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

FORM 10-K

|ý                                           | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|------------------------------------------- | ----------------------------------------------------------------------------------------
|FOR THE FISCAL YEAR ENDED DECEMBER 28, 2002
|OR                                         
|o                                           | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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 of
Incorporation or Organization)

(IRS Employer
Identification No.)2855 East Cottonwood Parkway, Suite 400
Salt Lake City, Utah

84121-7050(Address of Principal Executive Offices)

(Zip Code)


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

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. Yes ý    No o

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. ý

Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange
Act. Yes o    No ý

The
Company had400shares of common stock outstanding atMarch 15, 2003

DOCUMENTS INCORPORATED BY REFERENCE:None

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MRS. FIELDS' ORIGINAL COOKIES, INC.

TABLE OF CONTENTS

|PART I   |          |  |                                                                                                | 
|-------- | -------- |  | ---------------------------------------------------------------------------------------------- | 
|         | Item 1.  |  | Business                                                                                       | 
|         | Item 2.  |  | Properties                                                                                     | 
|         | Item 3.  |  | Legal Proceedings                                                                              | 
|         | Item 4.  |  | Submission of Matters to a Vote of Security Holders                                            | 
|PART II  |          |  |                                                                                                | 
|         | Item 5.  |  | Market for Registrant's Common Equity and Related Stockholder Matters                          | 
|         | Item 6.  |  | Selected Financial Data                                                                        | 
|         | Item 7.  |  | Management's Discussion and Analysis of Financial Condition and Results of Operations          | 
|         | Item 7A. |  | Quantitative and Qualitative Disclosures About Market Risk                                     | 
|         | Item 8.  |  | Financial Statements and Supplementary Data                                                    | 
|         | Item 9.  |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosures          | 
|PART III |          |  |                                                                                                | 
|         | Item 10. |  | Directors and Executive Officers of the Registrant                                             | 
|         | Item 11. |  | Executive Compensation                                                                         | 
|         | Item 12. |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 
|         | Item 13. |  | Certain Relationships and Related Transactions                                                 | 
|         | Item 14. |  | Controls and Procedures                                                                        | 
|PART IV  |          |  |                                                                                                | 
|         | Item 15. |  | Exhibits, Financial Statement Schedules and Reports on Form 8-K                                | 

2

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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 the Company believes that the plans and objectives reflected in or suggested by such forward-looking statements are based upon assumptions that are reasonable, the Company
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:



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

3

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Item 1. Business

Description Of Business And Nature Of Operations

Mrs. Fields' Original Cookies, Inc., a Delaware corporation (the "Company" or "Mrs. Fields"), is a wholly owned subsidiary of
Mrs. Fields' Holding Company, Inc., a Delaware corporation ("Mrs. Fields' Holding"). Mrs. Fields' Holding is a wholly owned subsidiary of Mrs. Fields Famous
Brands, Inc., a Delaware corporation ("MFFB"), which was established to combine Mrs. Fields' Holding and TCBY Holding Company, Inc., a Delaware corporation ("TCBY Holding"), under
a common parent (see Note 1 of Notes to Consolidated Financial Statements included in Item 8 of Part II of this report). The Company has ten wholly owned operating subsidiaries: Great
American Cookie Company, Inc., Pretzel Time, Inc., Pretzelmaker, Inc., Mrs. Fields Gifts, Inc., Mrs. Fields Cookies Australia, Mrs. Fields Cookies
(Canada) Ltd., Pretzelmaker Canada, Inc., Sunshine Pretzel Time, Inc., Peachtree Pretzel Time, Inc., CMBC, Inc. and two partially owned subsidiaries.

The
Company operates, develops and franchises retail bakery stores and cafes, which sell freshly baked cookies, brownies, pretzels and other food products through four specialty branded
concepts: Mrs. Fields Cookies, Great American Cookies, Pretzel Time and Pretzelmaker. In addition, the Company operates retail bakery stores that operate under two other branded concepts:
Original Cookie Company and Hot Sam Pretzels.

In
connection with its franchising activities, the Company authorizes third-party licensees and franchisees 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 licenses the use of its trademarks, logos and recipes to third parties for
distribution of Mrs. Fields branded products through non-bakery stores and cafes. The Company also markets and distributes its products through mail order catalogs and the Internet.

History

In 1996, an investor group led by Capricorn Investors II, L.P. ("Capricorn II") formed Mrs. Fields and The Mrs. Fields' Brand, Inc. as
Delaware corporations and subsidiaries of Mrs. Fields' Holding. On September 17, 1996, Mrs. Fields' Holding initiated operations when the Company 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").

The
Company has achieved growth in both its cookie and pretzel businesses through strategic acquisitions and may continue this strategy if appropriate opportunities arise. In a series of
transactions in 1997 and 1998, the Company acquired the following:



One
of the key elements of Mrs. Fields' business plan has been, and continues to be, closing or franchising certain company owned stores that do not meet financial and
geographical criteria established by management. 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 have decreased.

4

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In
late 1999 and early 2000, Mrs. Fields' Holding considered the acquisition of TCBY Enterprises, Inc. ("TCBY Enterprises"); however, because of debt limitations imposed
upon Mrs. Fields' Holding by an indenture governing its senior notes, Mrs. Fields' Holding did not have access to sufficient capital to pursue an acquisition at that time. Instead,
following a determination by Mrs. Fields' Holding's Board of Directors that such an acquisition by it would not constitute the wrongful taking of a corporate opportunity, Capricorn Investors
III, L.P. ("Capricorn III"), an affiliate of Capricorn II, acquired a majority interest in TCBY Enterprises on June 1, 2000.

In
connection with the acquisition of TCBY Enterprises by Capricorn III, Mrs. Fields entered into a management agreement (the "TCBY Management Agreement") with TCBY Holding, TCBY
Enterprises and TCBY Systems, LLC ("TCBY Systems"), a wholly owned subsidiary of TCBY Enterprises (collectively, "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 2000), in exchange for
a management fee paid by TCBY semi-monthly, which is in excess of the Company's costs to perform
these services. Revenue generated from the management fee is reported in "Management fee revenue" in the Consolidated Statements of Operations and Comprehensive Loss included in Item 8 of
Part II of this report. Management fee revenue was $11.3 million, $11.5 million and $7.5 million for the fiscal years ended December 28, 2002,
December 29, 2001 and December 30, 2000, respectively.

On
August 31, 2001, the TCBY Management Agreement was amended to provide for TCBY to defer payment of certain portions (not to exceed $2.0 million in fees in any given
fiscal year) of the management fee payable and to release such amounts based upon TCBY Systems' compliance with a ratio included in a TCBY Systems' credit facility. The Company agreed that the payment
of a portion of the management fees and certain other amounts to be received by the Company under the TCBY Management Agreement would, under certain circumstances, be subordinated to certain
indebtedness of TCBY Systems. To the extent that TCBY Systems' profitability was greater than required by the ratio test, the Company was entitled to receive a 15 percent "special management
fee" based upon a calculation of the amount by which TCBY Systems exceeded the compliance ratio.

On
November 19, 2002, the TCBY Management Agreement was further amended. The amendment reduced the management fee to $867,000 per month for the period from October 2002
through and including September 2003, and to $783,000 per month for the period from October 2003 through and including December 2004. The amendment eliminated the deferral of
management fees (described above) except for $1.5 million, which was retained as of September 28, 2002. This retained amount and accrued interest shall be paid to the Company upon TCBY
Systems' full payment of its obligations under its credit facility. Included in amounts due from affiliates as of December 28, 2002 in the Consolidated Balance Sheets included in Item 8 of
Part II of this report is $1.5 million related to such retention amount. The Company is entitled to receive interest at the highest non-default rate in effect under TCBY
Systems' credit facility on any amounts deferred.

On
September 29, 2001, Mrs. Fields' Holding completed a reorganization (the "Mrs. Fields Reorganization"), pursuant to which the stockholders and optionholders of
Mrs. Fields' Holding contributed their shares of common stock, preferred stock and options to MFFB, in exchange for the same number of shares of common stock and preferred stock of MFFB and
MFFB options with essentially the same terms, except that the holders of MFFB preferred stock have the right to vote together with the holders of the MFFB common stock on matters submitted to the vote
of the common stockholders.

Immediately
following the Mrs. Fields Reorganization, a wholly owned subsidiary of MFFB merged with and into TCBY Holding (the "Merger"). As a result of the Mrs. Fields
Reorganization and the

5

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Merger, Mrs. Fields' Holding and TCBY Holding have become first tier subsidiaries of MFFB. (See also "Overview" in Item 7 of Part II of this report.) The Mrs. Fields
Reorganization and the Merger were initiated because the Company believed that synergies of the combined entity would exceed that of the independent companies, would avoid conflicts between
shareholders and, ultimately, would simplify the day-to-day management of the two companies.

The
Mrs. Fields Reorganization and the Merger did not result in a "change of control" of Mrs. Fields' Holding or its subsidiaries, including the Company, under the
Indenture governing the 14 percent Senior Secured Discount Notes due December 1, 2005 of Mrs. Fields' Holding, the Indenture governing the 101/8 percent Senior
Notes due December 1, 2004 of the Company, or agreements governing Mrs. Fields' other indebtedness.

In
November 2002, the Company merged its wholly owned subsidiary Mrs. Fields' Brand, Inc. into Mrs. Fields' Original Cookies, Inc. In
December 2002, the Company formed Mrs. Fields Gifts, Inc., a separate wholly owned subsidiary for the mail order operations.

Access to Financial Information

The Company files annual, quarterly and current reports and other documents with the United States Securities and Exchange Commission ("SEC") under the Securities
and Exchange Act of 1934. The SEC maintains an Internet websitewww.sec.govthat contains these reports. The Company also makes available free of charge
on its Internet websitewww.mrsfields.comthe Company's Annual Report on Form 10-K and Quarterly Reports on
Form 10-Q. These financial reports are accessible under the financial option on the Company's Internet website as soon as reasonably practicable after the Company electronically
files such reports with the SEC. The reports remain accessible on the Company's Internet website for approximately one year.

General

Mrs. Fields is one of the largest retailers in the premium snack-food industry, with cookies and pretzels as its major product lines.
Mrs. Fields is the largest retailer in the United States of baked-on-premises cookies, which the Company sells primarily under its Mrs. Fields Cookies and Great
American Cookies brand names. Mrs. Fields Cookies is among the most widely recognized and respected brand names in the premium cookie industry with 94 percent brand awareness among
consumers. Mrs. Fields is the second largest retailer in the United States of baked-on-premises pretzels, which the Company sells primarily under its Pretzel Time and
Pretzelmaker brand names. As of January 25, 2003, Mrs. Fields' retail network consisted of 1,360 locations, of which 836 were cookie stores, 501 were pretzel stores and 23 were bakery
café locations that sell a combination of the products that Mrs. Fields offers. Of the total stores, 323 were company owned and 1,037 were franchised or licensed.
Mrs. Fields derives its revenues principally from the sale of the Company's products in its company owned stores and through its mail order segment, the sale of proprietary batter to its Great
American Cookies franchised stores and royalties based on gross sales from franchisees and licensees. In addition, the Company generates revenues from initial franchise fees, the sale of existing
company owned stores to franchisees and management fees from TCBY.

6

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Product Offerings

Mrs. Fields product offerings consist primarily of fresh baked cookies, brownies, "sweet dough" soft pretzels, "Bavarian" style pretzels and beverages.
During the year ended December 28, 2002, the Company's revenue mix at company owned stores consisted of the following:

Cookies and brownies

56
%Pretzels

18
%Beverages

18
%Other

8
%


Cookies and Brownies.As of January 25, 2003, the Company operates and franchises 836
specialty retail cookie outlets, including full-size stores and satellite (carts and kiosks) stores. Of these stores, 515 stores are operated under the Mrs. Fields brand, 296 under
the Great American brand and 25 stores under the Original Cookie brand. The Company has 762 cookie stores in 48 states and the District of Columbia, with its Great American stores concentrated in the
southeastern and south central states and its Mrs. Fields and Original Cookie stores located in the western, mid-western and eastern states. There is little overlap between
Mrs. Fields and Great American stores, with a dual presence in 8 of the 637 malls in which the Company has cookie stores.

Management
believes that Mrs. Fields' market is the premium quality, baked on-premises segment of the approximately $6.0 billion U.S. cookie industry. The
Company offers 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, tea
and milk. 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.

The
Company's cookie concept 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, the Company believes that cookie cakes, which are often purchased as gifts for special occasions, differentiate the Company from other specialty cookie
retailers by making the Company's cookie stores destination outlets.

Pretzels.As of January 25, 2003, the Company operates and franchises 501 retail pretzel
stores, which offer "sweet dough" soft pretzels and "Bavarian" style pretzels with a variety of toppings. Of these stores, 257 stores are operated under the Pretzel Time brand, 220 stores under the
Pretzelmaker brand and 24 stores under the Hot Sam 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. Pretzelmaker sells hand-rolled soft
pretzels freshly baked at each store location. In order to maintain a consistent and high quality product, the dough is shipped frozen to each location. The stores also offer soft drinks and fruit
juices.

Bakery Cafés.As of January 25, 2003, the Company operates and franchises 23
stores under the name Mrs. Fields Bakery Café or Great American Bakery Café in which it sells core products including cookies, brownies, frozen yogurt, ice cream
and pretzels under the Mrs. Fields, Great American, TCBY and Pretzel Time brand names, as well as other products, including breakfast items, such as muffins, bagels and coffee, and lunch items,
such as soup and sandwiches. The bakery cafés have higher operating costs and have not yet contributed the level of earnings to the Company that management expects to ultimately
achieve.

7

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Business Strategy

The Company's objective is to increase sales and profitability at its company owned and franchised stores by implementing the key elements of its
long-term business strategy. The Company's business strategy includes diversification of the Company's income base from company owned mall retail locations and franchises to other business
segments that capitalize on the Company's branded concepts. The key elements of the Company's business strategy are as follows:

Capitalize on Cross Selling and Co-Branding Opportunities.The Company intends 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
the Company's other brands and/or the TCBY brand. Additionally, the Company has the ability to market bundled brands to potential and existing licensees. As noted above, the Company operates and
franchises bakery café stores specifically designed for cross selling each of the Company's multiple core brands in a single location. As of January 25, 2003, the Company
operates and franchises 23 such stores. The Company will continue to explore additional co-branding opportunities with well-respected national and regional
brands.

Capitalize on the Strong Brand Names.The Company believes 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 28, 2002, achieved average revenue of
$321,000 per store compared to an average revenue of $289,000 per store for Great American stores and of $252,000 per store for Original Cookie stores. The Company intends to further capitalize on the
Mrs. Fields' brand name by further developing and expanding the ways it markets products, including kiosks and carts in malls, airports, convention centers, office building and street fronts;
increasing the emphasis on the mail order and Internet 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, chocolates and ready to eat cookies sold in supermarkets and other convenient locations.

The
Company believes the Pretzel Time brand name is one of the leading brand names in pretzel retailing. The Company believes that there are significant opportunities to improve existing
Hot Sam store operations by continuing to convert company owned Hot Sam stores to Pretzel Time stores. Pretzel Time stores have, for the year ended December 28, 2002, achieved average revenue
of $229,000 per store compared to an average revenue of $211,000 per store for Hot Sam stores. The Company believes that capitalizing on the Pretzel Time name and product offering may result in an
increase in net sales and income from store operations.

Develop Franchised Stores.As of January 25, 2003, the Company had 1,037 franchised and
licensed stores. During 2002, the Company franchised 92 new stores and sold 70 company owned stores to new and existing franchisees. The Company plans to continue to aggressively expand its franchised
stores. The Company intends to franchise approximately 65 to 90 new single concept or co-branded pretzel and cookie stores and to sell approximately 60 to 75 company owned stores to new
and existing franchisees. The Company does not intend to develop or franchise any additional Original Cookie or Hot Sam stores.

Continue Development of New Products.The Company maintains a product development department that
continually creates and tests new products to revitalize the interest of current customers and attract new customers. Once a new product is identified, prototypes are developed 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,

8

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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' impact, the new product is either fully implemented, modified or discontinued. In December 2002, the Company entered into a three year licensing agreement with Sesame Workshop
(Sesame Street) to use, among other things, the likeness of the Cookie Monster and Elmo characters. In the first quarter of 2003, the Company plans to begin offering cookies that bear the likeness of
Cookie Monster and Elmo. Management believes these products will attract families with children under six years old. Additionally,
Pretzel Time and Pretzelmaker are expanding their traditional customer base by continuing to introduce meal replacement product lines.

Increase International Locations.In addition to pursuing new store development opportunities within
the United States, the Company intends to continue to grow internationally by expanding its franchise operations. As of January 25, 2003, there were 104 franchised Mrs. Fields, Pretzel
Time and Pretzelmaker brand stores open internationally. Additionally, the Company entered into international area license agreements in Greece, India, South Korea, Kuwait, People's Republic of China
and Qatar in 2002. The revenue associated with these license agreements is amortized over the term of the license, generally five years, or based upon the opening of franchised units as defined
in the agreements.

Store Operations

Store Base.As of January 25, 2003, the Company's store portfolio consisted of 323 company
owned stores, 840 domestic franchised locations, 104 international franchised locations and 93 licensed locations. By brand, the Company's stores are distributed as follows:

|                |                  | Company
Owned |     | Domestic
Franchised |     | International
Franchised |     | Licensed |    | Total
|--------------- | ---------------- | ------------- | --- | ------------------- | --- | ------------------------ | --- | -------- | -- | -----
|Mrs. Fields     |                  | 99            |     | 276                 |     | 72                       |     | 68       |    | 515  
|Great American  |                  | 71            |     | 222                 |     |                         |     | 3        |    | 296  
|Original Cookie |                  | 25            |     |                    |     |                         |     |         |    | 25   
|                |                  |               |     |                     |     |                          |     |          |    |      
|                | Cookie Subtotal  |               | 195 |                     | 498 |                          | 72  |          | 71 |      
|                |                  |               |     |                     |     |                          |     |          |    |      
|Pretzel Time    |                  | 78            |     | 164                 |     | 6                        |     | 9        |    | 257  
|Pretzelmaker    |                  | 6             |     | 175                 |     | 26                       |     | 13       |    | 220  
|Hot Sam         |                  | 24            |     |                    |     |                         |     |         |    | 24   
|                |                  |               |     |                     |     |                          |     |          |    |      
|                | Pretzel Subtotal |               | 108 |                     | 339 |                          | 32  |          | 22 |      
|                |                  |               |     |                     |     |                          |     |          |    |      
|Bakery Café     |                  | 20            |     | 3                   |     |                         |     |         |    | 23   
|                |                  |               |     |                     |     |                          |     |          |    |      
|                | Total            |               | 323 |                     | 840 |                          | 104 |          | 93 |      
|                |                  |               |     |                     |     |                          |     |          |    |      

9

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As
of January 25, 2003, the Company's domestic stores were located in 48 states and the District of Columbia as follows:

State

Company Owned

Franchised

Licensed

Total

% of Retail
OutletsAlabama



27

3

30

2.2
%Alaska



1



1

0.1
%Arizona

9

18

1

28

2.1
%Arkansas

4

3



7

0.5
%California

28

131

7

166

12.2
%Colorado

3

20

1

24

1.8
%Connecticut

1

18

1

20

1.5
%Delaware

2





2

0.1
%District of Columbia



2



2

0.1
%Florida

16

56

7

79

5.8
%Georgia

29

20

5

54

4.0
%Hawaii

1

11



12

0.9
%Idaho

2

5

1

8

0.6
%Illinois

23

17



40

2.9
%Indiana

13

12

2

27

2.0
%Iowa

2

24

1

27

2.0
%Kansas

1

10



11

0.8
%Kentucky

2

11

2

15

1.1
%Louisiana

11

9

2

22

1.6
%Maine

1

2



3

0.2
%Maryland

10

8

3

21

1.5
%Massachusetts

6

8

2

16

1.2
%Michigan

8

40

3

51

3.8
%Minnesota



18



18

1.3
%Mississippi



4



4

0.3
%Missouri

3

28

5

36

2.6
%Montana



2



2

0.1
%Nebraska

1

6



7

0.5
%Nevada

1

12

7

20

1.5
%New Hampshire

1

4



5

0.4
%New Jersey

6

26

2

34

2.5
%New Mexico

1

2

1

4

0.3
%New York

18

31

3

52

3.8
%North Carolina

3

26

2

31

2.3
%North Dakota



9



9

0.7
%Ohio

28

20

2

50

3.7
%Oklahoma

3

7



10

0.7
%Oregon



11



11

0.8
%Pennsylvania

12

17

9

38

2.8
%South Carolina

8

6

2

16

1.2
%South Dakota



5



5

0.4
%Tennessee

2

19

2

23

1.7
%Texas

24

73

4

101

7.4
%Utah

4

19



23

1.7
%Virginia

13

19

2

34

2.5
%Washington

9

6



15

1.1
%West Virginia

1

7



8

0.6
%Wisconsin

12

6



18

1.3
%Wyoming

1

4



5

0.4
%Subtotal

323

840

82

1,245

91.5
%International



104

11

115

8.5
%Total

323

944

93

1,360

100.0
%


10

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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 its
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. The Company is expanding the products offered in current mall and non-urban areas, adding the full product line of brands it currently owns or
operates.



Location and Leasing.Due to the impulse nature of Mrs. Fields' business, the Company tries to
locate its outlets in areas of high pedestrian traffic with easy proximity to pedestrian traffic flow and at a distance from other food providers. 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.

11

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As
of January 25, 2003, Mrs. Fields, including franchise locations, has a presence in approximately 87 percent of the top 150 (as measured in sales per square foot)
"A" and "B" malls in the United States. 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. The Company's new bakery café stores are a vehicle for consolidating multiple operations in mall locations and pursuing locations outside the mall
environment, such as mixed use, entertainment and lifestyle centers.

Marketing and Advertising.The Company's in-house marketing department and an outside
public relations company emphasize product sampling, local store marketing and brand name identification. Historically, the Company has spent relatively little on paid advertising, relying mainly on
in-store signage and promotions. In addition to posters and display of products, the Company promotes products by offering special packaging and selling other promotional items.



Customer Profile.



Seasonality.The Company's 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. Sales of frozen yogurt and ice cream are higher during the warmer summer months.

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Supplies and Distribution

Ingredients and Supplies.The Company relies primarily on outside suppliers and distributors for the
ingredients used in products and other items used in its stores. Mrs. Fields' stores receive frozen products, made according to proprietary recipes, from its 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. Multifoods supplies the majority of
Mrs. Fields and Original Cookie frozen bakery products. In January 2003, the Company entered into a supply agreement with Countryside Baking Company, Inc. ("Countryside") to
replace Multifoods as the Company's primary supplier of frozen bakery products. It is anticipated that the transition from Multifoods to Countryside will be completed by May 2003. The agreement
expires December 31, 2006. Great American stores receive ready-to-bake refrigerated batter from the Company's batter facility in Atlanta.

Pretzel
Time stores buy a proprietary dry mix from selected distributors and mix and bake pretzels at individual stores. Pretzel Time franchisees buy from various distributors.
Pretzelmaker and Hot Sam Stores buy frozen pretzel dough from selected distributors.

Most
supplies, other than dough, are ordered from distributors by either the Company or the franchisee and are directly shipped to the stores. The Company sells
Coca-Cola® soft drinks exclusively in all of its company owned and franchised stores under agreements with Coca-Cola Fountain ("CCF"). In March 2003, the
Company renewed its beverage marketing agreement with CCF. The term of the agreement is the later of six years, or until certain gallon volumes have been purchased.

The
Company receives a formulation fee on the sale of dough products by Multifoods and certain allowances on beverage purchases from CCF. Formulation fees and allowances earned relating
to products sold to company owned stores are recorded as a reduction of cost of sales. Formulation fees and allowances earned relating to products sold to franchised stores are recorded as franchising
revenues.

Distribution.Mrs. Fields utilizes two primary distributors for distribution of perishable and
non-perishable items to our Mrs. Fields, Original Cookie, Pretzel Time, Pretzelmaker and Hot Sam stores weekly. The distributors own and maintain all of the inventory, but are
authorized to purchase inventory items only from authorized vendors at prices that have been negotiated. Great American stores receive batter from the Company's Atlanta batter facility by refrigerated
common carrier. Riverport Equipment and Distribution Company ("Riverport"), a wholly owned subsidiary of TCBY Systems, offers equipment and smallware supplies to our company owned stores and
franchisees at a profit. During the first quarter of 2003, Riverport will transition this function to an unrelated third party, Bintz, Inc. On January 9, 2003, the Company signed an
agreement with Bintz, Inc. to distribute equipment and smallware supplies to our company owned stores and franchisees.

Company Owned Store Operations

Management Structure.Each store has an on-site management team generally consisting of a
manager and an assistant manager. The store manager is responsible for hiring, training and motivating store personnel. The Company monitors all stores with a regionally based staff of sales managers.
Each regional sales manager is responsible for overseeing approximately 15 company owned cookie and pretzel stores within his or her region. Each regional sales manager reports to one of the four
regional vice-presidents of store operations. The operations management is also responsible for introducing new products and processes to the stores, ensuring proper implementation and
quality control.

Management Incentives.Each manager of a company owned store is eligible for salary increases and
bonuses based upon the performance of his or her store, including customer service, sales, profits

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and store appearance. Management believes that its incentive and other programs have achieved a strong retention rate of store managers and regional sales managers. Approximately 66 percent of
Mrs. Fields' regional sales managers have been with Mrs. Fields for at least three years (29 percent for over four years), and 54 percent of
Mrs. Fields' store managers have been with Mrs. Fields for at least three years (40 percent 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 its store managers and increase retention rates. New Mrs. Fields store managers
are required to attend a two-week training program at the Company's 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 personnel.

Quality Control.The Company maintains a quality control inspection program, which consists of both
scheduled and unscheduled inspections by its operations management, as well as a "mystery shopper" program. The Company's operations management conducts formal inspections of each of the Company's
stores on a regular basis. The Company's "mystery shopper" program, which began in 1999, employs professional mystery shoppers recruited by mystery shop companies, who fill out questionnaires
following visits to stores and report their results to the Company by an Internet web site.

Franchise Operations

In accordance with the Company's business strategy, Mrs. Fields has been selling, and expects to continue to sell, company owned stores to franchisees, who
operate with a lower cost structure. The Company may also choose to sell stores to provide liquidity or to develop additional stores with greater potential in the future. The Company is 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 the Company's franchisees
are full-time store operators, retired professionals and people seeking a second source of income. The majority of Mrs. Fields' franchisees own one store. As of January 25,
2003, the 12 largest Mrs. Fields' franchisees operated 147 stores and the largest Mrs. Fields' franchisee operated 18 stores.

Cookies.Each Mrs. Fields' franchisee pays an initial franchise fee of $30,000 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. The Company 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 franchisee pays royalty fees of 6 percent of the franchised
store's annual gross sales and an advertising fee of 1 percent (increasing to 1.25 percent as of May 4, 2003) of annual gross sales.

Each
new Great American franchisee pays an initial franchise fee of $30,000 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. The Company also charges 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 percent of the franchised store's annual
gross sales. Great American

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franchisees are required to purchase batter from the Company's batter facility, which makes a profit on batter sales.

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 percent of the franchised store's annual gross sales and a
marketing fee of 1 percent of annual gross sales.

Each
Pretzelmaker franchisee pays an initial franchise fee of $25,000 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 charged royalty fees from
Pretzelmaker of 6 percent of the franchised store's annual gross sales and a marketing fee of 1.5 percent of annual gross sales.

Franchisee Recruiting and Training.The Company has been successful in recruiting franchisees and
completing franchise transactions and believes it will continue to realize significant cash flow from franchising by:



The
Company believes that training franchisees is a critical component in creating an effective retail environment and, therefore, makes ongoing training programs available to
franchisees to improve the quality and effectiveness of their operations. Mrs. Fields' franchisees are required to attend a two-week training program at the Company's training
facilities in Salt Lake City or Atlanta. Ongoing training courses in new products, standards and procedures are available throughout the year to all franchisee personnel.

Quality Control.The Company maintains a quality control inspection program, which consists of both
scheduled and unscheduled inspections by its operations management, as well as a "mystery shopper" program. The Company's operations management conducts formal inspections of each of the franchise
stores at least three times a year. The Company's "mystery shopper" program, which began in 1999, employs professional mystery shoppers recruited by mystery shop companies, who fill out questionnaires
following visits to stores and report their results to the Company by an Internet web site.

Mail Order

Mrs. Fields markets a variety of fresh baked cookies, brownies, candies and other gift items through the Company's website and gift catalogs.
Mrs. Fields began its mail order business in 1988 with two product
offerings. In 2001, the Company moved its mail order business into a new production facility, which tripled capacity. In fiscal 2002, the Company mailed approximately 4.2 million catalogs,
generated revenue in excess of $12.6 million and carried 350 different inventory items ranging from customized cookie tins with company logos to birthday towers filled with cookies, brownies,
and jellybeans. In December 2002, the Company formed Mrs. Fields Gifts, Inc., a separate wholly owned

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subsidiary of Mrs. Fields, for the mail order operations. The mail order segment has four direct sales channels: Internet, telephone, online affiliations and strategic partners.

Internet Orders.The Company launched its website in 1997, and today approximately 40 percent
of all sales in the mail order segment originate from the website. In November 2002, the Company launched an improved website that allows each customer to establish an account and track each
order. The Company's principal URL iswww.mrsfields.com, which on average receives over 6,000 visitors daily.

Telephone Orders.Customers may place orders using a toll-free telephone number
"1-800-COOKIES". The number of telephone orders has increased since 1998; however, sales from telephone orders as a percentage of total sales in the mail order segment, have
decreased as customers have migrated to the Internet.

Online Affiliate Programs.In July 2001, the Company launched its online affiliate program
with one of the largest pay-for-performance affiliate marketing networks on the Internet. The Company now has over 11,000 affiliates who have a text link or banner on their
website towww.mrsfields.com. The Company compensates an affiliate on a commission basis for each sale that originates from its website.

Strategic Partnerships/Corporate Accounts.The Company has a number of partnerships with large online
and catalog retailers that advertise Mrs. Fields' products to their customers for gifting purposes. Gifts are sold to partners at wholesale prices. The partners are responsible for shipping to
the ultimate customer, advertising and customer service costs involved with the Mrs. Fields' gift program. The Company also has corporate gift relationships with a number of large companies who
use Mrs. Fields' products to motivate employees and reward customers.

Licensing

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

Concept Licensing.The Company has developed a licensing program for non-mall retail
outlets that enables it to enter difficult-to-reach markets and facilitates brand exposure through "presence" and "prestige" marketing. Licensees duplicate the
Mrs. Fields' store concept and purchase dough from 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 and ARAMARK Corporation, which sells product in stadiums and convention centers.

Retail Licensing.The Company is expanding the branding strategy to include products sold in other
retail environments outside the original scope of the Company's retail cookie store concept. Current examples are Maxfield's Candy Co. and Nonni's Food Company, Inc., which have the exclusive
North American rights to manufacture and sell, under our registered trademarks, candy and ready to eat cookies, respectively, and offer Mrs. Fields' candies and cookies throughout the
supermarket, drug and mass merchandise markets.

Competition

The Company competes for both leasing opportunities and customers with other cookie and pretzel retailers, as well as other confectionery, sweet snack and
specialty food retailers, including

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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. 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. The Company faces 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 28, 2002, the Company had approximately 3,175 employees. The Company had approximately 2,850 employees in company owned stores, of whom
approximately 575 were store managers and assistant store managers and 2,275 were part-time sales assistants. The typical Mrs. Fields store employs 4 to 10 employees. During the
period from November through January, the Company 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. The Company has never experienced any significant work stoppages and believes that employee relations are good.

As
of December 28, 2002, only 99 of the approximately 2,850 employees in company owned stores earned the federal minimum wage. A minimum wage increase would have a negative impact
on labor costs. However, management believes this would not have a significant impact on the Company's results of operations and can be mitigated in the long term through changing staffing patterns in
store operations and, as necessary, through retail price increases. None of our employees is 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. The Company is a party to disputes with respect to trademarks in some foreign jurisdictions, none of which, in the opinion of management, are material to its business, financial condition or
results of operations.

The
Company currently holds 58 trademark registrations that are federally registered in the United States and 234 trademarks that are registered in 56 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, the Company may have trademarks whose registration will soon expire and must be renewed. Under its license agreements, its licensees receive the rights to use
its recipes and its registered trademarks. The Company views its trademarks and the ability to license them to third parties as some of its most valuable assets.

The
Company has pending, or is 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, the Company routinely contests such applications to preserve its ability to register its trademarks in
those countries or to protect existing registrations.

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Item 2. Properties

As of December 28, 2002, Mrs. Fields is the tenant of 619 leases, of which 252 are currently subleased to franchisees ("Franchise Lease") with the
franchisees assuming all obligations of the tenant under the Franchise Lease, except to the extent the Company subsidizes such leases. In the event a franchisee ceases operations or otherwise defaults
under any of the Franchise Leases or in the event the Company ceases operations at any location governed by the operating leases, the Company will be primarily liable for the satisfaction of all
obligations of the tenant under such leases. Most of Mrs. Fields
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 percent of net retail store sales in excess of stipulated amounts.

Mrs. Fields
currently leases 43,000 square feet of office space in Salt Lake City, Utah, which is used as corporate headquarters. The Company also leases approximately 58,000
square feet of space in Salt Lake City, Utah for product development, training and mail order operations. The Company owns substantially all of the equipment used in both of these facilities and in
company owned retail outlets. Great American owns its batter production facility, located in a building of approximately 32,000 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, the Company is involved in routine litigation, including franchise and trademark disputes. The Company is not a party to any
legal proceedings which, in the opinion of management, after consultation with legal counsel, is material to its business, consolidated financial condition, results of operations or liquidity.

The
stores and the Company's 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.

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PART II

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

Market Information and Number of Stockholders

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

Dividends

For each of the three fiscal years in the period ended December 28, 2002, Mrs. Fields did not declare or pay cash dividends. The Company's
ability to declare or pay cash dividends is restricted by the covenants of its senior unsecured notes and current credit facility. During the fiscal year ended December 28, 2002, the Company
distributed approximately $5.2 million to MFFB under a tax sharing agreement among the MFFB entities. Mrs. Fields paid $5.0 million to MFFB in March 2003 relating to its
obligations under the tax sharing agreement. During the fiscal years ended December 29, 2001 and December 30, 2000, the Company distributed and paid approximately $800,000 and
$2.5 million, respectively, to Mrs. Fields' Holding under a tax sharing agreement, which had been in effect since 1998. This tax sharing agreement was amended in September 2001 to
include MFFB and TCBY.

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Item 6. Selected Financial Data

The following table presents historical financial data for Mrs. Fields' Original Cookies, Inc. and subsidiaries as of the dates and for the periods
indicated. Mrs. Fields operates using a 52/53-week year ending on the Saturday closest to December 31. The selected historical financial data has been derived from the
audited financial statements of Mrs. Fields. 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 consolidated financial statements and the related notes, contained elsewhere in this Form 10-K.

|                                                              |  | 52 Weeks Ended |        
|------------------------------------------------------------- |  | -------------- | -------
|
|
|Statement of Operations Data:                                 |  |                |        
|Net store and food sales                                      |  | $              | 115,458
|Net store contribution(1)                                     |  |                | 15,645 
|Franchising and licensing contribution(2)                     |  |                | 22,627 
|Mail order contribution(3)                                    |  |                | 2,846  
|Management fee revenue                                        |  |                | 11,315 
|General and administrative expenses                           |  |                | 32,968 
|Stock compensation expense                                    |  |                | 193    
|TCBY transition (income) expense                              |  |                | (2,442 
|Store closure provision (reversal)                            |  |                |       
|Income (loss) from operations                                 |  |                | 3,653  
|Net loss                                                      |  |                | (52,934
|Other Data:                                                   |  |                |        
|Interest expense, net                                         |  | $              | 17,412 
|Impairment of long-lived assets                               |  |                | 4,196  
|Total depreciation and amortization                           |  |                | 10,181 
|Loss from cumulative effect of accounting change              |  |                | 39,111 
|Balance Sheet Data:                                           |  |                |        
|Working capital deficit                                       |  | $              | (19,388
|Total assets                                                  |  |                | 111,589
|Debt and capital lease obligations, including current portion |  |                | 143,502
|Total stockholder's (deficit) equity                          |  |                | (66,602

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

Critical Accounting Policies

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses in the Company's consolidated financial statements. Management has reviewed with the Audit Committee
the accounting policies that it uses to prepare the Company's consolidated financial statements and believes that the following policies are the most important to the portrayal of the Company's
financial condition and the results of its operations while requiring the use of judgments and estimates about the effects of matters that are inherently uncertain.

Related Party Transactions.Mrs. Fields has contractual relationships with various affiliates,
primarily TCBY and Mrs. Fields' Holding, which are intended to be fair to the parties involved in the transactions and on terms similar to what could be negotiated with independent third
parties. Sometimes the Company is required to negotiate the agreements for both sides of the transactions. Also, inherent in any contractual relationship is the interpretation of the intent of the
agreement at a later time when unanticipated events occur. When situations like these occur, the Company attempts to objectively determine the terms of the transaction or interpret the intent of the
agreement on a fair and independent basis. However, there is no guarantee that we will be successful in doing so. Individual affiliate transactions or a series of related transactions in excess of
$1.0 million require a resolution by the Company's board of directors. Individual affiliate transactions or a series of related transactions in excess of $5.0 million require an "opinion
of fairness" by an accounting, appraisal or investment banking firm.

Tax Sharing Agreement.As a result of the Mrs. Fields Reorganization, the Company entered into
an Amended and Restated Tax Allocation Agreement with MFFB and Mrs. Fields' Holding (the "Tax Allocation Agreement"). The Tax Allocation Agreement is among MFFB, Mrs. Fields' Holding,
TCBY Holding, and all of their respective subsidiaries (collectively, the "Group").

The
Tax Allocation Agreement provides for compensation to the Company for any utilization of the Company's net operating loss and capital loss carryforwards that existed as of the date
of the Mrs. Fields Reorganization. The exact amount of any compensation is contingent upon the length of time between the utilization date and the date of the Mrs. Fields Reorganization
and is subject to additional calculations as defined in the Supplement to Tax Allocation Agreement.

Impairment of Goodwill and Intangible Assets.On an annual basis, the Company completes a valuation
of the intangible assets associated with its various operating segments. To the extent that the fair value associated with the intangible asset is less than the recorded value, the Company writes down
the value of the related intangible asset. The valuation of the intangible assets is affected by, among other things, the Company's business plan for the future, estimated results of future operations
and the

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comparable companies that are used to value the Company's intangible assets. Changes in the business plan or operating results that are different than the projections used to develop the valuation of
the intangible assets have an impact on the valuation of the intangible assets. Also, the decision to use one company versus another company as a benchmark may have an impact on the valuation of the
intangible assets.

Impairment of Long-lived Assets.The Company reviews its long-lived assets
for impairment when circumstances indicate that the book value of an asset may not be fully recovered by the undiscounted net cash flow generated over the remaining life of the related asset or group
of assets. If the cash flows generated by the asset are not sufficient to recover the remaining book value of the asset, the Company is required to write down the value of the asset. In evaluating
whether the asset will generate sufficient cash flow to recover its book value, the Company estimates the amount of cash flow that will be
generated by the asset and the remaining life of the asset. In making our estimate, the Company considers the performance trends related to the asset, the likelihood that the trends will continue or
change, both at the asset level as well as at the national economic level, and the length of time that we expect to retain the asset.

Allowance for Doubtful Accounts.The Company sells product to and receives royalties from its
franchisees and sells product to other customers. Sometimes these franchisees and customers are unable or unwilling to pay for the products that they receive or royalties that they owe. Factors that
affect the Company's ability to collect amounts that are due to Mrs. Fields include the financial strength of a franchisee or customer and its operations, the economic strength of the mall
where the franchisee is located and the overall strength of the retail economy. Mrs. Fields is required to establish an estimated allowance for the amounts included in accounts receivable that
it will not be able to collect in the future. To establish this allowance, it evaluates the customer's or franchisee's financial strength, payment history, reported sales and the availability of
collateral to offset potential losses. If the assumptions that are used to determine the allowance for doubtful accounts change, Mrs. Fields may have to provide for a greater level of expense
in future periods or to reverse amounts provided in prior periods.

Store Closure Reserve.The Company periodically closes under-performing stores, either individually
or as part of an overall store closure plan. When a store is targeted for closure, it records a provision for costs that will be incurred in closing the store, which are predominately estimated lease
termination costs. The costs include both settlement payments and continued contractual payments over time under original lease agreements. The amount of the provision is allocated between current
amounts that are estimated to be paid within one year and long-term amounts that are estimated to be paid thereafter. The amount of the estimated reserve and the timing of the payments are
affected by Mrs. Fields' ability to settle with the landlord for amounts less than the amount reserved and the timing of the payments agreed to in the settlement.

Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 143, "Accounting for
Asset Retirement Obligations." SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of long-lived assets that result from the
acquisition, construction, development and/or the normal operation of a long-lived asset, except for obligations of lessees and the associated asset retirement costs. SFAS No. 143
requires that the fair value of the liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. SFAS
No. 143 is effective for fiscal years beginning after June 15, 2002. The Company has not yet assessed the impact of SFAS No. 143 on the Company's consolidated financial position
and results of operations.

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In
April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statement No. 4, 44 and 64, Amendment of FASB Statement No. 39, and Technical Corrections."
The Statement rescinds SFAS No. 4, "Reporting Gains and Losses from Extinguishments of Debt," and an amendment of that Statement, SFAS No. 64, "Extinguishments of Debt Made to Satisfy
Sinking-Fund Requirements." SFAS No. 145 recognizes that the use of debt extinguishments can be a part of the risk management strategy of a company and hence, the classification of
all early extinguishments of debt as an extraordinary item may no longer be appropriate. In addition, the Statement amends SFAS No. 39, "Accounting for Leases," to eliminate an inconsistency
between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. Provisions of this Statement, as they relate to Statement No. 39, are to be effective for transactions occurring after May 15, 2002. Provisions,
which relate to Statement No. 4, are effective for fiscal years beginning after May 15, 2002. The Company has not yet assessed the impact of SFAS No. 145 on the Company's
consolidated financial position and results of operations.

In
July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 is effective for transactions initiated
after December 31, 2002. Under SFAS No. 146, a company will record a liability for a cost associated with an exit or disposal activity when that liability is incurred and can be measured
at fair value. A liability is incurred when an event obligates the entity to transfer or use assets. The Company has not yet assessed the impact of SFAS No. 146 on the Company's consolidated
financial position and results of operations.

In
November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness
to Others," an interpretation of FASB Statements No. 5, 57 and 107 and a rescission of FASB Interpretation No. 34. This Interpretation elaborates on the disclosures to be made by a
guarantor in its interim and annual financial statements about its obligations under guarantees issued. The Interpretation also clarifies that a guarantor is required to recognize, at inception of a
guarantee, a liability for the fair value of the obligation undertaken. The initial recognition and measurement provisions of the Interpretation are applicable to guarantees issued or modified after
December 31, 2002 and are not expected to have a material effect on the Company's consolidated financial statements. The recognition and measurement provisions for all guarantees are effective
for financial statements of interim and annual periods ending after December 31, 2002.

In
December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based CompensationTransition and Disclosure," an amendment of FASB Statement
No. 123. This Statement amends FASB Statement No. 123, "Accounting for Stock-Based Compensation," to provide alternative methods of transition for a voluntary change to the fair value
method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement No. 123 to require prominent disclosures in both annual
and interim financial statements. Certain of the disclosure modifications are required for fiscal years ending after December 15, 2002 and are included in the Notes to Consolidated
Financial Statements.

In
January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities," an interpretation of Accounting Research Bulletin ("ARB")
No. 51, "Consolidated Financial Statements." This Interpretation addresses the consolidation by business enterprises of variable interest entities as defined in the Interpretation. The
Interpretation applies immediately to variable interests in variable
interest entities created after January 31, 2003, and to variable interests in variable interest entities obtained after January 31, 2003. The application of this Interpretation is not
expected to have a material effect on the Company's consolidated financial statements. The Interpretation requires certain disclosures in financial statements issued after January 31, 2003 if
it is reasonably possible that the Company will consolidate or disclose information about variable interest entities when the Interpretation becomes effective.

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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.

|                                                                                                                       |                                                  | For the 52
Weeks Ended
December 28, 2002 |         | For the 52
Weeks Ended
December 29, 2001 |         | % Change
From
2001 to 2002 |         | For the 52
Weeks Ended
December 30, 2000 |       | % Change
From
2000 to 2001 |        
|---------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------ | ---------------------------------------- | ------- | ---------------------------------------- | ------- | -------------------------- | ------- | ---------------------------------------- | ----- | -------------------------- | -------
|
|Statement of Operations Data:                                                                                          |                                                  |                                          |         |                                          |         |                            |         |                                          |       |                            |        
|REVENUES:                                                                                                              |                                                  |                                          |         |                                          |         |                            |         |                                          |       |                            |        
|                                                                                                                       | Net store and food sales                         |                                          | $       | 115,458                                  |         | $                          | 126,389 |                                          | (8.6  | )                          | $      
|                                                                                                                       | Franchising and licensing                        |                                          |         | 32,616                                   |         |                            | 29,595  |                                          | 10.2  |                            |        
|                                                                                                                       | Mail order                                       |                                          |         | 12,628                                   |         |                            | 10,265  |                                          | 23.0  |                            |        
|                                                                                                                       | Management fee revenue                           |                                          |         | 11,315                                   |         |                            | 11,485  |                                          | (1.5  | )                          |        
|                                                                                                                       | Other operating revenue                          |                                          |         | 1,838                                    |         |                            | 279     |                                          | NM    |                            |        
|                                                                                                                       |                                                  |                                          |         |                                          |         |                            |         |                                          |       |                            |        
|                                                                                                                       |                                                  |                                          | 173,855 |                                          |         | 178,013                    |         | (2.3                                     | )     |                            | 178,527
|                                                                                                                       |                                                  |                                          |         |                                          |         |                            |         |                                          |       |                            |        
|OPERATING COSTS AND EXPENSES:                                                                                          |                                                  |                                          |         |                                          |         |                            |         |                                          |       |                            |        
|                                                                                                                       | Selling and store occupancy costs                |                                          |         | 72,434                                   |         |                            | 74,276  |                                          | (2.5  | )                          |        
|                                                                                                                       | Cost of salesstore and food                     |                                          |         | 27,379                                   |         |                            | 29,572  |                                          | (7.4  | )                          |        
|                                                                                                                       | Franchising and licensing                        |                                          |         | 9,989                                    |         |                            | 10,620  |                                          | (5.9  | )                          |        
|                                                                                                                       | Mail order                                       |                                          |         | 9,782                                    |         |                            | 8,074   |                                          | 21.2  |                            |        
|                                                                                                                       | General and administrative                       |                                          |         | 32,968                                   |         |                            | 31,909  |                                          | 3.3   |                            |        
|                                                                                                                       | Stock compensation expense                       |                                          |         | 193                                      |         |                            | 1,990   |                                          | NM    |                            |        
|                                                                                                                       | TCBY transition (income) expense                 |                                          |         | (2,442                                   | )       |                            |        |                                          | NM    |                            |        
|                                                                                                                       | Store closure provision (reversal)               |                                          |         |                                         |         |                            | 378     |                                          | NM    |                            |        
|                                                                                                                       | Wal-Mart restructuring costs                     |                                          |         | 7,530                                    |         |                            |        |                                          | NM    |                            |        
|                                                                                                                       | Impairment of long-lived assets                  |                                          |         | 4,196                                    |         |                            | 3,992   |                                          | 5.1   |                            |        
|                                                                                                                       | Depreciation                                     |                                          |         | 8,772                                    |         |                            | 9,611   |                                          | (8.7  | )                          |        
|                                                                                                                       | Amortizationgoodwill and intangibles            |                                          |         | 1,409                                    |         |                            | 12,497  |                                          | (88.7 | )                          |        
|                                                                                                                       | Other operating (income) expense, net            |                                          |         | (2,008                                   | )       |                            | (75     | )                                        | NM    |                            |        
|                                                                                                                       |                                                  |                                          |         |                                          |         |                            |         |                                          |       |                            |        
|                                                                                                                       |                                                  | Total operating costs and expenses       |         |                                          | 170,202 |                            |         | 182,844                                  |       | (6.9                       | )      
|                                                                                                                       |                                                  |                                          |         |                                          |         |                            |         |                                          |       |                            |        
|Income (loss) from operations                                                                                          |                                                  |                                          | 3,653   |                                          |         | (4,831                     | )       | NM                                       |       |                            | 2,212  
|Interest expense, net                                                                                                  |                                                  |                                          | (17,412 | )                                        |         | (17,342                    | )       | 0.4                                      |       |                            | (17,791
|                                                                                                                       |                                                  |                                          |         |                                          |         |                            |         |                                          |       |                            |        
|Loss before provision for income taxes, minority interest and cumulative effect of accounting change accounting change |                                                  |                                          | (13,759 | )                                        |         | (22,173                    | )       | (37.9                                    | )     |                            | (15,579
|Provision for income taxes and minority interest                                                                       |                                                  |                                          | (64     | )                                        |         | (28                        | )       | NM                                       |       |                            | (3,815 
|                                                                                                                       |                                                  |                                          |         |                                          |         |                            |         |                                          |       |                            |        
|Loss before cumulative effect of accounting change                                                                     |                                                  |                                          | (13,823 | )                                        |         | (22,201                    | )       | (37.7                                    | )     |                            | (19,394
|Loss from cumulative effect of accounting change                                                                       |                                                  |                                          | (39,111 | )                                        |         |                           |         | NM                                       |       |                            |       
|                                                                                                                       |                                                  |                                          |         |                                          |         |                            |         |                                          |       |                            |        
|Net loss                                                                                                               |                                                  | $                                        | (52,934 | )                                        | $       | (22,201                    | )       | NM                                       |       | $                          | (19,394
|                                                                                                                       |                                                  |                                          |         |                                          |         |                            |         |                                          |       |                            |        
|Cash flows from operating activities                                                                                   |                                                  | $                                        | 6,794   |                                          | $       | 16,473                     |         | (58.8                                    | )     | $                          | 9,446  
|                                                                                                                       |                                                  |                                          |         |                                          |         |                            |         |                                          |       |                            |        
|Cash flows from investing activities                                                                                   |                                                  | $                                        | 3,034   |                                          | $       | (20,967                    | )       | NM                                       |       | $                          | (9,784 
|                                                                                                                       |                                                  |                                          |         |                                          |         |                            |         |                                          |       |                            |        
|Cash flows from financing activities                                                                                   |                                                  | $                                        | (10,621 | )                                        | $       | 4,492                      |         | NM                                       |       | $                          | (984   
|                                                                                                                       |                                                  |                                          |         |                                          |         |                            |         |                                          |       |                            |        
|OTHER DATA:                                                                                                            |                                                  |                                          |         |                                          |         |                            |         |                                          |       |                            |        
|                                                                                                                       | Number of company owned store unit weeks(1)      |                                          |         | 21,841                                   |         |                            | 22,454  |                                          | (2.7  | )                          |        
|                                                                                                                       | Unit week average ("UWA") sales(1)               |                                          | $       | 5,242                                    |         | $                          | 5,577   |                                          | (6.0  | )                          | $      
|                                                                                                                       | Year-over-year comparable store sales percent(1) |                                          |         | (2.3                                     | )%      |                            | (3.3    | )%                                       |      |                            |        
|                                                                                                                       | Unit weeksstores open more than 13 months       |                                          |         | 17,297                                   |         |                            | 20,357  |                                          | (15.0 | )                          |        
|                                                                                                                       | UWA salesstores open more than 13 months        |                                          | $       | 5,674                                    |         | $                          | 5,653   |                                          | 0.4   |                            | $      

---

24

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52 Weeks Ended December 28, 2002 ("Fiscal 2002")
Compared to the 52 Weeks Ended December 29, 2001 ("Fiscal 2001")

Income From OperationsOverview.Income from operations was $3.7 million for
fiscal 2002 compared to a loss from operations of $4.8 million for fiscal 2001, an increase in income from operations of $8.5 million. This increase in income from operations was
primarily attributable to increases in contributions from franchising and licensing of $3.7 million and mail order of $700,000, other operating revenues of $1.5 million, TCBY transition
income of $2.4 million and other operating income of $1.9 million and decreases in depreciation and amortization expense of $11.9 million, stock compensation expense of
$1.8 million and store closure provision of $400,000 offset by decreases in store contribution of $6.9 million and management fee revenue of $200,000, increases in general and
administrative expenses of $1.1 million and impairment of long-lived assets of $200,000 and restructuring costs associated with the Company exiting its Wal-Mart
locations on September 28, 2002 of $7.5 million.

Store
contribution was $15.6 million for fiscal 2002, a decrease of $6.9 million or 30.6 percent, from store contribution of $22.5 million for fiscal 2001.
The decrease was a result of a 2.3 percent decrease in same store comparable sales for fiscal 2002 from fiscal 2001. Additionally, the decrease resulted from the sale of 70 corporate owned
stores to franchisees during fiscal 2002 and a $1.5 million loss incurred at the Company's Wal-Mart locations for fiscal 2002 compared to a loss of $600,000 during fiscal 2001.

Franchising
and licensing contribution was $22.6 million for fiscal 2002, an increase of $3.7 million or 19.2 percent, from franchising and licensing contribution of
$19.0 million for fiscal 2001. This increase was principally the result of an increase in royalties and license fees earned under its Mrs. Fields branded product licenses for
Mrs. Fields branded soft-baked cookies sold in retail stores, ice cream and premium hot cocoa of $1.2 million, an increase in initial franchise fees and franchise royalties
of $1.2 million, and an increase in contribution from cookie batter sold to Great American Cookie franchisees of $1.0 million.

Mail
order contribution was $2.8 million for fiscal 2002, an increase of $600,000 or 29.9 percent, from $2.2 million for fiscal 2001. This increase was attributable
to a 23.0 percent increase in mail order sales offset by a 21.2 percent increase in mail order operating expenses.

Other
operating revenue is principally comprised of $1.5 million received under the Company's business interruption insurance for the loss of the World Trade Center store as a
result of the events of September 11, 2001.

Company Owned and Franchised or Licensed Store Activity.As of December 28, 2002, there were
330 company owned stores and 1,038 franchised or licensed stores in operation. The store activity for fiscal 2002 and fiscal 2001 is summarized as follows:

|                                                       |  | Fiscal 2002 |   | Fiscal 2001 |  
|------------------------------------------------------ |  | ----------- | - | ----------- | -
|
|Stores open as of the beginning of the fiscal year     |  | 474         |   | 1,017       |  
|Stores opened (including relocations and acquisitions) |  | 5           |   | 92          |  
|Stores closed (including relocations)                  |  | (41         | ) | (125        | )
|Wal-Mart stores (closed) opened                        |  | (45         | ) | (9          | )
|Stores sold to franchisees                             |  | (70         | ) | 70          |  
|Stores acquired from franchisees                       |  | 7           |   | (7          | )
|                                                       |  |             |   |             |  
|Stores open as of the end of the fiscal year           |  | 330         |   | 1,038       |  
|                                                       |  |             |   |             |  

25

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Net Store and Food Sales.Total net store and food sales, which includes sales from stores and sales
of refrigerated cookie dough product to retail markets were $115.5 million for fiscal 2002, a decrease of $10.9 million, or 8.6 percent, from $126.4 million for fiscal
2001. Refrigerated cookie dough product sales were $1.0 million and $1.2 million for fiscal 2002 and fiscal 2001, respectively.

Store
sales were $114.5 million for fiscal 2002, a decrease of $10.7 million or 8.6 percent, from $125.2 million for fiscal 2001. The decrease in store sales
was principally due to a 2.3 percent reduction or $2.0 million in same store sales and 1,954 fewer store weeks (excluding Wal-Mart locations) resulting in a sales shortfall
from normalized unit week average ("UWA") of $10.1 million. These decreases were partially offset by a net increase in sales of $2.0 million from the Company's Wal-Mart
locations, which opened in mid-to-late 2001 and were closed effective September 28, 2002.

Store operations:The following table outlines the performance of the Company's store operations and
segregates the performance of the Wal-Mart locations for fiscal 2002 and 2001 (dollars in thousands, excluding UWA sales and contribution).

|                                  |  | 52 Weeks Ended December 28, 2002
|--------------------------------- |  | --------------------------------
|
|Sales                             |  | $                               
|Cost of sales                     |  |                                 
|Selling and store occupancy costs |  |                                 
|                                  |  |                                 
|Contribution                      |  | $                               
|                                  |  |                                 
|Unit weeks                        |  |                                 
|UWA sales                         |  | $                               
|UWA contribution                  |  | $                               

|                                  |  | 52 Weeks Ended December 29, 2001
|--------------------------------- |  | --------------------------------
|
|Sales                             |  | $                               
|Cost of sales                     |  |                                 
|Selling and store occupancy costs |  |                                 
|                                  |  |                                 
|Contribution                      |  | $                               
|                                  |  |                                 
|Unit weeks                        |  |                                 
|UWA sales                         |  | $                               
|UWA contribution                  |  | $                               

Cost of SalesStore and Food.Cost of sales was $27.4 million for fiscal 2002, a
decrease of $2.2 million or 7.4 percent, from $29.6 million for fiscal 2001. Cost of sales for the refrigerated cookie dough product sold to retail markets was $900,000 and
$1.0 million for fiscal 2002 and fiscal 2001, respectively.

Cost
of sales, stores only, was $26.5 million for fiscal 2002, a decrease of $2.1 million or 7.3 percent, from $28.6 million for fiscal 2001. This decrease
was due to fewer operating stores and closure of the Wal-Mart locations. Cost of sales for the Company's traditional stores were $24.9 million for fiscal 2002, a decrease of
$3.1 million or 8.2 percent, from $28.0 million for fiscal 2001 and was the result of 1,954 fewer unit weeks and cost containment strategies implemented, including the closing of
non-performing stores. Cost of sales for the Company's traditional stores for fiscal 2002 as a percent of sales was 22.5 percent compared to 22.6 percent for fiscal 2001.
This decrease was principally due to cost containment strategies and management of product waste.

26

---

Selling and Store Occupancy Costs.Total selling and store occupancy costs were $72.4 million
for fiscal 2002, a decrease of $1.9 million or 2.5 percent, from $74.3 million for fiscal 2001. This decrease was due to fewer stores opened during fiscal 2002 compared to fiscal
2001. Selling and store occupancy costs increased from 59.3 percent of sales in 2001 to 63.2 percent of sales in 2002.

Labor
costs for the traditional stores were 28.4 percent of sales and 27.9 percent sales for the fiscal 2002 and 2001, respectively. This was primarily the result of
tightening of staffing levels in conjunction with the lower sales volume being experienced in 2002 as a result of the general recession as it continued throughout 2002 resulting in lower sales
leverage on labor dollars.

Store
occupancy costs for the traditional stores were 24.0 percent of sales and 22.4 percent of sales for fiscal 2002 and 2001, respectively. This increase in store
occupancy costs was due to general increases in base rents and further impacted by the inability to obtain leverage on the rents as a result of the general slow mall-driven retail sector.

Other
store expense for the traditional stores were 9.7 percent of sales and 8.6 percent of sales for fiscal 2002 and 2001, respectively. This increase was due to increased
costs for property and liability insurance, utilities and other costs for which the stores were unable to obtain leverage.

Franchising and Licensing Revenues.Franchising and licensing revenues were $32.6 million for
fiscal 2002, an increase of $3.0 million or 10.2 percent, from $29.6 million for fiscal 2001. Franchising revenues were $26.7 million for fiscal 2002, an increase of
$1.9 million or 7.7 percent from $24.8 million for fiscal 2001. This increase was primarily due to an increase in initial franchise fees of $900,000 resulting from the sale of 70
additional corporate stores to franchisees with a corresponding increase in incremental franchise royalties and batter sales aggregating to $1.0 million.

Licensing
revenues were $5.9 million for fiscal 2002, an increase of $1.1 million or 22.6 percent, from $4.8 million for 2001. This increase was principally
due to an increase in licensing revenues from the sale of certain recipes and royalties under the licensing agreement with a national manufacturer of soft-baked cookies. Revenues for the
recipe sales and licensing royalties for fiscal 2002 were $3.8 million, an increase of $900,000 or 30.5 percent, from $2.9 million for fiscal 2001. Licensing revenues were also
positively impacted in fiscal 2002 by royalties earned under new licensing agreements for Mrs. Fields branded hot cocoa of $100,000 and Mrs. Fields branded ice cream of $300,000.

Franchising and Licensing Expenses.Franchising and licensing expenses were $10.0 million for
fiscal 2002, a decrease of $600,000 or 5.9 percent, from $10.6 million for fiscal 2001. This decrease was principally due to reduction of $300,000 in operating and administrative costs
of the Company's batter facility which sells cookie batter to the Company's Great American Cookie franchisees, and a $300,000 reduction in administrative costs associated with the Company's
international and domestic licensing group.

Mail Order Revenues.Mail order revenues were $12.6 million for fiscal 2002, an increase
$2.3 million or 23.0 percent, from $10.3 million for fiscal 2001. Mail order revenues consist of sales through the Company's catalog and e-tailing
web-site. The increase in revenues in fiscal 2002 was due to increases in catalog and Internet sales of $1.7 million as a result of additional catalogs published in 2002 and in
corporate gift sales of $600,000 from a significant corporate customer who uses Mrs. Fields gift products in promotional and customer appreciation gifts.

Mail Order Expense.Mail order contribution was $2.8 million or 22.5 percent of sales
for fiscal 2002 compared to $2.2 million or 21.3 percent of sales for fiscal 2001. Mail order expenses were $9.8 million for fiscal 2002, an increase of $1.7 million or
21.2 percent, from $8.1 million for fiscal 2001. This increase in expense was due to an increase in cost of sales of $700,000 associated with the

27

---

increased sales volume, increased marketing and catalog costs of $600,000, and increased labor costs of $300,000.

Management Fee Revenues.Management fee revenue was $11.3 million for fiscal 2002, a decrease
of $200,000 or 1.5 percent, from $11.5 million for fiscal 2001. The decrease was due to a decrease in the management fee effective October 1, 2002 as a result of an amendment to
the TCBY Management Agreement.

Other Operating Revenues.Other operating revenues were $1.8 million for fiscal 2002, an
increase of $1.5 million from $300,000 for fiscal 2001. This increase was primarily due to $1.5 million received under the Company's business interruption insurance policy for the loss
of the Company's World Trade Center store as a result of the events of September 11, 2001.

General and Administrative Expense.General and administrative expenses were $33.0 million for
fiscal 2002, an increase of $1.1 million or 3.3 percent, from $31.9 million for fiscal 2001. General and administrative expenses include operations and supervision costs
associated with store and franchise operations and general and administrative costs of the Company.

Operations
and supervision expenses were $7.4 million for fiscal 2002, an increase of $500,000 or 6.7 percent, from $6.9 million for fiscal 2001. This increase was
principally due to increases in payroll and related costs of $300,000, employee recruitment of $100,000 and various other costs of $100,000.

General
and administrative expenses were $25.6 million for fiscal 2002, an increase of $600,000 or 2.3 percent, from $25.0 million for fiscal 2001. This increase was
due to increases in workers compensation costs of $800,000, health insurance costs of $700,000, marketing costs of $600,000 and legal costs of $500,000. These increased costs were offset by decreases
in bonus compensation of $1.1 million, professional fees of $700,000 and travel and other costs of $200,000.

Stock Compensation Expense.Stock compensation expense was $193,000 for fiscal 2002, a decrease of
$1.8 million or 90.3 percent, from $2.0 million for fiscal 2001. During fiscal 2001, the Company recognized $2.0 million of non-cash compensation expense
related to the then-vested portion of MFFB stock options issued to Company employees, in exchange for options that had previously been outstanding at Mrs. Fields' Holding as part of
the Mrs. Fields Reorganization (see Note 1 of Notes to Consolidated Financial Statements included in Item 8 of part II of this report). The exchange of the options created a new
measurement date and, because the exercise price of the exchanged options was equal to the exercise price of the original MFH options and the fair value of the MFFB common stock at the date of grant
was higher than the exercise price of the new options, the Company recognized compensation expense for the difference between the fair value of the MFFB options vested upon issuance and the exercise
price of the original Mrs Fields' Holding options that had already vested. Compensation expense of $193,000 recognized by the Company during fiscal 2002 represents the difference in the exercise price
and the fair value of the MFFB common stock at the date of the grant of the new options for options that vested during fiscal 2002.

TCBY Transition Income.TCBY transition income of $2.4 million for fiscal 2002 represented
reimbursement by TCBY Enterprises of transitional costs incurred by the Company in fiscal 2000. The timing of the reimbursement was subject to when TCBY Enterprises' dairy processing plant generated
sufficient cash in excess of the working capital requirements to make the reimbursement or upon the sale of the dairy processing plant. The processing plant was sold in November 2002.

Store Closure Provision.Store closure provision was $378,000 for fiscal 2001. There were no stores
identified for closure in 2002 that required a reserve to cover early lease terminations costs. During late 2001, the Company identified four stores that were not performing at acceptable levels and
recorded a reserve of $378,000 for the stores' planned closure.

28

---

Wal-Mart Restructuring Costs.Wal-Mart restructuring costs were
$7.5 million for fiscal 2002. In September 2002, the Company negotiated a release from Wal-Mart for the Company's Wal-Mart locations. In connection with that
release, operations ceased at these locations on September 28, 2002. As a result, the carrying value of the equipment of $7.0 million was written off. Additionally, the associated
inventory was written off and certain costs were incurred for exiting these stores. The Company does not anticipate incurring any additional charges associated with exiting the Wal-Mart
locations.

Impairment of Long-Lived Assets.Impairment of long-lived assets was
$4.2 million for fiscal 2002, an increase of $200,000 or 5.1 percent, from $4.0 million for fiscal 2001. During fiscal 2002 and fiscal 2001, the Company wrote down to net
realizable value approximately $4.2 million and $2.6 million, respectively, of impaired long-lived store assets and the goodwill associated with company owned stores.
Impairment of long-lived assets principally represents the impairment of certain store locations and their associated assets. This increase was principally due to the general economic
recession continuing in
2002, whereby, the estimated future undiscounted cash flows (defined as the store's contribution) were estimated to be insufficient to recover the carrying value of the store's assets over the store's
current lease period, and renewal period if the store were considered a core store.

In
fiscal 2001, the Company recognized an impairment of $1.4 million relating to goodwill associated with the Original Cookie and Hot Sam brand names and recipes. In the
impairment assessment, the Company evaluated the future undiscounted cash flows from store contribution for Original Cookie and Hot Sam stores over the stores' current lease period. At expiration of
the lease period, the stores will either be closed or converted to a Mrs. Fields, Great American, Pretzel Time or Pretzelmaker stores.

Depreciation and Amortization Expense.Total depreciation and amortization expense was
$10.2 million for fiscal 2002, a decrease of $11.9 million or 54.0 percent, from $22.1 million for fiscal 2001. Depreciation expense was $8.8 million for fiscal
2002, a decrease of $800,000 or 8.7 percent, from $9.6 million for fiscal 2001. This decrease was principally due to the fewer store assets as a result of store closures, the sale of
corporate stores to franchisees and impairment of store assets discussed above.

Amortization
expense was $1.4 million for fiscal 2002, a decrease of $11.1 million or 88.7 percent, from $12.5 million for fiscal 2001. This decrease was due
to the adoption of SFAS No. 142, "Goodwill and Other Intangible Assets," which changed the accounting treatment applied to goodwill and other intangible assets after the assets have been
initially recognized in the financial statements. Under SFAS No. 142, amortization of goodwill ceased and is assessed annually for impairment.

Other Operating Income, Net.Other operating income, net was $2.0 million, an increase of
$1.9 million from $75,000 for fiscal 2001. The increase in other operating income was the result of net gains on stores sold to franchisees.

Interest Expense, Net.Interest expense, net was $17.4 million for fiscal 2002, an increase of
$100,000 or 0.4 percent, from $17.3 million for fiscal 2001. The increase was primarily due to higher average outstanding balance of the Company's line of credit during fiscal 2002.

Provision for Income Taxes.Provision for income taxes was $102,000 for fiscal 2002 compared to
$21,000 for fiscal 2001. Provision for income taxes for fiscal 2002 and 2001 primarily consisted of state and foreign income taxes.

Cumulative Effect of Accounting Change.The Company recorded a non-cash charge of
approximately $39.1 million to reduce the carrying value of the goodwill associated with its company owned stores reporting unit. Such charge is non-operational in nature and was
recorded as a cumulative effect of an accounting change upon the mandatory adoption of SFAS No. 142 effective the beginning of fiscal 2002.

29

---



52 Weeks Ended December 29, 2001 ("Fiscal 2001")
Compared to the 52 Weeks Ended December 30, 2000 ("Fiscal 2000")

Income (Loss) From OperationsOverview.Loss from operations was $4.8 million for
fiscal 2001 compared to income from operations of $2.2 million for fiscal 2000, a decrease in income from operations of $7.0 million. This decrease in income from operations was
primarily attributable to a decrease in store contribution of $9.0 million and increases in general and administrative expenses of $5.5 million, stock compensation expense of
$2.0 million and store closure provision of $1.4 million offset by increases in contributions from franchising and licensing of $2.0 million and mail order of $100,000, management
fee revenue of $4.0 million, other operating revenues of $200,000 and other operating income of $300,000 and decreases in TCBY transition expense of $2.4 million, depreciation and
amortization expense of $1.6 million and impairment of long-lived assets of $200,000.

Store
contribution was $22.5 million for fiscal 2001, a decrease of $9.0 million or 28.6 percent, from store contribution of $31.6 million for fiscal 2000.
The decrease was a result of several factors. Prior to September 11, 2001 ("September 11") and as result of the economic recession, which commenced in March 2001,
year-over-year sales were down 2.5 percent from that of the prior year. After September 11, year-over-year sales declined
5.6 percent from the prior year. The impact of the recession and September 11 resulted in year-over-year sales decrease of approximately $3.0 million and
$1.3 million, respectively, aggregating to a reduction in year-over-year sales of $4.3 million and a reduction in store contribution of $3.0 million. The
decrease in store contribution was also the result of contribution losses in poor performing stores identified for closure in 2001 of approximately $2.0 million, operating losses of the
Wal-Mart locations of approximately $600,000, increased costs of raw materials, such as butter, of approximately $500,000 and labor and benefit increases of approximately
$1.4 million.

Of
the Company's 474 corporate owned stores, 289 showed positive year-over-year results, and a store contribution margin of 18.9 percent, or 1 to
2 percent below expectations. The remaining stores included 87 stores with negative year-over-year sales, 45 Wal-Mart locations and 53 new stores and non
year-over-year stores. These stores earned a negative contribution margin. The loss from these stores relative to target of 15 to 20 percent margin accounts for most of
the year-over-year store contribution decline.

Franchising
and licensing contribution was $19.0 million for fiscal 2001, an increase of $2.0 million or 11.9 percent, from franchising and licensing contribution of
$17.0 million for fiscal 2000. This increase was principally the result of an increase in royalties and license fees earned under its Mrs Fields branded product licenses for Mrs. Fields
branded soft-baked cookies sold in retail stores and premium chocolates of $1.3 million and an increase in initial franchise fees and franchise royalties of $800,000.

Mail
order contribution was $2.2 million for fiscal 2001, an increase of $100,000 or 6.8 percent, from $2.1 million for fiscal 2000. This increase was attributable
to an 11.7 percent increase in mail order sales offset by a 13.2 percent increase in mail order operating expenses.

As
discussed below, the results at the store contribution level were partially off set by strong performances in Franchising, Licensing, and Mail order.

30

---

Company owned and Franchised or Licensed Store Activity.As of December 29, 2001, there were
474 company owned stores and 1,017 franchised or licensed stores in operation. The store activity for fiscal 2001 and fiscal 2000 is summarized as follows:

|                                                                                           |  | Fiscal 2001 |   | Fiscal 2000 |  
|------------------------------------------------------------------------------------------ |  | ----------- | - | ----------- | -
|
|Stores open as of the beginning of the fiscal year                                         |  | 431         |   | 972         |  
|Stores opened (including relocations and acquisitions)                                     |  | 43          |   | 100         |  
|Stores closed (including relocations)                                                      |  | (46         | ) | (72         | )
|Wal-Mart stores opened                                                                     |  | 45          |   | 18          |  
|Non-continuing company owned (closure plan) stores closed (September 18, 1996 forward)     |  |            |   |            |  
|Stores sold to franchisees                                                                 |  | (7          | ) | 7           |  
|Non-continuing company owned (closure plan) stores franchised (September 18, 1996 forward) |  |            |   |            |  
|Stores acquired from franchisees                                                           |  | 8           |   | (8          | )
|                                                                                           |  |             |   |             |  
|Stores open as of the end of the fiscal year                                               |  | 474         |   | 1,017       |  
|                                                                                           |  |             |   |             |  

Net Store and Food Sales.Total net store and food sales, which includes sales from stores and sales
of refrigerated cookie dough product to retail markets, were $126.4 million for fiscal 2001, a decrease of $8.3 million or 6.1 percent, from $134.7 million for fiscal 2000.
Refrigerated cookie dough product sales were $1.2 million and $2.5 million for fiscal 2001 and fiscal 2000, respectively. The decrease in retail refrigerated cookie dough sales was
principally due to the discontinuance of a frozen retail dough product. The product was discontinued due to its low contribution margin.

Store
sales were $125.2 million for fiscal 2001, a decrease of $7.0 million or 5.2 percent, from $132.2 million for fiscal 2000. As previously mentioned, the
impact of September 11 and the recession hit the hardest in the fourth quarter of fiscal 2001. With the holiday shopping season, the fourth quarter is traditionally the Company's busy period
with approximately 30 percent of annual store revenues occurring during that quarter. Net store revenues in the fourth quarter of fiscal 2001 decreased $3.7 million compared to the
fourth quarter of fiscal 2000, representing 53.6 percent of the total decline in net store revenues from fiscal 2000 to fiscal 2001. The decrease in same store sales was the result of the
general economic slow down and recession experienced in 2001 and the events of September 11, which reduced mall traffic and altered consumer-spending habits.

Prior
to the economic recession, which began in early 2001, the Company had experienced a 5.4 percent growth in store UWA sales from 1999 to 2000. However, the 2001 recession
contributed to a 2.5 percent decrease in store UWA sales. The decrease in UWA sales was also the result of opening 45 Wal-Marts,
which have experienced sales levels 60.0 percent lower than average. The original Wal-Mart model anticipated sales at 20.0 percent below average. Management believed that
these locations offered a good opportunity to develop a presence outside of the mall environment.

Cost of SalesStore and Food.Cost of sales was $29.6 million for fiscal 2001 and
fiscal 2000. Cost of sales for the refrigerated cookie dough product sold to retail markets was $1.0 million and $1.8 million for fiscal 2001 and fiscal 2000, respectively.

Cost
of sales, stores only, was $28.6 million for fiscal 2001, an increase of $800,000 or 2.9 percent, from $27.8 million. As a percentage of net store sales, cost
of sales increased from 21.1 percent in fiscal 2000 to 22.8 percent in fiscal 2001 due to an increase in raw ingredient costs and a change in product mix, including smoothies and other
products that have lower gross margins. Butter costs increased by $500,000 in fiscal 2001 over the prior year.

31

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Selling and Store Occupancy Costs.Selling and store occupancy costs were $74.3 million for
fiscal 2001, an increase of $800,000 or 1.1 percent, from $73.5 million for fiscal 2000. Labor costs increased 4.2 percent or $1.5 million from $34.1 million in
fiscal 2000 to $35.6 million in fiscal 2001. This increase was attributable to an increase in company owned stores primarily because of the Company's expansion into Wal-Mart, which
had higher labor costs as a percentage of sales than traditional stores. Additionally, labor costs as a percent of sales increased from 25.7 percent for fiscal 2000 to 28.3 percent for
fiscal 2001. Rent and occupancy expense decreased $500,000 or 1.6 percent from $28.4 million in fiscal 2000 to $27.9 million in fiscal 2001. This was the result of the closing of
certain stores, some of which had unfavorable lease terms or lower contribution margins, and lower contingent rents incurred as a result of the lower sales volume offset by additional rent expense
from the expansion of new Wal-Mart and other stores.

With
sales decreasing from the general economic recession and slowdown experienced in 2001, the Company experienced negative leverage of its labor and rent expense. Store staffing levels
were maintained at low levels to minimize labor to sales ratios, with staffing models and staffing dollars, along with rents, becoming relatively more fixed in nature.

Other
store and selling expenses were $10.8 million for fiscal 2001, a decrease of $200,000 or 2.4 percent, from $11.0 million for fiscal 2000.

Franchising and Licensing Revenues.Franchising and licensing revenues were $29.6 million for
fiscal 2001, an increase of $2.6 million or 9.4 percent, from $27.0 million for fiscal 2000. Franchising revenues were $24.8 million for fiscal 2001, an increase of
$900,000 or 3.9 percent, from $23.9 million for fiscal 2000. The increase in franchising revenues was partially attributable to increases in royalties of $400,000 and
initial franchise fees of $400,000. The increase in royalty revenues of $400,000 from our franchisees is primarily due to 45 additional franchised locations open in fiscal 2001 compared to fiscal
2000.

Licensing
revenues were $4.8 million for fiscal 2001, an increase of $2.1 million or 76.1 percent, from $2.7 million in fiscal 2000. Licensing revenues were
positively impacted in fiscal 2001 by $1.7 million as a result of the sale of certain recipes and a licensing agreement with a national manufacturer of cookies. The license agreement allows for
the sale of soft-baked cookies branded under the Mrs. Fields name in specified retail channels and geographic locations. Royalties under the licensing agreement for fiscal 2001 were
$2.0 million compared to $1.1 million for fiscal 2000.

Licensing
revenues were also positively impacted in fiscal 2001 by an increase in royalties from a candy manufacturer that distributes premium candies branded under the
Mrs. Fields name. Royalties under the license agreement were $645,000 for fiscal 2001 compared to $229,000 for fiscal 2000.

Additionally,
during 2001, the Company entered into international area license agreements in Switzerland, Japan and Saudi Arabia. Revenue associated with these license agreements is
recognized over the term of the license, generally five years, or based upon the specific opening of franchised units as defined in the agreements. Revenue recognized under these agreements totaled
$15,000 in fiscal 2001.

Franchising and Licensing Expense.Franchising and licensing expense was $10.6 million for
fiscal 2001, an increase of $600,000 or 5.2 percent, from $10.0 million for fiscal 2000. This increase in costs was principally due to additional administrative costs incurred for
international and domestic licensing costs associated with the merger of TCBY in 2000 of $700,000 offset by reduced operating and administrative costs of $300,000 of the Company's batter facility
which sells cookie batter to its Great American Cookie franchisees.

Mail Order Revenues.Mail order revenues were $10.3 million for fiscal 2001, an increase of
$1.1 million or 11.7 percent, from $9.2 million for fiscal 2000. Mail order revenues consisted of sales

32

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through the Company's catalog and e-tailing web-site. Internet sales increased 53.0 percent from fiscal 2000 and represented $4.2 million, or
40.1 percent, of total mail order sales in fiscal 2001. Mail order sales also increased as a result of obtaining corporate customers who have used Mrs. Fields products as promotional
products or customer appreciation gifts.

Mail Order Expense.Mail order expense was $8.1 million for fiscal 2001, an increase of
$1.0 million or 13.2 percent, from $7.1 million for fiscal 2000. During 2001, mail order incurred additional rent charges of $170,000 from fiscal 2000 as a result of its expansion
and relocation to a new facility. This expansion allowed for additional capacity to service the $1.1 million increase in revenues and provides capacity for future growth. Labor costs associated
with the increased revenues increased $500,000 and general and
administrative costs increased $200,000 for marketing and catalog. Cost of sales, as a percent of sales, decreased from 41.9 percent for fiscal 2000 to 38.0 percent for fiscal 2001. Net
contribution for mail order was $2.2 million for fiscal 2001, an increase of $100,000, or 4.7 percent, from $2.1 million for fiscal 2000.

Management Fee Revenues.Management fee revenue was $11.5 million for fiscal 2001, an increase
of $4.0 million or 52.5 percent, from $7.5 million for fiscal 2000. The increase was due to the Company receiving a management fee from TCBY for providing operation and support
services for the entire year of 2001 compared to only seven months in 2000. The TCBY Management Agreement was entered into on June 1, 2000.

General and Administrative, and TCBY Transitional and Other Expenses.General and administrative
expenses were $31.9 million, an increase of $5.5 million or 20.7 percent, from $26.4 million for fiscal 2000. The increase in general and administrative expenses is
principally due to the increased costs associated with the management of TCBY under the TCBY Management Agreement and was partially offset by the elimination of costs incurred in 2000 transitioning
TCBY's operations to Salt Lake City that did not recur in 2001. The TCBY Management Agreement was in place for seven months for fiscal 2000 versus 12 months for fiscal 2001. The
additional increase in general and administrative expenses, including TCBY transitional costs, is the result of hiring additional executive management and costs associated with executive recruitment,
relocation, and transactional costs and professional fees associated with the merger into MFFB.

Stock Compensation Expense.Stock compensation expense was $2.0 million for fiscal 2001.
During fiscal 2001, the Company recognized $2.0 million of non-cash compensation expense related to the then vested portion of MFFB stock options issued to Company employees, in
exchange for options that had previously been outstanding at Mrs. Fields' Holding as part of the Mrs. Fields Reorganization (see Note 1 of Notes to Consolidated Financial
Statements included in Item 8 of Part II of this report). The exchange of the options created a new measurement date and, because the exercise price of the exchanged options was equal to the
exercise price of the original MFH options and the fair value of the MFFB common stock at the date of grant was higher than the exercise price of the new options, the Company recognized compensation
expense for the difference between the fair value of the MFFB options that vested upon issuance and the exercise price of the original Mrs. Fields' Holding options that had already vested.

Store Closure Provision.Store closure provision was $378,000 for fiscal 2001 compared to a reversal
of expense of $1.0 million in fiscal 2000. During late 2001, the Company identified four additional stores that were not performing at acceptable levels and recorded a reserve of $378,000 for
the stores' planned closure. Prior to 1999, the Company 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, 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
$1.0 million of costs in excess of the amounts required to close the stores was reversed in 2000.

33

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Impairment of Long-Lived Assets.Impairment of long-lived assets was
$4.0 million for fiscal 2001, a decrease of $200,000 or 5.6 percent from $4.2 million for fiscal 2000. The Company annually assesses the impairment of its long-lived
assets. During fiscal 2001 and fiscal 2000, the Company wrote down to net realizable value approximately $2.6 million and $3.6 million, respectively, of impaired long-lived
store assets and the goodwill associated with these stores. The Company assessed the future undiscounted cash flows from store contributions over the stores' current lease period, and renewal period
if the stores were considered a core store.

In
fiscal 2001, the Company recognized an impairment of $1.4 million relating to goodwill associated with the Original Cookie and Hot Sam brand names and recipes. In the
impairment assessment, the Company assessed the future undiscounted cash flows from store contribution for Original Cookie and Hot Sam stores over the stores' current lease period. At expiration of
the lease period, the stores will either be closed or converted to a Mrs. Fields, Great American, Pretzel Time or Pretzelmaker stores.

Depreciation and Amortization Expense.Total depreciation and amortization expense was
$22.1 million for fiscal 2001, a decrease of $1.6 million or 6.7 percent, from $23.7 million for fiscal 2000. Depreciation expense was $9.6 million for fiscal 2001,
a decrease of $800,000 or 7.8 percent from $10.4 million for fiscal 2000. Amortization expense was $12.5 million for fiscal 2001, a decrease of $800,000 or 5.9 percent from
$13.3 million for fiscal 2000. These decreases were principally due to the store asset impairment recorded in fiscal 2001 and fiscal 2000 as previously discussed.

Other Operating Income, Net.Other operating income, net was $75,000 for fiscal 2001, an increase of
$259,000, from other operating expense, net of $184,000 in 2000. The increase in other income was the result of net gains on stores sold to franchisees and property insurance proceeds received on the
stores damaged as a result of the events September 11, 2001 in excess of the net book value of assets written off.

Interest Expense, Net.Interest expense, net for fiscal 2001 was $17.3 million, a decrease by
$500,000 or 2.5 percent, from $17.8 million for fiscal 2000. The decrease was primarily due to lower effective interest on the Company's line of credit and lower balances outstanding on
its capital lease obligations.

Provision for Income Taxes.In connection with the acquisition of Mrs. Fields, Inc. and
Original Cookie Company in 1996, the Company recorded a deferred tax asset totaling $3.5 million. The Company increased the valuation allowance on the deferred tax asset in 2000 because it had
not 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 valuation allowance against these
deferred tax assets may be reduced to the extent that the deferred tax asset can be utilized for income tax return purposes.

Liquidity and Capital Resources

General.The Company's principal sources of liquidity are cash flows from operating activities, cash
on hand, available borrowings under its revolving credit facility and proceeds from the sale of assets. At December 28, 2002, the Company had $2.6 million of unrestricted cash and
$6.5 million available under its $9.0 million revolving credit facility, which was replaced on January 16, 2003. The terms of the Company's indenture governing its outstanding
senior notes limit the Company's ability to borrow under the credit facility to a total of $9.9 million, excluding letters of credit. At December 28, 2002, the Company had outstanding
borrowings of $972,000 and outstanding letters of credit totaling $1.5 million, which were scheduled to mature on or prior to March 31, 2003.

On
January 16, 2003, the Company entered into a new credit facility with Foothill Capital Corporation ("Foothill"). The Foothill credit facility bears interest at the prime rate
plus 1.75 percent.

34

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The Foothill credit facility also requires a monthly servicing fee of $5,000 and an anniversary fee of $200,000. The Foothill credit facility provides for $11.9 million of credit comprised of
a $9.9 million revolving line of credit for financing working capital expenditures and $2.0 million for letters of credit. The Foothill credit facility matures November 1, 2004
and is secured by substantially all of the assets of the Company.

Mrs. Fields'
operations have been negatively impacted by the continued recession that began in 2001 and the events of September 11, 2001. The Company has incurred net
losses from the date of its formation resulting in a stockholder's deficit of $66.6 million at December 28, 2002. Approximately $62.4 million of such net losses have been the
result of non-cash expenses, including the loss from the cumulative effect of an accounting change, depreciation and amortization of intangible assets, debt issuance costs and asset
impairment on Wal-Mart locations in fiscal 2002. The Company generated $6.8 million of cash from operating activities during fiscal 2002, primarily from store sales and franchising
and licensing revenues less costs and expenses incurred to generate those revenues. The Company generated $3.0 million of cash from investing activities during fiscal 2002, primarily from
proceeds related to franchising 70 company owned stores, which were partially offset by capital expenditures. The Company utilized $10.6 million of cash for financing activities during fiscal
2002, principally due to payments on the Company's line of credit, long-term debt and capital leases.

As
of December 28, 2002, the Company had liquid assets (unrestricted cash and cash equivalents and accounts receivable) of $9.5 million, a decrease of $1.0 million
or 9.2 percent, from December 29, 2001 when liquid assets were $10.5 million. Current assets were $13.3 million at December 28, 2002, a decrease of
$3.9 million or 22.9 percent, from $17.2 million at December 29, 2001. This decrease was primarily the result of a decrease in cash and cash equivalents, inventories,
amounts due from franchisees and licensees, amounts due from affiliates and assets held for sale, partially offset by an increase in prepaid rents.

Long-term
assets were $98.3 million at December 28, 2002, a decrease of $60.8 million or 38.2 percent, from $159.1 million at
December 29, 2001. This decrease was due to a write off of goodwill in accordance with SFAS 142 of $39.1 million, write down of the carrying value of the long-term
assets of the Company's Wal-Mart locations of $7.5 million, impairment of long-lived assets of $4.2 million, recurring depreciation and amortization of property
and equipment, intangibles, and deferred loan costs and sale of company owned stores offset by purchases of property and equipment and amounts due from affiliates associated with the management fee
retention amount under the TCBY Management Agreement of $1.5 million.

Current
liabilities were $32.7 million at December 28, 2002, a decrease of $6.9 million or 17.6 percent, from $39.6 million at December 29,
2001. This decrease is due to a decrease in accounts payable, borrowings on the Company's line of credit and current portion of store closure reserve, which was partially offset by an increase in the
amounts due to affiliates related primarily to the Tax Allocation Agreement with MFFB.

The
Company's working capital deficit of $19.4 million at December 28, 2002 decreased by $3.0 million, or 13.6 percent, from a deficit of $22.4 million
at December 29, 2001, for the reasons described above.

As
of December 28, 2002, Mrs. Fields is the tenant of 619 leases ("Operating Leases"), of which 252 are currently subleased to franchisees ("Franchise Leases") with the
franchisees assuming all obligations of the tenant under the Franchise Lease, except to the extent the Company subsidizes such leases. In the event a franchisee ceases operations or otherwise defaults
under any of the Franchise Leases or in the event the Company ceases operations at any location governed by the Operating Leases, the Company will be primarily liable for the satisfaction of all
obligations of the tenant under such Leases.

35

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In
January 2003, the Company entered into a supply agreement with Countryside to replace Multifoods as the Company's primary supplier of frozen bakery products through
December 2006. It is anticipated that the transition from Multifoods to Countryside will be completed by May 2003. The agreement stipulates minimum annual purchase commitments of not
less than 15.0 million pounds of the products, approximately $16.5 million based on weighted average prices in effect at December 28, 2002, each year through the end of the
contract. The purchase commitment for fiscal 2003 will be prorated based on the commencement date of purchases from Countryside. The annual minimum purchase commitment of 15.0 million pounds of
products approximates the amount of products purchased during fiscal 2002.

The
following table reflects the Company's future contractual cash obligations as of December 28, 2002 and the supply agreement with Countryside explained above (in thousands):

|                                   |  | Payments Due by Fiscal Year
|---------------------------------- |  | ---------------------------
|
|
|Long-Term Debt                     |  | $                          
|Capital Lease Obligations          |  |                            
|Operating Leases                   |  |                            
|Dough Purchases                    |  |                            
|Store Closure Reserve              |  |                            
|                                   |  |                            
|Total Contractual Cash Obligations |  | $                          
|                                   |  |                            

During
2003, the Company expects that its principal uses of cash will be for working capital, capital expenditures, store closure obligations, debt service requirements, payments to MFFB
in accordance with the Tax Allocation Agreement and other general corporate purposes. In March 2003, Mrs. Fields
paid MFFB $5.0 million relating to its obligations under of the Tax Allocation Agreement for fiscal 2002. During fiscal 2003, Mrs. Fields expects to pay MFFB approximately
$3.5 million relating to its fiscal 2003 obligations under the Tax Allocation Agreement. The Company expects that its principal sources of cash will be provided by operating activities,
proceeds from the sale of assets including the sale of company owned stores to new or existing franchisees and borrowings from the revolving line of credit. In March 2003, the Company received
$2.0 million from a supplier as an advance to develop a beverage concept at its company owned and franchised stores.

The
Company is highly leveraged. In addition to its new credit facility with Foothill, the Company has $140 million of senior unsecured notes due on December 1, 2004 (the
"Senior Notes"). These notes require semi-annual interest payments of approximately $7.1 million on June 1 and December 1. Due to borrowing restrictions under its
senior note indenture and required maintenance of financial covenants under its new credit facility, the Company's ability to obtain additional debt financing is significantly limited. Therefore, the
Company may choose to sell additional company owned stores, defer capital expenditures and extend vendor payments to meet its debt service obligations. The Company believes that its sources of cash
will be adequate to meet its cash requirements anticipated for the next 12 months.

Mrs. Fields,
Mrs. Fields' Holding, MFFB and TCBY have engaged an investment banking firm to act as financial advisors to assist them in the evaluation of various financing
alternatives, which may include, among other alternatives, the refinancing of the Senior Notes. There can be no assurances that the Company will be successful in refinancing the Senior Notes or
consummating any other recommended financing alternatives.

36

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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 of America, which minimizes fluctuations in operating
income. In addition, some 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 lower staffing of store operations and, if necessary, through product price increases.

Seasonality

The Company's sales and income from store operations is highly seasonal given the significant impact of its mall-based locations. The Company's 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 a balance of $972,000 outstanding at December 28, 2002. An increase in the effective interest rate on the line of
credit of 1.0 percent would increase interest expense by $10,000 per year for every $1.0 million 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 $76,000 and unamortized discount of $202,000.

|                                                       |  | 2003 |       | 2004 |   | 2005    |   | 2006 |     | Thereafter |   | Total |  | Fair Value as of
December 28, 2002
|------------------------------------------------------ |  | ---- | ----- | ---- | - | ------- | - | ---- | --- | ---------- | - | ----- |  | ----------------------------------
|
|Long-term debt, including current portion (fixed rate) |  | $    | 1,707 |      | $ | 140,361 |   | $    | 12  |            | $ |      |  | $                                 
|Weighted average interest rate                         |  |      | 9.8   | %    |   | 10.1    | % |      | 9.5 | %          |   |      |  |                                   

37

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Item 8. Financial Statements and Supplementary Data

|                                                                                                                                               |  | Page
|---------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|Mrs. Fields' Original Cookies, Inc. and subsidiaries                                                                                           |  |     
|Report of Independent Auditors (KPMG LLP)                                                                                                      |  | 39  
|Report of Independent Public Accountants (Arthur Andersen LLP)                                                                                 |  | 40  
|Consolidated Balance Sheets as of December 28, 2002 and December 29, 2001                                                                      |  | 41  
|Consolidated Statements of Operations and Comprehensive Loss for the 52 weeks ended December 28, 2002, December 29, 2001 and December 30, 2000 |  | 43  
|Consolidated Statements of Stockholder's Equity (Deficit) for the 52 weeks ended December 28, 2002, December 29, 2001 and December 30, 2000    |  | 44  
|Consolidated Statements of Cash Flows for the 52 weeks ended December 28, 2002, December 29, 2001 and December 30, 2000                        |  | 45  
|Notes to Consolidated Financial Statements                                                                                                     |  | 47  

38

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REPORT OF INDEPENDENT AUDITORS

The
Board of Directors
Mrs. Fields' Original Cookies, Inc.:

We
have audited the accompanying consolidated balance sheet of Mrs. Fields' Original Cookies, Inc. (a Delaware corporation) and subsidiaries as of December 28, 2002, and the
related consolidated statements of operations and comprehensive loss, stockholder's deficit and cash flows for fiscal year ended December 28, 2002. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. The consolidated financial statements of
Mrs. Fields' Original Cookies, Inc. and subsidiaries as of December 29, 2001 and for each of the two fiscal years in the period ended December 29, 2001 were audited
by other auditors who have ceased operations. Those auditors expressed an unqualified opinion on those consolidated financial statements in their report dated March 1, 2002.

We
conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 audit provides 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 December 28, 2002 and the consolidated results of their operations and their cash flows for the fiscal year ended December 28, 2002 in
conformity with accounting principles generally accepted in the United States of America.

As
discussed in note 2 to the consolidated financial statements, the Company adopted the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets," in 2002.

KPMG
LLP

Salt
Lake City, Utah
March 7, 2003

39

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This
is a copy of the audit report previously issued by Arthur Andersen LLP in connection with Mrs. Fields' Original Cookies, Inc. and subsidiaries consolidated financial statements as
of December 29, 2001 and for each of the fiscal years in the two year period ended December 29, 2001. This audit report has not been reissued by Arthur Andersen LLP in connection
with this Annual Report on Form 10-K because Arthur Andersen LLP has ceased operations.

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 December 30, 2000 and
December 29, 2001 and the related consolidated statements of operations and comprehensive loss, stockholder's equity (deficit) and cash flows for each of the three fiscal years in the
period ended December 29, 2001. 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 December 30, 2000 and December 29, 2001 and the consolidated results of their operations and their cash flows for each of the three
fiscal years in the period ended December 29, 2001 in conformity with accounting principles generally accepted in the United States.

|/s/ARTHUR ANDERSEN LLPArthur Andersen LLP |  | 
|----------------------------------------- |  | 

Salt
Lake City, Utah
March 1, 2002

40

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MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES        CONSOLIDATED BALANCE SHEETS        (Dollars in thousands)

ASSETS

|                                                                                                     |                                                                                                                     | December 28, 2002          |         | December 29, 2001 |       
|---------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | ----------------- | ------
|CURRENT ASSETS:                                                                                      |                                                                                                                     |                            |         |                   |       
|                                                                                                     | Cash and cash equivalents                                                                                           |                            | $       | 2,667             |       
|                                                                                                     | Accounts receivable, net of allowance for doubtful accounts of $124 and $61, respectively                           |                            |         | 2,434             |       
|                                                                                                     | Amounts due from franchisees and licensees, net of allowance for doubtful accounts of $953 and $1,083, respectively |                            |         | 4,493             |       
|                                                                                                     | Amounts due from affiliates                                                                                         |                            |         |                  |       
|                                                                                                     | Inventories                                                                                                         |                            |         | 2,998             |       
|                                                                                                     | Prepaid rent and other                                                                                              |                            |         | 671               |       
|                                                                                                     | Assets held for sale                                                                                                |                            |         |                  |       
|                                                                                                     |                                                                                                                     |                            |         |                   |       
|                                                                                                     |                                                                                                                     | Total current assets       |         |                   | 13,263
|                                                                                                     |                                                                                                                     |                            |         |                   |       
|PROPERTY AND EQUIPMENT, at cost:                                                                     |                                                                                                                     |                            |         |                   |       
|                                                                                                     | Leasehold improvements                                                                                              |                            |         | 32,701            |       
|                                                                                                     | Equipment and fixtures                                                                                              |                            |         | 27,737            |       
|                                                                                                     | Land                                                                                                                |                            |         | 240               |       
|                                                                                                     |                                                                                                                     |                            |         |                   |       
|                                                                                                     |                                                                                                                     |                            | 60,678  |                   |       
|                                                                                                     | Less accumulated depreciation and amortization                                                                      |                            |         | (43,227           | )     
|                                                                                                     |                                                                                                                     |                            |         |                   |       
|                                                                                                     |                                                                                                                     | Net property and equipment |         |                   | 17,451
|                                                                                                     |                                                                                                                     |                            |         |                   |       
|GOODWILL, net                                                                                        |                                                                                                                     |                            | 64,115  |                   |       
|                                                                                                     |                                                                                                                     |                            |         |                   |       
|TRADEMARKS AND OTHER INTANGIBLES, net of accumulated amortization of $7,936 and $6,728, respectively |                                                                                                                     |                            | 10,619  |                   |       
|                                                                                                     |                                                                                                                     |                            |         |                   |       
|DEFERRED LOAN COSTS, net of accumulated amortization of $11,516 and $9,263, respectively             |                                                                                                                     |                            | 4,292   |                   |       
|                                                                                                     |                                                                                                                     |                            |         |                   |       
|AMOUNTS DUE FROM AFFILIATES                                                                          |                                                                                                                     |                            | 1,500   |                   |       
|                                                                                                     |                                                                                                                     |                            |         |                   |       
|OTHER ASSETS                                                                                         |                                                                                                                     |                            | 349     |                   |       
|                                                                                                     |                                                                                                                     |                            |         |                   |       
|                                                                                                     |                                                                                                                     | $                          | 111,589 |                   | $     
|                                                                                                     |                                                                                                                     |                            |         |                   |       

See
accompanying notes to consolidated financial statements.

41

---

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES        CONSOLIDATED BALANCE SHEETS (Continued)        (Dollars in thousands, except share data)

LIABILITIES AND STOCKHOLDER'S DEFICIT

|                                                    |                                                                               | December 28, 2002           |         | December 29, 2001 |        
|--------------------------------------------------- | ----------------------------------------------------------------------------- | --------------------------- | ------- | ----------------- | -------
|CURRENT LIABILITIES:                                |                                                                               |                             |         |                   |        
|                                                    | Bank borrowings under line of credit                                          |                             | $       | 972               |        
|                                                    | Current portion of long-term debt                                             |                             |         | 1,718             |        
|                                                    | Current portion of capital lease obligations                                  |                             |         | 373               |        
|                                                    | Accounts payable                                                              |                             |         | 12,243            |        
|                                                    | Accrued liabilities                                                           |                             |         | 4,051             |        
|                                                    | Current portion of store closure reserve                                      |                             |         | 678               |        
|                                                    | Accrued salaries, wages and benefits                                          |                             |         | 3,946             |        
|                                                    | Accrued interest payable                                                      |                             |         | 1,099             |        
|                                                    | Sales taxes payable                                                           |                             |         | 983               |        
|                                                    | Amounts due to affiliates                                                     |                             |         | 6,575             |        
|                                                    | Current portion of deferred revenue                                           |                             |         | 13                |        
|                                                    |                                                                               |                             |         |                   |        
|                                                    |                                                                               | Total current liabilities   |         |                   | 32,651 
|LONG-TERM DEBT, net of current portion and discount |                                                                               |                             | 140,236 |                   |        
|CAPITAL LEASE OBLIGATIONS, net of current portion   |                                                                               |                             | 203     |                   |        
|STORE CLOSURE RESERVE, net of current portion       |                                                                               |                             | 1,232   |                   |        
|DEFERRED REVENUE, net of current portion            |                                                                               |                             | 3,869   |                   |        
|                                                    |                                                                               |                             |         |                   |        
|                                                    |                                                                               | Total liabilities           |         |                   | 178,191
|                                                    |                                                                               |                             |         |                   |        
|MINORITY INTEREST                                   |                                                                               |                             |        |                   |        
|                                                    |                                                                               |                             |         |                   |        
|STOCKHOLDER'S DEFICIT:                              |                                                                               |                             |         |                   |        
|                                                    | Common stock, $.01 par value; 1,000 shares authorized, 400 shares outstanding |                             |         |                  |        
|                                                    | Additional paid-in capital                                                    |                             |         | 64,575            |        
|                                                    | Deferred stock compensation                                                   |                             |         | (493              | )      
|                                                    | Accumulated deficit                                                           |                             |         | (130,549          | )      
|                                                    | Accumulated other comprehensive loss                                          |                             |         | (135              | )      
|                                                    |                                                                               |                             |         |                   |        
|                                                    |                                                                               | Total stockholder's deficit |         |                   | (66,602
|                                                    |                                                                               |                             |         |                   |        
|COMMITMENTS AND CONTINGENCIES                       |                                                                               |                             |         |                   |        
|                                                    |                                                                               | $                           | 111,589 |                   | $      
|                                                    |                                                                               |                             |         |                   |        

See
accompanying notes to consolidated financial statements.

42

---



MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS        (Dollars in thousands)

|                                                                                                     |                                         | 52 Weeks Ended                     |                              
|---------------------------------------------------------------------------------------------------- | --------------------------------------- | ---------------------------------- | -----------------------------
|
|REVENUES:                                                                                            |                                         |                                    |                              
|                                                                                                     | Net store and food sales                |                                    | $                            
|                                                                                                     | Franchising and licensing               |                                    |                              
|                                                                                                     | Mail order                              |                                    |                              
|                                                                                                     | Management fee revenue                  |                                    |                              
|                                                                                                     | Other operating revenue                 |                                    |                              
|                                                                                                     |                                         |                                    |                              
|                                                                                                     |                                         | Total revenues                     |                              
|                                                                                                     |                                         |                                    |                              
|OPERATING COSTS AND EXPENSES:                                                                        |                                         |                                    |                              
|                                                                                                     | Selling and store occupancy costs       |                                    |                              
|                                                                                                     | Cost of salesstore and food            |                                    |                              
|                                                                                                     | Franchising and licensing               |                                    |                              
|                                                                                                     | Mail order                              |                                    |                              
|                                                                                                     | General and administrative              |                                    |                              
|                                                                                                     | Stock compensation expense              |                                    |                              
|                                                                                                     | TCBY transition (income) expense        |                                    |                              
|                                                                                                     | Store closure provision (reversal)      |                                    |                              
|                                                                                                     | Wal-Mart restructuring costs            |                                    |                              
|                                                                                                     | Impairment of long-lived assets         |                                    |                              
|                                                                                                     | Depreciation                            |                                    |                              
|                                                                                                     | Amortizationgoodwill and intangibles   |                                    |                              
|                                                                                                     | Other operating (income) expense, net   |                                    |                              
|                                                                                                     |                                         |                                    |                              
|                                                                                                     |                                         | Total operating costs and expenses |                              
|                                                                                                     |                                         |                                    |                              
|                                                                                                     |                                         |                                    | Income (loss) from operations
|Interest expense, net                                                                                |                                         |                                    | (17,412                      
|                                                                                                     |                                         |                                    |                              
|Loss before provision for income taxes, minority interest and cumulative effect of accounting change |                                         |                                    | (13,759                      
|Provision for income taxes                                                                           |                                         |                                    | (102                         
|                                                                                                     |                                         |                                    |                              
|Loss before minority interest and cumulative effect of accounting change                             |                                         |                                    | (13,861                      
|Minority interest                                                                                    |                                         |                                    | 38                           
|                                                                                                     |                                         |                                    |                              
|Loss before cumulative effect of accounting change                                                   |                                         |                                    | (13,823                      
|Loss from cumulative effect of accounting change                                                     |                                         |                                    | (39,111                      
|                                                                                                     |                                         |                                    |                              
|                                                                                                     |                                         | Net loss                           |                              
|                                                                                                     |                                         |                                    |                              
|COMPREHENSIVE LOSS:                                                                                  |                                         |                                    |                              
|                                                                                                     | Net loss                                |                                    | $                            
|                                                                                                     | Foreign currency translation adjustment |                                    |                              
|                                                                                                     |                                         |                                    |                              
|                                                                                                     |                                         | Comprehensive loss                 |                              
|                                                                                                     |                                         |                                    |                              

See
accompanying notes to consolidated financial statements.

43

---

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)        (Dollars in thousands, except share data)

|                                                   |  | Common Stock |  |   |   |  |   |        |   |   |        |   |  
|-------------------------------------------------- |  | ------------ |  | - | - |  | - | ------ | - | - | ------ | - | -
|
|
|BALANCE, January 1, 2000                           |  | 400          |  | $ |  |  | $ | 61,899 |   | $ |       |   | $
|Distribution to parent under tax sharing agreement |  |             |  |   |  |  |   |       |   |   |       |   |  
|Other comprehensive loss                           |  |             |  |   |  |  |   |       |   |   |       |   |  
|Net loss                                           |  |             |  |   |  |  |   |       |   |   |       |   |  
|                                                   |  |              |  |   |   |  |   |        |   |   |        |   |  
|BALANCE, December 30, 2000                         |  | 400          |  |   |  |  |   | 61,899 |   |   |       |   |  
|Deferred stock compensation                        |  |             |  |   |  |  |   | 2,713  |   |   | (2,713 | ) |  
|Compensation-parent company option grants          |  |             |  |   |  |  |   |       |   |   | 1,990  |   |  
|Distribution to parent under tax sharing agreement |  |             |  |   |  |  |   |       |   |   |       |   |  
|Other comprehensive loss                           |  |             |  |   |  |  |   |       |   |   |       |   |  
|Net loss                                           |  |             |  |   |  |  |   |       |   |   |       |   |  
|                                                   |  |              |  |   |   |  |   |        |   |   |        |   |  
|BALANCE, December 29, 2001                         |  | 400          |  |   |  |  |   | 64,612 |   |   | (723   | ) |  
|Stock compensation expense                         |  |             |  |   |  |  |   |       |   |   | 193    |   |  
|Unvested options returned to plan                  |  |             |  |   |  |  |   | (37    | ) |   | 37     |   |  
|Distribution to parent under tax sharing agreement |  |             |  |   |  |  |   |       |   |   |       |   |  
|Other comprehensive loss                           |  |             |  |   |  |  |   |       |   |   |       |   |  
|Net loss                                           |  |             |  |   |  |  |   |       |   |   |       |   |  
|                                                   |  |              |  |   |   |  |   |        |   |   |        |   |  
|BALANCE, December 28, 2002                         |  | 400          |  | $ |  |  | $ | 64,575 |   | $ | (493   | ) | $
|                                                   |  |              |  |   |   |  |   |        |   |   |        |   |  

See
accompanying notes to consolidated financial statements.

44

---



MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF CASH FLOWS        (Dollars in thousands)

|                                                   |                                                                                                                                    | 52 Weeks Ended                                                     |                                                    
|-------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------ | ---------------------------------------------------
|
|CASH FLOWS FROM OPERATING ACTIVITIES:              |                                                                                                                                    |                                                                    |                                                    
|                                                   | Net loss                                                                                                                           |                                                                    | $                                                  
|                                                   | Adjustments to reconcile net loss to net cash provided by operating activities, net of effects from acquisitions in 2001 and 2000: |                                                                    |                                                    
|                                                   |                                                                                                                                    | Loss from cumulative effect of accounting change                   |                                                    
|                                                   |                                                                                                                                    | Impairment of long-lived assets                                    |                                                    
|                                                   |                                                                                                                                    | Depreciation and amortization                                      |                                                    
|                                                   |                                                                                                                                    | Asset write offWal-Mart locations                                 |                                                    
|                                                   |                                                                                                                                    | Amortization of deferred loan costs and accretion of loan discount |                                                    
|                                                   |                                                                                                                                    | Stock compensation expense                                         |                                                    
|                                                   |                                                                                                                                    | (Gain) loss on disposition of assets                               |                                                    
|                                                   |                                                                                                                                    | Deferred income taxes                                              |                                                    
|                                                   |                                                                                                                                    | Minority interest                                                  |                                                    
|                                                   |                                                                                                                                    | Changes in assets and liabilities:                                 |                                                    
|                                                   |                                                                                                                                    |                                                                    | Accounts receivable, net                           
|                                                   |                                                                                                                                    |                                                                    | Amounts due from franchisees and licensees         
|                                                   |                                                                                                                                    |                                                                    | Amounts due to/from affiliates, net                
|                                                   |                                                                                                                                    |                                                                    | Inventories                                        
|                                                   |                                                                                                                                    |                                                                    | Prepaid rent and other                             
|                                                   |                                                                                                                                    |                                                                    | Other assets                                       
|                                                   |                                                                                                                                    |                                                                    | Accounts payable                                   
|                                                   |                                                                                                                                    |                                                                    | Accrued liabilities                                
|                                                   |                                                                                                                                    |                                                                    | Store closure reserve                              
|                                                   |                                                                                                                                    |                                                                    | Accrued salaries, wages and benefits               
|                                                   |                                                                                                                                    |                                                                    | Accrued interest payable                           
|                                                   |                                                                                                                                    |                                                                    | Sales taxes payable                                
|                                                   |                                                                                                                                    |                                                                    | Deferred revenue                                   
|                                                   |                                                                                                                                    |                                                                    |                                                    
|                                                   |                                                                                                                                    |                                                                    | Net cash provided by operating activities          
|                                                   |                                                                                                                                    |                                                                    |                                                    
|CASH FLOWS FROM INVESTING ACTIVITIES:              |                                                                                                                                    |                                                                    |                                                    
|                                                   | Purchase of property and equipment                                                                                                 |                                                                    |                                                    
|                                                   | Proceeds from the sale of assets                                                                                                   |                                                                    |                                                    
|                                                   | Purchase of stores from parent                                                                                                     |                                                                    |                                                    
|                                                   |                                                                                                                                    |                                                                    |                                                    
|                                                   |                                                                                                                                    |                                                                    | Net cash provided by (used in) investing activities
|                                                   |                                                                                                                                    |                                                                    |                                                    
|CASH FLOWS FROM FINANCING ACTIVITIES:              |                                                                                                                                    |                                                                    |                                                    
|                                                   | Net (payments) borrowings under line of credit                                                                                     |                                                                    |                                                    
|                                                   | Principal payments on long-term debt                                                                                               |                                                                    |                                                    
|                                                   | Payment of debt financing costs                                                                                                    |                                                                    |                                                    
|                                                   | Principal payments on capital lease obligations                                                                                    |                                                                    |                                                    
|                                                   | Reduction in preferred stock of Pretzel Time                                                                                       |                                                                    |                                                    
|                                                   |                                                                                                                                    |                                                                    |                                                    
|                                                   |                                                                                                                                    |                                                                    | Net cash (used in) provided by financing activities
|                                                   |                                                                                                                                    |                                                                    |                                                    
|EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH    |                                                                                                                                    |                                                                    | (43                                                
|NET DECREASE IN CASH AND CASH EQUIVALENTS          |                                                                                                                                    |                                                                    | (836                                               
|CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR |                                                                                                                                    |                                                                    | 3,503                                              
|                                                   |                                                                                                                                    |                                                                    |                                                    
|CASH AND CASH EQUIVALENTS AT END OF THE YEAR       |                                                                                                                                    | $                                                                  | 2,667                                              
|                                                   |                                                                                                                                    |                                                                    |                                                    

See accompanying notes to consolidated financial statements.

45

---

Supplemental Disclosure of Cash Flow Information:

Cash paid for interest was approximately $15.1 million, $14.9 million and $17.7 for the years ended December 28, 2002,
December 29, 2001 and December 30, 2000, respectively.

Cash
paid for income taxes was approximately $226,000, $115,000, and $305,000 for the years ended December 28, 2002, December 29, 2001 and December 30, 2000,
respectively.

Supplemental Disclosure of Noncash Investing and Financing Activities:

During the year ended December 28, 2002, the Company recorded distributions of $5.2 million due to its ultimate parent, Mrs. Fields Famous
Brands, Inc. under a tax sharing agreement that was entered into in September 2001. Mrs. Fields paid $5.0 million to MFFB in March 2003 relating to its obligations
under the tax sharing agreement.

During
the years ended December 28, 2002 and December 29, 2001, the Company recognized $193,000 and $2.0 million, respectively, of non-cash
compensation expense related to the issuance of MFFB stock options, as part of the Mrs. Fields Reorganization, to Company employees in accordance with the provisions of FASB Interpretation
No. 44, "Accounting for Certain Transactions Involving Stock Compensation."

See
accompanying notes to consolidated financial statements.

46

---



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., a Delaware corporation (the "Company" or "Mrs. Fields"), is a wholly owned subsidiary of
Mrs. Fields' Holding Company, Inc., a Delaware corporation ("Mrs. Fields' Holding"). Mrs. Fields' Holding is a wholly owned subsidiary of Mrs. Fields Famous
Brands, Inc., a Delaware corporation ("MFFB"), which was established to combine Mrs. Fields' Holding and TCBY Holding Company, Inc., a Delaware corporation ("TCBY Holding"), under
a common parent. The Company has ten wholly owned operating subsidiaries, Great American Cookie Company, Inc., Pretzel Time, Inc., Pretzelmaker, Inc., Mrs. Fields
Gifts, Inc., Mrs. Fields Cookies Australia, Mrs. Fields Cookies (Canada) Ltd., Pretzelmaker Canada, Inc., Sunshine Pretzel Time, Inc., Peachtree Pretzel
Time, Inc., CMBC, Inc. and two partially owned subsidiaries.

The
Company operates, develops and franchises retail bakery stores and cafes which sell freshly baked cookies, brownies, pretzels and other food products through four specialty branded
concepts: Mrs. Fields Cookies, Great American Cookies, Pretzel Time and Pretzelmaker. In addition, the Company operates retail bakery stores that operate under two other branded concepts:
Original Cookie Company and Hot Sam Pretzels.

In
connection with its franchising activities, the Company authorizes third-party licensees and franchisees 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 licenses the use of its trademarks, logos and recipes to third parties for
distribution of Mrs. Fields branded products through non-bakery stores and cafes. The Company also markets and distributes its products through catalogs and the Internet.

The
Company is highly leveraged and has sustained net losses for several years. The Company has negative working capital of $19.4 million at December 28, 2002. The
Company's borrowing capacity is limited by covenants within its Senior Debt agreements. As a result of these factors, the Company's operations are sensitive to downturns in the economy and negative
changes in interest rates. 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 of
the calendar year. Because the Company's stores are heavily concentrated in shopping malls, sales performance is significantly dependent on traffic in such malls.

Business Combinations



On October 30, 2000, Mrs. Fields' Holding acquired all of the stock of Sunshine Pretzel Time, Inc., Peachtree Pretzel Time, Inc., and
CMBC, Inc., which collectively owned and operated 20 Pretzel Time stores, for approximately $3.9 million, cash of $700,000 and a $3.2 million note, payable over a
three-year period. The acquisition was accounted for using the purchase method of accounting (based on the fair values of the net assets acquired) and resulted in recording
$2.5 million of goodwill and $800,000 of other intangible assets.

On
December 29, 2001, the Company entered into an Assignment and Assumption Agreement with Mrs. Fields' Holding whereby the assets, liabilities and common stock relating to
these three wholly owned subsidiaries of Mrs. Fields' Holding which own and operate 20 Pretzel Time stores were assigned to the Company. The execution of the agreement resulted in recording
working capital assets comprised of cash and inventory of $468,000, net property and equipment relating to the stores of $847,000, goodwill and other intangibles of $2.5 million and the
assumption of various liabilities of

47

---

$3.8 million, including a $607,000 note payable to Mrs. Fields' Holding. The note is payable upon demand and bears interest at 14.0 percent.

Pro
forma operating results (unaudited) of the Company for the fiscal years ended December 29, 2001 and December 30, 2000 assuming the acquisition of the Pretzel
Time franchise stores described above had been made at the beginning of fiscal 2000, are as follows (dollars in thousands):

December 29, 2001

December 30, 2000Revenue

$
182,831

$
184,440Net loss


(22,535
)

(19,274
)


Mrs. Fields Reorganization

On September 29, 2001, Mrs. Fields' Holding completed a reorganization (the "Mrs. Fields Reorganization"), pursuant to which the stockholders
and option holders of Mrs. Fields' Holding contributed their shares of common stock, preferred stock and options to MFFB in exchange for the same number of shares of common stock and preferred
stock of MFFB and MFFB options with essentially the same terms, except that the holders of the MFFB preferred stock have the right to vote together with the holders of MFFB common stock on matters
submitted to the vote of the common stockholders.

During
the years ended December 28, 2002 and December 29, 2001, the Company recognized $193,000 and $2.0 million of non-cash compensation expense,
respectively, related to the fiscal 2001 issuance of the MFFB stock options. The employees of the Company are the beneficiaries of the grant of options in MFFB stock and, therefore, the related
expense is reflected in the Company's consolidated financial statements.

Immediately
following the Mrs. Fields Reorganization, a wholly owned subsidiary of MFFB merged with and into TCBY Holding (the "Merger"). As a result of the Mrs. Fields
Reorganization and the Merger, Mrs. Fields' Holding and TCBY Holding have become first tier subsidiaries of MFFB.

The
Mrs. Fields Reorganization and Merger did not result in a "change of control" of Mrs. Fields' Holding or its subsidiaries under the indenture governing the
14 percent Senior Secured Discount Notes due December 1, 2005 of Mrs. Fields' Holding, the Indenture governing the 101/8 percent Senior Notes due December 1,
2004 of Mrs. Fields, or agreements governing Mrs. Fields' other indebtedness.

Impact of Events of September 11, 2001

As a result of the September 11th attacks, the Company lost one store located in the World Trade Center. Additionally, a corporate store
located in close proximity to the attack suffered inventory and property loss. The financial impact of property damage and inventory losses to these two stores was a net book value of approximately
$340,000, consisting of $23,000 of inventory and $315,000 of equipment, fixtures and facilities, as well as the loss of future store contribution from the World Trade Center store. In fiscal 2001, the
Company recovered $407,000 for the loss of inventory and equipment, fixtures and facilities under its property insurance. In fiscal 2002, the Company recovered $1.5 million under its business
interruption insurance policy for loss of its World Trade Center location, which is included in "Other operating revenue" in the consolidated statements of operations.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



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

48

---



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.



Mrs. Fields has contractual relationships with various affiliates, primarily Mrs. Fields' Holding, TCBY Holding, TCBY Enterprises, Inc.
("TCBY Enterprises"), a wholly owned subsidiary of TCBY Holding
and TCBY Systems, LLC ("TCBY Systems"), a wholly owned subsidiary of TCBY Enterprises (collectively "TCBY"), which are intended to be fair to the parties involved in the transactions and on terms
similar to what could be negotiated with independent third parties. Sometimes the Company is required to negotiate the agreements for both sides of the transaction. Also, inherent in any contractual
relationship is the interpretation of the intent of the agreement at a later time when unanticipated events occur. When situations like these occur, the Company attempts objectively to determine the
terms of the transaction or interpret the intent of the agreement on a fair and independent basis. However, there is no guarantee that the Company will be successful in doing so. Individual affiliate
transactions or a series of related transactions in excess of $1.0 million require a resolution by the Board of Directors. Individual affiliate transactions or a series of related transactions
in excess of $5.0 million require an "opinion of fairness" by an accounting, appraisal or investment banking firm.



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.



The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.



The Company sells product to and receives royalties from its franchisees and sells product to other customers. Sometimes these franchisees and customers are
unable or unwilling to pay for the products that they receive or royalties that they owe. Factors that affect our ability to collect amounts that are due to Mrs. Fields include the financial
strength of a franchisee or customer and its operations, the economic strength of the mall where the franchisee is located and the overall strength of the retail economy. We are required to establish
an estimated allowance for the amounts included in accounts receivable that we will not be able to collect in the future. To establish this allowance, we evaluate the customer's or franchisee's
financial strength, payment history, reported sales and the availability of collateral to offset potential losses. If the assumptions that are used to determine the allowance for doubtful accounts
change, we may have to provide for a greater level of expense in future periods or to reverse amounts provided in prior periods.



The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of
December 28, 2002, the Company had demand

49

---

deposits at various banks in excess of the $100,000 limit for insurance by the Federal Deposit Insurance Corporation. As of December 28, 2002, the Company had restricted cash of $75,000.



Inventories consist of raw ingredients, food, beverages and supplies and are stated at the lower of cost (first-in, first-out method) or
market value. Inventories at December 28, 2002 and December 29, 2001 are comprised of the following (in thousands):

December 28,
2002

December 29,
2001Food and beverage

$
1,067

$
2,306Supplies and novelties


1,651


1,386Raw ingredients


280


295$
2,998

$
3,987




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 are stated at cost less accumulated depreciation and amortization. Equipment, fixtures and leasehold improvements are depreciated or
amortized over three to seven years, or the shorter of the lease term, 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.



Goodwill represents the excess of costs over fair value of assets of businesses acquired. The Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS"), No. 142, "Goodwill and Other Intangible Assets," as of December 30, 2001. Goodwill and intangible assets acquired in a purchase business combination and determined to
have an indefinite useful life are not amortized, but are tested for impairment at least annually in accordance with the provisions of SFAS No. 142. SFAS No. 142 also requires that
intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS
No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets."

In
connection with SFAS 142's transitional goodwill impairment evaluation, the Statement required the Company to perform an assessment of whether there was an indication that
goodwill was impaired as of the date of adoption. To accomplish this, the Company identified its reporting units and determined the carrying value of each reporting unit by assigning the assets and
liabilities, including goodwill and intangible assets, to those reporting units as of the date of adoption. The Company, through an independent appraisal firm, determined the fair value of each
reporting unit and compared it to the carrying amount of the reporting unit. The carrying amount of the "corporate owned stores" reporting unit exceeded the fair value of the reporting unit indicating
goodwill impairment.

50

---

The
Company compared the implied fair value of the "company owned stores" reporting unit's goodwill with the carrying amount of its goodwill, both of which are measured as of the date of
adoption. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit to all of the assets (recognized and unrecognized) and liabilities of the reporting unit
in a manner similar to a purchase price allocation, in accordance with SFAS 141. As a result, the Company recorded a non-cash charge of approximately $39.1 million to reduce
the carrying value of the goodwill associated with its "company owned stores" reporting unit. Such charge is non-operational in nature and is reflected as a cumulative effect of an
accounting change in the accompanying consolidated statements of operations and comprehensive loss. Included in "corporate owned stores" assets are recognized assets, tradenames, trademarks, and
recipes, whose implied fair values exceed the current carrying value of the assets by approximately $35.0 million. Since SFAS 142 does not allow for any step up in the carrying value of
the assets, the allocated fair value necessitated the $39.1 million reduction in goodwill.

Prior
to the adoption of SFAS 142, the Company amortized goodwill over 15 years. The following outlines the impact of SFAS 142 on net loss as a result of
non-amortization of goodwill beginning in fiscal 2002 (in thousands):

December 28, 2002

December 29, 2001

December 30, 2000Loss before cumulative effect of accounting change

$
(13,823
)
$
(22,201
)
$
(19,394
)Add back: Goodwill amortization





11,205


11,254Adjusted loss before cumulative effect of accounting change


(13,823
)

(10,996
)

(8,140
)Loss from cumulative effect of accounting change


(39,111
)




Adjusted net loss

$
(52,934
)
$
(10,996
)
$
(8,140
)


The
following outlines the Company's goodwill by reporting unit (in thousands):

|                                                          |  | Company
Owned
Stores |         | Franchising |   | Licensing |  | Mail Order |       | Total |  
|--------------------------------------------------------- |  | -------------------- | ------- | ----------- | - | --------- |  | ---------- | ----- | ----- | -
|Balance at December 29, 2001                              |  | $                    | 41,398  |             | $ | 60,404    |  | $          | 1,852 |       | $
|Goodwill disposed of in connection with store asset sales |  |                      | (2,287  | )           |   |          |  |            |      |       |  
|Impairment recognized upon adoption of SFAS 142           |  |                      | (39,111 | )           |   |          |  |            |      |       |  
|                                                          |  |                      |         |             |   |           |  |            |       |       |  
|Balance at December 28, 2002                              |  | $                    |        |             | $ | 60,404    |  | $          | 1,852 |       | $
|                                                          |  |                      |         |             |   |           |  |            |       |       |  

Trademarks
and other intangible assets are comprised of definite lived assets. Trademarks, tradenames and recipes are amortized over 15 years while franchise license rights and
covenants not to

51

---

compete are amortized over 5 to 7 years. The following outlines the Company's trademarks and other intangibles as of December 28, 2002 and December 29, 2001 (in thousands):

December 28,
2002

December 29,
2001Trademarks and tradenames

$
8,301

$
8,301Recipes


8,301


8,301Licenses and other


1,953


2,75318,555


19,355Accumulated amortization


(7,936
)

(6,728
)$
10,619

$
12,627


Amortization
expense for the intangible assets for the years ended December 28, 2002, December 29, 2001 and December 30, 2000 was $1.4 million and
$1.3 million and $2.0 million, respectively. In addition, the Company wrote-off licenses paid to TCBY for the Company's Wal-Mart locations of $755,000 as part of
the Wal-Mart restructuring in fiscal 2002. Estimated amortization for the next five years is: $1.2 million in 2003, $1.2 million in 2004, $1.2 million in 2005,
$1.2 million in 2006 and $1.1 million in 2007.



Deferred loan costs totaling $14.9 million resulted from the sale of $100.0 million total principal amount of 101/8 percent
Series A Senior Notes (the "Series A Senior Notes") and the sale of $40.0 million total principal amount of 101/8 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).



Long-lived assets are reviewed for impairment when events or changes in circumstances indicate that the book value of an asset may not be fully
recovered. At each balance sheet date, the Company evaluates 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 whether the assets are recoverable. Impairment of long-lived assets is assessed at the lowest level
for which there are identifiable cash flows that are independent of other groups of assets. Impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. The impairment of long-lived assets requires judgments and estimates. If circumstances change, such estimates could also change.

During
the years ended December 28, 2002, December 29, 2001 and December 30, 2000, the Company wrote down approximately $4.2 million,
$3.9 million and $4.2 million, respectively, of impaired long-lived assets. These impairments included approximately $4.2 million of equipment and leasehold
improvements at company owned stores for the year ended December 28, 2002, $1.6 million of equipment and leasehold improvements at company owned stores for the year ended
December 29, 2001 and approximately $1.5 million of equipment and leasehold improvements at company owned stores for the year ended December 30, 2000. The Company intends to
franchise or continue to operate these stores through the end of their respective contractual lease terms. These assets are expected to be disposed of when the leases expire or the store is
franchised. Additionally, approximately $0, $859,000 and $2.1 million of goodwill that had been allocated to the impaired assets was written down for the years ended December 28,
2002, December 29, 2001 and December 30, 2000, respectively.

52

---

On February 8, 2002, the Company entered into an asset sale agreement to sell 12 stores to a franchisee in the Houston market for $4.1 million. The Company reduced the
goodwill associated with these stores by $722,000 in fiscal 2001 to reflect the realizable value. Assets held for sale at December 29, 2001 consists of the carrying value of the store assets
sold in February 2002.

During
the year ended December 29, 2001, the Company recognized an impairment of $1.4 million relating to goodwill associated with the Original Cookie and Hot Sam brand
names and recipes. This impairment is included in amortization expense and was determined in accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of." The Company's assessment was based on cash flows from store contribution for Original Cookie and Hot Sam stores over the stores' current lease
period. At expiration of the lease period, the stores will either be closed or converted to a Mrs. Fields, Great American, Pretzel Time or Pretzelmaker store.

During
the years ended December 28, 2002, December 29, 2001 and December 30, 2000, stores associated with impaired assets generated losses of approximately
$1.8 million, $2.4 million and $1.9 million, respectively. No provisions were recorded for estimated future store operating losses.



Based upon historical operating trends of the Wal-Mart locations, and to eliminate future operational losses from these locations, management
determined to close the Company's stores located within Wal-Mart. The Company negotiated a release from these locations from Wal-Mart effective September 28, 2002.
During the year ended December 28, 2002, the Company recorded a non-cash charge of $6.2 million for the write-off of the leasehold improvements and store assets
located within Wal-Mart and $755,000 for the write-off of intangibles associated with TCBY licenses for these Wal-Mart locations. In addition, the Company incurred
exit costs of $530,000 associated with loss of inventory and other costs. The Company has no further obligations for these store locations. Management does not anticipate any further costs or charges
related to these locations in the future. Sales generated from the Wal-Mart locations were $3.6 million and $1.7 million for the years ended December 28, 2002
and December 29, 2001, respectively, and store operating losses of $1.5 million and $600,000, respectively.



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).



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, which is generally upon the opening of a store. Franchise and license royalties, which are
based on a percentage of gross store sales, are recognized as earned. Minimum royalty payments under other licensing agreements are deferred and recognized on a straight-line basis over
the term of the agreement. Revenues from the sale of cookie dough that the Company produces and sells to franchisees are recognized at the time of shipment and are classified in franchising revenue.
Revenues from the sale of cookie dough to grocery stores and wholesale clubs are recognized upon shipment and are included in store and food sales. Revenues from mail order are recognized at the time
of shipment. Management fee revenues are recognized as the services are performed or deferred, if so required, under the terms of a management agreement with TCBY. The Company receives formulation
fees and allowances from suppliers based (directly or indirectly) on sales to franchisees and company owned stores. Formulation fees and

53

---

allowances related to franchisees are recorded as franchising revenue when earned. Formulation fees and allowances related to company owned stores are recorded as a reduction to cost of sales when
earned.



The Company charges its mail order and batter facility customers for shipping and handling costs and records the revenue in mail order sales and franchising and
licensing revenues, respectively. The costs for shipping and handling are included in mail order expense and franchising and licensing expense, respectively.



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. Contingent rental expense is
accrued on a monthly basis for those retail stores where contingent rental expense is probable. During the years ended December 28, 2002, December 29, 2001 and December 30,
2000, the Company incurred contingent rental expense of approximately $283,000, $519,000 and $558,000, respectively.



The Company is included in the consolidated federal income tax return of MFFB, the Company's ultimate parent. For financial reporting purposes, the Company
recognizes income tax expense and deferred tax assets and liabilities as if it were filing a separate tax return. 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.



The balance sheet accounts of 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.



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 $78.4 million and $121.8 as of December 28, 2002 and December 29, 2001, 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 and other long-term debt obligations, approximate fair values at the
respective balance sheet dates.



The Company administers advertising funds on behalf of the franchisees. The Company collects advertising funds from the franchisees and directs the expenditures
of the advertising funds in connection with advertising and marketing campaigns for the benefit of the various concepts. The advertising funds and their related activities are not included in the
accompanying consolidated financial statements.

54

---

Advertising
costs are expensed as incurred. During the years ended December 28, 2002, December 29, 2001 and December 30, 2000, the Company incurred
advertising expenses excluding the expenditures of the advertising funds totaling approximately $3.8 million, $3.1 million and $3.4 million, respectively.



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 consists of the following (in thousands):

|                                                                                                                                                                           |  | December 28,
2002 |         | December 29,
2001 |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | ----------------- | -
|Series A/B senior unsecured notes, interest at 101/8 percent payable semi-annually in arrears on June 1 and December 1, due December 1, 2004                               |  | $                 | 100,000 |                   | $
|Series C senior unsecured notes, interest at 101/8 percent payable semi-annually in arrears on June 1 and December 1, due December 1, 2004                                 |  |                   | 40,000  |                   |  
|Discount related to the issuance of $40,000 Series C senior unsecured notes, net of accumulated amortization of $397 and $291, respectively                                |  |                   | (202    | )                 |  
|Notes payable to individuals or corporations with interest terms ranging from non-interest bearing to 15 percent, due at various dates in 2006, requiring monthly payments |  |                   | 2,156   |                   |  
|                                                                                                                                                                           |  |                   |         |                   |  
|                                                                                                                                                                           |  |                   | 141,954 |                   |  
|Less current portion                                                                                                                                                       |  |                   | (1,718  | )                 |  
|                                                                                                                                                                           |  |                   |         |                   |  
|                                                                                                                                                                           |  | $                 | 140,236 |                   | $
|                                                                                                                                                                           |  |                   |         |                   |  

On
November 26, 1997, the Company issued $100.0 million 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 101/8 percent 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 $40.0 million total principal amount of Series C Senior Notes due December 1, 2004 in connection with the acquisitions
of Great American Cookie Company, Inc. and 48 stores from four franchisees. 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 Senior Notes were exchanged for 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 using the effective interest method.

55

---

The
Senior Notes are general unsecured obligations of the Company, rank senior in right of payment to all subordinated indebtedness of the Company and rankpari
passuin 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.

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.

The
total amount of principal maturities of debt at December 28, 2002 is as follows (in thousands):

Fiscal Year2003

$
1,7182004


140,3722005


232006


432007


$
142,156




On January 16, 2003, the Company entered into a new credit facility with Foothill Capital Corporation ("Foothill"). The Foothill credit facility bears
interest at the prime rate plus 1.75 percent. The Foothill credit facility also requires a monthly servicing fee of $5,000 and an anniversary fee of $200,000. The Foothill credit facility
provides for $11.9 million of credit comprised of a $9.9 million revolving line of credit for financing working capital expenditures and $2.0 million for letters of credit. The
Foothill credit facility matures November 1, 2004 and is secured by substantially all of the assets of the Company. The Foothill credit facility, among other things, (i) requires
Mrs. Fields to maintain certain financial ratios and covenants, including a minimum adjusted earnings before interest, income taxes, depreciation and amortization; a minimum leverage ratio and
a minimum fixed charge coverage ratio; (ii) limits aggregate capital expenditures in any fiscal year to $4.3 million; (iii) restricts the Company's ability to incur debt or liens;
sell, assign, pledge or lease assets; merge with another company; and (iv) restricts the payment of dividends without the prior consent of the lender.

As
of December 28, 2002, the Company had a line of credit facility with a commercial bank that provided for borrowings and the issuance of letters of credit up to
$9.0 million. The Company had outstanding borrowings of $972,000 and outstanding letters of credit of $1.5 million under the line of credit facility as of December 28, 2002.

56

---



Future minimum lease payments for equipment held under capital lease arrangements as of December 28, 2002 are as follows (in thousands):

Fiscal Year2003

$
4092004


1662005


422006


8Total future minimum lease payments


625Less amount representing interest


(49
)576Less current portion


(373
)$
203


As
of December 29, 2002 and December 28, 2001, total assets held under capital lease arrangements were approximately $4.2 million and $5.3 million with
accumulated amortization of approximately $3.7 million and $3.9 million, respectively.

4.    INCOME TAXES

The components of the provision for income taxes for the years ended December 28, 2002, December 29, 2001 and December 30, 2000 are as
follows (in thousands):

|          |         | December 28,
2002             |                                  | December 29,
2001 |        | December 30,
2000 |       
|--------- | ------- | ----------------------------- | -------------------------------- | ----------------- | ------ | ----------------- | ------
|Current:  |         |                               |                                  |                   |        |                   |       
|          | Federal |                               | $                                |                  |        | $                 |      
|          | State   |                               |                                  | 40                |        |                   | (3    
|          | Foreign |                               |                                  | 62                |        |                   | 24    
|Deferred: |         |                               |                                  |                   |        |                   |       
|          | Federal |                               |                                  | (12,945           | )      |                   | (5,962
|          | State   |                               |                                  | (375              | )      |                   | (929  
|          |         | Change in valuation allowance |                                  |                   | 13,320 |                   |       
|          |         |                               |                                  |                   |        |                   |       
|          |         |                               | Total provision for income taxes |                   | $      | 102               |       
|          |         |                               |                                  |                   |        |                   |       

The
differences between income taxes at the U.S. federal statutory income tax rate and income taxes reported in the consolidated statements of operations are as follows for
the years ended December 28, 2002, December 29, 2001 and December 30, 2000:

|                                  |                                         | December 28,
2002 |      | December 29,
2001 |      | December 30,
2000 |     
|--------------------------------- | --------------------------------------- | ----------------- | ---- | ----------------- | ---- | ----------------- | ----
|Federal statutory income tax rate |                                         | (34.0             | )%   | (34.0             | )%   | (34.0             | )%  
|                                  | Amortization of non-deductible goodwill |                   | 9.6  |                   | 7.1  |                   | 10.5
|                                  | State franchise minimum taxes           |                   |     |                   |     |                   | 1.3 
|                                  | Foreign taxes                           |                   | 0.1  |                   | 0.1  |                   | 0.2 
|                                  | Change in valuation allowance           |                   | 24.5 |                   | 26.9 |                   | 46.7
|                                  |                                         |                   |      |                   |      |                   |     
|Effective income tax rate         |                                         | 0.2               | %    | 0.1               | %    | 24.7              | %   
|                                  |                                         |                   |      |                   |      |                   |     

57

---

The
significant components of the Company's deferred income tax assets and liabilities at December 28, 2002 and December 29, 2001 are as follows (in thousands):

|                                 |                                             | December 28,
2002                                     |   | December 29,
2001 |       
|-------------------------------- | ------------------------------------------- | ----------------------------------------------------- | - | ----------------- | ------
|Deferred income tax assets:      |                                             |                                                       |   |                   |       
|                                 | Net operating loss carryforward             |                                                       | $ | 23,084            |       
|                                 | Depreciation and amortization               |                                                       |   | 16,803            |       
|                                 | Other reserves                              |                                                       |   | 864               |       
|                                 | Store closure reserve                       |                                                       |   | 750               |       
|                                 | Accrued expenses                            |                                                       |   | 1,272             |       
|                                 | Alternative minimum tax credit carryforward |                                                       |   |                  |       
|                                 | Transaction cost accrual                    |                                                       |   | 142               |       
|                                 | Deferred revenue                            |                                                       |   | 1,489             |       
|                                 |                                             |                                                       |   |                   |       
|                                 |                                             | Total deferred income tax assets                      |   |                   | 44,404
|                                 | Valuation allowance                         |                                                       |   | (44,404           | )     
|                                 |                                             |                                                       |   |                   |       
|                                 |                                             | Deferred income tax assets net of valuation allowance |   |                   |      
|                                 |                                             |                                                       |   |                   |       
|Deferred income tax liabilities: |                                             |                                                       |   |                   |       
|                                 | Other                                       |                                                       |   |                  |       
|                                 |                                             |                                                       |   |                   |       
|                                 |                                             | Total deferred income tax liabilities                 |   |                   |      
|                                 |                                             |                                                       |   |                   |       
|                                 |                                             | Net deferred income tax assets                        |   | $                 |      
|                                 |                                             |                                                       |   |                   |       

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 were not recorded through the provision for income taxes, but rather, as an increase to goodwill. If the Company achieves a history of generating taxable income in
the future, the valuation allowance may be reduced.

As
of December 28, 2002, the Company had net operating losses of $62.3 million that can be carried forward to offset U.S. 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 change and the federal long-term tax-exempt rate, plus
any limited carryforwards not utilized in prior years.

As
a result of the Mrs. Fields Reorganization, the Company entered into an Amended and Restated Tax Allocation Agreement with MFFB and Mrs. Fields' Holding (the "Tax
Allocation Agreement"). The Tax Allocation Agreement is among MFFB, Mrs. Fields' Holding, TCBY Holding and all of their respective subsidiaries (collectively, the "Group").

The
Tax Allocation Agreement provides for compensation to the Company for any utilization of the Company's net operating loss and capital loss carryforwards that existed as of the
Mrs. Fields Reorganization date. Pursuant to this agreement, on a quarterly basis, a hypothetical federal income tax liability is calculated for each subsidiary or subgroup of subsidiaries as
if each subsidiary or subgroup of subsidiaries filed its own U.S. federal income tax return. The exact amount of any compensation MFFB receives from a subsidiary or subgroup of subsidiaries is
contingent upon the length of time between the utilization date and the date of the Mrs. Fields Reorganization and is subject to additional calculations as defined in the Supplement to Tax
Allocation Agreement. During the year ended

58

---

December 28, 2002, TCBY paid $200,000 to MFFB and ultimately to the Company as settlement of anticipated compensation. For the year ended December 28, 2002, the Company and its
subsidiaries recorded distributions of $5.2 million due to MFFB under the Tax Allocation Agreement. In March 2003, Mrs. Fields paid $5.0 million to MFFB relating to its
obligations under the Tax Allocation Agreement for fiscal 2002. During the years ended December 29, 2001 and December 30, 2000, the Company distributed and paid approximately
$800,000 and $2.5 million, respectively, to Mrs. Fields' Holding under a tax sharing agreement, which had been in effect since 1998.

5.    STORE CLOSURE RESERVE

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 an impairment loss for that portion of the net property investment determined to be impaired.
Additionally, when a store is identified for targeted closing, the costs of closing the store are reserved. These costs consist primarily of 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 reached with the landlord. As a
result, although all stores targeted for closure may have been closed,
the store closure reserve will continue to have a balance until all cash payments have been made. The Company does not accrue for future expected operating losses.

Management
periodically reassesses the remaining store closure reserves based on all available relevant data. 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. Reserves for closed stores that are settled on terms more favorable than were
originally estimated and expensed through the store closure provision are reversed through the store closure provision (reversal) in the statement of operations. As of December 28, 2002, the
remaining store closure reserve was $1.9 million.



As of December 28, 2002, the estimated future cash payments under the store closure reserve are as follows (in thousands):

Fiscal Year2003

$
6782004


4652005


2572006


1232007


66Thereafter


321$
1,910


59

---

Consolidated Analysis

The following table presents a summary of the activity in the store closure reserve for the periods indicated (in thousands):

|                                                                                                               |  | Mrs. Fields, Inc. and
Original Cookie Co. |       | H&M |   | Pretzel Time |   | Great American |      | Pretzelmaker |   | Consolidated |  
|-------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------- | ----- | --- | - | ------------ | - | -------------- | ---- | ------------ | - | ------------ | -
|
|Balance, January 1, 2000                                                                                       |  | $                                         | 1,614 |     | $ | 1,581        |   | $              | 536  |              | $ | 294          |  
|Additional reserves for continuing company owned and franchised stores targeted for closure, December 30, 2000 |  |                                           | 19    |     |   | 258          |   |                |     |              |   |             |  
|Reversal during the 52 weeks ended December 30, 2000                                                           |  |                                           | (62   | )   |   | (18          | ) |                | (60  | )            |   | (75          | )
|Utilization for the 52 weeks ended December 30, 2000                                                           |  |                                           | (708  | )   |   | (602         | ) |                | (117 | )            |   | (134         | )
|                                                                                                               |  |                                           |       |     |   |              |   |                |      |              |   |              |  
|Balance, December 30, 2000                                                                                     |  |                                           | 863   |     |   | 1,219        |   |                | 359  |              |   | 85           |  
|Additional reserves for continuing company owned and franchised stores targeted for closure, December 29, 2001 |  |                                           | 117   |     |   | 673          |   |                | 7    |              |   | 84           |  
|Reversal during the 52 weeks ended December 29, 2001                                                           |  |                                           | (218  | )   |   | (97          | ) |                | (9   | )            |   | (5           | )
|Utilization for the 52 weeks ended December 29, 2001                                                           |  |                                           | (247  | )   |   | (447         | ) |                | (71  | )            |   | (51          | )
|                                                                                                               |  |                                           |       |     |   |              |   |                |      |              |   |              |  
|Balance, December 29, 2001                                                                                     |  |                                           | 515   |     |   | 1,348        |   |                | 286  |              |   | 113          |  
|Additional reserves for continuing company owned and franchised stores targeted for closure, December 28, 2002 |  |                                           | 24    |     |   | 47           |   |                |     |              |   |             |  
|Reversal during the 52 weeks ended December 28, 2002                                                           |  |                                           |      |     |   |             |   |                |     |              |   |             |  
|Utilization for the 52 weeks ended December 28, 2002                                                           |  |                                           | (163  | )   |   | (546         | ) |                | (46  | )            |   | (111         | )
|                                                                                                               |  |                                           |       |     |   |              |   |                |      |              |   |              |  
|Balance, December 28, 2002                                                                                     |  | $                                         | 376   |     | $ | 849          |   | $              | 240  |              | $ | 2            |  
|                                                                                                               |  |                                           |       |     |   |              |   |                |      |              |   |              |  

During the years ended December 28, 2002 and December 29, 2001 there were $0 of reversals used to reduce goodwill. During the
year ended December 30, 2000 approximately $60 of reversals were used to reduce goodwill.

60

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6.    COMMITMENTS AND CONTINGENCIES AND DEBT OF MRS. FIELDS' HOLDING



Mrs. Fields' Holding has pledged all of the Company's capital stock as collateral for Mrs. Fields' Holding's 14.0 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. In connection with the issuance of the $55.0 million principal amount at maturity of Mrs. Fields' Holding Discount Notes,
Mrs. Fields' Holding recorded a total original issue discount of approximately $24.1 million. In March 2001, Mrs. Fields' Holding repurchased approximately
$27.1 million principal amount of the Mrs. Fields' Holding Discount Notes. The principal amount of the outstanding Mrs. Fields' Holding Discount Notes will accrete at a rate of
14 percent compounded semi-annually to a total principal amount of $27.9 million 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 its subsidiaries' cash flows to make principal and interest payments when due. Semi-annual interest payments of $1.9 million will commence in
June 2003.



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, results of operations
or liquidity.



The Company leases retail store facilities, office space and equipment under long-term non-cancelable 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 (in thousands):

December 28,
2002

December 29,
2001

December 30,
2000Minimum rentals

$
37,114

$
37,450

$
37,641Contingent rentals


283


519


558Sub-lease rentals


(11,323
)

(11,174
)

(11,472
)$
26,074

$
26,795

$
26,727


As
of December 28, 2002, Mrs. Fields is the tenant of 619 leases, of which 252 are currently subleased to franchisees ("Franchise Lease") with the franchisees assuming all
obligations of the tenant under the Franchise Lease, except to the extent the Company subsidizes such leases. In the event a franchisee ceases operations or otherwise defaults under any of the
Franchise Leases or in the event the Company ceases operations at any location governed by the operating leases, the Company will be primarily liable for the satisfaction of all obligations of the
tenant under such leases. Most of Mrs. Fields 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 percent of net retail store sales in excess of stipulated amounts.

61

---

As
of December 28, 2002, 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 (in thousands):

Fiscal Year2003

$
27,3992004


23,2052005


19,3342006


15,3062007


12,223Thereafter


30,086$
127,553


As
of December 28, 2002, the future minimum sublease payments due to the Company under these leases are as follows (in thousands):

Fiscal Year2003

$
10,6032004


8,5092005


6,7702006


4,5912007


3,100Thereafter


3,730$
37,303




In January 2003, the Company entered into a supply agreement to buy frozen dough products through 2006. The agreement stipulates minimum annual purchase
commitments of not less than 15.0 million pounds of the products, approximately $16.5 million based on weighted average prices in effect at December 28, 2002, each year through
the end of the contract. The Company or the supplier may terminate the supply agreement if the other party defaults on any of the performance covenants.

The
Company has employment agreements with four executive officers with terms of two to three years. The agreements are for a total annual base salary of $1.2 million. If
the Company terminates employment without cause, or the employee terminates employment with good reason, the employee can receive severance pay of 18 to 24 months of his or her then current
base salary, plus a portion of any discretionary bonus that would otherwise have been payable. The severance is paid in 12 equal monthly installments. The agreements have customary provisions for
other benefits and also include noncompetition clauses.

7.    RELATED-PARTY TRANSACTIONS

During 2001, the Company sold equipment and smallware supplies of $789,000 to Riverport Equipment and Distribution Company ("Riverport"), a wholly owned
subsidiary of TCBY Systems. Riverport offers equipment supplies to the Company's franchisees and TCBY's franchisees. In connection with the construction of the Company's new store locations and
operations of the company owned stores, the
Company made equipment and smallware supply purchases of $2.4 million and $5.8 million for the years ended December 28, 2002 and December 29, 2001, respectively. At

62

---

December 28, 2002, the Company had an amount due to Riverport of $183,000 and at December 29, 2001, the Company had an amount due from Riverport of $406,000.

In
connection with the acquisition of TCBY Enterprises by Capricorn Investors III, L.P. ("Capricorn III"), one of MFFB's principal stockholders, Mrs. Fields entered into a
management agreement (the "TCBY Management Agreement") with TCBY pursuant to which the corporate and administrative functions of TCBY are managed by 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 in
fiscal 2000 on behalf of TCBY for the transfer of the management function from Little Rock, Arkansas to Salt Lake City, Utah), in exchange for a management fee paid by TCBY semi-monthly.
Revenue generated from the management fee is included in "Management fee revenue" in the consolidated statements of operations. Management fee revenue was $11.3 million, $11.5 million
and $7.5 million for the fiscal years ended December 28, 2002, December 29, 2001 and December 30, 2000, respectively.

On
August 31, 2001, the TCBY Management Agreement was amended to provide for the retention of certain amounts payable (not to exceed $2.0 million in fees in any given
fiscal year) and the release of such amounts based upon compliance with a ratio test included in a TCBY Systems' credit facility. The payment of management fees and certain other amounts to be
received by the Company under the TCBY Management Agreement are, under certain circumstances, subordinated to certain indebtedness of TCBY Systems.

On
November 19, 2002, the TCBY Management Agreement was amended. The amendment reduced the management fee to $867,000 per month for the period from October 2002 through and
including September 2003, and to $783,000 per month for the period from October 2003 through and including December 2004. The amendment eliminated the further retention of
management fees except for $1.5 million, which had been previously retained as of September 28, 2002. This retained amount and accrued interest shall be paid to the Company upon TCBY
Systems' full payment of its obligations under its credit facility. Included in amounts due from affiliates and deferred revenue in the consolidated balance sheet as of December 28, 2002 is
$1.5 million, which has been retained by TCBY in accordance with the TCBY Management Agreement.

In
accordance with the terms and conditions of the TCBY Management Agreement, Mrs. Fields and TCBY share costs savings obtained through the joint purchase of ingredients, supplies
and services and Mrs. Fields is eligible to receive payments for a portion of cost savings achieved by TCBY yogurt and ice cream manufacturing efficiencies. No payments have been received nor
benefits recognized for cost savings in the Company's consolidated financial statements during the fiscal years ended December 28, 2002 and December 29, 2001.

The
Company was entitled to receive 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 management functions of TCBY from Little Rock, Arkansas to Salt Lake City, Utah in 2000. The reimbursement of these costs was subject to the point in time when TCBY's dairy
processing plant generated sufficient cash in excess of the working capital requirements of the dairy processing plant to make the reimbursement or upon the sale of the dairy processing plant. During
2002, the dairy processing plant was sold and the Company was reimbursed by TCBY for these transition expenses.

In
March 2002, the Company entered into a licensing agreement with TCBY for the manufacturing and distribution through designated retail channels of Mrs. Fields' premium
ice cream. The term of the agreement is for one year with a royalty rate of 7 percent of net sales. During the year ended December 28, 2002, TCBY paid the Company $265,000 under the
licensing agreement.

In
2000, the Company entered into a franchise agreement with TCBY allowing the Company to sell and distribute TCBY products. The franchise agreement calls for an initial franchise fee of
$5,000

63

---

or $20,000 depending upon the TCBY products to be offered by the location. The Company paid and capitalized as other intangibles, initial franchise fees of $115,000 associated with 11 company owned
locations, and $890,000 associated with 64 company owned locations for the years ended December 28, 2002 and December 29, 2001, respectively. Under the agreement, the Company is to pay
ongoing royalties of 7 percent of net revenues from TCBY related products. The Company paid royalties of $90,000 and $73,000 under the agreement for the years ended December 28,
2002 and December 29, 2001, respectively.

The
net balance payable by the Company to TCBY for the above transactions at December 28, 2002 was $321,000. The net balance due to the Company from TCBY at December 29,
2001 was $15,000.

The
Company incurs various marketing expenditures on behalf of TCBY's advertising fund. During the years ended December 28, 2002 and December 29, 2001, the Company
incurred costs that were reimbursed from the TCBY advertising fund of $458,000 and $375,000, respectively.

The
amount due to/from affiliates is comprised of amounts due to/from Mrs. Fields' Holding, TCBY and its affiliates, MFFB and from the Company's minority interest subsidiary as
follows at December 28, 2002 and December 29, 2001 (in thousands):

December 28, 2002

December 29, 2001Amounts due from affiliates:Uvestminority interest subsidiary

$


$
131Riverport





406TCBY





15


552TCBYretention amount, long term


1,500


$
1,500

$
522Amounts due to affiliates:Mrs. Fields' Holdingnote payable

$
554

$
607Mrs. Fields' Holding


273


274Riverport


183


TCBY


321


MFFBtax sharing


5,244


$
6,575

$
881


The
Company has from time-to-time engaged Korn/Ferry International ("Korn/Ferry"), an international executive recruiting firm for which Richard Ferry, one of the
members of the Company's board of directors, is also Founder Chairman. For the years ended December 28, 2002, December 29, 2001 and December 30, 2000, the Company paid
recruiting fees to Korn/Ferry of $39,000, $121,000, and $68,000, respectively.

The
Company has periodically engaged Applied Predictive Technologies ("APT") to evaluate the economics and demographic trends of certain mall and retail site locations. Walker Lewis, one
of the members of the Company's board of directors, is Chairman of the Board of APT. For the years ended December 28, 2002, December 29, 2001 and December 30, 2000, the
Company paid APT $161,000, $163,000 and $134,000, respectively.

The
Company has entered into various licensing agreements with and has sold certain recipes to Nonni's Food Company, Inc., ("Nonni's") a manufacturer and distributor of soft baked
cookies. The Company has appointed Michael R. Ward, one of its executive officers, to represent the Company as a

64

---

director for this manufacturer. For the years ended December 28, 2002, December 29, 2001 and December 30, 2000, the earned royalty and licensing revenues associated with
the licensing and recipe sales agreements were $3.8 million, $2.9 million and $1.1 million, respectively.

In
connection with of the Company's line of credit facility that was replaced on January 16, 2003, Capricorn III provided to the Company's prior lender a guarantee of up to the
lesser amount of $3.5 million or 50 percent of the aggregate amount of such lender's funding commitment. Capricorn III has not guaranteed any portion of the Foothill credit facility.

8.    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 was matched by contributions from the Company at the Company's discretion. The total Company contributions to
the Plan for the years ended December 28, 2002, December 29, 2001 and December 30, 2000 were approximately $579,000, $588,000 and $479,000, respectively. As of
January 1, 2003, the Plan was amended to allow, but not require matching contributions from the Company.

9.    REPORTABLE SEGMENTS

Operating segments are components of the Company for which separate financial information is available that is evaluated regularly by management 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 four reportable
operating segments; namely, company owned stores and related activity, franchising activity, licensing activity, and mail order activity. The segments are determined by revenue source: direct sales,
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.
The franchising and licensing segments consist 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. The mail order segment includes sales generated from the Company's mail order gift
catalog and web site. The accounting policies for the segments are the same as those 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. Contribution margin 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

65

---

reported as a separate segment. Segment revenue and contribution margin are presented in the following table (in thousands):

|                             |  | Company Owned
Stores |         | Franchising |   | Licensing |  | Mail Order |       | Total
|---------------------------- |  | -------------------- | ------- | ----------- | - | --------- |  | ---------- | ----- | -----
|Year Ended December 28, 2002 |  |                      |         |             |   |           |  |            |       |      
|Revenue                      |  | $                    | 115,458 |             | $ | 26,707    |  | $          | 5,909 |      
|Contribution Margin          |  |                      | 15,645  |             |   | 17,853    |  |            | 4,774 |      
|Year ended December 29, 2001 |  |                      |         |             |   |           |  |            |       |      
|Revenue                      |  | $                    | 126,389 |             | $ | 24,775    |  | $          | 4,820 |      
|Contribution Margin          |  |                      | 22,541  |             |   | 15,634    |  |            | 3,341 |      
|Year ended December 30, 2000 |  |                      |         |             |   |           |  |            |       |      
|Revenue                      |  | $                    | 134,653 |             | $ | 24,306    |  | $          | 2,737 |      
|Contribution Margin          |  |                      | 31,552  |             |   | 14,774    |  |            | 2,176 |      

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

|                                                   |          | 52 Weeks Ended |        
|-------------------------------------------------- | -------- | -------------- | -------
|
|Contribution margin                                |          | $              | 41,118 
|Management fee revenue                             |          |                | 11,315 
|Other operating revenue                            |          |                | 1,838  
|General and administrative expense                 |          |                | (30,526
|Stock compensation expense                         |          |                | (193   
|Store closure (provision) reversal                 |          |                |       
|Wal-Mart restructuring costs                       |          |                | (7,530 
|Impairment of long-lived assets                    |          |                | (4,196 
|Other operating income (expense), net              |          |                | 2,008  
|Minority interest                                  |          |                | 38     
|Interest expense, net                              |          |                | (17,412
|Depreciation and amortization                      |          |                | (10,181
|Provision for income taxes                         |          |                | (102   
|                                                   |          |                |        
|Loss before cumulative effect of accounting change |          |                | (13,823
|Loss from cumulative effect of accounting change   |          |                | (39,111
|                                                   |          |                |        
|                                                   | Net loss |                | $      
|                                                   |          |                |        

The
assets of the Company primarily relate 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 December 28, 2002 and December 29, 2001, amounts due from franchisees and licensees were
$4.5 million and $4.6 million, respectively.

The
Company has one licensee, Nonni's, that accounted for $3.8 million, $2.9 million and $1.1 million, or 64.6 percent, 60.7 percent and
41.9 percent of the revenue of the licensing segment for years ended December 28, 2002, December 29, 2001, and December 30, 2000, respectively. The Company has one
customer, Quill Corporation, that accounted for $2.2 million and $1.6 million, or 17.2 percent and 15.5 percent of revenue of the mail order business segment for
the years ended December 28, 2002 and December 29, 2001, respectively. The Company had two customers, Aventis Pharmaceutical and United Airlines, that accounted for
$1.1 million and $950,000, or 12.0 percent and 10.3 percent, respectively, of revenue of the mail order business segment for the year ended

66

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December 30, 2000. There were no other customers or licensees that accounted for more than 10.0 percent of Mrs. Fields' total revenue or any individual segment's revenue. At
December 28, 2002, the Company has a receivable of $936,000 from Nonni's, which represents 13.5 percent of the Company's total combined receivables. Additionally, the Company has a
receivable of $775,000 from International Multifoods Corporation, which represents 11.2 percent of the Company's total combined receivables. At December 28, 2002, the Company has
deferred revenue of $2.1 million under the Nonni's licensing agreement. This amount will be recognized into income during fiscal years 2003 and 2004.

10.  SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The Company's obligation related to its $140.0 million 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 five 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 rankpari passuin 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., Pretzelmaker, Inc., Pretzel Time, Inc., Mrs. Fields Gifts,
Inc. and Mrs. Fields' Cookies Australia, Inc., which are Guarantors (collectively, the "Guarantor Subsidiaries") and Mrs. Fields' Cookies (Canada) Ltd., Pretzelmaker Canada, and
two 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.

67

---

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 28, 2002
(Unaudited)
(Dollars in thousands)

|                                                                     |                                                                 | Parent
Company            |         | Guarantor
Subsidiaries |        | Non-
Guarantor
Subsidiaries |        | Eliminations |      | Consolidated |      
|-------------------------------------------------------------------- | --------------------------------------------------------------- | ------------------------- | ------- | ---------------------- | ------ | --------------------------- | ------ | ------------ | ---- | ------------ | -----
|ASSETS                                                               |                                                                 |                           |         |                        |        |                             |        |              |      |              |      
|CURRENT ASSETS:                                                      |                                                                 |                           |         |                        |        |                             |        |              |      |              |      
|                                                                     | Cash and cash equivalents                                       |                           | $       | 2,553                  |        | $                           | 1      |              | $    | 113          |      
|                                                                     | Accounts receivable, net                                        |                           |         | 2,299                  |        |                             | 135    |              |      |             |      
|                                                                     | Amounts due from franchisees and licensees, net                 |                           |         | 2,206                  |        |                             | 2,266  |              |      | 21           |      
|                                                                     | Amounts due from affiliates, net                                |                           |         | 40,893                 |        |                             |       |              |      |             |      
|                                                                     | Inventories                                                     |                           |         | 2,412                  |        |                             | 583    |              |      | 3            |      
|                                                                     | Other current assets                                            |                           |         | 671                    |        |                             |       |              |      |             |      
|                                                                     |                                                                 |                           |         |                        |        |                             |        |              |      |              |      
|                                                                     |                                                                 | Total current assets      |         |                        | 51,034 |                             |        | 2,985        |      |              | 137  
|PROPERTY AND EQUIPMENT, net                                          |                                                                 |                           | 15,941  |                        |        | 1,510                       |        |              |     |              |      
|INTANGIBLES, net                                                     |                                                                 |                           | 19,807  |                        |        | 54,760                      |        |              | 167  |              |      
|INVESTMENT IN SUBSIDIARIES                                           |                                                                 |                           | 16,425  |                        |        |                            |        |              |     |              |      
|AMOUNTS DUE FROM AFFILIATES                                          |                                                                 |                           | 1,500   |                        |        |                            |        |              |     |              |      
|OTHER ASSETS                                                         |                                                                 |                           | 4,251   |                        |        | 390                         |        |              |     |              |      
|                                                                     |                                                                 |                           |         |                        |        |                             |        |              |      |              |      
|                                                                     |                                                                 | $                         | 108,958 |                        | $      | 59,645                      |        | $            | 304  |              | $    
|                                                                     |                                                                 |                           |         |                        |        |                             |        |              |      |              |      
|LIABILITIES AND STOCKHOLDER'S DEFICIT                                |                                                                 |                           |         |                        |        |                             |        |              |      |              |      
|CURRENT LIABILITIES:                                                 |                                                                 |                           |         |                        |        |                             |        |              |      |              |      
|                                                                     | Current portion of long-term debt and capital lease obligations |                           | $       | 2,089                  |        | $                           | 2      |              | $    |             |      
|                                                                     | Accounts payable and borrowings under line of credit            |                           |         | 12,399                 |        |                             | 814    |              |      | 2            |      
|                                                                     | Amounts due to affiliates                                       |                           |         | 1,655                  |        |                             | 44,754 |              |      | 1,059        |      
|                                                                     | Accrued liabilities                                             |                           |         | 9,909                  |        |                             | 809    |              |      | 52           |      
|                                                                     |                                                                 |                           |         |                        |        |                             |        |              |      |              |      
|                                                                     |                                                                 | Total current liabilities |         |                        | 26,052 |                             |        | 46,379       |      |              | 1,113
|LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, net of current portion |                                                                 |                           | 140,423 |                        |        | 16                          |        |              |     |              |      
|STORE CLOSURE RESERVE, net of current portion                        |                                                                 |                           | 1,232   |                        |        |                            |        |              |     |              |      
|DEFERRED REVENUE, net of current portion                             |                                                                 |                           | 3,869   |                        |        |                            |        |              |     |              |      
|MINORITY INTEREST                                                    |                                                                 |                           |        |                        |        |                            |        |              |     |              |      
|STOCKHOLDER'S EQUITY (DEFICIT)                                       |                                                                 |                           | (62,618 | )                      |        | 13,250                      |        |              | (809 | )            |      
|                                                                     |                                                                 |                           |         |                        |        |                             |        |              |      |              |      
|                                                                     |                                                                 | $                         | 108,958 |                        | $      | 59,645                      |        | $            | 304  |              | $    
|                                                                     |                                                                 |                           |         |                        |        |                             |        |              |      |              |      

68

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SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE 52 WEEKS ENDED DECEMBER 28, 2002
(Unaudited)
(Dollars in thousands)

|                                                                                                     |                                       | Parent
Company                     |         | Guarantor
Subsidiaries |         | Non-
Guarantor
Subsidiaries |        | Eliminations |      | Consolidated |    
|---------------------------------------------------------------------------------------------------- | ------------------------------------- | ---------------------------------- | ------- | ---------------------- | ------- | --------------------------- | ------ | ------------ | ---- | ------------ | ---
|REVENUES:                                                                                            |                                       |                                    |         |                        |         |                             |        |              |      |              |    
|                                                                                                     | Net store and food sales              |                                    | $       | 115,248                |         | $                           |       |              | $    | 210          |    
|                                                                                                     | Franchising and licensing             |                                    |         | 11,612                 |         |                             | 31,605 |              |      | 262          |    
|                                                                                                     | Mail order                            |                                    |         | 12,628                 |         |                             |       |              |      |             |    
|                                                                                                     | Management fee revenue                |                                    |         | 11,315                 |         |                             |       |              |      |             |    
|                                                                                                     | Other operating revenue               |                                    |         | 1,838                  |         |                             |       |              |      |             |    
|                                                                                                     |                                       |                                    |         |                        |         |                             |        |              |      |              |    
|                                                                                                     |                                       | Total revenues                     |         |                        | 152,641 |                             |        | 31,605       |      |              | 472
|                                                                                                     |                                       |                                    |         |                        |         |                             |        |              |      |              |    
|OPERATING COSTS AND EXPENSES:                                                                        |                                       |                                    |         |                        |         |                             |        |              |      |              |    
|                                                                                                     | Selling and store occupancy costs     |                                    |         | 80,087                 |         |                             |       |              |      | 190          |    
|                                                                                                     | Cost of salesstore and food          |                                    |         | 31,144                 |         |                             | (39    | )            |      | 59           |    
|                                                                                                     | Franchising and licensing             |                                    |         | 790                    |         |                             | 8,840  |              |      | 359          |    
|                                                                                                     | Mail order                            |                                    |         | 9,782                  |         |                             |       |              |      |             |    
|                                                                                                     | General and administrative            |                                    |         | 26,518                 |         |                             | 5,470  |              |      | 215          |    
|                                                                                                     | Stock compensation expense            |                                    |         | 193                    |         |                             |       |              |      |             |    
|                                                                                                     | TCBY transition (income) expense      |                                    |         | (2,442                 | )       |                             |       |              |      |             |    
|                                                                                                     | Store closure (reversal) provision    |                                    |         |                       |         |                             |       |              |      |             |    
|                                                                                                     | Wal-Mart restructuring costs          |                                    |         | 7,530                  |         |                             |       |              |      |             |    
|                                                                                                     | Impairment of long-lived assets       |                                    |         | 4,196                  |         |                             |       |              |      |             |    
|                                                                                                     | Depreciation and amortization         |                                    |         | 8,762                  |         |                             | 1,408  |              |      | 11           |    
|                                                                                                     | Other operating (income) expense, net |                                    |         | (2,039                 | )       |                             |       |              |      | 31           |    
|                                                                                                     |                                       |                                    |         |                        |         |                             |        |              |      |              |    
|                                                                                                     |                                       | Total operating costs and expenses |         |                        | 164,521 |                             |        | 15,679       |      |              | 865
|                                                                                                     |                                       |                                    |         |                        |         |                             |        |              |      |              |    
|                                                                                                     | Income (loss) from operations         |                                    |         | (11,880                | )       |                             | 15,926 |              |      | (393         | )  
|Interest expense, net                                                                                |                                       |                                    | (13,589 | )                      |         | (3,823                      | )      |              |     |              |    
|                                                                                                     |                                       |                                    |         |                        |         |                             |        |              |      |              |    
|Loss before provision for income taxes, minority interest and cumulative effect of accounting change |                                       |                                    | (25,469 | )                      |         | 12,103                      |        |              | (393 | )            |    
|Provision for income taxes                                                                           |                                       |                                    | 68      |                        |         | (170                        | )      |              |     |              |    
|                                                                                                     |                                       |                                    |         |                        |         |                             |        |              |      |              |    
|Loss before minority interest and cumulative effect of accounting change                             |                                       |                                    | (25,401 | )                      |         | 11,933                      |        |              | (393 | )            |    
|Minority interest                                                                                    |                                       |                                    | 38      |                        |         |                            |        |              |     |              |    
|                                                                                                     |                                       |                                    |         |                        |         |                             |        |              |      |              |    
|Income (loss) before cumulative effect of accounting change                                          |                                       |                                    | (25,363 | )                      |         | 11,933                      |        |              | (393 | )            |    
|Loss from cumulative effect of accounting change                                                     |                                       |                                    | (39,111 | )                      |         |                            |        |              |     |              |    
|                                                                                                     |                                       |                                    |         |                        |         |                             |        |              |      |              |    
|Net (loss) income                                                                                    |                                       | $                                  | (64,474 | )                      | $       | 11,933                      |        | $            | (393 | )            | $  
|                                                                                                     |                                       |                                    |         |                        |         |                             |        |              |      |              |    

69

---

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE 52 WEEKS ENDED DECEMBER 28, 2002
(Unaudited)
(Dollars in thousands)

|                                                     |                                                                    | Parent
Company                            |       | Guarantor
Subsidiaries |         | Non-
Guarantor
Subsidiaries |     | Eliminations |     | Consolidated |  
|---------------------------------------------------- | ------------------------------------------------------------------ | ----------------------------------------- | ----- | ---------------------- | ------- | --------------------------- | --- | ------------ | --- | ------------ | -
|NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES  |                                                                    | $                                         | 7,099 |                        | $       | (378                        | )   | $            | 73  |              | $
|                                                     |                                                                    |                                           |       |                        |         |                             |     |              |     |              |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                |                                                                    |                                           |       |                        |         |                             |     |              |     |              |  
|                                                     | Purchase of property and equipment                                 |                                           |       | (5,881                 | )       |                             |    |              |     |             |  
|                                                     | Proceeds from the sale of assets                                   |                                           |       | 8,458                  |         |                             | 457 |              |     |             |  
|                                                     |                                                                    |                                           |       |                        |         |                             |     |              |     |              |  
|                                                     |                                                                    | Net cash provided by investing activities |       |                        | 2,577   |                             |     | 457          |     |              | 
|                                                     |                                                                    |                                           |       |                        |         |                             |     |              |     |              |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                |                                                                    |                                           |       |                        |         |                             |     |              |     |              |  
|                                                     | Principal payments on long-term debt and capital lease obligations |                                           |       | (2,492                 | )       |                             | (57 | )            |     |             |  
|                                                     | Net payments under line of credit                                  |                                           |       | (8,072                 | )       |                             |    |              |     |             |  
|                                                     |                                                                    |                                           |       |                        |         |                             |     |              |     |              |  
|                                                     |                                                                    | Net cash provided by financing activities |       |                        | (10,564 | )                           |     | (57          | )   |              | 
|                                                     |                                                                    |                                           |       |                        |         |                             |     |              |     |              |  
|EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH      |                                                                    |                                           |      |                        |         |                            |     |              | (43 | )            |  
|                                                     |                                                                    |                                           |       |                        |         |                             |     |              |     |              |  
|NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS |                                                                    |                                           | (888  | )                      |         | 22                          |     |              | 30  |              |  
|CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR   |                                                                    |                                           | 3,441 |                        |         | (21                         | )   |              | 83  |              |  
|                                                     |                                                                    |                                           |       |                        |         |                             |     |              |     |              |  
|CASH AND CASH EQUIVALENTS AT END OF THE YEAR         |                                                                    | $                                         | 2,553 |                        | $       | 1                           |     | $            | 113 |              | $
|                                                     |                                                                    |                                           |       |                        |         |                             |     |              |     |              |  
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:    |                                                                    |                                           |       |                        |         |                             |     |              |     |              |  
|                                                     | Interest paid                                                      |                                           | $     | 15,087                 |         | $                           | 13  |              | $   |             |  
|                                                     | Income taxes paid                                                  |                                           |       | 126                    |         |                             | 100 |              |     |             |  

70

---

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 29, 2001
(Unaudited)
(Dollars in thousands)

|                                                                     |                                                                 | Parent
Company            |         | Guarantor
Subsidiaries |        | Non-Guarantor
Subsidiaries |         | Eliminations |      | Consolidated |     
|-------------------------------------------------------------------- | --------------------------------------------------------------- | ------------------------- | ------- | ---------------------- | ------ | -------------------------- | ------- | ------------ | ---- | ------------ | ----
|ASSETS                                                               |                                                                 |                           |         |                        |        |                            |         |              |      |              |     
|CURRENT ASSETS:                                                      |                                                                 |                           |         |                        |        |                            |         |              |      |              |     
|                                                                     | Cash and cash equivalents                                       |                           | $       | 3,441                  |        | $                          | (21     | )            | $    | 83           |     
|                                                                     | Accounts receivable, net                                        |                           |         | 2,466                  |        |                            | 731     |              |      |             |     
|                                                                     | Amounts due from franchisees and licensees, net                 |                           |         | 849                    |        |                            | 3,648   |              |      | 87           |     
|                                                                     | Amounts due from affiliates, net                                |                           |         | 44,750                 |        |                            | (43,622 | )            |      | (576         | )   
|                                                                     | Inventories                                                     |                           |         | 3,302                  |        |                            | 682     |              |      | 3            |     
|                                                                     | Other current assets                                            |                           |         | 2,063                  |        |                            |        |              |      |             |     
|                                                                     |                                                                 |                           |         |                        |        |                            |         |              |      |              |     
|                                                                     |                                                                 | Total current assets      |         |                        | 56,871 |                            |         | (38,582      | )    |              | (403
|PROPERTY AND EQUIPMENT, net                                          |                                                                 |                           | 32,701  |                        |        | 1,853                      |         |              | 39   |              |     
|INTANGIBLES, net                                                     |                                                                 |                           | 49,955  |                        |        | 67,997                     |         |              | 188  |              |     
|INVESTMENT IN SUBSIDIARIES                                           |                                                                 |                           | 37,398  |                        |        | 1                          |         |              |     |              |     
|OTHER ASSETS                                                         |                                                                 |                           | 6,360   |                        |        | 42                         |         |              |     |              |     
|                                                                     |                                                                 |                           |         |                        |        |                            |         |              |      |              |     
|                                                                     |                                                                 | $                         | 183,285 |                        | $      | 31,311                     |         | $            | (176 | )            | $   
|                                                                     |                                                                 |                           |         |                        |        |                            |         |              |      |              |     
|LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)                       |                                                                 |                           |         |                        |        |                            |         |              |      |              |     
|CURRENT LIABILITIES:                                                 |                                                                 |                           |         |                        |        |                            |         |              |      |              |     
|                                                                     | Current portion of long-term debt and capital lease obligations |                           | $       | 2,509                  |        | $                          | 56      |              | $    |             |     
|                                                                     | Accounts payable and borrowings under line of credit            |                           |         | 23,335                 |        |                            | 2,257   |              |      | 8            |     
|                                                                     | Amounts due to affiliates                                       |                           |         | 608                    |        |                            | 273     |              |      |             |     
|                                                                     | Accrued liabilities                                             |                           |         | 10,056                 |        |                            | 1,192   |              |      | 33           |     
|                                                                     |                                                                 |                           |         |                        |        |                            |         |              |      |              |     
|                                                                     |                                                                 | Total current liabilities |         |                        | 36,508 |                            |         | 3,778        |      |              | 41  
|LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, net of current portion |                                                                 |                           | 142,408 |                        |        |                           |         |              |     |              |     
|STORE CLOSURE RESERVE, net of current portion                        |                                                                 |                           | 1,857   |                        |        |                           |         |              |     |              |     
|DEFERRED REVENUE, net of current portion                             |                                                                 |                           | 50      |                        |        | 915                        |         |              |     |              |     
|MINORITY INTEREST                                                    |                                                                 |                           | 38      |                        |        |                           |         |              |     |              |     
|STOCKHOLDER'S EQUITY (DEFICIT)                                       |                                                                 |                           | 2,424   |                        |        | 26,618                     |         |              | (217 | )            |     
|                                                                     |                                                                 |                           |         |                        |        |                            |         |              |      |              |     
|                                                                     |                                                                 | $                         | 183,285 |                        | $      | 31,311                     |         | $            | (176 | )            | $   
|                                                                     |                                                                 |                           |         |                        |        |                            |         |              |      |              |     

71

---



SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE 52 WEEKS ENDED DECEMBER 29, 2001
(Unaudited)
(Dollars in thousands)

|                                                                                                     |                                       | Parent
Company                     |                      | Guarantor
Subsidiaries |         | Non-Guarantor
Subsidiaries |        | Eliminations |        | Consolidated |    
|---------------------------------------------------------------------------------------------------- | ------------------------------------- | ---------------------------------- | -------------------- | ---------------------- | ------- | -------------------------- | ------ | ------------ | ------ | ------------ | ---
|REVENUES:                                                                                            |                                       |                                    |                      |                        |         |                            |        |              |        |              |    
|                                                                                                     | Net store and food sales              |                                    | $                    | 126,153                |         | $                          |       |              | $      | 236          |    
|                                                                                                     | Franchising and licensing             |                                    |                      | 5,926                  |         |                            | 29,404 |              |        | 287          |    
|                                                                                                     | Mail order                            |                                    |                      | 10,265                 |         |                            |       |              |        |             |    
|                                                                                                     | Management fee revenue                |                                    |                      | 11,485                 |         |                            |       |              |        |             |    
|                                                                                                     | Other operating revenue               |                                    |                      | 130                    |         |                            | 149    |              |        |             |    
|                                                                                                     |                                       |                                    |                      |                        |         |                            |        |              |        |              |    
|                                                                                                     |                                       | Total revenues                     |                      |                        | 153,959 |                            |        | 29,553       |        |              | 523
|                                                                                                     |                                       |                                    |                      |                        |         |                            |        |              |        |              |    
|OPERATING COSTS AND EXPENSES:                                                                        |                                       |                                    |                      |                        |         |                            |        |              |        |              |    
|                                                                                                     | Selling and store occupancy costs     |                                    |                      | 75,323                 |         |                            |       |              |        | 184          |    
|                                                                                                     | Cost of salesstore and food          |                                    |                      | 34,305                 |         |                            |       |              |        | 58           |    
|                                                                                                     | Franchising and licensing             |                                    |                      |                       |         |                            | 10,620 |              |        |             |    
|                                                                                                     | Mail order                            |                                    |                      | 8,074                  |         |                            |       |              |        |             |    
|                                                                                                     | General and administrative            |                                    |                      | 14,657                 |         |                            | 16,685 |              |        | 567          |    
|                                                                                                     | Stock compensation expense            |                                    |                      | 1,990                  |         |                            |       |              |        |             |    
|                                                                                                     | TCBY transition (income) expense      |                                    |                      |                       |         |                            |       |              |        |             |    
|                                                                                                     | Store closure (reversal) provision    |                                    |                      | 378                    |         |                            |       |              |        |             |    
|                                                                                                     | Impairment of long-lived assets       |                                    |                      | 3,992                  |         |                            |       |              |        |             |    
|                                                                                                     | Depreciation and amortization         |                                    |                      | 15,626                 |         |                            | 6,408  |              |        | 74           |    
|                                                                                                     | Other operating (income) expense, net |                                    |                      | (76                    | )       |                            | 1      |              |        |             |    
|                                                                                                     |                                       | Total operating costs and expenses |                      |                        | 154,269 |                            |        | 33,714       |        |              | 883
|                                                                                                     |                                       |                                    |                      |                        |         |                            |        |              |        |              |    
|                                                                                                     |                                       |                                    | Loss from operations |                        |         | (310                       | )      |              | (4,161 | )            |    
|Interest expense, net                                                                                |                                       |                                    | (14,139              | )                      |         | (3,203                     | )      |              |       |              |    
|                                                                                                     |                                       |                                    |                      |                        |         |                            |        |              |        |              |    
|Loss before provision for income taxes, minority interest and cumulative effect of accounting change |                                       |                                    | (14,449              | )                      |         | (7,364                     | )      |              | (360   | )            |    
|Provision for income taxes                                                                           |                                       |                                    | 201                  |                        |         | (222                       | )      |              |       |              |    
|                                                                                                     |                                       |                                    |                      |                        |         |                            |        |              |        |              |    
|Loss before minority interest and cumulative effect of accounting change                             |                                       |                                    | (14,248              | )                      |         | (7,586                     | )      |              | (360   | )            |    
|Minority interest                                                                                    |                                       |                                    | (7                   | )                      |         |                           |        |              |       |              |    
|                                                                                                     |                                       |                                    |                      |                        |         |                            |        |              |        |              |    
|Loss before cumulative effect of accounting change                                                   |                                       |                                    | (14,255              | )                      |         | (7,586                     | )      |              | (360   | )            |    
|Loss from cumulative effect of accounting change                                                     |                                       |                                    |                     |                        |         |                           |        |              |       |              |    
|                                                                                                     |                                       |                                    |                      |                        |         |                            |        |              |        |              |    
|Net loss                                                                                             |                                       | $                                  | (14,255              | )                      | $       | (7,586                     | )      | $            | (360   | )            | $  
|                                                                                                     |                                       |                                    |                      |                        |         |                            |        |              |        |              |    

72

---

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE 52 WEEKS ENDED DECEMBER 29, 2001
(Unaudited)
(Dollars in thousands)

|                                                     |                                                                    | Parent
Company                                      |        | Guarantor
Subsidiaries |         | Non-Guarantor
Subsidiaries |       | Eliminations |      | Consolidated |  
|---------------------------------------------------- | ------------------------------------------------------------------ | --------------------------------------------------- | ------ | ---------------------- | ------- | -------------------------- | ----- | ------------ | ---- | ------------ | -
|NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES  |                                                                    | $                                                   | 17,335 |                        | $       | (694                       | )     | $            | (168 | )            | $
|                                                     |                                                                    |                                                     |        |                        |         |                            |       |              |      |              |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                |                                                                    |                                                     |        |                        |         |                            |       |              |      |              |  
|                                                     | Purchase of property and equipment                                 |                                                     |        | (21,445                | )       |                            |      |              |      |             |  
|                                                     | Proceeds from the sale of assets                                   |                                                     |        | 271                    |         |                            | 198   |              |      | 9            |  
|                                                     |                                                                    |                                                     |        |                        |         |                            |       |              |      |              |  
|                                                     |                                                                    | Net cash (used in) provided by investing activities |        |                        | (21,174 | )                          |       | 198          |      |              | 9
|                                                     |                                                                    |                                                     |        |                        |         |                            |       |              |      |              |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                |                                                                    |                                                     |        |                        |         |                            |       |              |      |              |  
|                                                     | Principal payments on long-term debt and capital lease obligations |                                                     |        | (1,107                 | )       |                            | (525  | )            |      |             |  
|                                                     | Net borrowings under line of credit                                |                                                     |        | 5,124                  |         |                            | 1,000 |              |      |             |  
|                                                     |                                                                    |                                                     |        |                        |         |                            |       |              |      |              |  
|                                                     |                                                                    | Net cash provided by financing activities           |        |                        | 4,017   |                            |       | 475          |      |              | 
|                                                     |                                                                    |                                                     |        |                        |         |                            |       |              |      |              |  
|EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH      |                                                                    |                                                     |       |                        |         |                           |       |              | (6   | )            |  
|                                                     |                                                                    |                                                     |        |                        |         |                            |       |              |      |              |  
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |                                                                    |                                                     | 178    |                        |         | (21                        | )     |              | (165 | )            |  
|CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR   |                                                                    |                                                     | 3,263  |                        |         |                           |       |              | 248  |              |  
|                                                     |                                                                    |                                                     |        |                        |         |                            |       |              |      |              |  
|CASH AND CASH EQUIVALENTS AT END OF THE YEAR         |                                                                    | $                                                   | 3,441  |                        | $       | (21                        | )     | $            | 83   |              | $
|                                                     |                                                                    |                                                     |        |                        |         |                            |       |              |      |              |  
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:    |                                                                    |                                                     |        |                        |         |                            |       |              |      |              |  
|                                                     | Interest paid                                                      |                                                     | $      | 14,853                 |         | $                          | 26    |              | $    |             |  
|                                                     | Income taxes paid                                                  |                                                     |        | 40                     |         |                            | 75    |              |      |             |  

73

---

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE 52 WEEKS ENDED DECEMBER 30, 2000
(Unaudited)
(Dollars in thousands)

|                                                                                                     |                                    | Parent
Company                     |                               | Guarantor
Subsidiaries |         | Non-Guarantor
Subsidiaries |        | Eliminations |        | Consolidated |    
|---------------------------------------------------------------------------------------------------- | ---------------------------------- | ---------------------------------- | ----------------------------- | ---------------------- | ------- | -------------------------- | ------ | ------------ | ------ | ------------ | ---
|REVENUES:                                                                                            |                                    |                                    |                               |                        |         |                            |        |              |        |              |    
|                                                                                                     | Net store and food sales           |                                    | $                             | 134,369                |         | $                          |       |              | $      | 284          |    
|                                                                                                     | Franchising and licensing          |                                    |                               | 3,598                  |         |                            | 27,737 |              |        | 296          |    
|                                                                                                     | Mail order                         |                                    |                               | 9,186                  |         |                            |       |              |        |             |    
|                                                                                                     | Management fee revenue             |                                    |                               | 7,533                  |         |                            |       |              |        |             |    
|                                                                                                     | Other operating revenue            |                                    |                               | 112                    |         |                            |       |              |        |             |    
|                                                                                                     |                                    |                                    |                               |                        |         |                            |        |              |        |              |    
|                                                                                                     |                                    | Total revenues                     |                               |                        | 154,798 |                            |        | 27,737       |        |              | 580
|                                                                                                     |                                    |                                    |                               |                        |         |                            |        |              |        |              |    
|OPERATING COSTS AND EXPENSES:                                                                        |                                    |                                    |                               |                        |         |                            |        |              |        |              |    
|                                                                                                     | Selling and store occupancy costs  |                                    |                               | 74,492                 |         |                            |       |              |        | 185          |    
|                                                                                                     | Cost of salesstores and food      |                                    |                               | 34,336                 |         |                            |       |              |        | 56           |    
|                                                                                                     | Franchising and licensing          |                                    |                               |                       |         |                            | 10,084 |              |        | 9            |    
|                                                                                                     | Mail order                         |                                    |                               | 7,134                  |         |                            |       |              |        |             |    
|                                                                                                     | General and administrative         |                                    |                               | 9,861                  |         |                            | 15,077 |              |        | 120          |    
|                                                                                                     | TCBY transition (income) expense   |                                    |                               | 2,442                  |         |                            |       |              |        |             |    
|                                                                                                     | Store closure (reversal) provision |                                    |                               | (1,015                 | )       |                            | 1      |              |        |             |    
|                                                                                                     | Impairment of long-lived assets    |                                    |                               | 4,232                  |         |                            |       |              |        |             |    
|                                                                                                     | Depreciation and amortization      |                                    |                               | 17,273                 |         |                            | 6,397  |              |        | 35           |    
|                                                                                                     | Other operating expense, net       |                                    |                               | 158                    |         |                            | 26     |              |        |             |    
|                                                                                                     |                                    |                                    |                               |                        |         |                            |        |              |        |              |    
|                                                                                                     |                                    | Total operating costs and expenses |                               |                        | 148,913 |                            |        | 31,585       |        |              | 405
|                                                                                                     |                                    |                                    |                               |                        |         |                            |        |              |        |              |    
|                                                                                                     |                                    |                                    | Income (loss) from operations |                        |         | 5,885                      |        |              | (3,848 | )            |    
|Interest expense, net                                                                                |                                    |                                    | (17,418                       | )                      |         | (373                       | )      |              |       |              |    
|                                                                                                     |                                    |                                    |                               |                        |         |                            |        |              |        |              |    
|Loss before provision for income taxes, minority interest and cumulative effect of accounting change |                                    |                                    | (11,533                       | )                      |         | (4,221                     | )      |              | 175    |              |    
|Provision for income taxes                                                                           |                                    |                                    | (3,776                        | )                      |         | (65                        | )      |              |       |              |    
|                                                                                                     |                                    |                                    |                               |                        |         |                            |        |              |        |              |    
|Loss before minority interest and cumulative effect of accounting change                             |                                    |                                    | (15,309                       | )                      |         | (4,286                     | )      |              | 175    |              |    
|Minority interest                                                                                    |                                    |                                    | 26                            |                        |         |                           |        |              |       |              |    
|                                                                                                     |                                    |                                    |                               |                        |         |                            |        |              |        |              |    
|Loss before cumulative effect of account change                                                      |                                    |                                    | (15,283                       | )                      |         | (4,286                     | )      |              | 175    |              |    
|Loss from cumulative effect of accounting change                                                     |                                    |                                    |                              |                        |         |                           |        |              |       |              |    
|                                                                                                     |                                    |                                    |                               |                        |         |                            |        |              |        |              |    
|Net (loss) income                                                                                    |                                    | $                                  | (15,283                       | )                      | $       | (4,286                     | )      | $            | 175    |              | $  
|                                                                                                     |                                    |                                    |                               |                        |         |                            |        |              |        |              |    

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SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE 52 WEEKS ENDED DECEMBER 30, 2000
(Unaudited)
(Dollars in thousands)

|                                                     |                                                                    | Parent
Company                                      |       | Guarantor
Subsidiaries |        | Non-Guarantor
Subsidiaries |        | Eliminations |     | Consolidated |  
|---------------------------------------------------- | ------------------------------------------------------------------ | --------------------------------------------------- | ----- | ---------------------- | ------ | -------------------------- | ------ | ------------ | --- | ------------ | -
|NET CASH PROVIDED BY OPERATING ACTIVITIES            |                                                                    | $                                                   | 8,355 |                        | $      | 998                        |        | $            | 93  |              | $
|                                                     |                                                                    |                                                     |       |                        |        |                            |        |              |     |              |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                |                                                                    |                                                     |       |                        |        |                            |        |              |     |              |  
|                                                     | Purchase of property and equipment                                 |                                                     |       | (9,312                 | )      |                            | (538   | )            |     |             |  
|                                                     | Proceeds from the sale of assets                                   |                                                     |       | 66                     |        |                            |       |              |     |             |  
|                                                     |                                                                    |                                                     |       |                        |        |                            |        |              |     |              |  
|                                                     |                                                                    | Net cash used in investing activities               |       |                        | (9,246 | )                          |        | (538         | )   |              | 
|                                                     |                                                                    |                                                     |       |                        |        |                            |        |              |     |              |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                |                                                                    |                                                     |       |                        |        |                            |        |              |     |              |  
|                                                     | Payment of debt financing costs                                    |                                                     |       | (338                   | )      |                            |       |              |     |             |  
|                                                     | Principal payments on long-term debt and capital lease obligations |                                                     |       | (2,151                 | )      |                            | (345   | )            |     |             |  
|                                                     | Net borrowings under line of credit                                |                                                     |       | 2,920                  |        |                            | 163    |              |     |             |  
|                                                     | Reduction in preferred stock of Pretzel Time                       |                                                     |       |                       |        |                            | (1,070 | )            |     |             |  
|                                                     |                                                                    |                                                     |       |                        |        |                            |        |              |     |              |  
|                                                     |                                                                    | Net cash provided by (used in) financing activities |       |                        | 431    |                            |        | (1,252       | )   |              | 
|                                                     |                                                                    |                                                     |       |                        |        |                            |        |              |     |              |  
|EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH      |                                                                    |                                                     |      |                        |        |                           |        |              | (86 | )            |  
|                                                     |                                                                    |                                                     |       |                        |        |                            |        |              |     |              |  
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |                                                                    |                                                     | (460  | )                      |        | (792                       | )      |              | 7   |              |  
|CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR   |                                                                    |                                                     | 3,886 |                        |        | 792                        |        |              | 241 |              |  
|                                                     |                                                                    |                                                     |       |                        |        |                            |        |              |     |              |  
|CASH AND CASH EQUIVALENTS AT END OF THE YEAR         |                                                                    | $                                                   | 3,426 |                        | $      |                           |        | $            | 248 |              | $
|                                                     |                                                                    |                                                     |       |                        |        |                            |        |              |     |              |  
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:    |                                                                    |                                                     |       |                        |        |                            |        |              |     |              |  
|                                                     | Interest paid                                                      |                                                     | $     | 17,297                 |        | $                          | 410    |              | $   |             |  
|                                                     | Income taxes paid                                                  |                                                     |       | 305                    |        |                            |       |              |     |             |  

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

On April 22, 2002, the board of directors of Mrs. Fields, upon recommendation of its Audit Committee, dismissed Arthur Andersen LLP ("Arthur
Andersen") as the Company's independent public accountants, and authorized KPMG LLP ("KPMG") to serve as the Company's independent public accountants for the fiscal year ended December 28,
2002.

In
connection with the audits of the Company's consolidated financial statements for the fiscal years ended December 29, 2001 and December 30, 2000, and during the
subsequent interim period through April 22, 2002, there were no disagreements between the Company and Arthur Andersen on any matters of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved to Arthur Andersen's satisfaction, would have caused Arthur Andersen to make reference to the subject matter of the
disagreement in connection with its reports. Arthur Andersen's reports on the Company's consolidated financial statements for the fiscal years ended December 29, 2001 and
December 30, 2000 did not contain an adverse opinion or disclaimer of opinion, nor was any such report qualified or modified as to uncertainty, audit scope or accounting principles.

During
the previous two fiscal years, and during the subsequent interim period through April 22, 2002, Arthur Andersen did not advise, and had not indicated to the Company
that it had reason to advise, the Company of any reportable events described under Item 304(a)(1)(v) of Regulation S-K.

During
the previous two fiscal years, and during the subsequent interim period through April 22, 2002, the Company did not consult KPMG with respect to the application of
accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company's consolidated financial statements, or any other
matters or reportable events listed in Items 304(a)(2)(i) and (ii) of Regulation S-K.

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PART III

Item 10. Directors and Executive Officers of the Registrant

The following table sets forth certain information regarding the executive officers and directors of Mrs. Fields as of March 15, 2003.

|Name               |  | Age |  | Title                                                    
|------------------ |  | --- |  | ---------------------------------------------------------
|Larry A. Hodges    |  | 54  |  | Director, President and Chief Executive Officer          
|Sandra M. Buffa    |  | 50  |  | Senior Vice President and Chief Financial Officer        
|Garry Remington    |  | 50  |  | Senior Vice President of Store Operations and Real Estate
|Robert Rodriguez   |  | 50  |  | Senior Vice President of Franchise Operations            
|Michael R. Ward    |  | 44  |  | Senior Vice President, General Counsel and Secretary     
|Dudley C. Mecum    |  | 68  |  | Chairman of the Board of Directors                       
|Richard M. Ferry   |  | 65  |  | Director                                                 
|Walker Lewis       |  | 58  |  | Director                                                 
|Peter W. Mullin    |  | 61  |  | Director                                                 
|Gilbert C. Osnos   |  | 73  |  | Director                                                 
|Christopher Wright |  | 45  |  | Director                                                 

Mr. Hodges
has been a President, Chief Executive Officer and Director of Mrs. Fields since its inception in September 1996. Prior to that, he joined the board of
directors of Mrs. Fields, Inc. in April 1993 and became President and Chief Executive Officer in March 1994. 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 38 years of
experience in the retail industry 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.

Ms. Buffa
joined Mrs. Fields as Senior Vice President and Chief Financial Officer in April 2001. She has significant retail experience and has served as Chief
Financial Officer for several growing entities involved with mergers and acquisitions, financings and divestitures. Immediately before joining Mrs. Fields, Ms. Buffa spent a year on
sabbatical. Prior to that, Ms. Buffa was President of Crabtree & Evelyn, Ltd. from November 1998 to November 1999; Chief Financial Officer and Director from
March 1998 to November 1998. She was Senior Vice President Chief Financial Officer, Treasurer and a Director of National Vision Associates, Ltd. from 1993 to 1998.

Mr. Remington
was appointed Senior Vice President of Store Operations on December 29, 2002. He continues to serve as Senior Vice President of Real Estate, a position he has
held since joining the Company in July 1997. Between October 1996 and July 1997, Mr. Remington served as Vice President of Real Estate for Sbarro, Inc.
Mr. Remington was Senior Vice President of Leasing for the Woolworth Corporation from 1994 to 1996. Mr. Remington commenced his employment at the Woolworth Company in 1972.

Mr. Rodriguez
was appointed Senior Vice President of Franchise Operations on December 29, 2002. He joined the Company in August 2001 as Senior Vice President of
Operations. From November 2000 to August 2001 was on sabbatical and pursuing personal interests. During 1998 through 2000, Mr. Rodriguez was President of Gloria Jean's Gourmet
Coffee, an operating division of Diedrich
Coffee, Inc. From 1992 through 1998, Mr. Rodriguez served as Divisional President for McDonald's Corporation.

Mr. Ward
has served as Senior Vice President, General Counsel and Secretary of Mrs. Fields since its inception in September 1996. Between 1991 and 1996,
Mr. Ward was Senior Vice President, General

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Counsel and Secretary of Mrs. Fields, Inc. Mr. Ward is a director of Nonni's Food Company, Inc. He is admitted to practice law in the State of Utah.

Mr. Mecum
has been the Chairman of the Board of Directors and a director of Mrs. Fields since February 2002. Mr. Mecum has been a General Partner at Capricorn
Holdings since 1997. Until September 1996, Mr. Mecum was a partner of G.L. Ohrstrom & Co., a merchant banking firm. From December 1985 to December 1987,
Mr. Mecum was President of the Environmental and Engineering Services Unit and a director of Combustion Engineering, Inc. He served as the managing partner of the New York office of Peat
Marwick Mitchell & Co. from 1979 to 1985 and as Vice Chairman of the Western Region of Peat Marwick Mitchell & Co. from 1973 to 1979. Mr. Mecum is director of Citigroup, CCC
Information Services Group Inc., Lyondell and Suburban Propane Partners, M.L.P.

Mr. Ferry
has been a director since the inception of Mrs. Fields in September 1996. Mr. Ferry is Founder Chairman of Korn/Ferry International, an
international executive search firm, where he served as Chairman from May 1997 to July 2001 and Chairman and Chief Executive Officer from May 1991 to May 1997.
Mr. Ferry serves on the Board of 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. Lewis
has been a director since the inception of Mrs. Fields 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 to SBC Warburg Dillon Read. 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 as a director of Owens Corning, Unilab Corporation
and London Fog Industries and Chairman of the Board of Applied Predictive Technologies.

Mr. Mullin
has been a director since the inception of Mrs. Fields in September 1996. Mr. Mullin founded Mullin Consulting, Inc., an executive
compensation, benefit planning and corporate insurance consulting firm, 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 a director of Avery Dennison Corporation and Mellon Financial GroupWest Coast. Mr. Mullin is an
investor in Capricorn II and Capricorn III.

Mr. Osnos
has been a director since the inception of Mrs. Fields in September 1996. Mr. Osnos has served as Chairman of Osnos Associates, Inc., which
provides interim management to companies since 1982. He has served as Interim President/CEO/COO in a large array of companies in manufacturing, distribution, retailing and services industries. He was
a founder, Chairman and director of the Board of Turnaround Management Association.

Mr. Wright
has been a director since February 2002. He is currently Chairman of various investment funds within Allianz Private Equity to which Mr. Wright is Senior
Advisor. From 1995 to 2002, he served as Head of the Global Private Equity business of Dresdner Kleinwort Capital and Chairman of the Dresdner Bank Group Private Equity Board. Mr. Wright joined
Kleinwort Benson Limited in London in 1978. He is director of Roper Industries, Inc., Genaissance Pharmaceuticals, Inc., Idocument Systems plc and several privately owned companies and
venture capital funds. Mr. Wright also serves on the Limited Partner Advisory Committee of Capricorn III.

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 (the "Named Executive Officers") of Mrs. Fields other than the Chief Executive Officer who were serving as executive
officers at the end of the last completed fiscal year. Information

78

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described in the table reflects compensation earned by such individuals for services with Mrs. Fields, its subsidiaries and certain of its affiliates.

SUMMARY COMPENSATION TABLE

|                                                                          |  | Annual Compensation |  | Long-Term
Compensation Award |                         | 
|------------------------------------------------------------------------- |  | ------------------- |  | ---------------------------- | ----------------------- | 
|
|Larry A. Hodges
President and Chief Executive Officer                     |  | 2002
2001
2000      |  | $                            | 430,000
430,000
402,500 | 
|Sandra M. Buffa(1)
Senior Vice President and Chief Financial Officer      |  | 2002
2001
2000      |  |                              | 250,000
176,136
       | 
|Garry Remington
Senior Vice President of Store Operations and Real Estate |  | 2002
2001
2000      |  |                              | 197,600
194,600
197,600 | 
|Robert Rodriguez(2)
Senior Vice President, of Franchise Operations        |  | 2002
2001
2000      |  |                              | 250,000
87,708
        | 
|Michael R. Ward
Senior Vice President, General Counsel and Secretary      |  | 2002
2001
2000      |  |                              | 225,000
230,320
183,782 | 

---

Option Grants and Exercises

Under the MFFB Employee Stock Option Plan, a committee of the Board of Directors is authorized to administer the MFFB Employee Stock Option Plan and has the
power, among other things, to grant awards to officers and other employees of MFFB and its subsidiaries, including Mrs. Fields, of options for common stock of MFFB. There were no individual
grants of stock options made during fiscal year 2002 to any of the Named Executive Officers of the Company. There were no exercises of stock options during fiscal year 2002 by any of the Named
Executive Officers of the Company. The following table gives information for the value of the options of MFFB common stock

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held by the Named Executive Officers at year end, using management's estimate of the value of MFFB's common stock on December 28, 2002.

Fiscal Year-End Options/SAR Values

|                 |  | Number of Securities
Underlying Unexercised
Options at Fiscal Year-End |  | Value of Unexercised
In-the-Money Options
at Fiscal Year-End(a)
|---------------- |  | ---------------------------------------------------------------------- |  | ---------------------------------------------------------------
|
|Larry A. Hodges  |  | 114,336                                                                |  | 260,157                                                        
|Sandra M. Buffa  |  | 15,600                                                                 |  | 62,400                                                         
|Garry Remington  |  | 27,238                                                                 |  | 19,562                                                         
|Robert Rodriguez |  | 12,250                                                                 |  | 65,750                                                         
|Michael R. Ward  |  | 28,268                                                                 |  | 49,733                                                         

---

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, are compensated for services rendered annually as follows:

(1)  $12,000
cash; and

(2)  grants
of options to purchase common stock of MFFB under the MFFB Director Stock Option Plan.

As
of January 1, 2002, the Board of Directors of MFFB approved the award of options under the MFFB Director Stock Option Plan to purchase 552 shares of common stock of MFFB at an
exercise price of $22.66 to each of Messrs. Ferry, Lewis, Mullin, Osnos, Winokur, Mecum and Wright. The cash compensation and options granted to Messrs. Winokur and Mecum were paid and
issued to Capricorn II and Capricorn III.

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. Mecum (Chairman) 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 Messr. Lewis (Chairman),
Mullin and Ferry. 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. Mecum (Chairman), Osnos and
Wright. The purpose of the Audit Committee is to provide assistance to the Board of Directors in

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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 auditors submit 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.

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, could have been issued to outside directors of Mrs. Fields'
Holding and its subsidiaries, including Mrs. Fields. Restricted shares vested 50 percent on January 1, 1999 and 50 percent on December 29, 2001. 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 were issued to directors under the Director Stock Purchase
Plan. These shares have been exchanged for shares of MFFB under the Mrs. Fields Reorganization.

Employee and Director Stock Option Plans

Under the MFFB Employee Stock Option Plan, a committee of the Board is authorized to administer the MFFB Employee Stock Option Plan and has the power, among other
things, to grant awards to officers and other employees of MFFB and its subsidiaries, including Mrs. Fields, of options for common stock of MFFB. The MFFB Employee Stock Option Plan provides
for the issuance of two types of options. Time vested options vest 25.0 percent per year on the anniversaries of the dates on which they are granted and vest in full upon a change of control of
MFFB. 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 20.0 percent, the option will not vest;

(2)  if
the IRR is from 20.0 percent to 24.99 percent, the option will vest one-third;

(3)  if
the IRR is from 25.0 percent to 29.99 percent, the option will vest two-thirds; and

(4)  if
the IRR is at least 30.0 percent, 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 MFFB calculated from the "Initial Date"
specified in the award agreement through the date that the determination is being made, using the "Initial Value" of one share at the Initial Date as specified in the award agreement.

A
total of 936,000 shares of common stock of MFFB have been reserved for issuance under the MFFB Employee Stock Option Plan. Stock issued under the MFFB Employee Stock Option Plan is
subject to customary restrictions on transfer.

Under
the MFFB Director Stock Option Plan, a committee of the Board of MFFB is authorized to administer the MFFB Director Stock Option Plan and has the power, among other things, to
grant awards of options for common stock of MFFB to outside directors of MFFB and its subsidiaries, including Mrs. Fields. The MFFB Director Stock Option Plan provides for the issuance of time
vested

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options, which vest 25.0 percent per year on the anniversaries of the dates on which they are granted and vest in full upon a change of control of MFFB or Mrs. Fields. A total of 50,000
shares of common stock of MFFB are reserved for issuance under the MFFB Director Stock Option Plan. Common stock of Mrs. Fields' Holding issued under the Director Stock Option Plan is subject
to customary restrictions on transfer.

Employment Agreements

The executives who have employment agreements and their current base salaries are: Larry A. Hodges, President and Chief Executive Officer, $430,000; Sandra M.
Buffa, Senior Vice President and Chief Financial Officer, $250,000; Michael R. Ward, Senior Vice President, General Counsel and Secretary, $235,000; and Garry Remington, Senior Vice President of Store
Operations and Real Estate, $235,000. 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 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 severance pay of 18 months
(24 months, in the case of Larry A. Hodges) of his or her then current salary, plus a portion of any discretionary bonus that would otherwise have been payable. The severance is paid in 12
equal monthly installments. 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 10.0 percent or more of Mrs. Fields'
gross sales, revenues or earnings before taxes. An exception is made for investments of not more than 3.0 percent 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.

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 Mrs. Fields Holding. Mrs. Fields Holding is a wholly owned
subsidiary of MFFB whose address is 2855 East Cottonwood Parkway, Suite 400, Salt Lake City, Utah 84121. The following table sets forth certain information, as of March 1, 2003, 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 the Company to own beneficially in excess of
5 percent 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. The stockholders listed below are deemed beneficial owners of common stock of Mrs. Fields as a result of their ownership of common stock of
MFFB, the ultimate parent 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 1, 2003, and give effect to the exercise of warrants issued
by MFFB. See "Executive Compensation" and "Board Compensation."

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As of March 1, 2003, there were 36 record holders of common stock of MFFB.

|                        |  |                                                          |  | Common Stock | 
|----------------------- |  | -------------------------------------------------------- |  | ------------ | 
|
|Common stock, par       |  | Capricorn Investors II, L.P.(1)(3)(4)                    |  | 3,243,511    | 
|value $0.001 per share, |  | Capricorn Investors III, L.P.(1)(3)(4)                   |  | 2,040,330    | 
|of Mrs. Fields Famous   |  | Affiliates of Dresdner Kleinwort Capital(2)              |  | 491,669      | 
|Brands, Inc.            |  | Larry A. Hodges(3)(4)                                    |  | 145,084      | 
|                        |  | Richard M. Ferry(3)(4)(5)                                |  | 17,066       | 
|                        |  | Walker Lewis(3)(4)                                       |  | 14,192       | 
|                        |  | Peter W. Mullin(3)(4)(5)                                 |  | 22,912       | 
|                        |  | Gilbert C. Osnos(3)(4)                                   |  | 14,941       | 
|                        |  | Herbert Winokur, Jr.(3)(4)(5)                            |  | 6,729        | 
|                        |  | Christopher Wright(3)(4)                                 |  | 138          | 
|                        |  | Sandra M. Buffa(4)                                       |  | 31,200       | 
|                        |  | Garry Remington(4)                                       |  | 27,313       | 
|                        |  | Robert Rodriguez(4)                                      |  | 12,250       | 
|                        |  | Michael R. Ward(4)                                       |  | 28,567       | 
|                        |  | All executive officers and directors as a group(3)(4)(5) |  | 320,392      | 

---

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Equity Compensation Plan Information

The following table sets forth certain information as of December 28, 2002 concerning MFFB's common stock that may be issued upon the exercise of options
under all of MFFB's equity compensation plans approved by the stockholders. As of December 28, 2002, there were no equity compensation plans in effect that were not approved by the
stockholders.

|Plan Category                   |  | Number of securities to be issued upon exercise of outstanding options and rights |  | Weighted-average
exercise price of
outstanding options and
rights |       | Number of securities
remaining for future
issuance under equity
compensation plans
|------------------------------- |  | --------------------------------------------------------------------------------- |  | ----------------------------------------------------------------- | ----- | ----------------------------------------------------------------------------------
|MFFB Employee Stock Option Plan |  | 777,592                                                                           |  | $                                                                 | 17.78 |                                                                                   
|MFFB Director Stock Option Plan |  | 45,954                                                                            |  |                                                                   | 15.09 |                                                                                   
|                                |  |                                                                                   |  |                                                                   |       |                                                                                   
|                                |  | 823,546                                                                           |  |                                                                   | 17.62 |                                                                                   
|                                |  |                                                                                   |  |                                                                   |       |                                                                                   

Item 13. Certain Relationships and Related Transactions

Arrangements With Mrs. Fields' Holding.As of December 28, 2002 and December 29,
2001, Mrs. Fields had a net payable of $273,000 and $274,000, respectively, with Mrs. Fields' Holding. The intercompany balance due to Mrs. Fields' Holding is principally the
amount due under an Assignment and Assumption Agreement entered into on December 29, 2001 for the assignment of 20 Pretzel Time stores formerly owned and operated by Mrs. Fields'
Holding, which is described in more detail below.

Assignment and Assumption Agreement.On December 29, 2001, the Company entered into an
Assignment and Assumption Agreement with Mrs. Fields' Holding whereby the assets, liabilities and common stock relating to three wholly owned subsidiaries of Mrs. Fields' Holding which
own and operate 20 Pretzel Time stores were assigned to the Company. The execution of the agreement resulted in the recording of working capital assets comprised of cash and inventory of $468,000, net
property and equipment relating to the stores of $847,000, goodwill and other intangibles of $2.5 million and the assumption of various liabilities of $3.8 million, including a $607,000
note payable to Mrs. Fields' Holding. The note is payable upon demand and bears interest at 14.0 percent.

The Stockholders' Agreement.Mrs. Fields' Holding previously entered into a stockholders'
agreement with its stockholders. In connection with the Mrs. Fields Reorganization, the Mrs. Fields' Holding stockholders' agreement was terminated. Concurrently, MFFB entered into a
stockholders' agreement with its stockholders. The stockholders' agreement provides that stockholders may not transfer their shares of MFFB, except to certain permitted transferees. If at any time
after seven years from the date of the stockholders' agreement any stockholder other than Capricorn II or Capricorn III receives an offer to purchase shares of common stock, that stockholder
must first offer the shares to MFFB and other stockholders at the same price and on substantially the same terms. MFFB has a right of first refusal with respect to such shares, with the stockholders
having the right, if MFFB does not buy all of the shares, to purchase such shares on a pro rata basis.

If
both Capricorn II and Capricorn III approve a sale or exchange of at least a majority of the outstanding common stock to a third party that is not an affiliate of either Capricorn II
or Capricorn III, then either Capricorn entity has the right to require the other stockholders to (i) if the sale is structured as a sale of stock, sell all of such stockholders' shares of
common stock; or (ii) if the sale is structured as a merger requiring the consent of stockholders, vote such stockholders' shares in favor of the sale. The stockholders' agreement also gives
certain rights to certain stockholders upon an initial public offering consummated by MFFB, and includes other provisions as set forth in the stockholders agreement.

84

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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 acquisition of TCBY Enterprises by Capricorn III, Mrs. Fields entered into a management agreement with TCBY
pursuant to which the Company manages the day-to-day operations of TCBY in return for a fee. Included in amounts due from affiliates as of December 28, 2002 is
$1.5 million, which has been retained by TCBY in accordance with the TCBY Management Agreement.

Riverport Equipment.During 2001, the Company sold equipment and smallware supplies of $789,000 to
Riverport Equipment and Distribution Company ("Riverport"), a wholly owned subsidiary of TCBY Systems, LLC. Riverport offers equipment supplies to the Company's franchisees and TCBY's franchisees. In
connection with the construction of the Company's new store locations and operations of the company owned stores, the Company made equipment and smallware supply purchases of $2.4 million and
$5.8 million for the years ended December 28, 2002 and December 29, 2001, respectively. At December 28, 2002, the Company had an amount due to Riverport of $183,000
and at December 29, 2001, the Company had an amount due from Riverport of $406,000.

Franchise Agreement with TCBY.In 2000, the Company entered into a franchise agreement with TCBY
allowing the Company to sell and distribute TCBY products. The franchise agreement calls for an initial franchise fee of $5,000 or $20,000 depending upon the TCBY products to be offered by the
location. The Company paid and capitalized as other intangibles, initial franchise fees of $115,000 associated with 11 company owned locations and $890,000 associated with 64 company owned locations
for the years ended December 28, 2002 and December 29, 2001, respectively. Under the agreement, the Company is to pay ongoing royalties of 7 percent of net revenues from
TCBY related products. The Company paid royalties of $90,000 and $73,000 under the agreement for the years ended December 28, 2002 and December 29, 2001, respectively.

License Agreement with TCBY.In March 2002, the Company entered into a licensing agreement
with TCBY for the manufacturing and distribution through designated retail channels of Mrs. Fields' premium ice cream. The term of the agreement is for one year with a royalty rate of net sales
at 7 percent. During the year ended December 28, 2002, TCBY paid the Company $265,000 under the licensing agreement.

The
net balance payable by the Company to TCBY for the above transactions at December 28, 2002 was $321,000. The net balance due to the Company from TCBY at December 29,
2001 was $15,000.

The
Company incurs various marketing expenditures on behalf of TCBY's advertising fund. During the years ended the December 28, 2002 and December 29, 2001, the
Company incurred costs that were reimbursed from the TCBY advertising fund of $458,000 and $375,000, respectively.

85

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The
amount due to/from affiliates are comprised of amounts due to/from Mrs. Fields' Holding, TCBY and its affiliates, MFFB and from the Company's minority interest subsidiary as
follows at December 28, 2002 and December 29, 2001 (in thousands):

December 28, 2002

December 29, 2001Amounts due from affiliates:Uvestminority interest subsidiary

$


$
131Riverport





406TCBY





15


552TCBYretention amount, long term


1,500


$
1,500

$
522Amounts due to affiliates:Mrs. Fields' Holdingnote payable

$
554

$
607Mrs. Fields' Holding


273


274Riverport


183


TCBY


321


MFFBtax sharing


5,244


$
6,575

$
881


Korn/Ferry International.The Company has from time-to-time engaged
Korn/Ferry International ("Korn/Ferry"), an executive recruiting firm for which Richard Ferry, one of the members of the Company's board of directors, is Founder Chairman. For the years ended
December 28, 2002, December 29, 2001 and December 30, 2000, the Company paid recruiting fees to Korn/Ferry of $39,000, $121,000 and $68,000, respectively.

Applied Predictive Technologies.The Company has periodically engaged Applied Predictive Technologies
("APT") to evaluate the economics and demographic trends of certain mall and retail site locations for which Walker Lewis, one of the members of the Company's board of directors, is Chairman of the
Board of APT. For the years ended December 28, 2002, December 29, 2001 and December 30, 2000, the Company paid APT $161,000, $163,000 and $134,000, respectively.

Nonni's Food Company, Inc.The Company has entered into various licensing agreements with and
has sold certain recipes to Nonni's Food Company, Inc., ("Nonni's") a manufacturer and distributor of soft baked cookies. The Company has appointed Michael R. Ward, one of its executive
officers, to represent the Company as a director for this manufacturer. For the years ended December 28, 2002, December 29, 2001 and December 30, 2000, the earned royalty
and licensing revenues associated with the licensing and recipe sales agreements were $3.8 million, $2.9 million and $1.1 million, respectively.

Tax Sharing Agreement.As a result of the Mrs. Fields Reorganization, the Company entered into
an Amended and Restated Tax Allocation Agreement with MFFB and Mrs. Fields' Holding (the "Tax Allocation Agreement"). The Tax Allocation Agreement is among MFFB, Mrs. Fields' Holding,
TCBY Holding, and all of their respective subsidiaries (collectively, the "Group").

The
Tax Allocation Agreement provides for compensation to the Company for any utilization of the Company's net operating loss and capital loss carryforwards that existed as of the
Mrs. Fields Reorganization date. Pursuant to this agreement, on a quarterly basis, a hypothetical federal income tax liability is calculated for each subsidiary or subgroup of subsidiaries as
if each subsidiary or subgroup of subsidiaries filed its own U.S. federal income tax return. The exact amount of any compensation MFFB receives from a subsidiary or subgroup of subsidiaries is
contingent upon the length of time between the utilization date and the date of the Mrs. Fields Reorganization and is subject to additional

86

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calculations as defined in the Supplement to Tax Allocation Agreement. During the year ended December 28, 2002, TCBY paid $200,000 to MFFB and ultimately to the Company as settlement of
anticipated compensation. For the year ended December 28, 2002, the Company and its subsidiaries recorded distributions of $5.2 million due to MFFB under the Tax Allocation Agreement. In
March 2003, Mrs. Fields paid $5.0 million to MFFB relating to its obligations under the Tax Allocation Agreement for fiscal 2002. During the years ended December 29,
2001 and December 30, 2000, the Company distributed and paid approximately $800,000 and $2.5 million, respectively, to Mrs. Fields' Holding under a tax sharing agreement, which
had been in effect since 1998.

Line of Credit.In connection with the Company's line of credit facility that was replaced on
January 16, 2003, Capricorn III provided to the Company's prior lender a guarantee of up to the lesser amount of $3.5 million or 50 percent of the aggregate amount of such
lender's funding commitments. Capricorn III has not guaranteed any portion of the Foothill credit facility.

Item 14. Controls and Procedures

Based on their evaluation, as of a date within 90 days of the filing of this Form 10-K, the Company's Chief Executive Officer and Chief
Financial Officer have concluded the Company's disclosure controls and procedures (as defined in Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934) are
effective in alerting them on a timely basis to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's reports filed or
submitted under the Securities Exchange Act of 1934. There have been no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the
date of their evaluation.

87

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PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K







88

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|Exhibit
Number |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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 2.4 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 2.5 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 2.6 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 2.7 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 2.8 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 2.9 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 2.10 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 2.11 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 Form S-4 (No. 333-45179) and incorporated by reference herein.                                                                                                                                                                                                                                          
|3.2            |  | By-Laws of Mrs. Fields' Original Cookies, Inc., filed as Exhibit 3.4to the Company's Registration Statement on Form S-4 (No. 333-45179) and incorporated by reference herein.                                                                                                                                                                                                                                                                         
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                       

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|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
Form S-4 (No. 333-45179) and incorporated by reference herein.                                                                                                            
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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 4.5 to the Company's Registration Statement on FormS-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 4.6 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., Pretzel Time,
 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  |  | Fifth Supplemental Indenture, dated as of January 27, 2000, 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 4.8 to the Company's Registration Statement on Form S-4 (No. 333-67389) and incorporated by reference herein.                      
|4.9  |  | 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.                                
|4.10 |  | Sixth Supplemental Indenture, dated as of December 3, 2002, among Mrs. Fields' Original Cookies, Inc., Great American Cookie Company, Inc., Pretzelmaker, Inc., Pretzel Time, Inc., Mrs. Fields Gifts, Inc., and
the Bank of New York as Trustee, filed herein.                                                                                                                                    
|4.11 |  | Seventh Supplemental Indenture, dated as of January 13, 2003, among Mrs. Fields' Original Cookies, Inc., Great American Cookie Company, Inc., Pretzelmaker, Inc., Pretzel Time, Inc., Mrs. Fields Gifts, Inc., and
Mrs. Fields Cookies Australia and the Bank of New York as Trustee, filed herein.                                                                                                
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                    

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|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 Form 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 Form S-4 (No. 333-45179) and
incorporated by reference herein.                                                                                                                     
|10.5  |  | 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 Form S-4 (No. 333-45179) and incorporated by
reference herein.                                                                                                                           
|10.6  |  | 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.                                                                                                                       
|10.7  |  | 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 Form S-4 (No. 333-45179)
 and incorporated by reference herein.                                                                                                
|10.8  |  | 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 Form S-4 (No. 333-45179)
and incorporated by reference herein.                                                                                                  
|10.9  |  | 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 Form S-4 (No. 333-45179) and
incorporated by reference herein.                                                                                                                
|10.10 |  | 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 Form S-4 (No. 333-45179)
and incorporated by reference herein.                                                                                                        
|10.11 |  | 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 Form S-4 (No. 333-45179) and\ incorporated
by reference herein.                                                                                                                     
|10.12 |  | 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 Form S-4 (No. 333-45179) and incorporated
by reference herein.                                                                                                                     
|      |  |                                                                                                                                                                                                                                                                                                                                                                          

91

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|10.13 |  | 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 Form S-4 (No. 333-45179) and
incorporated by reference herein.                       
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.14 |  | 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
Form S-4 (No. 333-45179) and incorporated by reference herein.
|10.15 |  | 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 Form S-4
(No. 333-45179) and incorporated by reference herein.                 
|10.16 |  | 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 Form S-4
(No. 333-45179) and incorporated by reference herein.               
|10.17 |  | 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 Form S-4 (No. 333-45179) and incorporated
by reference herein.                                      
|10.18 |  | Mrs. Fields' Holding Company, Inc. Director Stock Option Plan, filed as Exhibit 10.40 to the Company's Registration Statement on Form S-4 (No. 333-67389) and incorporated by reference herein.                                                                                             
|10.19 |  | Mrs. Fields Famous Brands, Inc. Employee Stock Option Plan adopted September 2001, filed as Exhibit 10.19 to the Company's Annual Report on Form 10-K filed on March 27, 2002, and incorporated by reference
herein.                                                                        
|10.20 |  | Mrs. Fields' Holding Company, Inc. Employee Stock Option Plan, filed as Exhibit 10.41 to the Company's Registration Statement on Form S-4 (No. 333-67389) and incorporated by reference herein.                                                                                             
|10.21 |  | Mrs. Fields' Holding Company, Inc. Director Stock Purchase Plan, filed as Exhibit 10.42 to the Company's Registration Statement on Form S-4 (No. 333-67389) and incorporated by reference herein.                                                                                           
|10.22 |  | 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 Form S-4
(No. 333-45179) and incorporated by reference herein.                 
|10.23 |  | 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.            
|10.24 |  | 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.                       
|10.25 |  | 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.                                       
|      |  |                                                                                                                                                                                                                                                                                             

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|10.26 |  | 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.
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.27 |  | 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.                                                                                                                                   
|10.28 |  | Trademark License Agreement, dated as of January 3, 2000, between The Mrs. Fields' Brand, Inc. and Nonni's Food Company, Inc., filed as Exhibit 10.30 to the Company's Annual Report on Form 10-K filed on March 30,
2000 and incorporated by reference herein.                                                                                                                                            
|10.29 |  | Purchase Agreement, dated December 1, 1999, between The Mrs. Fields' Brand, Inc. and Nonni's Food Company, Inc., filed as Exhibit 10.31 to the Company's Annual Report on Form 10-K filed on March 30, 2000 and
incorporated by reference herein.                                                                                                                                                          
|10.30 |  | First Amendment to Amended and Restated Loan Agreement, dated as of July 31, 1998, by and between Mrs. Fields' Original Cookies Inc. and LaSalle National Bank, filed as Exhibit 10.51 to the Company's Registration Statement on
Form S-4 (No. 333-67389) and incorporated by reference herein.                                                                                                           
|10.31 |  | Second Amendment to Amended and Restated Loan Agreement, dated as of April 1, 1999, by and between Mrs. Fields' Original Cookies Inc. and LaSalle National Bank, filed as Exhibit 10.52 to the Company's Registration Statement on
Form S-4 (No. 333-67389) and incorporated by reference herein.                                                                                                          
|10.32 |  | Third Amendment to Amended and Restated Loan Agreement, dated as of February 1, 2000, by and between Mrs. Fields' Original Cookies Inc. and LaSalle National Bank, filed as Exhibit 10.53 to the Company's Registration Statement on
Form S-4 (No. 333-67389) and incorporated by reference herein.                                                                                                        
|10.33 |  | Management Agreement, dated as of May 31, 2000, by and among Mrs. Fields' Original Cookies Inc., TCBY Holding Company, Inc. and TCBY Systems, LLC, filed as Exhibit 10.56 to Post-Effective Amendment No. 1 to the Company's
Registration Statement on Form S-4 (No. 333-67389) and incorporated by reference herein.                                                                                      
|10.34 |  | Amendment No. 1 to Management Agreement, dated as of December 22, 2000, by Mrs. Fields' Original Cookies Inc., TCBY Holding Company, Inc. and TCBY Systems, LLC., filed as Exhibit 10.36 to the Company's Amendment No.1 to its
Annual Report on Form 10-K/A filed on May 15, 2001 and incorporated by reference herein.                                                                                   
|10.35 |  | Fourth Amendment to Amended and Restated Loan Agreement, dated as of April 3, 2000, by and between Mrs. Fields' Original Cookies Inc. and LaSalle National Bank, filed as Exhibit 10.37 to the Company's Amendment No. 1 to its Annual
Report on Form 10-K/A filed on May 15, 2001 and incorporated by reference herein.                                                                                   
|10.36 |  | Fifth Amendment to Amended and Restated Loan Agreement, dated as of March 30, 2001, by and between Mrs. Fields' Original Cookies Inc. and LaSalle National Bank, filed as Exhibit 10.38 to the Company's Amendment No. 1 to its Annual
Report on Form 10-K/A filed on May 15, 2001 and incorporated by reference herein.                                                                                   
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                            

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|10.37 |  | Tax Allocation Agreement, dated as of September 28, 1998 by and between Mrs. Fields' Holding Company, Inc. and all of its direct and indirect Subsidiaries, filed as Exhibit 10.39 to the Company's Amendment No. 1 to its Annual
Report on Form 10-K/A filed on May 15, 2001 and incorporated by reference herein.                                                                                                  
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.38 |  | Amendment Number One, dated as of December 29, 2000, to Trademark License Agreement, dated as of January 3, 2000, between The Mrs. Fields' Brand, Inc. and Nonni's Food Company, Inc., filed as Exhibit 10.40 to the
Company's Amendment No. 1 to its Annual Report on Form 10-K/A filed on May 15, 2001 and incorporated by reference herein.                                                                       
|10.39 |  | Trademark License Agreement, dated as of February 21, 2001, between The Mrs. Fields' Brand, Inc. and Nonni's Food Company, Inc., filed as Exhibit 10.41 to the Company's Amendment No. 1 to its Annual Report on
Form 10-K/A filed on May 15, 2001 and incorporated by reference herein.                                                                                                                             
|10.40 |  | Amendment No. 2 to Management Agreement, dated as of August 31, 2001, by and among Mrs. Fields' Original Cookies Inc., TCBY Holding Company, Inc. and TCBY Systems, LLC, and, for certain purposes, Americana Foods Limited
Partnership, filed as Exhibit 10.1 to the Company's Report on Form 8-K filed on October 10, 2001 and incorporated by reference herein.                                                   
|10.41 |  | Amended and Restated Subordination Agreement, dated as of August 31, 2001, by and among Mrs. Fields' Original Cookies, Inc., TCBY Systems, LLC, TCBY Enterprises, Inc., TCBY Holding Company, Inc. and Wells Fargo Bank, National
Association, filed as Exhibit 10.2 to the Company's Report on Form 8-K filed on October 10, 2001 and incorporated by reference herein.                                             
|10.42 |  | Amended and Restated Tax Allocation Agreement, dated as of September 29, 2001, by and between Mrs. Fields' Holding Company, Inc., TCBY Holding Company, Inc., Mrs. Fields Famous Brands, Inc. and direct and indirect
Subsidiaries of Mrs. Fields Famous Brands, Inc. as set forth therein, Filed as Exhibit 10.3 to the Company's Report on Form 8-K filed on October 10, 2001 and incorporated by reference herein.
|10.43 |  | Supplement to Tax Allocation Agreement, dated as of September 29, 2001, by and among Mrs. Fields' Holding Company, Inc., all "MFH Subsidiaries" (as defined therein), TCBY Holding Company, Inc., all "TCBY Subsidiaries" (as defined
therein), and Mrs. Fields Famous Brands, Inc., filed as Exhibit 10.4 to the Company's Report on Form 8-K filed on October 10, 2001 and incorporated by reference herein.       
|10.44 |  | Employment Agreement, dated as of April 17, 2001, between Sandra Buffa and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.43 to the Company's Annual Report on Form 10-K filed March 27, 2002 and incorporated by
reference herein.                                                                                                                                                                        
|10.45 |  | Trademark License Agreement, dated as of January 2, 2002, between The Mrs. Fields' Brand, Inc. and Nonni's Food Company, Inc., filed as Exhibit 10.44 to the Company's Annual Report on Form 10-K filed March 27, 2002
and incorporated by reference herein.                                                                                                                                                         
|10.46 |  | Sixth Amendment to Amended and Restated Loan Agreement, dated as of September 28, 2001, by and between Mrs. Fields' Original Cookies Inc. and LaSalle National Bank, filed as Exhibit 10.45 to the Company's Annual Report on
Form 10-K filed March 27, 2002 and incorporated by reference herein.                                                                                                                   
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                      

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|10.47  |  | Seventh Amendment to Amended and Restated Loan Agreement, dated as of December 28, 2001, by and between Mrs. Fields' Original Cookies Inc. and LaSalle National Bank, filed as Exhibit 10.46 to the Company's Annual Report on
Form 10-K filed March 27, 2002 and incorporated by reference herein.                      
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.48  |  | Amendment Number One, dated as of January 17, 2002, to the Trademark License Agreement, dated as of February 21, 2001, between The Mrs. Fields' Brand, Inc. and Nonni's Food Company, Inc., filed as Exhibit 10.47 to the
Company's Annual Report on Form 10-K filed March 27, 2002 and incorporated by reference herein.
|10.49  |  | Amendment Number Two, dated as of January 17, 2002, to Purchase Agreement, dated as of December 1, 1999, between The Mrs. Fields' Brand, Inc. and Nonni's Food Company, Inc., filed as Exhibit 10.48 to the Company's Annual
Report on Form 10-K filed March 27, 2002 and incorporated by reference herein.              
|10.50  |  | Eighth Amendment to Amended and Restated Loan Agreement, dated as of August 30, 2002, by and between Mrs. Fields' Original Cookies, Inc. and LaSalle National Association, filed as Exhibit 10.49 to the Company's report on
Form 10-Q filed November 8, 2002 and incorporated by reference herein.                      
|10.51  |  | Ninth Amendment to Amended and Restated Loan Agreement, dated as of September 17, 2002, by and between Mrs. Fields' Original Cookies, Inc. and LaSalle National Association, filed as Exhibit 10.50 to the Company's Quarterly Report
on Form 10-Q filed November 8, 2002 and incorporated by reference herein.          
|10.52  |  | Mrs. Fields Famous Brands, Inc. Director Stock Option Plan adopted August 1, 2002, filed as Exhibit 10.18 to the Company's report on Form 10-Q filed November 8, 2002 and incorporated by reference herein.                                                                                                              
|10.53  |  | Second Amended and Restated Loan and Security Agreement dated as of January 16, 2003 between Mrs. Fields' Original Cookies, Inc., a Delaware corporation, and Foothill Capital Corporation, a California corporation, filed as
Exhibit 10.1 to the Company's report on Form 8-K filed February 4, 2003.                  
|10.54  |  | Tenth Amendment to Amended and Restated Loan Agreement, dated as of November 22, 2002, by and between Mrs. Fields' Original Cookies, Inc. and LaSalle National Association, filed herein.                                                                                                                                
|10.55  |  | Amendment No. 3 to Management Agreement, dated as of November 19, 2002, among Mrs. Fields' Original Cookies, Inc., TCBY Holding Company, Inc. and TCBY Systems, LLC, filed herein.                                                                                                                                       
|10.56* |  | Supply Agreement, between Mrs. Fields' Original Cookies, Inc. and Countryside Baking Company, Inc., filed herein.                                                                                                                                                                                                        
|10.57  |  | First Amendment to Second Amended and Restated Loan and Security Agreement, dated as of March 6, 2003, between Foothill Capital Corporation, a California corporation, and Mrs. Fields' Original Cookies, Inc., a Delaware corporation,
filed herein.                                                                    
|10.58* |  | Beverage Marketing Agreement, dated March 7, 2003, between Mrs. Fields' Original Cookies, Inc., and Coca-Cola Fountain, filed herein.                                                                                                                                                                                    
|12.1   |  | Computation of ratio of earnings to fixed charges of Mrs. Fields' Original Cookies, Inc., filed herein.                                                                                                                                                                                                                  
|21.1   |  | Subsidiaries of Mrs. Fields' Original Cookies, Inc., filed herein.                                                                                                                                                                                                                                                       
|       |  |                                                                                                                                                                                                                                                                                                                          

95

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|99.1 |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herein.
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|99.3 |  | Schedule IIValuation and Qualifying Accounts, filed herein.                                                                                                                                

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96

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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. HODGESLarry A. Hodges, President and Chief Executive Officer                                                               |  | March 26, 2003Date
|/s/SANDRA M. BUFFASandra M. Buffa
Senior Vice President and Chief Financial Officer
(Chief Financial and Principal Accounting Officer) |  | March 26, 2003Date

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. HODGESLarry A. Hodges       |  | President, Chief Executive Officer and Director    |  | March 26, 2003
|/s/SANDRA M. BUFFASandra M. Buffa       |  | Senior Vice President, and Chief Financial Officer |  | March 26, 2003
|/s/DUDLEY C. MECUMDudley C. Mecum       |  | Chairman of the Board of Directors                 |  | March 26, 2003
|/s/RICHARD M. FERRYRichard M. Ferry     |  | Director                                           |  | March 26, 2003
|/s/WALKER LEWISWalker Lewis             |  | Director                                           |  | March 26, 2003
|/s/PETER W. MULLINPeter W. Mullin       |  | Director                                           |  | March 26, 2003
|/s/GILBERT C. OSNOSGilbert C. Osnos     |  | Director                                           |  | March 26, 2003
|/s/CHRISTOPHER WRIGHTChristopher Wright |  | Director                                           |  | March 26, 2003

97

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SARBANES-OXLEY SECTION 302(a) CERTIFICATION

I, Larry A. Hodges, certify that:





|Date: March 26, 2003 |  | /s/LARRY A. HODGESLarry A. Hodges
President and Chief Executive Officer
|-------------------- |  | -----------------------------------------------------------------------

98

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SARBANES-OXLEY SECTION 302(a) CERTIFICATION

I, Sandra M. Buffa, certify that:





|Date: March 26, 2003 |  | /s/SANDRA M. BUFFASandra M. Buffa
Chief Financial Officer
|-------------------- |  | ---------------------------------------------------------

99

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