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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

|/x/ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. 
|--- | -----------------------------------------------------------------------------------------
|    |                                                                                          
|    | For the Quarterly Period Ended November 25, 2000                                         
|    |                                                                                          
|OR 
|    |                                                                                          
|    | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.

Commission File Number333-33751

ARCHIBALD CANDY CORPORATION

Incorporated in the

IRS Employer IdentificationState of Illinois

No. 36-0743280


1137
West Jackson Boulevard
Chicago, Illinois 60607
(312) 243-2700

Indicate
by check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filings requirements for the past
90 days. Yes /x/  No / /

As
of January 8, 2001, the number of shares outstanding of the registrant's Common Stock was 19,200, all of which were held by Fannie May Holdings, Inc.

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ARCHIBALD CANDY CORPORATION    FORM 10-Q    FOR THE QUARTER ENDED NOVEMBER 25, 2000  INDEX

PART IFINANCIAL INFORMATION:

|                                                                                               |                                                           | PAGE NO.
|---------------------------------------------------------------------------------------------- | --------------------------------------------------------- | --------
|ITEM 1  FINANCIAL STATEMENTS (UNAUDITED)                                                      |                                                           |         
|                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS                     |         
|                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS           |         
|                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |         
|                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS           |         
|                                                                                               | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS      |         
|ITEM 2  MANAGEMENT'S DISCUSSION AND ANAYLSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |                                                           | 13      
|ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            |                                                           | 15      
|PART II  OTHER INFORMATION:                                                                   |                                                           |         
|ITEM 6  EXHIBITS AND REPORTS ON FORM 8-K                                                      |                                                           | 16      
|SIGNATURES                                                                                     |                                                           | 17      

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PART IFINANCIAL INFORMATION:

ITEM
1FINANCIAL STATEMENTS

Archibald Candy Corporation  (A Wholly Owned Subsidiary of Fannie May Holdings, Inc.)  Condensed Consolidated Balance Sheets  As of November 25, 2000 and August 26, 2000  (In thousands)

|                                                     |                                              | November 25,
2000                      |         | August 26,
2000 |  
|---------------------------------------------------- | -------------------------------------------- | -------------------------------------- | ------- | --------------- | -
|
|ASSETS                                               |                                              |                                        |         |                 |  
|Current assets:                                      |                                              |                                        |         |                 |  
|                                                     | Cash and cash equivalents                    |                                        | $       | 4,863           |  
|                                                     | Accounts receivable, net                     |                                        |         | 7,290           |  
|                                                     | Inventories                                  |                                        |         | 51,087          |  
|                                                     | Prepaid expenses and other current assets    |                                        |         | 3,870           |  
|                                                     |                                              |                                        |         |                 |  
|Total current assets                                 |                                              |                                        | 67,110  |                 |  
|Property, plant, and equipment, net                  |                                              |                                        | 50,390  |                 |  
|Goodwill, net                                        |                                              |                                        | 70,443  |                 |  
|Noncompete agreements and other intangibles, net     |                                              |                                        | 756     |                 |  
|Deferred financing fees, net                         |                                              |                                        | 6,789   |                 |  
|Investment in joint venture                          |                                              |                                        | 1,728   |                 |  
|Other assets                                         |                                              |                                        | 1,202   |                 |  
|                                                     |                                              |                                        |         |                 |  
|Total assets                                         |                                              | $                                      | 198,418 |                 | $
|                                                     |                                              |                                        |         |                 |  
|LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)       |                                              |                                        |         |                 |  
|Current liabilities:                                 |                                              |                                        |         |                 |  
|                                                     | Revolving line of credit                     |                                        | $       | 28,000          |  
|                                                     | Accounts payable                             |                                        |         | 25,861          |  
|                                                     | Accrued liabilities                          |                                        |         | 5,006           |  
|                                                     | Payroll and related liabilities              |                                        |         | 3,653           |  
|                                                     | Accrued interest                             |                                        |         | 7,711           |  
|                                                     | Current portion of capital lease obligations |                                        |         | 43              |  
|                                                     |                                              |                                        |         |                 |  
|Total current liabilities                            |                                              |                                        | 70,274  |                 |  
|Due to affiliate                                     |                                              |                                        | 40      |                 |  
|Long-term debt                                       |                                              |                                        | 170,000 |                 |  
|Deferred rent                                        |                                              |                                        | 1,357   |                 |  
|Capital lease obligations, less current portion      |                                              |                                        | 8       |                 |  
|Shareholder's equity (deficit):                      |                                              |                                        |         |                 |  
|                                                     | Common stock, $0.01 par value:               |                                        |         |                 |  
|                                                     |                                              | Authorized  25,000 shares             |         |                 |  
|                                                     |                                              | Issued and outstanding  19,200 shares |         |                 |  
|                                                     | Additional paid-in-capital                   |                                        |         | 18,700          |  
|                                                     | Accumulated deficit                          |                                        |         | (61,865         | )
|                                                     | Other comprehensive income                   |                                        |         | (96             | )
|                                                     |                                              |                                        |         |                 |  
|Total shareholder's equity (deficit)                 |                                              |                                        | (43,261 | )               |  
|                                                     |                                              |                                        |         |                 |  
|Total liabilities and shareholder's equity (deficit) |                                              | $                                      | 198,418 |                 | $
|                                                     |                                              |                                        |         |                 |  

See
accompanying notes.

1

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Archibald Candy Corporation  (A Wholly Owned Subsidiary of Fannie May Holdings, Inc.)  Condensed Consolidated Statements of Operations (Unaudited)  For the Three Months Ended November 25, 2000 and
November 27, 1999  (In thousands)

|                                                                                       |  | Three Months Ended |       
|-------------------------------------------------------------------------------------- |  | ------------------ | ------
|
|Net sales                                                                              |  | $                  | 52,273
|Cost of sales, excluding depreciation                                                  |  |                    | 19,951
|Selling, general, and administrative expenses, excluding depreciation and amortization |  |                    | 32,004
|Depreciation and amortization expense                                                  |  |                    | 3,313 
|Amortization of goodwill and other intangibles                                         |  |                    | 1,052 
|Share of loss in joint venture                                                         |  |                    | 63    
|Management fees and other fees                                                         |  |                    | 131   
|                                                                                       |  |                    |       
|Operating loss                                                                         |  |                    | (4,241
|Other (income) and expense:                                                            |  |                    |       
|Interest expense                                                                       |  |                    | 5,058 
|Interest income                                                                        |  |                    |      
|Other income and expense                                                               |  |                    | (46   
|                                                                                       |  |                    |       
|Loss before income taxes                                                               |  |                    | (9,253
|Provision for income taxes                                                             |  |                    | 25    
|                                                                                       |  |                    |       
|Net loss                                                                               |  | $                  | (9,278
|                                                                                       |  |                    |       

See
accompanying notes.

2

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Archibald Candy Corporation  (A Wholly Owned Subsidiary of Fannie May Holdings, Inc.)  Condensed Consolidated Statements of Comprehensive Income (Unaudited)  For the Three Months Ended November 25,
2000 and November 27, 1999  (In thousands)

|                                   |                                          | Three Months Ended |       
|---------------------------------- | ---------------------------------------- | ------------------ | ------
|
|Net loss                           |                                          | $                  | (9,278
|Other comprehensive income (loss): |                                          |                    |       
|                                   | Foreign currency translation adjustments |                    |       
|                                   |                                          |                    |       
|Comprehensive loss                 |                                          | $                  | (9,527
|                                   |                                          |                    |       

See
accompanying notes.

3

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Archibald Candy Corporation  (A Wholly Owned Subsidiary of Fannie May Holdings, Inc.)  Condensed Consolidated Statements of Cash Flow (Unaudited)  For the Three Months Ended November 25, 2000 and
November 27, 1999  (In thousands)

|                                                                            |                                              | Three Months Ended                        |       
|--------------------------------------------------------------------------- | -------------------------------------------- | ----------------------------------------- | ------
|
|OPERATING ACTIVITIES                                                        |                                              |                                           |       
|Net loss                                                                    |                                              | $                                         | (9,278
|Adjustments to reconcile net loss to net cash used in operating activities: |                                              |                                           |       
|                                                                            | Depreciation and amortization                |                                           |       
|                                                                            | Share of loss in joint venture               |                                           |       
|                                                                            | Changes in operating assets and liabilities: |                                           |       
|                                                                            |                                              | Accounts receivable, net                  |       
|                                                                            |                                              | Inventories                               |       
|                                                                            |                                              | Prepaid expenses and other current assets |       
|                                                                            |                                              | Other assets                              |       
|                                                                            |                                              | Accounts payable and accrued liabilities  |       
|                                                                            |                                              |                                           |       
|Net cash used in operating activities                                       |                                              |                                           | (6,120
|INVESTING ACTIVITIES                                                        |                                              |                                           |       
|Purchase of property, plant, and equipment                                  |                                              |                                           | (1,313
|                                                                            |                                              |                                           |       
|Net cash used in investing activities                                       |                                              |                                           | (1,313
|FINANCING ACTIVITIES                                                        |                                              |                                           |       
|Net borrowings under revolving line of credit                               |                                              |                                           | 9,500 
|Principal payments of capital lease obligations                             |                                              |                                           | (3    
|Costs related to financing                                                  |                                              |                                           | (72   
|                                                                            |                                              |                                           |       
|Net cash provided by financing activities                                   |                                              |                                           | 9,425 
|Effect of exchange rates on cash                                            |                                              |                                           | (249  
|Net increase (decrease) in cash and cash equivalents                        |                                              |                                           | 1,743 
|Cash and cash equivalents beginning of period                               |                                              |                                           | 3,120 
|                                                                            |                                              |                                           |       
|Cash and cash equivalents end of period                                     |                                              | $                                         | 4,863 
|                                                                            |                                              |                                           |       
|SUPPLEMENTAL SCHEDULE OF CASH TRANSACTIONS                                  |                                              |                                           |       
|Interest paid                                                               |                                              | $                                         | 595   
|                                                                            |                                              |                                           |       

See
accompanying notes.

4

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Archibald Candy Corporation  (A Wholly Owned Subsidiary of Fannie May Holdings, Inc.)  Notes to Condensed Consolidated Financial Statements (Unaudited)  November 25, 2000

Note 1.  DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Archibald Candy Corporation ("Archibald") and its subsidiaries (collectively, the "Company") are manufacturers and retailers of boxed chocolates and other
confectionery items. The Company sells its Fannie May, Fanny Farmer, Sweet Factory and Laura Secord candies in over 700 Company-operated stores and in approximately 9,300 third-party retail outlets as
well as through quantity order, mail order and fundraising programs in the United States and Canada. The Company is a wholly owned subsidiary of Fannie May Holdings, Inc.

The
accompanying consolidated financial statements include the accounts of Archibald and its subsidiaries, Sweet Factory Group, Inc. and its three wholly-owned subsidiaries and
Archibald Candy (Canada) Corporation. All significant intercompany balances and transactions have been eliminated.

The
interim financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations,
although the Company believes these disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments necessary for fair presentation for the
periods presented have been reflected and are of a normal recurring nature. These financial statements should be read in conjunction with the financial statements and notes thereto for the year ended
August 26, 2000. Certain amounts in the 2000 financial statements have been reclassified to conform with the 2001 presentation.

Results
of operations for the period from August 27, 2000 to November 25, 2000 are not necessarily indicative of the results that may be achieved for the entire year.

Note 2.  INVENTORIES

Inventories at November 25, 2000 and August 26, 2000 are comprised of the following:

November 25,
2000

August 26,
2000Raw materials

$
16,806

$
14,492Work in process


353


304Finished goods


33,928


27,991$
51,087

$
42,787


Note 3.  LONG-TERM DEBT

Long-term debt at November 25, 2000 and August 26, 2000 is comprised of $170 million of 10.25% senior secured notes due
July 1, 2004.

Note 4.  INCOME TAXES

The provision for income taxes differs from the amount of income tax benefit computed by applying the United States federal income tax rate due to the benefit
of the net operating losses that were not recognized in prior periods.

5

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Archibald Candy Corporation  (A Wholly Owned Subsidiary of Fannie May Holdings, Inc.)  Notes to Condensed Consolidated Financial Statements (Unaudited)  November 25, 2000

Note 5.  GUARANTOR SUBSIDIARIES

The Company's obligations under its senior secured notes due 2004 are fully and unconditionally guaranteed on a senior secured, joint and several basis by each
of the Company's subsidiaries (collectively, the "Guarantor Subsidiaries"). The Company directly or indirectly wholly owns each of the Guarantor Subsidiaries. None of the Company's subsidiaries is
subject to any restriction on its ability to pay dividends or make distributions to the Company. The following condensed consolidating financial information illustrates the composition of the Company
and the Guarantor Subsidiaries as of and for certain dates and periods. Separate financial statements of the respective Guarantor Subsidiaries have not been provided because the Company's management
has determined that such additional information would not be useful in assessing the financial composition of the Guarantor Subsidiaries.

6

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Archibald Candy Corporation  (A Wholly Owned Subsidiary of Fannie May Holdings, Inc.)  Condensed Consolidating Balance Sheet  As of November 25, 2000  (Unaudited)  (In thousands)

|                                                     |                                      | Archibald Candy
Corporation               |         | Guarantor
Subsidiaries |        | Eliminations |         | Consolidated |        
|---------------------------------------------------- | ------------------------------------ | ----------------------------------------- | ------- | ---------------------- | ------ | ------------ | ------- | ------------ | -------
|ASSETS                                               |                                      |                                           |         |                        |        |              |         |              |        
|                                                     | Current assets:                      |                                           |         |                        |        |              |         |              |        
|                                                     |                                      | Cash and cash equivalents                 |         | $                      | 2,209  |              | $       | 2,654        |        
|                                                     |                                      | Accounts receivable, net                  |         |                        | 6,535  |              |         | 755          |        
|                                                     |                                      | Inventories                               |         |                        | 42,256 |              |         | 8,831        |        
|                                                     |                                      | Prepaid expenses and other current assets |         |                        | 3,055  |              |         | 815          |        
|                                                     |                                      |                                           |         |                        |        |              |         |              |        
|                                                     | Total current assets                 |                                           |         | 54,055                 |        |              | 13,055  |              |        
|                                                     | Property, plant and equipment, net   |                                           |         | 25,004                 |        |              | 25,386  |              |        
|                                                     | Intercompany                         |                                           |         | 34,129                 |        |              | (34,129 | )            |        
|                                                     | Investment in subsidiaries           |                                           |         | 11,352                 |        |              |        |              |        
|                                                     | Other assets                         |                                           |         | 67,527                 |        |              | 13,391  |              |        
|                                                     |                                      |                                           |         |                        |        |              |         |              |        
|Total assets                                         |                                      | $                                         | 192,067 |                        | $      | 17,703       |         | $            | (11,352
|                                                     |                                      |                                           |         |                        |        |              |         |              |        
|LIABILITIES AND SHAREHOLDER'S                        |                                      |                                           |         |                        |        |              |         |              |        
|EQUITY (DEFICIT)                                     |                                      |                                           |         |                        |        |              |         |              |        
|                                                     | Current liabilities:                 |                                           |         |                        |        |              |         |              |        
|                                                     |                                      | Revolving line of credit                  |         | $                      | 28,000 |              | $       |             |        
|                                                     |                                      | Accounts payable                          |         |                        | 23,607 |              |         | 2,254        |        
|                                                     |                                      | Other current liabilities                 |         |                        | 13,586 |              |         | 2,827        |        
|                                                     |                                      |                                           |         |                        |        |              |         |              |        
|                                                     | Total current liabilities            |                                           |         | 65,193                 |        |              | 5,081   |              |        
|                                                     | Long-term debt, less current portion |                                           |         | 170,000                |        |              | 8       |              |        
|                                                     | Other noncurrent liabilities         |                                           |         | 40                     |        |              | 1,357   |              |        
|Total shareholder's equity (deficit)                 |                                      |                                           | (43,166 | )                      |        | 11,257       |         |              | (11,352
|                                                     |                                      |                                           |         |                        |        |              |         |              |        
|Total liabilities and shareholder's equity (deficit) |                                      | $                                         | 192,067 |                        | $      | 17,703       |         | $            | (11,352
|                                                     |                                      |                                           |         |                        |        |              |         |              |        

7

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Archibald Candy Corporation  (A Wholly Owned Subsidiary of Fannie May Holdings, Inc.)  Condensed Consolidating Balance Sheet  As of August 26, 2000  (In thousands)

|                                    |                                      | Archibald Candy
Corporation               |         | Guarantor
Subsidiaries |        | Eliminations |         | Consolidated |        
|----------------------------------- | ------------------------------------ | ----------------------------------------- | ------- | ---------------------- | ------ | ------------ | ------- | ------------ | -------
|ASSETS                              |                                      |                                           |         |                        |        |              |         |              |        
|                                    | Current assets:                      |                                           |         |                        |        |              |         |              |        
|                                    |                                      | Cash and cash equivalents                 |         | $                      | 800    |              | $       | 2,320        |        
|                                    |                                      | Accounts receivable, net                  |         |                        | 1,114  |              |         | 319          |        
|                                    |                                      | Inventories                               |         |                        | 35,925 |              |         | 6,862        |        
|                                    |                                      | Prepaid expenses and other current assets |         |                        | 2,194  |              |         | 1,161        |        
|                                    |                                      |                                           |         |                        |        |              |         |              |        
|                                    | Total current assets                 |                                           |         | 40,033                 |        |              | 10,662  |              |        
|                                    | Property, plant and equipment, net   |                                           |         | 25,492                 |        |              | 26,657  |              |        
|                                    | Intercompany                         |                                           |         | 29,110                 |        |              | (29,110 | )            |        
|                                    | Investment in subsidiaries           |                                           |         | 14,660                 |        |              |        |              |        
|                                    | Other assets                         |                                           |         | 68,538                 |        |              | 13,481  |              |        
|                                    |                                      |                                           |         |                        |        |              |         |              |        
|Total assets                        |                                      | $                                         | 177,833 |                        | $      | 21,690       |         | $            | (14,660
|                                    |                                      |                                           |         |                        |        |              |         |              |        
|LIABILITIES AND SHAREHOLDER'S       |                                      |                                           |         |                        |        |              |         |              |        
|EQUITY (DEFICIT)                    |                                      |                                           |         |                        |        |              |         |              |        
|                                    | Current liabilities:                 |                                           |         |                        |        |              |         |              |        
|                                    |                                      | Revolving line of credit                  |         | $                      | 18,500 |              | $       |             |        
|                                    |                                      | Accounts payable                          |         |                        | 14,589 |              |         | 2,541        |        
|                                    |                                      | Other current liabilities                 |         |                        | 8,591  |              |         | 2,851        |        
|                                    |                                      |                                           |         |                        |        |              |         |              |        
|                                    | Total current liabilities            |                                           |         | 41,680                 |        |              | 5,392   |              |        
|                                    | Long-term debt                       |                                           |         | 170,000                |        |              | 11      |              |        
|                                    | Other noncurrent liabilities         |                                           |         | 40                     |        |              | 1,474   |              |        
|                                    | Total shareholder's equity (deficit) |                                           |         | (33,887                | )      |              | 14,813  |              |        
|                                    |                                      |                                           |         |                        |        |              |         |              |        
|Total liabilities and shareholder's |                                      |                                           |         |                        |        |              |         |              |        
|                                    | equity (deficit)                     |                                           | $       | 177,833                |        | $            | 21,690  |              | $      
|                                    |                                      |                                           |         |                        |        |              |         |              |        

8

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Archibald Candy Corporation  (A Wholly Owned Subsidiary of Fannie May Holdings, Inc.)  Consolidating Statement of Operations for the Three Months Ended November 25, 2000  (Unaudited)  (In thousands)

|                                                                                       |                           | Archibald Candy
Corporation |        | Guarantor
Subsidiaries |   | Eliminations |     | Consolidated |       
|-------------------------------------------------------------------------------------- | ------------------------- | --------------------------- | ------ | ---------------------- | - | ------------ | --- | ------------ | ------
|Net sales                                                                              |                           | $                           | 29,033 |                        | $ | 23,240       |     | $            |      
|Cost of sales, excluding depreciation                                                  |                           |                             | 11,435 |                        |   | 8,516        |     |              |      
|Selling, general, and administrative expenses, excluding depreciation and amortization |                           |                             | 15,962 |                        |   | 16,042       |     |              |      
|Depreciation and amortization expense                                                  |                           |                             | 1,780  |                        |   | 1,533        |     |              |      
|Amortization of goodwill and other intangibles                                         |                           |                             | 963    |                        |   | 89           |     |              |      
|Share of loss in joint venture                                                         |                           |                             |       |                        |   | 63           |     |              |      
|Management fees and other fees                                                         |                           |                             | 40     |                        |   | 91           |     |              |      
|                                                                                       |                           |                             |        |                        |   |              |     |              |       
|Operating loss                                                                         |                           |                             | (1,147 | )                      |   | (3,094       | )   |              |      
|Other (income) expense:                                                                |                           |                             |        |                        |   |              |     |              |       
|                                                                                       | Interest expense          |                             |        | 5,055                  |   |              | 213 |              |       
|                                                                                       | Interest income           |                             |        | (210                   | ) |              |    |              |       
|                                                                                       | Other income and expenses |                             |        | (45                    | ) |              | (1  | )            |       
|Equity in loss of subsidiaries                                                         |                           |                             | 3,308  |                        |   |             |     |              | (3,308
|                                                                                       |                           |                             |        |                        |   |              |     |              |       
|Income (loss) before income taxes                                                      |                           |                             | (9,255 | )                      |   | (3,306       | )   |              | 3,308 
|Provision for income taxes                                                             |                           |                             | 23     |                        |   | 2            |     |              |      
|                                                                                       |                           |                             |        |                        |   |              |     |              |       
|Net income (loss)                                                                      |                           | $                           | (9,278 | )                      | $ | (3,308       | )   | $            | 3,308 
|                                                                                       |                           |                             |        |                        |   |              |     |              |       

9

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Archibald Candy Corporation  (A Wholly Owned Subsidiary of Fannie May Holdings, Inc.)  Consolidating Statement of Operations for the Three Months Ended November 27, 1999  (Unaudited)  (In thousands)

|                                                                                       |                           | Archibald Candy
Corporation |        | Guarantor
Subsidiaries |   | Eliminations |      | Consolidated |       
|-------------------------------------------------------------------------------------- | ------------------------- | --------------------------- | ------ | ---------------------- | - | ------------ | ---- | ------------ | ------
|Net sales                                                                              |                           | $                           | 28,932 |                        | $ | 25,501       |      | $            |      
|Cost of sales, excluding depreciation                                                  |                           |                             | 11,830 |                        |   | 9,285        |      |              | (108  
|Selling, general, and administrative expenses, excluding depreciation and amortization |                           |                             | 16,142 |                        |   | 17,373       |      |              |      
|Depreciation and amortization expense                                                  |                           |                             | 1,303  |                        |   | 1,841        |      |              |      
|Amortization of goodwill and other intangibles                                         |                           |                             | 1,119  |                        |   | 149          |      |              |      
|Share of loss in joint venture                                                         |                           |                             |       |                        |   | 60           |      |              |      
|Management fees and other fees                                                         |                           |                             | 133    |                        |   |             |      |              |      
|                                                                                       |                           |                             |        |                        |   |              |      |              |       
|Operating income (loss)                                                                |                           |                             | (1,595 | )                      |   | (3,207       | )    |              | 108   
|Other (income) expense:                                                                |                           |                             |        |                        |   |              |      |              |       
|                                                                                       | Interest expense          |                             |        | 4,554                  |   |              | 209  |              |       
|                                                                                       | Interest income           |                             |        | (211                   | ) |              |     |              |       
|                                                                                       | Other income and expenses |                             |        | (190                   | ) |              | (245 | )            |       
|Equity in loss of subsidiaries                                                         |                           |                             | 3,171  |                        |   |             |      |              | (3,171
|                                                                                       |                           |                             |        |                        |   |              |      |              |       
|Income (loss) before income taxes                                                      |                           |                             | (8,919 | )                      |   | (3,171       | )    |              | 3,171 
|Provision for income taxes                                                             |                           |                             | 21     |                        |   |             |      |              |      
|                                                                                       |                           |                             |        |                        |   |              |      |              |       
|Net income (loss)                                                                      |                           | $                           | (8,940 | )                      | $ | (3,171       | )    | $            | 3,171 
|                                                                                       |                           |                             |        |                        |   |              |      |              |       

10

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Archibald Candy Corporation  (A Wholly Owned Subsidiary of Fannie May Holdings, Inc.)  Consolidating Statement of Cash Flows for the Three Months Ended November 25, 2000  (Unaudited)  (In thousands)

|                                                                                                   |                                           | Archibald Candy
Corporation    |        | Guarantor
Subsidiaries |       | Eliminations |        | Consolidated |      
|-------------------------------------------------------------------------------------------------- | ----------------------------------------- | ------------------------------ | ------ | ---------------------- | ----- | ------------ | ------ | ------------ | -----
|OPERATING ACTIVITIES                                                                               |                                           |                                |        |                        |       |              |        |              |      
|Net income (loss)                                                                                  |                                           | $                              | (9,278 | )                      | $     | (3,308       | )      | $            | 3,308
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |                                           |                                |        |                        |       |              |        |              |      
|                                                                                                   |                                           | Depreciation and amortization  |        |                        | 2,743 |              |        | 1,622        |      
|                                                                                                   |                                           | Equity in loss of subsidiaries |        |                        | 3,308 |              |        |             |      
|                                                                                                   |                                           | Share of loss in joint venture |        |                        |      |              |        | 63           |      
|Changes in operating assets and liabilities:                                                       |                                           |                                |        |                        |       |              |        |              |      
|                                                                                                   | Accounts receivables, net                 |                                |        | (5,421                 | )     |              | (436   | )            |      
|                                                                                                   | Inventories                               |                                |        | (6,331                 | )     |              | (1,969 | )            |      
|                                                                                                   | Prepaid expenses and other current assets |                                |        | (861                   | )     |              | 346    |              |      
|                                                                                                   | Intercompany                              |                                |        | (5,019                 | )     |              | 5,019  |              |      
|                                                                                                   | Other assets                              |                                |        | (87                    | )     |              | (15    | )            |      
|                                                                                                   | Accounts payable and accrued liabilities  |                                |        | 14,012                 |       |              | (508   | )            |      
|                                                                                                   |                                           |                                |        |                        |       |              |        |              |      
|Net cash provided by (used in) operating activities                                                |                                           |                                | (6,934 | )                      |       | 814          |        |              |     
|INVESTING ACTIVITIES                                                                               |                                           |                                |        |                        |       |              |        |              |      
|Purchase of property, plant, and equipment                                                         |                                           |                                | (1,093 | )                      |       | (220         | )      |              |     
|                                                                                                   |                                           |                                |        |                        |       |              |        |              |      
|Net cash used in investing activities                                                              |                                           |                                | (1,093 | )                      |       | (220         | )      |              |     
|FINANCING ACTIVITIES                                                                               |                                           |                                |        |                        |       |              |        |              |      
|Net borrowings under revolving line of credit                                                      |                                           |                                | 9,500  |                        |       |             |        |              |     
|Principle payments of capital lease obligations                                                    |                                           |                                |       |                        |       | (3           | )      |              |     
|Costs related to refinancing                                                                       |                                           |                                | (64    | )                      |       | (8           | )      |              |     
|                                                                                                   |                                           |                                |        |                        |       |              |        |              |      
|Net cash provided by (used in) financing activities                                                |                                           |                                | 9,436  |                        |       | (11          | )      |              |     
|Effect of exchange rates on cash                                                                   |                                           |                                |       |                        |       | (249         | )      |              |     
|                                                                                                   |                                           |                                |        |                        |       |              |        |              |      
|Net increase in cash and cash equivalents                                                          |                                           |                                | 1,409  |                        |       | 334          |        |              |     
|Cash and cash equivalents beginning of period                                                      |                                           |                                | 800    |                        |       | 2,320        |        |              |     
|                                                                                                   |                                           |                                |        |                        |       |              |        |              |      
|Cash and cash equivalents end of period                                                            |                                           | $                              | 2,209  |                        | $     | 2,654        |        | $            |     
|                                                                                                   |                                           |                                |        |                        |       |              |        |              |      

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Archibald Candy Corporation  (A Wholly Owned Subsidiary of Fannie May Holdings, Inc.)  Consolidating Statement of Cash Flows for the Three Months Ended November 27, 1999  (Unaudited)  (In thousands)

|                                                                                                   |                                           | Archibald Candy
Corporation    |        | Guarantor
Subsidiaries |       | Eliminations |        | Consolidated |      
|-------------------------------------------------------------------------------------------------- | ----------------------------------------- | ------------------------------ | ------ | ---------------------- | ----- | ------------ | ------ | ------------ | -----
|OPERATING ACTIVITIES                                                                               |                                           |                                |        |                        |       |              |        |              |      
|Net income (loss)                                                                                  |                                           | $                              | (8,940 | )                      | $     | (3,171       | )      | $            | 3,171
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |                                           |                                |        |                        |       |              |        |              |      
|                                                                                                   |                                           | Depreciation and amortization  |        |                        | 2,422 |              |        | 1,990        |      
|                                                                                                   |                                           | Equity in loss of subsidiaries |        |                        | 3,171 |              |        |             |      
|                                                                                                   |                                           | Share of loss in joint venture |        |                        |      |              |        | 60           |      
|Changes in operating assets and liabilities:                                                       |                                           |                                |        |                        |       |              |        |              |      
|                                                                                                   | Accounts receivables, net                 |                                |        | (5,899                 | )     |              | 2,286  |              |      
|                                                                                                   | Inventories                               |                                |        | (4,889                 | )     |              | (3,822 | )            |      
|                                                                                                   | Prepaid expenses and other current assets |                                |        | (95                    | )     |              | (2,665 | )            |      
|                                                                                                   | Intercompany                              |                                |        | 231                    |       |              | (231   | )            |      
|                                                                                                   | Other assets                              |                                |        | (455                   | )     |              | (190   | )            |      
|                                                                                                   | Accounts payable and accrued liabilities  |                                |        | 7,642                  |       |              | 5,363  |              |      
|                                                                                                   |                                           |                                |        |                        |       |              |        |              |      
|Net cash used in operating activities                                                              |                                           |                                | (6,812 | )                      |       | (380         | )      |              |     
|INVESTING ACTIVITIES                                                                               |                                           |                                |        |                        |       |              |        |              |      
|Purchase of property, plant, and equipment                                                         |                                           |                                | (2,287 | )                      |       | (828         | )      |              |     
|                                                                                                   |                                           |                                |        |                        |       |              |        |              |      
|Net cash used in investing activities                                                              |                                           |                                | (2,287 | )                      |       | (828         | )      |              |     
|FINANCING ACTIVITIES                                                                               |                                           |                                |        |                        |       |              |        |              |      
|Net borrowings under revolving line of credit                                                      |                                           |                                | 9,000  |                        |       |             |        |              |     
|Principal payments of capital lease obligations                                                    |                                           |                                | (14    | )                      |       | (22          | )      |              |     
|Costs related to refinancing                                                                       |                                           |                                | (119   | )                      |       | (965         | )      |              |     
|                                                                                                   |                                           |                                |        |                        |       |              |        |              |      
|Net cash provided by (used in) financing activities                                                |                                           |                                | 8,867  |                        |       | (987         | )      |              |     
|Effect of exchange rates on cash                                                                   |                                           |                                |       |                        |       | 51           |        |              |     
|                                                                                                   |                                           |                                |        |                        |       |              |        |              |      
|Net decrease in cash and cash equivalents                                                          |                                           |                                | (232   | )                      |       | (2,144       | )      |              |     
|Cash and cash equivalents beginning of period                                                      |                                           |                                | 2,290  |                        |       | 4,618        |        |              |     
|                                                                                                   |                                           |                                |        |                        |       |              |        |              |      
|Cash and cash equivalents end of period                                                            |                                           | $                              | 2,058  |                        | $     | 2,474        |        | $            |     
|                                                                                                   |                                           |                                |        |                        |       |              |        |              |      

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ITEM 2  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

Some information included in the report may constitute forward-looking statements that involve a number of risks and uncertainties. From time to time,
information provided by the Company or statements made by its employees may contain other forward-looking statements. Factors that could cause actual results to differ materially from the
forward-looking statements include, but are not limited to: general economic conditions, including inflation, interest rate fluctuations, trade restrictions, and general debt levels; competitive
factors, including price pressures, technological development, and products offered by competitors; inventory risks due to changes in market demand or business strategies; and changes in effective tax
rates. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. The Company undertakes no obligation to publicly update or revise
any forward-looking statements, whether as a result of new information, future events, or otherwise.

THREE MONTHS ENDED NOVEMBER 25, 2000 COMPARED TO THE THREE MONTHS ENDED NOVEMBER 27, 1999.

NET SALES. Consolidated sales for the three months ended November 25, 2000 were $52.3 million, a decrease of $2.1 million, or 3.9%, from
$54.4 million for the three months ended November 27, 1999. Company-operated retail sales for the three months ended November 25, 2000 were $38.4, a decrease of
$1.1 million, or 2.8%, from $39.5 million for the three months ended November 27, 1999. This decrease was due primarily to the closing of 24 Sweet Factory stores since
November 27, 1999. Same store sales increased 3.1% for Fannie May/Fanny Farmer and 0.2% (2.8% in Canadian Dollars) for Laura Secord, which was offset by a 7.0% decline in same store sales for
Sweet Factory. Sales through the Company's third-party retail outlets and non-retail distribution channels declined $1.0 million to $13.9 million for the three months ended
November 25, 2000 from $14.9 million for the three months ended November 27, 1999. This decrease was due to the shift in the timing of shipments to third-party retailers from
November in 1999 to December in 2000.

GROSS
PROFIT. Gross profit for the three months ended November 25, 2000 was $32.3 million, a decrease of $1.1 million, or 3.3%, from $33.4 million for the
three months ended November 27, 1999. Gross profit as a percentage of net sales increased to 61.8% for the three months ended November 25, 2000 from 61.4% for the three months ended
November 27, 1999. The decrease in gross profit dollars
was due primarily to lower sales as discussed above. The increase in gross profit as a percentage of net sales was due primarily to a higher mix of Company-operated retail sales, which have higher
gross profit margins versus third-party retail and non-retail sales. Company-operated retail sales for the three months ended November 25, 2000 increased to 73.4% of total net sales
from 72.6% for the same period in the prior year.

SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses were $32.0 million for the three months ended November 25, 2000, a decrease of $1.5 million, or 4.5%,
from $33.5 million for the three months ended November 27, 1999. As a percentage of net sales, SG&A expenses decreased to 61.2% for the three months ended November 25, 2000 from
61.6% for the three months ended November 27 1999. This decrease was due primarily to lower administrative wages associated with a reduction in the Company's workforce in the fourth quarter of
fiscal year 2000 and lower wages and occupancy costs related to the closing of Sweet Factory stores.

EBITDA. Earnings
before interest, income taxes, depreciation, and the amortization (EBITDA) was $0.2 million for the three months ended November 25, 2000, as compared to
$0.1 million for the three months ended November 27, 1999. The Fannie May/Fanny Farmer business contributed $0.6 million of increased EBITDA, which was partially offset by a
decline of $0.5 million in Sweet Factory.

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OPERATING LOSS. Operating loss was $4.2 million for the three months ended November 25, 2000, a decrease of $0.5 million from a loss of $4.7 million for the
three months ended November 27, 1999. The decrease in operating loss was due primarily to a decline in selling, general and administrative expenses, partially offset by lower gross profit.

NET
LOSS. Net loss for the three months ended November 25, 2000 was $9.3 million, an increase of $0.4 million from $8.9 million for the three months ended
November 27, 1999. This increase was due primarily to additional interest expense and lower other income, offset by the decrease in operating loss.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities was $6.1 million for the three months ended November 25, 2000 compared to $7.2 million for the three
months ended November 27, 1999. Net loss was $9.3 million for the three months ended November 25, 2000 compared to $8.9 million for the three months ended
November 27, 1999. Net loss included non-cash depreciation and amortization charges of $4.4 million for the three months ended November 25, 2000 and for the three
months ended November 27, 1999.

Net
cash used in investing activities decreased to $1.3 million for the three months ended November 25, 2000 from $3.1 million for the three months ended
November 27, 1999 due to lower capital expenditures.

On
July 2, 1997, the Company entered into a revolving credit agreement. On July 30, 1999, the Company amended the revolving credit agreement and caused its Canadian
subsidiary, Archibald Candy (Canada) Corporation, to enter into an additional related revolving credit agreement with a Canadian affiliate of the agent under the original credit agreement. The two
credit agreements, as amended, work together to provide for revolving loans to the Company and Archibald Candy (Canada) Corporation in an aggregate principal amount at any time not to exceed the
lesser of (1) $30.0 million (until December 31, 2000, and $20 million thereafter) and (2) a borrowing base comprised primarily of a percentage of eligible accounts
receivable, eligible inventory and some of our owned real properties. Archibald Candy (Canada) Corporation may separately borrow up to an aggregate principal amount not to exceed the lesser of
(a) $5.0 million and (b) a borrowing base comprised primarily of a percentage of our eligible accounts receivable, eligible inventory and some of our owned real properties,
provided that the aggregate amount of revolving loans under the two credit agreements together may not exceed $30.0 million (until December 31, 2000 and $20 million thereafter).

On
July 25, 2000, the Company entered into an additional amendment of the credit agreements that increased the borrowing availability from $25 million to
$30 million until December 31, 2000 and to $20 million thereafter. The July 25, 2000 amendment required the borrowings to be paid in full during the period beginning
December 27, 2000 and ending December 31, 2000. Borrowings were repaid in full during this period. As of November 25, 2000, the cash balance was $4.9 million and the
Company had borrowings of $28.0 million and letters of credit in the amount of $0.2 million outstanding under the revolving credit agreements. As of November 25, 2000, the Company
had outstanding $170 million of 10.25% senior secured notes due July 1, 2004.

The
revolving credit agreements expire on April 15, 2001. The Company will need to extend or renew the credit agreements or obtain alternative financing to meet its seasonal
working capital needs and other requirements for the period after April 15, 2001, including interest payments on the senior secured notes.

In
addition, Fannie May Holdings, Inc. has certain dividend and redemption obligations for which the Company must generate the necessary funds. Holdings has the following three
classes of preferred stock: Senior Preferred Stock, Junior Class A PIK Preferred Stock and Junior Class B PIK Preferred

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Stock. The Senior Preferred Stock was issued in 1991 in the original face amount of $10.0 million and is subject to mandatory redemption on August 31, 2001. The redemption value of the
Senior Preferred Stock on August 31, 2001 will be approximately $12.7 million. The Junior Class A PIK Preferred Stock and the Junior Class B PIK Preferred Stock were issued
in 1991 in the original face amounts of $7.0 million and $0.7 million, respectively. Both classes of Junior PIK Preferred Stock are subject to mandatory redemption on November 1,
2001. The redemption value of the Junior Class A PIK Preferred Stock and the Junior Class B PIK Preferred Stock on November 1, 2001 will be approximately $15.1 million and
$1.5 million, respectively. As of November 25, 2000, affiliates of TCW Capital owned approximately 64% of the Junior Class A PIK Preferred Stock and affiliates of The Jordan
Company owned approximately 36% of the Junior Class A PIK Preferred Stock and approximately 80% of the Junior Class B PIK Preferred Stock.

In
order for Holdings to make such redemption payments, Holdings must cause the Company, to the extent permitted by the indenture, its credit agreements and law, to advance the
necessary funds to Holdings by dividend or otherwise. Such advances, if paid, will reduce the funds available for the Company's operations. To the extent that such funds are not available, whether due
to the restrictions set forth in the indenture or the Company's credit agreements or otherwise, the failure to make required redemption payments (1) would trigger various provisions of
Holdings' preferred and common stock, including provisions providing for a change of control of Holdings' and the Company's Boards of Directors and (2) could result in defaults under the
indenture and the Company's credit agreements.

In
light of the above debt service and dividend and redemption obligations, and in order to have sufficient funds to meet the Company's projected capital expenditures and working
capital requirements, the Company is exploring various alternatives, including extending and/or amending the credit agreements and refinancing the credit agreement, and pursuing other sources of
capital. While management believes the Company's financing requirements will be met, there can be no assurance that the Company will be able to accomplish any of these alternatives or that the Company
will be able to do so on favorable terms.

ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's operations are not currently subject to market risks of a material nature for interest rates, foreign currency rates, commodity prices or other
market price risks.

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PART IIOTHER INFORMATION:

ITEM 6  EXHIBITS AND REPORTS ON FORM 8-K

No reports were filed on form 8-k for the quarter ended November 25, 2000.

16

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SIGNATURE

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED
THEREUNTO DULY AUTHORIZED.

|                      |  | ARCHIBALD CANDY CORPORATION
|--------------------- |  | ---------------------------
|DATE: JANUARY 8, 2001 |  | By:                        

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