UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

[X]  ANNUAL   REPORT  UNDER  SECTION  13  0R  15(d) OF  THE  SECURITIES EXCHANGE
     ACT OF 1934

For the fiscal year ended APRIL 30, 2000
                          --------------

[ ]  TRANSITION  REPORT   UNDER   SECTION  13  0R  15(d)  OF   THE    SECURITIES
     EXCHANGE ACT OF 1934

                 For the transition period from               to
                                               ---------------  ----------------
                             Commission file number
                                                   -----------------------------

                                DIPPY FOODS, INC.
                 ----------------------------------------------
                 (Name of Small Business Issuer in its charter)


<TABLE>
<CAPTION>

<S>                                                                  <C>
                 Incorporated in the State of Nevada                             33-076348
                 ------------------------------------                            ---------
   (State or other jurisdiction of incorporation or organization)    (I.R.S. Employer Identification No.)

</TABLE>

16581 Channel Lane, Huntington Beach, California                92649
------------------------------------------------                -----
    (Address of principal executive offices)                  (Zip Code)

Issuer's telephone number  (714) 816-0150
                           --------------

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

           TITLE OF EACH CLASS         NAME OF EACH EXCHANGE ON WHICH REGISTERED

                  None                                  N/A
           -------------------         -----------------------------------------

Securities to be registered pursuant to Section 12(g) of the Act:

                        Common Stock - $0.001 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 last 12 months (or for such shorter
period that the  registrant was required to file such reports) YES [ X ] NO [ ],
and (2) has been subject to such filing  requirements  for  the  past  90  days.
YES [ ] NO [X]

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

State issuer's revenues for its most recent fiscal year.          $320,581.00

<PAGE>

DIPPY FOODS, INC.                  FORM 10-KSB                      PAGE 2 OF 19

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates  computed by reference to the price at which the common equity
was sold,  or the average bid and asked  price of such  common  equity,  as of a
specified date within the past 60 days: $9,347,560 AS OF AUGUST 8, 2000

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.

                      CLASS                        OUTSTANDING AT AUGUST 8, 2000
                      -----                        -----------------------------
         Common Stock - $0.001 par value                    19,579,266

Documents incorporated by reference:        NONE

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



<PAGE>

DIPPY FOODS, INC.                  FORM 10-KSB                      PAGE 3 OF 19

                    INFORMATION REQUIRED IN ANNUAL REPORTS OF

                       TRANSITIONAL SMALL BUSINESS ISSUERS

FORWARD LOOKING STATEMENTS

Management's  discussion and analysis of the Company's  financial  condition and
the results of its operations and other sections of this report contain  forward
looking statements that are based on the current beliefs and expectations of the
Company's management,  as well as assumptions made by, and information currently
available to, the Company's management. These statements include those regarding
general  economic and food industry  trends.  Because these  statements  involve
risks and  uncertainties,  actual  actions  and  strategies  and the  timing and
expected  results may differ  materially  from those expressed or implied by the
forward-looking  statements,  and the Company's  future results,  performance or
achievements could differ materially from those expressed in, or implied by, any
forward-looking  statements.  Future  events and  actual  results  could  differ
materially from those set forth in or underlying the forward-looking statements.

This Annual  Report on Form  10-KSB for the year ended  April 30, 2000  contains
"forward-looking"  statements within the meaning of the Federal securities laws.
These  forward-looking  statements  involve a number of risks and uncertainties,
including the  development  and market  acceptance  of products,  the ability to
secure  additional  sources  of  financing,  the  ability  to  reduce  operating
expenses, acquisition of processing equipment to reduce cost of sales, and other
factors  described  in the  Company's  filing with the  Securities  and Exchange
Commission. The results that the Company achieves may differ materially from any
forward-looking   statements   due  to  these  risks  and   uncertainties.   The
forward-looking  statements  in this annual  report on Form 10KSB for the fiscal
year ended April 30,  2000,  are subject to risks and  uncertainties  that could
cause actual  results to differ  materially  from this  results  expressed in or
implied by the statements contained in this report.

                                     PART I

ITEM 6.  DESCRIPTION OF BUSINESS.

(A)      BUSINESS DEVELOPMENT

Dippy Foods,  Inc. (the  "ISSUER") was  incorporated  as Sweetbrier  Corporation
under the laws of Nevada on February  23,  1998,  for the purpose of  developing
mineral properties.  Sweetbrier abandoned its mining claims and changed its name
to Dippy Foods,  Inc. on September 17, 1998,  upon entering into an agreement of
acquisition with Dippy Foods, Inc., a California  corporation in the business of
developing,  processing  and  distributing  packaged  dipping  foods for snacks,
school lunch programs,  and disaster relief programs  ("DIPPY CA"). Dippy CA was
incorporated  under  the laws of  California  on May 30,  1997,  and  began  its
operations in January 1998.  The Issuer and Dippy CA together are referred to as
the "COMPANY" in this Form 10-KSB.

The  Issuer  acquired  all of the  outstanding  6,638,533  shares of Dippy CA in
exchange for 3,219,266  shares of the Issuer under an agreement  dated September
17, 1998. For accounting purposes, the acquisition has been treated as a reverse
acquisition with Dippy CA as the accounting acquirer.  In a reverse acquisition,
the stock issued goes to the  accounting  acquirer.  Since  reverse  acquisition
accounting  is the reverse of normal  accounting,  the fair market  value of the
issuer's stock at the date of the acquisition is valued with a write up or write
down of the  issuer's  net assets  depending  on whether the stock is trading at
more or less than  book  value.  If the  stock's  fair  market  value  cannot be
determined,  and the cost is based on the fair market  value of the issuer's net
assets,  then goodwill is not  recognized  and the  transaction is valued at the
issuer's  net  tangible  assets.  The Issuer had no  tangible  assets and a very
limited trading history.  The fair market value of the stock issued could not be
determined.  Accordingly,  goodwill was not recognized and the  transaction  was
recorded as a recapitalization of Dippy CA.

Neither  the  Issuer  nor  Dippy  CA  have  been  involved  in  any  bankruptcy,
receivership   or   similar    proceedings,    have   undergone   any   material
reclassification,  merger  or  consolidation,  or have  purchased  or  sold  any
significant  assets not in the  ordinary  course of its  business  other than as
described in this Form 10-KSB.

(B)      BUSINESS OF THE COMPANY

PRINCIPAL PRODUCTS OR SERVICES AND THEIR MARKETS

The Company develops and produces packaged, nutritious, single-serving meals and
sells them to institutional  food-service  providers,  specifically schools. The
meals are packaged in single-serving, heat-sealed, recyclable trays with colored
labels

<PAGE>

DIPPY FOODS, INC.                  FORM 10-KSB                      PAGE 4 OF 19

listing the flavor and nutritional  information.  All meals are shelf-stable for
sixty days and require no freezing,  refrigeration,  heating or preparation, and
can be eaten without utensils. The products are known as Dippers.

The Company has four Dippers  meals--one nacho meal containing corn chips, salsa
and cheese sauce; and three fruit flavored meals  containing  cinnamon and sugar
corn chips,  peanut  butter,  and a specially  blended fruit sauce.  See Table 1
below for a list of these products.

The food service directors of each school district must ensure that meals served
under the  National  School Lunch and  Breakfast  Programs  meet each  program's
requirements.  Their  principal  reference  for  designing the meals is the Food
Buying Guide for Child Nutrition  Programs  published by the U.S.  Department of
Agriculture.  The Food Buying Guide is based on the latest  federal  regulations
and  meal  pattern  requirements.  The  standards  in the  guide  are  based  on
laboratory testing performed by the Human Nutrition Information Services and the
U.S. Department of Agriculture, and are consistent with the standards set by the
Food Safety and Inspection Service and the Food and Drug Administration.

Table 1.

<TABLE>
<CAPTION>

Minimum Requirements - Lunch Program Grades 4 - 12
-------------------------------------------------------------------------------------------------------------
                                       Pineapple        Cherry             Blueberry
Food Item         Food Buying Guide*   Dive             Rapids             Surf             Santa Fe Nachos
-------------------------------------------------------------------------------------------------------------
<S>               <C>                  <C>              <C>                <C>              <C>
                                       3 breads per     3 breads per       3 breads per     3 breads per
Bread             8 servings per week  serving          serving            serving          serving
Protein           2 oz.                2 oz             2 oz               2 oz             2 oz
Fruit and
Vegetables        3/4 cup              3/8 cup          3/8 cup            3/8 cup          3/8 cup
Dairy+            1/2 pint             0                0                  0                0
-------------------------------------------------------------------------------------------------------------
*These values are from the U.S. Department of Agriculture's Food Buying Guide for Child Nutrition Programs.
+The dairy minimum requirement will be provided by the schools.

</TABLE>


Each of the Company's lunch meals meets the nutritional requirements of the Food
and Drug  Administration for three food groups: (1) bread, (2) protein,  and (3)
fruits and  vegetables.  See Table 1 above.  Combined  with a single  serving of
milk,  supplied to all children daily as part of the federal program,  the meals
are eligible for the National School Lunch Program. (See "Effect of Governmental
Regulation on the  Company's  Business"  below for a detailed  discussion of the
National  School  Lunch  Program.)  The  program  sets  out  weekly  nutritional
standards.  The schools  choose each week's meals to meet these  standards.  The
Company  hopes  that its  meals  will be  served  at least  once a month in this
program.

During 2000, the Company is also  designing  meals to meet the  requirements  of
correctional facilities and plans to introduce five new products:  three for the
school market and two for the federal, state and county correctional  facilities
market.  The school breakfasts will contain a breakfast muffin and cereal,  each
in a different  flavor.  For the  correctional  facilities,  one breakfast  will
contain a peanut butter and jelly spread,  1/2 cup of cereal, 3 slices of bread,
and a spoon.  The other will contain a nutrition  bar, 2 hard-boiled  eggs and 1
cup of cereal.  The Company  expects to begin  production of the breakfast meals
sometime in August 2000. See "Other  Markets" and "Status of Publicly  Announced
New Product or Service" below for more information.

The Company plans to develop at least four new products  each year.  See "Status
of Publicly  Announced  New  Product or Service"  under this same item below for
more information.

The Company  purchases  the  separate  ingredients  from a variety of  different
suppliers. The ingredients (fruit blends, peanut butter, chips, salsa and cheese
sauce) and packaging  supplies  (trays,  film,  labels,  boxes and dividers) are
delivered to the co-packer.  The co-packer  packs the meals pursuant to the Food
Buying Guide for Child Nutrition Programs.  The co-packer packages and boxes the
meals (40 meals per case for Lunches and 50 meals for  Breakfasts,  16 cases per
pallet)  and shrink  wraps the  pallets  for  delivery.  The  Company  sends the
co-packer packing slips that identify each pallet and order and a bill of lading
to be signed by whoever picks up the order. The Company buys the ingredients and
supplies.  The co-packer maintains the inventory.  The Company and the co-packer
count  inventory at each month end. See  "Sources,  Raw  Materials and Principal
Suppliers" for more information.

DISTRIBUTION METHODS

The  Company  has an  oral  distribution  agreement  with  U.S.  Foodservice  to
distribute Dippers.  Either party can terminate this agreement at any time. U.S.
Foodservice  is a major  national  food  distribution  company,  with  sales  of
approximately  $6 billion

<PAGE>

DIPPY FOODS, INC.                  FORM 10-KSB                      PAGE 5 OF 19

per year.  U.S.  Foodservice  has  granted the  Company  slotting  status in its
warehouses  and stocks the  Company's  products at its La Mirada branch near Los
Angeles.  Slotting  (obtaining  space  on  warehouse  racks)  is  a  significant
milestone for a food  manufacturer,  which can take years to obtain. The working
agreement includes the following provisions:

o    The Company's sales  representative  attends monthly U.S. Foodservice local
     area sales meetings to generate leads from U.S. Foodservice's agents and to
     train the agents in the Company's products.  This process began in December
     1998,  in  Southern  California  and  will  continue  through  2000 for the
     remainder of California.

o    The Company's sales representative will accompany U.S. Foodservice's agents
     on a "ride  along"  program to make an initial  presentation  to  potential
     customers.   The  Company's  sales  representative  will  follow  up  these
     presentations  to take  orders  and will  give the  purchase  orders to the
     appropriate U.S. Foodservice agent.

o    The  Company  will charge  U.S.  Foodservice  $0.85 for the fruit meals and
     $1.05 for the nachos, FOB the Company's docks. U.S. Foodservice will charge
     schools a minimum  price equal to the Company's  price to U.S.  Foodservice
     plus 8%.  The  Company's  payment  terms  are net 14 days of the  Company's
     shipment to U.S.  Foodservice.  These arrangements apply to smaller orders,
     subject to minimum delivery  policies.  The price for products delivered on
     large  orders  varies  depending  on the  services  rendered and the volume
     ordered.

o    U.S.  Foodservice's  sales  representative  will maintain  ongoing  service
     relationships with Foodservice's directors.

o    U.S.  Foodservice will pursue other markets,  such as hotels, the military,
     amusement parks,  child care facilities,  retail  delicatessens and similar
     institutions.

U.S.  Foodservice  has  expressed  an  interest in selling or  distributing  the
Company's products nationwide.  Discussions to define this opportunity have been
on hold until  production  could match orders from large  accounts.  The Company
will closely  monitor its  expected  ramp up in sales  activity  and  production
capacity and will ensure that significant  increases in capacity are implemented
as seamlessly and with as few bottlenecks as possible.

The ride along  program  has  resulted in sales from as little as six cases to a
delicatessen  to more  than  1,200  cases  (48,000  units) to  Bakersfield  City
Schools. The program has generated sales of more than 2,100 cases (84,000 meals)
since the first quarter of its implementation.

The Company  distributes  through ASR Food  Service  Distributors,  Joseph Webb,
Goldstar,  Pinco, Otay Distributors,  and Giuliano's,  all of whom specialize in
school distribution in Southern and Central  California.  In the school markets,
smaller  distributors  represent  a larger  percentage  of the  industry.  These
distribution  arrangements  are  important  as major  distributors  such as U.S.
Foodservice  generally focus on the largest customers.  Additional  arrangements
with smaller regional firms will enable the Company to cover the entire spectrum
of the school system.  The Company will deal with  distributors as its customers
prefer or require.

The customers choose their  distributors and advise the Company of their choice.
The Company then  arranges the shipment.  The  percentage  shipped  through each
distributor varies each month depending on how often each school district serves
Dippers on its menu. Table 2 sets out the percentages of product shipped through
each distributor for the twelve months ended April 30, 2000.

  Table 2.
  Percentages Shipped
  ------------------------------------------------
  Distributor                      Percentage
  ------------------------------------------------
  ASR                                  26
  Self                                 19
  Pinco                                23
  Gold Star                            15
  US Foodservice                        9
  Joseph Webb                           4
  Otay                                  2
  Giuliano's                            2
                                   ---------------
  Total                               100
  ------------------------------------------------

<PAGE>

DIPPY FOODS, INC.                  FORM 10-KSB                      PAGE 6 OF 19

The Company recommends that its customers use distributors,  but will handle the
distribution  of some smaller orders by having the Company's  co-packer ship the
orders  directly to the customer.  The Company bills these shipping costs to the
customer.

STATUS OF PUBLICLY ANNOUNCED NEW PRODUCT OR SERVICE

The Company has not publicly  announced  any new products or services.  However,
the Company does plan to develop and  introduce at least four new products  each
fiscal year. The Company is currently  developing four new products,  (1) animal
crackers and fruit dip, (2) chips and salsa (no cheese),  (3) peanut  butter and
graham  crackers  (all for the After School Snack  Program),  and (4) cereal and
muffin for the School Breakfast Program. See "Effect of Governmental Regulations
on the Company's  Business" for more information on these programs.  The Company
has not  received any purchase  orders from  schools for this  program,  but the
Company has sent out samples and displayed the new products at trade shows.  The
Company expects to begin production of the new after school snack meals sometime
in August 2000 and begin pursuing  purchase orders from school districts shortly
thereafter.

EXPENDITURES ON RESEARCH AND DEVELOPMENT DURING THE LAST TWO FISCAL YEARS

The Company spent approximately  $10,078 and $13,535 on research and development
in the fiscal years ended April 30, 2000 and 1999 respectively.

NUMBER OF TOTAL EMPLOYEES AND NUMBER OF FULL TIME EMPLOYEES

The Company has a total of three full-time employees.

REQUIREMENT FOR GOVERNMENT APPROVAL OF PRINCIPAL PRODUCTS OR SERVICES

The  Company is not  required  to obtain any direct  government  approval of its
products.  However,  pursuant to the National  School Lunch  Program,  all meals
served  under  the  program  must  meet  minimum  standards.   It  is  the  sole
responsibility of the school districts to ascertain and determine that the meals
they elect to serve meet the minimum  standards set forth by the National School
Lunch Program.  The Company's  products have been developed and produced to meet
these  minimum  standards.  Using the  guidelines  set forth in the Food  Buying
Guide, the Company produces its products to surpass the minimum  standards.  The
only minimum  standard that the Company does not meet is the dairy  requirement,
which the school  provides  by serving  milk.  See Table 1 above and  "Principal
Products" for more information.

EFFECT OF EXISTING OR PROBABLE GOVERNMENTAL REGULATIONS ON DIPPY FOOD'S BUSINESS

The National  School Lunch Program and the Commodity  School Program are central
to the Company's business strategy. The elimination of these programs could have
a materially adverse affect on the Company's operations.

The National School Lunch Program began in 1946 after military officials noticed
that some World War II recruits were  undernourished.  The goal was to make sure
children  received one good meal at least once a day.  Section 2 of the National
School Lunch Act states:

         It is declared to be the policy of  Congress,  as a measure of national
         security,  to  safeguard  the health  and  well-being  of the  Nation's
         children  and to  encourage  the  domestic  consumption  of  nutritious
         agricultural  commodities  and other  food,  by  assisting  the States,
         through  grants-in-aid and other means, in providing an adequate supply
         of  food  and  other  facilities  for the  establishment,  maintenance,
         operation and expansion of nonprofit school lunch programs.

The National School Lunch Program is a program under which participating schools
operate  a  nonprofit  lunch  program  in  accordance  with the Code of  Federal
Regulations.  The  Commodity  School  Program is a program  under which a school
operates the same lunch program, but receives donated food assistance in lieu of
general cash assistance.  Part 210 of the Code of Federal Regulations sets forth
the   requirements  for   participation   in  these  two  programs,   specifying
responsibilities   of  state  and  local  officials  in  the  areas  of  program
administration,  preparation  and  service of  nutritious  lunches,  payments of
funds,  use of program  funds,  program  monitoring,  and  reporting  and record
keeping requirements.

In order to qualify for reimbursement under either program,  all lunches offered
by  participating  schools  and served to  children  two and older must meet the
minimum  nutrition  standards with respect to the appropriate  level of calories
and nutrients as

<PAGE>

DIPPY FOODS, INC.                  FORM 10-KSB                      PAGE 7 OF 19

provided   in  the  Code  of   Federal   Regulations.   The   requirements   and
recommendations are designed so that the nutrients of the lunch, averaged over a
period of time,  approximate  one-third of the Recommended Dietary Allowance for
children.

The  Commodity  School  Program  is another  federal  program  whereby  the U.S.
Department  of  Agriculture  purchases  raw  ingredients  such as grains,  dairy
products,  poultry,  beef and row crops from farmers in order to maintain  price
points and  stabilize  markets  for the  producers  of such  products.  The U.S.
Department of Agriculture  inventories and warehouses  these products at various
locations  throughout the country.  The school districts submit a request to the
U.S.  Department of Agriculture for these raw ingredients  based upon prior year
usage. The U.S.  Department of Agriculture will distribute the products based on
availability  of raw  ingredients  to  school  districts  according  to  student
population.  School  districts can exchange these commodity foods for credits on
finished  products.  The school  districts and companies that participate in the
program both benefit. The school districts receive agricultural  commodities for
the cost of the shipping and deliver them to the  manufacturer at no cost to the
distributor. The manufacturer sells the finished product back to the school at a
price that is reduced by the amount saved. Some items such as peanut butter have
limited  menu-planning  alternatives and can be effectively used by the Company,
which can realize  significant  cost  savings  under this  program.  The schools
prefer to buy meals by  exchanging  commodities  because  their  facilities  and
resources are not adequate to handle food storage, preparation and distribution.

The Food and Nutrition Service  administers these programs for the Department of
Agriculture. Within each state, the state's educational agency administers these
programs.  The state may withhold  program payments under any of the programs if
the participating school has failed to comply with all applicable  provisions of
the Code of Federal Regulations.

The School  Breakfast  Program is another  federal  program that provides states
with  cash  assistance  for  non-profit   breakfast   programs  in  schools  and
residential   child  care   institutions.   The  School  Breakfast  Program  was
established in 1966 as a two-year pilot project designed to provide  categorical
grants to assist schools serving breakfasts to nutritionally needy children. The
School Breakfast Program received  permanent  authorization in 1975 to carry out
the  provisions  of  Section  4 of the  Child  Nutrition  Act of 1966.  The U.S.
Department of Agriculture  reports that during the first year of operation,  the
School Breakfast Program served  approximately 80,000 children at a federal cost
of $573,000.  In 1975,  approximately  two million children  participated in the
School  Lunch  Program  on a given  day and  over  the  following  two  decades,
participation increased to seven million.

Under the School  Breakfast  Program,  the objective is to provide one breakfast
per child per day. A school will receive breakfast  assistance payments from the
state, if funds are available, for breakfasts served to children. To be eligible
for federal cash reimbursement,  a breakfast must contain,  at minimum,  (i) one
serving  of milk,  (ii) one  serving  of fruit  or  vegetable  or both,  or full
strength  fruit or  vegetable  juice,  and (iii) two  servings  of bread,  bread
alternates,  meat or meat alternates,  in the quantities  specified for each age
group as set out in the Code of Federal Regulations.

The After School Snack  Program is a new program  under which  schools  offer an
after  school snack in  accordance  with the Code of Federal  Regulations.  This
program has been available for quite some time but not until  September 1999 did
the federal government begin promoting this program and have approved $3 billion
of funding for this program. The snack to be offered under the program must meet
two out of the four food groups as set out in the Food Buying  Guide.  For every
student  who   participates   in  this  program  the  school  receives  a  $0.52
reimbursement. The Company's products offered in this program will have the same
60 day shelf life,  but will be  produced at a reduced  cost as a result of less
product  being put into the snack as  compared  to the  products  in the  School
Breakfast Program and the National School Lunch Program.

SOURCES, RAW MATERIALS AND PRINCIPAL SUPPLIERS

The Company has agreements with several food suppliers to provide  high-quality,
specially blended ingredients  required by the Company's recipes. In particular,
the  co-branding  agreement  with  Hunt-Wesson,  Inc. and ConAgra  Brands,  Inc.
provides for low prices for peanut  butter,  fruit  blends,  and salsa under the
brand names of Peter Pan, Knott's Berry Farm, and Rosarita. See "Patents,  Trade
Marks,  Licences and other  Agreements or Labor  Contracts"  under this item and
Exhibit 6.4 - License Agreement for more information.

In addition to Hunt-Wesson, the Company's major suppliers include La Tapatia for
corn and  cinnamon  chips,  Gage  Industries  for  trays,  Acorn  for  boxes and
dividers,  Multi-Pak for film,  Best Labels for labels and Real Fresh for cheese
sauce. To date, these have been the primary suppliers.  However, the Company has
used  other  suppliers,  including  Pioneer  Packing  for  boxes  and  dividers,
Ampersand for labels, Associated Bag Company for film, and Warnock Tortillas for
chips. The Company has been using its current suppliers because they provide the
best price and terms. The Company will  periodically seek new suppliers in order
to receive competitive prices and terms.

<PAGE>
DIPPY FOODS, INC.                  FORM 10-KSB                      PAGE 8 OF 19

With the  exception of  Hunt-Wesson,  the Company has no written  agreements  or
licensing  agreements  with any of its suppliers.  The Company is currently on a
normal industry standard 30-day account.

The Company no longer uses Feedback Foundation,  Inc. as a co-packer as a result
of a dispute over invoices resulting from the spoilage of certain products.  See
"Item 2. Legal Proceedings" in Part II for further information.

The Issuer  entered  into a five month  co-packing  agreement  with  Global Food
Management Group, LLC ("GLOBAL"),  which expired on March 4, 2000. The agreement
was amended on January 24, 2000, to extend the term to September 1, 2000, and to
grant the Issuer the option to extend the agreement for two additional  terms of
three months each.  The option is  exercisable  for $50. The Company  expects to
exercise  the  option.  The  Company  will  furnish  all of the  equipment,  raw
materials and supplies to pack its products.  Under the terms of the  agreement,
Global, a U.S. Department of Agriculture  approved  co-packer,  must provide the
location  and labor at a cost of $0.12 per unit.  However,  the average cost has
been $0.16 per unit due to inefficient production.  See Exhibit 6.5 - Co-Packing
Agreement  and Exhibit  6.6 -  Amendment  to  Co-Packing  Agreement  for further
details.

The  Company  uses an  automatic  tray  heat  sealer to seal its  products.  The
assembly  process  requires 10 people and  produces  20 units per  minute.  As a
result, the cost of labor averages $0.16 per unit.  However,  the new horizontal
form fill and seal tray line  machine  requires  no more than 5 people  and will
produce 80 units per minute or approximately 1.5 million units a month, assuming
a 16-hour production day. This should reduce production costs,  particularly the
cost of trays and  labels,  by $0.07 per unit,  and the cost of cost by $0.06 to
$0.10 per unit The  manufacturer  has  indicated to the Company that the machine
will be ready for installation in August,  2000. When the Company  completes the
purchase and installation of its horizontal form fill and seal tray line machine
it can provide  meals to schools cost  effectively  and at an  aggressive  price
point.

The  equipment  that the Company  must  provide to Global  under the  Co-Packing
Agreement includes the new horizontal form fill and seal tray line machine.  The
Company can install this machine  Global's plant or another  co-packer's  plant.
The Company would continue to own the machine  wherever it is installed.  If the
Company  installs the machine at Global's plant,  then it would  renegotiate its
contract to extend the term of its agreement.

In July 1999, the California  Department of Education  approved the Company as a
Donated Food Processor for the 1999-2000 school year. See Exhibit #6.15 - Master
Donated Food Processing  Agreement for more information.  This agreement enables
the Company to participate  in the U.S.  Department of  Agriculture's  Commodity
School Program, which donates agricultural  commodities to schools participating
in the National School Lunch Program. See "Effect of Governmental Regulations on
the Company" for more information on the National School Lunch Program.

As part of the Commodity  School  Program,  the U.S.  Department of  Agriculture
purchases raw ingredients such as grains, dairy products,  poultry, beef and row
crops from farmers in order to maintain  price points and stabilize  markets for
the producers of such products.  The U.S. Department of Agriculture  inventories
and warehouses these products at various locations  throughout the country.  The
school  districts  submit a request to the U.S.  Department of  Agriculture  for
these raw  ingredients  based upon  prior year  usage.  The U.S.  Department  of
Agriculture   will   distribute  the  products  based  on  availability  of  raw
ingredients  to  school  districts  according  to  student  population.   School
districts can exchange these commodity  foods for credits on finished  products.
The school districts and companies that participate in the program both benefit.
The  school  districts  receive  agricultural  commodities  for the  cost of the
shipping and deliver them to the manufacturer at no cost to the distributor. The
manufacturer  sells the  finished  product back to the school at a price that is
reduced by the amount  saved.  Some items  such as peanut  butter  have  limited
menu-planning alternatives and can be effectively used by the Company, which can
realize  significant cost savings under this program.  The schools prefer to buy
meals by exchanging  commodities  because their facilities and resources are not
adequate to handle food storage, preparation and distribution.

If  the  Company  expands  into  the  national  arena,  it  anticipates  signing
agreements with major co-packers. Discussions with large food processors such as
Phillchic,  American CoPack,  and Overhill Farms have indicated that these major
co-packers  would be  interested  in  production  contracts  once the  Company's
production  reaches two to three million units per month.  There is no guarantee
that the Company can expand into the national arena.

DEPENDENCE ON ONE OR A FEW MAJOR CUSTOMERS

The Company had three major  customers  in the fiscal year ended April 30, 2000.
These were the Azuza  Unified  School  District,  Bakersfield  City  Schools and
Covina  Unified  School  District,  which  generated 13%, 11.2% and 10.3% of the
Company's sales revenue respectively, for a total of 34.5%, down from five major
customers in the prior period.  These were
<PAGE>

DIPPY FOODS, INC.                  FORM 10-KSB                      PAGE 9 OF 19

Bellflower  Unified School  District,  Carlsbad,  Covina Valley School District,
Paramount  Unified  School  District and South  Whittier  School  District,  who
generated 91.6% of the Company's sales revenue. The Company has sold its product
to more than 32  customers  and is  increasing  this  number and  lessening  its
dependence  on a few major  customers.  The  addition of new product  lines will
further lessen dependence on a few major customers.

PATENTS/TRADE MARKS/LICENCES/FRANCHISES/CONCESSIONS/ROYALTY AGREEMENTS OR LABOUR
CONTRACTS

The Company has a licence  agreement with ConAgra Brands,  Inc. and Hunt-Wesson,
Inc. dated May 19, 1999. See Exhibit #6.4 - License  Agreement for more details.
Under  the   agreement,   Hunt-Wesson   and   ConAgra   granted  the  Company  a
non-exclusive,  royalty-free  licence  to use the  trademarks  PETER  PAN(R) and
KNOTT'S BERRY FARMS(R)  until  December 31, 2008. The Company  annually must buy
certain minimum quantities of the licensor's fruit fillings and peanut butter as
set out in Table 3 and use them  exclusively in all of its products except those
products destined for the school districts that are part of the Commodity School
Program.  The  licensor has the right to cancel the contract if the Company does
not buy the minimum amounts.

  Table 3.
  Minimum Quantities under Licence

  -------------------------------------------------------
  Calendar year       Fruit             Peanut butter
  -------------------------------------------------------
  1999                400,000 lbs       200,000 lbs
  2000                600,000 lbs       400,000 lbs
  2001                800,000 lbs       500,000 lbs
  -------------------------------------------------------

The minimum  annual  quantity for fruit filling and peanut butter  increases 10%
over the previous year in each calendar year after 2001.

If the  Company  fails to  purchase  the  minimum  quantities  specified  by the
licensing  agreement  then ConAgra / Hunt-Wesson  could  terminate the licensing
agreement  and not permit the  Company to use their logos on its  products.  The
Company did not  purchase  the minimum  quantities  specified  by the  licensing
agreement for 1999.  The Company orders only what is required to fill its orders
and  maintain  a  small  inventory  of  finished  product.  To date  Con  Agra /
Hunt-Wesson has not terminated the licensing agreement. However, even though the
Company has not fulfilled its  obligations  under the licensing  agreement,  Con
Agra / Hunt Wesson will  continue to sell the  necessary  fruit  filling and the
peanut butter to the Company. The Company's account is current and is a sizeable
account for  Hunt-Wesson.  See "Results of  Operations - Cost of Goods" for more
information.

Jon  Stevenson  registered  copyrights to the cover art that the Company uses on
its packaged  meals.  Mr.  Stevenson,  a director and the  president of both the
Issuer and of Dippy CA, has assigned his interest in the copyright to the Issuer
under a  written  agreement  dated  September  18,  1998,  and  transferred  the
registered  copyright  into the name of the Issuer in  consideration  of 850,000
shares in the Issuer's common stock.  Currently,  the copyright is registered in
the name of Jon Stevenson, who is holding the legal interest in the copyright in
trust for the Issuer. See Exhibit 6.2- Assignment of Copyright.

The Company has no other  copyrights,  patents or trade marks and is not a party
to  any  other  licence  or  franchise  agreements,   concessions,   or  royalty
agreements.

ITEM 7.  DESCRIPTION OF PROPERTY.

KNOLLWOOD PROPERTY

The Company  has  sub-let  its  warehouse  at 1161  Knollwood  Circle,  Anaheim,
California,  from August 1, 2000, to the end of the lease. The Company moved its
administrative  office to 16581 Channel Lane in Huntington  Beach. The Knollwood
property consists of a concrete tilt-up building of approximately  10,524 square
feet  located  in a light  industrial  area.  The rent is  $5,893  per month and
escalates  annually to $5,999 in the final year. The sub-tenant  pays $6,314 per
month to the end of the lease,  all of which the  Company  pays to its  landlord
under its lease  agreement.  The lease and the sub-lease  expire on December 31,
2001.  Management  believes  that the  Company's  property is  adequate  for the
current level of operations.

SIGNAL HILL PROPERTY

The  Company  opened a 60-day  escrow on October  15,  1999,  with a  refundable
deposit of $20,000. The Company has not been able to complete the acquisition of
the Signal  Hill  Property  and has asked that the escrow be  cancelled  and the
$20,000

DIPPY FOODS, INC.                  FORM 10-KSB                     PAGE 10 OF 19

deposit be returned to the Company.  As of the date of this filing,  the deposit
has not been returned.  The Company is reviewing its options, one of which is to
sue for the return of its deposit and damages on the grounds  that the vendor of
the property misrepresented property's qualifications.

ITEM 8.  DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES

(A)      IDENTIFY DIRECTORS AND EXECUTIVE OFFICERS

Jon Stevenson  and Munjit Johal are the  directors of the Issuer.  Jon Stevenson
and Erin  Stevenson are the directors of Dippy CA. The Company's  management and
development teams are listed in Table 4.

Table 4.
Officers

<TABLE>
<CAPTION>

--------------------------------------------------------------------------------
                                            Office
                      ----------------------------------------------------------
Officer                The Issuer                           Dippy, CA
--------------------------------------------------------------------------------
<S>              <C>                                   <C>
Jon Stevenson    CEO, President, Chairman              CEO, President, Chairman
Munjit Johal     Chief Financial Officer, Treasurer,   Chief Financial Officer
                 Corporate Secretary
Erin Stevenson                                         Corporate Secretary, Executive VP,
                                                       Director of Trade Show Services.
--------------------------------------------------------------------------------
</TABLE>


Jon Stevenson, 38, has been with the Company since its inception. He is involved
in all  aspects of  product  development  and  packaging.  His  responsibilities
include direct sales,  sales  development,  public  relations and developing the
marketing  program for the  Company.  He is also  responsible  for the  training
program  developed for the  distributors'  representatives  and the sales broker
representatives contracted to the Company.

Mr. Stevenson has been in the food service industry for more than sixteen years.
He was  formerly  employed by Rykoff and U.S.  Foodservice  Company,  one of the
largest broadline distribution companies in the world. Jon left U.S. Foodservice
in November 1997, to focus his full energies on Dippy CA.

Munjit  Johal,  45,  has been with the  Company  since  September  1998,  and is
responsible  for all aspects of the  Company's  financial  management.  He has a
Master of Business  Administration  degree from the  University of San Francisco
and a Bachelor of Arts degree from the  University of  California,  Los Angeles.
Mr.  Johal  was the  chief  financial  officer  of  Bengal  Recycling,  Inc.,  a
California  corporation,  from February,  1996, to July, 1997; an executive vice
president and compliance  officer and an asset manager for Pacific Heritage Bank
in Torrance,  California, from 1990 to 1995; a vice president and compliance and
consulting associate for banks in Glendale and Newport Beach, California; and an
analytical  manager and  financial  analyst  for  Federal  Home Loan Bank of San
Francisco from 1981 to 1987.

Erin  Stevenson,  36, has been with the Company since  inception.  She worked in
sales and marketing with major retail stores for ten years from 1982 to 1992, as
a manager or owner of small  retailers from 1992 to 1994, and as a self-employed
massage  therapist from 1994 to 1997. She is responsible for show selections and
product sales and participates in designing the customer service program for the
Company.

(B)      IDENTIFY SIGNIFICANT EMPLOYEES

No  other  employees  are  expected  to make  significant  contributions  to the
business of the Company.

(C)      FAMILY RELATIONSHIPS

 Erin Stevenson is Jon Stevenson's sister.

(D)      INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS

None of the Company's directors,  officers, promoters or control persons, during
the past five years:

1.       were a general  partner or executive  officer of a business  that had a
         bankruptcy  petition  filed by or  against it either at the time of the
         bankruptcy  or within the two years before the  bankruptcy,  except for
         Munjit Johal, who was the chief financial  officer for seventeen months
         until July 1997, of Bengal  Recycling,  Inc., a California  corporation
         that filed  under  chapter 7 of the United  States  Bankruptcy  Code on
         September 4, 1998;

<PAGE>

DIPPY FOODS, INC.                  FORM 10-KSB                     PAGE 11 OF 19

2.       were  convicted in a criminal  proceeding  or been subject to a pending
         criminal  proceeding  (excluding  traffic  violations  and other  minor
         offenses);

3.       were  subject  to any order,  judgment,  or  decree,  not  subsequently
         reversed, suspended or vacated, of any court of competent jurisdiction,
         permanently or temporarily enjoining,  barring, suspending or otherwise
         limiting his involvement in any type of business, securities or banking
         activities,  except for (1) Erin Stevenson who  voluntarily  petitioned
         into bankruptcy in February 1998 and was discharged in April 1998; or

4.       were found by a court of competent  jurisdiction  (in a civil  action),
         the Securities and Exchange Commission or the Commodity Futures Trading
         Commission  to  have   violated  a  federal  or  state   securities  or
         commodities law, and the judgment has not been reversed,  suspended, or
         vacated.

ITEM 9.  REMUNERATION OF DIRECTORS AND OFFICERS.

Table 5.
------------------------------------------------------------
Name and capacity                    Aggregate remuneration
------------------------------------------------------------
Jon Stevenson, President, CEO        $46,000
------------------------------------------------------------

The Company does not have formal employment  agreements with any of its officers
but may in the future.

The Company has no arrangements with any of its directors to compensate them for
their services as directors.

Except for the oral agreements with the officers for the compensation  listed in
Table 5, the Company has no employment  agreement or other  compensation plan or
arrangement with any executive  officer that provides for specific  compensation
in the event of a resignation, retirement or other termination of employment, or
on  a  change  of  control  of  the  Company  or  of  an   executive   officer's
responsibilities following a change in control.

ITEM 10.   SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS.

Table 6
Security Ownership of Management and Certain Securityholders

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
       (1)                    (2)                            (3)                    (4)
                                                      Number and Nature of         Percent
  Title of Class    Name and Address of Owner         Beneficial Ownership        of Class*
-------------------------------------------------------------------------------------------
<S>                 <C>                                      <C>                    <C>
Common Stock        Jon Stevenson                            4,000,000              20.43
                    379 Newport Avenue #9
                    Long Beach, California 90814
Common Stock        Munjit Johal                                 0                   0.00
                    42 Rockwood
                    Irvine, California 92614
Common stock        Erin Stevenson                               0                   0.00
                    1948 Lave Avenue
                    Long Beach, California 90815
-------------------------------------------------------------------------------------------
</TABLE>

*The listed  beneficial  owner has no right to acquire any shares within 60 days
of the date of this Form  10-KSB  from  options,  warrants,  rights,  conversion
privileges or similar obligations.

NON-VOTING SECURITIES

Dippy Foods Inc. has not issued any of its non-voting securities.

OPTIONS, WARRANTS AND RIGHTS

Since Dippy Foods Inc.'s  incorporation,  no stock options,  stock  appreciation
rights, or long-term incentive plans have been granted, exercised or repriced.

<PAGE>

DIPPY FOODS, INC.                  FORM 10-KSB                     PAGE 12 OF 19

ITEM 11.   INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS.

(A)      RELATIONSHIPS WITH INSIDERS

No member of management, executive officer or security holder has had any direct
or indirect interest in any transaction to which the Company was a party.

(B)      TRANSACTIONS WITH PROMOTERS

Mr. Jon  Stevenson is the only  promoter of the Company.  Mr.  Stevenson has not
received  anything  of value  from the  Company  nor is he  entitled  to receive
anything of value from the Company  for  services  provided as a promoter of the
Company.


                                     PART II

ITEM 1. MARKET PRICE OF DIVIDENDS ON THE  REGISTRANT'S  COMMON  EQUITY AND OTHER
SHAREHOLDER MATTERS.

(A)      MARKET INFORMATION

The Issuer's  common stock has been quoted on the NASD OTC Bulletin  Board since
September  1998,  under the  symbol  "DPPI".  Table 7 gives the high and low bid
information  for each fiscal  quarter  since the Issuer's  common stock has been
quoted. The bid information was obtained from mytrack.com,  and  StockWatch.com,
the Internet site of Track Data Corporation,  and reflects  inter-dealer prices,
without retail mark-up,  mark-down or commission,  and may not represent  actual
transactions.

           Table 7.
           High & Low Bids
           ---------------------------------------------------------------------
           Period ended                 High          Low         Source
           ---------------------------------------------------------------------
           31 July, 1998                1.25          0.65        My Track.com
           31 October, 1998             0.99          0.65        My Track.com
           31 January 1999              0.77          0.38        StockWatch.com
           30 April 1999                1.03          0.25        StockWatch.com
           31 July 1999                 1.22          0.44        StockWatch.com
           31 October 1999              0.68          0.26        StockWatch.com
           31 January 2000              1.22          0.44        StockWatch.com
           30 April 2000                1.07          0.44        StockWatch.com
           8 August 2000                0.75          0.45        StockWatch.com
           ---------------------------------------------------------------------

(B)      HOLDERS

The Issuer has approximately 1,200 registered holders of shares of common stock.

(C)      DIVIDENDS

The Issuer has  declared no  dividends on its common stock and is not subject to
any restrictions that limit its ability to pay dividends on its Shares of common
stock.

ITEM 2.  LEGAL PROCEEDINGS.

The Company is not a party to any pending legal  proceedings and, to the best of
the  Company's  knowledge,  none of the  Company's  property  or assets  are the
subject of any pending legal proceedings, except for the following:

FEEDBACK FOUNDATION, INC.

A dispute has arisen  between the  Company  and its former  co-packer,  Feedback
Foundation,  Inc.,  regarding two invoices totaling $49,620.  The dispute arises
from the  spoilage  of  salsa  used in the  production  of  Nacho  Dippers.  The
Company's  investigation revealed that the spoilage occurred while the salsa was
being prepared for production.  As a result of the quality control  standards of
the Company,  there was no consumption of the defective product.  In the opinion
of management,  the

<PAGE>

DIPPY FOODS, INC.                  FORM 10-KSB                     PAGE 13 OF 19

preparation of the ingredients and the production of product is within the scope
of the co-packer's control and responsibility. The Company and Feedback have not
been able to reach an amicable  agreement.  On March 6, 2000,  Feedback  filed a
lawsuit claiming breach of contract, fraud and non-payment of invoices. Feedback
is suing for not less than $149,620.  The Company intends to file a counter suit
for an unspecified amount. Management is confident that the Company will prevail
in the lawsuit.

AL DIAMOND

The Company  believes Mr.  Diamond failed to perform his  obligations  under the
Settlement  and has taken the position that the  Settlement  Agreement  with Mr.
Diamond is null and void.  Management is deciding whether to take action against
Mr.  Diamond for the return of the  remaining  corporate  materials  and for the
return of any monies paid to Mr. Diamond under the Settlement Agreement.

ITEM 3.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.

The Company's first independent certified public accountants,  Andersen Andersen
& Strong,  were appointed by the former management of the Issuer.  The Company's
current  independent  certified  public  accountants,  BDO  Seidman,  LLP,  were
appointed by the current management in August 1999.

The Issuer has had no disagreements  with Andersen  Andersen & Strong within the
meaning of Item 304 of Regulation  SB on any matter of accounting  principles or
practices,  financial  statement  disclosure,  or auditing scope or procedure in
connection  with the audit of the  Issuer's  financial  statements  for the year
ended April 30,  1999,  and the period from  February  23, 1998 (the date of the
Issuer's  formation) to April 30, 1998, that would have caused Andersen Andersen
& Strong to issue an adverse  opinion or  disclaimer  of  opinion,  or to modify
their report as to  uncertainty,  audit scope or  accounting  principles  if the
disagreements had not been resolved to their satisfaction.

No  reportable  events (as defined in Item 304 or  Regulation  SB) occurred with
Andersen  Andersen & Strong  during  the period  audited.  The  Company  has not
consulted  with  BDO  Seidman,  LLP  regarding  the  application  of  accounting
principles to a specific  transaction or the type of audit opinion that might be
rendered  on the  financial  statements  during the period  audited by  Andersen
Andersen & Strong.

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

No  matter was submitted to a vote of security holders, through the solicitation
of proxies or otherwise, during the fourth quarter of the fiscal year covered by
this report.

ITEM 5. COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

The  Company is not aware of any  failures  to file a required  Form  during the
period  covered by this report.  All reports were filed with the SEC on a timely
basis.

ITEM 6.  REPORTS ON FORM 8-K.

There were no reports on Form 8-K filed by the Company  during the quarter ended
April 30, 2000.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS.

Management's  discussion and analysis of the Company's  financial  condition and
the results of its operations and other sections of this report contain  forward
looking statements that are based on the current beliefs and expectations of the
Company's management,  as well as assumptions made by, and information currently
available to, the Company's management. These statements include those regarding
general  economic and food industry  trends.  Because these  statements  involve
risks and  uncertainties,  actual  actions  and  strategies  and the  timing and
expected  results may differ  materially  from those expressed or implied by the
forward-looking  statements,  and the Company's  future results,  performance or
achievements could differ materially from those expressed in, or implied by, any
forward-looking  statements.  Future  events and  actual  results  could  differ
materially from those set forth in or underlying the forward-looking statements.

This Annual  Report on Form  10-KSB for the year ended  April 30, 2000  contains
"forward-looking"  statements within the meaning of the Federal securities laws.
These  forward-looking  statements  involve a number of risks and uncertainties,

<PAGE>

DIPPY FOODS, INC.                  FORM 10-KSB                     PAGE 14 OF 19

including the  development  and market  acceptance  of products,  the ability to
secure  additional  sources  of  financing,  the  ability  to  reduce  operating
expenses, acquisition of processing equipment to reduce cost of sales, and other
factors  described  in the  Company's  filing with the  Securities  and Exchange
Commission. The results that the Company achieves may differ materially from any
forward-looking   statements   due  to  these  risks  and   uncertainties.   The
forward-looking  statements  in this annual  report on Form 10KSB for the fiscal
year ended April 30,  2000,  are subject to risks and  uncertainties  that could
cause actual  results to differ  materially  from this  results  expressed in or
implied by the statements contained in this report.

THE FOLLOWING  PRESENTATION  OF  MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF DIPPY
FOODS,  INC.  SHOULD  BE READ  IN  CONJUNCTION  WITH  DIPPY  FOODS  CONSOLIDATED
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION INCLUDED HEREIN.

Dippy has targeted the school  food-services  market,  which  enables it to take
advantage of the  National  School Lunch  Program  offered by the United  States
Department of Agriculture.  The Company is intending to expand into the National
School Breakfast and After School Snack Programs.

The  Company's  initial  school  lunch  product   "Dippers"   consists  of  four
combinations  of corn  chips and  various  dips.  Dippers  can be eaten  without
utensils,  are packaged in  single-serving,  heat-sealed,  recyclable trays, are
shelf-stable for sixty days and require no freezing,  refrigeration,  heating or
preparation.  Each lunch meal combined  with a single  serving of milk meets the
nutritional  requirements of the Food and Drug  Administration.  The Company has
designed three new types of dippers to meet the standards of the National School
Breakfast program.

The Company  derives  revenue from the sale of lunch  Dippers.  Dippy  currently
makes $0.11 per unit on the Nachos and $0.09 per unit on the fruit Dippers. This
is  expected  to change to $0.29 per unit for both the Nachos and Fruit  Dippers
upon the purchase and  installation  of new  processing  equipment.  The Company
expects to make $0.14 per unit on the breakfast Dippers.

The Company has three full-time employees.

Dippy has incurred significant losses since inception,  and as of April 30, 2000
had accumulated net losses of $1,353,774.  Included in this accumulated  deficit
is $472,000 in non-cash  expenses  related to the  recording the fair value of a
directors'  uncompensated services of $100,000 and a $372,000 settlement payable
to a former director.

CONSOLIDATED RESULTS OF OPERATIONS FOR THEYEARS ENDED APRIL 30, 2000 AND 1999

Table 8.
Actual Results For Fiscal 2000 Compared to Fiscal 1999
--------------------------------------------------------------------------------
                                             Fiscal 2000  Fiscal 1999 Percentage
                                                   $            $       change
--------------------------------------------------------------------------------
Revenues                                      320,581      191,933        67 %
Costs of goods sold                           247,239      183,512        35
Gross Profit                                   73,342        8,421       770
Selling, general, & administrative expenses   503,455      802,916       (37)
Interest expense                               49,129        4,822       919
Net loss                                     (479,242)    (799,317)      (40)
--------------------------------------------------------------------------------

REVENUES

Revenue  increased  $128,648 or 67% from  $191,933 in fiscal 1999 to $320,581 in
fiscal 2000 primarily due to the reopening of schools from the winter  vacations
and  concerns  with Year  2000  issues.  The  Company  was also able to  further
penetrate the National School Lunch Program market.

Revenue is expected to increase during fiscal 2001 due to the  introduction of a
new breakfast line and the  development of a retail  strategy for inventory that
is not sold to schools.  The first of the breakfast meals were already delivered
at the end of July 2000, as well,  there have been requests from various schools
for samples of the breakfast meal in order to appraise the new product.

<PAGE>
DIPPY FOODS, INC.                  FORM 10-KSB                     PAGE 15 OF 19

COST OF SALES

Cost of sales increased  $63,727 or 35% from $183,512 in fiscal 1999 to $247,239
in fiscal 2000. As a percent of revenue,  the gross margin  increased from 4% in
fiscal 1999 to 23% in fiscal  2000.  These  changes  were  primarily  due to the
increase in sales, which required the purchase of more ingredients.  The Company
also retained a new co-packer  that is more  efficient and has reduced the waste
of  ingredients,  therefore  reducing the cost of sales and increasing the gross
margin.

Accordingly,  cost of sales as a percent of sales is expected to decrease due to
the  installation of the new horizontal  form, fill and seal tray-line  machine.
The new tray line will produce 80 units per minute or approximately  1.5 million
units a month assuming a 16 hour production  day. This should reduce  production
costs, particularly the cost of trays and labels, by $0.07, and labor costs from
between $0.06 and $0.10 per unit, depending upon production levels.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling,  general  and  administrative  expenses  decreased  in fiscal 2000 from
fiscal 1999 by $299,461 or 37% due  primarily to (1) a one time cost of $100,000
of  non-cash  compensation  to  Jon  Stevenson,  which  represented  12 % of the
Company's fiscal 1999 administrative costs, (2) a one time settlement of $96,000
in cash and in stock valued at $276,000,  which represented 46% of the Company's
fiscal 1999  administrative  costs, (3) an increase in professional  fees during
fiscal  2000  of  $133,905  primarily  due to the  filing  of the  Form  10-SB -
Registration  Statement  with the SEC, (4) an increase in rent of $46,255 due to
the leasing of the premises at 1161 Knollwood  Circle,  Anaheim,  CA, for a full
year  whereas  fiscal 1999 only  consisted  of four  months,  (5) an increase in
payroll of $21,927 due to a complete year of full time employees.

With the exception of an increase in  advertising  expense for the launch of the
new  breakfast  program,  the Company  believes  that its  selling,  general and
administrative  costs can remain fairly static and will decrease as a percentage
of revenue as its sales volume grows.

DEFERRED TAX ASSETS

The Company has deferred tax assets of $361,182 at April 30, 2000,  and $183,131
at April 30, 1999. Management has established a valuation allowance equal to the
full amount of the  deferred  tax assets  because the  Company's  ability to use
these losses is uncertain.

Depreciation  is expected to increase  in future  periods  primarily  due to the
acquisition of new processing equipment.

The net  operating  losses  incurred  by Dippy CA before the  reverse  merger on
September  17, 1998,  are limited  annually  due to the change of ownership  (as
defined in Section 382 of the  Internal  Revenue  Code) that  resulted  from the
reverse merger.

The Issuer's unused annual limitations may be carried over to future years until
the net operating losses expire.

INTEREST EXPENSE

Interest  expense  increased  from fiscal 1999 to fiscal 2000 by $44,307 or 919%
due primarily to interest accrued on notes payable.

LIQUIDITY AND CAPITAL RESOURCES

As of April 30, 2000, the Company had $4,635 cash and a working  capital deficit
of $929,531.  During the year ended April 30, 2000, cash increased by $4,635 and
the Company used $492,557 in operations,  primarily due to the operating loss of
the Company of  $479,242  and a decrease in working  capital of  $720,559.  This
decrease in working capital was primarily due to a $39,572  decrease in accounts
receivable,  $50,245 increase in inventory, $89,579 increase in deposits for the
new horizontal form, fill and seal tray-line machine,  and a $79,451 increase in
accounts payable and accruals. The Company used  $2,248 in investing activities,
primarily due to the purchase of equipment.  The Company  generated  $499,440 in
financing  activities,  primarily  due to net  proceeds  from  issuance of notes
payable, an increase in the line of credit and repayment of related party loans.
However, the Company has accumulated a deficit of $1,353,774 since inception and
has a  stockholders'  deficit  of  $907,641  at  April  30,2000.  Based on these
factors,  the Company's  independent  certified public  accountants  included an
uncertainty  paragraph in their report  indicating  there is  substantial  doubt
about the Company's ability to continue as a going concern.

The Company  anticipates  funding its working  capital needs for the next twelve
months through (1) the equity capital markets,  (2) increased sales particularly
with the addition of the breakfast line, (3) further  reductions in overhead and
cost of sales.
<PAGE>

DIPPY FOODS, INC.                  FORM 10-KSB                     PAGE 16 OF 19

Although the foregoing  actions are expected to cover the Companies  anticipated
cash needs for working  capital and capital  expenditures  for at least the next
twelve months,  no assurance can be given that the Company will be able to raise
sufficient cash to meet these cash requirements.

Management  plans to  improve  its cash flow and  operating  results  by raising
additional  capital through private  placements of stock and by increasing sales
to a number of new school districts.  The Company cannot ensure,  however,  that
these plans will be successful.

The new horizontal  form,  seal and fill tray-line will be purchased for a price
of  $161,000.  The  Company  has  $75,600 on  deposit,  and expects to raise the
balance in capital  markets.  The Company will install the machine at the Global
Food Management  Group's "Global" facility.  Global is the Company's  co-packer.
The  Company  believes  that the new  machine  will  enable it to  produce  more
efficiently.

The Company is involved  in two  separate  matters of  litigation  or  potential
litigation.  The Company  believes  that it will prevail in these  matters.  The
Company lawyers  estimate the potential costs  associated with the litigation to
be $35,000.00.  Included in the cost of litigation is the  settlement  agreement
with a former  director.  If the Company does not prevail in this  matter,  cash
flow will be immediately impaired by $100,000.

The  Company  is  considering  employment  contracts  with its  three  full-time
employees that could result in its payroll doubling.

INTERNAL AND EXTERNAL SOURCES OF LIQUIDITY

The Company has funded its operations  principally  from  borrowings  secured by
notes payable.

DEBT INSTRUMENTS

The Company borrowed $583,380.95 from the lenders set out in the table 9.

Table 9.
Promissory Notes
Payee                             Date                    Principle Sum
--------------------------------------------------------------------------------
Bellevue Investments Ltd.         June 2, 1999              $200,000.00
Silverado Farms Inc.              August 20, 1999             15,000.00
Silverado Farms Inc.              September 9, 1999           50,000.00
Silverado Farms Inc.              October 12, 1999            50,000.00
Silverado Farms Inc.              November 8, 1999            10,000.00
Silverado Farms Inc.              November 9, 1999            10,000.00
Silverado Farms Inc.              November 18, 1999           10,000.00
Silverado Farms Inc.              November 19, 1999           13,380.95
Silverado Farms Inc.              November 29, 1999           25,000.00
Silverado Farms Inc.              December 1, 1999           100,000.00
Money Layer Ltd                   February 26, 2000          100,000.00
                                                            -----------
                                                            $583,380.95
--------------------------------------------------------------------------------

The  Company  gave a  promissory  note to each of the payees as  evidence of the
debt.  The  principal sum is due in 12 months from the date of the loan together
with interest  accrued on the outstanding  principal  balance at the rate of 12%
per annum.  The Company may pay the  interest on the first day of the  following
month  or may  accrue  the  interest  and pay it with the  principal  sum on the
maturity date. The Company may repay the principal sum and any accrued  interest
in whole or in part at any time  without  penalty.  With any payment  made,  the
funds will be applied first to unpaid interest.  If the Company becomes bankrupt
or  insolvent,  or sells all its  assets,  or if a  corporate  event  occurs (as
defined in the promissory note) the debt is due and payable without demand.  The
lender may convert any portion of the outstanding debt or any portion of accrued
interest  into  shares of the  Company at a price per share that is equal to the
average  closing  price  of the  Company's  common  stock  from  the date of the
promissory note to the date of conversion.

On August 4, 2000, Bellevue Investments Ltd. elected to convert the $200,000 due
on its June 2, 1999 note plus $25,384 of accrued interest into 145,328 shares of
the Company's common stock.

<PAGE>

DIPPY FOODS, INC.                  FORM 10-KSB                     PAGE 17 OF 19

INFLATION

The Company does not believe that inflation  will have a material  impact on the
Company's future operations.

                                    PART F/S

See Index to Financial Statements on page F-1.

                                    PART III

ITEMS 1 AND 2.    INDEX TO AND DESCRIPTION OF EXHIBITS.

<TABLE>
<CAPTION>

EXHIBIT      DESCRIPTION                                                                                          STATUS
<S>          <C>                                                                                                   <C>
2.1          Corporate Charter filed as an Exhibit to Dippy Food's registration statement on Form 10-SB filed      Filed
             on April 17, 2000, and incorporated herein by reference.

2.2          Articles of Incorporation filed as an Exhibit to Dippy Food's registration statement on Form          Filed
             10-SB filed on April 17, 2000, and incorporated herein by reference.

2.3          Certificate of Amendment to Articles of Incorporation changing the Issuer's name to Dippy Foods,      Filed
             Inc. filed as an Exhibit to Dippy Foods Inc.'s registration statement on Form 10-SB filed on
             April 17, 2000, and incorporated herein by reference.

2.4          Bylaws filed as an Exhibit to Dippy Foods Inc.'s registration statement on Form 10-SB filed on        Filed
             April 17, 2000, and incorporated herein by reference.

3            Instruments defining the rights of security holders                                                   None

5            Voting Trust Agreement                                                                                None

6.1          Amended Exchange Agreement dated September 17, 1998, among Dippy Foods, Inc. (Nevada), Dippy          Filed
             Foods, Inc. (California) and the shareholders of Dippy Foods, Inc. (California) for the Issuer's
             acquisition of Dippy Foods, Inc.,  (California) filed as an Exhibit to Dippy Foods Inc.'s
             registration statement on Form 10-SB filed April 17, 2000, and incorporated herein by reference.

6.2          Assignment of Copyright dated September 18, 1998 between Jon Stevenson, as assignor, and Dippy        Filed
             Foods, Inc. (Nevada), as assignee filed as an Exhibit to Dippy Foods Inc.'s registration
             statement on Form 10-SB filed on April 17, 2000, and incorporated herein by reference.

6.3          Standard Industrial/Commercial Single--tenant Lease-Gross dated December 16, 1998, between Ae Sil     Filed
             Park as lessor and Dippy Foods, Inc. as lessee for the lease of the Knollwood Circle property
             filed as an Exhibit to Dippy Foods Inc.'s Form 10-SB filed on April 17, 2000, and incorporated
             herein by reference.

6.4          License Agreement dated May 19, 1999, between ConAgra Brands, Inc. and Hunt-Wesson, Inc. as           Filed
             licensor and Dippy Foods, Inc. as licensee filed as an Exhibit to Dippy Foods Inc.'s Form 10-SB
             filed on April 17, 2000, and incorporated herein be reference.

6.5          Co-Packing Agreement dated October 4, 1999, between Dippy Foods, Inc. (Nevada) and Global Food        Filed
             Management Group, LLC filed as an Exhibit to Dippy Foods Inc.'s Form 10-SB filed on April 17,
             2000, and incorporated herein by reference.

6.6          Amendment to Co-Packing Agreement dated January 24, 2000, between Dippy Foods, Inc. (Nevada) and      Filed
             Global Food Management Group, LLC filed as an Exhibit to Dippy Foods Inc.'s registration
             statement on Form 10-SBA filed on April 17, 2000, and incorporated herein by reference.

</TABLE>

<PAGE>

DIPPY FOODS, INC.                  FORM 10-KSB                     PAGE 18 OF 19

<TABLE>
<CAPTION>

EXHIBIT      DESCRIPTION                                                                                          STATUS
<S>          <C>                                                                                                   <C>
6.7          Form of Subscription Agreement used in March 7, 1998 Reg D Rule 504 private placement of              Filed
             6,000,000 shares at $0.003 per share filed as an Exhibit to Dippy Foods Inc.'s registration on
             Form 10-SB filed on April 17, 2000, and incorporated herein by reference.

6.8          Form of Subscription Agreement used in April 16, 1998 Reg D Rule 504 private placement of 30,000      Filed
             shares at $0.01 per share filed as an Exhibit to Dippy Foods Inc.'s Form registration statement
             on Form 10-SB filed on April 17, 2000, and incorporated herein by reference.

6.9          Blank Form of Subscription Agreement used in March 31, 1999 Reg D Rule 504 private placement of       Filed
             4,980,000 shares at $0.05 per share filed as an Exhibit to Dippy Foods Inc.'s registration
             statement on Form 10-SB filed on April 17, 2000, and incorporated herein by reference.

6.10         Settlement Agreement dated February 1, 1999, between Dippy Foods, Inc. (California) and               Filed
             Alexander Diamond as an Exhibit to Dippy Foods Inc.'s registration statement on Form 10-SB filed
             on April 17, 2000, and incorporated herein by reference.

6.11         Blank Form of convertible promissory note given by Dippy Foods, Inc. (Nevada) payable in 12           Filed
             months and bearing interest at 12% per annum as an Exhibit to Dippy Foods Inc.'s registration
             statement on Form 10-SB filed on April 17, 2000, and incorporated herein by reference.

6.12         Distributorship Agreement dated July 8, 1999, between Dippy Foods, Inc. and International Foam        Filed
             Solutions, Inc. filed as an Exhibit to Dippy Foods Inc.'s registration statement on Form 10-SB
             filed on April 17, 2000, and incorporated herein by reference.

6.13         Brokerage Agreement dated March 25, 1999, between Dippy Foods and Anderson Chamberlin, Inc.           Filed
             filed as an Exhibit to Dippy Foods Inc.'s registration statement on Form 10-SB filed on April
             17, 2000, and incorporated herein by reference.

6.14         Blank Form of Subscription Agreement for Dippy CA Shareholders filed as an Exhibit to Dippy           Filed
             Foods Inc.'s registration statement on Form 10-SB filed on April 17, 2000, and incorporated
             herein by reference.

6.16         Master Donated Food Processing Agreement dated June 30, 1999, between Dippy Foods, Inc.               Filed
             (California) and California Department of Education filed as an Exhibit to Dippy Foods, Inc.'s
             registration statement on Form 10-SB filed on April 17, 2000, and incorporated herein be
             reference.

7            Material Foreign Patents                                                                              None

12           Additional Exhibits                                                                                   None

27           Financial Data Schedule                                                                             Included

</TABLE>

<PAGE>

DIPPY FOODS, INC.                  FORM 10-KSB                     PAGE 19 OF 19

                                   SIGNATURES

In accordance  with Section 13 or 15(d) of the Securities  Exchange Act of 1934,
Dippy  Foods,  Inc.  has  caused  this  report to be signed on its behalf by the
undersigned, who is duly authorized.

                DIPPY FOODS, INC.

                By:   "JON STEVENSON"
                     -----------------------------------------------------------

                Name and Title: JON STEVENSON - DIRECTOR AND PRESIDENT
                                ------------------------------------------------

                Dated: AUGUST 10, 2000
                       ---------------------------------------------------------

In accordance with the Securities Exchange Act of 1934, this report to be signed
below by the  following  persons  on  behalf  of Dippy  Foods,  Inc.  and in the
capacities and on the dates indicated.

                By:   "JON STEVENSON"
                     -----------------------------------------------------------

                Name and Title: JON STEVENSON - DIRECTOR AND PRESIDENT
                                ------------------------------------------------

                Dated: AUGUST 10, 2000
                       ---------------------------------------------------------

                By:   "MUNJIT JOHAL"
                    ------------------------------------------------------------

                Name and Title: MUNJIT JOHAL - DIRECTOR, SECRETARY AND TREASURER
                                ------------------------------------------------

                Dated: AUGUST 10, 2000
                       ---------------------------------------------------------


<PAGE>

                                DIPPY FOODS, INC.
                        (FORMERLY SWEETBRIER CORPORATION)

                        CONSOLIDATED FINANCIAL STATEMENTS

                       YEARS ENDED APRIL 30, 2000 AND 1999


<PAGE>

                                DIPPY FOODS, INC.
                        (FORMERLY SWEETBRIER CORPORATION)

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Certified Public Accountants                         F-2

Consolidated Balance Sheets                                                F-3

Consolidated Statements of Operations                                      F-4

Consolidated Statements of Stockholders' Deficit                           F-5

Consolidated Statements of Cash Flows                                      F-6

Notes to Consolidated Financial Statements                                 F-7

<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Stockholders
Dippy Foods, Inc.

     We have  audited  the  accompanying  consolidated  balance  sheets of Dippy
Foods, Inc. (formerly Sweetbrier Corporation) as of April 30, 2000 and 1999, and
the related  consolidated  statements of operations,  stockholders'  deficit and
cash flows for each of the years in the  two-year  period  ended April 30, 2000.
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  generally  accepted  auditing
standards.  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  presentation  of the  financial
statements.  We  believe  that our  audits  provide a  reasonable  basis for our
opinion.

     In our opinion,  the consolidated  financial  statements  referred to above
present fairly, in all material respects, the financial position of Dippy Foods,
Inc. as of April 30, 2000 and 1999,  and the results of its  operations  and its
cash flows for each of the years in the two-year period ended April 30, 2000, in
conformity with generally accepted accounting principles.

     The  accompanying  consolidated  financial  statements  have been  prepared
assuming the Company will continue as a going concern. As discussed in Note 1 of
the consolidated financial statements, the Company has limited operating history
resulting in an  accumulated  deficit of $1,353,774  since  inception,  negative
working capital of $929,531,  and a  stockholders'  deficit of $907,641 at April
30, 2000. These conditions raise  substantial  doubt about the Company's ability
to continue as a going  concern.  Management's  plans in regard to these matters
are also  described  in Note 1. The  consolidated  financial  statements  do not
include any adjustments that might result from the outcome of this uncertainty.

                                                   BDO SEIDMAN, LLP

Los Angeles, California
June 15, 2000, except for Note 10,
         which is as of August 4, 2000.


                                      F-2

<PAGE>

                                DIPPY FOODS, INC.
                        (FORMERLY SWEETBRIER CORPORATION)

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>


                                                                                                                April 30,
                                                                                                      ----------------------------
                                                                                                         2000              1999
                                                                                                      ----------        ----------
<S>                                                                                                  <C>                <C>
ASSETS (Note 1)

Current assets:
   Cash ......................................................................................       $     4,635        $     --
   Restricted cash (Notes  2 and 6) ..........................................................            60,000          10,000
   Accounts receivable .......................................................................             9,280          48,852
   Inventory .................................................................................            56,394           6,149
   Prepaid expenses ..........................................................................             2,353           2,572
                                                                                                     -----------        --------
       Total current assets ..................................................................           132,662          67,573
                                                                                                     -----------        --------
Fixed assets, net (Notes 3, 4 and 6) .........................................................            24,385          29,404
Deposits (Note 8) ............................................................................           102,111          12,532
                                                                                                     -----------        --------
                                                                                                     $   259,158         109,509
                                                                                                     ===========        ========
LIABILITIES AND STOCKHOLDERS' DEFICIT

 Current liabilities:
   Line of credit (Notes 2 and 6) ............................................................       $    44,500              --
   Bank overdraft ............................................................................                --           9,229
   Accounts payable ..........................................................................           124,508         107,571
   Accrued expenses ..........................................................................            72,768          10,254
   Loans from related parties (Note 4) .......................................................                --          30,698
   Convertible notes payable (Notes 5 and 10) ................................................           583,381              --
   Current portion of long-term debt (Note 6) ................................................             3,036           1,793
   Current portion of settlement payable (Note 4) ............................................           234,000         117,000
                                                                                                     -----------        --------

Total current liabilities ....................................................................         1,062,193         276,545

Long-term debt, net of current portion (Note 6) ..............................................            10,606          14,363

Settlement payable, net of current portion (Note 4) ..........................................            94,000         247,000
                                                                                                     -----------        --------
Total liabilities ............................................................................         1,166,799         537,908
                                                                                                     -----------        --------

Commitments and contengencies (Notes 4 and 8)

Stockholders' deficit:
   Common stock,  authorized 200,000,000 shares, at $0.001 par value; 19,579,266
     and 4,264,597 common shares subscribed or issued and
     outstanding .............................................................................            19,579          19,579
   Additional paid-in capital ................................................................           426,554         426,554
   Accumulated deficit .......................................................................        (1,353,774)       (874,532)
                                                                                                     -----------        ---------

Total stockholders' deficit ..................................................................          (907,641)        (428,399)
                                                                                                     -----------        ---------

                                                                                                     $   259,158          109,509
                                                                                                     ===========        =========

</TABLE>

          See accompanying summary of accounting policies and notes to
                       consolidated financial statements.


                                      F-3

<PAGE>

                                DIPPY FOODS, INC.
                        (FORMERLY SWEETBRIER CORPORATION)

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                                                         Years Ended
                                                                                                          April 30,
                                                                                             --------------------------------------
                                                                                                 2000                      1999
                                                                                             ------------              ------------
<S>                                                                                          <C>                       <C>
Revenues .......................................................................             $    320,581              $    191,933

Cost of goods sold .............................................................                  247,239                   183,512
                                                                                             ------------              ------------

   Gross profit ................................................................                   73,342                     8,421

Selling, general and administrative expenses ...................................                  503,455                   802,916
                                                                                             ------------              ------------

   Loss from operations ........................................................                 (430,113)                 (794,495)

Interest expense ...............................................................                  (49,129)                   (4,822)
                                                                                             ------------              ------------

Net loss .......................................................................             $   (479,242)             $   (799,317)
                                                                                             ============              ============

Basic and diluted weighted average shares outstanding ..........................               19,579,266                11,644,580
                                                                                             ============              ============

Basic and diluted loss per share ...............................................             $       (.02)             $       (.07)
                                                                                             ============              ============

</TABLE>


          See accompanying summary of accounting policies and notes to
                       consolidated financial statements.


                                      F-4

<PAGE>

                                DIPPY FOODS, INC.
                        (FORMERLY SWEETBRIER CORPORATION)

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                       YEARS ENDED APRIL 30, 2000 AND 1999

<TABLE>
<CAPTION>

                                        Common Stock Issued              Common Stock Subscription
                                  -----------------------------------    -------------------------
                                   Number                  Additional      Number                                     Total
                                     of         Common      Paid-In          of                    Accumulated     Stockholders'
                                   Shares        Stock      Capital        Shares       Amount        Deficit        Deficit
                                  ---------    --------   ----------     ----------    --------    ------------    -------------
<S>                               <C>           <C>         <C>          <C>          <C>          <C>              <C>

BALANCES, April 30, 1998 ....     4,264,597     $ 4,265     $ 42,298            --    $      --    $   (75,215)     $ (28,652)

   Issuance of common
      stock .................       304,669         304       50,266            --           --             --         50,570

   Effect of reverse merger..    10,030,000      10,030      (10,030)           --           --             --             --

   Common stock
      subscribed ............            --          --           --     4,980,000      249,000             --        249,000

   Contributed services .....            --          --      100,000            --           --             --        100,000

   Net loss .................            --          --           --            --           --       (799,317)      (799,317)
                                 ----------     -------     --------    ----------    ---------    -----------      ---------

BALANCES, April 30, 1999 ....    14,599,266      14,599      182,534     4,980,000      249,000       (874,532)      (428,399)

   Issuance of common
      stock .................     4,980,000       4,980      244,020    (4,980,000)    (249,000)            --             --

   Net loss                              --          --           --            --           --       (479,242)      (479,242)
                                 ----------    --------     --------    ----------    ---------    -----------      ---------

BALANCES, April 30, 2000 ....    19,579,266    $ 19,579     $426,554            --    $      --    $(1,353,774)     $(907,641)
                                 ==========    ========     ========    ==========    =========    ===========      =========

</TABLE>

          See accompanying summary of accounting policies and notes to
                       consolidated financial statements.


                                      F-5

<PAGE>

                                DIPPY FOODS, INC.
                        (FORMERLY SWEETBRIER CORPORATION)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>


                                                                                                              Years Ended
                                                                                                                April 30,
                                                                                                   --------------------------------
                                                                                                      2000                  1999
                                                                                                   ---------              ---------
<S>                                                                                                <C>                     <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss ..........................................................................             $(479,242)             $(799,317)
   Adjustments to reconcile net loss to net cash used in operating activities:
     Depreciation and amortization ...................................................                 7,267                  7,863
     Non-cash settlement payable to former director (Note 4) .........................                    --                372,000
     Non-cash compensation ...........................................................                    --                100,000

   Increase (decrease) from changes in:
     Accounts receivable .............................................................                39,572                (26,588)
     Inventory .......................................................................               (50,245)                   247
     Prepaid expenses ................................................................                   219                 (2,572)
     Deposits ........................................................................               (89,579)               (12,532)
     Accounts payable and accruals ...................................................                79,451                 55,579
                                                                                                   ---------              ---------
Net cash used in operating activities ................................................              (492,557)              (305,320)
                                                                                                   ---------              ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment ................................................                (2,248)               (26,614)
                                                                                                   ---------              ---------

Net cash used in investing activities ................................................                (2,248)               (26,614)
                                                                                                   ---------              ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Restricted cash ...................................................................               (50,000)               (10,000)
   Bank overdraft ....................................................................                (9,229)                 9,229
   Increase in line of credit ........................................................                44,500                     --
   Due to related parties ............................................................               (30,698)                30,698
   Proceeds from stock issuance ......................................................                    --                299,570
   Proceeds from issuance of notes payable ...........................................               583,381                 17,862
   Principal payments of notes payable ...............................................                (2,514)                (9,706)
   Settlement payments ...............................................................               (36,000)                (8,000)
                                                                                                   ---------              ---------
Net cash provided by financing activities ............................................               499,440                329,653
                                                                                                   ---------              ---------
Increase (decrease) in cash ..........................................................                 4,635                 (2,281)
Cash, beginning of period ............................................................                    --                  2,281
                                                                                                   ---------              ---------
Cash, end of period ..................................................................             $   4,635              $      --
                                                                                                   =========              =========
SUPPLEMENTAL  DISCLOSURE  FOR STATEMENTS OF CASH FLOWS
 Cash paid during the year for:
     Interest ........................................................................             $   2,864              $   4,822
                                                                                                   =========              =========

NON-CASH FINANCING ACTIVITIES:

  On September 19, 1998, the Company exchanged  6,638,538 shares of stock for 4,569,266 shares of Dippy-NV stock pursuant to a share
     exchange agreement.

  On October 11, 1998, the Company acquired a vehicle for a note payable in the amount of $17,862 (Note 5).

  On February  1, 1999,  the Company  accrued a  settlement  payable to a former  director in the amount of $372,000  consisting  of
     $276,000 payable in common shares and $96,000 payable in cash. (Note 4).

  During 1999, the Company recorded non-cash compensation of $100,000 in respect of a director's uncompensated services.

  During 2000, the Company issued the 4,980,000 subscribed shares.

</TABLE>

          See accompanying summary of accounting policies and notes to
                       consolidated financial statements.


                                      F-6

<PAGE>

                               DIPPY FOODS, INC.
                       (FORMERLY SWEETBRIER CORPORATION)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1--ORGANIZATION, DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Dippy  Foods,  Inc.  ("Dippy" or  "Dippy-CA"),  a  California  corporation,  was
incorporated on May 30, 1997. Dippy is in the business of developing, processing
and distributing,  packaged dipping foods and snacks, for school lunch programs,
sport complexes and disaster relief  programs.  Dippy commenced  operations from
its  California  offices in January  1998.  The  Company  currently  distributes
products to customers in California.

On September 17, 1998, the Company merged with and into  Sweetbrier  Corporation
("Sweetbrier") (see "Merger"). Sweetbrier was incorporated in Nevada on February
23, 1998 for the purpose of developing mineral properties.  Sweetbrier abandoned
its mining claims after completing the merger with Dippy-CA.

During  fiscal  1999,  subsequent  to the merger,  the Company  raised  $249,000
through the sale of 4,980,000 shares of common stock.

MERGER

On  September  17, 1998,  Sweetbrier  entered  into a share  exchange  agreement
whereby  it  acquired  all of the  outstanding  common  stock  of  Dippy.  Total
consideration  for the acquisition  was a share exchange of 6,638,533  shares of
Dippy  for  4,569,266  shares  of  Sweetbrier.   For  accounting   purposes  the
acquisition  has  been  treated  as a  reverse  acquisition  with  Dippy  as the
accounting  acquirer.  In a reverse  acquisition,  the stock  issued goes to the
accounting  acquirer.  Since  reverse  acquisition  accounting is the reverse of
normal,  it is the fair market value  ("FMV") of the  issuer's  stock at date of
acquisition  that is valued  with a write up (write  down) of the  issuer's  net
assets  depending  on whether  the stock is trading in excess  (less  than) book
value. If a FMV cannot be determined for the stock, and cost is determined based
on the FMV of the issuer's net assets,  then goodwill is not  recognized and the
transaction  is valued at the issuer's net tangible  assets.  Sweetbrier  had no
tangible  net  assets and very  limited  trading  history.  The FMV of the stock
issued could not be determined. Accordingly, goodwill was not recognized and the
transaction  was  recorded as a  recapitalization  of Dippy-CA.  The  10,030,000
shares held by Sweetbrier  shareholders  at the time of the reverse  acquisition
are reflected as  consideration  for the transaction.  Upon  consummation of the
merger, Sweetbrier changed its name to Dippy Foods, Inc. ("Dippy-NV").

GOING CONCERN UNCERTAINTY

The accompanying  consolidated  financial statements have been prepared assuming
that the  Company  will  continue  as a going  concern  which  contemplates  the
realization  of the assets and the  satisfaction  of  liabilities  in the normal
course of business.  The carrying amounts of assets and liabilities presented in
the financial  statements  do not purport to represent  realizable or settlement
values.  However,  the Company has limited  operating  history  resulting  in an
accumulated  deficit of $1,353,774 since inception,  negative working capital of
$929,531,  and a  stockholders'  deficit of  $907,641 at April 30,  2000.  These
conditions raise  substantial doubt about the Company's ability to continue as a
going  concern.  The  consolidated  financial  statements  do  not  include  any
adjustments that might result from the outcome of those uncertainties.

Management is planning to improve cash flow and  operating  results in two ways.
First, by raising  additional capital through private placements of stock, which
will be used to fund its  operations  and for the purchase of the new  equipment
(see Note 8). Second,  by increasing sales arising from sales to a number of new
school districts,  correctional facilities and the introduction of new products.
However, there is no assurance that such plans will be successful.

                                      F-7

<PAGE>

                               DIPPY FOODS, INC.
                       (FORMERLY SWEETBRIER CORPORATION)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1--ORGANIZATION, DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION,
        CONTINUED

PRINCIPLES OF CONSOLIDATION

The  accompanying  financial  statements  include  accounts of Dippy-CA  for all
periods presented and the accounts of Dippy-NV subsequent to September 17, 1998.
Pro forma  information  giving effect to the merger is not presented because the
historical  operating results of Sweetbrier prior to September 17, 1998 were not
material.  All  significant  intercompany  accounts and  transactions  have been
eliminated in consolidation.

REVENUE RECOGNITION

Revenue is recorded when products are shipped to customers.

INCOME TAXES

The Company  provides for income taxes in accordance with Statement of Financial
Accounting  Standards No. 109 ("SFAS 109"),  "Accounting for Income Taxes". SFAS
109 requires a company to use the asset and liability  method of accounting  for
income taxes.

Under the asset and liability  method,  deferred income taxes are recognized for
the tax consequences of "temporary  differences" by applying  enacted  statutory
tax rates  applicable  to future  years to  differences  between  the  financial
statement carrying amounts and the tax bases of existing assets and liabilities.
A valuation allowance is provided when management cannot determine whether it is
more likely than not that the deferred tax asset will be realized.

INVENTORIES

Inventories are valued at the lower of cost (first-in, first-out) or market (net
realizable value).

FIXED ASSETS

Fixed assets are stated at cost.  Depreciation is provided on the  straight-line
method over the  estimated  useful  lives,  which are generally not greater than
five years.  Fixed assets are reviewed each year to determine whether any events
or  circumstances  indicate  that the  carrying  amount of the assets may not be
recoverable.

Maintenance  and repairs are charged to expense as incurred.  Major renewals and
improvements are capitalized.  At the time of retirement or other disposition of
property and equipment the cost and  accumulated  depreciation  are removed from
the accounts and any resulting gains or losses are reflected in income.

USE OF ESTIMATES

The  preparation  of  consolidated   financial  statements  in  conformity  with
generally accepted  accounting  principles requires management to make estimates
and  assumptions  that  affect the  reported  amounts  of  assets,  liabilities,
contingent  liabilities,  revenues, and expenses at the date of the consolidated
financial  statements  and for  the  periods  that  the  consolidated  financial
statements are prepared. Actual results could differ from those estimates.

                                      F-8

<PAGE>

                               DIPPY FOODS, INC.
                       (FORMERLY SWEETBRIER CORPORATION)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE  1--ORGANIZATION,  DESCRIPTION  OF  BUSINESS  AND  BASIS  OF  PRESENTATION,
         CONTINUED

CONCENTRATION OF CREDIT RISK AND OFF-BALANCE SHEET RISK

See Note 9, Major Customers and Suppliers. The Company primarily sells to school
districts. These school districts are located throughout California. The Company
conducts  business based on periodic  evaluations  of its  customers'  financial
condition and generally does not require deposits.  The Company does not believe
a significant  risk of loss from  concentration  of credit exists  because these
customers are funded by the State of California or one of its counties.

The Company  primarily  deals with a few suppliers for purchases of its products
and  supplies.  The Company does not believe a  significant  risk of loss exists
because  it can  obtain  these  products  and  supplies  from  other  sources at
comparable prices.

The Company's  products meet the standards of the National  School Lunch Program
and the Company has been  approved for  participation  in the  Commodity  School
Program.  The National School Lunch Program and the Commodity School Program are
central to the Company's  business  strategy.  The elimination of these programs
could have a materially adverse effect on the Company's operations.

NET LOSS PER SHARE

Basic loss per share  includes no dilution  and is computed by dividing net loss
available to common shareholders by the weighted average number of common shares
outstanding  for the period.  Diluted  earnings per share reflects the potential
dilution of securities  that could occur if securities or other  contracts (such
as stock options and warrants) to issue common stock were exercised or converted
into common stock. The Company has no outstanding stock options or warrants.

RESEARCH AND DEVELOPMENT

Research and  development  costs are charged to operations in the year incurred.
During  fiscal 2000 and 1999,  $10,078 and $13,535 in research  and  development
costs were charged to operations.

RECLASSIFICATIONS

Certain  reclassifications  have been made to the 1999  financial  statements to
conform to the 2000 presentation.

NOTE 2--RESTRICTED CASH

Based on a sales  agreement,  the Company  invests  $10,000 in  certificates  of
deposit with  maturities  of less than one year, as security in the event of the
loss of inventory supplied to the Company by the customer.

The Company also invested $50,000 in a certificate of deposit which matures July
2, 2000 and is used as security against the revolving line of credit (Note 6).

                                       F-9

<PAGE>

                               DIPPY FOODS, INC.
                       (FORMERLY SWEETBRIER CORPORATION)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3--FIXED ASSETS

Fixed assets are summarized as follows:

                                                              April 30,
                                                        --------------------
                                                         2000          1999
                                                        ------        ------

     Vehicles                                         $   20,862    $   20,862
     Equipment                                            18,653        16,405
                                                      ----------    ----------

                                                          39,515        37,267
     Less accumulated depreciation and amortization       15,130         7,863
                                                      ----------    ----------

                                                      $   24,385    $   29,404
                                                      ==========    ==========

During  the  years  ending  April  30,  2000  and  1999,  the  Company  recorded
depreciation expense of $7,267 and $7,863, respectively.

NOTE 4--RELATED PARTY TRANSACTIONS

During fiscal 2000, the Company repaid $30,698 of loans to four shareholders.

On February 1, 1999,  the Company  entered  into a settlement  agreement  with a
former director whereby the Company agreed to pay the director $96,000 at $4,000
per month for 24 months,  plus interest at 5% payable on the final payment.  The
Company also agreed to issue  400,000  shares to the former  director at 100,000
shares  per year for four  years.  None of these  shares  have been  issued.  In
respect of this stock award,  the Company  recorded a liability and compensation
expense of $276,000, based on the then current fair value of the promised stock.
During 2000 and 1999, the Company paid $36,000 and $8,000, respectively, of such
settlement,  however,  has ceased  making  payments  due to a  violation  of the
settlement agreement by the former director.

During fiscal 1999,  the Company  recognized  $100,000 in  compensation  expense
arising from services contributed by a significant shareholder.

One of the Company's  stockholders immediate family is a member of the Company's
outside legal firm. The Company incurred legal fees to that law firm during 2000
and 1999 totaling approximately $57,000 and $0, respectively.

The Company has  reflected as a fixed asset the  financed  purchase of a vehicle
(see Notes 3 and 6) and as an operating  lease the lease of another vehicle (see
Note 8) that are not held in the Company's name. The Company has agreed with the
owner/lease holder to assume the obligations therewith.

NOTE 5--CONVERTIBLE DEBT

Convertible  debt consists of $583,381 in notes payable bearing interest at 12%,
payable  monthly,  unsecured,  due at  various  dates  between  June 2, 2000 and
February  25,  2001,  convertible  at the option of the payee into shares of the
Companies'  common stock at a per share price equal to the average closing price
of the Company's stock from the date of the note to the date of conversion.  See
Note 10.


                                      F-10

<PAGE>
                               DIPPY FOODS, INC.
                       (FORMERLY SWEETBRIER CORPORATION)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6--LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                                            April 30,
                                                                                   ---------------------------
                                                                                       2000            1999
                                                                                   ----------       ----------
<S>                                                                                <C>              <C>
Note payable to bank, interest at 22%, secured by vehicle, payable in sixty
   monthly payments of $493, including principal and interest                      $   13,642       $   16,156
                                                                                   ----------       ----------

                                                                                       13,642           16,156
Less:  current portion                                                                 (3,036)          (1,793)
                                                                                   ----------       ----------

Note payable due after one year                                                    $   10,606       $   14,363
                                                                                   ==========       ==========

Annual future minimum payments under note payable consist of:

<CAPTION>
                                                                                                      Amount
                                                                                                    ----------

     2001                                                                                           $    3,036
     2002                                                                                                3,801
     2003                                                                                                4,726
     2004                                                                                                2,079
                                                                                                    ----------
                                                                                                    $   13,642
                                                                                                    ==========
</TABLE>

At April 30, 2000,  the Company had a line of credit with a bank for  borrowings
up to $44,500.  The line of credit bears interest at 6.6% per annum. The line of
credit is collateralized by a $50,000  certificate of deposit (Note 2). The line
of  credit  expired  on July 2,  2000 and was paid off with the  certificate  of
deposit.

The following summarizes information on short-term borrowings for the year ended
April 30, 2000:

<TABLE>
<CAPTION>
<S>                                                                                                 <C>
Average month end balance                                                                           $   37,083
Maximum balance outstanding at any month end                                                        $   44,500
Weighted average interest rate (computed by dividing interest expense by average monthly balance)         6.56%
Interest rate at year end                                                                                 6.60%

</TABLE>

NOTE 7--INCOME TAXES

As of April 30, 2000 and 1999, deferred tax assets consist of the following:

<TABLE>
<CAPTION>
                                                                                            April 30,
                                                                                   --------------------------
                                                                                      2000             1999
                                                                                   ----------      ----------
<S>                                                                                <C>             <C>
Federal loss carryforwards                                                         $  308,284      $  145,342
State loss carryforwards                                                               52,898          37,789
                                                                                   ----------      ----------

                                                                                      361,182         183,131
Less:  valuation allowance                                                           (361,182)       (183,131)
                                                                                   ----------     -----------

                                                                                   $       --     $        --
                                                                                   ==========     ===========
</TABLE>
                                      F-11
<PAGE>

                               DIPPY FOODS, INC.
                       (FORMERLY SWEETBRIER CORPORATION)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 7--INCOME TAXES (CONTINUED)

At April 30, 2000 and 1999,  the Company has net  operating  loss  carryforwards
(NOL's) of approximately $907,000 and $427,000,  respectively,  for both federal
and state tax purposes.

At April 30, 2000 and 1999, the Company has deferred tax assets of approximately
$361,182 and $183,131,  respectively,  which  primarily  relate to net operating
losses.  A 100% valuation  allowance has been  established as management  cannot
determine  whether it is more likely than not that the  deferred tax assets will
be realized.

The  federal  and state  NOL's  begin to expire on April 30,  2018 and April 30,
2013, respectively.

The Company's valuation allowance increased during 2000 by $178,051.

NOL incurred prior to September 19, 1998 are subject to an annual limitation due
to the ownership  change (as defined  under Section 382 of the Internal  Revenue
Code  of  1986)  which  occurred  as a  result  of  the  merger.  Unused  annual
limitations  may be carried over to future years until the net operating  losses
expire.  Utilization of net operating losses may also be limited in any one year
by alternative minimum tax rules.

NOTE 8--COMMITMENTS

LEASE OBLIGATIONS

The Company leases premises for $5,893 per month. This lease escalates  annually
to $5,999 in the final year and expires December 31, 2001. (see Note 10)

Annual future  minimum lease payments under  operating  lease  commitments as of
April 30, 2000 are as follows:


  FISCAL YEAR                                    Amount
  -----------                                   ----------

    2001                                        $   71,140
    2002                                            47,992
                                                ----------
     Total minimum lease payments               $  119,132
                                                ==========

Rent  expense  was  $69,876  and  $22,686 for the years ended April 30, 2000 and
1999, respectively.

On May 19, 1999, the Company  entered into a license  agreement with a supplier.
The  Company was granted a  non-exclusive,  royalty-free  license to use certain
trademarks  until December 31, 2008. The Company  annually must buy a minimum of
400,000 pounds of fruit and 200,000 pounds of peanut butter during 1999; 600,000
pounds of fruit and 400,000  pounds of peanut  butter  during 2000;  and 800,000
pounds of fruit and 500,000  pounds of peanut butter  during 2001.  Purchases of
fruit and peanut  butter are to increase by 10% per year  between 2002 and 2008,
and the Company must use them  exclusively  in all of its products  except those
products destined for the school districts that are part of the Commodity School
Program.  The  licensor has the right to cancel the contract if the Company does
not buy the minimum amounts. The Company has not fulfilled its obligations under
the  licensing  agreement.  However,  the licensor has  continued to sell to the
Company and has allowed the Company to continue with its trademarks.

                                      F-12



<PAGE>

                               DIPPY FOODS, INC.
                       (FORMERLY SWEETBRIER CORPORATION)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 8--COMMITMENTS (CONTINUED)

On August 24,  1999,  the Company  entered  into an agreement to purchase a form
fill and seal machine for  $161,000.  At April 30, 2000,  the Company had paid a
deposit of $75,600 and the balance is due upon delivery, which is expected to be
during the second quarter of fiscal 2001.

On March 6, 2000, the Company's  previous  co-packer filed an action against the
Company  claiming  damages  in the  amount of  $149,620.  The  Company  plans to
vigorously defend this action.  The likelihood of an unfavorable  outcome cannot
be determined at this time.

NOTE 9--MAJOR CUSTOMERS AND SUPPLIERS

The  following  table is a listing of all customer  with sales  exceeding 10% of
total revenue.

                                 Year Ended                 Year Ended
       Customer                April 30, 2000             April 30, 1999
     ---------------------------------------------------------------------

           A                      13.0%                          --%
           B                      11.2                           --
           C                      10.3                           --
           D                        --                         29.2
           E                        --                         14.7

The following table is a listing of all vendors with purchases  exceeding 10% of
total cost of goods sold.

                                 Year Ended                 Year Ended
         Vendor                April 30, 2000             April 30, 1999
     ---------------------------------------------------------------------

           A                      30.6%                        27.6%
           B                      19.4                         16.8
           C                      17.2                         13.0
           D                      12.8                         12.7

NOTE 10--SUBSEQUENT EVENT

On August 1, 2000, the Company  subleased its building for the remaining term of
the lease.

On August 4, 2000, a debt holder of $200,000 of convertible  debt and $25,384 of
accrued  interest  elected to convert the  amounts  into  145,328  shares of the
Company's common stock.

                                      F-13