<PAGE>

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

                                    FORM 10-K

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

For the fiscal year ended: DECEMBER 30, 2000

                                       or

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

For the transition period from               to
                               -------------    ----------

Commission File Number: 333-45179


                       MRS. FIELDS' ORIGINAL COOKIES, INC.
               --------------------------------------------------
               (Exact name of registrant specified in its charter)

         DELAWARE                                               87-0552899
---------------------------------                           --------------------
  (State or other jurisdiction                                 (IRS employer
of incorporation or organization)                            identification no.)


 2855 EAST COTTONWOOD PARKWAY, SUITE 400
         SALT LAKE CITY, UTAH                               84121-7050
----------------------------------------                    ----------
(Address of principal executive offices)                    (Zip code)


                                 (801) 736-5600
                                 --------------
              (Registrant's telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:
NONE

Securities registered pursuant to Section 12(g) of the Act:
NONE

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

/X/ YES        / / NO

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K. [X]

     The Company had 400 shares of common stock outstanding at MARCH 30, 2001.

     Documents incorporated by reference: NONE
<PAGE>

                       MRS. FIELDS' ORIGINAL COOKIES, INC.


                                TABLE OF CONTENTS


<TABLE>
<S>                                                                             <C>
PART I.

ITEM 1.   Business............................................................   3

ITEM 2.   Properties..........................................................  15

ITEM 3.   Legal Proceedings...................................................  15

ITEM 4.   Submission of Matters to a Vote of Security Holders.................  16


PART II.

ITEM 5.   Market for Registrant's Common Equity and Related
          Stockholder Matters.................................................  16

ITEM 6.   Selected Financial Data.............................................  17

ITEM 7.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations...........................................  19

ITEM 7A.  Quantitative and Qualitative Disclosures About Market Risk..........  27

ITEM 8.   Financial Statements and Supplementary Data.........................  28

ITEM 9.   Changes in and Disagreements with Accountants on Accounting
          and Financial Disclosure............................................  64

PART III.

ITEM 10.  Directors and Executive Officers of the Registrant..................  64

ITEM 11.  Executive Compensation..............................................  66

ITEM 12.  Security Ownership of Certain Beneficial Owners and Management......  68

ITEM 13.  Certain Relationships and Related Transactions......................  69


PART IV.

ITEM 14.  Exhibits, Financial Statement Schedule, and Reports on Form 8-K.....  70

</TABLE>

                                       2
<PAGE>

                                     PART I

     Unless the context otherwise requires, references to "we," "us," "our,"
"Mrs. Fields" and the "Company" in this report generally refer to Mrs.
Fields' Original Cookies, Inc., a Delaware corporation and its subsidiaries.

FORWARD-LOOKING INFORMATION

     This report contains forward-looking statements. Forward-looking statements
include the words "may," "will," "estimate," "continue," "believe," "expect" or
"anticipate" and other similar words. These forward-looking statements generally
relate to our plans and objectives for future operations and are based upon
management's reasonable estimates of future results or trends. Although we
believe that the plans and objectives reflected in or suggested by such
forward-looking statements are based upon assumptions that are reasonable, we
may not achieve such plans or objectives. Actual results may differ materially
from projected results due, but not limited, to unforeseen developments,
including developments relating to the following:

     o    the availability and adequacy of our cash flow to satisfy our
          obligations, including payment of the notes and additional funds
          required for working capital,

     o    economic, competitive, demographic, business and other conditions in
          our various markets,

     o    the seasonal nature of our operations,

     o    actions taken or failed to be taken by third parties, including our
          customers, suppliers, competitors and shareholders, as well as
          legislative, regulatory, judicial and other governmental authorities,

     o    changes in our business strategy, capital improvements or development
          plans or in our personnel or their compensation,

     o    performance by franchisees and licensees,

     o    difficulties or delays in developing and introducing anticipated new
          products or failure of customers to accept new product offerings,

     o    changes in consumer preferences and our ability adequately to
          anticipate such changes,

     o    changes in raw materials and employee labor costs,

     o    the termination of, or our inability to renew on favorable terms, our
          material agreements,

     o    changes in our relationships with our franchisees and licensees, and

     o    changes in customer traffic.

     We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this report may not occur.

ITEM 1. BUSINESS

                                     HISTORY

     In 1996, an investor group led by Capricorn Investors II, L.P. formed Mrs.
Fields' Original Cookies, Inc. and The Mrs. Fields' Brand, Inc. as Delaware
corporations and subsidiaries of Mrs. Fields' Holding Company, Inc. ("MFH"). On
September 17, 1996, we initiated operations when we purchased substantially all
of the assets and assumed certain liabilities of Mrs. Fields Inc. and its
subsidiaries, The Original Cookie Company, Incorporated ("Original Cookie") and
the pretzel business of Hot Sam Company, Inc. ("Hot Sam").

     One of the key elements of our business plan has been the closing or
franchising of certain company-owned stores that did not meet specific financial
and geographical criteria established by management. During the year ended
December 30, 2000, we completed closing or franchising the stores that we had
identified as part of our business plan or the stores had been removed from the
store closure plan. Implementation of this element of the business plan has
resulted in enhanced operating margins and cash flows as these stores franchised
or closed. As a result of converting certain stores to franchises, royalty
revenues have increased and are expected to continue to increase and net store
sales and expenses associated with operating those stores decreased.

                                       3
<PAGE>

     Cash payments to landlords for early lease termination costs have
negatively impacted our short-term liquidity position. However, our overall
financial position is expected to strengthen over time as cash flows from
operating activities increase. As cash is used to fund the store closure
commitments, corresponding store closure reserves are reduced which has a
neutral impact on working capital and financial position. We believe that we
have sufficient liquidity to complete our store closure plans.

     Historically, we have achieved growth in both our cookie and pretzel
businesses through strategic acquisitions and we expect to continue this
strategy. In a series of transactions in 1997 and 1998, we acquired:

     o    substantially all of the assets, including 79 Pretzel Time stores,
          of H&M Concepts Ltd. Co., the largest franchisee of Pretzel Time,
          Inc., the franchisor of the Pretzel Time concept, along with all
          of the common stock of Pretzel Time, Inc.,

     o    all of the outstanding capital stock of Great American Cookie Company,
          Inc. and 48 stores from four Great American franchisees, and

     o    all of the outstanding capital stock of Pretzelmaker Holdings, Inc.
          ("Pretzelmaker"). Pretzelmaker had 248 franchised stores at the
          time of acquisition.

     On February 9, 2000, Capricorn Investors III, L.P., an affiliate of
Capricorn Investors II, L.P., MFH's majority stockholder, entered into an
agreement to acquire TCBY Enterprises, Inc. ("TCBY"), a retail snack food
company. This acquisition (the "TCBY Transaction") was completed on June 1,
2000.

     In connection with the TCBY Transaction, Mrs. Fields entered into a
Management Agreement (the "TCBY Management Agreement") with TCBY Holding
Company, Inc., the parent company of TCBY, and TCBY Systems, LLC, a wholly-owned
subsidiary of TCBY, pursuant to which the corporate and administrative functions
of TCBY were transferred to Mrs. Fields. Under the TCBY Management Agreement,
Mrs. Fields has agreed to manage and operate TCBY's business, and pay specified
operating and other costs of TCBY (including specified costs associated with
expenses incurred on behalf of TCBY and the transfer of the management function
from Little Rock, Arkansas to Salt Lake City, Utah), in exchange for a
management fee that will be paid by TCBY semi-monthly. Revenue generated from
the management fee is reported under the caption "Management fee revenue" on the
statement of operations.

     In connection with the TCBY Transaction, Mrs. Fields received a $300,000
acquisition advisory fee for its services rendered in connection with the
acquisition and for partial reimbursement of out-of-pocket costs and expenses
totaling approximately $725,000 incurred by Mrs. Fields in connection with
its performance of acquisition advisory services. Mrs. Fields will be
entitled to receive a reimbursement from TCBY for costs incurred and expensed
by Mrs. Fields related to transitional and start-up expenses incurred on
behalf of TCBY and the transfer of the management function from Little Rock,
Arkansas to Salt Lake City, Utah upon TCBY's sale of its existing dairy
processing plant for net proceeds sufficient to retire debt associated with
the plant or upon sufficient cash being available from the excess working
capital of the dairy processing plant. Reimbursable expenses through December
30, 2000 were approximately $2,400,000. Mrs. Fields' management expects that
the revenues from the TCBY management fee and any fees earned in connection
with a sale of the TCBY dairy processing plant will exceed Mrs. Fields' costs
related to this agreement.

     In accordance with the terms and conditions of the TCBY Management
Agreement, Mrs. Fields and TCBY will share cost savings that may be obtained
through the joint purchase of ingredients, supplies and services and Mrs.
Fields will be eligible to receive a portion of the anticipated cost savings
in connection with the expected outsourcing of TCBY's yogurt and ice cream
manufacturing requirements. During the year ended December 30, 2000, Mrs.
Fields did not record any revenues or fees related to the cost savings
agreement. The TCBY Transaction has also provided the opportunity for Mrs.
Fields and its eligible franchisees to become TCBY franchisees and for
eligible TCBY franchisees to become franchisees of Mrs. Fields or its
subsidiaries.

                                     GENERAL

     We are one of the largest retailers in the premium snack-food industry,
with cookies and pretzels as our major product lines. We are the largest
retailer in the United States of baked on-premises cookies, which we sell
primarily under our Mrs. Fields brand name. Mrs. Fields is among the most widely
recognized and respected brand names in the premium cookie industry with 94%
brand awareness among consumers. We are the second largest

                                       4
<PAGE>

retailer in the United States of baked on-premises pretzels, which we sell
primarily under our Pretzel Time and Pretzelmaker brand names. As of February
24, 2001, our retail network consisted of 1,391 locations, of which 902 were
cookie stores, 481 were pretzel stores and 8 were bakery cafe locations that
sell a combination of the products that we offer. Of the total stores, 425 were
company-owned, and 966 were franchised or licensed. We derive our revenue
principally from the sale of our products in our company-owned stores, the sale
of proprietary batter to our Great American franchised stores, and the receipt
of royalty payments based on gross sales of franchisees. In addition, we
generate revenues from initial franchise fees, from the sale of existing
company-owned stores to franchisees, and from the management of the business of
TCBY, Inc., which was purchased by an affiliate of our parent company in 2000.

                                PRODUCT OFFERINGS

     Our product offerings consist primarily of fresh baked cookies, brownies,
muffins and other baked goods and fresh baked sweet dough and "Bavarian" style
pretzels. During the year ended December 30, 2000, our revenue mix consisted of
the following:

<TABLE>
<S>                                           <C>
          Cookies and Brownies .........      68%

          Pretzels .....................      16%

          Beverages ....................      14%

          Other ........................       2%
</TABLE>

     COOKIES. As of February 24, 2001, we operate and franchise 902 specialty
retail cookie outlets, including full-size stores and satellite sites,
consisting of carts, wagons and kiosks: 526 under the Mrs. Fields brand, 71
under the Original Cookie brand and 305 under the Great American brand. We have
cookie stores in 48 states, with our Great American stores concentrated in the
southeastern and south central states and our Mrs. Fields and Original Cookie
stores strongly represented in the western, midwestern and eastern states. There
is little overlap between Mrs. Fields and Great American stores, with a dual
presence in 41 of the 654 malls in which we have cookie stores.

     Management believes that Mrs. Fields' market is the premium quality, baked
on-premises segment of the approximately $12 billion U.S. cookie industry. We
offer over 50 different types of cookies, brownies and muffins, which are baked
continuously and served fresh throughout the day, as well as assorted soft
drinks, frozen drinks, coffee and tea. Baked products are made using only high
quality ingredients, and all dough is centrally manufactured and frozen or
refrigerated to maintain product quality and consistency. All products pass
strict quality assurance and control steps at both the manufacturing plants and
the stores. In addition, Mrs. Fields continually creates and tests new products
to attract new customers and satisfy current customers.

     Great American outlets also sell "Cookie Cakes." Cookie cakes are
extra-large cookies, decorated with customer-selected personalized messages, for
special occasions. Although cookie sales are generally the result of impulse
buying, we believe that cookie cakes, which are often purchased as gifts for
special occasions, differentiate Great American from other specialty cookie
retailers by making Great American stores destination outlets.

     PRETZELS. As of February 24, 2001, we operated and franchised 481 retail
pretzel stores, which offer "sweet dough" soft pretzels and "Bavarian" style
pretzels with a variety of toppings: 225 under the Pretzel Time brand, 43 under
the Hot Sam brand and 213 under the Pretzelmaker brand. Pretzel Time's primary
product is an all-natural, hand-rolled soft pretzel, freshly baked from scratch
at each store location. Pretzel Time stores prepare pretzels with a variety of
flavors and specialty toppings, including cheddar cheese, cream cheese and pizza
sauce. The stores also offer soft drinks and freshly squeezed lemonade.

     In addition, the retail pretzel business has grown more quickly than the
retail cookie business in recent years. Hot Sam was acquired by us in connection
with the acquisition of Original Cookie. In order to expand our presence in the
retail pretzel industry, we acquired the business of H&M and the common stock of
Pretzel Time and Pretzelmaker. From the time we acquired Pretzel Time, Pretzel
Time brand stores have experienced a 6.4% year-

                                       5
<PAGE>

over-year increase in store sales volume, an increase in average store sales of
$42,000 and an increase of $8,000 in average store contribution.

     CROSS SELLING LOCATIONS. As of February 24, 2001, we operate and franchise
eight stores under the name Mrs. Fields' Bakery Cafe in which we sell our core
products of cookies, yogurt and ice cream and pretzels under the Mrs. Fields,
TCBY and Pretzel Time brand names, respectively, as well as other products,
including breakfast items, such as muffins, bagels and coffee, and lunch items,
such as soup and sandwiches. The strength of a Bakery Cafe location is that it
allows the consumer to select from a wide variety of food items at one location.
By expanding the menu, we maximize multiple dayparts, or sales throughout the
day. As a result, each store has the opportunity to increase exposure, attract
new customers and increase frequency among current users. We believe that bakery
cafe stores will be an increasing part of our business in the future.

                                BUSINESS STRATEGY

     Our objective is to increase sales and profitability at our company-owned
and franchised stores by implementing the key elements of our long-term business
strategy. We believe that our recent operating results reflect the successful
implementation of our business strategy. The percentage change in comparable
store sales improved to a negative 0.1% for the fiscal year ended December 30,
2000 compared to a negative 0.7% for the fiscal year ended January 1, 2000. In
addition, during the same period, comparative store sales of Mrs. Fields and
Pretzel Time, our premier concept brands, increased 2.4%, and 1.4%,
respectively. The key elements of our business strategy are as follows:

     CAPITALIZE ON CROSS SELLING AND CO-BRANDING OPPORTUNITIES. We intend to
capitalize on cross selling and co-branding opportunities by offering multiple
product lines in a single location, providing franchisees of one brand the
ability to become franchisees of our other brands and marketing bundled brands
to potential and existing licensees. We have recently introduced stores specific
for cross selling, which we call Mrs. Fields' Bakery Cafe, that sell each of our
core brands in a single location. As of February 24, 2001, we had eight such
stores and we intend to open eleven additional stores by the end of 2001. We
will also open four Great American Cookies Bakery Cafe stores by the end of
2001. We intend to continue our relationship with existing third-party partners,
such as Subway and Taco Bell, to co-brand our brands in their numerous existing
locations. We will continue to explore additional co-branding opportunities with
other well-respected national and regional brands.

     CAPITALIZE ON THE STRONG BRAND NAMES.

     "MRS. FIELDS" We believe that the Mrs. Fields brand name is the most widely
recognized and respected brand name in the retail premium cookie industry. Mrs.
Fields brand stores, for the year ended December 30, 2000, achieved higher
average revenue ($353,000 versus $255,000) than Original Cookie stores. As a
result, we intend to continue converting our remaining company-owned Original
Cookie stores to Mrs. Fields brand stores, which we believe may result in an
increase in net sales and income from store operations. Original Cookie stores
represent 24% of all company-owned cookie stores. In addition, we intend to
further capitalize on the Mrs. Fields brand name by further developing and
expanding the ways we market our products, including kiosks and carts in malls,
airports, convention centers, office buildings, street fronts and sports
complexes; increasing the emphasis on the catalog/e-tailing business; and
developing and capitalizing on licensing opportunities, such as linking sales of
Mrs. Fields with prominent names in the retailing and food service industry,
expanding licensing agreements with our existing licensees, entering into new
licensing agreements with food service operators and developing product line
extensions, such as cocoa, chocolate chips, ice cream novelties, chocolates and
ready to eat cookies to be sold in supermarkets and other convenient locations.

     "PRETZEL TIME" We believe the "Pretzel Time" brand name is one of the
leading brand names in pretzel retailing. We believe that there are significant
opportunities to improve our existing Hot Sam store operations by continuing to
convert our company-owned Hot Sam stores to Pretzel Time stores. Pretzel Time
stores have, for the year ended December 30, 2000, achieved higher average
revenue than Hot Sam stores ($263,000 vs. $210,000). As of February 24, 2001,
Hot Sam stores represent 35% of all company-owned pretzel stores. We believe
that the conversion to the Pretzel Time name may result in an increase in net
sales and income from store operations for Mrs. Fields' pretzel business. In
addition, we believe there are significant new Pretzel Time franchising
opportunities.

                                       6
<PAGE>

     DEVELOP NEW COMPANY-OWNED AND FRANCHISED STORES. We plan to build and
franchise new stores, as well as carts and kiosks, in existing and new
markets. We have identified over 100 mall and non-traditional locations, such
as amusement parks and other entertainment centers, which we believe would be
ideal for cookie, pretzel and frozen yogurt and ice cream stores. Beginning
in fiscal year 2001, we intend to add approximately 35 new company-owned
stores per year, close 10 company-owned stores per year due to non-renewal of
leases and to franchise approximately 100 to 110 new or co-branded pretzel
and cookie stores per year.

     CONTINUE DEVELOPMENT OF NEW PRODUCTS. We maintain a product development
department that continually creates and tests new products to attract new
customers and revitalize the interest of current customers. Once a new product
is identified, we develop prototypes to determine the initial formula. For Mrs.
Fields products, the formula is then scaled up for test production runs at one
or more approved facilities. Once the product has been successfully produced,
ingredient specifications, formulas, manufacturing processes, finished product
specifications, shelf life, storage and distribution procedures are established.
The new product is either immediately launched throughout the system, as in the
case of seasonal items or simple line extensions, or test marketed in a limited
number of stores. After a trial period to evaluate both consumer response and
store operations' ability to handle the new product, it is fully commercialized,
modified or discontinued. We continually review the selection of products in an
effort to maximize daytime offerings and profitability. For example, new muffin
flavors, bagels, croissants, cinnamon rolls and a revitalized coffee program
were recently introduced to enhance morning offerings, as cookies begin selling
primarily after mid-day. Pretzel Time has developed flavor line extensions such
as baked garlic parmesan pretzels. Additionally, Pretzel Time has developed more
substantial meal replacement items including the pretzel dog, which attracts a
more traditional lunch customer and is scheduled for system wide rollout in
2001.

     INCREASE INTERNATIONAL LOCATIONS. In addition to pursuing new store
development opportunities within the United States, we intend to grow
internationally by expanding our franchise operations. As of February 24, 2001,
there were 111 franchised Mrs. Fields and Pretzelmaker brand stores open
internationally.

     PURSUE FURTHER STRATEGIC ACQUISITIONS OF RELATED BUSINESSES. We intend to
selectively pursue strategic acquisitions in order to expand our geographic
presence and achieve operating efficiencies. Our management has demonstrated its
ability to identify and integrate new businesses through our acquisitions of the
cookie businesses of Original Cookie and Great American in 1996 and 1998,
respectively, our acquisition of the pretzel business of Hot Sam in connection
with our acquisition of Original Cookie and our acquisitions of the majority
interest in Pretzel Time and the business of H&M in 1997.

                                       7
<PAGE>

                                STORE OPERATIONS

     STORE BASE. As of February 24, 2001, our store portfolio consisted of 425
company-owned stores, 730 domestic franchised locations, 111 international
franchised locations and 125 licensed locations. By brand, our stores are
distributed as follows:

<TABLE>
<CAPTION>
                                    Company          Domestic      International
                                     Owned          Franchised      Franchised         Licensed          Total
                                    -------         ----------     -------------       --------          -----
<S>                                 <C>             <C>            <C>                 <C>               <C>
Mrs. Fields .............              129              221               77               99              526
Great American ..........               94              211               --               --              305
Original Cookie .........               71               --               --               --               71
                                     -----            -----            -----            -----            -----
   Cookie Subtotal ......              294              432               77               99              902
                                     -----            -----            -----            -----            -----

Pretzel Time ............               75              138               --               12              225
Pretzelmaker ............                5              160               34               14              213
Hot Sam .................               43               --               --               --               43
                                     -----            -----            -----            -----            -----
   Pretzel Subtotal .....              123              298               34               26              481
                                     -----            -----            -----            -----            -----

Bakery Cafe .............                8               --               --               --                8
                                     -----            -----            -----            -----            -----
   Totals ...............              425              730              111              125            1,391
                                     =====            =====            =====            =====            =====

</TABLE>

                                       8
<PAGE>

As of February 24, 2001, our domestic stores were located in 48 states, Guam,
and Washington DC as follows:

<TABLE>
<CAPTION>
                                                             Mrs. Fields' Original Cookies, Inc.
                                                                     Store Geography List
--------------------------------------------------------------------------------------------------------------
                                                   Company                                          % of
State                                               Owned     Franchised  Licensed    Total     Retail Outlets
--------------------------------------------------------------------------------------------------------------
<S>                                                <C>        <C>         <C>         <C>      <C>
Alabama .....................................         --         19         --         19           1.37%
Alaska ......................................         --          2          3          5           0.36%
Arizona .....................................         12         15         --         27           1.94%
Arkansas ....................................          4          3          2          9           0.65%
California ..................................         55        106          9        170          12.22%
Colorado ....................................          3         23          1         27           1.94%
Connecticut .................................          5         13          3         21           1.51%
Delaware ....................................          2         --         --          2           0.14%
Florida .....................................         19         37          3         59           4.24%
Georgia .....................................         15         20          6         41           2.95%
Guam ........................................         --          2         --          2           0.14%
Hawaii ......................................          1          8          5         14           1.01%
Idaho .......................................          2          6         --          8           0.58%
Illinois ....................................         27         17          2         46           3.31%
Indiana .....................................         12         12         --         24           1.73%
Iowa ........................................          2         24          6         32           2.30%
Kansas ......................................          1         10          2         13           0.93%
Kentucky ....................................          3          8         --         11           0.79%
Louisiana ...................................         14          8         --         22           1.58%
Maine .......................................          1          1          2          4           0.29%
Maryland ....................................         12          6          4         22           1.58%
Massachusetts ...............................          5         10          2         17           1.22%
Michigan ....................................         14         30         --         44           3.16%
Minnesota ...................................          3         14          3         20           1.44%
Mississippi .................................         --          4          1          5           0.36%
Missouri ....................................          4         30          5         39           2.80%
Montana .....................................         --          2         --          2           0.14%
Nebraska ....................................          3          8         --         11           0.79%
Nevada ......................................          3         10          2         15           1.08%
New Hampshire ...............................          1          4         --          5           0.36%
New Jersey ..................................         10         19         --         29           2.08%
New Mexico ..................................          1          2          4          7           0.50%
New York ....................................         22         21          1         44           3.16%
North Carolina ..............................          4         26          7         37           2.66%
North Dakota ................................         --          7          1          8           0.58%
Ohio ........................................         43         16          9         68           4.89%
Oklahoma ....................................          6          7          6         19           1.37%
Oregon ......................................         --          6          1          7           0.50%
Pennsylvania ................................         16         12         --         28           2.01%
South Carolina ..............................          6          5         14         25           1.80%
South Dakota ................................          1          5          3          9           0.65%
Tennessee ...................................          1         21         --         22           1.58%
Texas .......................................         46         58          1        105           7.55%
Utah ........................................          5         21          3         29           2.08%
Virginia ....................................         16         17          1         34           2.44%
Washington ..................................          8         15          5         28           2.01%
Washington DC ...............................         --          2         --          2           0.14%
West Virginia ...............................          3          6         --          9           0.65%
Wisconsin ...................................         13          8         --         21           1.51%
Wyoming .....................................          1          4         --          5           0.36%
                                                   -----      -----      -----      -----         ------
    Subtotal ................................        425        730        117      1,272          91.45%
International Locations .....................         --        111          8        119           8.55%
                                                   -----      -----      -----      -----         ------
                                        TOTAL        425        841        125      1,391         100.00%
                                                   =====      =====      =====      =====         ======
</TABLE>

                                       9
<PAGE>

     CONFIGURATION. The Company has developed a number of retail configurations
that have wide application and adaptability to a variety of retail environments.
In addition to the stores that have been designed for prime mall locations, the
Company has developed other formats intended to extend our presence within and
beyond mall locations. The introduction of frozen dough technology has led to a
number of new store configurations, expanded product offerings in smaller
outlets and non-traditional formats. We are expanding the products offered in
current mall and non-urban areas, adding the full product line of brands we
currently own or operate. We have had strong success in our first attempts to
combine Mrs. Fields, TCBY and Pretzel Time in combination stores.

     o    GENERAL. All of the retail store configurations are designed to
          include the same high-quality marketing, merchandising and design
          features that customers have come to expect from us. The store designs
          are bright with high-profile trademark identity. All products are
          baked throughout the day on the premises with ovens located in full
          view of the customer to support the "fresh-baked" image. All designs
          contain retail display, small freezers and cash registers.

     o    COOKIE STORES. All stores are uniformly designed in accordance with
          the Mrs. Fields' Original Cookie or Great American prototype, making
          extensive use of glass, painted wood, brass, mirrors, lighting and
          point-of-sale displays intended to create an upscale, open and
          inviting look. Stores also attractively and efficiently display their
          fresh-baked products using custom-made showcases. Store size ranges
          from 350 to 800 square feet, and the typical company-owned store is
          about 600 to 700 square feet with a minimum of about 15 linear feet of
          counter space.

     o    PRETZEL STORES. Pretzel Time outlets have an average size of 700
          square feet in both kiosks and store locations. Pretzel Time stores
          are designed to enable customers to enjoy watching the pretzels being
          rolled, twisted and baked, which underscores freshness and lends to
          the product's growing appeal. The preferable size of a Pretzelmaker
          store is between 500 and 700 square feet. Stores and kiosks are likely
          to be located in high traffic areas allowing the efficient store
          layout and display to attract customers to watch the pretzels being
          rolled and baked in minutes.

     o    BAKERY CAFE STORES. The average size of a Bakery Cafe store, which
          combines the attributes of cookie and pretzel stores, is between 1,000
          and 1,500 square feet for malls and 1,500 to 2,000 square feet for
          lifestyle, entertainment and street front locations with 25 to 30 foot
          fronts and/or counter space.

     o    KIOSKS AND CARTS. We and our franchisees and licensees also operate
          cookie kiosks and carts in a number of malls on a year-round basis.
          Kiosks have 100 to 250 square feet of retail space, supported by
          off-site storage and preparation space. Carts range in size from 30 to
          92 square feet. Currently, only the Great American kiosks have
          self-contained baking ovens. Because of their small size, most carts
          and kiosks do not have baking equipment, and are supplied cookie
          products by a fully-equipped store usually located in the same mall.
          We continue to seek opportunities to expand and sell from carts and
          kiosks in malls, airports, convention centers and street fronts giving
          these outlets greater flexibility in the products they can offer.

     LOCATION AND LEASING. Taking the impulse nature of our business into
consideration, we try to locate our outlets in areas of high pedestrian traffic,
with easy proximity to pedestrian traffic flow and at a distance from other food
providers of any kind. Possibilities for locations include any high pedestrian
traffic areas, including second locations within malls, airport concourses,
office building lobbies, hospitals and universities. Most of our stores are in
malls with "A" and "B" classifications, which generally have the following
characteristics: size greater than 700,000 square feet, sales per square foot
greater than $300, population density greater than 150,000 people within a
five-mile radius, median family income greater than $50,000, generally supported
by national fashion anchor tenants and located to minimize competition from
other malls.

     As of February 24, 2001, Mrs. Fields, including franchise locations, has a
presence in approximately 90% of the top 150 (as measured in sales per foot) "A"
and "B" malls in the country. Great American stores are located primarily in
high-traffic "B" malls. The majority of our pretzel stores are located in
shopping malls falling into "A", "B" and "C" classifications. Our new bakery
cafe stores will be a vehicle for consolidating multiple operations in

                                       10
<PAGE>

mall locations and for pursuing locations outside the mall environment, such as
mixed use, entertainment and lifestyle centers.

     MARKETING AND ADVERTISING. Our in-house marketing department and an outside
public relations company emphasize product sampling, local store marketing and
brand name identification. Historically, we have spent relatively little on paid
advertising, relying mainly on in-store signage and promotions. In addition to
posters and display of products, we promote products by offering special
packaging and selling other promotional items.

     o    COOKIE STORES. In our Mrs. Fields stores we advertise at the store
          level, using the aroma of fresh-baked cookies and the attractive
          arrangement of finished products to create a store ambiance that is
          conducive to sales. We cultivate local customer loyalty by offering
          regular 20% discounts to employees in malls where stores are located
          and occasional other discounts. Mrs. Fields is currently working on
          developing catered corporate accounts for both company-owned and
          franchised stores and will be building awareness of products geared
          toward corporate accounts at the store level for the local market area
          and through catalog/e-tailing sales. We also promote our products as
          gifts, particularly at holiday time. Our marketing strategy for Great
          American has emphasized strong merchandising of our Great American
          products and the use of proactive sales techniques, including the free
          sampling of products and other methods intended to increase the size
          of customer orders.

     o    PRETZEL STORES. In our pretzel stores we use "entertainment" at the
          store level, including the hand rolling of the pretzel, to attract
          customers to the front counter. We promote combination purchases,
          which are sales that include a pretzel and a beverage, to increase the
          amount of the average customer check.

     o    BAKERY CAFE STORES. In our Bakery Cafe stores, we give the customer
          the opportunity to select from a variety of snack products as well as
          to buy a meal combination. Express lunch specials include a sandwich,
          soup, cookie and beverage. The bakery cafe stores incorporate the
          marketing strategies of both our cookie stores and our pretzel stores.

     CATALOG/E-TAILING. Our catalog/e-tailing division markets a variety of
fresh-baked cookies, chocolate, flowers and other gift items through our mail
order gift catalog using our toll free telephone number "1-800-COOKIES" and our
web site, www.mrsfields.com. For the fiscal year ended December 30, 2000, the
catalog/e-tailing division had $8.2 million in revenues, or 4.6% of our total
revenue, representing an increase of approximately 29.6% over sales for the
fiscal year ended January 1, 2000. Management believes that there is significant
potential in the catalog/e-tailing business and is developing this division by
targeting both corporate customers and individuals with a history of purchases
at Mrs. Fields stores. In 2001, the catalog/e-tailing division will be moved
into a new facility that will triple its current production capacity. We also
offer product coupons and store location information at our Pretzel Time web
site, www.pretzeltime.com.

     CUSTOMER PROFILE.

     o    COOKIE STORES. We believe that our products are best targeted to a
          demographic profile which is relatively young, with upper-middle
          income levels. At the time of a May 1994 study, 66% of Mrs. Fields'
          customers were female and 34% were male, the mean age of a customer
          was 35.1 years of age, and 57% of customers had a household income of
          $50,000 or more. We believe that this demographic profile remains
          valid.

     o    PRETZEL STORES. Because pretzels are generally perceived as a
          healthier snack alternative to sweet treats, they are best targeted to
          a demographic profile which is relatively young, age 18 to 24, female,
          with upper-middle income levels.

     o    BAKERY CAFE STORES. The broad variety of product offerings allows us
          to target a wider demographic profile than our single product stores.
          The Bakery Cafe appeals to all consumers seeking a great tasting,
          reasonably priced snack or meal.

                                       11
<PAGE>

     SEASONALITY. Our sales and profitability in both the cookie business and
the pretzel business are subject to seasonal fluctuation and are traditionally
higher during the Thanksgiving and Christmas holiday season and other
gift-giving holidays, due to increased mall traffic and holiday gift purchases.

                            Supplies and Distribution

     INGREDIENTS AND SUPPLIES. We rely primarily on outside suppliers and
distributors for the ingredients used in our products and other items used in
our stores. Our Mrs. Fields stores receive frozen products, made according to
proprietary recipes, from our primary supplier, International Multifoods
Corporation ("Multifoods"). Multifoods uses stringent quality controls in
testing ingredients and manufacturing, and products are not released for
distribution unless they pass all quality control steps, including an evaluation
of the finished baked product. Multifoods' contract for making frozen products
for us expires on December 31, 2003 and is renewable every three years at our
option. Multifoods supplies the majority of Mrs. Fields and Original Cookie
frozen bakery product. Great American stores receive "ready to bake"
refrigerated batter from our batter facility in Atlanta, which we acquired in
the acquisition of Great American. The batter, which has a shelf life of about
90 days, is stored at the batter facility for an average of one to three weeks,
depending on demand, before being shipped.

     Pretzel Time stores buys a proprietary dry mix from selected distributors
and mix and bake pretzels at individual stores. Pretzel Time franchisees buy
from various distributors. J&J Foods, Inc. supplies the majority of the frozen
pretzel dough to Hot Sam Stores.

     Most supplies, other than dough, are ordered from distributors by either us
or the franchisee and are directly shipped to the store. We sell Coca-Cola soft
drinks exclusively in all of our company-owned and franchised stores under
agreements with Coca-Cola USA Fountain.

     DISTRIBUTION. Regional distributors handle distribution of perishable and
non-perishable items to our Mrs. Fields and Original Cookie stores weekly.
Regional distributors own and maintain all of the inventory, but are authorized
to purchase inventory items only from authorized vendors at prices that we have
negotiated. Great American stores receive batter from the Atlanta batter
facility by refrigerated common carrier. Pretzel Time franchisees use a variety
of distributors. Hot Sam distributes perishable and non-perishable items weekly
to stores using seven different regional distribution companies. Mrs. Fields
ships equipment related items, including smallwares, equipment and oven parts,
directly from public warehouses.

                                STORE MANAGEMENT

     MANAGEMENT STRUCTURE. We monitor all stores with a regionally based staff
of district sales managers. District sales managers are responsible for
monitoring all cookie and pretzel stores in their territories. Each district
sales manager is responsible for overseeing approximately 30 company-owned
and/or franchised cookie and pretzel stores within his or her region. Each
district sales manager reports to one of the four regional vice-presidents of
store operations. The field staff is also responsible for introducing new
products and processes to the stores, ensuring proper implementation and quality
control.

     MANAGEMENT INCENTIVES. Each store has an on-site management team consisting
of a manager and an assistant manager. The store manager is responsible for
hiring, training and motivating store personnel. Each manager of a company-owned
store is eligible for salary increases and bonuses based upon the performance of
his or her store, including sales, profits and store appearance. Management
believes that our incentive and other programs for management have achieved a
strong retention rate for managers. 77% of Mrs. Fields' district sales managers
have been with Mrs. Fields for at least three years (67% for over four years),
and 49% of Mrs. Fields' store managers have been with Mrs. Fields for at least
three years (43% for over four years).

     TRAINING. The Company believes store managers are a critical component in
creating an effective retail environment and, accordingly, has developed ongoing
programs to improve the quality and effectiveness of our store managers and to
increase retention rates. New store managers are required to attend a two-week
training program at our Salt Lake City training facility and ongoing training
courses in new products, standards, and procedures are available throughout the
year to all Mrs. Fields personnel. Managers of Great American stores are
required to attend a one-week training program at Great American's Atlanta
training facility, known as "Cookie University." In addition, training courses
are available throughout the year to all Great American and franchisee
personnel.

                                       12
<PAGE>

     QUALITY CONTROL. We maintain a quality control inspection program, which
consists of both scheduled and unscheduled inspections by our field staff as
well as a "mystery shopper" program. Our field staff, which consists of
approximately 100 employees, conducts formal inspections of each of our stores
at least four times a year. Our "mystery shopper" program, which we began in
1999, employs professional mystery shoppers recruited by mystery shop companies,
who fill out questionnaires following visits to our stores and report their
results to us by an Internet web site.

                              FRANCHISE OPERATIONS

     In accordance with our business strategy, we have been selling, and expect
to continue to sell, selected company-owned stores to franchisees to reduce
costs, increase profitability and provide for liquidity and development of
additional stores in the future. We are also actively seeking to franchise new
stores.

     Mrs. Fields' franchisees come from a wide variety of business backgrounds
and bring with them different operating styles and business objectives. Among
our franchisees are full-time store operators, passive investors, retired
professionals and people seeking a second source of income. The majority of Mrs.
Fields franchisees own one store. As of February 24, 2001, the 14 largest Mrs.
Fields franchisees operated 149 stores, and the largest Mrs. Fields franchisee
operated 16 stores.

     COOKIES. Each Mrs. Fields franchisee pays us an initial franchise fee of
$25,000 per Mrs. Fields store location and is responsible for funding the
build-out of the new store and purchasing initial dough inventory and supplies,
at a total cost of approximately $200,000, including the initial franchise fee.
However, the cost of opening a new store can vary based on individual operating
and location costs. We also charge franchisees a fee to handle equipment
purchases and to provide other assistance in helping the franchisee to set up
operations. After a store is set up, a franchisee pays royalty fees to us of 6%
of the franchised store's annual gross sales, and an advertising fee of 1% of
annual gross sales.

     Each new Great American franchisee pays an initial franchise fee of $25,000
per store and is responsible for funding the build-out of the new store and
purchasing initial batter inventory and supplies, at a total cost of
approximately $225,000, including the initial licensing fee. However, the cost
of opening a new store can be significantly higher for franchisees who purchase
existing company-owned stores and otherwise varies based on individual operating
and location costs. We also charge franchisees a fee to purchase equipment and
to provide other assistance in helping the franchisee to set up operations.
After a store is set up, a Great American franchisee pays royalty fees to Great
American of 7% of the franchised store's annual gross sales.

     We do not franchise Original Cookie stores.

     PRETZELS. Each new franchisee pays Pretzel Time an initial franchise fee of
$25,000 per new Pretzel Time store location and is responsible for funding the
build-out of the new store and supplies, at a total cost of approximately
$200,000, including the initial franchise fee. However, the cost of opening a
new store can vary based on individual operating and location costs. Pretzel
Time also charges franchisees a fee to handle equipment purchases and to provide
other assistance in helping the franchisee to set up operations. After a store
is set up, a Pretzel Time franchisee pays royalty fees to Pretzel Time of 7% of
the franchised store's annual gross sales, and a marketing fee of 1% of annual
gross sales. In addition to being the franchisor, we operate 95 Pretzel Time
stores.

     Each Pretzelmaker franchisee pays an initial franchise fee of $12,500
and is responsible for funding the build-out of the new store, equipment and
supplies, at a total cost of approximately $215,000, including the initial
franchise fee. However, the costs can vary depending on individual operating
and location costs. Franchisees are also charge royalty fees to Pretzelmaker
of 4 to 5% of the franchised store's annual gross sales, and a marketing fee
of 1.5% of annual gross sales. In addition to being the franchisor, we
operate five Pretzelmaker stores.

     We do not franchise Hot Sam stores.

     FRANCHISEE RECRUITING AND TRAINING. We have been successful in recruiting
franchisees and completing franchise transactions and believe we will continue
to realize significant cash flow from franchising by:

     o    emphasizing the use of proprietary dough, yogurt, ice cream and
          dessert products, minimizing product quality issues and ensuring a
          consistent product across all outlets,

                                       13
<PAGE>

     o    requiring frequent quality, service and cleanliness evaluations of
          franchised stores by operations support staff, and

     o    providing initial and continuing training of franchisees to improve
          their financial and retail sales skills.

     We believe training the franchisees is a critical component in creating an
effective retail environment, and accordingly makes ongoing training programs
available to franchisees to improve their quality and effectiveness. Mrs. Fields
franchisees are required to attend a two-week training program at our training
facilities in Salt Lake City and Atlanta. Ongoing training courses in new
products, standards, and procedures are available throughout the year to all
franchisee personnel.

                                    LICENSING

     In the past few years, we have utilized a "branding" strategy, which allows
a licensee the right to use the Mrs. Fields name (which is a registered
trademark) to build traffic, expand sales, improve market share, and to increase
profits through cultivating different ways of distributing our products. We
expect licensing to continue to be a major component of our growth in the
future. The following is a comprehensive list of branding strategies, with
examples of current licensees within our system:

     CONCEPT LICENSING. We have developed a licensing program for non-mall
retail outlets that enables it to enter difficult-to-reach markets and
facilitate brand exposure through "presence" and "prestige" marketing. Our
licensees duplicate the Mrs. Fields store concept and purchase dough from our
various distributors. Our licensees are generally corporate customers; several
of these licensees are contract management companies that manage and operate
food service in host locations. Our licensees include Host Marriott, which has a
non-exclusive license to sell our products in airports and travel plazas from
which we receive a royalty on product sold, ARAMark, which sells product in
stadiums and convention centers, and Holiday Inn Worldwide, which sells our
product in hotels.

     RETAIL LICENSING. We are expanding the branding strategy to include
products sold in other retail environments, including refrigerated dough,
dry-mix and non-food products, and other applications outside the original scope
of our retail cookie store concept. Current examples are Maxfield's and Nonni's,
which have the exclusive North American rights to manufacture and sell, under
our registered trademarks, boxed chocolates and ready to eat cookies,
respectively, and offer Mrs. Fields chocolates and cookies throughout the
supermarket, drug and mass merchandise or trade industry.

     SUPPLY LICENSING. We currently have arrangements with United Airlines,
Northwest Airlines, and TWA under which our mail order division sells cookies to
the airlines and allows the airlines to promote our Mrs. Fields brand and
products to their first-class customers. We are pursuing similar relationships
to compete with other manufacturers' brands selling in this distribution
channel.

                                   COMPETITION

     We compete for both leasing opportunities and customers with other cookie
and pretzel retailers, as well as other confectionery, sweet snack and specialty
food retailers, including cinnamon rolls, baked goods and candy shops. The
specialty retail food and snack industry is highly competitive with respect to
price, service, location and food quality, and there are many well-established
competitors with greater resources than us. We compete with these retailers on
the basis of price, quality, location and service. We face competition from a
wide variety of sources, including such companies as Cinnabon, Inc., Auntie
Anne's Soft Pretzels, and Baskin-Robbins 31 Flavors.

                                    EMPLOYEES

     As of December 30, 2000, we had approximately 3,416 employees in
company-owned stores, of whom approximately 682 were store managers and
assistant store managers and 2,734 were part-time sales assistants. The typical
Mrs. Fields store employs 5 to 13 employees. During the period from November
through February, we may hire as many as 750 additional part-time employees to
handle additional mall traffic. Most employees are paid on an hourly basis,
except store managers, and are not unionized. We have never experienced any
significant work stoppages and believe that our employee relations are good.

                                       14
<PAGE>

     Many employees are paid hourly rates based upon the federal minimum
wage. As of December 30, 2000, 304 of our 3,416 employees in company-owned
stores earned the federal minimum wage. A minimum wage increase would have a
negative impact to our labor costs, increasing wages by approximately
$350,000 annually per $0.50 increase in the minimum wage, excluding the
effect of "pay compression" in higher-paid employees. Management believes
this impact can be negated in the long-term, however, through increased
efficiencies in our operations and, as necessary, through retail price
increases. The current labor market is tight, which may cause us to have
difficulty hiring quality employees.

     None of our employees are covered by collective bargaining agreements.

                                   TRADEMARKS

     Mrs. Fields is the holder of numerous trademarks that have been federally
registered in the United States and in other countries located throughout the
world. We are a party to disputes with respect to trademarks in some foreign
jurisdictions, none of which, in the opinion of management, is material to our
business, financial condition or results of operations.

     We currently hold 50 trademark registrations that are federally registered
in the United States and 171 trademarks that are registered in 58 countries
outside the United States. The trademarks consist of various brand and product
names and logos. Trademarks are registered under United States laws for periods
of 7 to 10 years and in other countries for periods of 7 to 20 years, and at any
time, we may have trademarks whose registration will soon expire and must be
renewed. Under our license agreements, our licensees receive the rights to use
our recipes and our registered trademarks. We view our trademarks and the
ability to license them to third parties, as some of our most valuable assets.

     We have pending, or are in the process of filing, applications for
trademark registrations in a number of foreign countries. In a few foreign
countries, unrelated third parties have filed applications for registration of
similar trademarks. Upon discovery of such filings, we routinely contest such
applications to preserve our ability to register our trademarks in those
countries or to protect our existing registrations.

ITEM 2. PROPERTIES

     As of December 30, 2000, Mrs. Fields' is the tenant on or guarantor of
performance on 784 leases ("Operating Leases"), of which 284 are currently
subleased to franchisees ("Franchise Leases") with the franchisees assuming all
obligations of the tenant under the Franchise Lease, except to the extent we
subsidize such leases. In the event a franchisee ceases operations or otherwise
defaults under any of the Franchise Leases or in the event we cease operations
at any location governed by the Operating Leases, we will be primarily liable
for the satisfaction of all obligations of the tenant under such Leases. Most of
our operating leases provide for the payment of lease rents plus real estate
taxes, utilities, insurance, common area charges and other expenses, as well as
contingent rents which generally range from 8% to 10% of net retail store sales
in excess of stipulated amounts.

     Mrs. Fields' currently leases 36,000 square feet of office space in Salt
Lake City, Utah, which is used as corporate headquarters. We also lease
approximately 51,000 square feet of space in Salt Lake City, Utah for product
development, training and mail order operations. We own substantially all of the
equipment used in both of these facilities and in company-owned retail outlets.
We have recently signed a new lease on a 29,000 square foot facility in Salt
Lake City that will accommodate the significant growth of our catalog/e-tailing
division. The new building replaces 10,000 square feet of our current facility
and will triple the current capacity. Great American owns its batter production
facility, located in a building of approximately 28,000 square feet in Atlanta,
Georgia. The Atlanta facility also is used to house regional operational
personnel and the Great American training center.

ITEM 3. LEGAL PROCEEDINGS

     In the ordinary course of business, we are involved in routine litigation,
including franchise disputes and trademark disputes. We are not a party to any
legal proceedings which, in the opinion of management, after consultation with
legal counsel, is material to our business, financial condition or results of
operations.

                                       15
<PAGE>

     The stores and our products are subject to regulation by numerous
governmental authorities, including, without limitation, federal, state and
local laws and regulations governing health, sanitation, environmental
protection, safety and hiring and employment practices.

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

     Not applicable.


                                     PART II

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

                  MARKET INFORMATION AND NUMBER OF STOCKHOLDERS

     We are a wholly owned subsidiary of MFH. There is no established trading
market for Mrs. Fields or Mrs. Fields' Holding's common stock.

                                    DIVIDENDS

     For the fiscal years ended January 2, 1999 and January 1, 2000, we did
not declare or pay cash dividends. During the fiscal year ended December 30,
2000, the Company transferred $2,534,000 to MFH under a tax sharing agreement
which has been in effect since 1998.

                                       16
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

     The following table presents historical financial data for Mrs. Fields'
Original Cookies, Inc. and subsidiaries and its predecessors; namely, Mrs.
Fields Inc. and subsidiaries, The Original Cookie Company, Incorporated and the
pretzel business of Hot Sam Company, Inc. as of the dates and for the periods
indicated. The selected historical financial data has been derived from the
audited financial statements of Mrs. Fields and its predecessors. Due to the
acquisitions of the net assets of Mrs. Fields Inc., Original Cookie and Hot Sam
on September 17, 1996, the financial data is not comparable for all periods.
However, in order for the presentations to be meaningful for the periods
presented, certain statement of operations information for the predecessors has
been reclassified to be consistent with the Mrs. Fields historical financial
statement presentation. The selected historical financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the historical financial statements and the
related notes to it, contained elsewhere in this Form 10-K.

<TABLE>
<CAPTION>
                                                                                            Predecessors
                                                                   -----------------------------------------------------------------
                                                                                       (Dollars in thousands)
                                                                                                            The Original Cookie
                                                                                                         Company, Incorporated and
                                                                        Mrs. Fields Inc. and           the Carved-Out Portion of Hot
                                                                           Subsidiaries (1)           Sam Company, Inc. Combined (1)
                                                                    ------------------------------    ------------------------------
                                                                           December 31, 1995                 December 31, 1995
                                                                    through September 17, 1996 (2)    through September 17, 1996 (2)
                                                                    ------------------------------    ------------------------------
<S>                                                                  <C>                              <C>
STATEMENT OF OPERATIONS DATA:
Net store and food sales .........................................               $ 29,674                   $ 54,366
Net store contribution(3) ........................................                  3,797                      5,854
Franchising and licensing, net ...................................                  3,786                         --
General and administrative expenses ..............................                  8,984                      7,538
Income (loss) from operations ....................................                 (1,742)                    (2,772)
Net loss .........................................................                 (2,304)                    (5,645)
OTHER DATA:
Interest expense .................................................                     80                      2,895
Depreciation and amortization ....................................                  1,911                      4,937
Capital expenditures .............................................                  1,054                      1,200
EBITDA(4) ........................................................                    169                      2,165
Ratio of earnings to fixed charges(5) ............................                   (695)                    (1,751)
BALANCE SHEET DATA:
Working capital (deficit) ........................................                (21,704)                    (3,640)
Total assets .....................................................                 19,144                     59,024
Debt and capital lease obligations, including current portion ....                 21,224                     30,977
Total stockholders' equity (deficit) .............................                (30,318)                    16,943

</TABLE>

                                       17
<PAGE>

<TABLE>
<CAPTION>

                                                                         Mrs. Fields (1)
                                          ----------------------------------------------------------------------------
                                          September 18,    53 Weeks        52 Weeks        52 Weeks        52 Weeks
                                          1996 through       Ended           Ended           Ended          Ended
                                          December 28,     January 3,      January 2,      January 1,     December 30,
                                            1996(2)         1998(2)         1999(2)         2000(2)         2000(2)
                                          -------------    ----------      ----------      ----------     ------------
<S>                                       <C>             <C>             <C>             <C>             <C>
STATEMENT OF OPERATIONS DATA:
Net store and food sales ................  $  40,849       $ 127,845       $ 140,235       $ 152,268       $ 142,796
Net store contribution(3) ...............      9,707          25,044          20,166          20,802          23,196
Franchising and licensing ...............      1,267           6,563          14,001          28,669          27,150
General and administrative expenses .....      4,035          16,192          19,017          21,972          26,159
TCBY transition and other expenses ......         --              --              --              --           2,442
Store closure provision (reversal) ......         --             538           7,303          (1,579)         (1,014)
Income (loss) from operations ...........      5,649           8,415          (5,389)         10,381           2,396
Net income (loss) .......................      1,961            (974)        (19,143)         (8,221)        (19,394)
OTHER DATA:
Interest expense ........................      1,867           7,830          13,197          17,880          17,853
Total depreciation and amortization .....      2,344          10,403          19,820          24,206          27,937
Capital expenditures ....................      1,638           4,678           8,235           5,157           9,850
EBITDA(4) ...............................      7,993          18,818          21,734          33,008          29,319
Ratio of earnings to fixed charges(5) ...      2.85x              --              --              --              --
Cash flow from operating activities .....      7,609             919           5,296          17,903          11,980
Cash flow from investing activities .....    (21,131)        (15,505)        (40,894)         (4,696)         (9,784)
Cash flow from financing activities .....     20,281          24,164          24,062         (13,039)         (3,518)
BALANCE SHEET DATA:
Working capital (deficit) ...............  $  (2,889)      $  13,133       $ (12,727)      $  (3,786)      $  (7,964)
Total assets ............................    110,055         149,684         231,906         208,410         183,110
Mandatorily redeemable cumulative
  preferred stock of subsidiaries .......      3,597             902           1,261           1,070              --
Debt and capital lease obligations,
  including current portion .............     67,563         101,081         150,989         146,485         144,075
Total stockholder's equity ..............     16,961          30,765          40,678          34,457          12,443

</TABLE>

(1)  On September 17, 1996, Mrs. Fields completed the acquisitions of
     substantially all of the assets and assumed certain liabilities of the
     predecessors. As a result of purchase accounting adjustments related to the
     acquisitions, the Mrs. Fields' financial statements are not directly
     comparable to the predecessors' financial statements.

(2)  Mrs. Fields and its predecessors operate using a 52/53-week year ending on
     the Saturday closest to December 31.

(3)  Store contribution (which includes food sales, catalog/e-tailing sales
     and sales of refrigerated cookie dough product in retail markets)
     is determined by subtracting all store operating expenses, cost of sales
     and depreciation from net store and food sales. Management uses store
     contribution information to measure operating performance at the store
     level. Store contribution for stores in the process of being closed or
     franchised as a separate caption is not in accordance with accounting
     principles generally accepted in the United States. Store contribution may
     not be comparable to other similarly titled measures.

(4)  EBITDA consists of earnings before store closure provision (reversal)
     depreciation, amortization, interest, income taxes, minority interest,
     preferred stock accretion and dividends of subsidiaries and other income
     or expense. EBITDA is not intended to represent cash flows from
     operations as defined by accounting principles generally accepted in the
     United States and should not be considered as an alternative to net income
     (loss) as an indicator of operating performance or to cash flows as a
     measure of liquidity. EBITDA has been included because it is one of the
     indicators by which Mrs. Fields assesses its financial performance and its
     capacity to service debt.

(5)  For purposes of computing the ratio of earnings to fixed charges under our
     loan indenture, earnings consist of income before income taxes plus fixed
     charges. Fixed charges consist of interest expense on all indebtedness
     (whether paid or accrued and net of debt premium amortization), including
     the amortization of debt issuance costs and original issue discount,
     noncash interest payments, the interest component of any deferred payment
     obligations, the interest component of all payments associated with capital
     lease obligations, one-third of net rent expense, letter of credit
     commissions, fees or discounts and the product of all dividends and
     accretion on mandatorily redeemable cumulative preferred stock multiplied
     by a fraction, the numerator of which is one and the denominator of which
     is one minus the current combined federal, state and local statutory tax
     rate. For the period December 31, 1995 through September 17, 1996, Mrs.
     Fields Inc. and subsidiaries' earnings were insufficient to cover fixed
     charges by $2,099,000. For the period December 31, 1995 through
     September 17, 1996, Original Cookie and Hot Sam (combined) earnings were
     insufficient to cover fixed charges by $5,645,000. For the 53 weeks ended
     January 3, 1998, and the 52 weeks ended January 2, 1999 and January 1,
     2000, Mrs. Fields' earnings were insufficient to cover fixed charges by
     $319,000, $18,827,000 and $8,003,000 respectively. For the 52 weeks ended
     December 30, 2000, Mrs. Fields' earnings were insufficient to cover fixed
     charges by $15,504,000.

                                       18
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

     In 1996, an investor group led by Capricorn Investors II, L.P. formed Mrs.
Fields' Original Cookies, Inc. and The Mrs. Fields' Brand, Inc. as Delaware
corporations and subsidiaries of Mrs. Fields' Holding Company, Inc. ("MFH"). On
September 17, 1996, we initiated operations when we purchased substantially all
of the assets and assumed certain liabilities of Mrs. Fields Inc. and its
subsidiaries, The Original Cookie Company, Incorporated ("Original Cookie") and
the pretzel business of Hot Sam Company, Inc. ("Hot Sam").

     One of the key elements of our business plan has been the closing or
franchising of certain company-owned stores that did not meet specific financial
and geographical criteria established by management. During the year ended
December 30, 2000, we completed closing or franchising the stores that we had
identified as part of our business plan or the stores had been removed from the
store closure plan. Implementation of this element of the business plan has
resulted in enhanced operating margins and cash flows as these stores franchised
or closed. As a result of converting certain stores to franchises, royalty
revenues have increased and are expected to continue to increase and net store
sales and expenses associated with operating those stores decreased.

     Cash payments to landlords for early lease termination costs have
negatively impacted our short-term liquidity position. However, our overall
financial position is expected to strengthen over time as cash flows from
operating activities increase. As cash is used to fund the store closure
commitments, corresponding store closure reserves are reduced which has a
neutral impact on working capital and financial position. We believe that we
have sufficient liquidity to complete our store closure plans.

     Historically, we have achieved growth in both our cookie and pretzel
businesses through strategic acquisitions and we expect to continue this
strategy. In a series of transactions in 1997 and 1998, we acquired:

     o    substantially all of the assets, including 79 Pretzel Time stores,
          of H&M Concepts Ltd. Co., the largest franchisee of Pretzel Time,
          Inc., the franchisor of the Pretzel Time concept, along with all
          of the common stock of Pretzel Time, Inc.,

     o    all of the outstanding capital stock of Great American Cookie Company,
          Inc. and 48 stores from four Great American franchisees, and

     o    all of the outstanding capital stock of Pretzelmaker Holdings, Inc.
          ("Pretzelmaker"). Pretzelmaker had 248 franchised stores at the time
          of acquisition.

     On February 9, 2000, Capricorn Investors III, L.P., an affiliate of
Capricorn Investors II, L.P., Mrs. Fields' Holding's majority stockholder,
entered into an agreement to acquire TCBY Enterprises, Inc. ("TCBY"), a retail
snack food company. This acquisition (the "TCBY Transaction") was completed on
June 1, 2000.

     In connection with the TCBY Transaction, Mrs. Fields entered into a
Management Agreement (the "TCBY Management Agreement") with TCBY Holding
Company, Inc., the parent company of TCBY, and TCBY Systems, LLC, a wholly-owned
subsidiary of TCBY, pursuant to which the corporate and administrative functions
of TCBY were transferred to Mrs. Fields. Under the TCBY Management Agreement,
Mrs. Fields has agreed to manage and operate TCBY's business, and pay specified
operating and other costs of TCBY (including specified costs associated with
expenses incurred on behalf of TCBY and the transfer of the management function
from Little Rock, Arkansas to Salt Lake City, Utah), in exchange for a
management fee that will be paid by TCBY semi-monthly. Revenue generated from
the management fee is reported under the caption "Management fee revenue" on the
statement of operations.

     In connection with the TCBY Transaction, Mrs. Fields received a $300,000
acquisition advisory fee for its services rendered in connection with the
acquisition and for partial reimbursement of out-of-pocket costs and expenses
totaling approximately $725,000 incurred by Mrs. Fields in connection with
its performance of acquisition advisory services. Mrs. Fields will be
entitled to receive a reimbursement from TCBY for transitional and start-up
costs incurred and expensed by Mrs. Fields related to expenses incurred on
behalf of TCBY and the transfer of the management function from Little Rock,
Arkansas to Salt Lake City, Utah upon TCBY's sale of its existing dairy
processing plant for net proceeds sufficient to retire debt associated with
the plant or upon sufficient cash being

                                       19
<PAGE>

available from the excess working capital of the dairy processing plant.
Reimbursable expenses through December 30, 2000, were approximately $2,400,000.
Mrs. Fields' management expects that the revenues from the TCBY Management Fee
and any fees earned in connection with a sale of the TCBY dairy processing plant
will exceed Mrs. Fields costs related to this agreement.

     In accordance with the terms and conditions of the TCBY Management
Agreement, Mrs. Fields and TCBY will share cost savings that may be obtained
through the joint purchase of ingredients, supplies and services and Mrs. Fields
will be eligible to receive a portion of the anticipated cost savings in
connection with the expected outsourcing of TCBY's yogurt and ice cream
manufacturing requirements. During the year ended December 30, 2000, Mrs. Fields
did not record any revenues or fees related to the cost savings agreement. The
TCBY Transaction has also provided the opportunity for Mrs. Fields and its
eligible franchisees to become TCBY franchisees and for eligible TCBY
franchisees to become franchisees of Mrs. Fields or its subsidiaries.

RESULTS OF OPERATIONS OF MRS. FIELDS

     The following table sets forth, for the periods indicated, certain
information relating to the operations of Mrs. Fields expressed in thousands of
dollars and percentage changes from period to period.

<TABLE>
<CAPTION>

                                                    For the 52       For the 52           %            For the 52           %
                                                    Weeks Ended      Weeks Ended         Change       Weeks Ended         Change
                                                     January 2,       January 1,         From         December 30,        From
                                                       1999             2000         1998 to 1999        2000         1999 to 2000
                                                    -----------      -----------     ------------     ------------    ------------
                                                                                (DOLLARS IN THOUSANDS)
<S>                                                 <C>              <C>             <C>              <C>            <C>
STATEMENT OF OPERATIONS DATA: ..............
Revenues:
   Net store and food sales ................        $ 140,235         $ 152,268             8.6%       $ 142,796             (6.2%)
   Franchising .............................           12,464            24,782            98.8%          24,763             (0.1%)
   Management Fee ..........................               --                --             n/a            7,533              n/a
   Licensing and other .....................            1,537             3,887           152.9%           2,387            (38.6%)
                                                    ---------         ---------                        ---------
      Total revenues .......................          154,236           180,937            17.3%         177,479             (1.9%)
                                                    ---------         ---------                        ---------
Operating costs and expenses:
   Selling and store occupancy costs .......           75,003            79,634             6.2%          73,538             (7.7%)
   Cost of sales ...........................           38,482            46,323            20.4%          46,021             (0.7%)
   General and administrative expenses .....           19,017            21,972            15.5%          26,159             19.1%
   TCBY transition and other expenses ......               --                --             n/a            2,442              n/a
   Store closure provision (benefit) .......            7,303            (1,579)         (121.6%)         (1,014)           (35.8%)
   Depreciation and amortization ...........           19,820            24,206            22.1%          27,937             15.4%
                                                    ---------         ---------                        ---------
      Total operating costs and expenses ...          159,625           170,556             6.8%         175,083              2.7%
                                                    ---------         ---------                        ---------
Interest expense ...........................          (13,197)          (17,880)           35.5%         (17,853)            (0.2%)
Interest income ............................              623                53           (91.5%)             62             17.0%
Other expense, net .........................             (864)             (557)          (35.5%)           (158)           (71.6%)
Provision for income taxes .................             (316)             (218)          (31.0%)         (3,841)          1661.9%
                                                    ---------         ---------                        ---------
Net loss ...................................        $ (19,143)        $  (8,221)          (57.1%)      $ (19,394)           135.9%
                                                    =========         =========                        =========
EBITDA(1) ..................................        $  21,734         $  33,008           139.7%       $  29,319            (12.3%)
                                                    =========         =========                        =========
Cash flow from operating activities ........            5,296            17,903           238.0%          11,980            (33.1%)
Cash flow from investing activities ........          (40,894)           (4,696)          (88.5%)         (9,784)           108.3%
Cash flow from financing activities ........           24,062           (13,039)         (154.2%)         (3,518)           (73.0%)

</TABLE>

---------
(1) EBITDA consists of earnings before store closure provision (reversal)
    depreciation, amortization, interest, income taxes, minority interest,
    preferred stock accretion and dividends of subsidiaries and other income
    or expense. EBITDA is not intended to represent cash flows from operations
    as defined by accounting principles generally accepted in the United
    States and should not be considered as an alternative to net income (loss)
    as an indicator of operating performance or to cash flows as a measure of
    liquidity. EBITDA has been included because it is one of the indicators by
    which Mrs. Fields assesses its financial performance and its capacity to
    service debt.


                                       20
<PAGE>

        52 WEEKS ENDED DECEMBER 30, 2000 ("FISCAL 2000") COMPARED TO THE
                 52 WEEKS ENDED JANUARY 1, 2000 ("FISCAL 1999")

     COMPANY-OWNED AND FRANCHISED OR LICENSED STORE ACTIVITY. As of December 30,
2000, there were 420 company-owned stores and 971 franchised or licensed stores
in operation. The store activity for fiscal 1999 and fiscal 2000 is summarized
as follows:

<TABLE>
<CAPTION>
                                                                          Fiscal 1999                Fiscal 2000
                                                                    ----------------------      -----------------------
                                                                    Company-   Franchised       Company-    Franchised
                                                                     Owned     or Licensed       Owned      or Licensed
                                                                    --------   -----------      --------    -----------
<S>                                                                 <C>        <C>              <C>         <C>
Stores open as of the beginning of the fiscal year ..........          566           972           462           981
Stores opened (including relocations and acquisitions) ......           13           100            12           132
Stores closed (including relocations) .......................          (26)         (123)          (39)         (152)
Non-continuing company-owned (closure plan) stores closed
(September 18, 1996 forward) ................................          (59)           --            (5)           --
Stores sold to franchisees ..................................          (13)           13           (15)           15
Non-continuing company-owned (closure plan) stores
  franchised (September 18, 1996 forward) ...................          (24)           24            (2)            2
Stores acquired from franchisees ............................            5            (5)            7            (7)
                                                                      ----          ----          ----          ----
Stores open as of the end of the fiscal year ................          462           981           420           971
                                                                      ====          ====          ====          ====
</TABLE>

     NET STORE AND FOOD SALES. Total net store and food sales, which includes
sales from stores, our catalog/e-tailing facility, and sales of refrigerated
cookie dough product to retail markets, decreased $9,472,000, or 6.2%, from
$152,268,000 in fiscal 1999 to $142,796,000 in fiscal 2000.

     The decrease in net store sales from company-owned stores was primarily
attributable to the closure or franchising of 7 closure plan stores and 54 other
stores in 2000. The decreased revenues caused by store closures was partially
offset by opening or acquiring from franchisees 19 new stores in 2000. Fiscal
2000 sales were also negatively affected by the 122 stores that were closed
throughout 1999 and positively affected by the 13 stores that were opened
throughout 1999. The net impact of the store openings and closings is that our
company owned stores were open an aggregate of 3,358, or 12.5%, fewer unit weeks
during 2000 than 1999.

     The decrease in net store sales was also caused in part by negative same
store sales. Based on stores that have been open for at least two years
(adjusted for the calendar shift), system-wide company-owned store sales were
0.1% less in fiscal 2000 than in fiscal 1999. However, comparative store
sales of Mrs. Fields and Pretzel Time, our premier concept brands, increased
2.4%, and 1.4%, respectively. Sales per week of our Company-owned stores
increased $243, or 4.5%, from $5,375 in fiscal 1999 to $5,618 in fiscal 2000.

     The decrease in net store and food sales was partially offset due to:

     o    a 29.6% increase in mail order and e-tailing sales.

     o    the sale of a frozen cookie dough product for sale to retail
          markets for a full year in 2000. This frozen cookie dough product
          was introduced in 1999 and sales increased 108.7% from $1,198,000 in
          1999 to $2,500,000 in 2000.

     FRANCHISING REVENUES. Franchising revenues decreased $19,000, or 0.1%, from
$24,782,000 in fiscal 1999 to $24,763,000 in fiscal 2000. The decrease in
franchising revenues is attributable to a $1,164,000 or 10.2% increase in
royalties, which was offset by a $979,000, or 49.5%, decrease in initial
franchise fees and a $206,000, or 1.9%, decrease in batter sales to our
franchisees. Initial franchise fees decreased due to a decrease in the number of
transactions closed as well as in the average fee charged per transaction.

                                       21
<PAGE>

     MANAGEMENT FEE REVENUES. On February 9, 2000, Capricorn Investors III,
L.P., an affiliate of Capricorn Investors II, L.P., MFH's majority shareholder,
entered into an agreement to acquire TCBY, a retail snack food company. This
acquisition (the "TCBY Acquisition") was completed on June 1, 2000.

     In connection with the TCBY Acquisition, on June 1, 2000, we entered into a
Management Agreement (the "TCBY Management Agreement") with TCBY Holding
Company, Inc., the parent company of TCBY, and TCBY Systems, LLC, a wholly-owned
subsidiary of TCBY, pursuant to which the corporate and administrative functions
of TCBY were transferred to us. Under the TCBY Management Agreement, we have
agreed to manage and operate TCBY's business, and pay specified operating and
other costs of TCBY (including certain costs incurred on behalf of TCBY and
other specified costs associated with the transfer of the management function
from Little Rock, Arkansas to Salt Lake City, Utah), in exchange for a monthly
management fee of $1,033,000 paid by TCBY semi-monthly. We do not separate the
costs incurred under the management agreement from our own costs of operation,
as most of our employees support both companies; therefore the activity for
managing TCBY is not reported as a separate segment. We received a total of
$7,233,000 of management fee revenue under the Management Agreement during
fiscal 2000.

     In connection with the TCBY Acquisition, we also received a $300,000
acquisition advisory fee for our services rendered in connection with the
acquisition and for partial reimbursement of out-of-pocket costs and expenses
incurred by us in connection with our performance of acquisition advisory
services. We will also be entitled to receive a fee from TCBY for
reimbursement of approximately $2.4 million of certain costs incurred on
behalf of TCBY and other one-time transition costs incurred in the transfer
of the management functions of TCBY from Little Rock, Arkansas, to Salt Lake
City, Utah, when TCBY is successful in selling its existing dairy processing
plant for net proceeds sufficient to retire debt associated with the plant or
upon sufficient cash being available from the excess working capital of the
dairy processing plant. We expect that the revenues from the TCBY Management
Fee and any fees earned in connection with a sale of the TCBY dairy
processing plant will exceed any costs not fully reimbursed by the
acquisition advisory fee and related reimbursement.

     LICENSING AND OTHER REVENUES. Licensing and other revenues decreased
$1,500,000, or 38.6%, from $3,887,000 in fiscal 1999 to $2,387,000 in fiscal
2000. In fiscal 1999, we received $2,250,000 in licensing and other revenues
attributable to initial license fees on new contracts. There were no such
transactions in fiscal 2000. The decrease in initial license fees earned on
new contracts was partially offset by royalties earned on these new and
existing licensing agreements. The Company has entered into an agreement with
a national manufacturer of cookies for the sale of some of the Company's
cookie recipes for use in limited specific retail channels and geographic
locations. The sale is expected to close in 2001.

     TOTAL REVENUES. Total revenues decreased by $3,458,000, or 1.9%, from
$180,937,000 in fiscal 1999 to $177,479,000 in fiscal 2000 due to the reasons
discussed above.

     SELLING AND STORE OCCUPANCY COSTS. Total selling and store occupancy costs
decreased $6,096,000, or 7.7%, from $79,634,000 in fiscal 1999 to $73,538,000 in
fiscal 2000. The decrease in store occupancy costs was primarily attributable to
the decrease in the number of stores discussed above. The decrease was partially
offset by increased labor costs due to a tight labor market and wage inflation.

     COST OF SALES. Total cost of sales decreased $302,000, or 0.7%, from
$46,323,000 in fiscal 1999 to $46,021,000 for fiscal 2000. As a percentage of
net store and food sales, cost of sales increased from 30.4% in fiscal 1999 to
32.2% in fiscal 2000 due to lower gross profit margins earned on mail order
sales and on the sale of refrigerated cookie dough to retail supermarkets.

     GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased $4,187,000, or 19.1%, from $21,972,000 in fiscal 1999 to $26,159,000
in fiscal 2000. The increase in general and administrative expenses was
primarily attributable to costs incurred in managing the business of TCBY from
June 1, 2000 through December 30, 2000. The Company also incurred approximately
$2.4 million of one-time expenses and transition costs incurred in the transfer
of the management functions of TCBY from Little Rock, Arkansas, to Salt Lake
City, Utah.

     STORE CLOSURE PROVISION. Prior to 1999, we recorded a store closure reserve
to cover early lease termination costs under a plan to close or franchise
existing stores that were not earning acceptable levels of contribution. During
1999 and 2000, we were successful in closing certain of these stores at a
negotiated cost less than had been provided for in the plan. A total of
$1,579,000 and $1,014,000 of costs in excess of the amounts required to close
the stores was reversed in 1999 and 2000, respectively.

                                       22
<PAGE>

     DEPRECIATION AND AMORTIZATION EXPENSE. Total depreciation and amortization
expense increased by $3,731,000, or 15.4%, from $24,206,000 in fiscal 1999 to
$27,937,000 in fiscal 2000.

     During fiscal 2000, we wrote down to net realizable value approximately
$3,558,000 of impaired long-lived store assets and the goodwill associated with
these stores. This expense is included in depreciation and amortization expense.
During fiscal 1999, the addition to the impairment reserve for impaired store
assets was only $1,883,000.

     The Company continues to convert its Original Cookie and Hot Sam stores to
Mrs. Fields and Pretzel Time stores, respectively, and is considering abandoning
those brands in 2001. If this occurs, the Company will write off approximately
$13,500,000 of goodwill related to the Original Cookie and Host Sam brand names
and recipes in 2001 as a non-cash charge to amortization expense.

     TOTAL OPERATING COSTS AND EXPENSES. Total operating costs and expenses
increased $4,527,000, or 2.7%, from $170,556,000 in fiscal 1999 to $175,083,000
in fiscal 2000, due to the reasons discussed above.

     INTEREST EXPENSE. Interest expense for fiscal 2000 was comparable to fiscal
1999.

     INTEREST INCOME. Interest income for fiscal 2000 was comparable to fiscal
1999.

     OTHER, NET. Other expenses and other items decreased $399,000 from
$557,000 in 1999 to $158,000 in fiscal 2000, primarily due to no preferred
stock accretion in fiscal 2000.

     PROVISION FOR INCOME TAXES. In connection with the formation of the Mrs.
Fields, Inc. and Original Cookie in 1996, the Company recorded a deferred tax
asset totaling $3,499,000. Under the provisions of Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes", the Company
increased the valuation allowance on the deferred tax asset in 2000 because
it had not yet achieved taxable income subsequent to the date that the
Company was formed. As the Company achieves a history of generating taxable
income in the future, the deferred tax assets will be reinstated to the
extent that the deferred tax asset can be utilized for income tax return
purposes.

     NET LOSS. The net loss increased by $11,173,000, or 136.0%, from
$8,221,000 in fiscal 1999 to $19,394,000 in fiscal 2000, principally due to
the reasons described above.

                                       23
<PAGE>

         52 WEEKS ENDED JANUARY 1, 2000 ("FISCAL 1999") COMPARED TO THE
                 52 WEEKS ENDED JANUARY 2, 1999 ("FISCAL 1998")

     COMPANY-OWNED AND FRANCHISED OR LICENSED STORE ACTIVITY

     As of January 1, 2000, there were 462 company-owned stores and 981
franchised or licensed stores in operation. The store activity for fiscal 1998
and fiscal 1999 is summarized as follows:

<TABLE>
<CAPTION>
                                                                             Fiscal 1998               Fiscal 1999
                                                                      -----------------------     -----------------------
                                                                      Company-    Franchised      Company-    Franchised
                                                                       Owned      or Licensed      Owned      or Licensed
                                                                      --------    -----------     --------    -----------
<S>                                                                   <C>         <C>             <C>         <C>
Stores open as of the beginning of the fiscal year ...........          481           553           566           972
Stores opened (including relocations and acquisitions) .......          128           504            13           100
Stores closed (including relocations) ........................          (20)          (78)          (26)         (123)
Non-continuing company-owned (exit plan) stores closed
    (September 18, 1996 forward) .............................          (30)           --           (59)           --
Stores sold to franchisees ...................................          (11)           11           (13)           13
Non-continuing company-owned (exit plan) stores franchised
    (September 18, 1996 forward) .............................          (15)           15           (24)           24
Stores acquired from franchisees .............................           33           (33)            5            (5)
                                                                       ----          ----          ----          ----
Stores open as of the end of the fiscal year .................          566           972           462           981
                                                                       ====          ====          ====          ====

</TABLE>

     REVENUES

     NET STORE AND FOOD SALES. Total net store and food sales, which includes
sales from stores and the catalog/e-tailing facility and sales of
refrigerated cookie dough product to retail markets, increased $12,033,000,
or 8.6%, from $140,235,000 to $152,268,000 for fiscal 1999 compared to fiscal
1998.

     The increase in net store sales from continuing company-owned stores was
primarily attributable to:

          (1)  the operation for a full year of 66 Great American stores
               acquired in connection with the acquisitions of Great American
               and some of its franchisees in August and September 1998,

          (2)  the operation of two Pretzelmaker continuing company-owned stores
               acquired in connection with the Pretzelmaker acquisition in
               November 1998,

          (3)  a 21% increase in mail order sales,

          (4)  the introduction of a frozen cookie dough product for sale to
               retail markets.

     The increase in net store sales was offset in part by negative same
store sales. Based on stores that have been open for at least two years
(adjusted for the calendar shift), system-wide continuing company-owned store
sales were down 1% during the fiscal 1999 compared to the same period in
fiscal 1998. The Company also closed or franchised 150 stores during fiscal
1999, principally due to its store closure plan. Sales per week of our
Company-owned stores increased $489, or 10%, from $4,880 in fiscal 1998 to
$5,375 in fiscal 1999.

     FRANCHISING REVENUES. Franchising revenues increased $12,318,000, or 98.8%,
from $12,464,000 to $24,782,000 for fiscal 1999 compared to fiscal 1998. The
increase in franchising revenues was primarily attributable to royalties earned
from the 211 Great American franchised stores obtained in connection with the
acquisitions of Great American, Deblan, Chocolate Chip and Karp in August and
September 1998, the 199 Pretzelmaker franchised stores acquired in November 1998
and the additional stores that were franchised by the Company in 1999.

     LICENSING AND OTHER REVENUES. Licensing revenues increased $2,350,000, or
152.9%, from $1,537,000 to $3,887,000 for fiscal 1999 compared to fiscal 1998.
The increase in licensing and other revenues was attributable to license fees on
new contracts entered into in 1999 and royalties earned on existing licensing
agreements. The increase was partially offset by a decrease in the number of
licensed locations during 1999.

                                       24
<PAGE>

     TOTAL REVENUES. Total revenues increased by $26,701,000, or 17.3%, from
$154,236,000 to $180,937,000 for fiscal 1999 compared to fiscal 1998 due to the
reasons discussed above.

     OPERATING COSTS AND EXPENSES

     SELLING AND STORE OCCUPANCY COSTS. Selling and store occupancy costs
increased $4,631,000, or 6.2%, from $75,003,000 to $79,634,000 for fiscal 1999
compared to fiscal 1998.

     The increase in selling and store occupancy costs was primarily
attributable to the 66 Great American continuing company-owned stores acquired
in connection with the acquisitions of Great American, Deblan, Chocolate Chip
and Karp in August and September 1998 and the two Pretzelmaker stores acquired
in November 1998. The increase in store occupancy costs was also attributable to
rent escalations in existing leases and lease renewal increases.

     COST OF SALES. Total cost of sales increased $7,841,000, or 20.4%, from
$38,482,000 to $46,323,000 for fiscal 1999 compared to fiscal 1998.

     This increase was primarily the result of the addition 66 Great American
company-owned stores acquired in connection with the acquisitions of Great
American, Deblan, Chocolate Chip and Karp in August and September 1998 and 2
Pretzelmaker stores acquired in November 1998. Mail order cost of sales
increased consistent with the increased mail order sales.

     GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased $2,955,000, or 15.5%, from $19,017,000 to $21,972,000 for fiscal 1999
compared to fiscal 1998. The decrease in general and administrative expenses was
primarily attributable an effort on the part of the Company to reduce expenses.

     STORE CLOSURE PROVISION. During the fourth quarter of 1998, the Company
recorded an additional $7,303,000 in store closure reserves to cover early lease
termination costs under a plan to close or franchise 54 existing stores that
were not earning acceptable levels of contribution. During 1999, the Company was
successful in closing certain of these stores at a negotiated cost less than had
been provided for in the plan. A total of $1,579,000 of costs in excess of the
amounts required to close the stores have been reversed in 1999. See Note 5 to
the Consolidated Financial Statements for a detailed explanation of the store
closure reserve.

     DEPRECIATION AND AMORTIZATION EXPENSE. Total depreciation and amortization
expense increased by $4,386,000, or 22.1%, from $19,820,000 to $24,206,000 for
fiscal 1999 compared to fiscal 1998. This increase was primarily attributable to
increased goodwill amortization from the acquisitions of H&M and Pretzel Time in
fiscal 1997 and the acquisitions of Great American, Deblan, Chocolate Chip and
Pretzelmaker in fiscal 1998.

     During fiscal 1999, the Company wrote down, to net realizable value,
approximately $1,646,000 of impaired long-lived assets. This expense is included
in depreciation and amortization expense. The Company also assessed the
realization of goodwill associated with these stores and recorded an impairment
of goodwill totaling $237,000.

     TOTAL OPERATING COSTS AND EXPENSES. Total operating costs and expenses
increased by $10,931,000, or 6.8%, from $159,625,000 to $170,556,000 for fiscal
1999 compared to fiscal 1998 for the reasons discussed above.

     INTEREST EXPENSE. Interest expense increased $4,683,000, or 35.5%, from
$13,197,000 to $17,880,000 for fiscal 1999 compared to fiscal 1998. This
increase was primarily attributable to interest expense for a full fiscal year
on the $40,000,000 senior notes issued in August 1998, increased levels of
capital leases and usage of the Company's line of credit.

     INTEREST INCOME. Interest income decreased $570,000, or 91.5%, from
$623,000 to $53,000 for fiscal 1999 compared to fiscal 1998. In 1998, the
Company earned interest on excess cash provided by the $100,000,000 senior notes
that were placed in November 1997 and the $40,000,000 senior notes placed in
August 1998. This excess cash was used to acquire Great American and
Pretzelmaker and, therefore, was not available for investment in 1999.

     OTHER, NET. Other expenses and other items for fiscal 1999 were
comparable to fiscal 1998.

                                       25
<PAGE>

     NET LOSS. The net loss decreased by $10,922,000, or 57.1%, from $19,143,000
to $8,221,000 for fiscal 1999, compared to fiscal 1998 due to the combination of
factors described above.

                         LIQUIDITY AND CAPITAL RESOURCES

     GENERAL. Our principal sources of liquidity are cash flows from operating
activities, cash on hand and available borrowings under our existing revolving
credit facility. At December 30, 2000, we had $3,308,000 of unrestricted cash
and cash equivalents, $10,000,000 available under our credit facility which
expired in March 2001 and has been renewed with substantially equivalent terms
through March 31, 2002, and $2,618,000 of capital lease borrowings allowable
under our bond indenture. However, compliance with the terms of the indenture
governing our outstanding senior notes limited our ability to borrow under the
credit facility to $7,984,000 at December 30, 2000. During 2001, we expect that
our principal uses of cash will be for working capital, capital expenditures,
store closure costs, debt service requirements and other general corporate
purposes. We are highly leveraged. We believe that our sources of cash will be
adequate to meet our anticipated requirements through at least fiscal 2000.
There can be no assurance, however, that our operating activities will continue
to generate cash flows at or above current levels. In addition, given borrowing
restrictions under our senior note indenture and maintenance covenants in the
revolving credit facility, our ability to make additional borrowings is limited.
Accordingly, we may choose to defer capital expenditure plans and extend vendor
payments for additional cash flow flexibility.

     As of December 30, 2000, we had liquid assets (unrestricted cash and
cash equivalents and accounts receivable) of $12,410,000, a decrease of 2.5%,
or $320,000, from January 1, 2000, when liquid assets were $12,730,000.
Current assets decreased by $2,671,000, or 13.0%, to $17,924,000 at December
30, 2000, from $20,595,000 at January 1, 2000. This decrease was primarily
the result of a decrease in inventories, prepaid rents and the current
portion of deferred tax assets, partially offset by an increase in accounts
receivable.

     Long-term assets decreased $22,629,000, or 12.0%, to $165,186,000 at
December 30, 2000, from $187,815,000 at January 1, 2000. This decrease was
primarily the result of depreciation and amortization of property and equipment,
goodwill, deferred loan costs and a decrease in the long-term portion of
deferred tax asset.

     Current liabilities increased by $1,507,000, or 6.2%, to $25,888,000 at
December 30, 2000, from $24,381,000 at January 1, 2000. This increase is due to
an increase in accounts payable which was partially offset by a decrease in the
current portion of the store closure reserve.

     Our working capital deficit increased by $4,178,000, or 110.4%, to a
deficit of $7,964,000 at December 30, 2000, from a deficit of $3,786,000 at
January 1, 2000, for the reasons described above.

     We generated $11,980,000 of cash from operating activities during fiscal
2000, primarily from store sales and franchising and licensing revenues less
costs and expenses incurred to generate the store sales and franchising and
licensing revenues, and less interest paid on $140,000,000 of senior notes.

     We utilized $9,784,000 of cash from investing activities during fiscal
2000, primarily for capital expenditures relating to store remodels and
renovations.

     We utilized $3,518,000 of cash from financing activities during fiscal
2000, primarily for the payment of long-term debt and preferred stock and to
retire the Pretzel Time Preferred Stock.

     The specialty cookie and pretzel businesses do not require the maintenance
of significant receivables or inventories. However, we continually invest in our
business by upgrading and remodeling stores and adding new stores, carts, and
kiosks as opportunities arise. Investments in these long-term assets, which are
key to generating current sales, reduce our working capital. We expect to expend
approximately $14,000,000 for capital expenditures in fiscal year 2001 of which
approximately $7,000,000 will be used for the construction of new stores,
$3,000,000 will be used to remodel existing stores and $2,000,000 will be used
to convert our remaining Hot Sam and Original Cookie stores to Pretzel Time and
Mrs. Fields stores, respectively. Management anticipates that these expenditures
will be funded with cash generated from operating activities and short-term
borrowings under its credit and lease facilities as needed.

                                       26
<PAGE>

                                    INFLATION

     The impact of inflation on the operations of the business has not been
significant in recent years. Most of our leases contain escalation clauses.
However, such leases are accounted for on a straight-line basis as required by
accounting principles generally accepted in the United States which minimizes
fluctuations in operating income. In addition, many of our employees are paid
hourly wages at the Federal minimum wage level. Minimum wage increases will
negatively impact our payroll costs in the short term, but management believes
such impact can be offset in the long term through operational efficiency gains
and, if necessary, through product price increases.

                                   SEASONALITY

     Our sales and income from store operations are highly seasonal given the
significant impact of our mall-based locations. Our sales tend to mirror
customer traffic flow trends in malls which increase significantly during the
fourth quarter, primarily between Thanksgiving and the end of the calendar year.
Holiday gift purchases are also a significant factor in increased sales in the
fourth quarter.

     The seasonality effect on income from store operations is even more
significant than the effect on sales. The impact on income from store operations
is more significant due to the fixed nature of certain store level costs, such
as occupancy costs and store manager salaries. Once these fixed costs are
covered by store sales, the flow through of sales to income from store
operations becomes greater. Accordingly, the fourth quarter is a key determinant
to overall profitability for the year.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company's major market risk exposure is changing interest rates. The
Company does not hedge against changes in interest rates. The Company's only
financial instrument with a variable interest rate is its line of credit which
had no balance outstanding at December 30, 2000. The maximum balance outstanding
in the line of credit during fiscal year 2000 was $5.8 million. An increase in
the effective interest rate on the line of credit of 1% would increase interest
expense by $10,000 per year for every $1,000,000 that the Company had
outstanding on its line of credit for a full year.

     The table below provides information about the Company's financial
instruments that are sensitive to changes in interest rates in the event of
refinancing including principal cash flows and related weighted average interest
rates by year of expected maturity dates. The table does not include
non-interest bearing notes totaling $103,000 and unamortized discount of
$403,000.

<TABLE>
<CAPTION>
                                                                                                                        Fair Value
                                                                                                                           as of
                                   2001          2002         2003           2004           2005         Total           12/30/00
                                   ----          ----         ----           ----           ----         -----          ----------
<S>                            <C>           <C>           <C>          <C>              <C>          <C>               <C>
Long-term debt,
   including current portion
  (fixed rate)                 $ 643,000     $ 688,000     $ 586,000    $ 140,063,000    $  13,000    $ 141,993,000     $121,693,000
Weighted average
  interest rate                     9.49%         9.00%         9.50%           10.12%        9.50%           10.12%

</TABLE>

                                       27
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

<TABLE>
<CAPTION>
                                                                                PAGE
                                                                                ----
<S>                                                                             <C>
MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES
Report of Independent Public Accountants ..................................      29
Consolidated Balance Sheets as of January 1, 2000 and December 30, 2000 ...      30
Consolidated Statements of Operations for the 52 weeks ended
   January 2, 1999, January 1, 2000 and December 30, 2000 .................      32
Consolidated Statements of Stockholder's Equity for the 52 weeks ended
   January 2, 1999, January 1, 2000 and December 30, 2000 .................      33
Consolidated Statements of Cash Flows for the 52 weeks ended
   January 2, 1999, January 1, 2000 and December 30, 2000 .................      34
Notes to Consolidated Financial Statements ................................      37

</TABLE>

                                       28
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS




To Mrs. Fields' Original Cookies, Inc.:


We have audited the accompanying consolidated balance sheets of Mrs. Fields'
Original Cookies, Inc. (a Delaware corporation) and subsidiaries as of
January 1, 2000 and December 30, 2000, and the related consolidated
statements of operations and comprehensive loss, stockholder's equity and
cash flows for each of the three fiscal years in the period ended December
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 auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Mrs.
Fields' Original Cookies, Inc. and subsidiaries as of January 1, 2000 and
December 30, 2000 and the consolidated results of their operations and their
cash flows for each of the three fiscal years in the period ended December 30,
2000 in conformity with accounting principles generally accepted in the United
States.


ARTHUR ANDERSEN LLP

Salt Lake City, Utah
March 29, 2001


                                       29
<PAGE>

              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)

                                     ASSETS

<TABLE>
<CAPTION>
                                                                             JANUARY 1, 2000    DECEMBER 30, 2000
                                                                             ---------------    -----------------
<S>                                                                          <C>                <C>
CURRENT ASSETS:
   Cash and cash equivalents ...........................................         $   4,919          $   3,511
   Accounts receivable, net of allowance for doubtful
      accounts of $111 and $547, respectively ..........................             4,295              5,147
   Amounts due from franchisees and licensees, net of
      allowance for doubtful accounts of $821 and $758, respectively ...             3,708              3,955
   Inventories .........................................................             4,977              4,686
   Prepaid rent and other ..............................................             1,336                625
   Deferred income tax asset ...........................................             1,360                 --
                                                                                 ---------          ---------
      Total current assets .............................................            20,595             17,924
                                                                                 ---------          ---------
PROPERTY AND EQUIPMENT, at cost:
   Leasehold improvements ..............................................            26,698             31,100
   Equipment and fixtures ..............................................            22,540             26,234
   Land ................................................................               240                240
                                                                                 ---------          ---------
                                                                                    49,478             57,574
   Less accumulated depreciation and amortization ......................           (20,813)           (31,597)
                                                                                 ---------          ---------
      Net property and equipment .......................................            28,665             25,977
                                                                                 ---------          ---------
DEFERRED INCOME TAX ASSET ..............................................             2,139                 --
                                                                                 ---------          ---------
GOODWILL, net of accumulated amortization
   of $21,156 and $33,351, respectively ................................           132,479            117,947
                                                                                 ---------          ---------
TRADEMARKS AND OTHER INTANGIBLES, net of accumulated
   amortization of $3,700 and $4,993, respectively .....................            13,062             12,129
                                                                                 ---------          ---------
DEFERRED LOAN COSTS, net of accumulated
   amortization of $4,052 and $6,762, respectively .....................            10,818              8,446
                                                                                 ---------          ---------
OTHER ASSETS ...........................................................               652                687
                                                                                 ---------          ---------
                                                                                 $ 208,410          $ 183,110
                                                                                 =========          =========

</TABLE>

           The accompanying notes to consolidated financial statements
                  are an integral part of these balance sheets.

                                       30
<PAGE>

              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

                    CONSOLIDATED BALANCE SHEETS--(CONTINUED)
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

                      LIABILITIES AND STOCKHOLDER'S EQUITY

<TABLE>
<CAPTION>
                                                                     JANUARY 1, 2000    DECEMBER 30, 2000
                                                                     ---------------    -----------------
<S>                                                                  <C>                <C>
CURRENT LIABILITIES:
   Current portion of long-term debt ............................         $     781          $     658
   Current portion of capital lease obligations .................               842                970
   Accounts payable .............................................            10,514              9,756
   Bank overdraft ...............................................                --              2,920
   Accrued liabilities ..........................................             2,851              3,718
   Current portion of store closure reserve .....................             3,665              1,498
   Accrued salaries, wages and benefits .........................             3,180              3,904
   Accrued interest payable .....................................             1,288              1,142
   Sales taxes payable ..........................................             1,128              1,073
   Deferred credits .............................................               132                249
                                                                          ---------          ---------
      Total current liabilities .................................            24,381             25,888
LONG-TERM DEBT, net of current portion and discount .............           141,755            141,035
STORE CLOSURE RESERVE, net of current portion ...................             3,529              2,281
CAPITAL LEASE OBLIGATIONS, net of current portion ...............             3,107              1,412
                                                                          ---------          ---------
      Total liabilities .........................................           172,772            170,616
                                                                          ---------          ---------
COMMITMENTS AND CONTINGENCIES (Notes 7 and 8)

MANDATORILY REDEEMABLE CUMULATIVE PREFERRED
   STOCK of Pretzel Time (a wholly owned subsidiary),
      aggregate liquidation preference of $1,070 as
      of January 1, 2000 ........................................             1,070                 --
                                                                          ---------          ---------
MINORITY INTEREST ...............................................               111                 51
                                                                          ---------          ---------
STOCKHOLDER'S EQUITY:
   Common stock, $.01 par value; 1,000 shares authorized,
      400 shares outstanding ....................................                --                 --
   Additional paid-in capital ...................................            61,899             61,899
   Accumulated deficit ..........................................           (27,442)           (49,370)
   Accumulated other comprehensive loss .........................                --                (86)
                                                                          ---------          ---------
   Total stockholder's equity ...................................            34,457             12,443
                                                                          ---------          ---------
                                                                          $ 208,410          $ 183,110
                                                                          =========          =========
</TABLE>

           The accompanying notes to consolidated financial statements
                  are an integral part of these balance sheets.


                                       31
<PAGE>

              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

          CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                              52 WEEKS ENDED     52 WEEKS ENDED       52 WEEKS ENDED
                                                              JANUARY 2, 1999    JANUARY 1, 2000    DECEMBER 30, 2000
                                                              ---------------    ---------------    -----------------
<S>                                                           <C>                <C>                <C>
REVENUES:
   Net store and food sales ...........................         $ 140,235          $ 152,268          $ 142,796
   Franchising ........................................            12,464             24,782             24,763
   Management fee revenue .............................                --                 --              7,533
   Licensing and other ................................             1,537              3,887              2,387
                                                                ---------          ---------          ---------
      Total revenues ..................................           154,236            180,937            177,479
                                                                ---------          ---------          ---------
OPERATING COSTS AND EXPENSES:
   Selling and store occupancy costs ..................            75,003             79,634             73,538
   Cost of sales ......................................            38,482             46,323             46,021
   General and administrative .........................            19,017             21,972             26,159
   TCBY transition and other expenses .................                --                 --              2,442
   Store closure provision (benefit) ..................             7,303             (1,579)            (1,014)
   Depreciation and amortization ......................            19,820             24,206             27,937
                                                                ---------          ---------          ---------
      Total operating costs and expenses ..............           159,625            170,556            175,083
                                                                ---------          ---------          ---------
         Income (loss) from operations ................            (5,389)            10,381              2,396
                                                                ---------          ---------          ---------
OTHER INCOME (EXPENSE), net:
   Interest expense ...................................           (13,197)           (17,880)           (17,853)
   Interest income ....................................               623                 53                 62
   Other expense, net .................................              (409)              (230)              (184)
                                                                ---------          ---------          ---------
      Total other expense, net ........................           (12,983)           (18,057)           (17,975)
                                                                ---------          ---------          ---------
Loss before provision for income
   taxes, preferred stock accretion and
   dividends of subsidiaries and minority interest.....           (18,372)            (7,676)           (15,579)
PROVISION FOR INCOME TAXES ............................              (316)              (218)            (3,841)
                                                                ---------          ---------          ---------
Loss before preferred stock accretion and
   dividends of subsidiaries and minority interest.....           (18,688)            (7,894)           (19,420)
PREFERRED STOCK ACCRETION AND
   DIVIDENDS OF SUBSIDIARIES ..........................              (444)              (305)                --
MINORITY INTEREST .....................................               (11)               (22)                26
                                                                ---------          ---------          ---------
      Net loss ........................................         $ (19,143)         $  (8,221)         $ (19,394)
                                                                =========          =========          =========
COMPREHENSIVE LOSS:
   Net loss ...........................................         $ (19,143)         $  (8,221)         $ (19,394)
   Foreign currency translation
      adjustment ......................................                --                 --                (86)
                                                                ---------          ---------          ---------
      Comprehensive loss ..............................         $ (19,143)         $  (8,221)         $ (19,480)
                                                                =========          =========          =========

</TABLE>

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

                                       32
<PAGE>

              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
                    (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                                         FOREIGN
                                             COMMON STOCK           ADDITIONAL                           CURRENCY
                                         ---------------------       PAID-IN         ACCUMULATED       TRANSLATION
                                         SHARES        AMOUNT        CAPITAL           DEFICIT          ADJUSTMENT           TOTAL
                                         ------       --------      ----------       -----------       -----------         --------
<S>                                      <C>          <C>           <C>              <C>               <C>                 <C>
BALANCE, January 3, 1998 ...              400         $   --         $ 30,843          $    (78)         $     --          $ 30,765

Parent contribution ........               --             --           29,056                --                --            29,056

Comprehensive loss .........               --             --               --                --                --                --

Net loss ...................               --             --               --           (19,143)               --           (19,143)
                                        -----         ------         --------          --------          --------          --------
BALANCE, January 2, 1999 ...              400             --           59,899           (19,221)               --            40,678

Parent contribution ........               --             --            2,000                --                --             2,000

Comprehensive loss .........               --             --               --                --                --                --

Net loss ...................               --             --               --            (8,221)               --            (8,221)
                                        -----         ------         --------          --------          --------          --------
BALANCE, January 1, 2000 ...              400             --           61,899           (27,442)               --            34,457
Distribution to parent under
  tax sharing agreement ......             --             --               --            (2,534)               --            (2,534)

Other comprehensive loss .....             --             --               --                --               (86)              (86)

Net loss ...................               --                              --           (19,394)               --           (19,394)
                                        -----         ------         --------          --------          --------          --------
BALANCE, December 30, 2000 .              400         $   --         $ 61,899          $(49,370)         $    (86)         $ 12,443
                                        =====         ======         ========          ========          ========          ========

</TABLE>

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


                                       33
<PAGE>

              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                       52 WEEKS           52 WEEKS       52 WEEKS
                                                                                         ENDED              ENDED          ENDED
                                                                                       JANUARY 2,        JANUARY 1,     DECEMBER 30,
                                                                                         1999               2000             2000
                                                                                       ----------        ----------     ------------
<S>                                                                                    <C>               <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss ..................................................................         $(19,143)         $ (8,221)         $(19,394)
   Adjustments to reconcile net loss to net
      cash provided by operating activities,
      net of effects from acquisitions:
      Depreciation and amortization ..........................................           19,820            24,206            27,937
      Amortization of discount on notes ......................................               32                77                86
      Amortization of deferred loan costs ....................................            1,250             2,732             2,710
      Loss (gain) on disposition of assets ...................................              409              (142)              439
      Deferred income taxes ..................................................               --                --             3,499
      Preferred stock accretion and dividends of subsidiaries ................              444               305                --
      Minority interest ......................................................               11                (8)              (60)
      Changes in assets and liabilities, net of effects from acquisitions:
         Accounts receivable .................................................           (1,673)           (1,087)             (852)
         Amounts due from franchisees and licensees ..........................             (866)            2,295              (247)
         Inventories .........................................................             (822)              526               291
         Prepaid rent and other ..............................................              932             2,681               711
         Other assets ........................................................            1,437               680              (474)
         Accounts payable and accrued liabilities ............................           (1,364)             (955)              109
         Store closure reserve ...............................................            5,196            (5,219)           (3,415)
         Accrued salaries, wages and benefits ................................            1,264                25               724
         Accrued interest payable ............................................             (713)               28              (146)
         Sales taxes payable .................................................              (80)              166               (55)
         Deferred credits ....................................................             (838)             (186)              117
                                                                                       --------          --------          --------
            Net cash provided by operating activities ........................            5,296            17,903            11,980
                                                                                       --------          --------          --------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Net cash paid for acquisitions and related costs ..........................          (32,835)               --                --
   Purchase of property and equipment ........................................           (8,235)           (5,157)           (9,850)
   Proceeds from the sale of assets ..........................................              176               461                66
                                                                                       --------          --------          --------
            Net cash used in investing activities ............................          (40,894)           (4,696)           (9,784)
                                                                                       --------          --------          --------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from issuance of long-term debt ..................................           39,400                --                --
   Bank overdraft ............................................................            4,133            (4,133)            2,920
   Principal payments on long-term debt ......................................          (41,257)           (5,978)             (929)
   Payment of debt financing costs ...........................................           (7,062)           (1,832)             (338)
   Tax sharing distribution to Mrs. Fields' Holding ..........................               --                --            (2,534)
   Equity contribution from Mrs. Fields' Holding .............................           29,056                --                --
   Principal payments on capital lease obligations ...........................             (123)             (600)           (1,567)
   Reduction in preferred stock of Pretzel Time ..............................              (85)             (496)           (1,070)
                                                                                       --------          --------          --------
            Net cash provided by (used in) financing activities ..............           24,062           (13,039)           (3,518)
                                                                                       --------          --------          --------
   Effect of foreign exchange rate changes on cash ...........................               --                --               (86)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .........................          (11,536)              168            (1,408)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR ...........................           16,287             4,751             4,919
                                                                                       --------          --------          --------
CASH AND CASH EQUIVALENTS AT END OF THE YEAR .................................         $  4,751          $  4,919          $  3,511
                                                                                       ========          ========          ========
</TABLE>

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

                                       34
<PAGE>

              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

               CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
                             (DOLLARS IN THOUSANDS)

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

     Cash paid for interest was approximately $12,440, $17,957 and $17,707 for
the years ended January 2, 1999 and January 1, 2000 and December 30, 2000,
respectively.

     Cash paid for income taxes was approximately $209, $401 and $305 for the
years ended January 2, 1999 and January 1, 2000 and December 30, 2000,
respectively.

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

     During the period from the acquisition of the majority ownership of Pretzel
Time (September 2, 1997) to January 1, 2000, Pretzel Time increased its
mandatorily redeemable cumulative preferred stock liquidation preference by
approximately $284, in lieu of paying cash dividends. In addition, for the same
period, Pretzel Time's mandatorily redeemable cumulative preferred stock was
increased by approximately $573 for the accretion required over time to amortize
the original issue discount.

     In August 1998, the Company acquired all of the outstanding capital stock
and subordinated indebtedness of Cookies USA, Inc. ("Cookies USA") for a total
purchase price of approximately $18,400. During August and September 1998, the
Company also entered into agreements with three franchisees of Cookies USA (the
"Great American Franchisees") under which the Company purchased a total of 37
Great American Cookies franchises for a total purchase price of $16,328. The
total purchase price for all of these acquisitions of $34,728 was allocated, as
follows. Additionally, in connection with the purchase accounting, certain other
accruals were recorded (see Note 1).

<TABLE>
<S>                                                <C>
          Fair value of assets acquired .....      $ 77,410
          Net cash paid .....................       (27,771)
                                                   --------
                  Liabilities assumed .......      $ 49,639
                                                   ========
</TABLE>

     In October 1998, the Company acquired the assets of the Cookie
Conglomerate, Inc. ("Cookie Conglomerate") for a total purchase price of $2,800.
The total purchase price was allocated as follows:

<TABLE>
<S>                                                <C>
          Fair value of assets acquired .....      $2,800
          Net cash paid .....................          --
                                                   ------
                  Liabilities assumed .......      $2,800
                                                   ======
</TABLE>

     In November 1998, the Company acquired all of the outstanding stock of
Pretzelmaker Holdings, Inc. ("Pretzelmaker") for $5,419. The total purchase
price was allocated as follows:

<TABLE>
<S>                                                <C>
          Fair value of assets acquired .....      $ 8,519
          Net cash paid .....................       (1,100)
                                                   -------
                  Liabilities assumed .......      $ 7,419
                                                   =======
</TABLE>

     During the years ended January 2, 1999 and January 1, 2000, the Company
acquired property and equipment under capitalized lease obligations and
long-term debt totaling $3,786 and $3,997, respectively. No property and
equipment was acquired under capitalized lease obligations during the year ended
December 30, 2000.

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


                                       35
<PAGE>

              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

               CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
                             (DOLLARS IN THOUSANDS)



     During the year ended January 1, 2000, Mrs. Fields' Holding made an equity
contribution of $2,000 by assuming a $2,000 note payable that was due
December 31, 1999.

     In 2000, the Company capitalized $140 of franchise fees to TCBY as
intangible assets.



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


                                       36
<PAGE>

              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS

     Mrs. Fields' Original Cookies, Inc. (the "Company"), a Delaware
corporation, is a wholly owned subsidiary of Mrs. Fields' Holding Company, Inc.
("Mrs. Fields' Holding"). Mrs. Fields' Holding is a majority owned subsidiary of
Capricorn Investors II, L.P. ("Capricorn"). The Company has eight wholly owned
operating subsidiaries; namely, Great American Cookie Company, Inc., The Mrs.
Fields' Brand, Inc., Pretzel Time, Inc., Pretzelmaker Holdings, Inc., Mrs.
Fields' Cookies Australia, Mrs. Fields' Cookies (Canada) Ltd., H & M Canada and
Pretzelmaker of Canada; and three partially owned subsidiaries.

     The Company primarily operates retail stores which sell freshly baked
cookies, brownies, pretzels and other food products through six specialty retail
chains. As of December 30, 2000, the Company owns and operates Mrs. Fields
Cookies stores (including combination stores that include more than one kind of
store), Original Cookie Company stores, Great American Cookies stores, Hot Sam
Pretzels stores, Pretzel Time stores, and Pretzelmaker stores in the United
States. Additionally, the Company has franchised or licensed stores in the
United States and stores in several other countries.

     The Company holds legal title to certain trademarks for the "Mrs. Fields"
name and logo and licenses the use of these trademarks to third parties for the
establishment and operation of Mrs. Fields' cookie and bakery operations and
other merchandising activities. In connection with these licensing activities,
the Company authorizes third-party licensees to use certain business formats,
systems, methods, procedures, designs, layouts, specifications, trade names and
trademarks in the United States and other countries. Additionally, the Company
markets and distributes its products through catalogs, other print media, the
internet and mail order.

     The Company's business follows seasonal trends and is also affected by
climate and weather conditions. The Company experiences its highest revenues in
the fourth quarter. Because the Company's stores are heavily concentrated in
shopping malls, the Company's sales performance is significantly dependent on
the performance of those malls.

     The Company continues to convert its Original Cookie and Hot Sam stores to
Mrs. Fields and Pretzel Time stores, respectively, and is considering abandoning
those brands in 2001. If this occurs, the Company will write off approximately
$13,500,000 of goodwill related to the Original Cookie and Host Sam brand names
and recipes in 2001 as a non-cash charge to amortization expense.

BUSINESS COMBINATIONS

     GREAT AMERICAN COOKIE COMPANY, INC.

     On August 24, 1998, the Company acquired all of the outstanding capital
stock and subordinated indebtedness of Cookies USA, Inc., the sole stockholder
of Great American Cookie Company, Inc., for a total purchase price of
$18,400,000. Great American is an operator and franchisor of mall-based
specialty retail cookie outlets and a manufacturer of cookie batter which is
distributed to Great American operated retail stores and sold to franchised
retail stores. Concurrently with the acquisition of Cookies USA, the Company
entered into agreements with two Great American franchisees under which the
Company purchased a total of 29 Great American franchises for a total purchase
price of $14,430,000. The Company acquired the franchises through the
acquisition of 100 percent of the capital stock of the two corporations through
which the franchises operated. On September 9, 1998, the Company acquired eight
additional Great American franchised retail stores from a Great American
franchisee, under an asset purchase agreement, for a total purchase price of
$1,898,000. These acquisitions will be collectively referred to as the "Great
American Acquisitions."

     The Great American Acquisitions have been accounted for using the purchase
method of accounting which resulted in recording approximately $69,390,000 of
goodwill that is being amortized using the straight-line method

                                       37
<PAGE>

              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


over 15 years. Additionally, the Company caused Cookies USA to be merged with
and into the Company and caused the acquired franchisees corporations and/or net
assets to be merged with and into Great American. Great American became a wholly
owned subsidiary of the Company. The acquired entities' results of operations
have been included with those of the Company since the applicable dates of
acquisition.

     The Great American Acquisitions were financed by (i) the net proceeds from
the Company issuing $40,000,000 Series C Senior Notes; (ii) the contribution of
the net proceeds totaling $29,056,000 from a Mrs. Fields' Holding offering to
the Company; and (iii) existing cash of the Company.

     On October 5, 1998, Mrs. Fields purchased all of the retail cookie and
related business and operations of eleven Great American stores for a total
purchase price of $2,800,000 under an asset purchase agreement among The Cookie
Conglomerate, Inc., The Cookie Conglomerate, LLP and two individuals who were
the partners of Cookie Conglomerate, LLP and the shareholders of Cookie
Conglomerate, Inc. The sellers were franchisees of Great American. The sellers'
rights under franchise agreements and subleases with Great American were
terminated upon closing of the transaction. The acquisition was funded through
borrowings.

     PRETZELMAKER HOLDINGS, INC.

     On November 19, 1998, Mrs. Fields purchased all of the outstanding capital
stock of Pretzelmaker Holdings, Inc. under an agreement among Mrs. Fields,
Pretzelmaker, and the holders of its capital stock. Pretzelmaker is the holding
company for a pretzel retail company. The purchase price was approximately
$5,400,000 and Mrs. Fields assumed indebtedness, including severance payments,
totaling approximately $1,600,000.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     ACCOUNTING PERIODS

     The Company operates using a 52/53-week year ending on the Saturday closest
to December 31.

     PRINCIPLES OF CONSOLIDATION

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

     SOURCES OF SUPPLY

     The Company currently buys a significant amount of its food products from
four suppliers. Management believes that other suppliers could provide similar
products with comparable terms.

     USE OF ESTIMATES

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

                                       38
<PAGE>

              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


     CASH EQUIVALENTS

     The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. As of December
30, 2000, the Company had demand deposits at various banks in excess of the
$100,000 limit for insurance by the Federal Deposit Insurance Corporation. As of
December 30, 2000, the Company had restricted cash of $203,000.

     INVENTORIES

     Inventories consist of food, beverages and supplies and are stated at the
lower of cost (first-in, first-out method) or market value.

     PRE-OPENING COSTS

     Pre-opening costs associated with new company-owned stores are charged to
expense as incurred. These amounts were not significant for the periods
presented in the accompanying consolidated financial statements. Pre-opening
costs associated with new franchised stores are the responsibility of the
franchisee.

     PROPERTY AND EQUIPMENT

     Property and equipment are stated at cost less accumulated depreciation and
amortization. Equipment, fixtures and leasehold improvements are depreciated or
amortized over three to seven years using the straight-line method.

     Expenditures that materially increase values or capacities or extend useful
lives of property and equipment are capitalized. Routine maintenance, repairs
and renewal costs are expensed as incurred. Gains or losses from the sale or
retirement of property and equipment are recorded in current operations.

     INTANGIBLE ASSETS

     Intangible assets consist primarily of goodwill and trademarks and are
amortized using the straight-line method over 15 years. Other intangible assets
such as covenants not to compete are not significant and are being amortized
using the straight-line method over one to five years.

     DEFERRED LOAN COSTS

     Deferred loan costs totaling $14,870,000 resulted from the sale of
$100,000,000 total principal amount of 10 1/8 percent Series A Senior Notes (the
"Series A Senior Notes") and the sale of $40,000,000 total principal amount of
10 1/8 percent Series C Senior Notes (the "Series C Senior Notes"). These costs
are being amortized to interest expense over the approximate seven-year life of
the Series A Notes and the approximate six-year life of the Series C Senior
Notes (see Note 3).

     DISCOUNT ON SERIES C SENIOR NOTES

     The Series C Senior Notes were issued at a discount which is being
amortized to interest expense over the approximate six-year life of the related
notes.

     LONG-LIVED ASSETS

     The Company reviews for impairment of long-lived assets when events or
changes in circumstances indicate that the book value of an asset may not be
fully recovered. The Company evaluates, at each balance sheet date, whether
events and circumstances have occurred that indicate possible impairment. The
Company uses an estimate of future undiscounted net cash flows of the related
asset or group of assets over the remaining life in measuring

                                       39
<PAGE>

              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


whether the assets are recoverable. The Company assesses impairment of
long-lived assets at the lowest level for which there are identifiable cash
flows that are independent of other groups of assets.

     During the years ended January 1, 2000 and December 30, 2000, the Company
wrote down approximately $1,645,000 and $3,558,000, respectively, of impaired
long-lived assets. The write down included approximately $1,408,000 of equipment
and leasehold improvements at 35 company-owned stores for the year ended January
1, 2000 and approximately $1,455,000 of equipment and leasehold improvements at
49 company-owned stores for the year ended December 30, 2000 that the Company
intends to franchise or continue to operate through the end of contractual lease
terms. These assets are expected to be disposed of when the leases expire or the
store is franchised. Additionally, approximately $237,000 and $2,103,000 of
goodwill that had been allocated to the impaired assets was written-down for the
years ended January 1, 2000 and December 30, 2000, respectively.

     The net book value of the assets has either been fully or partially
written-down because the carrying amounts exceeded the estimated future cash
flows as determined in accordance with guidance in SFAS 121. During the years
ended January 1, 2000 and December 30, 2000, stores associated with impaired
assets generated losses of approximately $2,642,000 and $1,923,000,
respectively. The impairment provisions were included in depreciation and
amortization in the accompanying consolidated statements of operations for the
years ended January 1, 2000 and December 30, 2000. No provisions were recorded
for estimated future operating losses (see Note 5).

     STORE CLOSURE RESERVE

     The Company accrues an estimate for the costs associated with closing a
non-performing store in the period the determination is made to close the store.
The accruals are for estimated store lease termination costs (see Note 5).

     REVENUE RECOGNITION

     Revenues generated from company-owned stores are recognized at the point of
sale. Initial franchising fees and licensing and other fee revenues are
recognized when all material services or conditions relating to the sale have
been substantially performed or satisfied. Franchise and license royalties,
which are based on a percentage of gross store sales, are recognized as earned.
Revenues from the sale of batter that the Company produces and sales to
franchisees are recognized at the time of shipment and are classified in
franchising revenue. Revenues from the sale of cookie dough to retailers are
recognized upon shipment and are included in store and food sales. Revenues from
catalog/e-tailing are recognized at the time of shipment. Management fee
revenues are recognized as the services are performed under the terms of the
agreement. The Company receives rebates or other payments from suppliers based
(directly or indirectly) on sales to franchisees and company-owned stores.
Rebates related to franchisees are recorded as franchising revenue when earned.
Rebates related to company-owned stores are recorded as a reduction to cost of
sales when earned.

     SHIPPING AND HANDLING COSTS

     The Company charges its customers for shipping and handling costs and
records the revenues in net store and food sales. The cost for shipping and
handling is included in cost of sales.

     LEASES

     The Company has various operating lease commitments on both company-owned
and franchised store locations and equipment. Expenses of operating leases with
escalating payment terms, including leases underlying subleases with
franchisees, are recognized on a straight-line basis over the lives of the
related leases. The Company accrues contingent rental expense on a monthly basis
for those retail stores where contingent rental expense is probable.


                                       40
<PAGE>

              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


     INCOME TAXES

     The Company recognizes deferred income tax assets or liabilities for
expected future tax consequences of events that have been recognized in the
financial statements or tax returns. Under this method, deferred income tax
assets or liabilities are determined based upon the difference between the
financial and income tax bases of assets and liabilities using enacted tax rates
expected to apply when differences are expected to be settled or realized.

     FOREIGN CURRENCY TRANSLATION

     The balance sheet accounts of the Company's foreign subsidiaries are
translated into U.S. dollars using the applicable balance sheet date exchange
rates, while revenues and expenses are translated using the average exchange
rates for the periods presented. Translation gains or losses are insignificant
for the periods presented.

     FAIR VALUE OF FINANCIAL INSTRUMENTS

     The Company estimates that the total fair market value of its Series A/B
Senior Notes and Series C Senior Notes (see Note 3) was approximately
$113,400,000 and $119,700,000 as of January 1, 2000 and December 30, 2000,
respectively. These estimates are based on quoted market prices. The book values
of the Company's other financial instruments, including cash and cash
equivalents, accounts receivable, accounts payable, accrued liabilities and
other long-term debt obligations, approximate fair values at the respective
balance sheet dates.

     RECENT ACCOUNTING PRONOUNCEMENT

     In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement established accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
The statement also requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria are
met. This statement is effective for fiscal year 2001 and is not expected to
have a material impact on the Company's consolidated financial statements.

     RECLASSIFICATIONS

     Certain reclassifications have been made to the prior years' consolidated
financial statements to conform with the current year presentation.

3.   LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

     LONG-TERM DEBT

     Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                                     January 1, 2000    December 30, 2000
                                                                                     ---------------    -----------------
<S>                                                                                  <C>                <C>
Series A/B senior unsecured notes, interest at 10 1/8 percent payable semi-
    annually in arrears on June 1 and December 1, due December 1, 2004 .........      $ 100,000,000       $ 100,000,000
Series C senior unsecured notes, interest at 10 1/8 percent payable semi-
    annually in arrears on June 1 and December 1, due December 1, 2004 .........         40,000,000          40,000,000
Discount related to the issuance of $40,000,000 Series C senior unsecured
    notes, net of accumulated amortization of $110,000 and $196,000,
    respectively ...............................................................           (489,000)           (403,000)
Notes payable to individuals or corporations with interest terms ranging
    from non-interest bearing to 15 percent, due at various dates from 1999
    through 2001, requiring monthly payments ...................................          3,025,000           2,096,000
                                                                                      -------------       -------------
                                                                                        142,536,000         141,693,000
Less current portion ...........................................................           (781,000)           (658,000)
                                                                                      -------------       -------------
</TABLE>

                                       41
<PAGE>

              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


<TABLE>
<S>                                                                                  <C>                <C>
                                                                                      $ 141,755,000       $ 141,035,000
                                                                                      =============       =============
</TABLE>

     On November 26, 1997, the Company issued $100,000,000 total principal
amount of Series A Senior Notes due December 1, 2004 pursuant to an indenture
between the Company and the Bank of New York (the "Indenture"). The Series A
Senior Notes were issued pursuant to a private transaction that was not subject
to the registration requirements of the Securities Act of 1933 (the "Securities
Act"). On June 12, 1998, a majority of the Series A Senior Notes were exchanged
for 10 1/8% Series B Senior Notes due December 1, 2004 (collectively, the
"Series A/B Senior Notes"), which were registered under the Securities Act.

     On August 24, 1998, the Company issued $40,000,000 total principal amount
of Series C Senior Notes due December 1, 2004 in connection with the Great
American Acquisitions. The Series C Senior Notes were issued under the Indenture
which also governs the terms of the Series A/B Senior Notes in a private
transaction that was not subject to the registration requirements of the
Securities Act. The Series A/B Senior Notes and the Series C Senior Notes will
be collectively referred to as the "Senior Notes." On June 21, 2000, all of the
Series C Senior Notes and the remaining Series A Notes were exchanged for 10
1/8% Series B Senior Notes due December 1, 2004 (collectively, the "Series A/B
Senior Notes"), which were registered under the Securities Act.

     In connection with the issuance of the Series C Senior Notes, the Company
recorded a discount of approximately $600,000. This discount is being amortized
to interest expense over the approximate six-year life of the Series C Senior
Notes.

     The Senior Notes are general unsecured obligations of the Company, rank
senior in right of payment to all subordinated indebtedness of the Company and
rank pari passu in right of payment with all existing and future senior
indebtedness of the Company.

     The Senior Notes are redeemable at the option of the Company, in whole or
in part, at any time on or after December 1, 2001 in cash at redemption prices
defined in the Indenture, plus accrued and unpaid interest. In addition, at any
time prior to December 1, 2001, the Company may redeem up to a total of 35
percent of the principal amount at a redemption price equal to 110.125 percent
of the principal, plus accrued and unpaid interest.

     The Senior Notes contain certain covenants that limit, among other things,
the ability of the Company and its subsidiaries to: (i) declare or pay dividends
or make any other payment or distribution on account of the Company's or any of
its subsidiaries' equity interest (including without limitation, any payment in
connection with any merger or consolidation involving the Company); (ii)
purchase, redeem or otherwise acquire or retire for value (including, without
limitation, in connection with any merger or consolidation involving the
Company) any equity interest of the Company or any direct or indirect parent of
the Company or other affiliate of the Company; (iii) make any payment on or with
respect to, or purchase, redeem, defease or otherwise acquire or retire for
value any indebtedness that is subordinated to the Senior Notes, except as
payment of interest or principal at stated maturity; or (iv) make any restricted
investments except under conditions provided for in the Indenture. At
December 30, 2000, the Company was in compliance with the Senior Notes
Covenants.

     The total amount of principal maturities of debt at December 30, 2000 are
as follows:

<TABLE>
<CAPTION>
          FISCAL YEAR
          -----------
<S>                                                <C>
          2001..............................       $     658,000
          2002..............................             699,000
          2003..............................             597,000
          2004..............................         140,074,000
          2005..............................              23,000
          Thereafter........................              45,000
                                                   -------------
                                                   $ 142,096,000
                                                   =============
</TABLE>


                                       42
<PAGE>


              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


     LINE OF CREDIT

     The Company has a line of credit agreement with a commercial bank which
provides for a maximum commitment of up to $10,000,000 secured by essentially
all of the assets of the Company. The availability under the line of credit was
limited by the Company's Indenture to $7,984,000 as of December 30, 2000.
Borrowings under the agreement bear interest, at the Company's option, at either
the bank's prime rate or the applicable LIBOR rate plus two percent, with
interest payable monthly in arrears. The Company is also obligated to pay the
bank a commitment fee in the amount of one quarter of one percent of the unused
portion of the revolving loan commitment. As of December 30, 2000, the Company
had no outstanding borrowings under the agreement, which expired March 31, 2001,
and was renewed through March 31, 2002, with terms essentially the same as the
existing revolving loan commitment. The agreement requires the Company to
maintain certain financial ratios including a minimum debt service coverage
ratio. At December 30, 2000, the Company was in compliance with the terms of the
agreement.

     CAPITAL LEASE OBLIGATIONS

     Future minimum lease payments for equipment held under capital lease
arrangements as of December 30, 2000 are as follows:

<TABLE>
<CAPTION>
          FISCAL YEAR
          -----------
<S>                                                                   <C>
          2001...................................................     $  1,157,000
          2002...................................................          967,000
          2003...................................................          407,000
          2004...................................................          162,000
          2005...................................................           35,000
                                                                      ------------
          Total future minimum lease payments....................        2,728,000
          Less amount representing interest......................         (346,000)
                                                                      ------------
                                                                         2,382,000
          Less current portion...................................         (970,000)
                                                                      ------------
                                                                      $  1,412,000
                                                                      ============

</TABLE>

     As of January 1, 2000 and December 30, 2000, total assets held under
capital lease arrangements were approximately $8,170,000 and $6,007,000 with
accumulated amortization of approximately $1,907,000 and $1,123,000,
respectively.

4.   INCOME TAXES

     The components of the provision for income taxes for the years ended
January 2, 1999, January 1, 2000 and December 30, 2000 are as follows:

<TABLE>
<CAPTION>
                                                         January 2,       January 1,       December 30,
                                                           1999             2000               2000
                                                         ----------       ----------       ------------
<S>                                                    <C>               <C>               <C>
Current:
        Federal .................................      $        --       $        --       $        --
        State ...................................          245,000           186,000           316,000
        Foreign .................................           71,000            32,000            26,000
Deferred:
        Federal .................................       (3,021,000)          106,000        (4,335,000)
        State ...................................         (469,000)           17,000          (676,000)
        Change in valuation allowance ...........        3,490,000          (123,000)        8,510,000
                                                       -----------       -----------       -----------
             Total provision for income taxes ...      $   316,000       $   218,000       $ 3,841,000
                                                       ===========       ===========       ===========
</TABLE>

                                       43
<PAGE>

              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


     The differences between income taxes at the statutory federal income tax
rate and income taxes reported in the consolidated statements of operations are
as follows for the years ended January 2, 1999, January 1, 2000 and December 30,
2000:

<TABLE>
<CAPTION>
                                                             January 2,   January 1,  December 30,
                                                               1999         2000        2000
                                                             ----------   ----------  ------------
<S>                                                          <C>          <C>         <C>
Federal statutory income tax rate .......................       (34.0)%     (34.0)%     (34.0)%
        Amortization of non-deductible goodwill .........         7.7        25.3         9.8
        State income taxes, net of federal tax effect ...        (5.3)       (5.3)       (5.3)
        State franchise minimum taxes ...................         1.3         2.4         1.6
        Foreign taxes ...................................         0.4         0.4         0.1
        Change in valuation allowance ...................        19.0        (1.6)       61.8
        Other ...........................................        12.6        15.6       (14.2)%
                                                               ------      ------      ------
Effective income tax rate ...............................         1.7%        2.8%       19.8%
                                                               ======      ======      ======

</TABLE>

     The significant components of the Company's deferred income tax assets and
liabilities at January 1, 2000 and December 30, 2000 are as follows:

<TABLE>
<CAPTION>
                                                                                  January 1,        December 30,
                                                                                    2000               2000
                                                                                 ------------       ------------
<S>                                                                              <C>                <C>
Deferred income tax assets:
        Accumulated depreciation and amortization .........................      $         --       $  5,437,000
        Property and equipment reserve ....................................         1,760,000                 --
        Store closure reserve .............................................         2,826,000          1,484,000
        Transaction cost accrual ..........................................           306,000            218,000
        Net operating loss carryforward ...................................        13,095,000         15,212,000
        Legal reserve .....................................................           157,000             47,000
        Other reserves ....................................................           539,000          1,442,000
        Accrued expenses ..................................................           450,000            330,000
        Alternative minimum tax credit carryforward .......................           215,000            215,000
                                                                                 ------------       ------------
                Total deferred income tax assets ..........................        19,348,000         24,385,000
        Valuation allowance ...............................................       (15,683,000)       (24,193,000)
                                                                                 ------------       ------------
                Deferred income tax assets net of valuation allowance .....         3,665,000            192,000
                                                                                 ------------       ------------
Deferred income tax liabilities:
        Accumulated depreciation and amortization .........................           (16,000)                --
        Other .............................................................          (150,000)          (192,000)
                                                                                 ------------       ------------
                Total deferred income tax liabilities .....................          (166,000)          (192,000)
                                                                                 ------------       ------------
                Net deferred income tax assets ............................      $  3,499,000       $         --
                                                                                 ============       ============
</TABLE>

     Management has provided valuation allowances on portions of the deferred
income tax assets arising from the Company's business combinations. The
valuation allowances established in connection with purchase accounting are not
recorded through the provision for income taxes, but rather, as an increase to
goodwill. During the year ended January 2, 1999, a valuation allowance of
$6,910,000 was recorded in connection with accounting for business combinations.

     As of December 30, 2000, the Company had net operating losses of
$38,726,000 that can be carried forward to offset federal income taxes. If not
utilized, the tax net operating loss carryforwards begin to expire in 2009. As
defined in Section 382 of the Internal Revenue Code, the Company has acquired
companies which have had a greater than 50 percent ownership change.
Consequently, a certain amount of these companies' tax net operating loss
carryforwards available to offset future taxable income in any one year may be
limited. The maximum amount of carryforwards available in a given year is
limited to the product of these companies' value on the date of ownership

                                       44
<PAGE>

              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


change and the federal long-term tax-exempt rate, plus any limited
carryforwards not utilized in prior years. In connection with the Mrs.
Fields, Inc. and Original Cookie Company acquisitions (see Note 1), the
Company recorded a deferred tax asset totaling $3,841,000. Under the
provisions of Statement of Financial Accounting Standards No. 109 "Accounting
for Income Taxes", the Company provided a valuation allowance against the
deferred tax asset in 2000 because the Company had not yet achieved taxable
income for federal income tax return purposes. As the Company achieves a
history of generating taxable income in the future, the valuation allowance
may be reduced.

5.   STORE CLOSURE AND PROPERTY AND EQUIPMENT IMPAIRMENT RESERVES

     The Company's management reviews the historical and projected operating
performance of its stores on a periodic basis to identify under performing
stores for impairment of net property investment or for targeted closing. The
Company's policy is to recognize a loss for that portion of the net property
investment determined to be impaired. Additionally, when a store is identified
for targeted closing, the Company's policy provides for the costs of closing the
store, which are predominantly estimated lease termination costs. Lease
termination costs include both one-time settlement payments and continued
contractual payments over time under the original lease agreements where no
settlement can be resolved with the landlord. As a result, although all stores
under the current exit plans were exited by the end of fiscal year 2000, a
portion of the store closure reserve will remain until all cash payments have
been made. The Company did not accrue for future expected operating losses. If
and when a reserve that was established as part of purchase accounting is not
fully utilized, the Company reduces the reserve to zero and goodwill is adjusted
for the corresponding amount.

     During fiscal years 1999 and 2000, in accordance with accounting principles
generally accepted in the United States, the Company reassessed its lease
termination obligations on a store by store basis for stores closed or targeted
for closing. Management reassessed the remaining store closure reserves based on
all available relevant data. A portion of the reversal of the reserves was
recorded as a reduction to goodwill for those stores that had reserves
established at the time of an acquisition in accordance with Emerging Issues
Task Force Issue 95-3 ("EITF 95-3"). The remaining portion of the reversal of
the reserves was recorded to the store closure provision (benefit) in the
accompanying consolidated statement of operations for those stores that
initially had reserves established through that statement of operations line
item in accordance with the SEC Staff Accounting Bulletin No. 100,
"Restructuring and Impairment Charges". As of December 30, 2000, the remaining
store closure reserve was $3,779,000.

MRS. FIELDS INC. AND AFFILIATES AND ORIGINAL COOKIE COMPANY AND AFFILIATES

     During the year ended January 2, 1999, the Company reassessed the adequacy
of the store closure reserve related to the remaining stores left to be closed
and recorded an additional charge of $1,693,000 to the reserve. The additional
$1,693,000 resulted from management's expectation of higher lease termination
costs than the costs originally anticipated when the plan was finalized. This
portion of the store closure reserve was expensed in the Company's statement of
operations for the fiscal year ended January 2, 1999 as the decision to increase
the reserve was made subsequent to finalization of the original plan.

     During the fourth quarter of fiscal year 1998, the Company's management
approved and committed the Company to a plan to exit 35 Mrs. Fields stores that
were not meeting certain financial and geographical criteria. The plan also
committed the Company to exit seven under performing franchised stores that the
Company determined to disenfranchise as of January 2, 1999. These stores were
originally identified as continuing company-owned stores at the date of
acquisition, however, the stores have not performed as expected. The Company
intends to exit the stores primarily through closing and franchising. In
connection with this plan, the Company increased the store closure reserve by
$4,674,000 primarily for costs to be incurred for settling lease termination
costs for these stores. The charge was included in the store closure provision
in the accompanying consolidated statement of operations for the year ended
January 2, 1999.

                                       45
<PAGE>

              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


     H&M

     During the fourth quarter of fiscal year 1998, the Company's management
approved and committed the Company to a plan to exit five H&M stores that were
not meeting certain financial and geographical criteria. In connection with this
plan, the Company increased the store closure reserve by $367,000 primarily for
costs to be incurred for settling lease termination costs for these stores. The
charge was included in the store closure provision in the accompanying
consolidated statement of operations for the year ended January 2, 1999. All of
the stores identified for closure were closed or franchised by the end of fiscal
year 1999.

     PRETZEL TIME

     During the fourth quarter of fiscal year 1998, the Company's management
approved and committed the Company to a plan to exit five Pretzel Time stores
that were not meeting certain financial and geographical criteria. In connection
with this plan, the Company increased the store closure reserve by $264,000
primarily for costs to be incurred for settling lease termination costs for
these stores. The charge was included in the store closure provision in the
accompanying consolidated statement of operations for the year ended January 2,
1999.

     GREAT AMERICAN

     During the fourth quarter of fiscal year 1998, the Company's management
approved and committed the Company to a plan to exit five under performing Great
American franchised stores that the Company determined to disenfranchise as of
January 2, 1999. These stores were originally franchised stores at the date of
acquisition, however, the stores have not performed as expected. In connection
with this plan, the Company increased the store closure reserve by $305,000
primarily for costs to be incurred for settling lease termination costs for
these stores. The charge was included in the store closure provision in the
accompanying consolidated statement of operations for the year ended January 2,
1999.

     PRETZELMAKER

     All of the stores identified for closure were closed by the end of fiscal
year 1999.

                                       46
<PAGE>

              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


     CONSOLIDATED ANALYSIS

     The following table presents a summary of the activity in the store closure
reserve for the periods indicated for stores to be closed or franchised:

<TABLE>
<CAPTION>

                                    Mrs. Fields Inc. and
                                     Original Cookie Co.                    H&M                   Pretzel Time
                                  -------------------------      ------------------------   ------------------------
                                                   Company-                      Company-                  Company-
                                    Business        Owned                         Owned                     Owned
                                  Combination      Stores                        Stores                    Stores
                                     and          Unrelated                     Unrelated                 Unrelated
                                  Subsequent         to            Business        to         Business        to
                                  Adjustments    Acquisition     Combination   Acquisition  Combination  Acquisition
                                  -----------    -----------     -----------   -----------  -----------  -----------
<S>                               <C>            <C>             <C>           <C>          <C>          <C>
Balance, January 3, 1998 .......  $ 3,967,000    $        --     $ 1,000,000    $      --    $ 499,000    $      --
To record obligations
  related to stores
  identified for
  closure upon
  acquisition,
  August 24, 1998 ..............           --             --              --           --           --           --
To record obligations
  related to stores
  identified for
  closure upon
  acquisition,
  November 29, 1998 ............           --             --              --           --           --           --
Additional reserves for
  stores originally
  identified for
  closure upon
  acquisition,
  January 2, 1999 ..............    1,693,000             --              --           --           --           --
Additional reserves for
  continuing company-
  owned and franchised
  stores targeted for
  closure, January 2, 1999 .....           --      4,674,000              --      367,000           --      264,000
Utilization for the
  52 weeks ended
  January 2, 1999 ..............   (1,932,000)            --         (19,000)          --       (6,000)          --
                                  -----------    -----------     -----------    ---------    ---------    ---------
Balance, January 2, 1999 .......    3,728,000      4,674,000         981,000      367,000      493,000      264,000
Additional reserves for
  continuing company-
  owned and franchised
  stores targeted for
  closure, January 1, 2000 .....      810,000             --         151,000       85,000       66,000           --
Reversal during the
  52 weeks ended
  January 1, 2000 ..............   (1,524,000)    (2,092,000)       (418,000)          --     (362,000)    (155,000)
Utilization for the
  52 weeks ended
  January 1, 2000 ..............   (1,400,000)    (1,001,000)       (178,000)    (158,000)     (88,000)     (23,000)
                                  -----------    -----------     -----------    ---------    ---------    ---------
Balance, January 1, 2000 .......    1,614,000      1,581,000         536,000      294,000      109,000       86,000
Additional reserves for
  continuing company-
  owned and franchised
  stores targeted for
  closure, December 30, 2000 ...       19,000        258,000              --           --           --           --
Reversal during the
  52 weeks ended
  December 30, 2000 ............      (62,000)       (18,000)        (60,000)     (75,000)          --      (85,000)
Utilization for the
  52 weeks ended
  December 30, 2000 ............     (708,000)      (602,000)       (117,000)    (134,000)     (44,000)      (1,000)
                                  -----------    -----------     -----------    ---------    ---------    ---------
Balance, December 30, 2000 .....  $   863,000    $ 1,219,000     $   359,000    $  85,000    $  65,000    $      --
                                  ===========    ===========     ===========    =========    =========    =========

<CAPTION>
                                       Great American                  Pretzelmaker                 Consolidated
                                  --------------------------  --------------------------  ------------------------------------------
                                                   Company-                    Company-                   Company-        Total
                                                    Owned       Business       Owned        Business       Owned         Business
                                                   Stores     Combination      Stores     Combination      Stores       Combinations
                                                  Unrelated       and        Unrelated       and         Unrelated     and Company-
                                    Business          to       Subsequent       to        Subsequent        to           Owned
                                  Combination    Acquisition  Adjustments   Acquisition  Adjustments    Acquisition       Stores
                                  -----------    -----------  -----------   -----------  -----------    ------------   ------------
<S>                               <C>            <C>          <C>           <C>          <C>            <C>            <C>
Balance, January 3, 1998 .......  $        --    $      --    $      --      $      --    $ 5,466,000    $        --   $  5,466,000
To record obligations
  related to stores
  identified for
  closure upon
  acquisition,
  August 24, 1998 ..............    3,548,000           --           --             --      3,548,000             --      3,548,000
To record obligations
  related to stores
  identified for
  closure upon
  acquisition,
  November 29, 1998 ............           --           --      500,000             --        500,000             --        500,000
Additional reserves for
  stores originally
  identified for
  closure upon
  acquisition,
  January 2, 1999 ..............           --           --           --             --      1,693,000             --      1,693,000
Additional reserves for
  continuing company-
  owned and franchised
  stores targeted for
  closure, January 2, 1999 .....           --      305,000           --             --             --      5,610,000      5,610,000
Utilization for the
  52 weeks ended
  January 2, 1999 ..............     (149,000)          --           --             --     (2,106,000)            --     (2,106,000)
                                  -----------    ---------    ---------      ---------    -----------    -----------   ------------
Balance, January 2, 1999 .......    3,399,000      305,000      500,000             --      9,101,000      5,610,000     14,711,000
Additional reserves for
  continuing company-
  owned and franchised
  stores targeted for
  closure, January 1, 2000 .....           --      389,000       88,000        650,000      1,115,000      1,124,000      2,239,000
Reversal during the
  52 weeks ended
  January 1, 2000 ..............   (1,159,000)    (100,000)    (366,000)            --     (3,829,000)    (2,347,000)    (6,176,000)
Utilization for the
  52 weeks ended
  January 1, 2000 ..............     (566,000)     (49,000)    (117,000)            --     (2,349,000)    (1,231,000)    (3,580,000)
                                  -----------    ---------    ---------      ---------    -----------    -----------   ------------
Balance, January 1, 2000 .......    1,674,000      545,000      105,000        650,000      4,038,000      3,156,000      7,194,000
Additional reserves for
  continuing company-
  owned and franchised
  stores targeted for
  closure, December 30, 2000 ...           --           --           --             --         19,000        258,000        277,000
Reversal during the
  52 weeks ended
  December 30, 2000 ............           --     (400,000)      (1,000)      (650,000)      (123,000)    (1,228,000)    (1,351,000)
Utilization for the
  52 weeks ended
  December 30, 2000 ............     (561,000)    (145,000)     (29,000)            --     (1,459,000)      (882,000)    (2,341,000)
                                  -----------    ---------    ---------      ---------    -----------    -----------   ------------
Balance, December 30, 2000 .....  $ 1,113,000    $      --    $  75,000      $      --    $ 2,475,000    $ 1,304,000   $  3,779,000
                                  ===========    =========    =========      =========    ===========    ===========   ============

</TABLE>
During the years ended January 1, 2000 and December 30, 2000 approximately
$2,358,000 and $60,000, respectively, of reversals were used to reduce goodwill.
There were no such reversals during the year ended January 2, 1999.

                                       47
<PAGE>

              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


     The following table presents a summary of activity for stores originally
identified to be closed or franchised in connection with the applicable business
combination for the periods indicated. This table does not include a summary of
activity for stores the Company intends to close or franchise that were not
originally identified in connection with a business combination.

<TABLE>
<CAPTION>
                                 Mrs. Fields Inc.
                                       and
                                Original Cookie Co.         H&M              Pretzel Time       Great American
                                -------------------  ------------------  -------------------  ------------------
                                To Be      To Be     To Be     To Be     To Be     To Be      To Be     To Be
                                Closed   Franchised  Closed  Franchised  Closed   Franchised  Closed  Franchised
                                ------   ----------  ------  ----------  -------  ----------  ------  ----------
<S>                             <C>      <C>         <C>     <C>         <C>      <C>         <C>     <C>
Balance, January 3, 1998 .....    38          52        8         14        4         --        --        --
Stores identified for
  closure or franchise
  upon acquisition,
  August 24, 1998 ............    --          --       --         --       --         --        54        11
Stores identified for
  closure or franchise
  upon acquisition,
  November 19, 1998 ..........    --          --       --         --       --         --        --        --
Stores closed or
  franchised for the
  52 weeks ended
  January 2, 1999 ............   (15)        (16)      (2)        (7)      (1)        --       (11)       --
                                 ---         ---       --        ---       --         --       ---       ---
Balance, January 2, 1999 .....    23          36        6          7        3         --        43        11

Stores closed, franchised
  or reversed for the
  52 weeks ended
  January 1, 2000 ............   (23)        (22)      (6)        (7)      (3)        --       (37)      (10)
                                 ---         ---       --        ---       --         --       ---       ---
Balance, January 1, 2000 .....    --          14       --         --       --         --         6         1

Stores closed, franchised
  or reversed for the
  52 weeks ended
  December 30, 2000 ..........    --         (14)      --         --       --         --        (6)       (1)
                                 ---         ---       --        ---       --         --       ---       ---
Balance, December 30, 2000 ...    --          --       --         --       --         --        --        --
                                 ===         ===       ==        ===       ==         ==       ===       ===

<CAPTION>


                                    Pretzelmaker        Consolidated
                                -------------------  -------------------
                                To Be     To Be      To Be      To Be
                                Closed   Franchised  Closed   Franchised
                                ------   ----------  -------  ----------
<S>                             <C>      <C>         <C>      <C>
Balance, January 3, 1998 .....    --        --        50          66
Stores identified for
  closure or franchise
  upon acquisition,
  August 24, 1998 ............    --        --        54          11
Stores identified for
  closure or franchise
  upon acquisition,
  November 19, 1998...........     7        --         7          --
Stores closed or
  franchised for the
  52 weeks ended
  January 2, 1999 ............    --        --       (29)        (23)
                                  --        --       ---         ---
Balance, January 2, 1999 .....     7        --        82          54

Stores closed, franchised
  or reversed for the
  52 weeks ended
  January 1, 2000 ............    (7)       --       (76)       (39)
                                  --        --       ---        ---
Balance, January 1, 2000 .....    --        --         6         15

Stores closed, franchised
  or reversed for the
  52 weeks ended
  December 30, 2000 ..........    --        --        (6)       (15)
                                  --        --       ---        ---
Balance, December 30, 2000 ...    --        --        --         --
                                  ==        ==       ===        ===

</TABLE>

                                       48
<PAGE>

              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


     The following table presents a summary of activity for stores the Company
intends to close or franchise that were not originally identified to be closed
or franchised in connection with a business combination:

<TABLE>
<CAPTION>
                                  Mrs. Fields Inc.
                                        and
                                 Original Cookie Co.         H&M             Pretzel Time       Great American       Consolidated
                                 -------------------  ------------------  ------------------  ------------------  ------------------
                                 To Be     To Be      To Be     To Be     To Be     To Be     To Be     To Be     To Be     To Be
                                 Closed  Franchised   Closed  Franchised  Closed  Franchised  Closed  Franchised  Closed  Franchised
                                 ------  ----------   ------  ----------  ------  ----------  ------  ----------  ------- ----------
<S>                              <C>      <C>         <C>      <C>         <C>      <C>         <C>     <C>        <C>      <C>
Balance, January 3, 1998 .......    1          --       --        --        --        --        --         -        1          --
Stores identified
  for closure or franchise
  (not included in the
  original store closure
  plan), January 2, 1999 .......   20          10        4         1         2         3         5         -       31          14
Stores closed or
  franchised for the
  52 weeks ended
  January 2, 1999 ..............   (1)         --       (2)       --        --        --        --         -       (3)         --
                                  ---         ---       --        --        --        --        --         -      ---         ---
Balance, January 2, 1999 .......   20          10        2         1         2         3         5         -       29          14
Stores closed or franchised
  for the 52 weeks ended
  January 1, 2000 ..............  (17)         (6)      (2)       (1)       (2)       (2)       (5)        -      (26)         (9)
                                  ---         ---       --        --        --        --        --         -      ---         ---
Balance, January 1, 2000 .......    3           4       --        --        --         1        --         -        3           5
Stores closed or franchised
  for the 52 weeks ended
  December 30, 2000 ............   (3)         (4)      --        --        --        (1)       --         -       (3)         (5)
                                  ---         ---       --        --        --        --        --         -      ---         ---
Balance, December 30, 2000 .....   --          --       --        --        --        --        --         -       --          --
                                  ===         ===       ==        ==        ==        ==        ==         =      ===         ===
</TABLE>

     STORE CLOSURE RESERVE PAYMENT OBLIGATIONS

        As of December 30, 2000,  the estimated  future cash payments  under the
store closure reserve are as follows:

<TABLE>
<CAPTION>
          FISCAL YEAR
          -----------
<S>                                 <C>
          2001................       $ 1,498,000
          2002................           831,000
          2003................           581,000
          2004................           434,000
          2005................           189,000
          Thereafter..........           246,000
                                     -----------
                                     $ 3,779,000
                                     ===========
</TABLE>


                                       49
<PAGE>

              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


     The following table presents a summary of changes in the property and
equipment impairment reserves that were established in connection with the
applicable business combination for the periods indicated for stores to be
closed and franchised. For the fiscal years ended January 2, 1999 and January
1, 2000, the impairment reserve was offset against the fixed assets in the
balance sheet and additions are included in depreciation expense for each
period.

<TABLE>
<CAPTION>
                                            Mrs. Fields
                                              Inc. and
                                              Original                           Great
                                             Cookie Co.         H&M             American       Pretzelmaker     Consolidated
                                            -----------      -----------      -----------      ------------     ------------
<S>                                         <C>              <C>              <C>              <C>              <C>
Balance, January 3, 1998 ..............     $ 6,061,000      $ 2,292,000      $        --      $        --      $ 8,353,000

To record property and equipment
  impairment upon acquisition,
  August 24, 1998 .....................              --               --        2,150,000               --        2,150,000

To record property and equipment
  impairment upon acquisition,
  September 9, 1998 ...................              --               --          973,000               --          973,000

To record property and equipment
  impairment upon acquisition,
  November 19, 1998 ...................              --               --               --          327,000          327,000

Utilization for the 52 weeks ended
  January 2, 1999 related to
  stores to be closed .................      (1,782,000)         (93,000)        (246,000)              --       (2,121,000)

Utilization for the 52 weeks ended
  January 2, 1999 related to
  stores to be franchised .............        (435,000)        (819,000)              --               --       (1,254,000)
                                            -----------      -----------      -----------      -----------      -----------
Balance, January 2, 1999 ..............       3,844,000        1,380,000        2,877,000          327,000        8,428,000

Addition to impairment for the
  52 weeks ended January 1, 2000
  related to stores to be closed ......          86,000            5,000           25,000               --          116,000

Addition to impairment for 52 weeks
  ended January 1, 2000 related to
  stores to be franchised .............         443,000           11,000               --               --          454,000

Utilization for the 52 weeks ended
  January 1, 2000 related to
  stores to be closed .................      (1,192,000)        (410,000)      (1,434,000)        (158,000)      (3,194,000)

Utilization for the 52 weeks ended
  January 1, 2000 related to stores
  to be franchised ....................        (935,000)        (346,000)         (41,000)              --       (1,322,000)
                                            -----------      -----------      -----------      -----------      -----------
Balance, January 1, 2000 ..............     $ 2,246,000      $   640,000      $ 1,427,000      $   169,000      $ 4,482,000
                                            ===========      ===========      ===========      ===========      ===========

</TABLE>

     During the fiscal year ended December 30, 2000, the Company wrote off
the related fixed assets against the impairment reserve.

6.   MANDATORILY REDEEMABLE CUMULATIVE PREFERRED STOCK OF PRETZEL TIME, INC.

     The mandatorily redeemable cumulative preferred stock of Pretzel Time (the
"Pretzel Time Preferred Stock") is nonvoting and the preferred stockholders are
entitled to cumulative preferred dividends of ten percent for three years,
accrued and payable upon redemption. The Pretzel Time Preferred Stock must be
redeemed at $10,000 per share, plus unpaid and accumulated dividends. The excess
of the redemption price over the carrying value was accreted over the period
from issuance through September 1, 1999, using the effective interest method and
was charged to the accumulated deficit of Pretzel Time. During the period from
the acquisition of a majority ownership in Pretzel Time September 2, 1997 to
January 1, 2000, Pretzel Time increased the liquidation preference of the
Pretzel Time Preferred Stock by $307,000, in lieu of paying cash dividends. In
addition, the Pretzel Time Preferred Stock was increased by $736,000, for the
accretion required to amortize the original issue discount incurred at the time
of issuance.

                                       50
<PAGE>

              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


     As of January 1, 2000, the liquidation preference and the recorded amount
in the accompanying consolidated balance sheet was $1,070,000. On January 5,
2000, the Company redeemed all of the remaining Pretzel Time Preferred Stock for
$1,070,000.

7.   COMMITMENTS AND CONTINGENCIES

     STOCK PLEDGED AS COLLATERAL

     Mrs. Fields' Holding has pledged all of the Company's capital stock as
collateral for Mrs. Fields' Holding's 14 percent Senior Secured Discount Notes
due December 1, 2005 (the " Mrs. Fields' Holding Discount Notes"). Mrs. Fields'
Holding issued the Mrs. Fields' Holding Discount Notes on August 24, 1998, in
connection with the Great American Acquisitions and the Mrs. Fields' Holding
Equity contribution (see Note 1). In connection with the issuance of the
$55,000,000 principal amount at maturity of Mrs. Fields' Holding Discount Notes,
Mrs. Fields' Holding recorded a total original issue discount of approximately
$24,136,000. The principal amount of the Mrs. Fields' Holding Discount Notes
will accrete at a rate of 14 percent compounded semi-annually to a total
principal amount of $55,000,000 at December 1, 2002. Thereafter, the Mrs.
Fields' Holding Discount Notes will accrue interest at the annual rate of 14
percent, payable semi-annually on June 1 and December 1 of each year, commencing
June 1, 2003.

     Mrs. Fields' Holding is a holding company and does not have separate
operations from which it can generate cash flows. Under the circumstances, Mrs.
Fields' Holding would likely be dependent on its owners' and the Company's cash
flows to make principal and interest payments when due. Interest payments
totaling $7,700,000 per year will commence in 2003. The Company has not
guaranteed, nor is it obligated to make principal or interest payments related
to the Mrs. Fields' Holding Discount Notes. However, in accordance with the
Company's Indenture, the Company may pay dividends to Mrs. Fields' Holding, in
order for Mrs. Fields' Holding to service the debt, if no default or event of
default occurs under the Indenture and certain fixed charge coverage ratios and
consolidated net income tests are met. The Mrs. Fields' Holding Discount Notes
are effectively subordinated to the Company's Senior Notes.

     LEGAL MATTERS

     The Company is the subject of certain legal actions, which it considers
routine to its business activities. Management, after consultation with legal
counsel, believes that the potential liability to the Company under any such
actions is adequately accrued for or will not materially affect the Company's
consolidated financial position or results of operations.

     OPERATING LEASES

     The Company leases retail store facilities, office space and equipment
under long-term noncancelable operating lease agreements with remaining terms of
one to ten years. Certain of the retail store leases provide for contingent
rentals based on gross revenues. Additionally, as part of the Company's
franchising program, certain locations have been subleased to franchisees.

     Rent expense was as follows for the periods presented:

<TABLE>
<CAPTION>
                                     52 Weeks Ended     52 Weeks Ended      52 Weeks Ended
                                        January 1,        January 2,         December 30,
                                          1999              2000                2000
                                      ------------       ------------       ------------
<S>                                   <C>                <C>                <C>
Minimum rentals ................      $ 36,834,000       $ 35,510,000       $ 39,274,000
Contingent & other rentals .....           553,000            415,000            558,000
Sub-lease rentals ..............       (12,550,000)       (10,487,000)       (11,472,000)
                                      ------------       ------------       ------------
                                      $ 24,837,000       $ 25,438,000       $ 28,360,000
                                      ============       ============       ============
</TABLE>

                                       51
<PAGE>

              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


     As of December 30, 2000, the future minimum lease payments due under
operating leases (including future minimum lease payments for stores in the
process of being closed or franchised), which include required lease payments
for those stores that have been subleased, are as follows:

<TABLE>
<CAPTION>
          FISCAL YEAR
          -----------
<S>                                  <C>
          2001...................    $   30,062,000
          2002...................        26,035,000
          2003...................        21,831,000
          2004...................        17,434,000
          2005...................        10,070,000
          Thereafter.............        27,918,000
                                     --------------
                                     $  133,350,000
                                     ==============
</TABLE>

As of December 30, 2000, the future minimum sublease payments due to the Company
under these leases are as follows:

<TABLE>
<CAPTION>
          FISCAL YEAR
          -----------
<S>                                 <C>
          2001...................    $   9,469,000
          2002...................        7,958,000
          2003...................        6,409,000
          2004...................        4,631,000
          2005...................        2,004,000
          Thereafter.............        4,253,000
                                     -------------
                                     $  34,724,000
                                     =============
</TABLE>

CONTRACTUAL ARRANGEMENTS

     The Company entered into a supply agreement to buy frozen dough products
through 2003. The agreement stipulates minimum annual purchase commitments of
not less than 18,500,000 pounds of the products each year through the end of the
contract. The terms of the supply agreement include certain volume incentives
and penalties. The Company and the supplier may terminate the supply agreement
if the other party defaults on any of the performance covenants.

     The Company has entered into agreements requiring the Company to purchase
minimum amount of product from a supplier and under which the Company received
advance payments of volume rebates. Revenue from the advance payments has been
deferred and is being recognized ratably as purchases are made from the
supplier. The agreements expire in 2003. Under these agreements, the Company
recognized approximately $812,000, $40,000 and $40,000, primarily as a reduction
of food cost of sales during the years ended January 2, 1999, January 1, 2000
and December 30, 2000.

     The Company has entered into employment agreements with three key officers
with terms of two to three years. The agreements are for a total annual base
salary of $852,600. If the Company terminates employment without cause, or the
employee terminates employment with good reason, the employee can receive in
severance pay the amount equal to the product of his or her then current
semi-monthly base salary by the greater of the number of semi-monthly periods
from the notice of termination or 36 to 48 semi-monthly periods, plus a portion
of any discretionary bonus that would otherwise have been payable. The
agreements have customary provisions for other benefits and also include
noncompetition clauses.

8.   RELATED-PARTY TRANSACTIONS

     As of January 1, 2000 and December 30, 2000 the Company had receivables due
from franchisees and licensees, primarily related to prepaid rent which the
Company had paid on behalf of franchisees, totaling approximately $3,708,000 and
$3,955,000, respectively. These amounts are included in amounts due from
franchisees and affiliates and are net of allowance for doubtful accounts
totaling $821,000 and $758,000, respectively.

                                       52
<PAGE>

              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


     As of January 1, 2000 the Company had a net receivable of approximately
$642,000 with Mrs. Fields' Holding. The amounts due to Mrs. Fields' Holding
are recorded in prepaid rent and other in the accompanying consolidated
balance sheets.

     In connection with the acquisition of TCBY Enterprises, Inc. (together with
the parent company and the parent company's subsidiaries, "TCBY") on June 1,
2000, by Capricorn Investors III, L.P., an affiliate of Capricorn Investors II,
L.P. ("Capricorn"), Mrs. Fields' Holdings' approximately 87% stockholder, the
Company entered into a management agreement with TCBY, pursuant to which the
corporate and administrative functions of TCBY were transferred to the Company.
The Company also oversees the sale of new TCBY franchises and monitors the
activities of TCBY franchisees. Under the management agreement, the Company has
agreed to manage and operate TCBY's business and pay specified operating and
other costs of TCBY in exchange for an annual management fee which was
approximately $7,533,000 for the seven months ended December 30, 2000. The
management fee is paid by TCBY semi-monthly and adjusted annually.

     In fiscal 2000, the Company capitalized $140,000 of franchise fees to
TCBY as intangible assets.

     The Company will also be entitled to receive a fee of approximately $2.4
million from TCBY for reimbursement of expenses incurred on behalf of TCBY and
one-time transition costs incurred in the transfer of the management functions
of TCBY from Little Rock, Arkansas to Salt Lake City, Utah, when TCBY is
successful in selling its existing dairy processing plant for net proceeds
sufficient to retire debt associated with the plant or upon sufficient cash
being available from the excess working capital of the dairy processing plant.

     In November 1996, the Company entered into a consulting agreement (the
"Consulting Agreement") with Debbi Fields, a director of the Company, under
which Debbi Fields traveled and performed public relations and advertising
activities on behalf of the Company for at least 50 days a year for a fee of
$250,000 per year, with an option to perform these services for 20 additional
days a year for additional pay of $5,000 per day. The compensation increased by
10 percent for 1999. The Consulting Agreement expired on December 31, 1999 and
was not renewed.

     In May 1999, Mrs. Fields, Mrs. Fields' Holding, Pretzel Time, a former
Pretzel Time shareholder and Capricorn entered into an assignment and assumption
agreement under which Capricorn agreed to assume a payment obligation of Mrs.
Fields of $2,000,000 for Pretzel Time stock held by the former shareholder that
was due on December 31, 1999. In a related transaction on the same date,
Capricorn and Mrs. Fields' Holding entered into a contribution agreement under
which Mrs. Fields' Holding and Capricorn agreed to treat the assumption by
Capricorn of the Mrs. Fields payment obligation as a capital contribution from
Capricorn to Mrs. Fields' Holding, and as a capital contribution from Mrs.
Fields' Holding to Mrs. Fields.

     The Company and Mrs. Fields' Holding have entered into a tax-sharing
arrangement under the terms of which the Company distributed $2,534,000 to Mrs.
Fields' Holding in fiscal 2000.

9.   EMPLOYEE BENEFIT PLAN

     The Company sponsors the Mrs. Fields' Original Cookies, Inc. 401(k)
Retirement Savings Plan (the "Plan") for all eligible employees. Under the terms
of the Plan, employees may make contributions to the Plan, a portion of which is
matched by contributions from the Company. The total Company contributions to
the Plan for the years ended January 2, 1999, January 1, 2000 and December 30,
2000 were approximately $171,000, $168,000 and $479,000, respectively.

10.  REPORTABLE SEGMENTS

     Operating segments are components of the Company for which separate
financial information is available that is evaluated regularly by the Chief
Operating decision maker in deciding how to allocate resources and in assessing
performance. This information is reported on the basis that it is used
internally for evaluating segment performance. Mrs. Fields has two reportable
operating segments; namely, company-owned stores and related activity and

                                       53
<PAGE>

              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


franchising and licensing activity. The segments are determined by revenue
source: direct sales or royalties and license fees. The company-owned stores
segment consists of both cookie and pretzel stores owned and operated by Mrs.
Fields along with sales of branded cookie dough to retailers and
catalog/e-tailing sales. The franchising and licensing segment consists of
cookie and pretzel stores, which are owned and operated by third parties who pay
Mrs. Fields an initial franchise or license fee and monthly royalties based on a
percentage of gross sales and other licensing activity not related to cookie or
pretzel stores. Our catalog/e-tailing and branded dough sales are not disclosed
as separate operating segments because their revenues are less than 10% of total
revenues. The accounting policies for the segments are discussed in the summary
of significant accounting policies (see Note 2). Sales and transfers between
segments are eliminated in consolidation.

     Mrs. Fields evaluates performance of each segment based on contribution
margin. Contribution margin is computed as the difference between the revenues
generated by a reportable segment and the selling and store occupancy costs and
cost of sales related to that reportable segment. It is used as a measure of the
operating performance of an operating segment. Mrs. Fields does not allocate any
revenue generated from the TCBY management fee, general and administrative
expense, other income (expense), interest expense, depreciation and amortization
or assets to its reportable operating segments. Mrs. Fields does not separate
the costs incurred while performing activities for the TCBY management agreement
from costs of operating Mrs. Fields, as most of Mrs. Fields' employees support
both companies, therefore the activity of managing TCBY is not reported as a
separate segment. Segment revenue and contribution margin are presented in the
following table:

<TABLE>
<CAPTION>
                                                        Franchising,
                                      Company-Owned      Licensing
                                          Stores         and Other          Total
                                      -------------     -----------      ------------
<S>                                   <C>               <C>              <C>
YEAR ENDED JANUARY 2, 1999
Revenue ........................      $140,235,000      $14,001,000      $154,236,000
Contribution Margin ............        30,337,000       10,414,000        40,751,000
YEAR ENDED JANUARY 1, 2000
Revenue ........................       152,268,000       28,669,000       180,937,000
Contribution Margin ............        31,189,000       23,791,000        54,980,000
YEAR ENDED DECEMBER 30, 2000
Revenue ........................       142,796,000       27,150,000       169,946,000
Contribution Margin ............        32,970,000       17,418,000        50,388,000

</TABLE>

     The reconciliation of contribution margin to net income (loss) is as
follows:

<TABLE>
<CAPTION>
                                            Fiscal 1998        Fiscal 1999        Fiscal 2000
                                            ------------       ------------       ------------
<S>                                         <C>                <C>                <C>
Contribution margin ..................      $ 40,751,000       $ 54,980,000       $ 50,388,000
Management fee revenue ...............                --                 --          7,533,000
General and administrative expense ...       (19,017,000)       (21,972,000)       (28,601,000)
Store closure provision ..............        (7,303,000)         1,579,000          1,014,000
Depreciation and amortization ........       (19,820,000)       (24,206,000)       (27,937,000)
Interest expense, net ................       (12,574,000)       (17,827,000)       (17,791,000)
Other expense, net ...................        (1,180,000)          (775,000)        (4,000,000)
                                            ------------       ------------       ------------
Net income (loss) ....................      $(19,143,000)      $ (8,221,000)      $(19,394,000)
                                            ============       ============       ============
</TABLE>

     Geographic segment information is as follows:

                                       54
<PAGE>

              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

<TABLE>
<CAPTION>
                         DOMESTIC          INTERNATIONAL      DOMESTIC         INTERNATIONAL
                      COMPANY-OWNED        COMPANY-OWNED     FRANCHISING        FRANCHISING
                         STORES               STORES        AND LICENSING      AND LICENSING
                      ------------         -------------    -------------      -------------
<S>                  <C>                  <C>              <C>                 <C>
REVENUE
Fiscal 1998 ...         $140,018,000         $217,000         $13,738,000         $263,000
Fiscal 1999 ...          152,249,000           19,000          28,450,000          219,000
Fiscal 2000 ...          142,796,000           44,000          26,854,000          252,000
</TABLE>

     Revenues from international franchising and licensing are secured from
Canada and Australia with no other countries having material representation.
Revenues from international company-owned stores and income from foreign
operations are immaterial.

     The assets of the Company primarily related to company-owned stores and
related activity. Assets relating to franchising and licensing activity are
primarily amounts due from franchisees and licensees and goodwill relating to
franchising concepts. For the years ended January 1, 2000 and December 30,
2000 amounts due from franchisees and licensees were $3,708,000 and
$3,995,000, respectively. For the years ended January 1, 2000 and December
30, 2000 the net book value of goodwill relating to franchising concepts were
approximately $70,547,000 and $65,283,000, respectively.

     There were no customers who accounted for more than 10% of Mrs. Fields'
total revenue or either segment's revenue. The Company has a receivable of
approximately $1,200,000 from one company which represents 9.5% of the Company's
total receivables.

11.  SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION

     The Company's obligation related to its $140,000,000 total principal amount
of Senior Notes due 2004 (see Note 3) is fully and unconditionally guaranteed on
a joint and several basis and on a senior basis by four of the Company's wholly
owned subsidiaries (the "Guarantors"). These guarantees are general unsecured
obligations of the Guarantors, rank senior in right of payment to all
subordinated indebtedness of the Guarantors and rank pari passu in right of
payment with all existing and future senior indebtedness of the Guarantors.
There are no restrictions on the Company's ability to obtain cash dividends or
other distributions of funds from the Guarantors, except those imposed by
applicable law. The following supplemental financial information sets forth, on
a condensed consolidating basis, balance sheets, statements of operations and
statements of cash flows for Mrs. Fields' Original Cookies, Inc. (the "Parent
Company"), Great American Cookie Company, Inc., The Mrs. Fields' Brand, Inc.,
Pretzelmaker Holdings, Inc., and Pretzel Time, Inc., which are Guarantors
(collectively, the "Guarantor Subsidiaries") and Mrs. Fields' Cookies Australia,
Mrs. Fields' Cookies (Canada) Ltd., H & M Canada and Pretzelmaker of Canada, and
three partially owned subsidiaries, (collectively, the "Non-guarantor
Subsidiaries"). The Company has not presented separate financial statements and
other disclosures concerning the Guarantor Subsidiaries because management has
determined that such information is not material to investors.

                                       55
<PAGE>

              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


          SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                     FOR THE 52 WEEKS ENDED JANUARY 2, 1999
                                   (UNAUDITED)
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                           Non-
                                                        Parent          Guarantor       Guarantor
                                                       Company        Subsidiaries     Subsidiaries    Eliminations    Consolidated
                                                      ---------       ------------     ------------    ------------    ------------
<S>                                                   <C>             <C>              <C>             <C>             <C>
NET REVENUES ....................................     $ 144,057          $ 13,939          $ 377          $(4,137)        $ 154,236
                                                      ---------          --------          -----          -------         ---------
OPERATING COSTS AND EXPENSES:
   Selling and store occupancy costs ............        76,437                --            334           (1,768)           75,003
   Cost of sales ................................        37,165             3,587             99           (2,369)           38,482
   General and administrative ...................        21,213             5,107             --               --            26,320
   Depreciation and amortization ................        16,624             3,196             --               --            19,820
                                                      ---------          --------          -----          -------         ---------
      Total operating costs and expenses ........       151,439            11,890            433           (4,137)          159,625
                                                      ---------          --------          -----          -------         ---------
   (Loss) income from operations ................        (7,382)            2,049            (56)              --            (5,389)
INTEREST EXPENSE AND OTHER, net .................       (13,064)               81             --               --           (12,983)
                                                      ---------          --------          -----          -------         ---------
   (Loss) income before provision for income
      taxes, preferred stock accretion and
      dividends of subsidiaries and equity in
      net loss of consolidated subsidiaries .....       (20,446)            2,130            (56)              --           (18,372)
PROVISION FOR INCOME TAXES ......................          (197)             (119)            --               --              (316)
                                                      ---------          --------          -----          -------         ---------
   (Loss) income before preferred stock
      accretion and dividends of subsidiaries
      and equity in net loss of consolidated
      subsidiaries ..............................       (20,643)            2,011            (56)              --           (18,688)
PREFERRED STOCK ACCRETION AND
   DIVIDENDS OF SUBSIDIARIES ....................            --              (444)            --               --              (444)
EQUITY IN NET LOSS OF
   CONSOLIDATED SUBSIDIARIES ....................         1,500                --             --           (1,511)              (11)
                                                      ---------          --------          -----          -------         ---------
NET (LOSS) INCOME ...............................     $ (19,143)         $  1,567          $ (56)         $(1,511)        $ (19,143)
                                                      =========          ========          =====          =======         =========
</TABLE>

                                       56
<PAGE>

              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


          SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
                     FOR THE 52 WEEKS ENDED JANUARY 2, 1999
                                   (UNAUDITED)
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                            Non-
                                                              Parent      Guarantor      Guarantor
                                                             Company     Subsidiaries   Subsidiaries    Eliminations    Consolidated
                                                             --------    ------------   ------------    ------------    ------------
<S>                                                          <C>         <C>            <C>             <C>             <C>
NET CASH PROVIDED BY (USED IN)
   OPERATING ACTIVITIES ............................         $(27,953)      $ 33,382        $(133)      $         --      $  5,296
                                                             --------       --------        -----       ------------      --------

CASH FLOWS FROM INVESTING
   ACTIVITIES:
      Net cash paid for acquisitions and related
         Expenses ..................................          (39,873)         7,038           --                 --       (32,835)
      Purchase of property and equipment, net ......           (8,228)            (7)          --                 --        (8,235)
      Proceeds for asset sales .....................              176             --           --                 --           176
                                                             --------       --------        -----       ------------      --------

         Net cash (used in) provided by
            Investing activities ...................          (47,925)         7,031           --                 --       (40,894)
                                                             --------       --------        -----       ------------      --------

CASH FLOWS FROM FINANCING
   ACTIVITIES:
      Proceeds from long-term debt .................           39,400             --           --                 --        39,400
      Bank overdraft ...............................            4,133             --           --                 --         4,133
      Payment of debt financing costs ..............           (7,062)            --           --                 --        (7,062)
      Equity infusion from Mrs. Fields'
         Holding ...................................           29,056             --           --                 --        29,056
      Principal payments on long-term debt
         and capital lease obligations .............             (257)       (41,000)          --                 --       (41,257)
      Capital lease repayments .....................             (123)            --           --                 --          (123)
      Reduction in preferred stock of
         Pretzel Time ..............................               --            (85)          --                 --           (85)
                                                             --------       --------        -----       ------------      --------
         Net cash provided by (used in)
            Financing activities ...................           65,147        (41,085)          --                 --        24,062
                                                             --------       --------        -----       ------------      --------
NET DECREASE IN CASH AND CASH
   EQUIVALENTS .....................................          (10,731)          (672)        (133)                --       (11,536)
CASH AND CASH EQUIVALENTS, beginning of period .....           14,270          1,806          211                 --        16,287
                                                             --------       --------        -----       ------------      --------
CASH AND CASH EQUIVALENTS, end of period ...........         $  3,539       $  1,134        $  78       $         --      $  4,751
                                                             ========       ========        =====       ============      ========
SUPPLEMENTAL DISCLOSURE OF CASH
   FLOW INFORMATION:
      Interest paid ................................         $ 12,405       $     35        $  --       $         --      $ 12,440
      Taxes paid ...................................              141             68           --                 --           209

</TABLE>

                                       57
<PAGE>

              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


               SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
                              AS OF JANUARY 1, 2000
                                   (UNAUDITED)
                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                                            Non-
                                                              Parent      Guarantor      Guarantor
                                                             Company     Subsidiaries   Subsidiaries    Eliminations   Consolidated
                                                             --------    ------------   ------------    ------------   ------------
<S>                                                          <C>         <C>            <C>             <C>            <C>
ASSETS

CURRENT ASSETS:
   Cash and cash equivalents ..........................      $  3,886      $    792       $    241       $      --       $  4,919
   Accounts receivable, net ...........................         2,151         2,131             13              --          4,295
   Amounts due from franchisees and licensees, net ....         1,314         2,394             --              --          3,708
   Inventories ........................................         4,009           968             --              --          4,977
   Other current assets and amounts due from
      (to) affiliates, net ............................        22,236       (18,898)          (642)             --          2,696
                                                             --------      --------       --------       ---------       --------
         Total current assets .........................        33,596       (12,613)          (388)             --         20,595
PROPERTY AND EQUIPMENT, net ...........................        26,481         2,033            151              --         28,665
INTANGIBLES, net ......................................        74,301        81,769            289              --        156,359
INVESTMENT IN SUBSIDIARIES ............................        65,468            --             --         (65,468)            --
OTHER ASSETS ..........................................         2,714           134            (57)             --          2,791
                                                             --------      --------       --------       ---------       --------
                                                             $202,560      $ 71,323       $     (5)      $ (65,468)      $208,410
                                                             ========      ========       ========       =========       ========
LIABILITIES AND STOCKHOLDER'S
   EQUITY (DEFICIT)

CURRENT LIABILITIES:
   Current portion of long-term debt and
      capital lease obligations .......................      $  1,377      $    246       $     --       $      --       $  1,623
   Accounts payable ...................................         8,823         1,676             15              --         10,514
   Accrued liabilities ................................        11,134         1,000            110              --         12,244
                                                             --------      --------       --------       ---------       --------
         Total current liabilities ....................        21,334         2,922            125              --         24,381
LONG-TERM DEBT AND CAPITAL LEASE
   OBLIGATIONS, net of current portion ................       144,582           280             --              --        144,862
STORE CLOSURE RESERVE, net of
    current portion ...................................         3,529            --             --              --          3,529
MANDATORILY REDEEMABLE CUMULATIVE
  PREFERRED STOCK .....................................            --         1,070             --              --          1,070
MINORITY INTEREST .....................................            --            --             --             111            111
STOCKHOLDER'S EQUITY (DEFICIT) ........................        33,115        67,051           (130)        (65,579)        34,457
                                                             --------      --------       --------       ---------       --------
                                                             $202,560      $ 71,323       $     (5)      $ (65,468)      $208,410
                                                             ========      ========       ========       =========       ========
</TABLE>

                                       58
<PAGE>

              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


          SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                     FOR THE 52 WEEKS ENDED JANUARY 1, 2000
                                   (UNAUDITED)
                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                                  Non-
                                                     Parent      Guarantor      Guarantor
                                                    Company     Subsidiaries   Subsidiaries    Eliminations   Consolidated
                                                    --------    ------------   ------------    ------------   ------------
<S>                                                <C>         <C>            <C>             <C>            <C>
NET REVENUES ....................................  $ 156,727       $ 29,691       $658          $(6,139)      $ 180,937
                                                   ---------       --------       ----          -------       ---------
OPERATING COSTS AND EXPENSES:
   Selling and store occupancy costs ............     80,702             --        288           (1,356)         79,634
   Cost of sales ................................     41,369          9,678         74           (4,798)         46,323
   General and administrative ...................     11,622         10,140        210               --          21,972
   Depreciation and amortization ................     15,933          6,702         --               (8)         22,627
                                                   ---------       --------       ----          -------       ---------
      Total operating costs and expenses ........    149,626         26,520        572           (6,162)        170,556
                                                   ---------       --------       ----          -------       ---------
   Income from operations .......................      7,101          3,171         86               23          10,381
INTEREST EXPENSE AND OTHER, net .................    (17,634)          (435)        12               --         (18,057)
                                                   ---------       --------       ----          -------       ---------
   (Loss) income before provision for income
      taxes, preferred stock accretion and
      dividends of subsidiaries and equity in
      net loss of consolidated subsidiaries .....    (10,533)         2,736         98               23          (7,676)
PROVISION FOR INCOME TAXES ......................       (218)            --         --               --            (218)
                                                   ---------       --------       ----          -------       ---------
   (Loss) income before preferred stock
      accretion and dividends of subsidiaries
      and equity in net loss of consolidated
      subsidiaries ..............................    (10,751)         2,736         98               23          (7,894)
PREFERRED STOCK ACCRETION AND
   DIVIDENDS OF SUBSIDIARIES ....................         --           (305)        --               --            (305)
EQUITY IN NET LOSS OF
   CONSOLIDATED SUBSIDIARIES ....................      2,530             --         --           (2,552)            (22)
                                                   ---------       --------       ----          -------       ---------
NET (LOSS) INCOME ...............................  $  (8,221)      $  2,431       $ 98          $(2,529)      $  (8,221)
                                                   =========       ========       ====          =======       =========
</TABLE>


                                       59
<PAGE>

              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


          SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
                     FOR THE 52 WEEKS ENDED JANUARY 1, 2000
                                   (UNAUDITED)
                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                                  Non-
                                                       Parent    Guarantor      Guarantor
                                                      Company   Subsidiaries   Subsidiaries    Eliminations     Consolidated
                                                      --------  ------------   ------------    ------------     ------------
<S>                                                  <C>        <C>            <C>             <C>              <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES ......      $ 16,392       $ 1,348       $163        $          --      $ 17,903
                                                      --------       -------       ----        -------------      --------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment, net .....        (5,157)           --         --                   --        (5,157)
   Proceeds for asset sales ....................           461            --         --                   --           461
                                                      --------       -------       ----        -------------      --------
      Net cash used in
         investing activities ..................        (4,696)           --         --                   --        (4,696)
                                                      --------       -------       ----        -------------      --------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Payment of debt financing costs .............        (1,832)           --         --                   --        (1,832)
   Principal payments on long-term debt
      and capital lease obligations ............        (5,384)       (1,194)        --                   --        (6,578)
   Bank overdraft ..............................        (4,133)           --         --                   --        (4,133)
   Reduction in preferred stock of
      Pretzel Time .............................            --          (496)        --                   --          (496)
                                                      --------       -------       ----        -------------      --------
     Net cash used in financing activities .....       (11,349)       (1,690)        --                   --       (13,039)
                                                      --------       -------       ----        -------------      --------
NET INCREASE (DECREASE) IN CASH AND CASH
   EQUIVALENTS .................................           347          (342)       163                   --           168
CASH AND CASH EQUIVALENTS,
   beginning of period .........................         3,539         1,134         78                   --         4,751
                                                      --------       -------       ----        -------------      --------
CASH AND CASH EQUIVALENTS,
   end of period ...............................      $  3,886       $   792       $241        $          --      $  4,919
                                                      ========       =======       ====        =============      ========
SUPPLEMENTAL DISCLOSURE OF CASH
   FLOW INFORMATION:
      Interest paid ............................      $ 17,444       $   513       $ --        $          --      $ 17,957
      Income taxes paid ........................           204           197         --                   --           401
</TABLE>

                                       60
<PAGE>

              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


               SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
                             AS OF DECEMBER 30, 2000
                                   (UNAUDITED)
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                  Non-
                                                    Parent      Guarantor      Guarantor
                                                   Company     Subsidiaries   Subsidiaries    Eliminations    Consolidated
                                                   --------    ------------   ------------    ------------    ------------
<S>                                               <C>          <C>            <C>             <C>             <C>
                     ASSETS

CURRENT ASSETS:
   Cash and cash equivalents ................      $  3,426      $     --       $    248       $    (163)       $  3,511
   Accounts receivable, net .................         3,708           233             71           1,135          5,147
   Amounts due from franchisees and
      licensees, net ........................           831         4,332             --          (1,208)         3,955
   Inventories ..............................         3,973           709              4              --          4,686
   Other current assets and amounts
      due from (to) affiliates, net .........        19,057       (17,888)          (544)             --            625
                                                   --------      --------       --------       ---------       --------
         Total current assets ...............        30,995       (12,614)          (221)           (236)        17,924

PROPERTY AND EQUIPMENT, net .................        23,695         2,187             95              --         25,977
INTANGIBLES, net ............................        64,037        74,269            216              --        138,522
INVESTMENT IN SUBSIDIARIES ..................        65,011            --             --         (65,011)            --
OTHER ASSETS ................................           545            44             --              98            687
                                                   --------      --------       --------       ---------       --------
                                                   $184,283      $ 63,886       $     90       $ (65,149)      $183,110
                                                   ========      ========       ========       =========       ========
LIABILITIES AND STOCKHOLDER'S EQUITY

CURRENT LIABILITIES:
   Current portion of long-term debt and
      capital lease obligations .............      $     --      $     --       $     --       $   1,628       $  1,628
   Accounts payable and bank overdraft ......         5,390           542              7           6,737         12,676
   Accrued liabilities ......................        15,637         1,149             25          (5,227)        11,584
                                                   --------      --------       --------       ---------       --------
      Total current liabilities .............        21,027         1,691             32           3,138         25,888
LONG-TERM DEBT AND CAPITAL LEASE
   OBLIGATIONS, net of current portion ......       143,894           430             --          (1,877)       142,447
STORE CLOSURE RESERVE, net of
    current portion .........................         3,779            --             --          (1,498)         2,281
MINORITY INTEREST ...........................            --            --             --              51             51
STOCKHOLDER'S EQUITY ........................        15,583        61,765             58         (64,963)        12,443
                                                   --------      --------       --------       ---------       --------
                                                   $184,283      $ 63,886       $     90       $ (65,149)      $183,110
                                                   ========      ========       ========       =========       ========
</TABLE>

                                       61
<PAGE>

              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


          SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                    FOR THE 52 WEEKS ENDED DECEMBER 30, 2000
                                   (UNAUDITED)
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                      Non-
                                                         Parent      Guarantor      Guarantor
                                                        Company     Subsidiaries   Subsidiaries    Eliminations     Consolidated
                                                        --------    ------------   ------------    ------------     ------------
<S>                                                    <C>          <C>            <C>             <C>              <C>
NET REVENUES ....................................      $ 155,243       $ 27,624       $ 580          $(5,968)         $ 177,479
                                                       ---------       --------       -----          -------          ---------
OPERATING COSTS AND EXPENSES:
   Selling and store occupancy costs ............         74,539             --         185           (1,186)            73,538
   Cost of sales ................................         41,029          9,719          55           (4,782)            46,021
   General and administrative ...................         13,664         13,794         129               --             27,587
   Depreciation and amortization ................         21,503          6,399          35               --             27,937
                                                       ---------       --------       -----          -------          ---------
      Total operating costs and expenses ........        150,735         29,912         404           (5,968)           175,083
                                                       ---------       --------       -----          -------          ---------
   (Loss) income from operations ................          4,508         (2,288)        176               --              2,396
INTEREST EXPENSE AND OTHER, net .................        (17,563)          (399)         --              (13)           (17,975)
                                                       ---------       --------       -----          -------          ---------
   (Loss) income before provision for income
      taxes and equity in net loss of
      consolidated subsidiaries .................        (13,055)        (2,687)        176              (13)           (15,579)
PROVISION FOR INCOME TAXES ......................         (3,776)           (65)         --               --             (3,841)
                                                       ---------       --------       -----          -------          ---------
   (Loss) income before equity in net loss
     of consolidated subsidiaries ...............        (16,831)        (2,752)        176              (13)           (19,420)
EQUITY IN NET LOSS OF
   CONSOLIDATED SUBSIDIARIES ....................         (2,563)            --          --            2,589                 26
                                                       ---------       --------       -----          -------          ---------
NET (LOSS) INCOME ...............................      $ (19,394)      $ (2,752)      $ 176          $ 2,576          $ (19,394)
                                                       =========       ========       =====          =======          =========

</TABLE>

                                       62
<PAGE>

              MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


          SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
                    FOR THE 52 WEEKS ENDED DECEMBER 30, 2000
                                   (UNAUDITED)
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                  Non-
                                                     Parent     Guarantor      Guarantor
                                                    Company    Subsidiaries   Subsidiaries    Eliminations     Consolidated
                                                    --------   ------------   ------------    ------------     ------------
<S>                                                 <C>        <C>            <C>             <C>              <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES ....      $ 10,889       $   998       $  93         $        --      $ 11,980
                                                    --------       -------       -----         -----------      --------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment, net ...        (9,312)         (538)         --                  --        (9,850)
   Proceeds for asset sales ..................            66            --          --                  --            66
                                                    --------       -------       -----         -----------      --------
      Net cash (used in) provided by
         investing activities ................        (9,246)         (538)         --                  --        (9,784)
                                                    --------       -------       -----         -----------      --------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Payment of debt financing costs ...........          (338)           --          --                  --          (338)
   Principal payments on long-term debt
      and capital lease obligations ..........        (2,151)         (345)         --                  --        (2,496)
   Bank overdraft ............................         2,920           163          --                (163)        2,920
   Reduction in preferred stock of
      Pretzel Time ...........................            --        (1,070)         --                  --        (1,070)
   Tax sharing distribution to Mrs. Fields'
      Holding ................................        (2,534)           --          --                  --        (2,534)
                                                     --------       -------       -----         -----------      --------
      Net cash provided by (used in)
         financing activities ................        (2,103)       (1,252)         --                (163)       (3,518)
                                                    --------       -------       -----         -----------      --------
EFFECT OF FOREIGN EXCHANGE RATE CHANGES
   ON CASH ...................................            --            --         (86)                 --           (86)
                                                    --------       -------       -----         -----------      --------
NET DECREASE IN CASH AND CASH
   EQUIVALENTS ...............................          (460)         (792)          7                (163)        (1,408)
CASH AND CASH EQUIVALENTS,
    beginning of period ......................         3,886           792         241                  --         4,919
                                                    --------       -------       -----         -----------      --------
CASH AND CASH EQUIVALENTS,
   end of Period .............................      $  3,426       $    --       $ 248         $      (163)     $  3,511
                                                    ========       =======       =====         ===========      ========
SUPPLEMENTAL DISCLOSURE OF CASH
   FLOW INFORMATION:
      Interest paid ..........................      $ 17,297       $   410       $  --         $        --      $ 17,707
      Taxes paid .............................           305            --          --                  --           305

</TABLE>


                                       63
<PAGE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES

     None.


                                    PART III

ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT

     The following table sets forth certain information regarding the executive
officers and directors of Mrs. Fields as of March 30, 2001. The directors are
also directors of Mrs. Fields' Holding.

<TABLE>
<CAPTION>
Name                                              Age        Title
----                                              ---        -----
<S>                                               <C>        <C>
Larry A.  Hodges............................       52        Director, President and Chief Executive Officer
Garry Remington.............................       48        Senior Vice President of Real Estate
Michael R.  Ward............................       43        Senior Vice President, General Counsel and Secretary
Herbert S.  Winokur, Jr.....................       57        Chairman of the Board of Directors
Richard Ferry...............................       63        Director
Nat Gregory.................................       52        Director
Walker Lewis................................       56        Director
Peter Mullin................................       60        Director
Gilbert Osnos...............................       71        Director
</TABLE>

     Mr. Hodges has been President and Chief Executive Officer of our
predecessor, Mrs. Fields Inc., and us since March 1994, and a Director of Mrs.
Fields' Original Cookies, Inc. since April 1993. From 1992 to 1994, Mr. Hodges
was the Chief Executive Officer of Food Barn Stores, Inc. (Kansas City,
Missouri). Earlier Mr. Hodges was a consultant to various manufacturers and
retailers. For 25 years, Mr. Hodges was with American Stores Company where he
served as President of two of its subsidiaries ranging in annual sales from $600
million to $2.3 billion. Mr. Hodges has over 32 years of experience in the
retail field serving as president of four supermarket chains and consultant and
director to large food companies. Mr. Hodges is a director of Ameristar Casinos,
Inc. and Successories, Inc.

     Mr. Remington has been our Senior Vice President of Real Estate since July
1997. Mr. Remington's responsibilities include all aspects of real estate, store
construction, remodels and lease negotiations. Between October 1996 and July
1997, Mr. Remington served as Vice President of Real Estate for Sbarro, Inc.
from 1994 to 1996, Mr. Remington held the position of Senior Vice President of
Leasing for the Woolworth Corporation, with responsibilities for Footlocker,
Champ Sports, Northern Reflections, Afterthoughts, and seven other divisions,
and from 1992 to 1994, Mr. Remington was Vice President and Director of Leasing
for the Woolworth Corporation, which he joined in 1972.

     Mr. Ward serves as our Senior Vice President, General Counsel and
Secretary. Mr. Ward's responsibilities include management of our Legal and Human
Resources Departments. Between 1991 and 1996, Mr. Ward's responsibilities were
overseeing the Legal Department and the Human Resources Department for Mrs.
Fields Inc. Mr. Ward is a member of the Board of Directors of Nonni's Food
Company, Inc. He is also admitted to practice law in the State of Utah.

     Mr. Winokur has been our Chairman of the Board of Directors since our
inception in September 1996. Mr. Winokur is the managing Chairman and Chief
Executive Officer of Capricorn Holdings, Inc., and the General Partner of three
private investment partnerships concentrating on investments in restructure
situations, including Capricorn Investors II, L.L.P., which owns the majority of
MFH's stock, Capricorn Investors III, L.L.P., the majority stockholder of TCBY,
and Capricorn Investors, L.P. Prior to his current appointment, Mr. Winokur was
Senior Executive Vice President and a director of Penn Central Corporation. Mr.
Winokur is also a director of CCC Information Services Group, Inc., NATCO Group,
Inc., DynCorp., and Enron Corp.

     Mr. Ferry has been a director since our inception in September 1996. Mr.
Ferry is co-founder and Chairman of Korn/Ferry International, the world's
leading executive search firm. Mr. Ferry is on the Board of

                                       64
<PAGE>

Directors of Avery Dennison, Dole Food Company and Pacific Life Insurance
Company. Mr. Ferry is an investor in both Capricorn II and Capricorn III.

     Mr. Gregory has been a director since our inception in September 1996.
Since 1993, Mr. Gregory has served as Chairman and Chief Executive Officer of
NATCO Group, Inc., an international supplier of oilfield production equipment,
which is a portfolio company of Capricorn II. Mr. Gregory is a member and
managing director of Capricorn Holdings, L.L.C., the General Partner of
Capricorn II and Capricorn III.

     Mr. Lewis has been a director since our inception in September 1996. Mr.
Lewis is the Chairman of Devon Value Advisers. Mr. Lewis served as Chairman of
Strategic Planning Associates, specializing in shareholder value strategies. He
was a Senior Advisor at Dillon Read & Co., Inc. Mr. Lewis was a Managing
Director of Kidder, Peabody & Co., Inc., President of Avon North America, and
Executive Vice President of Avon Products, Inc. Mr. Lewis serves on the Boards
of American Management Systems, Autotote, Owens Corning, London Fog, and Marakon
Associates.

     Mr. Mullin has been a director since our inception in September 1996. Mr.
Mullin founded Mullin Consulting, Inc. in Los Angeles in 1969, and serves as its
Chairman and Chief Executive Officer. He also co-founded Strategic Compensation
Associates and serves as Chairman of the firm's Executive Committee. Mr. Mullin
is an investor in both Capricorn II and Capricorn III. Mr. Mullin is a member of
the Board of Directors of Avery Dennison Corporation, Mellon West Board of
Directors, Golden State Vintners, M Life Insurance Company, and is a member of
the Board of Advisors of CMS Companies.

     Mr. Osnos has been a director since our inception in September 1996. Mr.
Osnos has served since 1992 as Chairman of Osnos & Company, which provides
interim management to companies. He has served as Interim President/CEO/COO to a
large array of companies in manufacturing, distribution, retailing and service
industries. In 1979 he joined the predecessor firm and became a partner in 1981.
He has been Chairman of the Turnaround Management Association and a member of
its Board since prior to 1993. He is also on the Board of Directors of
ehomecare.com and Strauss Discount Auto. He serves on the Advisory Committee of
Business Executives for National Security in the New York chapter.


                                       65
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

     The following table sets forth information with regard to compensation for
services rendered in all capacities to Mrs. Fields by its Chief Executive
Officer and the four other most highly compensated executive officers of Mrs.
Fields other than the CEO who were serving as executive officers at the end of
the last completed fiscal year. Information described in the table reflects
compensation earned by such individuals for services with Mrs. Fields or its
subsidiaries.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                       Long-Term
                                              Annual Compensation                  Compensation Award
                                       -------------------------------------    -------------------------
                                                                                               Securities
                                                                   Other        Restricted     Underlying
                                                                   Annual         Stock         Options/        All Other
                                         Salary       Bonus      Compensation    Award(s)        SARS(1)      Compensation
Name and Principal Position   Year        ($)          ($)           ($)           ($)             (#)            ($)
---------------------------   ----      --------     --------    ------------   ----------      ----------    ------------
<S>                           <C>       <C>          <C>         <C>            <C>            <C>            <C>
Larry Hodges                  2000      $402,500     $207,500    $      --       $   --             --         $     --
  President and CEO           1999       354,667       87,500        4,410           --             --               --
                              1998       339,583      150,000        4,833           --             --          471,000 (4)
Mark S. Tanner          (2)   2000       215,977      103,770           --           --             --               --
  Senior Vice President       1999       137,873       20,000           --           --         51,580               --
  and CFO                     1998            --           --           --           --             --               --

Pat Knotts              (3)   2000       237,782       77,608           --           --             --               --
  Senior Vice President       1999       222,001       43,000           --           --             --               --
  Operations                  1998       191,699       70,000           --           --             --               --

Michael Ward                  2000       183,782       81,200           --           --             --               --
  Senior Vice President       1999       176,113       28,000        2,033           --             --               --
  Gen. Counsel & Secretary    1998       135,385       50,000        1,370           --             --               --

Garry Remington               2000       197,600       55,328           --           --             --               --
  Senior Vice President       1999       192,533       38,000           --           --             --               --
  Real Estate                 1998       180,000       33,945           --           --             --               --

</TABLE>

(1)  The stock options for common stock of MFH have 10-year terms and were
     granted as of June 1999 with an exercise price of $19.72 per share.

(2)  Mr. Tanner resigned from Mrs. Fields on November 16, 2000.

(3)  Mr. Knotts resigned from Mrs. Fields on January 13, 2001. Mrs. Fields
     Holding bought back his vested shares of stock for $362,693.

(4)  Represents payment under Mrs. Fields Inc. Management Value Creation Plan

OPTION GRANTS AND EXERCISES

     In 1996, the Board of Directors of MFH approved the provisions of a
director stock option plan (the "Director Stock Option Plan"), providing for
the issuance of common stock, par value $.001 per share, of MFH to directors
of Mrs. Fields' Holding, and an employee stock option plan (the "Employee
Stock Option Plan" and, together with the Director Stock Option Plan, the
"Plans"), providing for the issuance of options to purchase common stock of
MFH to officers and other employees of MFH and its subsidiaries, including
Mrs. Fields. The Plans provide for the issuance of options to purchase a
total of 542,840 shares of common stock of MFH to directors of MFH and
officers and employees of Mrs. Fields' Holding's subsidiaries, including Mrs.
Fields. Of the total 542,840 option shares available, 466,241 shares,
representing approximately 11.6% of the total common stock of MFH on a fully
diluted basis, after giving effect to the issuance of stock under the
warrants to purchase common stock of MFH and to issuances of stock under
options currently issued to directors and employees under the Plans, have
been issued. See "Security Ownership of Certain Beneficial Owners and
Management."

                                       66
<PAGE>

BOARD COMPENSATION

     The Board of Directors of Mrs. Fields meets regularly on a quarterly
basis and more often as required. Board members, other than officers of Mrs.
Fields and Mr. Winokur and Mr. Gregory, are compensated for services rendered
annually as follows:

     (1)  $12,000 cash; and

     (2)  grants of options to purchase common stock of Mrs. Fields' Holding,
          under the Director Stock Option Plan.

     The Board of Directors of MFH approved the award of options under the
Director Stock Option Plan to purchase 1,792 shares of common stock of MFH to
each of Messrs. Ferry, Gregory, Lewis, Mullin, Osnos and Winokur as of
January 1, 1998, at an exercise price of $16.74 per share, and the award of
options to purchase 634 shares of common stock of MFH as of January 2, 1999,
at an exercise price of $19.72 and 634 shares of common stock of MFH as of
January 2, 2001 at the exercise price of $19.72, to each of the same
directors, with the options of Messrs. Gregory and Winokur being issued to
Capricorn.

     The Board members were also offered an opportunity to acquire shares of
common stock of MFH under a director stock purchase plan (the "Director Stock
Purchase Plan"). Such compensation in shares that would be payable or issuable
to Messrs. Winokur and Gregory will be paid to Capricorn. A total of 51,667
vested shares of common stock of MFH and 28,333 restricted shares of common
stock of MFH have been issued to directors and officers of Mrs. Fields under the
Director Stock Purchase Plan.

BOARD COMMITTEES

     Three functioning committees of the Board have been organized: an Executive
Committee, a Compensation Committee and an Audit Committee. Following is a brief
description of each of these committees.

     EXECUTIVE COMMITTEE. The Executive Committee is composed of Messrs. Winokur
(Chairman), Gregory and Hodges. The purpose of this committee is to act on
behalf of the entire Board of Directors between Board meetings.

     COMPENSATION COMMITTEE. The Compensation Committee is composed of Messrs.
Gregory (Chairman), Mullin and Lewis. The purpose of this committee is to ensure
that Mrs. Fields has a broad plan of executive compensation that is competitive
and motivating to the degree that it will attract, hold and inspire performance
of managerial and other key personnel of a quality and nature that will enhance
the growth and profitability of Mrs. Fields.

     AUDIT COMMITTEE. The Audit Committee is comprised of Messrs. Ferry
(Chairman) and Osnos. The purpose of the Audit Committee is to provide
assistance to the board of directors in fulfilling their oversight
responsibilities relating to the Mrs. Fields' financial statements and
financial reporting process and internal controls in consultation with Mrs.
Fields' independent and internal auditors. The committee also is responsible
for ensuring the independent auditor submits a formal written statement to
the company regarding relationships and services which may affect the
auditors objectivity and independence.

INDEMNIFICATION AND COMPENSATION

     Mrs. Fields' by-laws authorize Mrs. Fields to indemnify its present and
former directors and officers and to pay or reimburse expenses for such
individuals in advance of the final disposition of a proceeding upon receipt of
an undertaking by or on behalf of such individuals to repay such amounts if so
required.

EMPLOYMENT AGREEMENTS

     All of the executive officers are parties to employment agreements with
Mrs. Fields. Each employment agreement provides for a period of employment of
two years (or three years, in the case of Larry Hodges) from the date of the
agreement, subject to termination provisions and to automatic extension of the
agreement. Each employment agreement permits the employee to participate in any
incentive compensation plan adopted by Mrs. Fields to replace the Fiscal 1994
Incentive Compensation Plan of Mrs. Fields Inc., benefit plans and an
equity-based plan or arrangement. If Mrs. Fields terminates employment for cause
or if the employee terminates employment without good reason, Mrs. Fields has no
further obligation to pay the employee. If Mrs. Fields terminates employment
without cause, or the employee terminates employment with good reason, the
employee can receive in severance pay the amount equal to the product of his or
her then current semi-monthly base salary by the greater of the number of
semi-monthly periods from the notice of termination or 36 semi-monthly periods,
plus a

                                       67
<PAGE>

portion of any discretionary bonus that would otherwise have been payable. The
employment agreement prohibits the employee, for a year from the date of
termination of employment under the agreement, from becoming an employee, owner,
officer, agent or director of a firm or person that directly competes with Mrs.
Fields in a line or lines of business of Mrs. Fields that accounts for 10% or
more of Mrs. Fields' gross sales, revenues or earnings before taxes. An
exception is made for investments of not more than 3% of the equity of a company
listed or traded on a national securities exchange or an over-the-counter
securities exchange. The employment agreements have customary provisions for
vacation, fringe benefits, payment of expenses and automobile allowances. The
employees who have employment agreements, and their current base salaries, are:
Larry Hodges, President and Chief Executive Officer, $430,000, Michael Ward,
Senior Vice President, General Counsel and Secretary, $225,000 and Garry
Remington, Senior Vice President of Real Estate, $197,600.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     As of the date of this report, all of the capital stock of Mrs. Fields
is owned by MFH, whose address is 2855 East Cottonwood Parkway, Suite 400,
Salt Lake City, Utah 84121. The following table sets forth certain
information, as of March 30, 2001, believed by us to be accurate based on
information provided to us concerning the beneficial ownership of common
stock by each stockholder who is known by Mrs. Fields to own beneficially in
excess of 5% of the outstanding common stock, and by each director, Mrs.
Fields' Chief Executive Officer, each of Mrs. Fields' other four most highly
compensated executive officers and all executive officers and directors as a
group, as of March 30, 2001. The stockholders listed below are deemed
beneficial owners of common stock of Mrs. Fields as a result of their
ownership of common stock of MFH, the owner of 100% of the capital stock of
Mrs. Fields. Except as otherwise indicated, all persons listed below have (1)
sole voting power and investment power with respect to their shares, except
to the extent that authority is shared by spouses under applicable law, and
(2) record and beneficial ownership with respect to their shares. The shares
and percentages described below include shares of common stock which were
outstanding or issuable within 60 days upon the exercise of options
outstanding as of March 30, 2001, and give effect to the exercise of warrants
issued by MFH. See "Executive Compensation" and "Board Compensation."

As of March 30, 2001, there were 28 record holders of common stock of MFH.

<TABLE>
<CAPTION>
                                                                                                   Common Stock
                                                                                     ---------------------------------------
Title of Class                Name of Beneficial Owner                               Number of Shares    Percentage of Class
-----------------------       --------------------------------------------------     ----------------    -------------------
<S>                           <C>                                                    <C>                 <C>
Common stock, par value       Capricorn Investors II, L.P. (1) (2) (3) (4)......         3,191,505              86.76%
$0.001 per share,             Herbert S. Winokur, Jr. (2) (3) (4) (5) ..........            10,296               0.28%
of Mrs. Fields' Holding       Larry Hodges (2) (3)..............................           136,359               3.71%
                              Peter Mullin (2) (3)..............................            14,787               0.40%
                              Richard Ferry (2) (3).............................            13,941               0.38%
                              Walker Lewis (2) (3)..............................            13,567               0.37%
                              Gilbert Osnos (2) (3).............................            14,316               0.39%
                              Garry Remington (3)...............................            15,408               0.42%
                              Michael Ward (3)..................................            21,656               0.59%
                              All executive officers and directors as a
                                group(2) (3) (4) (5) ...........................         3,421,539              93.01%

</TABLE>

(1)  The address of Capricorn is 30 East Elm Street, Greenwich, CT 06830.

(2)  Larry Hodges, Peter Mullin, Richard Ferry, Walker Lewis and Gilbert Osnos
     are directors of the Company. Herbert Winokur and Nat Gregory are managing
     member and member, respectively, of Capricorn Holdings, L.L.C., the General
     Partner of Capricorn, and are directors of Mrs. Fields. See "Management."

(3)  The shares and percentages include shares subject to options granted to
     directors and officers of Mrs. Fields that are currently vested as of March
     30, 2001, as follows: Capricorn, 7,134 shares; Mr. Hodges, 105,139 shares;
     Mr. Mullin, 3,567 shares; Mr. Ferry, 3,567 shares; Mr. Lewis, 3,567 shares;
     Mr. Osnos, 3,567 shares; Mr. Ward, 21,356 shares; and Mr. Remington, 15,333
     shares; all executive officers and directors as a group, 163,230.

(4)  Includes shares beneficially owned by Capricorn.

(5)  Includes shares held by Mr. Mullin and Mr. Winokur in an individual
     retirement account.

                                       68
<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     ARRANGEMENTS WITH DEBBI FIELDS. Mrs. Fields has a license agreement with
FSG Holdings, Inc., a Delaware corporation, under which Debbi Fields has a
nonexclusive license to use certain trademarks, names, service marks and logos
of Mrs. Fields in connection with book and television series projects. Debbi
Fields is required to pay 50% of any gross revenues in excess of $200,000 that
she receives from the book and television series projects to Mrs. Fields as a
license fee.

     ARRANGEMENTS WITH MRS. FIELDS' HOLDING. As of January 1, 2000 and December
30, 2000, Mrs. Fields had a net receivable and net payable of $642,000 and
$11,100, respectively, with Mrs. Fields' Holding, The receivables stem primarily
from goods sold and an allocation of payroll and other operating expenses. Mrs.
Fields believes that the terms of the sale and allocations are essentially
equivalent to the terms that would have been obtained from an unaffiliated third
party in a similar transaction.

     DIRECTOR STOCK PURCHASE PLAN. Each of the directors of Mrs. Fields was
offered an opportunity to purchase common stock of Mrs. Fields' Holding under
the Director Stock Purchase Plan. Under the Director Stock Purchase Plan, shares
of common stock of Mrs. Fields' Holding, either restricted or vested, can be
issued to outside directors of Mrs. Fields' Holding and its subsidiaries,
including Mrs. Fields. Restricted shares vested 50% on January 1, 1999 and 50%
on January 1, 2000. A total of 51,667 vested shares of common stock of Mrs.
Fields' Holding and 28,333 restricted shares of common stock of Mrs. Fields'
Holding have been issued to directors and officers of Mrs. Fields under the
Director Stock Purchase Plan.

     THE PLANS. Under the Employee Stock Option Plan, a committee of the Board
is authorized to administer the Employee Stock Option Plan and has the power,
among other things, to grant awards to officers and other employees of Mrs.
Fields' Holding and its subsidiaries, including Mrs. Fields, of options for
common stock of Mrs. Fields' Holding. The Employee Stock Option Plan provides
for the issuance of three types of options. Performance vested options were
deemed to be vested 20% for fiscal year 1997 and vest an additional 20% per year
for each subsequent fiscal year in which there is a 10% increase in the implied
valuation of Mrs. Fields, which is equal to the excess of 5.5 times Adjusted
EBITDA for such fiscal year over net debt at the end of such fiscal year. Time
vested options vest 25% per year on the anniversaries of the dates on which they
are granted, and vest in full upon a change of control of Mrs. Fields' Holding
or Mrs. Fields. Upside options vest upon the earlier to occur of the expiration
of such option and a change of control, in accordance with certain internal rate
of return targets:

     (1)  if the IRR through the vesting date is less than 20%, the option will
          not vest;

     (2)  if the IRR is from 20% to 24.99%, the option will vest one-third;

     (3)  if the IRR is from 25% to 29.99%, the option will vest two-thirds; and

     (4)  if the IRR is at least 30%, the option will vest in full.

     IRR means, as of any date, the internal rate of return, determined in
accordance with generally accepted practice, on one share of common stock of
Mrs. Fields' Holding calculated from September 18, 1996, through the date as of
which the determination is being made, using

     (1)  a value of $10.00 per share at September 18, 1996 (subject to certain
          adjustments),

     (2)  if the relevant date is the date of a change of control, the value
          paid under or implicit in the change of control transaction (as
          determined in good faith by a committee of the Board of Directors),
          and

     (3)  if the relevant date of determination is the expiration of such
          option, the value determined in good faith based on the implied
          valuation for the four most recent fiscal quarters for which financial
          statements are available.

     A total of 492,840 shares of common stock of Mrs. Fields' Holding have been
reserved for issuance under the Employee Stock Option Plan. Stock issued under
the Employee Stock Option Plan is subject to customary restrictions on transfer.

                                       69
<PAGE>

     Under the Director Stock Option Plan, a committee of the Board is
authorized to administer the Director Stock Option Plan and has the power, among
other things, to grant awards of options for common stock of Mrs. Fields'
Holding to outside directors of Mrs. Fields' Holding and its subsidiaries,
including Mrs. Fields. The Director Stock Option Plan provides for the issuance
of time vested options, which vest 25% per year on the anniversaries of the
dates on which they are granted, and vest in full upon a change of control of
Mrs. Fields' Holding or Mrs. Fields. A total of 50,000 shares of common stock of
Mrs. Fields' Holding are reserved for issuance under the Director Stock Option
Plan. Common stock of Mrs. Fields' Holding issued under the Director Stock
Option Plan is subject to customary restrictions on transfer. Options have been
awarded under the Director Stock Option Plan to each of Messrs. Ferry, Gregory,
Lewis, Osnos and Winokur to purchase 1,792, 634 and 634 shares of common stock
of Mrs. Fields' Holding as of January 1, 1998, January 1, 1999 and January 2,
2000, at exercise prices of $16.74, $19.72 and $19.72 per share, respectively.
Options of Messrs. Gregory and Winokur have been issued to Capricorn.

     THE STOCKHOLDERS' AGREEMENT. Mrs. Fields' Holding has entered into a
stockholders' agreement with its stockholders. The stockholders' agreement gives
rights of first refusal to Mrs. Fields' Holding if any Mrs. Fields' Holding
stockholder receives an offer to purchase common stock of Mrs. Fields' Holding
and, if Mrs. Fields' Holding does not exercise its rights, gives the rights of
first refusal to other Mrs. Fields' Holding stockholders. In the event of a sale
to a third party approved by Capricorn, Capricorn has the right to require the
other Mrs. Fields' Holding stockholders to sell their common stock of Mrs.
Fields' Holding (the "Drag Along"). If Capricorn sells any common stock of Mrs.
Fields' Holding, the other Mrs. Fields' Holding stockholders will have the
opportunity to sell their common stock of Mrs. Fields' Holding in proportion to
their holdings (the "Tag Along"). The stockholders' agreement also provides for
piggyback registration rights for all Mrs. Fields' Holding stockholders, and
gives one Mrs. Fields' Holding stockholder demand registration rights. The
stockholders' agreement gives Mrs. Fields' Holding the option to purchase all of
the common stock of Mrs. Fields' Holding held by an officer or director that
holds common stock of Mrs. Fields' Holding if such officer or director is
terminated. If an officer or director is terminated other than for cause, the
officer or director has the right to sell shares to Mrs. Fields' Holding. The
stockholders' agreement provides for customary restrictions on transfer of
common stock of Mrs. Fields' Holding. The holders of warrants to purchase common
stock of Mrs. Fields' Holding will be subject to the Drag Along and benefit from
the Tag Along.

     MANAGEMENT AGREEMENTS. As more fully described under "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," in connection with the TCBY Transaction, we entered into a
management agreement with TCBY pursuant to which we manage the day to day
operations of TCBY, in return for a fee. Also, we expect to enter into a
management agreement with MFH pursuant to which we will manage the day-to-day
operations of 20 Pretzel Time stores, acquired in October 2000 by MFH, in
return for a fee. The agreement will be retroactively effective to October
30, 2000, the date MFH acquired the stores and are expected to provide for an
estimated fee of approximately $150,000 to be paid in 2001 for services
rendered during 2000.

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K

     (a)  FINANCIAL STATEMENTS

          (1)  See Item 8 "Financial Statements and Supplementary Data" for a
               list of the financial statements filed as part of this report.

          (2)  The following financial statement schedule for Mrs. Fields'
               Original Cookies, Inc. is filed as a part of this report

<TABLE>
<CAPTION>
                                                                            PAGE
<S>                                                                         <C>
               Schedule II - Valuation and Qualifying Accounts.........      78
</TABLE>

          (3)  Exhibits Index

               The exhibits filed with or incorporated by reference in this
               report are listed in the Exhibit Index beginning on page 71.

     (b)  REPORTS FILED ON FORM 8-K DURING THE FOURTH QUARTER

          None

                                       70
<PAGE>

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number                                 Description
------                                 -----------
<S>       <C>

  2.1     Securities Purchase Agreement by and among Cookies USA, Inc., the
          Individuals and Entities Identified Therein as The Sellers and Mrs.
          Fields' Original Cookies, Inc., dated as of August 13, 1998, filed as
          exhibit 2.3 to the Company's Registration Statement on Form S-4 (No.
          333-67389) and incorporated by reference herein.

  2.2     Stock Purchase Agreement among Mrs. Fields' Original Cookies, Inc., as
          Buyer, and Jake Tortorice of Chocolate Chip Cookies of Texas, Inc. as
          Seller. Filed as Exhibit 2.3 to the 8-K dated September 3, 1998, filed
          as exhibit 2.3 to the Company's Registration Statement on Form S-4
          (No. 333-67389) and incorporated by reference herein.

  2.3     Stock Purchase Agreement among Mrs. Fields' Original Cookies, Inc., as
          Buyer, and Lawrence J. Cohen, Mildred S. Cohen, Jerome E. Mouton,
          Steven J. Bryan and Jason A. Piltzmaker, holders of all outstanding
          capital stock of Deblan Corporation, as Sellers Filed as Exhibit 2.2
          to the 8-K dated September 3, 1998, filed as exhibit 2.2 to the
          Company's Registration Statement on Form S-4 (No. 333-67389) and
          incorporated by reference herein.

  2.4     Asset Purchase Agreement between Mrs. Fields' Original Cookies, Inc.
          and ASK & MSK Family Limited Partnership-II(B), Ltd. Filed as Exhibit
          2.4 to the 8-K dated September 3, 1998, filed as exhibit 2.1 to the
          Company's Registration Statement on Form S-4 (No. 333-67389) and
          incorporated by reference herein.

  2.5     Asset Purchase Agreement between Mrs. Fields' Original Cookies, Inc.
          and Crossroads Cookies, Inc. Filed as Exhibit 2.5 to the 8-K dated
          September 3, 1998, filed as exhibit 2.1 to the Company's Registration
          Statement on Form S-4 (No. 333-67389) and incorporated by reference
          herein.

  2.6     Asset Purchase Agreement between Mrs. Fields' Original Cookies, Inc.
          and Hot Barton and Northpark Cookies, Inc. Filed as Exhibit 2.6 to the
          8-K dated September 3, 1998, filed as exhibit 2.1 to the Company's
          Registration Statement on Form S-4 (No. 333-67389) and incorporated by
          reference herein.

  2.7     Asset Purchase Agreement between Mrs. Fields' Original Cookies, Inc.
          and Northpark Cookies, Inc. Filed as Exhibit 2.7 to the 8-K dated
          September 3, 1998, filed as exhibit 2.1 to the Company's Registration
          Statement on Form S-4 (No. 333-67389) and incorporated by reference
          herein.

  2.8     Asset Purchase Agreement between Mrs. Fields' Original Cookies, Inc.
          and Quail Springs Cookies, Inc. Filed as Exhibit 2.8 to the 8-K dated
          September 3, 1998, filed as exhibit 2.1 to the Company's Registration
          Statement on Form S-4 (No. 333-67389) and incorporated by reference
          herein.

  2.9     Asset Purchase Agreement between Mrs. Fields' Original Cookies, Inc.
          and Westgate Cookies, Inc. Filed as Exhibit 2.9 to the 8-K dated
          September 3, 1998, filed as exhibit 2.1 to the Company's Registration
          Statement on Form S-4 (No. 333-67389) and incorporated by reference
          herein.

  3.1     Restated certificate of Incorporation of Mrs. Fields' Original
          Cookies, Inc., filed as Exhibit 3.1 to the Company's Registration
          Statement on S-4 (No. 333-45179) and incorporated by reference herein.

  3.2     By-Laws of Mrs. Fields' Original Cookies, Inc., filed as Exhibit 3.4
          to the Company's Registration Statement on S-4 (No. 333-45179) and
          incorporated by reference herein.

  4.1     Indenture, dated as of November 26, 1997, among Mrs. Fields' Original
          Cookies, Inc., The Mrs. Fields' Brand, Inc., and The Bank of New York,
          as Trustee, filed as Exhibit 4.1 to the Company's Registration
          Statement on S-4 (No. 333-45179) and incorporated by reference herein.
</TABLE>

                                       71
<PAGE>

                            EXHIBIT INDEX (continued)

<TABLE>
<S>       <C>

  4.2     Form of Notation of Guarantee (included as Exhibit E to Exhibit 4.1)

  4.3     Form of Certificate of Senior Note (included as Exhibit A to Exhibit
          4.1)

  4.4     First Supplemental Indenture, dated as of August 24, 1998, among Mrs.
          Fields' Original Cookies, Inc., The Mrs. Fields' Brand, Inc., and The
          Bank of New York, as Trustee, filed as exhibit 4.4 to the Company's
          Registration Statement on Form S-4 (No. 333-67389) and incorporated by
          reference herein.

  4.5     Second Supplemental Indenture, dated as of August 24, 1998, among Mrs.
          Fields' Original Cookies, Inc., The Mrs. Fields' Brand, Inc., Great
          American Cookie Company, Inc., and The Bank of New York, as trustee,
          filed as exhibit 4.4 to the Company's Registration Statement on Form
          S-4 (No. 333-67389) and incorporated by reference herein.

  4.6     Third Supplemental Indenture, dated as of November 20, 1998, among
          Mrs. Fields' Original Cookies, Inc., Great American Cookie Company,
          Inc., The Mrs. Fields' Brand, Inc., Pretzelmaker Holdings, Inc., and
          The Bank of New York, as a Trustee, filed as exhibit 4.5 to the
          Company's Registration Statement on Form S-4 (No. 333-67389) and
          incorporated by reference herein.

  4.7     Fourth Supplemental Indenture, dated as of December 30, 1998, among
          Mrs. Fields' Original Cookies, Inc., Great American Cookie Company,
          Inc., The Mrs. Fields' Brand, Inc., Pretzelmaker Holdings, Inc., and
          The Bank of New York, as a Trustee, filed as exhibit 4.7 to the
          Company's Registration Statement on Form S-4 (No. 333-67389) and
          incorporated by reference herein.

  4.8     Registration Rights Agreement, dated as of August 24, 1998, among Mrs.
          Fields' Original Cookies, Inc., The Mrs. Fields' Brand, Inc., Great
          American Cookie Company, Inc., Jefferies & Company, Inc. and BT Alex.
          Brown Incorporated, filed as exhibit 4.9 to the Company's Registration
          Statement on Form S-4 (No. 333-67389) and incorporated by reference
          herein.

 10.1     Amended and Restated Marketing Agreement, dated as of January 9, 1997,
          between Mrs. Fields' Original Cookies, Inc. and Coca-Cola USA
          Fountain, filed as Exhibit 10.27 to the Company's Registration
          Statement on S-4 (No. 333-45179) and incorporated by reference herein.

 10.2     Amendment, dated December 1, 1997, to Amended and Restated Marketing
          Agreement between Mrs. Fields' Original Cookies, Inc. and Coca-Cola
          USA Fountain, filed as exhibit 10.4 to the Company's Registration
          Statement on Form S-4 (No. 333-67389) and incorporated by reference
          herein.

 10.3     Corollary agreement, dated September 21, 1998, to existing marketing
          agreement, dated as of January 9, 1997 and amended on November 13,
          1997 and December 1, 1997 between Mrs. Fields' Original Cookies, Inc.
          and Coca-Cola USA Fountain, filed as exhibit 10.5 to the Company's
          Registration Statement on Form S-4 (No. 333-67389) and incorporated by
          reference herein.

 10.4     Employment Agreement, dated as of October 1, 1997, between Michael R.
          Ward and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.28
          to the Company's Registration Statement on S-4 (No. 333-45179) and
          incorporated by reference herein.

 10.5     Employment Agreement, dated as of October 1, 1997, between Pat Knotts
          and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.29 to the
          Company's Registration Statement on S-4 (No. 333-45179) and
          incorporated by reference herein.

 10.6     Employment Agreement, dated as of July 1, 1996, between Lawrence
          Hodges and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.31
          the Company's Registration Statement on S-4 (No. 333-45179) and
          incorporated by reference herein.
</TABLE>


                                       72
<PAGE>

                            EXHIBIT INDEX (continued)

<TABLE>
<S>       <C>

 10.7     Employment Agreement, dated as of July 10, 1997, between Garry
          Remington and Mrs. Fields' Original Cookies, Inc. , filed as exhibit
          10.10 to the Company's Registration Statement on Form S-4 (No.
          333-67389) and incorporated by reference herein.

 10.8     Lease Agreement, dated as of February 23, 1993, between The Equitable
          Life Assurance Society of the United States and Mrs. Fields Cookies,
          filed as Exhibit 10.32 the Company's Registration Statement on S-4
          (No. 333-45179) and incorporated by reference herein.

 10.9     Lease Agreement, dated as of October 10, 1995, between The Equitable
          Life Assurance Society of the United States and Mrs. Fields Cookies,
          filed as Exhibit 10.33 the Company's Registration Statement on S-4
          (No. 333-45179) and incorporated by reference herein.

 10.10    Letter of Agreement, dated as of October 1, 1992, between United
          Airlines, Inc. and Mrs. Fields Development Corporation, filed as
          Exhibit 10.34 to the Company's Registration Statement on S-4 (No. 333-
          45179) and incorporated by reference herein.

 10.11    Lease Agreement, dated as of January 18, 1998, between 2855 E.
          Cottonwood Parkway, L.C. and Mrs. Fields' Original Cookies, Inc.,
          filed as Exhibit 10.35 to the Company's Registration Statement on S-4
          (No. 333-45179) and incorporated by reference herein.

 10.12    Amendment to Supply Agreement, dated as of June 19, 1995 between Van
          Den Bergh Foods Company and Mrs. Fields Inc., filed as Exhibit 10.37
          to the Company's Registration Statement on S-4 (No. 333-45179) and
          incorporated by reference herein.

 10.13    License Agreement, dated as of March 1, 1992, between Mrs. Fields
          Development Corporation and Marriott Corporation, filed as Exhibit
          10.40 to the Company's Registration Statement on S-4 (No. 333-45179)
          and incorporated by reference herein.

 10.14    License Agreement, dated as of October 28, 1993 between Mrs. Fields
          Development Corporation and Marriott Management Services, Corp., filed
          as Exhibit 10.41 to the Company's Registration Statement on S-4 (No.
          333-45170) and incorporated by reference herein.

 10.15    Uniform Franchise Offering Circular of Pretzel Time, Inc., filed as
          Exhibit 10.56 to the Company's registration Statement on S-4 (No.
          333-45179), and incorporated by reference herein.

 10.16    Uniform Franchise Offering Circular of Great American Cookie Company,
          Inc. as amended on November 24, 1998, filed as Exhibit 2.1 to the
          Company's registration Statement on S-4 (No. 333-45179), and
          incorporated by reference herein.

 10.17    Assignment of Assets and Assumption of Liabilities Agreement, dated
          July 25, 1997, between H&M Concepts Ltd., Co., and Mrs. Fields'
          Pretzel Concepts, Inc., filed as Exhibit 10.62 to the Company's
          Registration Statement on S-4 (No. 333-45179) and incorporated by
          reference herein.

 10.18    First Amendment to Operating Agreement for UVEST, LLC, dated July 25,
          1997, between Mrs. Fields' Pretzel Concepts, Inc. and NVEST Limited,
          filed as Exhibit 10.64 to the Company's Registration Statement on S-4
          (No. 333-45179) and incorporated by reference herein.

 10.19    First Amendment to Operating Agreement for LV-H&M, L.L.C., Dated July
          25, 1997, between Mrs. Fields' Pretzel Concepts, Inc. and Jean Jensen,
          filed as Exhibit 10.65 to the Company's Registration Statement on S-4
          (No. 333-45179) and incorporated by reference herein.
</TABLE>

                                       73
<PAGE>

                            EXHIBIT INDEX (continued)

<TABLE>
<S>       <C>

 10.20    Lease Agreement, dated March 2, 1995, between Price Development
          Company, Limited Partnership and Mrs. Fields Cookies, filed as Exhibit
          10.69 to the Company's Registration Statement on S-4 (No. 333-45179)
          and incorporated by reference herein.

 10.21    Mrs. Fields' Holding Company, Inc. Director Stock Option Plan, filed
          as exhibit 2.1 to the Company's Registration Statement on Form S-4
          (No. 333-67389) and incorporated by reference herein.

 10.22    Mrs. Fields' Holding Company, Inc. Employee Stock Option Plan, filed
          as exhibit 2.1 to the Company's Registration Statement on Form S-4
          (No. 333-67389) and incorporated by reference herein.

 10.23    Mrs. Fields' Holding Company, Inc. Director Stock Purchase Plan, filed
          as exhibit 2.1 to the Company's Registration Statement on Form S-4
          (No. 333-67389) and incorporated by reference herein.

 10.24    Amended and Restated Loan Agreement, dated as of February 28, 1998,
          between Mrs. Fields' Original Cookies, Inc. and LaSalle National Bank,
          filed as Exhibit 10.73 to the Company's Registration Statement on S-4
          (No. 333-45179) and incorporated by reference herein.

 10.25    Intellectual Property Security Agreement, dated as of February 28,
          1998, between Mrs. Fields' Original Cookies, Inc. and LaSalle National
          Bank, filed as exhibit 10.44 to the Company's Registration Statement
          on Form S-4 (No. 333-67389) and incorporated by reference herein.

 10.26    Pledge and Security Agreement, dated as of February 28, 1998, between
          Mrs. Fields' Original Cookies, Inc. and LaSalle National Bank, filed
          as exhibit 10.45 to the Company's Registration Statement on Form S-4
          (No. 333-67389) and incorporated by reference herein.

 10.27    Stockholders' Agreement, dated as of July 17, 1998, between Mrs.
          Fields' Holding Company, Inc. and its Stockholders, filed as exhibit
          10.46 to the Company's Registration Statement on Form S-4 (No.
          333-67389) and incorporated by reference herein.

 10.28    Form of Settlement Agreement and Release, by and among Mrs. Fields'
          Original Cookies, Inc., Capricorn Investors II, L.P., a Delaware
          limited partnership, Great American Cookie Company, Inc., Cookies USA,
          Inc., The Jordan Company, and the Franchisees parties thereto, filed
          as exhibit 10.47 to the Company's Registration Statement on Form S-4
          (No. 333-67389) and incorporated by reference herein.

 10.29    Supply Agreement, dated as of March 30, 1998 between Mrs. Fields'
          Original Cookies, Inc. and LBI Acquisition Corp. d/b/a Pennant Foods,
          filed as exhibit 10.48 to the Company's Registration Statement on Form
          S-4 (No. 333-67389) and incorporated by reference herein.

 10.30*   Trademark license agreement dated January 3, 2000 between The Mrs.
          Fields' Brand, Inc. and Nonni's Food Company, Inc.

 10.31*   Purchase agreement dated December 1, 1999 between The Mrs. Fields'
          Brand, Inc. and Nonni's Food Company, Inc.

 12.1*    Computation of ratio of earnings to fixed charges of Mrs. Fields'
          Original Cookies, Inc.

 21.1*    Subsidiaries of Mrs. Fields' Original Cookies, Inc.

 99.3     Schedule II - Valuation and Qualifying Accounts.

</TABLE>

* to be filed by amendment
                                       74
<PAGE>

                                   SIGNATURES

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



MRS. FIELDS' ORIGINAL COOKIES, INC.


/s/ Larry A.  Hodges                              March 30, 2001
----------------------------------                --------------
Larry A.  Hodges, President & CEO                     Date




/s/ Michael B. Malan                              March 30, 2001
----------------------------------                --------------
Michael B. Malan                                      Date
Vice President, Controller and
Principal Accounting Officer


                                       75
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.


        Signature                        Title                      Date


/s/ Larry A.  Hodges          President, Chief Executive         March 30, 2001
-------------------------     Officer and Director
Larry A.  Hodges


/s/ Michael R.  Ward          Senior Vice President, General     March 30, 2001
-------------------------     Counsel and Secretary
Michael R.  Ward


/s/ Herbert S.  Winokur       Chairman of the Board              March 30, 2001
-------------------------     of Directors
Herbert S.  Winokur


/s/ Richard M.  Ferry         Director                           March 30, 2001
-------------------------
Richard M.  Ferry


/s/ Nathaniel A.  Gregory     Director                           March 30, 2001
-------------------------
Nathaniel A.  Gregory


/s/ Walker Lewis              Director                           March 30, 2001
-------------------------
Walker Lewis


/s/ Peter W.  Mullin          Director                           March 30, 2001
-------------------------
Peter W.  Mullin


/s/ Gilbert C.  Osnos         Director                           March 30, 2001
-------------------------
Gilbert C.  Osnos



                                       76