customers into a
wide variety of consumer and institutional products including natural and
artificially flavored beverages, confections, foods, pharmaceuticals,
aromatherapy essential oils, perfumes, and health and beauty products. We
believe our proprietary formulations are currently used in more than 1,200
products sold by more than 500 companies worldwide, approximately 50 of which
are Fortune 1,000 companies. Our executive offices, manufacturing, research and
development, sales and marketing, and distribution facilities are located in
Amityville, New York. We also have sales, marketing and warehouse facilities
located in Inglewood, California, Toronto, Canada and Santiago, Chile.

         Unless the context otherwise requires, (i) the terms "TFF", "company",
"our", "we" or "us" refer to Technology Flavors & Fragrances, Inc., a Delaware
corporation, together with its wholly-owned subsidiaries, Technology Flavors &
Fragrances, Inc. (Canada), and Technology Flavors & Fragrances S.A. (Chile), and
(ii) all references to "dollars" refer to U.S. dollars.

BACKGROUND

         We were incorporated in New York in 1989 under the name "Aroma Globe,
Inc." In May 1991, we changed our name to "Technology Flavors & Fragrances,
Inc." when we acquired the assets and business of another company by that name.
Since then, we have expanded our operations primarily through acquisitions of
other businesses and internal growth. In July 1993, we acquired most of the
assets of the Fragrance Division of F&C International Inc. ("F&C Fragrance
Division"). The F&C Fragrance Division was engaged in the business of
developing, manufacturing, marketing and selling, domestically and
internationally, fragrance products for personal care, cosmetic and toiletry,
household, industrial and commercial products.

         In March 1994, we completed concurrent offerings of a total of
5,000,000 shares of our Common Stock, of which (i) 4,670,000 shares were sold to
the public in the Canadian Provinces of Ontario and British Columbia at a price
of Cdn. $2.00 per share and (ii) 330,000 shares were sold privately in the
United States for the equivalent price of U.S. $1.44 per share. In addition, our
Common Stock was listed on the Toronto Stock Exchange in March 1994. The
proceeds of these sales were used to pay debt incurred to acquire the assets of
the F&C Fragrance Division.

         In December 1995, we acquired substantially all of the assets and
assumed the trade obligations and certain other liabilities of Seafla, Inc.
("Seafla"), a Milford, Ohio producer of savory and dairy flavors. In
consideration therefor, we paid Seafla $3,000,000 in cash and issued a 12%
promissory note for $888,019. In August 1998, we sold substantially all of the
assets and certain liabilities of Seafla to Mane-Seafla, Inc. ("Mane"), a
subsidiary of Mane USA, Inc., for $5.5 million in cash, less $1,003,454 in
principal and accrued interest assumed by Mane which was owed under a promissory
note to a former director and executive officer of the company in connection
with our acquisition of Seafla in December 1995. In connection with the
transaction, we realized a net gain of approximately $1.3 million, of which
$261,000 was realized in income during 2000 as funds held in escrow were
released.

INDUSTRY OVERVIEW

         We believe that changes in consumer buying habits and preferences over
the past few years have impacted on the industry as a whole and that these
changes have contributed to a demand for new and innovative products. We believe
that there is a trend toward more natural foods in the marketplace, requiring
manufacturers to produce more naturally flavored products. Not only has this
translated into a steady shift from artificial to natural ingredients, but we
believe it is also placing greater emphasis on producing flavors that more
effectively impart "natural" tastes in processed foods. We believe that a
growing desire among consumers to adopt a healthier lifestyle is increasing the
demand for lighter, healthier foods. This has posed new challenges for us to
develop ways of replacing the tastes which are lost when sugar, salt, fat and
cholesterol are reduced or eliminated from traditional food preparation.

         Another important trend in the industry, we believe, is the growing
consumption of processed foods. We believe that more than 80% of the food
consumed in the home today is in processed form, with over 1,000 natural and
synthetic flavoring agents being used to produce these foods. We believe that as
the demand for microwaving products and prepared and frozen convenience foods
continues to rise, so, too, will the need for flavor products to counteract the
adverse effects of mocrowaving and freezing.

         We believe that the trend towards natural, healthier products also
includes soaps, shampoos, cosmetics, detergents, and other cleaning products,
air fresheners, and numerous other household items.

                                       1
<PAGE>

PRODUCTS

         Our principal product categories include natural flavors, artificial
flavors and fragrances. The five largest end-user categories of our products are
beverages, baked goods, confections, cosmetics, and soaps and detergents. Our
flavor products, produced from our proprietary formulations, are sold primarily
to the beverage and food industries. Examples of consumer products containing
our flavor products include confections, toothpaste, chewing gums, prepared
foods, ice creams, animal feeds, candy, alcoholic and non-alcoholic beverages,
poultry, seafood and processed meats.

         Areas which we believe currently offer growth opportunities include
flavor products to enhance "natural food" products to restore the flavors in
non-fat and low fat, sugar, salt and cholesterol foods, and flavor products able
to withstand the effects of microwaving and freezing (i.e., convenience foods).

         Our fragrance products, produced from our proprietary formulations, are
sold primarily to the personal care, cosmetic and toiletry, and household and
industrial product industries. Fragrances are used by customers in the
manufacture of a wide variety of consumer products such as soaps, detergents,
household cleaners, cosmetic creams, lotions and powders, after-shave lotions,
deodorants, air fresheners, perfumes, colognes, aromatherapy oils and hair care
products.

MARKETING

         Our marketing strategy principally involves the utilization of direct
sales and marketing personnel strategically located in regions in the U.S.,
Canada and South America and, to a lesser extent, independent sales brokers.
Typically, our research and development personnel accompany sales personnel in
making sales presentations to new and existing customers. We believe that this
strategy has worked effectively to promote our products.

         We work in association with existing and potential customers to develop
a flavor or fragrance for a new consumer product. During this process, which
generally lasts between six and 12 months, we typically present the customer
with several samples from our proprietary formulations. Generally, a particular
flavor or fragrance formulation is created and produced for one customer.

         In the last two years, we have furnished over 10,000 samples to
existing and potential customers. The typical lag time between initial sample
submissions and when customers place production orders has historically ranged
from six to 18 months.

RESEARCH AND DEVELOPMENT

         Our research and development activities are conducted principally at
our Amityville, New York facility. We maintain research and development labs as
well as applications labs, both of which we believe are necessary for the
development of high quality flavor and fragrance compounds. In 1996, we
installed a processed flavor laboratory that utilizes amino acids and sugars in
a water medium to produce meat, poultry and roasted flavors and aromas. We
currently offer new and innovative products developed in this laboratory.

         We believe that one of the most fundamental challenges in creating
flavor and fragrance formulations, from a technical standpoint, is the
development of flavors and fragrances which are able to (i) withstand the rigors
of processing, storage, and final preparation, and (ii) maintain the integrity
of the basic taste and scent characteristics for the useful life of the final
product. In the case of certain products, such as perfumes, colognes and frozen
foods, the potential shelf life of the product may be a period of up to one
year.

         During the past several years, the flavor industry has had to respond
to new demands by consumers for:

             o  products with little or no cholesterol, fat, sugar or salt,

             o  products that withstand microwaving or freezing, and

             o  products that contain more natural ingredients.

         Each of these demands results in taste differences from what consumers
have come to expect so that new flavor formulations are necessary to satisfy
taste expectations. Consequently, we believe our research and development
abilities are increasingly important for flavor products.

         We spent $1,366,000 and $1,307,000 in research and development during
2000 and 1999, respectively. We expect our research and development expenses to
remain at this level during year 2001.

                                       2
<PAGE>

RAW MATERIALS

         We utilize a significant number of different raw materials in the
preparation of our flavor and fragrance formulations. We devote considerable
effort to ensuring that these ingredients remain uniform and consistent over
time -- a critical process since many of the raw materials we use are inherently
unstable and/or are derived from plants that vary naturally with seasons and
crop years. Accordingly, we routinely test and analyze shipments of raw
materials for compliance with specifications we set.

         We purchase raw materials from numerous suppliers. For the year ended
December 31, 2000, no single supplier provided us with more than approximately
11% of our raw material requirements. Our three largest suppliers provided us
with approximately 28% of our raw material requirements. Although there can be
no assurance, we believe that alternate sources of raw materials are available
in the event of an interruption in the supply of raw materials from a single
supplier.

SEASONALITY

         Historically, our sales tend to be higher in the calendar quarters
ending June 30 and September 30, primarily due to higher consumer demand from
our beverage customers during those periods. We cannot assure you that the
seasonality of our business will not have a material adverse effect on our
operations.

COMPETITION

         The flavor and fragrance industry is highly fragmented with a few large
companies, such as International Flavors & Fragrances, Inc., Haarmann & Reimer
Corporation and Firmenich, Inc., competing against many smaller companies.
Certain of our competitors have substantially greater financial, marketing and
other resources than us. Recently, there have been trends toward increased
industry consolidation as companies vertically integrate with suppliers and
expand horizontally through acquisitions. The flavor and fragrance industry
sells primarily to manufacturers of consumer products. The cost of the flavor or
fragrance component of a consumer product typically represents a small portion
of the total cost of the consumer product. As a result, in selling our products,
we believe that price is not as significant as product performance and customer
service. We believe that our competitiveness depends upon our creativity,
responsiveness and reliability, as well as the diversity of our customers and
products. We expect that we will continue to sell our products to large
companies that do not purchase all of their flavor and fragrance products from a
single supplier, and to smaller companies that our large competitors choose not
to service.

CUSTOMERS

         We believe our products are currently used in more than 1,200 products
sold by more than 500 companies worldwide, approximately 50 of which are Fortune
1,000 companies. We work with our customers in the development of specific
flavors or fragrances for a particular end product. For the years ended December
31, 2000 and 1999, no one customer accounted for more than 10% of our sales, and
our top ten customers accounted for approximately 40% and 36% of our sales,
respectively.

BACKLOG

         Customers purchase our products as required, and normally delivery can
be made within two to four weeks thereafter. Consequently, backlog is not a
significant indicator of the volume of our business over an extended period of
time.

GOVERNMENTAL REGULATIONS

         Production of many of our products involves the manufacturing of
flavors for foods and beverages, the handling of alcohol and the generation,
storage, transportation and disposal of hazardous waste. Accordingly, our
operations are subject to extensive Federal, state and local laws and
regulations relating to such matters, and to the safety and health of our
employees and others. Although there can be no assurance, we believe that we
currently comply in all material respects with such applicable laws and
regulations. In the future, we could be subject to, among other things,
sanctions, penalties (including significant fines), and suspension or revocation
of required licenses or permits for failure to comply with applicable
governmental laws or regulations. Any of these actions could have a material
adverse effect on our results of operations in any given year, or materially
affect our liquidity or financial condition over a longer period of time. At
this time, we are unable to anticipate the impact, if any, that subsequent
changes or new interpretations to applicable laws and regulations may have on
our business, financial condition or results of operations.

EMPLOYEES

         At March 15, 2001, we had 61 employees, of which 60 persons were
employed full-time. Of our 60 full-time employees, 6 were employed in
management, 8 were employed in administrative and purchasing, 9 were employed in
sales and marketing, 19 were employed in production and warehousing, 14 were
employed in research and development and quality control, and 4 were employed


                                       3
<PAGE>


in customer service. We consider our relationship with our employees to be
satisfactory. None of our employees is subject to a collective bargaining
agreement.

PROPRIETARY RIGHTS

         We consider our flavor and fragrance formulas to be proprietary
information and trade secrets. We do not, however, generally rely on patents,
copyrights or trademarks to protect our proprietary rights in our flavor and
fragrance formulations. There can be no assurance that our current protections
will be adequate or that our competitors will not independently develop flavors
and fragrances that are substantially equivalent or superior to our flavors and
fragrances.

         A substantial portion of our technology and know-how are trade secrets.
We have a policy of requiring our employees and contractors to protect our
proprietary information through written agreements. In addition, we have a
policy of requiring our prospective business partners to enter into
non-disclosure agreements with us before we reveal any of our proprietary
information to them. We cannot assure that the measures taken by us to protect
our technology, products and other proprietary information will be adequate.
Further, we cannot assure that others will not independently develop
substantially equivalent proprietary information and technologies, or otherwise
gain access to our trade secrets.

         We may be required to take various forms of legal action, from time to
time, to protect our proprietary rights. Because of the rapid evolution of
technology and uncertainties in intellectual property laws both in the United
States and internationally, we cannot assure that our current or future products
or technologies will not be subject to claims of infringement. Any litigation
regarding claims against us or claims made by us against others could result in
significant expense to us, divert the efforts of our technical and management
personnel and have a material adverse effect on us, whether or not such
litigation is ultimately resolved in our favor. In the event of an adverse
result in any such litigation, we may be required to expend significant
resources to develop non-infringing products or obtain licenses from third
parties. We cannot assure you that we would be successful in such development or
that any such licenses would be available on commercially reasonable terms, if
at all.

FORWARD-LOOKING STATEMENTS

         Certain statements contained in this Annual Report on Form 10-KSB,
including, without limitation, statements containing the words "believes,"
"anticipates," "may," "intends," "expects" and words of similar import,
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors that may cause
the actual results, performance or achievements of our company (or industry
results, performance or achievements) expressed or implied by such
forward-looking statements to be substantially different from those predicted.
Such factors might include, among others, the following: general economic and
business conditions, both nationally and in the regions in which we operate;
competition; changes in business strategy or development plans; delays in the
development or testing of our products; technological, manufacturing, quality
control or other problems which could delay the sale of our products; our
inability to obtain appropriate licenses from third parties, protect our trade
secrets, operate without infringing upon the proprietary rights of others and
prevent others from infringing on our proprietary rights; our inability to
obtain sufficient financing to continue operations; and changes in demand for
products of our customers. Certain of these factors are discussed in more detail
elsewhere in this Form 10-KSB, including, without limitation, under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

ITEM 2            DESCRIPTION OF PROPERTY

         Our principal properties are our leased 36,000 square foot headquarters
and production facility at 10 Edison Street East in Amityville, New York, and an
adjoining 6,000 square foot warehouse. Our lease for our principal executive
offices, production facilities and warehouse in Amityville, New York expires in
2006. We also lease sales, warehouse and customer service facilities in
Inglewood, California, Toronto, Canada, and Santiago, Chile. We believe that we
can renegotiate existing leases as they expire or lease alternative properties
on acceptable terms. We believe our present facilities are adequate for our
current and anticipated operations.

ITEM 3            LEGAL PROCEEDINGS

         We are not a party to any pending legal proceedings which if adversely
determined would have a materially adverse effect on our business.

ITEM 4            SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         There were no matters submitted to a vote of security holders during
the quarter ended December 31, 2000.

                                       4
<PAGE>


                                     PART II

ITEM 5            MARKETS FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         TORONTO STOCK EXCHANGE. Our Common Stock has been listed on the Toronto
Stock Exchange, or TSE, since March 28, 1994 (Symbol: "TFF"). The following
table sets forth the reported high and low closing prices (as reported by the
TSE) for our Common Stock for each calendar quarter from January 1, 1999 through
March 15, 2001, in Canadian dollars and translated into U.S. dollars at the
exchange rates in effect on the last day of such period.
<TABLE>
<CAPTION>
                                                                                       HIGH                        LOW
                                                                                       ----                        ---
<S>                                                                        <C>                        <C>
1999
   First Quarter........................................................     Cdn. $1.41 (U.S.$0.94)      Cdn. $0.80 (U.S.$0.53)
   Second Quarter.......................................................     Cdn.  2.10 (U.S. 1.43)      Cdn.  0.75 (U.S. 0.50)
   Third Quarter........................................................     Cdn.  2.30 (U.S. 1.52)      Cdn.  1.45 (U.S. 0.97)
   Fourth Quarter.......................................................     Cdn.  1.92 (U.S. 1.31)      Cdn.  01.20(U.S. 0.81)

2000
   First Quarter........................................................     Cdn. $3.75 (U.S.$2.56)       Cdn. $1.75(U.S.$1.20)
   Second Quarter.......................................................     Cdn.  3.25 (U.S. 2.22)       Cdn.  2.45(U.S. 1.64)
   Third Quarter........................................................     Cdn.  3.00 (U.S. 2.02)       Cdn.  2.00(U.S. 1.34)
   Fourth Quarter.......................................................     Cdn.  2.00 (U.S. 1.32)       Cdn.  1.20(U.S. 0.80)

2001
   First Quarter  (through March 15, 2001)..............................     Cdn. $1.85 (U.S.$1.19)       Cdn. $1.31(U.S.$0.87)
</TABLE>

     The closing price of our Common Stock on the TSE on March 15, 2001 was Cdn.
$1.85 (U.S. $1.19).


         AMERICAN STOCK EXCHANGE AND OTC BULLETIN BOARD. Our Common Stock has
been listed on the American Stock Exchange, or AMEX, since March 29, 2000
(Symbol: "TFF"). Prior to that, our Common Stock traded on the OTC Bulletin
Board (Symbol: "TFFI") from March 12, 1996 through March 28, 2000. The following
table sets forth the range of high and low closing prices (as reported by the
OTC Bulletin Board) for our Common Stock for each calendar quarter from January
1, 1999 through March 28, 2000 in U.S. Dollars and (as reported by the AMEX)
from March 29, 2000 through March 15, 2001.
<TABLE>
<CAPTION>
                                                                  HIGH               LOW
                                                                  ----               ---
<S>                                                      <C>              <C>
1999
   First Quarter ............................................ U.S. $ 1.00      U.S. $ 0.434
   Second Quarter ........................................... U.S.   1.562     U.S.   0.625
   Third Quarter ............................................ U.S.   1.562     U.S.   1.062
   Fourth Quarter ........................................... U.S.   1.438     U.S.   1.00

2000
   First Quarter ............................................ U.S. $ 2.75      U.S. $ 1.25
   Second Quarter ........................................... U.S.   2.312     U.S.   1.00
   Third Quarter ............................................ U.S.   2.062     U.S.   1.50
   Fourth Quarter ........................................... U.S.   1.50      U.S.   0.875

2001
   First Quarter (through March 15, 2001) ................... U.S. $ 1.375     U.S. $ 0.92
</TABLE>

    The closing price of our Common Stock on the AMEX on March 15, 2001 was U.S.
$1.00.



                                       5
<PAGE>


HOLDERS

         At March 15, 2001, we had approximately 750 stockholders of record.

DIVIDENDS

         We have not paid any cash dividends on our Common Stock and we do not
anticipate paying any cash dividends in the foreseeable future. The declaration
and payment of dividends on our Common Stock is at the discretion of the Board
of Directors and will depend on, among other things, our operating results,
financial condition, capital requirements, contractual restrictions or
prohibitions and such other factors as our Board of Directors may deem relevant.
In addition, the terms of our $3.0 million revolving credit facility prohibit
the payment of cash dividends.

RECENT SALES OF UNREGISTERED SECURITIES

         The following information relates to unregistered securities sold by us
during the year ended December 31, 2000. The sales of securities described below
were made in reliance upon an exemption from the registration provisions set
forth in Section 4(2) of the Securities Act of 1933, as amended, as transactions
by an issuer not involving a public offering.

STOCK OPTION GRANTS

         During the year ended December 31, 2000, we granted options to purchase
an aggregate of 200,000 shares of our Common Stock under our 1999 Stock Option
Plan. The exercise prices for such options were set at the market price of our
Common Stock on the AMEX on the grant dates ($1.06 to $1.875 per share). Of
these options, we granted options to purchase 100,000 shares to an executive
officer and options to purchase 100,000 shares to Murdock Capital Partners Corp.
("Murdock") pursuant to a consulting agreement with Murdock. The options granted
to Murdock vested in equal monthly installments over a 12-month period. On
November 2, 2000, we terminated the consulting agreement and we cancelled
Murdock's unvested options to purchase 66,667 shares. Murdock's remaining vested
options expired on February 2, 2001.


                                       6
<PAGE>

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

RESULTS OF OPERATIONS

         The following information for the years ended December 31, 2000, 1999
and 1998 has been derived from our audited consolidated financial statements and
should be read in conjunction with such statements and the notes thereto
included elsewhere in this Annual Report on Form 10-KSB.
<TABLE>
<CAPTION>
                                                                               YEARS ENDED DECEMBER 31,
                                                         --------------------------------------------------------------------
                                                                  2000                   1999                   1998
                                                         --------------------  -----------------------  ----------------------
                                                                           (dollar amounts in thousands)
<S>                                                        <C>         <C>        <C>         <C>       <C>          <C>
Net sales ............................................     $15,334     100.0%     $14,769     100.0%    $ 13,888      100.0%
Gross profit .........................................       6,322      41.2        6,318      42.8        5,600       40.3
Operating expenses:
        Selling ......................................       2,530      16.5        2,315      15.7        2,714       19.5
        General and administrative ...................       1,986      13.0        1,670      11.3        1,918       13.8
        Research and development .....................       1,366       8.9        1,307       8.9        1,396       10.1
        Amortization .................................         220       1.4          181       1.2          354        2.5
        Write-down of intangible assets and other charges       --        --           --        --        2,120       15.3
Income (loss) from operations ........................         220       1.4          845       5.7       (2,902)      20.9
Interest expense, net ................................         170       1.1          160       1.1          108        0.8
Provision for income taxes ...........................          27       0.2           28       0.2            2         --
Income (loss) from continuing operations .............          23       0.1          657       4.4       (3,012)      21.7
Discontinued operations:
        Gain on disposal of discontinued operations ..         248       1.6           --        --        1,080        7.8
        Loss from discontinued operations ............          --        --           --        --         (105)       0.8
Net income (loss) ....................................         271       1.7          657       4.4       (2,036)      14.7
</TABLE>


NET SALES. Net sales increased 3.8% to $15,334,000 in 2000 from $14,769,000 in
1999. Net sales during the first nine months of 2000 increased 12.0% from last
year's comparable period due principally to the launching of new food and
beverage flavor products, however, the three-month period ended December 31,
2000 net sales declined by 23.1% compared to last year's comparable period
primarily attributable to the downturn in the flavor and fragrance industry and
general economy and, to a lesser extent, delays in new product launches. Net
sales increased 6.3% to $14,769,000 in 1999 from $13,888,000 in 1998 due
principally to the launching of new food and beverage flavor products to new and
existing customers.

GROSS PROFIT. Gross profit in 2000, as a percentage of net sales, decreased 1.6%
to 41.2% on net sales of $15,334,000 in 2000 from 42.8% on net sales of
$14,769,000 in 1999. This decrease was due principally to a lower gross profit
margin on a new food flavor product and differences in product mix attributable
to a higher concentration of export sales where gross margins are generally
lower. Gross profit in 1999, as a percentage of net sales, increased 2.5% to
42.8% on net sales of $14,769,000 in 1999 from 40.3% on net sales of $13,888,000
in 1998. Gross profit for 1999 was essentially the same as in 1998 before the
1998 write-down of inventories of $280,000.

OPERATING EXPENSES:

         SELLING EXPENSES. Selling expenses increased by $215,000, or 9.3%, to
$2,530,000 in 2000 from $2,315,000 in 1999. This increase was due principally to
the hiring of additional sales personnel. Selling expenses decreased by
$399,000, or 14.7%, to $2,315,000 in 1999 from $2,714,000 in 1998 due
principally to reductions in personnel, and to a lesser extent, travel and
entertainment, and advertising costs under our cost reduction program
implemented in the third quarter of 1998.

         GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses increased by $316,000, or 18.9%, to $1,986,000 in 2000 from $1,670,000
in 1999. This increase was due principally to increases in professional and
investor relations fees and related activities, professional fees associated
with our evaluation of potential strategic business opportunities, new listing
fees on the American Stock Exchange, the hiring of our new President, and to a
lesser extent, a 3% general wage increase. General and administrative expenses
decreased by $248,000, or 12.9%, to $1,670,000 in 1999 from $1,918,000 in 1998.
This decrease was due


                                       7
<PAGE>

principally to the incurrence in 1998 of a $194,000 bad debt expense which was
primarily attributable to a customer's bankruptcy, and reductions in personnel
and professional and consulting fees under our cost reduction program
implemented during the third quarter of 1998.

         RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
increased by $59,000, or 4.5%, to $1,366,000 in 2000 from $1,307,000 in 1999.
This increase was due principally to an increase in outside contract services
and the hiring of an additional laboratory technician. Research and development
expenses decreased by $89,000, or 6.4%, to $1,307,000 in 1999 from $1,396,000 in
1998. This decrease was due principally to reductions in personnel under our
cost reduction program implemented during the third quarter of 1998.

         AMORTIZATION EXPENSE. Amortization expense increased by $39,000, or
21.5%, to $220,000 in 2000 from $181,000 in 1999. This increase was due
principally to the increase in deferred financing costs associated with the
revolving credit facility we entered into in June 1999. Amortization expense
decreased by $173,000, or 48.9%, to $181,000 in 1999 from $354,000 in 1998. This
increase was due principally to the write-down of $1,723,000 in intangible
assets during 1998.

         TOTAL OPERATING EXPENSES. Total operating expenses increased by
$629,000, or 11.5%, to $6,102,000 in 2000 from $5,473,000 in 1999 as a result of
the factors described above. Total operating expenses decreased by $3,029,000,
or 35.6%, to $5,473,000 in 1999 from $8,502,000 in 1998 as a result of our cost
reduction program and the other factors described above. Without giving effect
to the write-down of intangible assets and other charges of $2,120,000 in 1998,
total operating expenses decreased by $909,000, or 14.2%, in 1999.

INTEREST EXPENSE, NET. Interest expense, net increased by $10,000, or 6.3%, to
$170,000 in 2000 from $160,000 in 1999. This increase was due principally to
higher interest rates on outstanding borrowings in 2000. Interest expense, net
increased by $52,000, or 48.1%, to $160,000 in 1999 from $108,000 in 1998. This
increase was due principally to higher outstanding borrowings and higher
interest rates on outstanding borrowings during 1999.

PROVISION FOR INCOME TAXES. Provision for income taxes principally represents
state franchise taxes and Federal alternative minimum tax. There were no Federal
income tax provisions in 2000 and 1999 since we had available net operating loss
carryforwards.

DISCONTINUED OPERATIONS. During 1998, we recorded a net gain of $1,080,000 on
the disposal of discontinued operations after a loss from such discontinued
operations for 1998 of $(105,000). In 2000, we recorded a gain of $248,000
representing $261,000 of cash received from escrowed funds net of $13,000 of
related income taxes which became available to us in connection with the
disposal of discontinued operations in 1998. There was no income or loss from
discontinued operations in 1999.

NET INCOME (LOSS). Net income for 2000 was $271,000 (including the one-time gain
of $248,000 as discussed above) as compared to net income of $657,000 for 1999
and a net loss of $(2,036,000) for 1998.

FOREIGN OPERATIONS

         Approximately 6% and 8% of our net sales for the years ended December
31, 2000 and 1999, respectively, were derived from sales denominated in foreign
currencies, principally in Canada. The effect of foreign currency exchange rate
fluctuations on such sales is largely offset to the extent expenses of our
international operations are incurred and paid for in the same currencies as
those of our sales.

EXPORT SALES

         For the years ended December 31, 2000 and 1999, export sales were
approximately 28% and 27%, respectively, of total net sales. Our export sales
are made to entities located primarily in Canada and Central and South America.
Receivables from such foreign sales at December 31, 2000 and 1999 amounted to
approximately 42% and 43%, respectively, of total accounts receivable.

LIQUIDITY AND CAPITAL RESOURCES

         Historically, our financing needs have been met through the issuances
of equity and debt securities and commercial bank loans. In June 1999, we
entered into a Loan and Security Agreement with a lender which provided for a
three year $3,000,000 revolving credit facility. We call this revolving credit
facility the 1999 Credit Facility. Outstanding borrowings under the 1999 Credit
Facility initially bore interest at a rate of three-quarters of one percent
(0.75%) in excess of a prime lending rate, and is subject to certain adjustments
based upon our financial performance. Effective January 1, 2000, the interest
rate was reduced to one quarter of one percent (0.25%) in excess of a prime
lending rate. Borrowings under the 1999 Credit Facility are subject to certain
eligibility requirements relating to our receivables and inventories and the
discretion of the lender. Outstanding borrowings are secured by substantially
all of our assets, including our product formulations. We must comply with
certain financial and other covenants contained in the Loan and Security
Agreement including maintaining tangible net worth of at least $1,750,000,
achieving not less than



                                       8
<PAGE>

75% of our projected pre-tax income for the upcoming year, and incurring
expenditures for capital assets of not more than $450,000 for the year. Our
subsidiaries have guaranteed our obligations under the 1999 Credit Facility. At
December 31, 2000, we had borrowings of approximately $1,340,000 under the 1999
Credit Facility, and $1,236,000 was available for additional borrowings in
accordance with the terms of the 1999 Credit Facility. The outstanding
borrowings under the 1999 Credit Facility at December 31, 2000 was classified as
a current liability. At that date, outstanding borrowings bore interest at 9.5%
per annum.

         At December 31, 2000, working capital increased by $787,000, or 29.5%,
to $3,451,000 from $2,664,000 at December 31, 1999.

         Future minimum commitments under certain non-cancellable operating and
capital leases aggregate approximately $1,277,000 through year 2007, of which
$289,000 is payable in 2001 and $266,000 is payable in 2002. We believe that the
existing cash balances together with cash generated from operations and amounts
available under the 1999 Credit Facility will be sufficient to meet our
projected working capital and other cash flow requirements for the foreseeable
future.

ITEM 7            FINANCIAL STATEMENTS

         Our audited consolidated financial statements for the years ended
December 31, 2000 and 1999 begin on page F-1 of this Annual Report on Form
10-KSB.

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

         None.


                                       9
<PAGE>


                                    PART III

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

INFORMATION CONCERNING OUR BOARD OF DIRECTORS AND EXECUTIVE OFFICERS

         The following table sets forth certain information, as of March 15,
2001, concerning our directors and executive officers:
<TABLE>
<CAPTION>
      NAME                    AGE    POSITIONS WITH THE COMPANY
      ----                    ---    --------------------------
<S>                         <C>    <C>
Philip Rosner ...........     65     Chairman of the Board of Directors and Chief Executive Officer
Joseph Raimondo .........     51     President and Chief Operating Officer
A. Gary Frumberg ........     67     Director and Executive Vice President
Joseph A. Gemmo .........     55     Vice President, Chief Financial Officer, Secretary and Treasurer
Ronald J. Dintemann .....     57     Vice President Operations
Harvey Farber ...........     60     Senior Vice President-Flavor Division
Sean Deson ..............     37     Director
Werner F. Hiller ........     64     Director
Irwin D. Simon ..........     42     Director
</TABLE>

         The business experience of each of the persons listed above for at
least the last five years is as follows:

         PHILIP ROSNER has been the Chairman of the Board of Directors,
President and Chief Executive Officer of our company from its inception 1989 to
August 2000 and Chairman and Chief Executive Officer since August 2000. Mr.
Rosner has been engaged in the flavor and fragrance industry for over 47 years.
Prior to 1989, Mr. Rosner was the President of Globe Extracts, Inc. and for 15
years before that, was President of Felton Worldwide, Inc., both of which
produced and marketed flavors and fragrances.

         JOSEPH RAIMONDO has been President and Chief Operating Officer of our
company since August 2000. Prior to August 2000, Mr. Raimondo held operational
and technical management positions with Bush Boake Allen, Inc., a global New
York Stock Exchange flavor and fragrance company, for over 20 years.

         A. GARY FRUMBERG has been a Director and an Executive Vice President of
our company since 1989. Prior to 1989, Mr. Frumberg served as Vice
President-International Sales of Felton Worldwide, Inc.

         JOSEPH A. GEMMO has been Vice President and Chief Financial Officer of
our company since August 1996 and Secretary and Treasurer since June 1998. From
January 1994 to April 1996, Mr. Gemmo was the Chief Financial Officer of
Bio-Botanica, Inc., a developer and manufacturer of herbal extracts. From 1989
to 1994, Mr. Gemmo was Chief Financial Officer of General Aerospace Materials
Corp.

         RONALD J. DINTEMANN has been Vice President-Operations of our company
since 1989 after serving as Vice President-Operations of Globe Extracts, Inc.
for two years.

         HARVEY FARBER has been Senior Vice President-Flavor Division of our
company since October 1997. From October 1995 through October 1997, Mr. Farber
was Senior Vice President-Flavor Development of our company. Before Mr. Farber
joined our company, he was the Vice President-Flavor Development at J. Manheimer
Inc. for 12 years.

         SEAN DESON has been a Director of our company since June 1998. Mr.
Deson is currently the Managing Partner of Deson & Co., a private equity
investment firm. Prior thereto, Mr. Deson was a Senior Vice President in the
Investment Banking Division of Donaldson, Lufkin & Jenrette Securities
Corporation, or DLJ. Mr. Deson served in various capacities at DLJ since 1990,
primarily as an advisor, financier and investor. Mr. Deson also serves as a
member of the Board of Directors of SpecChem International Holdings, L.L.C.,
SystemsFusion Inc., ActiveWorlds.com, Inc., Fastxchange, and Liquidxs.

         WERNER F. HILLER has been a Director of our company since June 1998.
Since 1996, Mr. Hiller has been a consultant to General Spice Companies, a
division of ConAgra, and previously served as the President of General Spice
Companies from 1990 to 1996. Mr. Hiller also was the co-founder of General Spice
Companies, and from 1965 to 1990, he served as its Executive Vice President and
Treasurer.

                                       10
<PAGE>

         IRWIN D. SIMON has been a Director of our company since June 1998. Mr.
Simon has been the Chairman, President and Chief Executive Officer of The Hain
Celestial Group, Inc., a natural and specialty foods company listed on NASDAQ,
since May 2000, and President and Chief Executive Officer of The Hain Food
Group, Inc. from 1993 to May 2000. Prior to 1993, Mr. Simon spent 15 years in
various sales and marketing positions, including Vice President of Marketing of
Slim-Fast Foods Company, and Eastern Regional Director of Haagen-Dazs Shops, a
division of Grand Metropolitan, PLC.

         All of our directors serve for a one year term ending at the next
annual meeting of stockholders or until their respective successors are duly
elected and qualified. Officers serve at the discretion of the Board of
Directors, subject to rights, if any, under their contracts of employment. There
are no family relationships among our directors and executive officers.

         We maintain a $1,000,000 key man life insurance policy on the life of
Philip Rosner, our Chairman and Chief Executive Officer, in which we are the
beneficiary.

MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES

         Our business affairs are managed under the direction of the Board of
Directors. Members of the Board of Directors are informed about our affairs
through presentations, reports and documents distributed to them, through
operating and financial reports routinely presented at meetings of the Board of
Directors and committee meetings and through other means. Our directors not only
attend meetings of the Board of Directors but also have personal meetings and
other communications, including telephone contact, with management.

BOARD COMMITTEES

         Our Board of Directors has an Executive Committee, an Audit Committee
and a Compensation Committee. Members of these Committees are appointed by the
Board of Directors each year.

         EXECUTIVE COMMITTEE. The Executive Committee of the Board of Directors
may exercise, except when the Board of Directors is in session and to the extent
permitted by the General Corporation Law of the State of Delaware, all of the
powers of the Board of Directors in the management of the affairs of our
Company. The current members of the Executive Committee are Messrs. Rosner,
Deson and Hiller.

         AUDIT COMMITTEE. The Audit Committee recommends to the Board of
Directors the firm to be selected each year as independent auditors of our
financial statements and to perform services related to such audit. The Audit
Committee also has responsibility for:

            o  reviewing the scope and results of the audit with the independent
               auditors,

            o  reviewing our financial condition and results of operations with
               management,

            o  considering the adequacy of the internal accounting, bookkeeping
               and control procedures, and

            o  reviewing any non-audit services and special engagements to be
               performed by the independent auditors and considering the effect
               of such performance on the auditors' independence.

         The current members of the Audit Committee are Messrs. Deson and
Hiller.

         COMPENSATION COMMITTEE. The Compensation Committee recommends to the
Board of Directors the compensation to be paid to our executive officers and
other key personnel, reviews new or existing employee compensation programs and
periodically reviews management perquisites and other benefits. The current
members of the Compensation Committee are Messrs. Hiller and Simon.

         We have not established a nominating committee and/or a corporate
governance committee as recommended by the TSE Report (as discussed below),
however, we believe that the nomination of directors and other issues normally
considered by these committees can be effectively managed by the Board of
Directors due to its composition, or by the Audit Committee.

DIRECTOR COMPENSATION

         Each of our outside directors is paid a $10,000 annual fee plus $500
for each formal meeting attended. Alternatively, an outside director may, at his
option and in lieu of such cash remuneration, elect to receive a non-qualified
stock option grant for such earned fees. In addition, directors are reimbursed
for reasonable expenses actually incurred in connection with attending each
formal meeting of the Board of Directors or any committee thereof. Our outside
directors currently are Messrs. Deson, Hiller and Simon.

                                       11
<PAGE>

STATEMENT OF CORPORATE GOVERNANCE PRACTICES

         Our Common Stock is listed on the Toronto Stock Exchange. The by-laws
of the TSE require listed companies to disclose their approach to corporate
governance on an annual basis and within the context of certain guidelines
proposed in the December 1994 report issued by The Toronto Stock Exchange
Committee on Corporate Governance in Canada (the "TSE Report"). The report
focuses on the importance of each company addressing the governance issue in its
own context and the receipt by the company's stockholders of an explanation for
each company's approach to governance. There is no requirement for us to comply
with the guidelines in the TSE Report, and the report itself recognizes that
each company should have the flexibility to develop its own approach to
corporate governance.

         Of particular significance is the fact that we are organized under the
laws of the State of Delaware, and therefore subject to that State's laws and
principles of corporate governance. We are of the opinion that our approach to
corporate governance is in compliance in all material respects with Delaware law
and the principles of the TSE Report.

UNRELATED DIRECTORS

         Much of the discussion in the TSE Report focuses on the composition of
a company's board of directors and, in particular, the number of "unrelated
directors." In the TSE Report, an "unrelated director" is a director who is free
from any interest and any business or other relationship which could, or could
reasonably be perceived to, materially interfere with that director's ability to
act with a view to the best interests of the company, other than an interest
arising from such director's status as a stockholder. The TSE Report also
focuses on the importance of having an appropriate portion of the board of
directors which is free from any interest or relationship with a "significant
shareholder" of the company (i.e., a shareholder controlling more than 50% of a
company's common stock). We do not have a "significant shareholder" within the
meaning of the TSE Report.

         We believe that three of our five directors (i.e., Messrs. Deson,
Hiller and Simon) are "unrelated" within the meaning of the TSE Report. We
believe that the number of unrelated directors is appropriate for the effective
operations of the company.

         The Board of Directors has no formal policy setting out which specific
matters must be brought by the President or management to the Board of Directors
for approval, although generally all material transactions are presented by
management for approval by the Board of Directors.

RESPONSE TO STOCKHOLDERS

         Management is available to stockholders to respond to questions and
concerns. The Board of Directors believes that management is generally
responsive to the inquiries of stockholders and others interested in our
company.

EXPECTATIONS OF MANAGEMENT

         The Board of Directors works closely with members of management. The
Board's access to information relating to our operations, through membership on
the Board of several key members of management and, as necessary, attendance by
other members of management at the request of the Board, are important elements
to the effective and informed functioning of the Board of Directors.

         The Board of Directors expects our management to take the initiative in
identifying opportunities and risks affecting our business and finding means to
deal with such opportunities and risks for the benefit of our stockholders.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

         Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires that our directors and executive officers and persons who beneficially
own more than 10% of our Common Stock (collectively, the "Reporting Persons")
file with the Securities and Exchange Commission (the "Commission") (and, if
such security is listed on a national securities exchange, with such exchange)
various reports as to their ownership of and activities relating to such Common
Stock. Such Reporting Persons are required by Commission regulations to furnish
us with copies of all Section 16 (a) reports they file. Based solely upon a
review of copies of Section 16(a) reports and representations received by us
from Reporting Persons, and without conducting any independent investigation of
our own, in 2000, all Forms 3, 4 and 5 were timely filed with the Commission by
such Reporting Person except that Mr. Rosner failed to timely report one
transaction on Form 4.


                                       12
<PAGE>

ITEM 10  EXECUTIVE COMPENSATION

         The following summary compensation table sets forth the aggregate
compensation paid to or earned by our Chairman of the Board and Chief Executive
Officer and the other five most highly compensated executive officers of our
company (other than the Chairman of the Board and Chief Executive Officer) whose
total annual salaries and bonuses exceeded $100,000 for the year ended December
31, 2000 (the "Named Executive Officers"):

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                                      AWARDS
                                                                ANNUAL             ANNUAL           SECURITIES
                                                             COMPENSATION       COMPENSATION        UNDERLYING         ALL OTHER
NAME AND PRINCIPAL POSITION                       YEAR          SALARY             BONUS           OPTIONS/SARS    COMPENSATION (1)
---------------------------                       ----          ------             -----           ------------    ----------------
<S>                                               <C>          <C>                <C>               <C>                 <C>
Philip Rosner...............................      2000         $231,750           $13,111               -               $8,424
Chairman of the Board and Chief Executive         1999          225,000             4,327           100,000(2)          10,923
Officer                                           1998          225,930              -                  -               11,545

Joseph Raimondo(3)............................    2000           57,692             2,885           100,000(4)           3,240
President and Chief Operating Officer

A. Gary Frumberg............................      2000          214,240            12,120               -               10,692
Director and Executive Vice President             1999          208,000             4,000           100,000(2)          13,089
                                                  1998          208,000              -                  -               12,514

Harvey Farber...............................      2000          160,500             8,971               -                3,437
Senior Vice President-Flavor Division             1999          150,000             2,885            20,000(5)           3,544
                                                  1998          172,415              -                  -                3,446

Ronald J. Dintemann.........................      2000          144,612             8,181               -               12,329
Vice President-Operations                         1999          140,400             2,700            20,000(5)          12,345
                                                  1998          140,400              -                  -               12,330

Joseph A. Gemmo.............................      2000          139,256             7,878               -                6,313
Vice President, Chief Financial Officer,          1999          135,200             2,600            20,000(5)           6,541
Secretary and Treasurer                           1998          135,200              -                  -                5,565
</TABLE>

----------
(1)     Represents expenses in connection with the personal use of company
        automobiles and life insurance policies on the life of such executive.

(2)     Represents five-year stock options to purchase 100,000 shares of our
        Common Stock granted in June 1999 under our 1999 Stock Option Plan at an
        exercise price of $1.62 per share.

(3)     Mr. Raimondo was hired on August 8, 2000 at an annual base salary
        $150,000.

(4)     Represents ten-year stock options to purchase 50,000 shares of our
        Common Stock granted in August 2000 under our 1999 Stock Option Plan at
        an exercise price of $1.875 per share and 50,000 shares of our Common
        Stock granted in November 2000 under our 1999 Stock Option Plan at an
        exercise price of $1.06 per share.

(5)     Represents ten-year stock options to purchase 20,000 shares of our
        Common Stock granted in April 1999 under our 1993 Stock Option Plan at
        an exercise price of $.875 per share.


                                       13
<PAGE>


STOCK OPTION GRANTS IN 2000

         The following table sets forth certain information concerning
individual stock option grants during the year ended December 31, 2000 to each
of the Named Executive Officers.
<TABLE>
<CAPTION>

                                 NUMBER OF      % OF TOTAL
                                SECURITIES     OPTIONS/SARS
                                UNDERLYING       GRANTED TO
                               OPTIONS/SARS     EMPLOYEES IN    EXERCISE PRICE     EXPIRATION
NAME                             GRANTED         FISCAL YEAR       PER SHARE          DATE
----                             -------         -----------       ---------          ----
<S>                                <C>              <C>           <C>                <C>
Philip Rosner ...........            --              --               --                --
Joseph Raimondo .........          50,000           100%          $  1.875           8/8/10
                                   50,000           100              1.06            11/13/10
A. Gary Frumberg ........            --              --               --                --
Harvey Farber ...........            --              --               --                --
Ronald J. Dintemann .....            --              --               --                --
Joseph A. Gemmo .........            --              --               --                --
</TABLE>

AGGREGATE STOCK OPTION EXERCISES IN 2000 AND 2000 YEAR-END STOCK OPTION VALUES

         The following table provides certain information concerning each
exercise of stock options during the year ended December 31, 2000 by each of the
Named Executive Officers and the year-end value of unexercised stock options.
The stock options listed below were granted without tandem stock appreciation
rights. We have no freestanding stock appreciation rights outstanding.
<TABLE>
<CAPTION>

                                  NUMBER OF                             NUMBER OF UNEXERCISED         NUMBER OF UNEXERCISED
                                   SHARES                                    OPTIONS AT                 IN-THE-MONEY OPTIONS AT
                                 ACQUIRED ON         VALUE                DECEMBER 31, 2000                DECEMBER 31, 2000
NAME                              EXERCISE        REALIZED ($)        EXERCISABLE/UNEXERCISABLE      EXERCISABLE/UNEXERCISABLE (1)
----                              --------        ------------        -------------------------      -----------------------------
<S>                               <C>                  <C>                 <C>                          <C>
Philip Rosner ........               --                --                   33,333/66,667                $ -/-(2)
Joseph Raimondo ......               --                --                     0/100,000                    -/-(2)
A. Gary Frumberg .....               --                --                   33,333/66,667                  -/-(2)
Harvey Farber ........               --                --                   54,000/26,000                500/2,000
Ronald J. Dintemann ..               --                --                   94,000/26,000               32,000/2,000
Joseph A. Gemmo ......               --                --                  144,000/26,000                500/2,000
</TABLE>

(1)  Value of unexercised "in-the-money" options is equal to the difference
     between the closing per share price of our Common Stock on the AMEX at
     December 31, 2000 ($1.00) and the option exercise price per share
     multiplied by the number of shares subject to options.

(2)  None of these options were "in-the-money" at December 31, 2000.


EMPLOYMENT AGREEMENTS

         In October 1995, we entered into a five-year employment agreement with
Mr. Rosner which provides that he will serve as the Chief Executive Officer of
our company. The agreement provides for an annual base salary (adjustable in
accordance with the Consumer Price Index) of $235,000. Effective January 1,
1998, we increased Mr. Rosner's annual base salary to $244,400 per year.
Effective May 1, 1998, Mr. Rosner voluntarily reduced his annual salary from
$244,400 to $200,000 for the remainder of 1998. Effective January 1, 1999 and
January 1, 2001, Mr. Rosner's annual base salary was increased to $225,000 and
$231,750, respectively. In October 2000, the agreement was automatically
extended to October 2001 and contains, among other things, customary termination
and confidentiality provisions.

                                       14
<PAGE>

         In October 1995, we entered into a five-year employment agreement with
Mr. Frumberg which provides that he will serve as Executive Vice President of
our company. The agreement provides for an annual base salary (adjustable in
accordance with the Consumer Price Index) of $200,000. Effective January 1, 1998
and January 1, 2001, we increased Mr. Frumberg's annual base salary to $208,000
and $214,240, respectively. In October 2000 the agreement was automatically
extended to October 2001 and contains, among other things, customary termination
and confidentiality provisions.

         In August 2000, we entered into a two-year employment agreement with
Joseph Raimondo to serve as President and Chief Operating Officer of our
company. Pursuant to his employment agreement, Mr. Raimondo is entitled to
receive an annual base salary of $150,000 plus an annual bonus payable at the
sole discretion of our Board of Directors. In addition, pursuant to his
employment agreement, on August 8, 2000, Mr. Raimondo received stock options to
purchase 50,000 shares of our Common Stock at an exercise price of $1.875 per
share, the market price of our Common Stock at the date of the grant. Mr.
Raimondo's employment agreement contains, among other things, customary
termination and confidentiality provisions.

         In January 1996, we entered into a five-year employment agreement with
Ronald J. Dintemann to serve as Vice President-Operations of our company.
Pursuant to his employment agreement, Mr. Dintemann is entitled to receive an
annual base salary (adjustable in accordance with the Consumer Price Index) of
$135,000. Effective January 1, 1998 and January 1, 2001, we increased Mr.
Dintemann's annual base salary to $140,400 and $144,612, respectively. In
January 2001, Mr. Dintemann's employment agreement was extended to January 2002
and contains, among other things, customary termination and confidentiality
provisions.

         In August 1996, we entered into a three-year employment agreement with
Joseph A. Gemmo to serve as Vice President and Chief Financial Officer of our
company. Pursuant to his employment agreement, Mr. Gemmo is entitled to receive
an initial annual base salary of $115,000. Effective August 1997, we increased
Mr. Gemmo's annual base salary to $130,000. Effective January 1, 1998 and
January 1, 2001, we increased Mr. Gemmo's annual base salary to $135,200 and
$139,256, respectively. On December 1, 1997, our Board of Directors authorized
us to reprice the options granted to Mr. Gemmo in August 1996 to purchase
100,000 shares of our Common Stock from $2.0625 to $1.28 per share, the market
price of our Common Stock at the time of repricing and to pay Mr. Gemmo a
minimum cash bonus of $50,000 in the event our company undergoes a "change of
control." In August 1999, Mr. Gemmo's employment agreement was renewed for an
additional three-year term.

1993 STOCK OPTION PLAN

         In November 1993, we adopted, and the stockholders approved, the 1993
Stock Option Plan pursuant to which we may grant to our employees options to
purchase up to 500,000 shares of our Common Stock. The options granted under the
1993 Stock Option Plan may be exercised during the ten-year period after they
are granted at an exercise price equal to the mean between the high and low
selling prices of our Common Stock on the TSE on the date of the grant. Options
granted to any person who beneficially owns ten percent (10%) or more of our
Common Stock may not be exercised after the fifth anniversary of the date of the
grant and must be granted at an exercise price equal to 110% of the market price
at the date of the grant. In May 1999, our Board of Directors terminated the
1993 Stock Option Plan for the purpose of granting additional stock options.
Termination of the 1993 Stock Option Plan will not affect options that were
granted prior to the termination date.

         As of March 15, 2001, options to purchase an aggregate of 422,000
shares of our Common Stock were outstanding under the 1993 Stock Option Plan.

1996 AND 1999 STOCK OPTION PLANS

         In October 1996, our then existing Board of Directors adopted, and the
stockholders approved, the 1996 Stock Option Plan. In May 1999, our Board of
Directors adopted, and in June 1999, the stockholders approved, the 1999 Stock
Option Plan.

         The maximum number of shares of our Common Stock that may be subject to
options under each of the 1996 and 1999 Stock Option Plans may not exceed an
aggregate of 1,000,000 shares. This number may be adjusted in certain events,
such as a stock split, reorganization or recapitalization. Our employees
(including officers and directors who are employees) and employees of our
company's subsidiaries are eligible for the grant of incentive options under the
1996 and 1999 Stock Option Plans. Directors who are not employees are not
eligible to receive incentive stock options, but may receive non-qualified
options. Options may also be granted to other persons, provided that such
options are non-qualified options. In the event of incentive options, the
aggregate fair market value of our Common Stock with respect to which such
options become first exercisable by the holder during any calendar year cannot
exceed $100,000. This limit does not apply to non-qualified options. To the
extent an option that otherwise would be an incentive option exceeds this
$100,000 threshold, it will be treated as a non-qualified option.

         In the case of an incentive option, the exercise price cannot be less
than the fair market value (as defined in the 1996 and 1999 Stock Option Plans)
of our Common Stock on the date the option is granted and, if an optionee is a
stockholder who beneficially owns 10% or more of our outstanding Common Stock,
the exercise price of incentive options may not be less than 110% of the fair
market


                                       15
<PAGE>

value of our Common Stock. The term of an option cannot exceed ten years and, in
the case of an optionee who owns 10% or more of the outstanding Common Stock,
cannot exceed five years.

         The 1996 and 1999 Stock Option Plans will terminate automatically and
no options may be granted more than ten years after the dates the 1996 and 1999
Stock Option Plans, respectively, were approved by our Board of Directors. The
1996 and 1999 Stock Option Plans may be terminated at any prior time by the
Board of Directors. Termination of the 1996 and 1999 Stock Option Plans will not
affect options that were granted prior to the termination date.

         As of March 15, 2001, options to purchase an aggregate of 927,629 and
400,000 shares of our Common Stock were outstanding under the 1996 and 1999
Stock Option Plans, respectively, and an aggregate of 618,080 shares were
reserved for the future issuance of stock options.

MANAGEMENT INCENTIVE PLAN

         In 2000, we adopted a management incentive plan for corporate officers
and key management employees for the purpose of awarding cash and stock bonuses
based on the achievement of certain predetermined goals. These goals are
established for each participant in the plan and are set by our Compensation
Committee prior to the beginning of the year. These goals are based on a
participant's performance and may relate to a variety of factors reflecting our
objectives and performance and a participant's ability to contribute to the
overall success of our company within the context of the purposes of the plan,
our business plan and the aspects of our business which the participant's duties
involve.

         Bonuses awarded pursuant to the plan are based on a percentage of each
participant's base salary and the overall performance of our company during the
year. However, the amount of any award to a participant for any year shall not
exceed 50% of the participant's base salary, in the case of a participant who is
a corporate officer of the Company, or 25% of base salary, in the case of a
participant who is a key management employee. Further, if the aggregate amount
of all awards under the plan exceeds 10% of our net income for a particular
year, each award shall be proportionately reduced so that the aggregate amount
of all such awards does not exceed 10% of our net income for the year.

         Such goals were not met during 2000 and, accordingly, no bonuses were
 awarded under this plan.

ITEM 11  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain information as of March 15, 2001
regarding the beneficial ownership of our Common Stock by (A) each person known
by us to own beneficially more than 5% of our Common Stock, (B) each of our
directors, (C) each of our Named Executive Officers, and (D) all of our
executive officers and directors as a group (9 persons):
<TABLE>
<CAPTION>
                                                                         NUMBER OF SHARES                 PERCENTAGE
    NAME                                                              BENEFICIALLY OWNED (1)          BENEFICIALLY OWNED
    ----                                                              ----------------------          ------------------
<S>                                                                     <C>                          <C>
    Philip Rosner (2) .............................................         2,116,842 (3)(4)                 16.2%
    Joseph Raimondo (2) ...........................................             3,000 (5)                      *
    A. Gary Frumberg (2) ..........................................         1,338,007 (3)                    10.3%
    Richard R. Higgins ............................................           795,900                         6.1%
    Stanley Altschuler ............................................           878,000 (6)                     6.7%
    Sean Deson (2) ................................................           190,898 (7)(8)                  1.4%
    Werner F. Hiller (2) ..........................................           175,751 (7)(9)(10)              1.3%
    Irwin D. Simon (2) ............................................           140,000 (7)(9)                  1.1
    Ronald J. Dintemann (2) .......................................           117,111 (11)                     *
    Harvey F. Farber (2) ..........................................            65,600 (12)                     *
    Joseph A. Gemmo (2) ...........................................           150,100 (13)                     1.1%
    All  directors and executive officers as a group (9 persons) ..         4,297,309                         31.0%
</TABLE>
*        Less than 1%

(1)     As used in this table, a beneficial owner of a security includes any
        person who, directly or indirectly, through contract, arrangement,
        understanding, relationship or otherwise has or shares (i) the power to
        vote, or direct the voting of, such security or (ii) investment power
        which includes the power to dispose or to direct the disposition of such
        security. In addition, a person is deemed to be the beneficial owner of
        a security if that person has the right to acquire beneficial ownership
        of such security within 60 days of the date shown above.

(2)     The business address of each of Messrs. Rosner, Raimondo, Frumberg,
        Dintemann, Farber and Gemmo is c/o Technology Flavors & Fragrances,
        Inc., 10 Edison Street East, Amityville, New York 11701. The business
        address of Mr. Deson is c/o Deson & Co., 219 East 69th Street, Apt. 12D,
        New York, New York 10021. The business address of Mr. Hiller is 55
        Dugway, Watchung, New Jersey 07060. The business address of Mr. Simon is
        c/o The Hain Celestial Group, Inc., 50 Charles Lindbergh Boulevard,
        Uniondale, New York 11553.

(3)     Includes five-year options to purchase 33,333 shares of our Common Stock
        granted to each of Messrs. Rosner and Frumberg in June 1999 which are
        fully vested and excludes options to purchase 66,667 shares of our
        Common Stock granted to each that have not yet vested. Of such unvested
        options, options to purchase 33,333 shares will vest in each of 2001 and
        2002.

                                       16
<PAGE>

(4)     Includes 36,438 shares of our Common Stock owned by Mr. Rosner's wife.
        Mr. Rosner disclaims beneficial ownership of the shares owned by his
        wife.

(5)     Excludes ten-year options to purchase an aggregate of 100,000 shares of
        our Common Stock granted to Mr. Raimondo in 2000 that have not yet
        vested. Of such unvested options, options to purchase 26,666 shares will
        vest in 2001, 26,667 shares will vest in each of 2002 and 2003 and
        10,000 shares will vest in each of 2004 and 2005.

(6)     Includes 350,000 shares of Common Stock personally owned by Mr.
        Altschuler and 528,000 shares of Common Stock held by Strategic Growth
        International, or SGI, of which Mr. Altschuler is a 50% stockholder.
        Mr. Altschuler shares voting and dispositive power over the 528,000
        shares owned by SGI.

(7)     Includes ten-year options to purchase 100,000 shares of our Common Stock
        granted to each of Messrs. Deson, Hiller and Simon in June 1999 which
        are fully vested.

(8)     Includes ten-year options to purchase 80,000 shares of our Common Stock
        granted to Mr. Deson in June 1998 and an aggregate of 10,898 shares
        granted in 1999 which are fully vested and excludes options to purchase
        120,000 shares of our Common Stock that have not yet vested. Of such
        unvested options, options to purchase 40,000 shares will vest in each of
        2001 through 2003.

(9)     Includes ten-year options to purchase 40,000 shares of our Common Stock
        granted to each of Messrs. Hiller and Simon in January 1998 which are
        fully vested and excludes options to purchase 60,000 shares of our
        Common Stock that have not yet vested . Of such unvested options,
        options to purchase 20,000 shares will vest to each of Messrs. Hiller
        and Simon in each of 2001 through 2003.

(10)    Includes ten-year options to purchase 6,731 shares of our Common Stock
        granted to Mr. Hiller in April 1999 which are fully vested.

(11)    Includes ten-year options to purchase an aggregate of 98,000 shares of
        our Common Stock granted to Mr. Dintemann in April 1994, June 1997 and
        April 1999 which are fully vested and excludes options to purchase
        22,000 shares that have not yet vested. Of such unvested options,
        options to purchase 5,000 shares will vest in 2001, 9,000 shares will
        vest in 2002, and options to purchase 4,000 shares will vest in each of
        2003 and 2004.

(l2)    Includes ten-year options to purchase an aggregate of 58,000 shares of
        our Common Stock granted to Mr. Farber in January 1996, February 1997
        and April 1999 which are fully vested and excludes options to purchase
        22,000 shares that have not yet vested. Of such unvested options,
        options to purchase 14,000 shares will vest in 2002, and options to
        purchase 4,000 shares will vest in each of 2003 and 2004.

(13)    Includes ten-year options to purchase an aggregate of 148,000 shares of
        our Common Stock granted to Mr. Gemmo in February 1997, December 1997
        and April 1999 which are fully vested and excludes options to purchase
        22,000 shares that have not yet vested. Of such unvested options,
        options to purchase 14,000 shares will vest in 2002, and options to
        purchase 4,000 shares will vest in each of 2003 and 2004

                                       17
<PAGE>

ITEM 12  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         In October 1999, we began selling flavor products to The Hain Food
Group, Inc., which changed its name to The Hain Celestial Group, Inc. ("Hain")
in May 2000. Irwin D. Simon, a director of our company, is the Chairman,
President and Chief Executive Officer of Hain. Our sales to Hain totaled
approximately $594,000 for 2000 and $213,000 for the fourth quarter of 1999. We
believe such sales were made at arms-length and at competitive prices.

         The following table sets forth certain information regarding loans made
by us to our directors and executive officers which were outstanding as of
December 31, 2000. The notes bore interest based at a bank's prime rate through
December 31, 2000. On March 15, 1999, the loans were amended to change the
maturity date from December 31, 1999 to March 15, 2002. On January 23, 2001, the
notes were further amended to change the maturity date from March 15, 2002 to
April 1, 2002, and the interest component on the principal balance of the loans
was eliminated effective January 1, 2001. As of March 15, 2001, the aggregate
indebtedness owed to us under these loans was $125,035, including accrued
interest through December 31, 2000. These loans are secured by shares of our
Common Stock that are owned by Messrs. Rosner and Frumberg, and are due in equal
annual installments through March 15, 2002. On June 1, 2000, Mr. Rosner
surrendered to us 100,000 shares of our Common Stock owned by him which resulted
in a partial reduction of his outstanding loan to us of $141,300. On February 1,
2000, Mr. Frumberg surrendered to us 25,000 shares of our Common Stock owned by
him which resulted in a partial reduction of his outstanding loan to us of
$40,250.


                                       18
<PAGE>

                       TABLE OF INDEBTEDNESS OF DIRECTORS
                        AND EXECUTIVE OFFICERS OF COMPANY
<TABLE>
<CAPTION>

                                                                                        AMOUNT                      AMOUNT
                                                                                     OUTSTANDING                  OUTSTANDING
                                                              INVOLVEMENT               AS OF                        AS OF
NAME AND PRINCIPAL POSITION                                    OF ISSUER         DECEMBER 31, 2000(1)          MARCH 15, 2001(1)
---------------------------                                    ---------         --------------------          -----------------
<S>                                                          <C>                     <C>                          <C>
Philip Rosner, Chairman of the Board and
    Chief Executive Officer................................    Lender                 $77,153                      $77,153

A. Gary Frumberg, Director and
    Executive Vice President...............................    Lender                  47,882                      47,882
</TABLE>


(1)  Includes accrued interest through December 31, 2000.

TRANSACTIONS WITH RELATED PARTIES

         In 2000 and 1999, we sold fragrance products to Scent-A-Vision, Inc., a
company owned by Ms. Sharon Christie who is the spouse of Mr. Philip Rosner, our
Chairman and Chief Executive Officer. Our sales to Scent-A-Vision for years 2000
and 1999 were approximately $64,000 and $335,000, respectively, which we believe
were competitive with other available sources for such fragrance products.


                                       19
<PAGE>


ITEM 13  EXHIBITS AND REPORTS ON FORM 8-K.

         (a) The exhibits listed below are filed as part of this Annual Report
on Form 10-KSB.
<TABLE>
<CAPTION>
  EXHIBIT
   NUMBER                                           DOCUMENT
   ------                                           --------
<S>        <C>
      3.1   Certificate of Incorporation and By-Laws (A).
      4.1   Form of Certificate Representing Share of Common Stock (A).
     10.1   Lease for Property in Amityville, New York (A).
     10.2   1993 Stock Option Plan (A).
     10.3   1996 Stock Option Plan (incorporated by reference from our 1996 definitive proxy statement with respect to our 1996
            Annual Meeting of Stockholders, held October 30, 1996, as filed with the Commission on September 25, 1996).
     10.4   1999 Stock Option Plan (incorporated by reference from our 1999 definitive proxy statement with respect to the 1999
            Annual Meeting of Stockholders, held June 24, 1999, as filed with the Commission on May 28, 1999).
     10.5   Promissory Note of Philip Rosner issued to us, dated March 15, 1999 (filed as Exhibit 10.25 to Form 10-KSB, Annual
            Report of our company for the year ended December 31, 1998 and incorporated herein by reference).
     10.6   Stock Pledge Agreement, dated March 15, 1999, between us and Philip Rosner (filed as Exhibit 10.26 to Form 10-KSB,
            Annual Report of our company for the year ended December 31, 1998 and incorporated herein by reference).
     10.7   Promissory Note of A. Gary Frumberg issued to us, dated March 15, 1999 (filed as Exhibit 10.27 to Form 10-KSB, Annual
            Report of our company for the year ended December 31, 1998 and incorporated herein by reference).
     10.8   Stock Pledge Agreement, dated March 15, 1999, between us and A. Gary Frumberg (filed as Exhibit 10.28 to Form 10-KSB,
            Annual Report of our company for the year ended December 31, 1998 and incorporated herein by reference).
     10.9   Asset Purchase Agreement, dated August 25, 1998, between us, Mane-Seafla, Inc. and Mane USA, Inc. (filed as Exhibit 2.1
            to Form 8-K, Current Report of our company, filed with the Commission on September 9, 1998).
    10.10   Loan and Security Agreement, dated June 29, 1999, between us and Foothill Capital Corporation (filed as Exhibit 10.1 to
            Form 8-K, Current Report of our company, filed with the Commission on July 16, 1999).
    10.11   Unconditional Guaranty, dated June 29, 1999 between us and Foothill Capital Corporation (filed as Exhibit 10.2 to Form
            8-K, Current Report of our company, filed with the Commission on July 16, 1999).
    10.12   Unconditional Guaranty, dated June 29, 1999 between Technology Flavors & Fragrances S.A. and Foothill Capital
            Corporation (filed as Exhibit 10.3 to Form 8-K, Current Report of our company, filed with the Commission on July 16,
            1999).
    *21.1   Subsidiaries.
    *23.1   Consent of Ernst & Young LLP.
</TABLE>


(A)    Incorporated by reference to our Registration Statement on Form 10-SB
       (File No. 0-26682) filed with the Commission on August 28, 1995.

* Filed in this Annual Report on Form 10-KSB.

         (b) Reports on Form 8-K.
             None

                                       20
<PAGE>



                                   SIGNATURES

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

                                     TECHNOLOGY FLAVORS & FRAGRANCES, INC.

Dated: March 29, 2001                By:        /s/ JOSEPH A. GEMMO
                                        ---------------------------------------
                                                    Joseph A. Gemmo
                                      Vice President and Chief Financial Officer

         In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>

               SIGNATURE                                                 TITLE                                           DATE
               ---------                                                 -----                                           ----
<S>                                             <C>                                                        <C>
            /s/ PHILIP ROSNER                        Chairman of the Board, Chief Executive Officer and            March 29, 2001
--------------------------------------------         Director (Principal Executive Officer)
                Philip Rosner

            /s/ JOSEPH RAIMONDO                      President and Chief Operating Officer                         March 29, 2001
--------------------------------------------
                Joseph Raimondo

            /s/ A.GARY FRUMBERG                      Executive Vice President and Director                         March 29, 2001
--------------------------------------------
                A. Gary Frumberg

            /s/ JOSEPH A. GEMMO                      Vice President, Chief Financial Officer, Secretary and        March 29, 2001
--------------------------------------------         Treasurer (Principal Financial and Accounting Officer)
                Joseph A. Gemmo

            /s/ SEAN DESON                           Director                                                      March 29, 2001
--------------------------------------------
                Sean Deson

            /s/ WERNER F. HILLER                     Director                                                      March 29, 2001
--------------------------------------------
                Werner F. Hiller

            /s/ IRWIN D. SIMON                       Director                                                      March 29, 2001
--------------------------------------------
                Irwin D. Simon
</TABLE>


                                  21
<PAGE>

                      INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                       PAGE
                                                                                       ----
<S>                                                                                    <C>
                  Report of Independent Auditors                                         F-2


                  Consolidated Balance Sheets as of December 31, 2000 and 1999           F-3


                  Consolidated Statements of Operations for the Years Ended
                  December 31, 2000 and 1999                                             F-4


                  Consolidated Statements of Stockholders' Equity for the Years
                  Ended December 31, 2000 and 1999                                       F-5


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


                  Notes to Consolidated Financial Statements for the Years Ended
                  December 31, 2000 and 1999                                             F-7
</TABLE>




                                       F-1


<PAGE>



                        REPORT OF INDEPENDENT AUDITORS

To the Stockholders and Board of Directors of
Technology Flavors & Fragrances, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of Technology
Flavors & Fragrances, Inc. and Subsidiaries as of December 31, 2000 and 1999 and
the related consolidated statements of operations, stockholders' equity, and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with 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 consolidated financial position of Technology Flavors
& Fragrances, Inc. and Subsidiaries at December 31, 2000 and 1999, and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with accounting principles generally accepted in the United
States.

                                                    /s/ ERNST & YOUNG LLP

Melville, New York
March 19, 2001

                                       F-2


<PAGE>


                         TECHNOLOGY FLAVORS & FRAGRANCES, INC.
                                CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                                            AT DECEMBER 31,
                                                                                ------------------------------
                                                                                    2000                1999
                                                                                ----------------  ----------------
<S>                                                                             <C>               <C>
                                     ASSETS

Current assets:
   Cash and cash equivalents                                                    $    195,387      $    154,535
   Receivables (less allowance for doubtful accounts of $103,000 in 2000
     and $115,000 in 1999) (Note 3)                                                2,953,620         3,270,571
   Inventories (Note 4)                                                            2,829,974         2,634,997
   Prepaid expenses and other current assets                                          92,750            54,995
                                                                                ------------      ------------
       Total current assets                                                        6,071,731         6,115,098

Fixed assets, net (Note 5)                                                           547,441           577,482
Intangible assets, net (Note 6)                                                      770,235           945,903
Other assets                                                                         145,346           382,708
Notes receivable from related parties (Note 7)                                       125,035           292,101
                                                                                ------------      ------------
       Total assets                                                             $  7,659,788      $  8,313,292
                                                                                ============      ============
                                  LIABILITIES
Current liabilities:
   Accounts payable                                                             $  1,180,905      $  1,565,575
   Accrued expenses                                                                   77,053           301,775
   Revolving credit facility (Note 8)                                              1,340,499         1,544,607
   Current portion of capital lease obligations (Note 11)                             22,066            39,354
                                                                                ------------      ------------
       Total current liabilities                                                   2,620,523         3,451,311

Capital lease obligations (Note 11)                                                   58,107            35,359
Deferred credits                                                                      71,447           334,087
                                                                                ------------      ------------
                                                                                   2,750,077         3,820,757
Commitments (Note 11)

                              STOCKHOLDERS' EQUITY

Common stock:
   $ .01 par value, authorized 20,000,000 shares, issued 13,019,348 and
   12,549,223 shares, respectively                                                   130,193           125,492
Paid-in capital                                                                   10,363,542        10,222,544
Accumulated deficit                                                               (5,584,024)       (5,855,501)
                                                                                ------------      ------------
       Total stockholders' equity                                                  4,909,711         4,492,535
                                                                                ------------      ------------
       Total liabilities and stockholders' equity                               $  7,659,788      $  8,313,292
                                                                                ============      ============
</TABLE>


                                   See accompanying notes.

                                              F-3

<PAGE>


                       TECHNOLOGY FLAVORS & FRAGRANCES, INC.
                       CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                             FOR THE YEARS ENDED DECEMBER 31,
                                                           ----------------------------------
                                                               2000                 1999
                                                           --------------     ----------------
<S>                                                         <C>               <C>
Net sales                                                   $ 15,333,888      $ 14,769,130
Cost of sales                                                  9,011,486         8,450,923
                                                            ------------      ------------
       Gross profit                                            6,322,402         6,318,207
                                                            ------------      ------------
Operating expenses:
   Selling                                                     2,529,733         2,315,251
   General and administrative                                  1,986,891         1,670,492
   Research and development                                    1,365,891         1,306,695
   Amortization                                                  219,886           181,006
                                                            ------------      ------------
       Total operating expenses                                6,102,401         5,473,444
                                                            ------------      ------------
Income from operations                                           220,001           844,763

Interest expense, net                                           (170,010)         (160,383)
                                                            ------------      ------------
Income before provision for income taxes                          49,991           684,380
Provision for income taxes                                       (26,884)          (27,559)
                                                            ------------      ------------
Income from continuing operations                                 23,107           656,821

Gain on disposal of discontinued operations,
   net of income taxes (Note 9)                                  248,370              --
                                                            ------------      ------------
Net income                                                  $    271,477      $    656,821
                                                            ============      ============
Net income per common share - basic and diluted:
   Continuing operations                                    $        .00      $        .05
   Discontinued operations                                           .02              --
                                                            ------------      ------------
Net income per common share - basic and diluted             $        .02      $        .05
                                                            ============      ============
Weighted average common shares outstanding                    12,607,224        12,499,223
                                                            ============      ============
</TABLE>


                                       See accompanying notes.


                                                 F-4


<PAGE>

                         TECHNOLOGY FLAVORS & FRAGRANCES, INC.
                        CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                         COMMON STOCK                PAID-IN      (ACCUMULATED)
                                                     SHARES         AMOUNT           CAPITAL          DEFICIT)           TOTAL
                                                -----------     ------------     ------------     ------------     -------------
<S>                                            <C>            <C>              <C>              <C>              <C>
Balance at December 31, 1998                     12,449,223     $    124,492     $ 10,178,015     $ (6,512,322)    $  3,790,185

Exercise  of stock options                          100,000            1,000           44,529                            45,529

Net income                                                                                             656,821          656,821
                                                 ----------     ------------     ------------     ------------     ------------
Balance at December 31, 1999                     12,549,223          125,492       10,222,544       (5,855,501)       4,492,535

Exercise of stock options                            25,958              259           25,657                            25,916

Repurchase of common stock
  by the Company and retired                        (25,833)            (258)         (25,575)                          (25,833)

Options issued for consulting services                                                 13,500                            13,500

Common stock surrendered by officers
  in connection with partial repayment
  of officers' loans and retired                   (125,000)          (1,250)        (180,300)                         (181,550)

Exercise of stock warrants, net of
  expenses                                          595,000            5,950          307,716                           313,666

Net income                                                                                             271,477          271,477
                                                 ----------     ------------     ------------     ------------     ------------
Balance at December 31, 2000                     13,019,348     $    130,193     $ 10,363,542     $ (5,584,024)    $  4,909,711
                                                 ==========     ============     ============     ============     ============
</TABLE>



                                See accompanying notes.

                                            F-5


<PAGE>



              TECHNOLOGY FLAVORS & FRAGRANCES, INC.
              CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                         FOR THE YEARS ENDED DECEMBER 31,
                                                                        ---------------------------------
                                                                             2000                 1999
                                                                        -------------     ---------------
<S>                                                                     <C>                <C>
Cash flows from operating activities:
  Net income                                                            $    271,477       $    656,821
  Adjustments to reconcile net income to net cash provided by
   (used in) operating activities:
     Gain on disposal of discontinued operations                            (261,370)              --
     Depreciation and amortization                                           398,388            338,166
     Accrued interest on notes receivable                                    (14,484)           (22,369)
     Provision for bad debts                                                  24,232               --
     Deferred rent                                                            12,360             12,360
     Stock option grants for outside services                                 13,500               --
     Changes in assets and liabilities:
       Accounts receivable                                                   292,719           (743,842)
       Inventories                                                          (194,977)           167,287
       Prepaid expenses and other current assets                             (37,755)           (22,238)
       Other assets                                                          179,514            (42,374)
       Accounts payable                                                     (384,670)           (56,312)
       Accrued expenses                                                     (224,722)          (309,375)
                                                                        ------------       ------------
     Net cash provided by (used in) operating activities                      74,212            (21,876)
                                                                        ------------       ------------
Cash flows from investing activities:
  Purchase of fixed assets                                                  (102,157)          (130,131)
                                                                        ------------       ------------
    Net cash used in investing activities                                   (102,157)          (130,131)
                                                                        ------------       ------------
Cash flows from financing activities:
  Proceeds from revolving credit facility                                 15,330,000          3,185,412
  Repayment of revolving credit facility                                 (15,534,108)        (3,218,439)
  Proceeds from exercise of stock options and
    warrants, net of expenses                                                339,582             58,000
  Repurchase of common stock                                                 (25,883)              --
  Payment of capital lease obligations                                       (40,844)           (35,465)
                                                                        ------------       ------------
    Net cash provided by (used in) financing activities                       68,797            (10,492)
                                                                        ------------       ------------
Increase (decrease) in cash                                                   40,852           (162,499)
Cash-beginning of year                                                       154,535            317,034
                                                                        ------------       ------------
Cash-end of year                                                        $    195,387       $    154,535
                                                                        ============       ============
Supplemental information:
   Cash paid during the year for interest                               $    200,000       $    201,000
                                                                        ============       ============
   Cash paid during the year for income taxes                           $     51,000       $     35,000
                                                                        ============       ============
</TABLE>


Supplemental disclosures of non-cash investing and financing activities:

   Equipment acquired under capital lease obligations amounted to $46,304 in
   2000 and $35,000 in 1999.

   Surrender of Company Common Stock owned by officers as partial paydown of
   notes receivable of $181,550.

                            See accompanying notes.

                                    F-6

<PAGE>

                      TECHNOLOGY FLAVORS & FRAGRANCES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


1.  DESCRIPTION OF BUSINESS

    Technology Flavors & Fragrances, Inc. (the "Company", "us", "we" or "our")
is a manufacturer of flavor and fragrance products used to provide or enhance
flavors or fragrances in a wide variety of consumer and industrial products.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CONSOLIDATION

   The accompanying consolidated financial statements include the accounts of
the Company and our wholly-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.

INVENTORIES

   Inventories are stated at the lower of cost, determined using the first-in,
first-out method, or market. The cost of raw materials is determined using the
specific identification method.

SHIPPING AND HANDLING COSTS

   Shipping and handling costs are included in cost of sales.

FIXED ASSETS

   Machinery and equipment, including assets acquired under capital leases, are
recorded at cost and depreciated over their estimated useful lives ranging from
5 to 10 years, using the straight-line method. Leasehold improvements are
amortized over the shorter of the lease term or estimated useful life of the
assets. Maintenance and repairs are charged to expense as incurred and renewals
and improvements, which extend the life of the assets, are capitalized.

LONG-LIVED ASSETS

   Amortization of intangible assets is provided using the straight-line method
over the estimated useful lives of the assets ranging from 10 to 13 years. The
carrying values of intangible and other long-lived assets are periodically
reviewed to determine if any impairment indicators are present. If it is
determined that such indicators are present and the review indicates that the
assets will not be fully recoverable, based on undiscounted estimated cash flows
over the remaining amortization and depreciation period, their carrying values
are reduced to estimated fair value. Impairment indicators include, among other
conditions, cash flow deficits, an historic or anticipated decline in revenue or
operating profit, adverse legal or regulatory developments, accumulation of
costs significantly in excess of amounts originally expected to acquire the
asset and a material decrease in the fair value of some or all of the assets.
Assets are grouped at the lowest level for which there are identifiable cash
flows that are largely independent of the cash flows generated by other asset
groups. No such impairment existed at December 31, 2000.

RESEARCH AND DEVELOPMENT COSTS

   Research and development costs are expensed as incurred.

INCOME TAXES

   We recognize deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred tax assets and liabilities are
determined based on the difference between the financial statement and tax bases
of assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount currently
estimated to be realized.

                                          F-7
<PAGE>


                      TECHNOLOGY FLAVORS & FRAGRANCES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

FOREIGN CURRENCY TRANSLATION

   The financial condition and results of operations of our subsidiaries are
measured using local currency as the functional currency. Balance sheet accounts
are translated at the exchange rate in effect at the end of the year, and income
statement accounts are translated at the average rate of exchange prevailing
during the year. Translation adjustments arising from differences in exchange
rates between years have not been material.

EARNINGS PER SHARE

   Basic net income per share was calculated using the weighted average number
of shares of common stock outstanding during the year. Diluted net income per
share was calculated using the weighted average common and common stock
equivalents that were outstanding during the year. The effect of common stock
equivalents for 2000 and 1999 was not material and, thus, diluted net income per
share is the same as basic earnings per share.

REVENUE RECOGNITION

   We recognize revenue when inventory is shipped and title legally transfers to
the purchaser.

ADVERTISING COSTS

   We expense advertising costs as incurred. Advertising costs were
approximately $11,000 in 2000 and $22,000 in 1999.

USE OF ESTIMATES

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

FAIR VALUE OF FINANCIAL INSTRUMENTS

   Cash and cash equivalents, notes receivable and long-term debt are reflected
in the accompanying consolidated balance sheets at amounts considered by
management to reasonably approximate fair value. We estimate the fair value of
our fixed rate note receivable and long-term debt by using a discounted cash
flow analysis.

3.  RECEIVABLES
<TABLE>
<CAPTION>

                                                                  DECEMBER 31,        DECEMBER 31,
                                                                      2000                1999
                                                                  ------------        ------------
<S>                                                                <C>                 <C>
Trade........................................................      $2,749,735          $3,025,695
Alcohol drawbacks............................................         177,827             213,267
Other........................................................          26,058              31,609
                                                                   ----------          ----------
                                                                   $2,953,620          $3,270,571
                                                                   ==========          ==========
</TABLE>

    Included within trade receivables at December 31, 2000 and 1999 is an amount
due from a party related to our executive and principal shareholder in the
amount of approximately $215,000 and $342,000, respectively.

                                      F-8


<PAGE>

                      TECHNOLOGY FLAVORS & FRAGRANCES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


4.       INVENTORIES
<TABLE>
<CAPTION>

                                                                           DECEMBER 31,       DECEMBER 31,
                                                                               2000               1999
                                                                         ------------        ------------
<S>                                                                       <C>                <C>
Raw materials.......................................................      $1,582,272         $1,427,698
Finished goods......................................................       1,247,702          1,207,299
                                                                          ----------         ----------
                                                                          $2,829,974         $2,634,997
                                                                          ==========         ==========
</TABLE>

5.   FIXED ASSETS
<TABLE>
<CAPTION>

                                                                           DECEMBER 31,       DECEMBER 31,
                                                                               2000               1999
                                                                          ------------       -------------
<S>                                                                        <C>                <C>
Machinery and equipment.............................................       $1,269,051         $1,202,101
Leasehold improvements..............................................          686,773            621,252
Furniture and fixtures..............................................          544,361            528,371
                                                                           ----------        -----------
                                                                            2,500,185          2,351,724
Less: accumulated depreciation and amortization.....................       (1,952,744)        (1,774,242)
                                                                           ----------        -----------
                                                                            $ 547,441          $ 577,482
                                                                           ==========        ===========
</TABLE>

   Depreciation and amortization expense relating to fixed assets for the years
ended December 31, 2000 and 1999 was approximately $179,000 and $157,000,
respectively.

6.       INTANGIBLE ASSETS
<TABLE>
<CAPTION>

                                                                                     DECEMBER 31,      DECEMBER 31,
                                                                                         2000              1999
                                                                                    ------------       -------------
<S>                                                                                  <C>               <C>
           Formulations.........................................................     $1,048,979        $1,048,979
           Customer lists.......................................................         86,105            86,105
                                                                                     ----------        ----------
                                                                                      1,135,084         1,135,084
           Less: accumulated amortization.......................................       (364,849)         (189,181)
                                                                                     ----------        ----------
                                                                                      $ 770,235         $ 945,903
                                                                                     ==========        ==========
</TABLE>


     Amortization expense relating to intangible assets for the years ended
December 31, 2000 and 1999 was approximately $176,000 and $162,000,
respectively.

                                               F-9

<PAGE>

                      TECHNOLOGY FLAVORS & FRAGRANCES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999



7.  NOTES RECEIVABLE FROM RELATED PARTIES

   Notes receivable from related parties consist of amounts owed by two
executives and principal shareholders and are secured by shares of our Common
Stock owned by them. The notes bore interest at a bank's prime rate through
December 31, 2000 and are due in annual installments through March 15, 2002. On
March 15, 1999, the notes were amended to change the maturity date from December
31, 1999 to March 15, 2002. On January 23, 2001, the notes were further amended
to change the maturity date from March 15, 2002 to April 1, 2002, and cease
interest on the principal balance effective January 1, 2001. On June 1, 2000,
one executive surrendered to us 100,000 shares of our Common Stock owned by him
which resulted in a partial reduction of his outstanding loan to us of $141,300.
On February 1, 2000, the other executive surrendered to us 25,000 shares of our
Common Stock owned by him which resulted in a partial reduction of his loan to
us of $40,250.

8.  REVOLVING CREDIT FACILITY

     On June 29, 1999, we entered into a Loan and Security Agreement (the "Loan
Agreement") with a lender providing for a three-year $3,000,000 revolving credit
facility (the "1999 Credit Facility"). Outstanding borrowings under the 1999
Credit Facility initially bore interest at a rate of three quarters of one
percent (0.75%) in excess of a prime or "reference" lending rate, and is subject
to certain adjustments based upon our financial performance. Effective January
1, 2000, the interest rate was reduced to one quarter of one percent (0.25%)
above the bank's reference rate. Borrowings under the 1999 Credit Facility are
subject to certain eligibility requirements relating to our receivables and
inventories and the discretion of the lender. Outstanding borrowings are secured
by substantially all of our assets, including our product formulations. During
the term of the 1999 Credit Facility, we must comply with certain financial and
other covenants contained in the Loan Agreement including maintaining tangible
net worth of at least $1,750,000, achieving not less than 75% of our projected
pre-tax income for the upcoming year, and incurring expenditures for capital
assets of not more than $450,000 for the year. At December 31, 2000,
approximately $1,340,000 was outstanding and $1,236,000 was available for
additional borrowings under the 1999 Credit Facility. At that date, outstanding
borrowings bore interest at 9. 5% per annum.

9.  DISCONTINUED OPERATIONS

   In August 1998, we sold substantially all of the assets and certain
liabilities relating to our Seasoning Division. Of the total purchase price
paid, $275,000 was held in escrow to secure certain of our indemnification
obligations and was recorded in "other assets" while the corresponding deferred
gain was recorded in "deferred credits". During 2000, $261,370 of the escrowed
funds was received by the Company and recorded as a gain on disposal of
discontinued operations, net of $13,000 of income taxes.

                                   F-10


<PAGE>


                      TECHNOLOGY FLAVORS & FRAGRANCES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


10.  INCOME TAXES

     The income tax provision for the years ended December 31, 2000 and 1999
principally represents current state franchise taxes and Federal alternative
minimum tax.

     A reconciliation of the income tax provision of continuing operations at
the statutory rate to income tax expense at the annualized effective tax rate
for the years ended December 31, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
                                                                                     2000            1999
                                                                                 ---------       ---------
<S>                                                                              <C>             <C>
Computed tax provision at Federal statutory rate ..........................      $  16,997       $ 232,689
State and local income tax provision net of Federal tax benefit ...........          9,267           8,097
Non-deductible officers' life insurance premiums and travel and
     entertainment expenses ...............................................          8,167           9,175
Utilization of net operating loss carryforward ............................        (17,026)       (241,680)
Alternative Minimum Tax ...................................................          9,479          19,278
                                                                                 ---------       ---------
Provision for income taxes ................................................      $  26,884       $  27,559
                                                                                 =========       =========
</TABLE>

     The components of deferred taxes as of December 31, 2000 and 1999 are as
follows:
<TABLE>
<CAPTION>
                                                                2000            1999
                                                            ---------         ---------
<S>                                                       <C>               <C>
Deferred tax assets:
  Accounts receivable ..............................      $    39,140       $    39,900
  Capitalized inventory costs ......................           23,002            20,259
  Depreciation .....................................           69,549           107,455
  Intangibles ......................................          610,603           680,167
  Net operating loss carryforward - U.S. ...........          190,920           492,431
  Net operating loss carryforward - Foreign ........          388,197           256,156
  AMT credit .......................................           48,062            38,583
  Other ............................................           27,150            (3,439)
                                                               ------            ------
                                                            1,396,623         1,631,512
Valuation allowance ................................       (1,396,623)       (1,631,512)
                                                           ----------        ----------
Net deferred tax asset .............................      $      --         $      --
                                                           ==========        ==========
</TABLE>



      The Company has net operating loss carryforwards relating to U.S.
operations of approximately $500,000 which expire at various dates from 2007
through 2012.

                                    F-11

<PAGE>

                      TECHNOLOGY FLAVORS & FRAGRANCES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


11.  COMMITMENTS

LEASE OBLIGATIONS

   Our facility lease includes a provision for annual increases in rental
payments. We recorded rent expense using the straight-line method based on the
minimum rent payable over the 12-year period of the lease.

   Future minimum commitments under noncancelable operating and capital leases
are as follows:
<TABLE>
<CAPTION>

  ,                                                                    OPERATING        CAPITAL
                                                                        LEASES           LEASES
                                                                        ------           ------
<S>                                                               <C>               <C>
    2001 .........................................................      253,857           $35,468
    2002 .........................................................      238,174            27,368
    2003 .........................................................      219,527            27,368
    2004 .........................................................      198,966            23,516
    2005 .........................................................      189,432              --
    Thereafter ...................................................       63,144              --
                                                                    -----------       -----------
    Total minimum lease payments .................................  $ 1,163,100           113,720
                                                                    ===========
    Amounts representing interest ................................                        (33,547)
                                                                                      -----------
    Present value of net minimum lease payments (including
            current portion of $22,066) ..........................                    $    80,173
                                                                                      ===========
</TABLE>


     Rental expense for the years ended December 31, 2000 and 1999 was $311,000
and $307,000, respectively.

EMPLOYMENT CONTRACTS

We are obligated under employment contracts providing for annual compensation
expiring on various dates through August 2002. Certain other contracts call for
us to pay additional compensation based on sales volumes. Future fixed
compensation under these contracts, not including commissions based upon sales
volume, as of December 31, 2000, amounted to $1,192,000 in 2001 and $213,000 in
2002.

12.  STOCKHOLDERS' EQUITY

NON-EMPLOYEE STOCK OPTION GRANTS

   In June 2000, we issued stock options to purchase 100,000 shares of our
Common Stock to an investor relations consulting firm. The expense related to
such options in 2000 amounted to $13,500. Of such options, 66,667 shares were
cancelled in November 2000 and 33,333 shares expired in February 2001.

                                    F-12


<PAGE>



                      TECHNOLOGY FLAVORS & FRAGRANCES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


STOCK OPTION PLANS

   We granted stock options under three separate plans: the 1999 Stock Option
Plan, the 1996 Stock Option Plan and the 1993 Stock Option Plan.

   Under the 1999, 1996 and 1993 Option Plans, our employees (including officers
and directors who are employees) and the employees of our subsidiaries are
eligible for the grant of incentive options to purchase up to a maximum of
1,000,000, 1,000,000 and 500,000 shares, respectively, which vest immediately or
ratably over periods ranging from one to five years. Options may also be granted
to other persons, provided that such options are non-qualified options. In the
case of an incentive option, the exercise price cannot be less than the fair
market value of the shares on the date the option is granted, and if an optionee
is a shareholder who beneficially owns 10% or more of our outstanding Common
Stock, the exercise price of the incentive options cannot be less than 110% of
such fair market value. The exercise price of non-qualified options shall not be
less than the fair market value of our Common Stock at the date of grant and
shall be determined by our Board of Directors or the Committee appointed by the
Board of Directors. In May 1999, our Board of Directors terminated the 1993
Option Plan and no further option grants may be made under such Plan provided,
however, that such termination will not affect options that were granted prior
to the date of termination.

   The following table summarizes stock option activity for the years ended
December 31, 2000 and 1999:
<TABLE>
<CAPTION>
                                                           2000                          1999
                                                 --------------------------  ----------------------------
                                                              WEIGHTED AVG.                WEIGHTED AVG.
                                                 OPTIONS     EXERCISE PRICE    OPTIONS      EXERCISE PRICE
                                                 -------     --------------    -------      --------------
<S>                                              <C>             <C>           <C>           <C>
Outstanding at beginning of year .........       1,674,462       $1.21         932,500       $1.00
Granted ..................................         200,000        1.36       1,152,629        1.20
Exercised ................................         (25,958)       1.00        (100,000)        .58
Cancelled ................................         (70,542)       1.23        (310,667)        .75
                                                 ---------       -----       ---------       -----
Outstanding at end of year ...............       1,777,962       $1.23       1,674,462       $1.21
                                                 =========       =====       =========       =====
Exercisable at end of year ...............                       $1.24         786,962       $ .81
                                                                 =====       =========       =====
Weighted average fair value of options
  granted during the year ................                       $ .82                       $ .71
                                                                 =====                       =====
</TABLE>

     The following table summarizes information on stock options outstanding at
December 31, 2000:
<TABLE>
<CAPTION>
                                                          OPTIONS OUTSTANDING                           OPTIONS EXERCISABLE
                                              ---------------------------------------------            -------------------------
                                                       WEIGHTED AVERAGE
                                                      REMAINING CONTRACTUAL     WEIGHTED AVERAGE                WEIGHTED AVERAGE
EXERCISE PRICE                              SHARES        LIFE IN YEARS         EXERCISE PRICE          SHARES    EXERCISE PRICE
--------------                          ----------    ---------------------     ----------------        ------  ----------------
<S>                                    <C>                 <C>                    <C>               <C>           <C>
$   .58 -  .97..................           652,462             6.8                    $ .88             315,462       $ .81
   1.06 - 1.44..................           525,500             6.3                     1.30             399,100        1.32
   1.47 - 1.88..................           600,000             8.4                     1.57             396,666        1.51
   ----   -----                          ---------             ---                                    ---------
                                         1,777,962             7.2                                    1,111,228
                                         =========             ===                                    =========
</TABLE>


     At December 31, 2000, 618,080 shares of our Common Stock were reserved for
the future issuance of stock options under the Plans.

                                      F-13


<PAGE>


                      TECHNOLOGY FLAVORS & FRAGRANCES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

WARRANTS

     The following table summarizes information on warrants outstanding at
December 31, 2000:
<TABLE>
<CAPTION>
                        WARRANTS               EXERCISE           WARRANTS
                       OUTSTANDING              PRICE            EXERCISABLE          EXPIRATION
                       -----------              -----            -----------          ----------
<S>                      <C>                    <C>                <C>            <C>
                         450,000                $2.40              450,000           October 2001
                         156,250                 2.70              156,250           October 2001
                         -------                                   -------
                         606,250                                   606,250
                         =======                                   =======
</TABLE>

STOCK BASED COMPENSATION PLANS

     We continue to follow Accounting Principles Board Opinion No. 25,
"ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES" ("APB 25") and related
interpretations in accounting for our stock-based compensation plans. Under APB
25, because the exercise price of our stock options equals the market price of
the underlying stock on the date of the grant, no compensation expense is
recognized.

     Pro forma information regarding net income and net income per share is
determined as if we had accounted for our stock options granted subsequent to
December 31, 1994, using the fair value method estimated at the date of the
grant based upon a Black-Scholes option pricing model with the following
weighted-average assumptions: risk-free interest rate of 6.2% and 5.6%; no
dividend yield; volatility factor of the expected market price of our Common
Stock of 65% and 61%; and a weighted-average expected life of the options of 7.5
years at December 31, 2000 and 1999, respectively.

   The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because our stock options have characteristics significantly different from
those of traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of the fair
value of our employee stock options.

   For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. Our pro forma
information is as follows:
<TABLE>
<CAPTION>
                                                                                    2000              1999
                                                                                    ----              ----
<S>                                                                           <C>                 <C>
Income from continuing operations as reported ........................        $    23,107         $   656,821
Pro forma (loss) income from continuing operations ...................           (128,098)            216,899
Net income per common share from continuing operations as reported

   -basic and diluted ................................................                .00                 .05
Pro forma net (loss) income per common share from continuing
   operations - basic and diluted.....................................               (.01)                .02
</TABLE>

   The FASB No. 123 method of accounting has not been applied to options granted
prior to January 1, 1996. As a result, the pro forma compensation cost may not
be representative of that to be expected in future years.

13.  EMPLOYEE SAVINGS PLAN

     We have an employee savings and retirement plan covering all non-union
employees meeting certain age and length of service requirements, pursuant to
Section 401k of the Internal Revenue Code. Participants may contribute a
percentage of compensation, but not in excess of the maximum allowable by law.

   The Plan provides for a voluntary matching contribution by us which is one
half of the amount contributed by the participant up to a maximum of 3% per
annum. Matching contributions of 1% per annum amounted to $27,000 and $18,000
for the years ended December 31, 2000 and 1999, respectively. Employees vest in
the employer contribution at the rate of 25% per year.

                             F-14

<PAGE>

                      TECHNOLOGY FLAVORS & FRAGRANCES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


14.  CONCENTRATIONS OF CREDIT RISK

   Financial instruments, which potentially subject us to concentrations of
credit risk, are primarily trade accounts receivable. Ongoing credit evaluation
of customers' financial condition are performed and generally no collateral is
required. Credit losses have typically been within management's expectations.

   For the years ended December 31, 2000 and 1999, no one customer accounted for
more than 10% of our net sales. At December 31, 2000 and 1999, five customers
accounted for approximately 37% and 36% of the accounts receivable balance,
respectively.

   For the years ended December 31, 2000 and 1999, export sales were
approximately 28% and 27%, respectively, of total sales. Our export sales are
made to entities located primarily in Canada and in Central and South America.
Receivables from such foreign sales at December 31, 2000 and 1999 amounted to
42% and 43%, respectively, of total accounts receivable.

   Cash and cash equivalent balances are held primarily at one financial
institution and may, at times, exceed the amount insurable. We believe we
mitigate risk by investing in or through a major financial institution.

15.  RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
     PRINCIPLES

   These financial statements have been prepared in accordance with accounting
principles generally accepted in the United States. During 2000 and 1999, there
were no material items which would be required to be recorded in order for our
financial statements to be in accordance with accounting principles generally
accepted in Canada.

                                F-15