SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    Form 10-Q



/X/       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
          EXCHANGE ACT OF 1934

For the quarterly period ended                  June 30, 1999
                              --------------------------------------------------

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

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

Commission file number 000-24941


                             Delicious Brands, Inc.
        -----------------------------------------------------------------
           (Exact name of the registrant as specified in its charter)


               Delaware                                   06-1255882
--------------------------------------   ---------------------------------------
    (State of other jurisdiction of      (I.R.S. Employer Identification Number)
     incorporation or organization)

  2070 Maple Street, Des Plaines, Illinois                   60018
-------------------------------------------    ---------------------------------
   (Address of Principal executive offices)               (Zip code)

Registrant's telephone number including area code:        (847) 699-3200
                                                  ------------------------------



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     X                   NO
             -------             -------


Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock as of the latest practicable date.


      4,620,835 shares of Common Stock were outstanding on August 23, 1999.

<PAGE>

                             DELICIOUS BRANDS, INC.

                                    FORM 10-Q

                       FOR THE QUARTER ENDED JUNE 30, 1999




                                    I N D E X


Part I:   Financial Information                                             Page

Item 1.   Financial Statements:

          Balance Sheets as of June 30, 1999 and December 31, 1998             2

          Statements of Operations, Three and Six Months Ended                 3
               June 30, 1999 and 1998

          Statements of Cash Flows, Six Months Ended June 30, 1999             4
               and 1998

          Notes to Condensed Financial Statements                              5

Item 2.   Management's Discussion and Analysis of Financial Condition          7
               and Results of Operations

Item 3.   Quantitative and Qualitative Disclosure About Market Risk           11


Part II:  Other Information

Item 2.  Changes in Securities and Use of Proceeds                            12

Item 5.  Other Information                                                    12

Item 6.  Exhibits and Reports on Form 8-K                                     12


                                       1
<PAGE>
                             DELICIOUS BRANDS, INC.
                                 BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                   June 30,      December 31,
                                                                                  -----------    ------------
                                                                                      1999            1998
                                                                                  -----------    ------------
                                                                                  (unaudited)

<S>                                                                             <C>            <C>
ASSETS
Current Assets:
     Cash.......................................................................  $         0     $   981,646
     Accounts receivable (including $691,090 and $324,070,
       respectively, due from related parties, net of allowances of
       $670,412 and $800,980, respectively).....................................    5,333,835       5,108,747
      Inventory.................................................................    1,708,411       1,879,041
      Due from distributors.....................................................       99,317          99,317
      Prepaid expenses and other current assets.................................      628,977         327,964
                                                                                 ------------   -------------
                                                                                    7,770,540       8,396,715
                                                                                 ------------   -------------
Property and Equipment, Net of Accumulated Depreciation.........................      330,906         381,185
                                                                                 ------------   -------------

Other Assets:
      Goodwill..................................................................    9,736,400      10,011,946
      Other ....................................................................      369,658         436,261
                                                                                 ------------   -------------
                                                                                   10,106,058      10,448,207
                                                                                 ------------   -------------
                                                                                  $18,207,504     $19,226,107
                                                                                 ============   =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
      Bank loan payable.........................................................  $  3,357,182    $ 3,665,828
      Current portion of subordinated debt......................................       393,332        393,332
      Accounts payable (including $76,675 and $82,040, respectively,
            due to related parties).............................................     8,776,600      7,173,870
      Due to distributors.......................................................       512,298        532,769
      Accrued expenses..........................................................     2,000,754      2,954,389
      Current portion of long-term liabilities..................................       795,098        904,838
                                                                                 -------------    -----------
                                                                                    15,835,264     15,625,026
                                                                                 -------------    -----------

Long-term Liabilities:
      Restructuring liability...................................................       416,273        544,679
      Packaging loss liability..................................................       200,000        200,000
                                                                                 -------------    -----------
                                                                                       616,273        744,679
                                                                                 -------------    -----------

Stockholders' Equity:
      Preferred  stock,  $.01 par value  1,000,000  shares  authorized:  Class A
            designated  245,000  shares  with a  liquidation  value of $8.00 per
            share, 189,584 and 195,834 shares issued and
            outstanding in 1999 and 1998, respectively..........................     1,516,668     1,566,668
            Class B designated 35,000 shares with 35,000 issued and
            outstanding in 1999.................................................           350            --
      Common Stock, $.01 par value,  25,000,000 shares authorized,
            4,490,010 and 4,481,767 shares issued in 1999 and 1998,
            respectively........................................................        44,900        44,818
      Additional paid-in capital................................................    19,849,404    18,343,209
      Accumulated deficit.......................................................   (19,494,306)  (16,937,244)
                                                                                 -------------    -----------
                                                                                     1,917,016     3,017,451
      Less, common stock in treasury at cost....................................      (161,049)     (161,049)
                                                                                 -------------    -----------
            Total stockholders' equity..........................................     1,755,967     2,856,402
                                                                                 =============    ============
                                                                                  $ 18,207,504   $19,226,107
                                                                                 =============    ============
</TABLE>
         The accompanying notes are an integral part of this statement.

                                        2

<PAGE>
                             DELICIOUS BRANDS, INC.
                             STATEMENT OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                               Three Months Ended June 30,            Six Months Ended June 30,
                                                               ------------------------------      -----------------------------
                                                                    1999             1998                1999           1998
                                                               --------------   -------------      ------------    -------------

<S>                                                          <C>             <C>                <C>              <C>
Net Sales (including approximately
      $1,277,000, $1,815,000, $2,390,000
      and $3,045,000 respectively, to related
      parties)..............................................   $  11,389,402     $ 15,838,609     $ 23,731,219     $ 22,331,015

Cost of Sales (including approximately
      $7,000, $1,859,000, $17,000
      and $1,913,000,  respectively, from
      related parties)......................................       8,821,129       12,165,650       18,317,268       17,446,954
                                                               -------------     ------------      -----------     ------------

Gross Profit................................................       2,568,273        3,672,959        5,413,951        4,884,061
                                                               -------------     ------------      -----------     ------------


Selling, general and administrative                                3,760,040        4,312,284        7,671,800        5,828,954
                                                               -------------     ------------      -----------     ------------

Loss from Operations........................................      (1,191,767)        (639,325)      (2,257,849)        (944,893)
                                                               -------------     ------------      -----------     ------------
Other Income (Expense):
      Interest expense......................................        (175,601)        (401,565)        (342,076)        (514,514)
      Other, net............................................         116,372           26,827          121,197           37,805
                                                               -------------     ------------      ------------    ------------
                                                                     (59,229)        (372,738)        (220,879)        (476,709)
                                                               -------------     ------------      ------------    ------------

Loss before Provision for Income Taxes                            (1,250,996)      (1,014,063)      (2,478,728)      (1,421,602)
Provision for Income Taxes..................................               0                0                0                0
                                                               -------------     ------------      ------------     -----------
Net Loss    ................................................   $ (1,250,996)     $ (1,014,063)     $ (2,478,728)    $(1,421,602)
                                                               =============     ============      ============     ===========

Earnings per Share:
      Basic:
            Net loss per common share.......................   $       (.28)     $       (.31)     $       (.56)    $      (.44)
                                                               ============      ============      ============     ===========
            Weighted average number of
                  common shares outstanding.................      4,441,085         3,282,828         4,438,586       3,254,983

      Diluted:
            Net loss per common share.......................   $       (.28)     $       (.31)     $       (.56)    $      (.44)
                                                               ============      ============      ============     ===========
            Weighted average number of
                  common shares outstanding.................      4,441,085         3,282,828         4,438,586       3,254,983

</TABLE>
         The accompanying notes are an integral part of this statement.

                                        3
<PAGE>

                             DELICIOUS BRANDS, INC.
                             STATEMENT OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                  Six Months Ended June 30,
                                                                                ----------------------------------
                                                                                       1999               1998
                                                                                -------------       --------------
<S>                                                                           <C>                <C>
Cash Flows from Operating Activities:
      Net loss    ............................................................  $  (2,478,728)      $  (1,421,602)
      Adjustments to reconcile net loss to net cash used in
            operating activities:
            Depreciation and amortization.....................................        394,184             421,431
            Provision for bad debts...........................................         37,333             232,144
            Increase (Decrease) in cash from changes in:
                  Accounts receivable.........................................       (262,421)           (131,271)
                  Inventory...................................................        170,630            (745,498)
                  Due from distributors.......................................              0             112,378
                  Prepaid expenses and other current assets...................       (301,013)            (70,098)
                  Other assets................................................         49,103              59,190
                  Accounts payable and accrued expenses.......................        649,095           1,929,772
                  Due to distributors.........................................        (20,471)             24,684
                  Accrued restructuring liabilities...........................       (128,406)           (114,661)
                  Other liabilities...........................................       (109,740)           (164,519)
                                                                                 -------------        -----------
      Net cash provided (used) in operating activities........................     (2,000,434)            131,950
                                                                                 -------------        -----------
Cash Flows from Investing Activities:
      Payment for purchase of assets of Salerno Foods,
                  L.L.C. (net of cash acquired of $12,564)....................              0          (3,709,599)
      Purchase of property and equipment......................................        (50,859)            (63,826)
                                                                                 ------------         -----------
      Net cash used in investing activities...................................        (50,859)         (3,773,425)
                                                                                 ------------         -----------

Cash Flows from Financing Activities:
      Payments of long-term debt..............................................              0             (10,120)
      Payments of financing costs.............................................              0          (1,162,470)
      Proceeds from (payments of) bank loan payable, net......................       (308,646)            195,121
      Proceeds from issuance of notes payable.................................              0           3,500,000
      Proceeds of notes payables..............................................              0             840,000
      Proceeds from issuance of preferred stock...............................      1,750,000                   0
      Proceeds from issuance of common stock..................................          3,191                   0
      Payment of preferred stock dividend.....................................        (78,334)                  0
      Initial public offering costs...........................................              0            (385,015)
      Payments of stock issuance costs........................................       (296,564)           (144,390)
                                                                                 ------------         -----------
      Net cash provided by (used in) financing activities.....................     (1,069,647)          2,833,126
                                                                                 ------------         -----------

Decrease in Cash.............................................................        (981,646)           (808,349)
Cash, Beginning of Period.....................................................        981,646             808,349
                                                                                 ============         ===========
Cash, End of Period...........................................................   $          0         $         0
                                                                                 ============         ===========
Supplemental Disclosure of Cash Flow Information:
      Cash paid during the period for:
            Income taxes......................................................   $          0         $         0
                                                                                 ============         ===========
            Interest..........................................................   $    348,720         $   285,986
                                                                                 ============         ===========
</TABLE>
         The accompanying notes are an integral part of this statement.

                                       4

<PAGE>
                             DELICIOUS BRANDS, INC.
                        NOTES TO THE FINANCIAL STATEMENTS
                                   (Unaudited)

1.   Basis of Presentation

Interim Financial Statements
----------------------------

The  unaudited  interim  financial  statements  included  herein  were  prepared
pursuant to the rules and regulations for interim reporting under the Securities
Exchange Act of 1934, as amended. Accordingly,  certain information and footnote
disclosures normally  accompanying the annual financial statements were omitted.
The interim  financial  statements and notes should be read in conjunction  with
the annual audited financial  statements and notes thereto contained in the Form
10-K of  Delicious  Brands,  Inc.  (the  "Company")  dated April 15,  1999.  The
accompanying  unaudited  interim financial  statements  contain all adjustments,
consisting only of normal  adjustments,  which in the opinion of management were
necessary for a fair statement of the results for the interim  periods.  Results
for the interim periods are not  necessarily  indicative of results for the full
year.

Matters Affecting Comparability - Acquisition of Assets
-------------------------------------------------------

On April 3,  1998,  the  Company  acquired  substantially  all of the assets and
assumed certain liabilities of Salerno Foods, L.L.C.  ("Salerno").  Accordingly,
the  Company's  results of  operations  for the six months  ended June 30,  1999
include the operating results of Salerno whereas the comparable six months ended
for the prior year include the operating  results of Salerno  beginning April 3,
1998.

The following  unaudited pro forma  information  has been prepared  assuming the
acquisition  had  taken  place at  January  1,  1998.  The  unaudited  pro forma
information  includes  adjustments  for  interest  expense  that would have been
incurred to finance the purchase,  additional  depreciation  of the property and
equipment  acquired,  amortization of the goodwill  arising from the acquisition
and the result of conforming  Salerno's  accounting  policy for slotting fees to
the Company's  policy.  The  unaudited  pro forma results of operations  are not
necessarily  indicative of what the results that would have been had the Salerno
acquisition been effected on the assumed date.
<TABLE>
<CAPTION>
                                                           Unaudited for the
                                                            Six Months Ended
                                                              June 30, 1998
                                                           -----------------
<S>                                                         <C>
Net sales ...........................................         $ 30,836,000
Loss before income taxes ............................         $ (2,733,000)
Net loss ............................................         $ (2,733,000)
Net loss per share:
      Basic .........................................         $      (0.83)
      Diluted .......................................         $      (0.83)
</TABLE>

Business and Ownership

During the fourth quarter of 1998, the Company  issued  1,150,000  shares of its
Common Stock,  at $12.00 per share, in an initial public  offering.  Proceeds of
the offering were  $10,690,684  net of  commissions  and other related  expenses
totaling $3,109,316.

On April 12, 1999, the Company  consummated a private placement of 35,000 shares
of Series B Convertible  Preferred Stock, $.01 par value per share and a warrant
to purchase  700,000  shares of Common  Stock,  for an aggregate  price of $1.75
million.  Proceeds of the offering were  $1,456,290 net of commissions and other
related expenses totaling $293,710. Each share of Series B Convertible Preferred
Stock is  currently  convertible  into five shares of Common  Stock,  subject to
certain  antidilution  provisions.  The  warrant to purchase  700,000  shares of
Common  Stock has an  initial  exercise  price of $0.01 per  share,  subject  to
certain  antidilution  provisions,  for a term of ten years from the date of its
issuance.

                                       5

<PAGE>

2.   Net Income (Loss) Per Share

Basic net income  (loss) per share and diluted net income  (loss) per share have
been  calculated  using the  weighted  average  number of shares of Common Stock
outstanding  during each period.  Preferred stock dividends,  totaling  $78,334,
were paid during the three months ended March 31, 1999 and have been included in
both the basic and diluted net income (loss) per share  calculations for the six
months  ended June 30,  1999.  All options and  warrants  were  omitted from the
computation  of diluted  net income  (loss) per share  because  the  options and
warrants are antidilutive when net losses are reported.

3.   Inventory

Inventory is stated at the lower of cost or market with cost  determined  by the
first-in, first-out (FIFO) method.

4.   Recent Account Pronouncements

Effective  January 1, 1999,  the Company  adopted FAS No. 133,  "Accounting  for
Derivatives Instruments and Hedging Activities," which required the recording of
all  derivatives  on the balance sheet at fair value,  and Statement of Position
98-5 (SOP 98-5),  "Reporting on the Cost of Start-up Activities," which requires
costs of start-up  activities and organization costs to be expensed as incurred.
The adoption of FAS No. 133 and SOP 98-5 had no impact on the Company's  results
of operations, financial position or cash flows.

5.   Subordinated Debt

On April  27,  1999,  the  remaining  outstanding  9%  Subordinated  Convertible
Promissory Notes (the "9% Notes"),  aggregate  principal amount of approximately
$393,000,  matured.  The  Company  has not repaid the 9% Notes.  The  Company is
currently  negotiating  with the  holders  of the 9% Notes  with  regard  to the
conversion  of the 9% Notes to  equity.  As the  Company  failed to repay the 9%
Notes or to negotiate  their  conversion  into equity on or before May 27, 1999,
the Company is in default of the terms of the 9% Notes.

6.   Borrowings

On August 18, 1999, the Company  borrowed  $360,000 and issued  promissory notes
(the "Notes") in respect of this loan. Interest on the Notes accrue at a rate of
10% per annum. Interest on the Notes shall be paid monthly in arrears. The Notes
shall be due and payable on the earliest of (i) the one-year  anniversary of the
date first  written  above,  (ii)  consummation  of a private  placement  equity
financing of the  Company's  capital stock or any sale of assets or any business
unit or division  from which the  Company  receives  gross  proceeds of at least
$2,000,000  or (iii) upon a change of control of voting  power of the  Company's
stockholders.

                                       6
<PAGE>
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Matters Affecting Comparability - Acquisition of Assets
-------------------------------------------------------

On April 3,  1998,  the  Company  acquired  substantially  all of the assets and
assumed certain liabilities of Salerno Foods, L.L.C.  ("Salerno").  Accordingly,
the  Company's  results of  operations  for the six months  ended June 30,  1999
include the operating results of Salerno whereas the comparable six months ended
for the prior year include the results of Salerno beginning April 3, 1998.

Results of Operations
---------------------

Net Sales.  Net sales  decreased 28% to $11.4 million for the three months ended
June 30, 1999. Delicious brand product sales decreased $2.3 million primarily as
a result of changes  in the  buying  habits of  customers  as well as  increased
competition from private label and national brands.  Additionally,  distributors
formerly visited retailers multiple times each week and relied on unit volume to
earn profits.  Distributors  currently  rely on less visits per week,  and lower
volume sales at a higher gross  margin.  Salerno brand product sales as compared
to 1998 decreased $1.8 million primarily as a result of reduced  distribution in
two regions of the country and lower volume sales to certain  national  accounts
for the three  months  ended  June 30,  1999.  Net sales  increased  6% to $23.7
million for the six months ended June 30,  1999.  The net sales  increase,  $1.4
million,  resulted primarily from the inclusion of the April 3, 1998 acquisition
of Salerno,  partially  offset by the sales  reduction in Delicious  and Salerno
discussed above.

Effective  August 2, 1999,  the  Company  terminated  business  with its largest
distributor of Delicious brand products due to poor  performance and replaced it
with new distributors.  Initially, the Company expects a decline in sales due to
the start up process, but ultimately higher sales are anticipated.

Gross  Profit.  Gross profit  decreased 30% to $2.6 million for the three months
ended June 30,1999. The gross profit decrease, $1.2 million,  resulted primarily
from the sales reduction  discussed above. Gross profit as a percentage of sales
decreased  1.3% for the three months ended June 30,1999 as Frookie and Delicious
gross margins increased 3.6% while Salerno's gross profit decreased by 3.8%. The
gross margin percentage increased for Frookie and Delicious product lines as the
Company  concentrated  on raising gross margins by reducing  promotion costs and
obtaining lower supplier costs.  Salerno's  decrease in gross margin  percentage
was a result of increased promotional allowances caused by competitive pressures
in the premium sector of the cookie market.  Gross profit  increased 11% to $5.4
million and gross  profit as a  percentage  of sales  increased  .9% for the six
months  ended June 30,  1999.  The gross  profit  increase,  $500,000,  resulted
primarily  from the  inclusion  of the April 3,  1998  acquisition  of  Salerno,
partially offset by reduced sales and the gross margin variance discussed above.

Selling,   General   and   Administrative   Expenses.   Selling,   general   and
administrative expenses decreased 14% to $3.8 million for the three months ended
June 30,  1999.  The  selling,  general  and  administrative  expense  decrease,
$600,000,  resulted  primarily  from lower selling  expenses  related to reduced
sales  and a  decline  in  general  and  administrative  expenses  caused by the
elimination of additional  redundant expenses  associated with the April 3, 1998
acquisition of Salerno.  Selling,  general and administrative expenses increased
32% to $7.7 million for the six months ended June 30, 1999. The selling, general
and administrative expense increase,  $1.8 million,  resulted from the inclusion
of the April 3, 1998 acquisition of Salerno  partially offset by decreases noted
above.

Other  Income  (Expense).  Other  expenses  decreased  84% to $59,000 and 54% to
$221,000 for the three and six months ended June 30, 1999, respectively. For the
three and six months ended June 30, 1999 interest expense declined  $226,000 and
$172,000,  respectively.  This decrease was primarily due to additional interest
expense  related to the April 3, 1998  acquisition  of Salerno  during the three
months ended June 30, 1998.

Provision  for Income Tax.  The  provision  for income tax for the three and six
months  ended June 30, 1999 was zero as a result of there being a net  operating
loss for the period for which a valuation  allowance  was provided to

                                       7

<PAGE>
reduce the tax benefit of this loss.  The valuation  allowance for the three and
six months ended June 30, 1999  increased  $488,000 and $967,000,  respectively.
The valuation  allowance  increases were primarily due to the uncertainty of the
future  utilization of the net operating losses generated.  The variation of the
Company's  effective tax rate from the federal statutory tax rate is principally
due to  non-deductible  amortization of intangible  assets and the effect of the
increase in the valuation allowance.

Net Loss. Net loss increased 23% to $1.3 million for the three months ended June
30, 1999 and 74% to $2.5  million for the six months  ended June 30,  1999.  The
increased losses were a result of the factors discussed above.

Liquidity and Capital Resources
-------------------------------

In recent  periods,  the Company has utilized  its working  capital and proceeds
from both private  placements and public offerings to cover operating  deficits.
Because the Company  purchases its products from co-packers,  it does not intend
to invest in plant or  equipment  relating to the  manufacture  of products  for
sale. Further,  the Company believes that its existing fleet of leased trucks is
sufficient for the foreseeable future. In addition,  the Company's  introduction
of new products  represents an immaterial capital expenditure because co-packers
are responsible for the research,  development and ingredients  costs.  The only
costs incurred by the Company are packaging  design costs,  which did not exceed
$100,000  in 1998  and are not  expected  to  increase  significantly  in  1999.
Consequently,  additions  to  property  and  equipment  are not  expected  to be
material in future periods.

On  February  6, 1998,  the Company  consummated  a second  closing of a private
placement  (the  "Second  Closing")  pursuant to which it issued an aggregate of
140,000 shares of common stock, $.01 par value per share ("Common  Stock"),  for
an  aggregate  price of $840,000.  The net proceeds of $695,610  from the Second
Closing  were  applied  by the  Company to  increase  cash  balances  and reduce
outstanding trade payables balances.

On March 30, 1998, the Company borrowed $500,000 (the "Acquisition  Loan"). Such
indebtedness  bore  interest  at the rate of 12% per  annum and  matured  on the
consummation  of the  Company's  initial  public  offering  of  Common  Stock on
November 17, 1998 (the "Initial  Public  Offering").  The  Acquisition  Loan and
accrued  interest  thereon were repaid from the  proceeds of the Initial  Public
Offering.

On April 3, 1998,  the Company  entered into an amendment to a revolving  credit
facility with U.S. Bancorp Republic Commercial Finance,  Inc. ("Republic") for a
revolving line of credit of up to $7.0 million.  Borrowings  under the revolving
credit  facility are due upon demand and bear  interest at 1.50% per annum above
the reference rate of interest publicly announced from time to time by U.S. Bank
National  Association  (9.25% at June 30, 1999).  Borrowings under the revolving
credit  facility  at June 30,  1999  were  $3.7  million.  Borrowings  under the
revolving  credit facility are  collateralized  by a first lien on substantially
all of the assets of the Company.

On April 3, 1998,  the Company  consummated  the  acquisition  of  Salerno.  The
purchase  price for Salerno  consisted of (i) $3.3 million in cash,  (ii) a $1.5
million  promissory  note from the Company to Salerno (the  "Salerno  Promissory
Note"), bearing interest at a rate of 12% per annum, secured by a second lien on
substantially  all  of  the  Company's  assets,  and  (iii)  the  assumption  of
substantially all of the liabilities of Salerno.  In connection  therewith,  the
Company  entered  into  a  loan  agreement  with  American   Pacific   Financial
Corporation  ("APFC")  pursuant  to which the  Company  borrowed  $4.6  million,
bearing  interest at a rate of 12% per annum through  August 3, 1998 and 15% per
annum thereafter, from APFC (the "APFC Loan") consisting of $3.0 million in cash
used by the Company to fund a portion of the cash  purchase  price for  Salerno,
$1.5  million  in the form of APFC  assuming  the  Salerno  Promissory  Note and
$100,000 as a fee for the APFC Loan. In addition,  the Company  issued to APFC a
promissory note in the principal amount of $100,000,  bearing interest at a rate
of 12% per annum, as a fee for assuming the Salerno  Promissory  Note. The notes
and accrued interest thereon were repaid from the proceeds of the Initial Public
Offering.

As of August 1, 1998, holders of approximately $1.6 million aggregate  principal
amount  of  9%  Subordinated  Convertible  Promissory  Notes  (the  "9%  Notes")
exchanged  such notes for an aggregate of 195,834 shares of Series A Convertible
Preferred Stock, $.01 par value per share ("Series A Preferred Stock"), pursuant
to an  offer to  exchange  made by the  Company.  Annual  dividends  of 10% paid
semi-annually  are payable on the shares of Series

                                       8

<PAGE>
A Preferred Stock out of the assets of the Company legally available for payment
thereof.  The expiration  date of warrants to purchase  107,730 shares of Common
Stock  collectively held by the holders of the 9% Notes exchanged for the Series
A Preferred Stock was extended to April 27, 2001 from April 27, 1999.

On November 17, 1998, the Company  consummated  the Initial  Public  Offering of
1,000,000  shares of Common Stock,  at a price of $12.00 per share.  On December
31, 1998, the Company consummated the sale of 150,000 shares of Common Stock, at
a price of $12.00 per  share,  pursuant  to the  underwriters'  exercise  of the
over-allotment  option  on  December  29,  1998.  After  deducting  underwriting
discounts and expenses,  the Company received approximately $10.7 million of net
proceeds from the Initial Public Offering.

On April 12, 1999, the Company  consummated a private placement of 35,000 shares
of Series B Convertible  Preferred  Stock,  $.01 par value per share  ("Series B
Preferred Stock"), and a warrant to purchase 700,000 shares of Common Stock, for
an  aggregate  price of $1.75  million.  The net  proceeds of $1.5  million were
applied by the Company primarily to reduce  outstanding trade payables balances.
Each share of Series B Preferred Stock is currently convertible into five shares
of Common  Stock,  subject to certain  antidilution  provisions.  The warrant to
purchase  700,000 shares of Common Stock has an initial  exercise price of $0.01
per share, subject to certain antidilution  provisions,  for a term of ten years
from the date of its issuance.

On April 27, 1999, 9%  promissory  notes in the  aggregate  principal  amount of
approximately  $393,000 matured.  The Company did not repay the promissory notes
and currently does not have funds to repay the promissory notes.

On August 18, 1999, the Company  borrowed  $360,000 and issued  promissory notes
(the "Notes") in respect of this loan. Interest on the Notes accrue at a rate of
10% per annum. Interest on the Notes shall be paid monthly in arrears. The Notes
shall be due and payable on the earliest of (i) the one-year  anniversary of the
date first  written  above,  (ii)  consummation  of a private  placement  equity
financing of the  Company's  capital stock or any sale of assets or any business
unit or division  from which the  Company  receives  gross  proceeds of at least
$2,000,000  or (iii) upon a change of control of voting  power of the  Company's
stockholders.

On August 18,  1999,  options to  purchase  60,000  shares of Common  Stock were
exercised at a per share price of $4.00, resulting in the receipt of $240,000 by
the Company.

Currently,  the Company  has  insufficient  funds for its needs.  The Company is
seeking  additional  debt  and/or  equity  financing;  however,  there can be no
assurance that additional funds can be obtained on acceptable  terms, if at all.
If the Company is unable to obtain  additional  financing  or generate  positive
cash flow, the Company's business will be materially adversely affected.

On August 23,  1999,  the Company  and two  individuals  executed a  non-binding
letter of intent in respect of the issuance and sale of  convertible  promissory
notes,  $5,000,000  aggregate principal amount (the "August Notes").  The August
Notes will  automatically  convert  into  1,000,000  shares of Common Stock upon
approval of The Nasdaq Stock Market of the additional listing application of the
Shares,  so long as the  Shares  represent  less than 20% of (i) the  issued and
outstanding  shares of Common Stock and (ii) the outstanding voting power of the
Company's securities.  The closing of this transaction is subject to negotiation
and  signing  of the  transaction  documents  and the  proposed  investors'  due
diligence  review of the Company.  There can be no assurance  that the documents
will be signed or that this  transaction  will ever be  consummated.  Also,  the
transaction is subject to a number of  conditions,  including the execution of a
definitive agreement and various regulatory and corporate  approvals,  including
the approval of the Company's  senior lender It is expected that the  definitive
agreements will be signed and the transaction  will be consummated by August 31,
1999.

Forward-Looking Statements
--------------------------

This report contains certain  forward-looking  statements  within the meaning of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities Exchange Act of 1934, as amended, which are intended to be covered by
the safe  harbors  created  thereby.  Although  the  Company  believes  that the
assumptions  underlying  the  forward-looking  statements  contained  herein are
reasonable,  any of the  assumptions  could be  inaccurate  and are dependent on
certain risks and uncertainties,  and therefore,  there can be no assurance that
the  forward-looking  statements  included  in  this  report  will  prove  to be
accurate.   In  light  of  the   significant   uncertainties   inherent  in  the
forward-looking  statements  included herein,  the inclusion of such information
                                       9

<PAGE>
should not be regarded as a  representation  by the Company or any other  person
that the objectives and plans of the Company will be achieved.  Certain of these
major risks and uncertainties are described below.

Year 2000 Program
-----------------

Many computer systems used in the current business  environment were designed to
use only  two  digits  in the date  field  and  thus may  experience  difficulty
processing  dates beyond the year 1999 and, as such, some computer  hardware and
software will need to be modified  prior to the Year 2000 to remain  functional.
The Company's core internal systems that have been recently implemented are Year
2000 compliant.  The Company is also completing a

preliminary  assessment  of Year 2000  issues not  related to its core  systems,
including issues with third-party suppliers and warehouse communications.  Based
on its  initial  evaluation,  the  Company  does  not  believe  that the cost of
remedial actions will have a material adverse effect on the Company's results of
operations,  liquidity  or  financial  condition.  However,  due to the  general
uncertainty of the Year 2000  readiness of third-party  suppliers and customers,
the Company is unable to determine at this time whether the consequences of Year
2000  failures  will  have  a  material  impact  on  the  Company's  results  of
operations,  liquidity or financial  condition.  The Company believes that, with
the  implementation  of new  business  systems  and  completion  of  projects as
scheduled,  the possibility of significant  interruptions  of normal  operations
should be reduced.

Certain Factors that may Affect Future Results
----------------------------------------------

Previous Default on Repayment of Promissory Notes
-------------------------------------------------

In  April  1999,   promissory  notes  in  the  aggregate   principal  amount  of
approximately  $393,000 matured.  The Company did not repay the promissory notes
and currently does not have funds to repay the promissory notes and believes its
credit facility with Republic  prohibits  repayment of the principal  portion of
these promissory notes.  There can be no assurance that the noteholders will not
utilize any or all legal means necessary to recover the principal  amount of the
promissory  notes,  including  an  action  for  judgment  or  the  filing  of an
involuntary  petition for bankruptcy.  One noteholders'  success in any of these
possible actions may have a material  adverse effect on the Company's  business,
results of operations and financial condition.

Historical and Projected Future Losses;
Accumulated Deficit; Net Working Capital Deficit
------------------------------------------------

Since 1994, the Company has not operated  profitably and has incurred  continued
net losses. Additionally, the Company's negative net working capital (the amount
by which current liabilities exceed current assets) continues to increase and is
currently  insufficient  to operate the  Company.  The Company  expects to incur
additional  net losses  through  1999.  Management  of the  Company is unable to
predict  the  extent  of any  future  losses  or the time  required  to  achieve
profitability.  Future operating results will depend on many factors,  including
the  demand  for  the  Company's  products,  the  level  of  product  and  price
competition, the Company's success in maintaining and expanding its distribution
channels,  the  ability of the  Company to develop  and market  products  and to
control costs and general economic conditions.

Reliance on Outside Product Manufacturing
-----------------------------------------

The Company relies  exclusively on outside  manufacturers to produce and deliver
its  products  to its  distributors.  The  Company  does not have any  long-term
contracts  with its  manufacturers.  Due to the Company's  current  negative net
working capital,  many of the Company's outside manufacturers have restricted or
eliminated  credit terms and  currently  require  payment  upon  delivery of the
Company's products. One manufacturer has given written notice to the Company and
Republic of the Company's  alleged  breach of its  manufacturing  agreement with
that manufacturer for failure to timely pay its invoices,  but continues to ship
product to the Company.  No assurance can be given that if the Company needed to
change manufacturers,  it would be able to do so on a timely or effective basis.
Additionally,  production  problems  encountered by these outside  manufacturers
could have a material adverse effect on the business,  results of operations and
financial  condition of the Company.  Any such production  problems could have a
greater  adverse  effect on the  Company as a result of it  streamlining  of its
supplier base.
                                       10
<PAGE>
Potential Nasdaq Delisting for Violation of Marketplace Rule
------------------------------------------------------------

In May  1999,  the  Company  received  a letter  from The  Nasdaq  Stock  Market
("Nasdaq")  stating that the Company had violated a Nasdaq marketplace rule as a
result of the  Company's  sale and  issuance  of shares of Series B  Convertible
Preferred  Stock,  $.01 par value per share,  and warrants to purchase shares of
Common Stock (the "Violation  Letter").  The Violation Letter stated that Nasdaq
would  initiate  its  delisting  procedure in respect of the Common Stock if the
Company failed to propose a satisfactory plan of compliance.  In accordance with
Nasdaq's  instructions,  the  Company  submitted  to Nasdaq a  proposed  plan of
compliance  that the  Company  believed  would cure the alleged  violation  of a
Nasdaq marketplace rule. Nasdaq reviewed and commented on the Company's

proposed plan of  compliance  and has given the Company until August 23, 1999 to
submit  additional  components  to its proposed  plan that are  satisfactory  to
Nasdaq.  If Nasdaq determines that the proposal is not satisfactory and that the
Common  Stock does not  warrant  continued  listing,  Nasdaq will issue a formal
notice of deficiency, and, pending the outcome of a hearing, if one is requested
by the Company, the Common Stock may be delisted from Nasdaq.  Moreover,  Nasdaq
has discretionary power to delist companies from Nasdaq even if they satisfy the
requirements for continued  listing.  There can be no assurance that Nasdaq will
approve of the Company's proposal or, if a delisting hearing is conducted,  that
the Company will prevail at the delisting hearing. If the Company's Common Stock
is delisted from Nasdaq,  trading,  if any, of the Common Stock would thereafter
be conducted on the OTC Bulletin  Board.  See  "Potential  Nasdaq  Delisting for
Failure to Meeting Maintenance Requirements."

Potential Nasdaq Delisting for Failure to Meet Maintenance Requirements
-----------------------------------------------------------------------

The  Company  currently  does not  satisfy  all of the  Nasdaq  SmallCap  Market
maintenance  criteria,  and its continued failure may result in the Common Stock
no longer  being  eligible  for  quotation  on the  Nasdaq  SmallCap  Market and
trading,  if any,  of the Common  Stock would  thereafter  be  conducted  in the
over-the-counter  market. Under Nasdaq rules, in order for the Company to remain
eligible for listing on the Nasdaq SmallCap Market,  among other things, (i) the
Company's  Common  Stock  must  have a  minimum  bid price of $1.00 and (ii) the
Company  must  have  minimum  tangible  net  assets  of $2  million  or a market
capitalization  of $35  million  or net income of  $500,000  in two of the three
prior years. On August 18, 1999, Nasdaq notified the Company that the Company no
longer  met the  maintenance  criteria  described  in (ii)  above,  and gave the
Company until  September 1, 1999 to submit its plan to achieve  compliance  with
all of the  maintenance  criteria.  If Nasdaq  delists the Common Stock from the
Nasdaq SmallCap Market, an investor may find it more difficult to dispose of, or
to obtain  accurate  quotations  as to the market  value of,  the Common  Stock.
Furthermore,   the  regulations  of  the  Securities  and  Exchange   Commission
("Commission")  promulgated  under  the  Securities  Exchange  Act of  1934,  as
amended,  require additional disclosure relating to the market for penny stocks.
Commission  regulations  generally define a penny stock to be an equity security
that has a market  price of less  than  $5.00  per  share,  subject  to  certain
exceptions.  A  disclosure  schedule  explaining  the penny stock market and the
risks  associated  therewith  is required  to be  delivered  to a purchaser  and
various sales practice requirements are imposed on broker-dealers who sell penny
stocks to persons  other than  established  customers and  accredited  investors
(generally  institutions).  In  addition,  the  broker-dealer  must  provide the
customer  with  current  bid and  offer  quotations  for the  penny  stock,  the
compensation  of the  broker-dealer  and its  salesperson in the transaction and
monthly account  statements showing the market value of each penny stock held in
the  customer's  account.  If the  Company's  securities  become  subject to the
regulations  applicable to penny stocks,  the market liquidity for the Company's
securities  could be severely  affected.  In such an event,  the  regulations on
penny  stock could limit the  ability of  broker-dealers  to sell the  Company's
securities  and thus the ability of purchasers  of the  Company's  securities to
sell their securities in the secondary market.

Item 3:   Quantitative and Qualitative Disclosures About Market Risk

At  June  30,  1999,  the  Company  had  no  outstanding   derivative  financial
instruments. All of the Company's transactions occur in U.S. dollars. Therefore,
the Company is not subject to significant foreign currency exchange risk.

                                       11
<PAGE>
Part II:  Other Information

Item 2:   Changes in Securities and Use of Proceeds

          The following  unregistered  securities were issued by the Company
          during the three months ended June 30, 1999:

<TABLE>
<CAPTION>
 Date of          Description of                  Number of Shares Issued     Exercise or Purchase
 Issuance       Securities Issued                 or Subject to Options       Price per Share
 --------       -----------------                 -----------------------     --------------------
<S>      <C>                                         <C>                      <C>
  4/7/99       Common Stock Options                      53,000                   $10.00
  4/7/99       Common Stock Options                       3,000                   $10.25
 4/12/99       Common Stock Options                       3,000                   $10.125
 4/12/99   Series B Convertible Preferred Stock          35,000                   $50.00
 4/12/99   Common Stock Purchase Warrants               700,000                    $0.01
</TABLE>

The above options were granted to  non-employee  directors  pursuant to the 1994
Formula Stock Option Plan or to an existing employee under the 1995 Stock Option
Plan except for the 3,000 options at $10.25 which vest in two years and have a
life of ten years.  These other  options  have a vesting  period of either two
years or three years and a life of ten years.

Each share of Series B Convertible Preferred Stock is currently convertible into
five  shares of Common  Stock,  subject to certain  antidilution  provisions.  A
commission  of $175,000 was paid to the placement  agent in connection  with the
issuance of the Series B Convertible Preferred Stock.

The  issuance  of these  securities  is claimed to be exempt  from  registration
pursuant  to Section  4(2) of the  Securities  of Act of 1933,  as  amended,  as
transactions  by an  issuer  not  involving  a public  offering.  There  were no
underwriting  discounts or commissions  paid in connection  with the issuance of
any of the options.

Irem 5:   Other Information:

On August 18, 1999,  Nasdaq notified the Company that it no longer meets the net
tangible  assets/market  capitalization/net  income  requirement  for  continued
listing on The Nasdaq SmallCap  Market.  The Company has until September 1, 1999
to  submit  its  plan  for  achieving  compliance  with  all  continued  listing
requirements.  If Nasdaq concludes that the Company's plan is deficient and that
the  Company's  continued  listing  is not  warranted,  it will send a notice of
deficiency and commence the formal delisting process.  Delisting action will not
be taken  until the  Company  has had  adequate  time to  respond  to the formal
notice.

Item 6:   Exhibits and reports on Form 8-K:
          a)   Exhibits:  27 - Financial Data Schedule
          b)   Form 8-K: On April 14, 1999, the Company filed a Form 8-K
               disclosing  under Item 5 the sale and  issuance  of the  Series B
               Convertible  Stock and  Warrants  to Purchase 700,000 shares of
               Common Stock.

                                       12
<PAGE>

                                   Signatures
                                   ----------

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.



                                             DELICIOUS BRANDS, INC.
                                             (Registrant)

       August 23, 1999                       /s/ Michael J. Kirby
-----------------------------                -----------------------------------
          Date                                     Michael J. Kirby
                                               President, Director and
                                               Chief Executive Officer


       August 23, 1999                       /s/ Jeffry W. Weiner
-----------------------------                -----------------------------------
           Date                                      Jeffry W. Weiner
                                                Executive Vice President and
                                                  Chief Financial Officer


                                       13