SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB


             X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
               SECURITIES EXCHANGE ACT OF 1934 For the fiscal year
                            ended December 31, 1997.
                                       OR
            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                 For the transition period from ______ to ______

                         Commission file number 0-23026

                           PARAMARK ENTERPRISES, INC.
             (Exact name of registrant as specified in its charter)

             Delaware                                   22-3261564
  (State or other jurisdiction of                   (I.R.S. Employer
    incorporation or organization)                  Identification No.)


           135 Seaview Drive
         Secaucus, New Jersey                             07094
         (Address of principal                         (Zip Code)
           executive offices)

Registrant's telephone number including area code:    (201) 422-0910


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

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

                    Common Stock
                    (Title of Class)

                    Class A Warrants
                    (Title of Class)

                    Class B Warrants
                    (Title of Class)
<PAGE>

     Check  whether  the issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 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 ____ No____

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B  contained  in  this  Form,  and no  disclosure  will be
contained,  to the best of the  registrant's  knowledge,  in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendments to this Form 10-KSB. [ ]

     The  issuer's  revenues  for the fiscal year ended  December  31, 1997 were
$3,878,381.

     As of March  25,  1998,  there  were  3,373,883  shares  of  Common  Stock,
1,453,000 Class A Warrants,  and 557,750 Class B Warrants outstanding.  Based on
the average  high and low bid prices of the Common  Stock on February  28, 1998,
the approximate  aggregate  market value of Common Stock held by  non-affiliates
was $593,000 (1).


                      DOCUMENTS INCORPORATED BY REFERENCE

     Certain   exhibits  are  incorporated  by  reference  to  the  Registrant's
Registration  Statement  on  Form  SB-2  and  the  amendments  thereto,  and the
Registrant's  Annual  Reports on Form 10-KSB for the fiscal years ended December
31, 1995 and December 31, 1996 as listed in response to Item 13(a)(2).

     Transitional Small Business Disclosure Format (check one): Yes __ No _X_


(1)  The aggregate  dollar value of the voting stock set forth equals the number
     of shares of the Company's Common Stock outstanding,  reduced by the amount
     of Common  Stock held by officers,  directors  and  shareholders  owning in
     excess of 10% of the Company's  Common Stock,  multiplied by the average of
     the high and low bid prices  for the  Company's  Common  Stock on March 25,
     1998. The information provided shall in no way be construed as an admission
     that any officer, director or 10% stockholder in the Company may or may not
     be deemed an  affiliate  of the  Company,  or that he/it is the  beneficial
     owner  of the  shares  reported  as  being  held by  him/it,  and any  such
     inference is hereby disclaimed. The information provided herein is included
     solely  for   recordkeeping   purposes  of  the   Securities  and  Exchange
     Commission.

                                      -2-
<PAGE>
                                     PART I

ITEM 1.   BUSINESS

General

     For  a  discussion  of  certain  factors  which  should  be  considered  in
evaluating the Company and its business, see "Risk Factors".

     Paramark Enterprises,  Inc., formerly T.J. Cinnamons, Inc. (the "Company"),
a Delaware  corporation was originally  formed in December 1985. The Company was
one of the first operators and  franchisors of retail  bakeries  specializing in
gourmet  cinnamon rolls and related  products in the United States.  The Company
currently owns and operates a production  facility and  distributes its products
through  wholesale  channels of distribution  throughout the United States.  The
Company's  Common  Stock,  Class A Warrants  and Class B Warrants  are  publicly
traded on the OTC Bulletin Board under the symbols "TJCI", "TJCIW", and "TJCIZ"

     In June 1992, current management acquired the Company with the intention of
implementing a focused  business plan designed to further develop and capitalize
on what  management  believed  to be brand  equity  beyond the scope of its then
current  points of  distribution.  The  Company's  business plan had centered on
leveraging  the  T.J.   Cinnamons   brand  equity  to  expand   distribution  by
implementing three interrelated strategies:  (1) expand the Company's franchised
bakery  system,  (2) explore  opportunities  to offer the Company's  products in
non-traditional  retailing  environments,  and (3) expand opportunities to offer
the  Company's  cinnamon  roll and related  products in  supermarkets  and other
grocery outlets.

     With insufficient  capital to fully implement the foregoing  business plan,
in June 1995 the Company retained the Corporate Finance Group at Arthur Andersen
LLP to act as its  financial  advisor  in  connection  with the  exploration  of
strategic alternatives available to the Company. As a result of this engagement,
in June 1996 the  Company  executed a  definitive  agreement  with T.J.  Holding
Company,  Inc.,  a  wholly  owned  subsidiary  of  Arby's,  Inc.  d/b/a/  Triarc
Restaurant  Group  (the  "Triarc  Purchase  Agreement")  for  the  sale  of  its
intellectual  property and a simultaneous  license by Triarc back to the Company
certain  of  the  intellectual  property  for  the  purposes  of  continuing  to
distribute  T.J.   Cinnamons   products   through  retail  grocery  outlets  and
supermarkets.  Under the terms of the Triarc  Purchase  Agreement,  the  Company
retained rights to own and operate one existing  retail bakery.  See "The Triarc
Transaction."

     Following   the   completion  of  the  Triarc   Transaction,   the  Company
discontinued its franchise and  non-traditional  bakery  development  strategies
outlined  above,  and began to emphasize its strategy of expanding its wholesale
manufacturing  and  distribution  of the T.J.  Cinnamons  branded  products  for
distribution to retail grocery outlets and supermarkets.

         In November 1996, the Company developed a bakery manufacturing facility
in Santa Ana,  California,  and is  currently  selling  its line of  products in
approximately  1,500  supermarket  and wholesale  club stores  including  Ralphs
Supermarkets, Walmart Super Centers, Lucky's Supermarkets,

                                      -3-
<PAGE>

H.E. Butt Supermarkets,  ShopRite Supermarkets, Sams Wholesale Club's and Costco
Wholesale Club's. During the fiscal year ended December 31, 1997,  approximately
77% of the  Company's  sales were to Ralph's  Supermarkets  and Sam's  Wholesale
Clubs. See "Risk Factors - Dependence on Major Customers".

     The Company's products include: (a) "T.J. Cinnamons" branded cinnamon rolls
and  cinnachips,  and  (b) a full  line of  specialty  gourmet  bakery  products
including  rugalach  sold in four  flavor  varieties,  bundt  cakes sold in four
flavor  varieties,  upside down pineapple  cakes,  pull-apart  cakes,  chocolate
brownies  branded under the Hershey's  label,  7" chocolate and white iced layer
cakes, 4" mini 7" chocolate and white iced layer cakes, 1/4" chocolate and white
iced sheet cakes, and other specialty bakery products.  The Company is currently
negotiating  the sale of its  rights to the "T.J.  Cinnamons"  name  brand.  See
"Business  -  Proposed  Sale  of  rights  under  Triarc   Agreements."  If  this
transaction is  consummated,  the Company will continue to manufacture  and sell
its line of specialty  gourmet bakery products,  and will endeavor to expand its
line of products to include biscotti's, puff pastries and other specialty items.

     Management believes that the Company is favorably positioned to participate
in a growing trend among  supermarket  chain's in-store  bakeries to discontinue
on-premises  baking,  and to purchase  products  that are made off  premises and
delivered to them frozen. After delivery,  such products are thawed, date coded,
and placed on the shelves for sale to customers.  This "thaw and sell"  strategy
eliminates  the need to employ  experienced  bakers,  cost  control  systems and
extensive  operating  systems  to  ensure  quality  and  consistency  of  bakery
products, all of which are extremely costly.

     Triarc  Transaction.  On August  29,  1996 the  Company  sold to TJ Holding
Company,  Inc.  (a  wholly  owned  subsidiary  of  Arby's,  Inc.  d/b/a/  Triarc
Restaurant  Group)  certain  of its  operating  assets,  comprised  of the "T.J.
Cinnamons"  and other related trade names,  trademarks,  service  marks,  logos,
signs, emblems, distinctive recipes, secret formulas and technical information (
the "Intellectual  Property"),  and also assigned to it various manufacturer and
distributor agreements.

     In  consideration  for the sale of the Intellectual  Property,  the Company
received (i) a 99 year  royalty free license to produce and sell T.J.  Cinnamons
branded products through  wholesale  channels of distribution  (see below),  and
(ii) a base purchase price of $3,540,000,  with  $1,790,000 paid at the closing,
$1,650,000 paid in the form of a 15 month  promissory note, and $100,000 paid in
the form of a 24 month  promissory note. In addition,  the transaction  provided
for  contingent  additional  payments of up to $5.5  million.  These  contingent
additional payments (i) will commence only if in any consecutive 12 month period
aggregate system wide sales of T.J.  Cinnamons products in Triarc retail outlets
exceed $26.3 million; and (ii) are based on a royalty equal to 2% of system wide
sales of T.J.  Cinnamons  products for the next 48 months,  and thereafter 1% of
system wide sales of T.J.  Cinnamons  products for an additional 36 months.  See
"Risk Factors - Contingent Additional Payments under the Triarc Agreement".

     Under the terms of the Triarc License Agreement, Triarc granted the Company
the rights to use the Intellectual  Property for (a) the sale of T.J.  Cinnamons
branded products through wholesale channels of distribution, and (b) to continue
to operate the T.J.  Cinnamons  bakery  located in  Poughkeepsie,  New York. The
Company also  continues to act as franchisor  under the existing T.J.

                                      -4-
<PAGE>

Cinnamons franchise agreements,  although day-to-day management responsibilities
were  assumed  by Triarc  pursuant  to a  management  agreement.  The  wholesale
licensing rights provided under the Triarc License  Agreement are for the United
States and any foreign country if the Company pays for the costs and expenses of
securing  trademark  registrations  and necessary  government  approvals in such
foreign  country.  The  term  of the  license  agreement  aggregates  99  years,
consisting  of an initial term of 20 years,  together with three 20 year renewal
options,  and one 19 year renewal option.  Each renewal option is subject to the
Company's  compliance  with the terms of the license  agreement  and executing a
general release in favor of Triarc.

     Under the Triarc License Agreement, the Company has the right to distribute
approved   wholesale   products  to  supermarket   chains  approved  by  Triarc.
Supermarket chains include grocery stores, warehouse stores,  combination stores
and  wholesale  club stores with annual sales  exceeding $2 million,  but do not
include  convenience  stores. A list of wholesale products were pre-approved and
included  as an exhibit  to the  license  agreement,  including  seven  sizes of
cinnamon rolls, seven flavor varieties of cinnamon rolls, three flavor varieties
of CinnaChip's,  and three flavor  varieties of CinnaLoaf  breads.  The cinnamon
roll  products  can be sold in 4-pack,  6-pack and 12-pack  containers  or other
containers  approved by Triarc.  The Triarc License Agreement  provides that for
the period ending May 29, 2000, Triarc may not sell any approved T.J.  Cinnamons
products under the license agreement to any supermarket chain unless Triarc pays
the  Company a 2%  royalty  based on the  wholesale  sales to these  supermarket
accounts.  Triarc may not sell such products to any  supermarket  chain to which
the Company has been,  and  continues  selling such products as of May 29, 2000.
See "Risk Factors - Non-Exclusivity of Triarc License Agreement."

     The  Company  is  obligated   to  comply  with   Triarc's   standards   and
specifications  for  the  preparation,   manufacture,  packaging,  distribution,
advertising  and promotion of the approved  wholesale  products,  and to use the
Intellectual  Property  only to the extent  provided  for in the Triarc  License
Agreement.

     Need for  Additional  Capital.  In an effort to  secure  financing  to fund
operating  deficits  and  provide the Company  with  sufficient  capital for its
expansion  plans,  in October  1997,  the  Company  offered  for sale units in a
convertible  preferred  stock private  placement  with  Commonwealth  Associates
acting as the placement agent.  This offering was held open to investors through
January 1998, and was not consummated as orders for the minimum number of shares
were  not  obtained.  Without  alternative  sources  of  financing  to fund  the
Company's  operating  deficits,  the Company initiated  discussions with a third
party regarding  securing capital through the sale of the Company's rights under
the Triarc agreements.

     Proposed Sale of Rights Under Triarc  Agreements.  The Company is currently
negotiating  with an  unaffiliated  third party  purchaser  (the "Third  Party")
regarding the sale of (a) all of the Company's  rights under the Triarc Purchase
Agreement and License  Agreement and (b) the Company's rights and obligations as
franchisor  under the T.J.  Cinnamons  franchise system  (collectively  the "TJC
Transaction").  Consummation  of the  proposed  TJC  Transaction  is  subject to
negotiation of the final terms of the  transaction and execution of a definitive
agreement,  completion by Third Party of its due  diligence of the Company,  and
the receipt of shareholder approval for the TJC Transaction. No assurance can be
given that the Company and the Third Party will be successful  in  negotiating a

                                      -5-
<PAGE>

definitive agreement following completion of the due diligence,  or even if such
agreement is reached,  that the  Company's  shareholders  would  approve the TJC
Transaction. See "Risk Factors - Failure to Close the TJC Transaction."

     If the TJC  Transaction is  consummated,  then following the closing of the
proposed  TJC  Transaction,   the  Company  will  continue  to  manufacture  and
distribute  gourmet  specialty  bakery products,  however,  the Company would no
longer  manufacture  and sell T.J.  Cinnamons  branded  products  which  include
cinnamon  rolls and  cinnachips.  For the fiscal year ending  December 31, 1997,
sales of T.J.  Cinnamons  branded  products  accounted  for 75% of the Company's
total  wholesale  sales.  See "Risk Factors - Potential Loss of Wholesale  Sales
Resulting  from the TJC  Transaction."  In addition,  if the TJC  Transaction is
consummated, then following the closing of the TJC Transaction, the Company will
no longer be entitled to receive any  payments  under the  previously  described
Triarc  purchase  agreement  and  license  agreement.  See  "Business  -  Triarc
Transaction."

     Industry Overview. Supermarket in-store bakery sales have grown from $10.72
billion to $11.43 billion in the twelve months from 1995 to 1996. This growth is
attributed  to  actual  sales  increases  per  store  and is not the  result  of
additional bakeries developed.  According to Progressive  Grocer's Bakery Update
1997 report,  average bakery sales in 1996 grew by 8.5%, a significant  increase
over the sales increase of 6.6% in 1995.  In-store bakeries outperform all other
supermarket  departments by contributing a substantial 52.3% gross margin on all
bakery  sales.  There are now more than  23,000  supermarket  in-store  bakeries
representing 76.3% of all supermarkets.

     The "sweet  goods"  and  "cookie"  categories  each  represent  7.9% of the
industry-wide  bakery sales and combined  represent 15.8% of such sales. As this
industry grows and as the need for high quality value-added  products increases,
the Company believes that  manufacturers  who position  themselves as leaders in
the upscale, gourmet bakery market will be capturing more of the total sales.

     Management believes that the shift from full time to part time labor in the
in-store  bakery  departments  of  supermarkets  and  wholesale  club stores has
created a shortage of skilled bakers and is fostering a climate that is ripe for
"new"  products  the  preparation  of which  requires  little  or no  expertise.
Management  further  believes that all of the trends and barometers point toward
new product  development in "fully baked",  "thaw and sell",  and  "prepackaged"
product lines that meet the quality profile of today's in-store bakery products.
The Company's goal is to capitalize on these trends and market dynamics in order
to become a leader in the off premises  manufacture of bakery  products for sale
to supermarket and grocery store customers. The Company believes that this trend
is very likely to continue  into the next  decade,  resulting  in the  Company's
ideal positioning of its "thaw and sell" line of gourmet bakery products.  There
can,  however,  be no  assurance  that the  Company  can  achieve  its sales and
earnings goals. See "Risk Factors - Competition".

     Business Strategy.  To develop its wholesale sales, the Company has focused
its selling  efforts in specific  geographic  areas through  alliances  with the
following key food brokerage groups: (a) Le Grand Marketing, representing retail
grocery stores in California; (b) Food Scene, representing retail grocery stores
in the New York tri-state area, (c) J & J Brokers,  representing  retail grocery
stores in New England,  (d) Priority Food Brokers,  representing  retail grocery
stores  in  Maryland  and  Virginia,  and  (e)

                                      -6-
<PAGE>

American Sales and Marketing, representing membership club stores nationwide and
retail grocery stores in the Midwest.  The Company is targeting its product line
to in-store bakeries and in-store deli areas of supermarket chains,  focusing on
large multi-unit accounts.

     The  Company  has  focused  its  marketing  efforts on the  following  core
products:  (a) T.J.  Cinnamons  gourmet cinnamon rolls and gourmet sticky rolls;
(b) T.J.  Cinnamons  cinnachips;  (c) private label rugalach;  (d) private label
bundt cakes,  (e) gourmet brownies sold under the Hershey's label, and (d) other
private label specialty cakes. The private label rugalach are made utilizing the
Company's own recipe in the following flavor varieties: chocolate chip, cinnamon
apple,  raspberry  walnut and apricot  pecan.  The  gourmet  bundt cakes in four
flavor  varieties,  and the specialty cakes include upside down pineapple cakes,
pull-apart  cakes, 7" chocolate and white iced layer cakes, 4" mini 7" chocolate
and white iced layer cakes,  and 1/4" chocolate and white iced sheet cakes.  All
of these  products  are sold in various  packaging  and sizes,  and are  shipped
through both fresh and frozen distribution.

     If the TJC Transaction is completed, the Company will no longer manufacture
and  sell  "T.J.  Cinnamons"  branded  products  including  cinnamon  rolls  and
cinnachips,  however the Company will continue to manufacture and sell all other
specialty  bakery products  outlined above.  For the fiscal year ending December
31, 1997,  sales of T.J.  Cinnamons  branded  products  accounted for 75% of the
Company's total wholesale sales, of which  approximately 47% represents the sale
of cinnachips.  Management  believes that it will be able to replace these sales
with other  private  label and branded  products.  However,  no assurance can be
given that the Company will be successful  in replacing  the sales  generated by
the T.J.  Cinnamons branded products,  or that the proposed TJC Transaction will
be completed.  See "Risk Factors - Potential Loss of Wholesale  Sales  Resulting
from the TJC Transaction."

     The Company is targeting its product line to in-store bakeries and in-store
deli areas of supermarket  chains,  focusing on large multi-unit  accounts.  The
Company is  supporting  all initial  sales with a marketing  budget for in-store
sampling  and  demonstrations  and store  circular  promotions.  The Company has
developed a mass production  process to produce the cinnachip products which are
similar to bagel chips made from cinnamon rolls utilizing a double bake process.
The cinnachips are currently sold in plastic tub containers ranging in size from
8 ounces to 20 ounces, and a paper bag targeted to the in-store deli departments
of  supermarkets.  Sales  of  cinnachips  accounted  for  47% of  the  Company's
wholesale  sales in fiscal 1997. If the proposed TJC Transaction is consummated,
following  completion  of the  TJC  Transaction,  the  Company  will  no  longer
manufacture and sell T.J. Cinnamons  cinnachips.  See "Risk Factors - Failure to
Close the TJC Transaction."

     The Company is  currently  selling  its  products  in  approximately  2,000
locations including the following accounts:  Ralph's  Supermarkets,  Food-4-Less
Supermarkets, Walmart Super Centers, Luckys Supermarkets, ShopRite Supermarkets,
H.E. Butt Supermarkets,  Kings Supermarkets,  D'Agostinos  Supermarkets,  Costco
Wholesale Clubs and Sam's Wholesale Clubs. During the fiscal year ended December
31, 1997,  approximately 77% of the Company's sales were to Ralph's Supermarkets
and Sam's Wholesale Clubs. See "Risk Factors - Dependence on Major Customers".

     Management believes that the continuous development and introduction of new
gourmet bakery products at attractive pricing will further develop the Company's
sale of its "private label" specialty bakery products to both the retail grocery
and food service trade. However, there can be no assurance that the Company will
be able to implement its business strategy, or if implemented, that the business

                                      -7-
<PAGE>

strategy will permit the Company to accomplish its sales and earnings goals. See
"Risk Factors Management of Growth."

     The Company  plans,  as an integral  part of its  competitive  posture,  to
introduce new products rapidly and continuously. The Company believes that a key
to  its  success  is  its  ability  to  develop   innovative  new  products  and
merchandising  programs  reacting to demand of its  customers  and trends in the
in-store  baking  industry.  Some  of the new  products  under  development  are
biscotti,  mandel toast, puff pastries,  and sweet and savory bagel crisps.  See
"Risk Factors - Competition; New Product Development."

     Plan of Operation.  The Company's  plan of operations  for fiscal year 1998
calls  for  the  implementation  of the  Company's  overall  strategy  to  build
substantial  sales of new and existing  gourmet bakery  products sold as private
label products to major supermarket chains,  wholesale club stores,  convenience
stores, specialty stores, vending outlets and food service accounts.

     The Company anticipates further automation of its manufacturing facility in
California  during  1998.  Furthermore,  the  Company  intends  to  explore  the
possibility of entering into a co-packing  agreement with a manufacturer  in the
Northeast  and also intends to explore the possible  acquisition  of an existing
bakery  business to meet  projected  demand for its products in fiscal 1998. The
most  likely  acquisition  candidate  will be a company  that  manufactures  and
distributes  specialty  bakery  products,  and whose  manufacturing,  marketing,
sales,  distribution  and  administrative  operations  complement  those  of the
Company,  although no specific  acquisitions  are  currently  contemplated.  The
Company  intends to relocate to new office space in Secaucus,  New Jersey in May
1998.  Management believes that this office space and forecasted  administrative
staff  will be  sufficient  to meet  the  Company's  needs at the  sales  volume
anticipated for fiscal year 1998. See "Properties." The Company expects to lease
or purchase  accounting  software and  computers in fiscal  1998.  However,  the
Company will continue to explore opportunities to improve its product design and
production capability.

     The Company  believes  that the net proceeds from the TJC  Transaction,  if
consummated,  together with its anticipated  lines of credit,  and the Company's
anticipated cash from operations,  should be sufficient to satisfy the Company's
cash needs through June 30, 1999.  Should  demand for the Company's  products be
greater than anticipated, the Company might find it necessary to seek additional
financing or to reduce planned  expenditures on marketing and product  expansion
if efficient financing cannot be obtained or obtained timely on terms acceptable
to the Company. See "Risk Factors - Possible Need for Additional Financing."

     Manufacturing and Distribution.  The Company's existing production facility
is located in Santa Ana, California. The lease for this facility expires on June
30, 1998.  The Company has executed a three year lease for a 15,000  square foot
bakery in El Cajon, California, and anticipates relocating its production to the
new  facility  in  May,  1998.  The  facility  has a  capacity  estimated  to be
approximately   $10  million.   The  facility  has  blast  freezers,   freezers,
refrigerators, proofers, ovens, mixers, depositors and other equipment necessary
for the production of the Company's  products.  The Company recently acquired an
automated bakery production line which sheets,  forms, fills, rolls and cuts the
various bakery products,  as well as an automated packaging line which cools and
packages the fully baked

                                      -8-

<PAGE>

products. Management anticipates that these automated processes will result in a
substantial  reduction in labor costs thereby  increasing  the  Company's  gross
margins.

     The  Company  intends  to  explore  the  possibility  of  entering  into  a
co-packing relationship with a manufacturer in the Northeast and/or acquiring an
existing  bakery  business when the California  facility is nearing its capacity
and sales in the northeastern  United States have been  sufficiently  developed.
All products sold in the northeastern United States are currently shipped frozen
and  warehoused  at a  distribution  facility in New  Jersey.  The Company has a
minimum half truck load order  requirement for all products  shipped to areas of
the country other than California and the northeastern United States.

     The cinnamon  roll products are baked fresh and  distributed  daily through
independent  distributors  or  through  the  internal  distribution  systems  of
supermarket chains. The cinnamon roll products have a 5 to 7 day shelf life, the
cinnachips  have a 120 day shelf life, and the rugalach have a 45 day shelf life
based on the current  packaging.  All cinnamon roll products  currently  sold in
southern  California are distributed  daily to supermarkets  and membership club
stores through an outside  distributor or through  supermarket  chains' in-house
distribution systems. The Company freezes all cinnamon rolls, cakes and rugalach
products for distribution outside of southern California.  These products are to
be fully baked and packaged,  and are to be shipped and distributed frozen to be
thawed at the  supermarket  and sold as a fresh  product in the in-store  bakery
section of the  supermarkets.  All CinnaChip  products are distributed  fresh at
room temperature due to their extended shelf life.

     Quality  Control.  The Company's  products,  other than the T.J.  Cinnamons
branded products, are produced in accordance with the Company's recipes, quality
standards and proprietary formulations. In order to maintain the high quality of
its bakery products,  the Company maintains  specifications  for its ingredients
and  periodically  reviews the  standards of its purchased  ingredients  against
these  specifications.  The Company is not dependent on any one supplier for its
ingredients  and  only  those  ingredients  that  meet  specified  criteria  are
selected.  Ingredients are carefully  inspected by the Company before they enter
its plant.  Product consistency is ensured by inspection at critical flow points
by quality  assurance  employees,  although  all  workers  are  responsible  for
monitoring  the quality of the product and may stop the production  process,  if
necessary.  Product  sampling  occurs on the  production  floor to  ensure  that
products are consistent with the Company's standards.

     Provisions  and  Supplies.  The  Company's dry mix products are produced by
Williams Foods, Inc. in accordance with the T.J.  Cinnamons  proprietary  secret
formulas and quality  standards.  The T.J. Cinnamon  proprietary  cinnamon spice
formulation  is produced by  McCormick & Company,  Inc.  and various  other T.J.
Cinnamons  proprietary  blends are  produced by Dawn Foods,  Inc.  Although  the
Company's  relationship  with its  suppliers is  generally on an  order-by-order
basis, the Company believes  alternate  sources of supply for all essential food
and paper products are available,  or on short notice can be made available,  at
comparable prices.  The Company  negotiates  directly with its suppliers for all
primary food and paper ingredients, and beverage products sold at its bakery, to
ensure adequate supply and to obtain competitive prices.

     Governmental Regulations. The Company is subject to various federal, state,
and local laws  affecting  its business.  The Company's  bakeries are subject to
regulation  by  various  governmental   agencies,   including  state  and  local
licensing,  zoning,  land use,  construction and  environmental

                                      -9-

<PAGE>

regulations  and various  health,  sanitation,  safety and fire  standards.  The
Company is also subject to the Fair Labor  Standards  Act and various state laws
governing such matters as minimum wages, overtime and working conditions.

     The Company has not made nor does it anticipate making any material capital
expenditures in order to comply with environmental regulations.  There can be no
assurance, however, that new environmental regulations may be adopted which will
require the Company to make material capital  expenditures to comply  therewith.
See "Risk Factors - Governmental Regulations; Minimum Wages."

     Employees.  The Company has 12 full-time employees,  4 of whom are employed
in general or administrative  functions  principally at the Company's  executive
offices in Secaucus,  New Jersey;  and 7 of whom are  employed in its  wholesale
bakery in Santa Ana,  California.  The Company also has  approximately  100 full
time hourly employees  employed in the Santa Ana manufacturing  facility.  There
are no collective  bargaining  agreements,  and the Company  considers its labor
relations to be satisfactory.

     Competition.  The  retail  bakery  industry  and the  restaurant  industry,
particularly the quick-service  segment,  is highly  competitive with respect to
price,  service,  food quality  (including taste,  freshness,  healthfulness and
nutritional value) and location. There are numerous well-established competitors
possessing  substantially  greater  financial,  marketing,  personnel  and other
resources  than the Company.  These  competitors  include  national and regional
bakeries,  supermarkets  with in-store  bakeries and  quick-service  restaurants
chains, many of which specialize in or offer bakery products. Many quick-service
restaurant chains are expanding their menus to include products competitive with
the  Company's  cinnamon  rolls.  The  Company  can  also  be  expected  to face
competition   from  a  broad  range  of  other   restaurants  and  food  service
establishments.

     Many of the  Company's  competitors  have  achieved  significant  national,
regional  and local brand name and product  recognition  and engage in extensive
advertising and promotional programs,  both generally and in response to efforts
by additional competitors to enter new markets or introduce new products.

     The retail bakery industry and the  quick-service  restaurant  industry are
characterized  by the frequent  introduction  of new products,  accomplished  by
substantial  promotional campaigns. In recent years, numerous companies in these
industries have introduced products positioned to capitalize on growing consumer
preference  for  food  products  that  are or  are  perceived  to be  healthful,
nutritious,  low in calories and low in fat content. It can be expected that the
Company will be subject to increasing  competition from companies whose products
or marketing  strategies address these consumer  preferences.  Furthermore,  the
Company  is aware of two  significant  competitors  (Cinnabon  and La  Francaise
Bakery) that offer cinnamon rolls directly comparable to T.J. Cinnamons products
sold and distributed by the Company.

     A majority of the  Company's  revenue is derived  from sales of products to
grocery  retail  outlets.  The wholesale  food  distribution  business is highly
competitive. The principal competitive factors include price, service, extent of
product offered,  strength of brand offered and store promotional support. These
intense  competitive  factors may result in a reduction in the  Company's  gross
margins which could have a materially adverse effect on the Company's  financial
condition and results of operations.

                                      -10-

<PAGE>

     There can be no assurance  that  consumers  will regard the  products  sold
under the Company's name by in-store  bakeries as  sufficiently  distinguishable
from competitive  products,  that substantially  equivalent products will not be
introduced by the Company's  other  competitors or that the Company will be able
to compete successfully. See "Risk Factors - Competition."

Forward Looking Statements

     When used in this Annual Report, the words or phrases "will likely result",
"are expected to", "will continue", "is anticipated",  "estimate",  "projected",
"intends to" or similar  expressions are intended to identify  "forward  looking
statements" within the meaning of the Private  Securities  Litigation Reform Act
of 1995.  Such  statements  are  subject  to  certain  risks and  uncertainties,
including  but not  limited  to the  Company's  history  of losses and cash flow
deficit;  independent  auditor's  report  regarding  the  Company's  ability  to
continue as a going concern; failure to close the TJC Transaction; possible loss
of  wholesale  sales  resulting  from  the TJC  Transaction;  possible  need for
additional  financing;  dietary  trends;  competition;   management  of  growth;
non-exclusivity  of Triarc License  Agreement;  contingent  additional  payments
under the Triarc  Purchase  Agreement;  trademarks  and service  marks;  limited
manufacturing   and  warehouse   facilities;   dependence  on  major  customers;
termination of the management  agreement on the  Poughkeepsie  Galleria  Bakery;
dependence upon key and other personnel;  government regulations;  insurance and
potential liability;  lack of liquidity;  possible adverse effect of penny stock
rules and liquidity of the Company's Common Stock;  dividend policy;  control by
directors and executive officers,  that could cause the Company's actual results
to differ materially from historical earnings and those presently anticipated or
projected.  Such factors, which are discussed in "Risk Factors",  "Business" and
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" and the notes to consolidated financial statements, could affect the
Company's financial performance and could cause the Company's actual results for
future periods to differ  materially  from any opinions or statements  expressed
with  respect to future  periods  expressed in the Annual  Report.  As a result,
potential  investors  are  cautioned  not to place  undue  reliance  on any such
forward-looking  statements,  which  speak only as of the date  made.  See "Risk
Factors"  "Business"  and  "Management's  Discussion  and  Analysis of Financial
Condition and Results of Operations."

Risk Factors

In addition to the other information in this report,  the following  information
should be considered carefully in evaluating the Company and its business.

     (a) History of Operating Losses;  Operating Cash Flow Deficit.  The Company
has had net operating  losses since 1988. For the fiscal year ended December 31,
1997,  the  Company's  net  loss was  $1,376,657.  The  Company  has been and is
currently  experiencing  an operating  cash flow deficit  primarily  because its
current expenses exceed its current  revenues.  At December 31, 1997 the Company
had a  working  capital  deficit  of  approximately  $679,200.  There  can be no
assurance  that the Company will achieve  profitable  operations  and a positive
cash flow. See "Management's Discussion and Analysis of Financial Conditions and
Results of Operations."

                                      -11-
<PAGE>

     (b) Independent  Auditor's Report. The Independent  Auditor's report on the
Company's  financial  statements  for the fiscal year ending  December  31, 1997
includes an  explanatory  paragraph  that  describes the  uncertainty  as to the
ability of the Company to continue as a going concern.  In the event the Company
is unable to continue  as a going  concern,  stockholders  may lose all of their
investment  in the Company.  See Note 2 of the Notes to  Consolidated  Financial
Statements.

     (c)  Failure  to  Close  the TJC  Transaction.  The  Company  is  currently
negotiating  with an unaffiliated  Third Party regarding the sale of (a) acquire
all of the  Company's  rights under the Triarc  Purchase  Agreement  and License
Agreement and (b) the Company's  rights and obligations as franchisor  under the
T.J.   Cinnamons   franchise  system   (collectively  the  "TJC   Transaction").
Consummation  of the proposed TJC Transaction is subject to negotiation of final
terms, execution of a definitive agreement, completion by Third Party of its due
diligence of the Company,  and the receipt of  shareholder  approval for the TJC
Transaction  under Delaware Law and other customary  closing  conditions.  Based
upon  currently  proposed  plans and  assumptions  relating  to its  operations,
Management  believes that it will have sufficient working capital available from
operating revenues and the net proceeds of the TJC Transaction,  if consummated,
to finance its activities  through June 30, 1999. There can be no assurance that
the Company will be able to reach a definitive agreement with the Third Party on
the TJC  Transaction,  or even if such agreement is reached,  that the Company's
stockholders  will  approve the TJC  Transaction.  The failure of the Company to
close the TJC Transaction  could have a material adverse effect on the Company's
business,  financial condition and results of operations as the Company will not
have sufficient financial resources to continue its current business operations.

     (d) Potential Loss of Wholesale Sales  Resulting from the TJC  Transaction.
Following  consummation  of the TJC  Transaction,  the Company will  continue to
manufacture and distribute  gourmet  specialty  bakery  products,  however,  the
Company would no longer  manufacture and sell T.J.  Cinnamons  branded products.
T.J.  Cinnamons  branded  products  accounted for 75% of wholesale sales for the
fiscal year ending December 31, 1997. The failure of the Company to replace such
sales with other products could have a material  adverse effect on the Company's
business, financial condition and results of operations.

     (e) Possible Need for Additional Financing. In the future, the Company will
require  additional  capital in connection with the  manufacture,  marketing and
sale  of  its  products.   In  order  to  develop  new  products,   manufacture,
merchandise,  market,  and sell its new and existing product line, and otherwise
implement  its plan of  operations,  the Company will be  required,  among other
things,  to raise  additional  capital.  While the Company has existing lines of
credit,  there can be no assurance that such debt financing will be available to
the Company in the future or that such debt  financing  will be available in the
amounts  required  by the Company or on terms  acceptable  to the  Company.  The
failure of the Company to obtain financing in adequate amounts and on acceptable
terms  could  have  an  adverse  effect  on the  Company's  business,  financial
condition and results of operations.

     (f)  Dietary  Trends;  Consumer  Preferences.  In  recent  years,  numerous
companies in the retail bakery industry have introduced  products  positioned to
capitalize on growing  consumer  preference for bakery products that are, or are
perceived to be, healthful, nutritious, and low in calories, cholesterol and fat
content.  The  Company's  primary  products  are  relatively  high in  calories,
cholesterol and fat content. A decline in the sale of cinnamon rolls and related
products, due to industry trends, changing consumer

                                      -12-

<PAGE>

preferences  including  taste,  eating  habits,  demographic  trends and traffic
patterns,  or  because  of health  related or other  dietary  concerns  or other
reasons,  could  have an adverse  effect on the  Company's  business,  financial
condition and results of operations.

     (g)  Competition;  New Product  Development.  The retail bakery industry is
highly  competitive  with  respect to price and food  quality  including  taste,
freshness,   healthfulness  and  nutritional  value.  A  number  of  established
companies with  significant  brand name recognition  currently  compete with the
Company in the various  markets for market share.  Many of these  companies have
far more available  capital,  broader product lines,  and greater  marketing and
sales  resources  than does the  Company,  and many  devote  significantly  more
resources to the development of new products than does the Company.  The Company
will seek to  compete  on the  basis of the  Company's  innovation  and speed of
execution in expanding  its existing  product line and  launching  new products.
However, there can be no assurance that such competitors will not develop direct
competing  brands  with more  market  acceptance,  or which can be sold at lower
prices than products that have been, or may be, developed by the Company.  These
intense  competitive  factors may result in a reduction in the  Company's  gross
margins which could have a materially adverse effect on the Company's  business,
financial condition and results of operations.

     (h)  Management  of  Growth.   The  Company's   ability  to  manage  growth
effectively and expand its operations will be dependent on its ability to expand
and improve its  operational,  technical,  financial and sales  systems,  and to
develop the skills of its managers and  supervisors,  and to hire,  motivate and
manage  its  employees.  Expansion  of the  Company's  manufacturing,  sales and
distribution operations will be dependent upon, amongst other things,  continued
growth in the bakery industry,  the Company's ability to withstand intense price
competition,  its ability to obtain new  customers,  and retain  sales and other
personnel.  There can be no  assurance  that the Company will be  successful  in
managing its growth and expanding its business.  The Company's failure to manage
its growth or expand its business  could have a material  adverse  effect on its
business, financial condition and results of operations.

     (i) Non-Exclusivity of Triarc License Agreement.  The Company  manufactures
and sells selected T.J.  Cinnamons  products (the "TJC Products")  pursuant to a
license  agreement with Triarc.  The license for the wholesaling of TJC Products
to supermarket chains is exclusive to the Company through May 29, 2000, although
there is an explicit  prohibition  for the  manufacture  and sale only by Triarc
through such date, and not by other entities to whom Triarc may grant  licenses.
After  the  expiration  of such  exclusive  period,  both  Triarc  and any other
licensee of Triarc,  may sell the TJC  Products  through  wholesale  channels of
distribution except to those supermarket chains in which the Company was selling
TJC Products prior to the expiration of such exclusivity period and to which the
Company  continues to sell the TJC Products on a continuous basis. To the extent
that the license agreement is not and will not be exclusive, the Company will be
forced to  compete  against  Triarc  and/or  Triarc's  other  licensees  for new
supermarket sales.  Triarc's  resources greatly exceed the Company's  resources,
and it is  anticipated  that  Triarc's  resources  will  continue  to exceed the
Company's  resources  following the  expiration of the  exclusivity  period.  If
Triarc chooses to enter, either directly or indirectly,  into the wholesaling of
TJC Products at the end of the  exclusivity  period (or if Triarc should attempt
to enter into licensing  agreements with other entities during such period,  and
the Company is  unsuccessful in restraining  such licenses),  the Company may be
unable to compete  effectively  for new accounts,  which may severely

                                      -13-

<PAGE>

limit the Company's  growth.  If the proposed TJC  Transaction is consummated as
currently  structured,  the  Company  will no longer have any rights to sell TJC
Products  under the Triarc  license  agreement.  See "Risk  Factors - Failure to
Close the TJC Transaction."

     (j) Contingent Additional Payments under the Triarc Purchase Agreement.  In
August 1996,  the Company  completed a transaction  with Triarc  whereby  Triarc
acquired the T.J.  Cinnamons  intellectual  property in consideration  for (a) a
royalty  free  license  agreement  for a period  of 99 years  including  renewal
options,  (b) a base  purchase  price  of  $3.54  million,  and  (c)  contingent
additional  future payments of up to $5.5 million.  These contingent  additional
payments will commence only if in any  consecutive 12 month period the aggregate
system wide sales of T.J.  Cinnamons  products by Triarc  exceeds $26.3 million,
and are based on a  percentage  of Triarc  system wide sales equal to 2% for the
next 48 months  and 1% for a further  36  months.  These  contingent  additional
payments  will be  recorded  as  revenues  when  and if  received,  and  have no
corresponding  expenses  associated  with them.  As a result,  these  additional
payments  could  be of  significant  value  to the  Company.  However,  they are
contingent  on Triarc's  development  efforts and success in promoting  the T.J.
Cinnamons concept into a number of the Arby's franchised  restaurant  locations,
over which the Company has no control.  Furthermore,  the Triarc franchisees are
under no obligation to develop the T.J.  Cinnamons  concept.  If Triarc's system
wide sales never reach the $26.3  million,  this could have an adverse effect on
the Company's business,  financial  condition and results of operations.  If the
proposed TJC  Transaction is consummated  as currently  structured,  the Company
will not be entitled to receive any further  payments under the Triarc  purchase
agreement. See "Risk Factors - Failure to Close the TJC Transaction."

     (k) Trademarks and Service Marks. The Company's  business is dependent upon
its license of the trademarks,  services marks and other  Intellectual  Property
pursuant to the Triarc license agreement . The Company believes these trademarks
and service marks have  significant  value and are important to the marketing of
its products.  However, in addition to the non-exclusivity of the Triarc License
Agreement,  there can be no  assurance  that the Company  will be able to retain
these rights pursuant to its license agreement,  that these marks do not or will
not violate the proprietary rights of others,  that the marks would be upheld if
challenged  or that the Company  would not be prevented  from using these marks.
The occurrence of any of the aforementioned  events could have an adverse effect
on the Company's business, financial condition and results of operations. If the
proposed TJC  Transaction is consummated  as currently  structured,  the Company
will no longer  have any rights to the T.J.  Cinnamons  trademarks  and  service
marks pursuant to the Triarc  License  Agreement.  See "Risk Factors  Failure to
Close the TJC  Transaction."  No assurance can be given that the TJC Transaction
will be consummated.

     (l) Limited  Manufacturing and Warehouse  Facilities.  The Company has only
one manufacturing and warehouse facility located in Santa Ana, California,  with
limited  production  capacity.  The  Company  plans to  improve  its  production
capability by implementing  automation of its production  processes  through new
equipment  purchases,  and  developing  a second  manufacturing  facility in the
Northeast.  There can be no assurance that the Company,  will, in the future, be
able to manufacture and warehouse products in adequate quantities to meet future
demand.  Accordingly,  the  Company  may have to seek  additional  manufacturing
capacity,  warehouse  facilities,  and/or  subcontractors  to service its future
needs.   There  can  be  no  assurance  that  such  capacity,   facilities,   or
subcontractors  will either be  available  in the future or  available  on terms
acceptable to the Company.

                                      -14-
<PAGE>

     (m) Dependence on Major Customers.  The Company's  current revenues consist
primarily of sales to a limited number of large  supermarket  and wholesale club
chains. During the fiscal year ended December 31, 1997, approximately 77% of the
Company's  sales were to Ralph's  Supermarkets  and Sam's Wholesale  Clubs.  The
Company's success will depend upon a continuous stream of orders for its various
products from existing  customers  and an  increasing  number of new  customers.
There can be no assurance,  however,  that the Company's prior sales to existing
accounts will result in any new and/or repeat orders from these or other similar
accounts.  The failure of such  accounts to carry the  Company's  products or to
place repeat orders for the  Company's  products  would have a material  adverse
effect on the Company's business, financial condition and results of operations.
If the proposed TJC  Transaction  is consummated  as currently  structured,  the
Company will no longer have any rights to  manufacture  and sell T.J.  Cinnamons
branded  products which accounted for 75% of the Company's total wholesale sales
in fiscal  1997.  No  assurance  can be given that the TJC  Transaction  will be
consummated.

     (n) Termination of the Management  Agreement on the  Poughkeepsie  Galleria
Bakery.  In the event  the  current  independent  managers  of the  Poughkeepsie
Galleria  Bakery are unable or  unwilling  to meet  their  continuing  financial
obligations  to the Company under their  management  agreement,  the Company may
have to reassume  the  operation  of the  Poughkeepsie  Galleria  Bakery and the
payments due under its lease  agreement  which  expires on June 1, 2000.  If the
Company reassumes  operation of said bakery,  there can be no assurance that the
bakery will generate  sufficient  revenue to meet the payment  obligations under
the  bakery  lease,  which  may  result  in a drain on the  Company's  financial
resources.

     (o)  Dependence  Upon Key and Other  Personnel.  The success of the Company
will be largely dependent on the efforts of certain key personnel of the Company
including Charles Loccisano,  its Chairman and Chief Executive Officer, and Alan
Gottlich its President and Chief Financial  Officer.  The loss of the service of
any such  persons  would  have a material  adverse  effect on the  Company.  The
Company maintains  "key-man" insurance on Charles Loccisano and Alan Gottlich in
the amount of  $1,000,000  and $500,000,  respectively.  The Company has entered
into  three  year  employment  agreements  with each of  Messrs.  Loccisano  and
Gottlich. The Company will also be dependent upon its ability to retain existing
and hire additional qualified personnel. The competition for qualified personnel
in the food industry is intense and, accordingly, there can be no assurance that
the Company  will be able to retain or hire other  necessary  personnel.  If the
Company is required to provide its employees  higher wages or more  extensive or
costly  benefits as a result of competitive  reasons or changes in  governmental
regulations,  the expenses  associated  with the Company's  operations  could be
substantially   increased  without  an  offsetting  increase  in  the  Company's
revenues.

     (p) Government  Regulations;  Minimum Wages. The Company also is subject to
various  federal,  state and local  laws  affecting  its  business.  Both of the
Company's  retail and  wholesale  bakeries are subject to  regulation by various
governmental  agencies,  including state and local licensing,  zoning, land use,
construction  and  environmental  regulations  and various  health,  sanitation,
safety and fire  standard  laws and  regulations.  In  addition,  suspension  of
certain licenses or approvals,  or failure to comply with applicable regulations
or  otherwise,  could  interrupt the  operations of the Company's  manufacturing
facility  or  otherwise  adversely  affect  the  manufacturing  facility  of the
Company.  Any such  interruption  could  have a material  adverse  effect on the
Company's  revenues  and results of

                                      -15-
<PAGE>

operations.  The Company is also subject to federal and state laws  establishing
minimum  wages  and  regulating  overtime  and  working   conditions.   Since  a
substantial portion of the Company's  manufacturing  facility personnel are paid
or expected to be paid at rates based on the federal minimum wage,  increases in
such minimum wage will  increase the  Company's  labor costs.  If the Company is
required to pay higher wages to its employees,  the expenses associated with the
Company's  operations  could be increased  without a  corresponding  increase in
revenues.

     (q) Insurance and Potential  Liability.  The Company  maintains  insurance,
including  insurance  relating to personal  injury,  in amounts that the Company
currently considers adequate.  Nevertheless, a partially or completely uninsured
or  underinsured  claim  against the Company,  if  successful  and of sufficient
magnitude,  could  have a material  adverse  effect on the  Company's  business,
financial condition and results of operations.

     (r) Lack of  Liquidity;  Volatility  of Market  Price of  Common  Stock and
Warrants.  The Common Stock and Warrants of the Company were  delisted  from the
Nasdaq SmallCap Market on January 7, 1998 and are presently quoted and traded on
the OTC Bulletin Board. As a result, the purchaser may find it more difficult to
dispose  of, or to obtain  accurate  quotations  as to the  market  value of the
Common  Stock and  Warrants.  Consequently,  there can be no  assurance  that an
active and liquid market for the Common Stock or the uniform quotation of prices
for the Common Stock can be sustained. The market price for the Company's Common
Stock and  Warrants  may also be  significantly  affected by such factors as the
introduction of new products by the Company or its competitors. Additionally, in
recent years,  the stock market has experienced a high level of price and volume
volatility,  and  market  prices  for many  companies,  particularly  small  and
emerging growth companies, the securities of which trade in the over-the-counter
market,  have experienced wide price fluctuations not necessarily related to the
operating  performance of such companies.  The market price and liquidity of the
Company's  Common Stock and Warrants may also be  significantly  affected by the
general business condition of the Company.

     As a result of the  delisting of the Company's  securities  from the Nasdaq
SmallCap  Market,  sales of the  Company's  securities  are  within the scope of
Securities and Exchange  Commission rules that imposes additional sales practice
requirements  on  broker-dealers  who sell such securities to persons other that
their established  customers and accredited  investors  (generally  institutions
with assets in excess of $5,000,000 or  individuals  with net worth in excess of
in excess of $1,000,000 or annual income exceeding  $200,000 or $300,000 jointly
with their spouses).  For transactions  covered by that rule, the  broker-dealer
must make a special  suitability  determination  with respect to each purchaser,
and receive the purchaser's  written  agreement to the transaction  prior to the
sale.  Consequently,  the rule may affect the ability of  broker-dealers to sell
the Company's securities and also may affect the ability of current shareholders
to sell their securities in the secondary market. There can be no assurance that
trading  of the  Company's  securities  will not be  adversely  affected  by the
Company's failure to comply with these or other regulations that could adversely
effect the market for such securities.

     (s)  Possible  Adverse  Effect of Penny  Stock Rules on  Liquidity  for the
Company's Securities.  The Securities and Exchange Commission (the "Commission")
regulations  define a "penny stock" to be an equity security not registered on a
national securities exchange, or for which quotation information is disseminated
on the Nasdaq  SmallCap  Market that has a market price (as therein  defined) of
less than  $5.00 per share or an  exercise  price of less than

                                      -16-
<PAGE>

$5.00 per share, subject to certain exemptions.  For any transaction involving a
penny stock,  unless exempt, the rules require delivery,  prior to a transaction
in a penny stock, of a disclosure  schedule prepared by the Commission  relating
to the  penny  stock  market.  Disclosure  is also  required  to be  made  about
commissions payable to both the broker-dealer and the registered  representative
and current  quotations  for the  securities.  Finally,  monthly  statements are
required to be sent disclosing recent price information for the penny stock held
in the account and information on the limited market in penny stocks.

     The foregoing required penny stock restrictions will apply to the Company's
securities if such  securities  continue to be listed on the OTC Bulletin Board,
and have  certain  price  and  volume  information  provided  on a  current  and
continuing  basis or meet certain  minimum net tangible assets or average return
criteria.  In any event, even if the Company's  securities were exempt from such
restrictions,  the  Company  would  remain  subject to Section  15(b)(6)  of the
Securities  Exchange Act of 1934,  as amended,  which gives the  Commission  the
authority  to  prohibit  any person that is engaged in  unlawful  conduct  while
participating  in a  distribution  of a  penny  stock  from  associating  with a
broker-dealer  or  participating  in a  distribution  of a penny  stock,  if the
Commission finds that such a restriction would be in the public interest. If the
Company's  securities  were  subject  to the rules on penny  stocks,  the market
liquidity  for the  Company's  securities  could  be  materially  and  adversely
affected.  Any  disruption in the liquid  market of the  Company's  Common Stock
could limit the Company's access to the equity markets in the future,  and could
have a materially adverse effect on the Company's business, financial conditions
and results of operations.

     (t) Dividend Policy. To date, the Company has not paid any dividends on its
Common  Stock.  In the  event  the  Company  is not able to  consummate  the TJC
Transaction,  the Board of  Directors  does not  anticipate  declaring  any cash
dividends on its Common Stock in the foreseeable  future.  Future dividends,  if
any, will be dependent upon the results of operations and financial condition of
the  Company,  tax  considerations,  industry  standards,  economic  conditions,
general business practices and other factors.

     (u) Control by Directors and Executive Officers.  The directors,  executive
officers and their affiliates own approximately 44% of the Company's outstanding
Common Stock (excluding currently exercisable stock options) and, therefore, are
in a position to elect all of the Company's directors who, in turn, elect all of
the Company's  executive officers.  Accordingly,  such stockholders are able to,
directly or indirectly, control all of the affairs of the Company.

                                      -17-
<PAGE>

ITEM 2.   PROPERTIES

     The Company leases its executive  offices at 135 Seaview  Drive,  Secaucus,
New Jersey. The offices occupy  approximately  2,900 square feet. The lease with
respect to these  premises  commenced  on December  31, 1994 and  provided for a
three  year  term and base  rent of  approximately  $29,000  per  year,  payable
monthly,  and requires the Company to pay its proportionate share of real estate
taxes,  common area  maintenance  fees and  insurance  premiums.  The Company is
currently  leasing its office space on a month-to-month  basis, and is currently
negotiating a lease with its current  landlord to relocate to a new office space
owned by the landlord.  The new office space is approximately 2,200 square feet,
and is located at One Harmon Plaza, Secaucus, New Jersey. The lease with respect
to  these  new  premises  provides  for  a  one  year  term  and  base  rent  of
approximately $46,600 per year, payable monthly.

     The Company leases its retail bakery located in the  Poughkeepsie  Galleria
Mall, in Poughkeepsie,  New York, with the lease term expiring June 2, 2000. The
lease has a minimum base  occupancy  charge of $35,000 per annum,  charges for a
proportionate  share of building  operating  expenses  and real estate taxes and
contingent  percentage  rent based on sales above a stipulated  sales level.  In
April 1997, the Company  entered into a management  agreement  pursuant to which
the  manager  collects  all  receipts,  assumes  responsibility  for all  bakery
expenses including rent and related charges,  and retains all positive cash flow
as a management fee. See "Risk Factors - Termination of Management  Agreement on
the Poughkeepsie Galleria Bakery."

     The Company  leases its wholesale  bakery  production  facility  located in
Santa Ana,  California with the lease term expiring June 30, 1998. The lease has
a minimum  base  occupancy  charge of $12,437  per  month,  plus  charges  for a
proportionate  share of building  operating  expenses and real estate taxes. The
Company has  entered  into a three year lease for a bakery  production  facility
located in El Cajon,  California.  This Company anticipates relocating the Santa
Ana bakery to the El Cajon facility in June 1998. The lease for the new facility
has a minimum  base  occupancy  charge of $7,967  per month plus  charges  for a
proportionate  share of building  operating expenses and real estate taxes. with
an increase of 4% per annum, plus charges for a proportionate  share of building
operating expenses and real estate taxes. The Company anticipates moving to this
new facility in May, 1998.

                                      -18-
<PAGE>

ITEM 3. LEGAL PROCEEDINGS

     Presently  the Company is not  involved  in any  litigation.  However,  the
Company  from time to time has been  involved in routine  litigation,  including
litigation with various vendors and creditors.  None of these litigation matters
in which the Company has been involved is material to its financial condition or
results of operations.


                                      -19-

<PAGE>

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

     The Company did not submit any matters to vote of its stockholders, through
the  solicitation  of proxies or otherwise  during the fourth  quarter of fiscal
1997.



                                      -20-

<PAGE>
                                     PART II

ITEM 5.  MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS

     The  Company's  Common  Stock,  Class A Warrants  and Class B Warrants  are
currently  traded on the OTC Bulletin  Board ("OTC")  under the symbols  "TJCI",
"TJCIW",  and "TJCIZ".  Prior to January 7, 1998,  the  Company's  Common Stock,
Class A Warrants and class B Warrants were traded on the Nasdaq  SmallCap Market
under the same symbols.

     The following  table sets forth,  for the periods  indicated,  the range of
high and low bid prices of the Common Stock as reported by Nasdaq for the twelve
months ended  December 31, 1996 and  December  31,  1997.  These prices  reflect
interdealer   prices  and  do  not  include  retail   mark-ups,   mark-downs  or
commissions, and do not necessarily represent actual transactions.

                                                 High             Low
Quarters Ending:
March 31, 1996 ......................          $4 3/8            $1 3/4
June 30, 1996 .......................           2 15/16           1 11/16
September 30, 1996 ..................           2 3/4             2 3/16
December 31, 1996 ...................           2 7/16            1 5/16


Quarters Ending:
March 31, 1997 ......................          $3 1/8            $1 9/16
June 30, 1997 .......................           2 7/16            1 3/8
September 30, 1997 ..................           2 3/16            1 5/16
December 31, 1997 ...................           1 11/16             7/16

As of  February  28,  1998,  the high bid and low bid prices were  $0.40625  and
$0.375 respectively.

Sales of Unregistered Securities

     The  following  sales  of  unregistered   securities  occurred  during  the
Company's fiscal year ended December 31, 1997:

1. In 1997, the Company authorized the issuance of 1,250 shares of the Company's
Common Stock to Kaya Yurtkuran.  These shares were issued without an underwriter
or placement  agent in  consideration  for  consulting  services  rendered.  The
exemption  from  registration  for the issuance was claimed  pursuant to Section
4(2) of the Securities  Act of 1933, as amended,  in reliance upon the fact that
such sale did not involve a public offering.

2. In  November  1997,  in order to  bring  the  Company  into  compliance  with
requirements  necessary for  continued  listing on the Nasdaq  SmallCap  Market,
Charles Loccisano,  the Company's Chairman and

                                      -21-

<PAGE>

Chief Executive Officer,  and Alan Gottlich,  the Company's  President and Chief
Financial Officer purchased an aggregate of 20,000 shares of redeemable Series B
preferred  stock at a price of $5.00  per  share.  In  January  1998,  following
delisting of the Company's  securities  from the Nasdaq SmallCap Market and as a
result of  additional  funds  loaned to the  Company by Messers.  Loccisano  and
Gottlich,  these shares of Series B preferred stock were redeemed by the Company
at a price of $5.00 per share.

     The  approximate  number of  stockholders  of the Common Stock of record at
December 31, 1997 was  approximately  65, not including  beneficial owners whose
shares are held by banks, brokers and other nominees.

Dividend Policy

     The  Company  has not  paid  any  dividends  in the  past.  Declaration  of
dividends in the future will remain within the discretion of the Company's Board
of Directors.  Future  dividends,  if any, will be dependent upon the results of
operations and financial condition of the Company, tax considerations,  industry
standards, economic conditions, general business practices and other factors. As
a Delaware  corporation,  the Company may not declare and pay  dividends  on its
capital  stock if the amount if the amount paid  exceeds an amount  equal to the
excess of the  Company's  net assets  over  paid-in-capital,  or, if there is no
excess,  its net profits for the current  and/or  immediately  preceding  fiscal
year.

                                      -22-

<PAGE>

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS

The following  discussion and analysis  should be read in  conjunction  with the
financial statements and notes thereto appearing elsewhere in this report.

     RESULTS OF OPERATIONS (for the fiscal year ended December 31, 1997 compared
to the fiscal year ended December 31, 1996).

     The following tables set forth the components of the Company's revenue:

                                          Fiscal Year Ended December 31,
                                              1996              1997

         Wholesale sales                    $861,900         $3,475,400

         Company-owned bakery sales          256,000            203,000
         Royalties and licensing fees        311,100            200,000
         Initial franchise fees               17,500                  0
         Product rebates                      43,300                  0
                                          ----------         ----------
         Total Revenue                    $1,489,800         $3,878,400


     Wholesale sales were $3,475,400 for the fiscal year ended December 31, 1997
as compared  to  $861,900  for the fiscal year ended  December  31,  1996.  This
increase in  wholesale  sales was due to the change in the  Company's  strategic
focus described below.

     In 1996, the Company  changed its strategic focus from franchise and retail
bakery development to wholesale  manufacturing and distribution of its products.
In connection  therewith,  in August,  1996, the Company completed a transaction
with Triarc whereby Triarc acquired the T.J.  Cinnamons  intellectual  property,
took over management of the existing 50 unit franchise system,  and provided the
Company  with a  wholesale  license  agreement  to sell T.J.  Cinnamons  branded
products to retail grocery outlets. See "Business - 1996 Triarc Transaction."

     The 1996 Triarc  transaction  provided  the Company  with a 99 year license
agreement to use the T.J.  Cinnamons  trade name,  recipes and  formulations  to
manufacture and sell certain T.J.  Cinnamons  products to wholesale  channels of
distribution. Consistent with the Company's change in business strategy to focus
on the wholesale  distribution of its products,  the Company  developed a 22,000
square foot  manufacturing  facility in California and began  manufacturing  and
distributing  its  products  in  December  1996.  As a result,  wholesale  sales
increased to $3,475,400  for the fiscal year ended December 31, 1997 as compared
to $861,900 for the fiscal year ended December 31, 1996.  These sales  increases
are primarily the result of the successful  launching of a variety of new bakery
products (both T.J. Cinnamons branded and non-branded  products) and penetration
into  approximately  1,500  grocery  store and  wholesale  club  accounts.  T.J.
Cinnamons  branded products  accounted for 75% of wholesale

                                      -23-
<PAGE>

sales  for the  fiscal  year  ended  December  31,  1997.  See  "Risk  Factors -
Non-Exclusivity of Triarc Transaction."

     Company-owned bakery sales decreased by 21% to $203,000 for the fiscal year
ended  December 31, 1997 from  $256,000  for the fiscal year ended  December 31,
1996. This decrease  resulted  primarily from a decline in mall traffic due to a
number of  vacancies  in the  Poughkeepsie  Galleria  mall.  In April 1997,  the
Company entered into a management  agreement  whereby the Poughkeepsie  Galleria
mall bakery will be operated with all cash deficits funded by the manager of the
Poughkeepsie  Galleria and all positive  cash flow  retained by the manager as a
management fee.

     Royalty and  licensing  fee  revenues  decreased to $200,000 for the fiscal
year ended  December 31, 1997 from  $311,100 for the fiscal year ended  December
31, 1996.  This  decrease in royalty fees  resulted  primarily  from declines in
sales and closings of T.J. Cinnamons retail franchisee locations,  and decreases
in product rebates and license fees.

     Initial  franchise  fees decreased to $0 for the fiscal year ended December
31, 1997 from $17,500 for the fiscal year ended December 31, 1996. This decrease
reflects  the  discontinuation  of the  Company's  marketing  and  sales  of new
franchise  agreements  following  completion of the Triarc  transaction in 1996.

     Product rebates of $43,300 for the fiscal year ended December 31, 1996 were
from various  supplier  rebates and  commitment  fees.  The Company  received no
product rebates during fiscal 1997.

     Cost of goods  sold  increased  to  $3,043,984  for the  fiscal  year ended
December  31, 1997 from  $925,228  for the fiscal year ended  December 31, 1996.
These  increases  were  primarily the result of the increased cost of goods sold
associated with increased  wholesale sales to supermarkets chains and membership
club chains.

     Selling,  general and  administrative  expenses increased to $2,283,036 for
the fiscal  year ended  December  31, 1997 from  $1,697,009  for the fiscal year
ended December 31, 1996.  These increases were primarily the result of increases
in selling,  general and  administrative  costs  associated  with the  Company's
manufacturing  plant in Santa Ana,  California  and the increases in selling and
marketing  expenses  associated with the launch of the Company's product line to
wholesale channels of distribution.

     Net  interest  expenses  for the fiscal  year ended  December  31, 1997 was
$8,106 as compared to net  interest  expense for the fiscal year ended  December
31, 1996 of $96,841,  resulting  primarily from the interest expenses associated
with the Company's  short-term loans and accounts receivable financing from Gelt
Financial  Corporation,  offset by the interest  earned on the notes  receivable
from Triarc Restaurant Group (see Liquidity and Capital Resources herein).

     Other income  decreased  to $80,088 for the fiscal year ended  December 31,
1997 from $162,729 for the fiscal year ended December 31, 1996. The other income
in  both  periods  was  due  to  reductions  in  accounts  payable  and  accrued
liabilities  resulting  from  discounted  settlements  and write-offs of certain
accounts payable.

                                      -24-
<PAGE>

     Gain from sale of assets was $0 for fiscal year ended  December 31, 1997 as
compared to $1,286,197  for the fiscal year ending  December 31, 1996.  The gain
from sale of assets in fiscal 1996 resulted from the sale of assets to Triarc in
August  1996  pursuant  to the terms of a purchase  agreement.  See  "Business -
Triarc Transaction."

     The Company had a net loss of $1,376,657 for the fiscal year ended December
31,  1997 as  compared  to a net income of  $219,864  for the fiscal  year ended
December 31, 1996.

     Liquidity and Capital Resources

     At  December  31,  1997,  the  Company  had a working  capital  deficit  of
approximately  $679,200.  During the twelve months ended  December 31, 1997, the
Company experienced cash flow deficits from its operating  activities  primarily
because its operating expenses exceeded its operating revenues.  These operating
deficits have been funded primarily by the Triarc notes  receivable  payments in
an amount of approximately $116,000 per month. The last payment under the Triarc
note receivable was December 1, 1997.

     The  Company  used  net  cash in  operating  activities  in the  amount  of
$1,076,277  for the  fiscal  year  ended  December  31,  1997,  as  compared  to
$1,027,064 for the fiscal year ended December 31, 1996. The Company received net
cash from  investing  activities in the amount of $1,113,156 for the fiscal year
ended  December  31,  1997,  as compared  to net cash  received  from  investing
activities  in the amount of $1,595,639  for the fiscal year ended  December 31,
1996.  The Company  received net cash  provided by financing  activities  in the
amount of $36,015 for the fiscal year ended December 31, 1997 as compared to net
cash used in financing  activities in the amount of $570,585 for the fiscal year
ended December 31, 1996.

     In June 1997, the Company entered into a loan agreement with Gelt Financial
Corporation  for a credit line in the amount of $200,000 which was  subsequently
increased to $300,000 secured by Wal-Mart accounts receivable. The terms of this
loan agreement  provide for a service fee of 1.5% of each advance  together with
interest at a rate of 675 basis  points above the prime rate.  In addition,  the
Company  granted  Gelt  3,000  shares of the  Company's  Common  Stock as a loan
origination  fee. This credit line balance was ($65,000) on December 31, 1997 as
a result of various  credits taken by Walmart for in-store demo fees. The credit
line balance of ($65,000) was fully repaid in March 1998.

     In October  1997,  the  Company  offered  for sale  units in a  convertible
preferred stock private  placement with  Commonwealth  Associates  acting as the
placement agent.  This offering was held open to investors through January 1998,
and was not  consummated  as orders for the  minimum  number of shares  were not
obtained.  Without  alternative  sources  of  financing  to fund  the  Company's
operating deficits,  in January 1998, Charles Loccisano,  the Company's Chairman
and Chief  Executive  Officer,  and Alan Gottlich,  the Company's  President and
Chief Financial Officer provided the Company with loans aggregating $282,500. In
March 1998, based on the need for additional  funding resulting from the receipt
of large purchase orders from Walmart Super Centers,  the previous Loccisano and
Gottlich loans were repaid in full and Messrs.  Loccisano and Gottlich agreed to
provide the Company with a credit line

                                      -25-

<PAGE>

for up to $500,000 with interest  payable  quarterly at the  applicable  federal
rate of 5.39% per annum.  The credit line is  required  to be repaid  within one
year or such shorter period if the Company obtains  alternative sources of funds
to fund its  operations.  The line of credit is secured by  payments  due to the
Company under its purchase agreement with Triarc. In consideration for providing
this credit line facility, the Company granted Messrs. Loccisano and Gottlich an
aggregate of 300,000 unregistered shares of Common Stock.

     In  November  1997,  in order to bring the  Company  into  compliance  with
requirements  necessary for  continued  listing on the Nasdaq  SmallCap  Market,
Messers.  Loccisano  and Gottlich  purchased  an  aggregate of 20,000  shares of
redeemable  Series B preferred  stock at a price of $5.00 per share.  In January
1998,  following delisting of the Company's  securities from the Nasdaq SmallCap
Market and as a result of  additional  funds  loaned to the  Company by Messers.
Loccisano and Gottlich,  these shares of Series B preferred  stock were redeemed
by the Company at a price of $5.00 per share.

     The  Company is  currently  negotiating  with an  unaffiliated  third party
purchaser  (the "Third  Party")  regarding  the sale of (a) all of the Company's
rights under the Triarc  Purchase  Agreement  and License  Agreement and (b) the
Company's  rights  and  obligations  as  franchisor  under  the  T.J.  Cinnamons
franchise  system  (collectively  the "TJC  Transaction").  Consummation  of the
proposed TJC  Transaction  is subject to  negotiation  of the final terms of the
transaction,  execution of a definitive agreement,  completion by Third Party of
its due diligence of the Company,  and the receipt of  shareholder  approval for
the TJC  Transaction.  No assurance  can be given that the Company and the Third
Party  will be  successful  in  negotiating  a  definitive  agreement  following
completion of the due diligence,  or even if such agreement is reached, that the
Company's  shareholders  would approve the TJC Transaction.  See "Risk Factors -
Failure to Close the TJC Transaction."

     The  Company  anticipates  that  the net  proceeds  from the  proposed  TJC
Transaction,  together with its anticipated  lines of credit,  and the Company's
anticipated cash from operations,  should be sufficient to satisfy the Company's
cash needs through June 30, 1999.  Should  demand for the Company's  products be
greater than anticipated, the Company might find it necessary to seek additional
financing or to reduce planned  expenditures on marketing and product  expansion
if  efficient  financing  cannot  be  obtained  or  obtained  timely or on terms
acceptable  to  the  Company.  See  "Risk  Factors  Failure  to  Close  the  TJC
Transaction" and " Need for Additional Financing."

     The Company's  independent  auditors report of its financial statements for
the fiscal year ending  December  31, 1997 raises  substantial  doubts about the
Company's ability to continue as a going concern.  The failure to consummate the
TJC Transaction could have a material adverse effect on the Company's ability to
continue  as a going  concern.  In the  event  that the TJC  Transaction  is not
consummated,  the Company will reevaluate available  alternatives including debt
or equity financing, or a possible merger or sale of all or part of the Company.
If  alternative  sources of financing  are not  available in the near term,  the
Company will be unable to pursue its business plan and may be unable to continue
its existing business  operations.  See "Risk Factors - Failure to Close the TJC
Transaction."

                                      -26-
<PAGE>

     If the Company is able to consummate the TJC Transaction,  the Company will
continue to  manufacture  and distribute  gourmet bakery  products to the retail
grocery and food service trade. However, the Company would no longer manufacture
and sell T.J. Cinnamons branded products, which represent 75% of wholesale sales
for the fiscal year ended  December 31, 1997,  and the Company will no longer be
entitled to any further  payments  under the Triarc  Purchase  Agreement and the
Triarc License Agreement.

     Even if the TJC Transaction is consummated,  in order to implement its plan
of  operations,  the Company  will be  required,  among other  things,  to raise
additional capital beyond June 30, 1999. While the Company has existing lines of
credit,  there can be no assurance that such debt financing will be available to
the Company in the future or that such debt  financing  will be available in the
amounts required by the Company or on terms acceptable to the Company. There can
be no assurance that such financing will be available or available on attractive
terms,  or that such  financing  would not result in a  substantial  dilution of
shareholders'   interest.   See  "Risk  Factors  -  Failure  to  Close  the  TJC
Transaction" and "Possible Need for Additional Financing."

                                      -27-
<PAGE>


ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     See Item 13(a)(1) in Part IV.


                                      -28-
<PAGE>

ITEM 8. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

     On January 31, 1997 the Company dismissed  Goldstein,  Golub, Kessler & Co.
P.C.  ("GGK") as its  independent  auditors.  Such dismissal was approved by the
Company's  Board  of  Directors.  GGK's  report  upon  the  Company's  financial
statements  for its  fiscal  year ended  December  31,  1995 did not  contain an
adverse  opinion or a disclaimer  of opinion,  nor was such report  qualified or
modified as to audit scope or  accounting  principles.  The report was  prepared
assuming that the Company will continue as a going concern. During the Company's
fiscal  years ended  December 31, 1995 and to the date of GGK's  dismissal  (the
"Interim  Period"):  (i) there were no disagreements (of nature  contemplated by
Item 304 (a) (1) (iv) of  Regulation  S-K) between the Company and GGK; and (ii)
there were no reportable events of nature  contemplated by Item 304 (a) (1) (iv)
(B) of Regulation S-B.

On January  31,  1997 the  Company  engaged  Arthur  Andersen  LLP ("AA") as its
independent  public accountants for the Company's fiscal year ended December 31,
1996.  During the Company's  fiscal year ended December 31, 1995 and the Interim
Period,  the Company did not consult  with AA with respect to any of the matters
contemplated by Item 304 (a) (2) (i)-(ii) of Regulation S-B.

On February  14,  1997 AA resigned  its  position as the  Company's  independent
auditors.  Such resignation was necessitated  because AA concluded that it had a
conflict of interest in reporting on the Company's financial  statements for the
fiscal  year ended  December  31,  1996 due to the fact that  during 1996 AA had
rendered financial advisory services to the Company for which it received a fee.
During the Company's  engagement of AA through the date of AA's  withdrawal (the
"Second  Interim   Period"):   (i)  there  were  no  disagreements   (of  nature
contemplated by Item 304 (a) (1) (iv) (A) of Regulation S-B) between the Company
and GGK; and (ii) there were no reportable events of nature contemplated by Item
304 (a) (1) (iv) (B) of Regulation S-B.

On February 21, 1997 the Company engaged Amper,  Politziner & Mattia ("AP&M") as
its independent  public accountants for the Company's fiscal year ended December
31, 1996.  During the Company's fiscal year ended December 31, 1995, the Interim
Period and the Second Interim Period, the Company did not consult with AP&M with
respect  to any of the  matters  contemplated  by Item 304 (a) (2) (i) - (ii) of
Regulation S-K.

                                      -29-
<PAGE>
                                    Part III

ITEM 9.   DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
          COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

     The  following  table sets forth  certain  information  with respect to the
executive   officers  and  directors  of  the  Company.   There  are  no  family
relationships  among any  directors or executive  officers of the Company.  Each
director  has been  elected  for a term of one year or until  his  successor  is
elected and shall qualify.  The term of each director expires at the next annual
meeting of shareholders to occur in fiscal 1998.

       Name               Age       Position with the Company
Charles Loccisano         49        Chairman, Chief Executive Officer and
                                     Director
Alan Gottlich             37        President, Chief Financial Officer,
                                     Treasurer and Director
Philip Friedman           50        Director
Paul Bergrin              41        Director

     Charles  Loccisano  has been the  Chairman,  Chief  Executive  Officer  and
Director of the Company  since its  acquisition  in June 1992.  Since 1980,  Mr.
Loccisano  has  primarily  engaged  in  the  acquisition,   development   and/or
management of real estate  through his general  partnership  interest in various
real estate limited partnerships. Some of these partnerships were forced to file
for protection  under the United States  Bankruptcy Code after a turndown in the
real estate market in 1987 and after the temporary  loss by Mr.  Loccisano,  and
his  partner,  of  control  of these  limited  partnerships.  Subsequently,  Mr.
Loccisano and his partner regained control,  and some of these partnerships were
successfully  reorganized  and some lost their  real  properties  in  bankruptcy
and/or to  foreclosure.  Mr.  Loccisano,  through  a  separate  entity  and with
partners,  was also a franchisee of the Company until 1993,  and was a principal
of a company  that owned  five Roy Roger  restaurants  in New  Jersey  from 1989
through 1994.

     Alan  Gottlich  has been the Vice  Chairman,  Chief  Financial  Officer and
Director of the Company since its  acquisition  in June 1992,  and the President
since October,  1996. Prior thereto,  Mr. Gottlich was primarily  engaged in the
acquisition,  development  and/or  management of real estate through his general
partner  interest in various  real  estate  limited  partnerships.  One of these
entities was forced to file for  protection  under the United States  Bankruptcy
Code in 1993 and subsequently  lost its real property.  Mr. Gottlich,  through a
separate entity and together with partners, was also a franchisee of the Company
until  1993,  and was a  principal  of a  company  that  owned  five Roy  Rogers
restaurants in New Jersey from 1989 through 1994.  Prior to that,  Mr.  Gottlich
was a staff accountant at Touche Ross & Co.

     Philip  Friedman has been a Director of the Company since August 1993.  Mr.
Friedman is the President and principal  stockholder of P.Friedman & Associates,
Inc. a food management and consulting company based in Rockville,  Maryland. Mr.
Friedman is also the President of Panda Management  Company,  Inc. (an owner and
operator fast food Chinese restaurants),  serves as a director of Eateries,

                                      -30-

<PAGE>

Inc. (an operator and  franchisor  of full service  restaurants),  and Roadhouse
Grill, Inc. (an operator and franchisor of full service steak houses).

     Paul Bergrin has been a Director of the Company since  November  1996.  Mr.
Bergrin has been a partner in the law firm of Pope,  Grossman,  Bergrin  Toscano
and  Verdesco  for more than the last five years  specializing  in criminal  and
civil litigation.

Section 16 Beneficial Ownership Reporting Compliance

     Section 16(a) of the Exchange Act ("Section  16(a)") requires the Company's
directors,  executive officers and persons who own more than 10% of a registered
class of the Company's equity  securities,  to file with the SEC initial reports
of  ownership  and  reports of changes in  ownership  of common  stock and other
equity  securities  of the  Company.  Officers,  directors  and greater than 10%
stockholders  are required by SEC  regulation to furnish the Company with copies
of all Section 16(a) forms they file.

     To the Company's knowledge,  based solely on a review of the copies of such
reports  furnished  to the  company and  written  representations  that no other
reports were  required,  during the fiscal year ended  December  31,  1997,  all
Section 16(a) filing  requirements  applicable  to its  officers,  directors and
greater  than 10%  beneficial  owners were  complied  with  except that  certain
reports  disclosing  the  grant of stock  options  to  Charles  Loccisano,  Alan
Gottlich, Philip Friedman and Paul Bergrin were not filed on a timely basis. The
grant of such options were subsequently reported on Form 5.

                                      -31-
<PAGE>

ITEM 10. EXECUTIVE COMPENSATION

Summary Compensation Table

     The  following  table  sets  forth the total  annual  compensation  paid or
accrued by the Company for services in all  capacities  for the Chief  Executive
Officer  and each other  officer  who made in excess of  $100,000  (salary  plus
bonuses) (the "Named  Officers")  for the fiscal years ended  December 31, 1997,
1996 and 1995.  No other  executive  officers of the Company who were serving as
such at the end of such  fiscal  years  received  salary  and bonus in excess of
$100,000.
<TABLE>
<CAPTION>
                                                                            Long Term Compensation
Awards
                                Annual Compensation                Other
Name and Principal                                                 Annual          Securities
Position                   Year       Salary      Bonus            Comp.*       Underlying Options
<S>                        <C>      <C>          <C>              <C>              <C>
Charles Loccisano,         1997     $134,615     $68,805          $12,000          225,000
Chairman, and Chief        1996      130,000      31,500           12,000              -0-
Executive Officer          1995      101,682       8,625           12,000          192,500

Alan Gottlich,             1997      $98,464     $34,402          $ 9,000          163,500
President and Chief        1996       95,000      14,000            9,000             -0-
Financial Officer          1995       87,500       4,625            9,000           87,500
<FN>
*    These amounts represent reimbursable automobile expenses.
</FN>
</TABLE>

     In March 1998,  the Board of  Directors  approved a  cancellation  of stock
options  held by Messrs..  Loccisano  and  Gottlich in the amount of 417,500 and
251,000  respectively,  and a grant of new  options in the amount of 313,125 and
188,250 respectively. The new options are exercisable at $.50 per share and have
the same vesting provisions as the canceled options.

Stock Option Grants in Last Fiscal Year

     The following table sets forth information regarding options granted to the
Named Officers during fiscal 1997.

<TABLE>
<CAPTION>
                                                                      Weighted
                              Number of           % of Total          Average
                              Securities          Options Granted     Exercise
                              Underlying          to Employees in     or Base
Name                          Options Granted     Fiscal 1997         Price          Expiration Date
<S>                           <C>                 <C>                 <C>           <C>
Charles Loccisano,
 Chairman, and Chief
 Executive Officer            225,000             29.9%               $1.55         July 15, 2002

Alan Gottlich, President,
 and Chief Financial
 Officer                      163,500             21.7%               $1.57         July 15, 2007
</TABLE>

     In March 1998,  the Board of  Directors  approved a  cancellation  of stock
options  held by Messrs..  Loccisano  and  Gottlich in the amount of 417,500 and
251,000  respectively,  and a grant of new  options in the amount of 313,125 and
188,250 respectively. The new options are exercisable at $.50 per share and have
the same vesting provisions as the canceled options.

                                      -32-

<PAGE>

Aggregate Option Exercises in Last Fiscal Year and Fiscal Year End Option Values

     The  following  table sets forth  information  regarding  aggregate  option
exercises and year end option values.
<TABLE>
<CAPTION>
                                                                      Number of                 Value of
                                                                      Unexercised               Unexercised
                                                                      Options at                In-The-Money
                                                                      12/31/97(1)               Options at
                                   Shares                                                       12/31/97
                                   Acquired on      Value             Exercisable/              Exercisable/
Name                               Exercise         Realized          Unexercisable             Unexercisable
<S>                                   <C>            <C>            <C>                         <C>
Charles Loccisano,
  Chairman and Chief
  Executive Officer                     0              0              352,500 / 65,000             0 / 0

Alan Gottlich, President,
  and Chief Financial Officer           0              0              186,000 / 65,000             0 / 0
<FN>

     (1) In March 1998, the Board of Directors  approved a cancellation of stock
options  held by Messrs..  Loccisano  and  Gottlich in the amount of 417,500 and
251,000  respectively,  and a grant of new  options in the amount of 313,125 and
188,250 respectively. The new options are exercisable at $.50 per share and have
the same vesting provisions as the canceled options.
</FN>
</TABLE>

Director Compensation

The Company  provides  compensation to directors at the rate of $500 per day for
meetings  attended,  and  reimbursement of travel and other expenses incurred in
attending meetings.

During the last fiscal  year,  directors  received  the  following  stock option
grants under the  Company's  1996 Stock Option Plan in  consideration  for their
serving as  directors:  (a) In March 1997,  options were granted to directors of
the Company to purchase  shares of Common Stock,  at an exercise  price of $1.75
per  share  of  Common  Stock,  in the  following  amounts:  45,000  to  Charles
Loccisano,  Director;  45,000  to Alan  Gottlich,  Director;  45,000  to  Philip
Friedman,  Director;  and 45,000 to Paul Bergrin,  Director.  These options vest
over a period of three  years with 5,000  options  vested to each  member of the
Company's  Board of Directors for each of three  meetings  annually  attended in
person. To date, 15,000 options have vested to each of Charles  Loccisano,  Alan
Gottlich,  Philip Friedman and Paul Bergrin;  and (b) In July 1997, options were
granted to directors of the Company to purchase  shares of Common  Stock,  at an
exercise  price of $1.50 per share of Common Stock,  in the  following  amounts:
45,000 to Charles Loccisano, Director; 45,000 to Alan Gottlich, Director; 45,000
to Philip  Friedman,  Director;  and  45,000 to Paul  Bergrin,  Director.  These
options  vest over a period of three  years  with 5,000  options  vested to each
member of the Company's  Board of Directors for each of three meetings  annually
attended  in person.  To date,  10,000  options  have  vested to each of Charles
Loccisano,  Alan Gottlich,  Philip Friedman and Paul Bergrin.  All Loccisano and
Gottlich options described above are reported in the Summary Compensation Table.

No other compensation was paid to the directors during the last fiscal year.

                                      -33-

<PAGE>

Employment Contracts

On October 1, 1997, the Company entered into a three year  employment  agreement
with Charles  Loccisano,  the Company's  Chairman and Chief  Executive  Officer,
providing  for an  annual  base  salary of  $175,000  of which  $25,000  will be
accrued.  Such accrual will be paid upon the closing of the TJC Transaction,  or
when the Company achieves a positive cash flow from operations.  The base salary
will be  increased  by 10% per annum on each  anniversary,  and a bonus  will be
payable at the discretion of the Board of Directors.

On October 1, 1997, the Company entered into a three year  employment  agreement
with  Alan  Gottlich,  the  Company's  President  and Chief  Financial  Officer,
providing  for an  annual  base  salary of  $125,000  of which  $15,000  will be
accrued.  Such accrual will be paid upon the closing of the TJC Transaction,  or
when the Company achieves a positive cash flow from operations.  The base salary
will be  increased  by 10% per annum on each  anniversary,  and a bonus  will be
payable at the discretion of the Board of Directors.

Both of  these  employment  agreements  include  change  of  control  provisions
providing  for a  payment  equal  to two  years  base  salary  plus  one half of
aggregate  bonuses  paid  during  the three  years  prior to  termination.  Both
employment  agreements  also  include a number of other  provisions  relating to
term, duties, termination, and other contractual rights.

                                      -34-
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth information,  as of March 31, 1998 as to the
beneficial  ownership  of Common Stock  (including  shares which may be acquired
within sixty days pursuant to stock options) of each director of the Company and
the executive  officers of the Company listed in the Summary  Compensation Table
below, all directors and executive  officers as a group and persons known by the
Company  to  beneficially  own more than 5% of the Common  Stock.  Except as set
forth below, no person beneficially owns more than 5% of the Common Stock.
<TABLE>
<CAPTION>
                                            Number of Shares
    Name and Address of Beneficial          of Common Stock           Percent
              Owner (1)                   Beneficially Owned (2)  Beneficially Owned
<S>                                          <C>                      <C>
         Charles Loccisano                   1,541,229  (3)(4)        45.7%
         Alan Gottlich                         331,839  (5)(6)         9.8%
         Philip Friedman                        63,359  (7)            1.9%
         Paul Bergrin                           18,750  (8)            0.6%

         All Directors and Executive
         Officers as of group
         (four persons)                      1,955,247  (9)           58.0%
<FN>
(1)  Unless otherwise indicated, the address of each beneficial owner is that of
     the Company's principal executive offices.
(2)  The  securities  "beneficially  owned" by an individual  are  determined in
     accordance  with the definition of "beneficial  ownership" set forth in the
     regulations of the Securities and Exchange  Commission.  Accordingly,  they
     may include securities owned by of for, among others, the wife and/or minor
     children of the  individual and any other relative who has the same home as
     such individual, as well as other securities as to which the individual has
     or shares  voting or  investment  power or has the right to  acquire  under
     outstanding  stock  options  within 60 days  after the date of this  table.
     Beneficial  ownership may be  disclaimed  as to certain of the  securities.
     Certain  of these  shares  are held in  escrow  ("Escrow  Shares")  and are
     subject to release on the earlier of (a) the  achievement by the Company of
     certain minimum pre-tax earnings during specified periods,  and (b) May 12,
     2001.  Such  shares  may be voted but may not be  transferred  prior to the
     release from escrow.
(3)  Includes  506,695 shares held by The Charles  Loccisano  Irrevocable  Trust
     f/b/o  Marissa  Loccisano of which 213,747 are Escrow  Shares,  and 506,695
     shares  held by The  Charles  Loccisano  Irrevocable  Trust  f/b/o  Michael
     Loccisano (jointly referred to as the "Loccisano  Trusts") of which 213,746
     are escrow shares, with respect to which Mr. Loccisano is the settlor.  Mr.
     Loccisano disclaims beneficial ownership of these shares.
(4)  Includes  a  maximum  of  264,325  shares  which may be  acquired  upon the
     exercise of options  exercisable  within the next 60 days.  Excludes 48,750
     shares subject to options not exercisable within the next 60 days.
(5)  Includes  a  maximum  of  139,500  shares  which may be  acquired  upon the
     exercise of options  exercisable  within the next 60 days.  Excludes 48,750
     shares subject to options not exercisable within the next 60 days.
(6)  Includes 155,874 shares held by Mr.  Gottlich's  spouse of which 64,765 are
     Escrow Shares, as to which Mr. Gottlich disclaims beneficial ownership.
(7)  Includes a maximum of 58,359 shares which may be acquired upon the exercise
     of options  exercisable  within the next 60 days . Excludes  48,750  shares
     subject to options not exercisable within the next 60 days.
(8)  Represents 18,750 shares which may be acquired upon the exercise of options
     exercisable within the next 60 days.
(9)  Includes  a  maximum  of  480,984  shares  which may be  acquired  upon the
     exercise of options that are exercisable within the next 60 days.
</FN>
</TABLE>

                                      -35-
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Policy for Related Party Transactions

     The Company believes that all  transactions  with officers,  directors,  or
affiliates  to date are on terms no less  favorable  than those  available  from
unaffiliated  third  parties.  It  is  the  Company's  policy  that  all  future
transactions  with officers,  directors,  or affiliates  will be approved by the
independent  members of the Company's  Board of Directors not having an interest
in the transaction and will be on terms no less favorable than could be obtained
from unaffiliated third parties.

Heinz Bakery Products License Agreement

     In June  1992,  the  Company  entered  into an  exclusive  20 year  license
agreement with Heinz Bakery Products  ("Heinz"),  pursuant to which, among other
things,  Heinz paid an  aggregate of $1.425  million in advance  royalties to be
offset by actual  royalties  earned.  The advance  royalties  owed to Heinz were
guaranteed by Charles N. Loccisano,  the Chairman and Chief Executive Officer of
the Company. In August 1996, the Company entered into an agreement with Heinz to
terminate the license agreement and satisfy the balance due under the promissory
note in the amount of approximately $795,000 based on a payment of $600,000 made
in August 1996, the assignment of a $100,000  promissory  note  receivable  from
Triarc, and the forgiveness of the balance of $95,000. At December 31, 1997, the
outstanding balance due Heinz was $69,800.

Gelt Financial Group Loan

     In connection a loan in the amount of $125,000 from Gelt Financial Group in
July 1996,  250,000 shares of the Company's  Common Stock (held by affiliates of
Charles Loccisano,  the Company's Chairman,  Chief Executive Officer,  President
and Director,  and Alan  Gottlich,  the  Company's  President,  Chief  Financial
Officer  and  Director)  were  pledged  to Gelt  Financial  Group,  and  limited
guarantee agreements were entered into by such affiliates.  In August 1996, this
loan was repaid in full.

Option Grant by Affiliate

     In April 1994, the Loccisano  Trusts granted an option to purchase  250,000
shares of their Common Stock to Dan  Feldman,  then a consultant  to the Company
and now a Director of the Company,  in exchange for his  agreement to serve as a
Director. In January 1995, Dan Feldman acquired 125,000 shares of Company Common
Stock from the Loccisano  Trusts for no cash  consideration,  and the balance of
the option was  terminated.  In November 1996, the Company issued 125,000 shares
of its Common  Stock to the  Loccisano  Trusts in  consideration  for the shares
previously  conveyed  by the  Loccisano  Trusts to Dan  Feldman on behalf of the
Company. Stock and Option Grants in connection Consulting Arrangements

     In November 1996, the Company  granted Philip  Friedman,  a Director of the
Company,  5,000 shares of Common Stock and 10,000 options to purchase  shares of
Common  Stock at an  exercise  price  of $1.94

                                      -36-

<PAGE>

per share of Common Stock in consideration  for consulting  services rendered to
the Company. All the aforementioned options are fully vested.

Loans and Investments from Affiliates

     During the period  November  1995 through June 1996,  the Company  borrowed
approximately  $184,500  from an affiliate of Charles  Loccisano,  the Company's
Chairman and Chief Executive Officer, and Alan Gottlich, the Company's President
and Chief  Financial  Officer.  These  loans were repaid in August 1996 based on
terms which include loan  origination fees of 25% and interest at a rate of five
points above the Wall Street  Journal Prime Rate. In August 1996,  this loan was
repaid in full.

     In  November  1997,  Charles  Loccisano,   the  Company's  Chairman,  Chief
Executive Officer,  and Director,  and Alan Gottlich,  the Company's  President,
Chief Financial Officer and Director  purchased an aggregate of 20,000 shares of
convertible Series B Preferred Stock at a price of $5.00 per share. The Series B
Preferred  Stock carried a dividend equal to 8% per annum payable semi annually,
were  convertible into common stock at the holders option and were redeemable by
the Company at its option.  The purchase price for the Series B Preferred  Stock
was paid  for in a  combination  of cash and  promissory  notes  payable  to the
Company.  In January  1998,  the Company  redeemed the 20,000 Series B Preferred
Stock at a price of $5.00 per share.

     In January  1998,  Charles  Loccisano,  the  Company's  Chairman  and Chief
Executive  Officer,  and  Alan  Gottlich,  the  Company's  President  and  Chief
Financial Officer provided the Company with loans aggregating $282,500. In March
1998,  based on the need for  additional  funding  resulting from the receipt of
large purchase orders from Walmart Super Centers, the previous loans provided by
Loccisano and Gottlich were repaid in full,  and Messrs.  Loccisano and Gottlich
agreed to  provide  the  Company  with a credit  line for up to  $500,000,  with
interest  payable  quarterly at the applicable  federal rate of 5.39% per annum.
The credit line is required to be repaid within one year or such shorter  period
if the Company obtains alternative sources of funds to fund its operations.  The
line of credit is secured by  payments  due to the  Company  under its  purchase
agreement  with Triarc.  In  consideration  for providing  this credit line, the
Company  granted  Messrs.   Loccisano  and  Gottlich  an  aggregate  of  300,000
unregistered shares of common stock.

                                      -37-

<PAGE>

ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

                                                                            PAGE

(a)      Documents filed as part of this report.

         1. Financial Statements

            Independent Auditor's Report                                    F-2

            Consolidated Balance Sheet                                      F-3

            Consolidated Statements of Operations                           F-4

            Consolidated Statement of Stockholders' Equity                  F-5

            Consolidated Statements of Cash Flows                           F-6

            Notes to Consolidated Financial Statements               F-7 - F-15

         2. Exhibits

         1.1 *   ................   Underwriting Agreement with Paragon Capital
                                    Corporation

         2.1 *   ................   Certificate of Ownership and Merger
                                    regarding the merger of Signature
                                    Acquisition Corp. with and into T.J.
                                    Cinnamons, Inc.

         2.2 *   ................   Certificate of Ownership and Merger
                                    regarding the merger of Signature Foods,
                                    Inc. with and into T.J. Cinnamons, Inc.

         2.3 *** ................   Purchase Agreement between the Registrant
                                    and Triarc Restaurant Group

         3.1 *   ................   Restated Certificate of Incorporation of the
                                    Registrant

         3.2 *   ................   By-Laws of the Registrant

         9.1 *   ................   Modification Agreement (the "Modification
                                    Agreement") among Signature Foods, Inc., The
                                    Charles N.

                                      -38-
<PAGE>

                                    Loccisano Irrevocable Trust f/b/o Michael
                                    Loccisano, The Charles N. Loccisano
                                    Irrevocable Trust f/b/o Marissa Loccisano,
                                    The Ted H. Rice and Joyce Rice Family Trust,
                                    U/T/I dated August 8, 1986, The Roger L.
                                    Cohen Trust U/T/D/ dated January 26, 1984
                                    and the Kenneth D. Hill Revocable Trust
                                    U/T/I dated march 29, 1989, Signature
                                    Acquisition Corp., the Registrant, Charles
                                    N. Loccisano and Alan S. Gottlich relating
                                    to a Stock Purchase Agreement (the "Stock
                                    Purchase Agreement") among them

         9.2 *   ................   Waiver of Default under the Modification
                                    Agreement, as amended

         9.3 *   ................   Amendment to Stock Purchase Agreement

         9.4 *   ................   Stock Purchase Agreement

         10.1 *  ................   Trademark and Technology License and
                                    Manufacturing Agreement ("License
                                    Agreement") by and between Signature
                                    Acquisition Corp. and Pro Bakers Ltd.

      10.1(a) *  ................   Amendment to License Agreement

      10.1(b) *  ................   Second Amendment to License Agreement

      10.1(c) ** ................   Termination of the License Agreement

         10.2 *  ................   1993 Stock Option Plan

         10.3    ................   1996 Amended and Restated Stock Option Plan

         10.4    ................   Employment Agreement with Charles Loccisano

         10.5    ................   Employment Agreement with Alan Gottlich

         10.9 *  ................   Lease regarding the Company's principal
                                    executive offices

         10.13 * ................   License agreement with Triarc Restaurant
                                    Group

         10.14 **................   Management Agreement with TJ Holding
                                    Company, Inc.

         10.15 **................   Lease regarding the Santa Ana bakery
                                    facility

         10.16   ................   Lease regarding the El Cajon bakery facility

                                      -39-

<PAGE>

         16.1 ** ................   Letter from Goldstein Golub and Kessler, the
                                    Registrant's former independent accountant

         16.2 ** ................   Letter from Arthur Andersen LLP

         21.1 ** ................   Certificate of Incorporation of Interbake
                                    Brands, Inc.

         27      ................   Financial Data Schedule

---------------------

*    Incorporated by reference to the Company's Registration Statement on Form
     SB-2 and the amendments thereto.

**   Incorporated by reference to the Company's Annual Report on Form 10-KSB for
     the fiscal years ended December 31, 1996 and 1995.

***  Incorporated by reference to the Company's Current Report on Form 8-K dated
     June 18, 1996.

(b)  On November 12, 1997, the Company filed one Current Report on Form 8-K
     regarding the sale of 20,000 shares of Class B preferred stock.


                                      -40-

<PAGE>

                                   SIGNATURES

     In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.



                                      PARAMARK ENTERPRISES, INC.


                                       By: /s/ Charles N. Loccisano
                                           Charles N. Loccisano, Chairman




     In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates stated.


Signature                               Title(s)                      Date



                                Chairman, Chief                          , 1998
-------------------------       Executive Officer
Charles N. Loccisano            and Director


-------------------------       President, Chief                         , 1998
Alan S. Gottlich                Financial Officer
                                and Director


-------------------------       Director                                 , 1998
Philip Friedman



-------------------------       Director                                 , 1998
Paul Bergrin

                                      -41-

<PAGE>
                           PARAMARK ENTERPRISES, INC.
                 (Formerly T. J. Cinnamons, Inc.) and SUBSIDIARY

                      For the Year Ended December 31, 1997







                                                                            Page

Independent Auditors' Report                                                F-2

Consolidated Balance Sheet                                                  F-3

Consolidated Statements of Operations                                       F-4

Consolidated Statement of Stockholders' Equity                              F-5

Consolidated Statements of Cash Flows                                       F-6

Notes to Consolidated Financial Statements                           F-7 - F-15

                                       F-1

<PAGE>

                         Report of Independent Auditors


To the Board of Directors and Stockholders of
Paramark Enterprises, Inc.
 (formerly T. J. Cinnamons, Inc.) and Subsidiary

We have audited the accompanying consolidated balance sheet of Paramark
Enterprises, Inc. (formerly T. J. Cinnamons, Inc.) and Subsidiary at December
31, 1997, and the related consolidated statements of operations, stockholders'
equity, and cash flows for the years ended December 31, 1996 and 1997. 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 audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall 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 financial position of Paramark
Enterprises, Inc. (formerly T. J. Cinnamons, Inc.) and Subsidiary as of December
31, 1997 and the results of their operations and their cash flows for the years
ended December 31, 1996 and 1997 in conformity with generally accepted
accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from operations
and has an accumulated deficit, which raise substantial doubt about its ability
to continue as a going concern. Management's plans regarding those matters also
are described in Note 2. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.


                                               Amper, Politziner & Mattia P.A.

                                               AMPER, POLITZINER & MATTIA P.A.

March 6, 1998
Edison, New Jersey

                                       F-2

<PAGE>
                           PARAMARK ENTERPRISES, INC.
                 (formerly T. J. Cinnamons, Inc.) and SUBSIDIARY
                           Consolidated Balance Sheet
                                December 31, 1997

                                     Assets
<TABLE>
<S>                                                                   <C>
Current assets
    Cash                                                              $   122,561
    Accounts receivable, less allowance for
     doubtful accounts of $64,000                                         259,271
    Notes receivable                                                       69,837
    Inventory                                                             234,822
    Prepaid expenses and other current assets, net                         35,291
                                                                      -----------
                                                                          721,782

Property and equipment, net                                               453,296
Excess of cost over fair value of net assets acquired                     476,667

                                                                      $ 1,651,745

                      Liabilities and Stockholders' Equity

Current liabilities
    Accounts payable and accrued expense                              $ 1,142,415
    Current maturities of long-term debt                                  258,545
                                                                      -----------
                                                                        1,400,960

Long-term debt, net of current maturities                                  69,460

Commitment and contingencies

Stockholders' equity
    Preferred stock - $.01 par value; authorized 1,000,000 shares,
     none issued
    Common stock - $.01 par value; authorized 10,000,000 shares,
     issued and outstanding 3,070,083 shares                               30,702
    Additional paid-in capital                                          6,759,352
    Accumulated deficit                                                (6,608,729)
                                                                      -----------
       Total stockholders' equity                                         181,325
                                                                      $ 1,651,745
                                                                      ===========
</TABLE>

                 See notes to consolidated financial statements.
                                       F-3

<PAGE>
                           PARAMARK ENTERPRISES, INC.
                 (formerly T. J. Cinnamons, Inc.) and SUBSIDIARY
                      Consolidated Statements of Operations
                        For the Years Ended December 31,

<TABLE>
<CAPTION>
                                                              1996              1997
<S>                                                       <C>               <C>
Revenue
    Wholesale sales                                       $   861,894       $ 3,475,463
    Sales from Company-owned stores                           256,023           202,998
    Royalties, licensing fees and other                       311,087           199,920
    Initial franchise fees                                     17,500                --
    Other                                                      43,333                --
                                                          -----------       -----------
       Total revenue                                        1,489,837         3,878,381
                                                          -----------       -----------

Expenses
    Cost of goods sold                                        925,228         3,043,984
    Selling, general and administrative                     1,696,830         2,283,036
    Interest expense, net of interest income of
     $6,790 and $76,008, respectively                          96,841             8,106
                                                          -----------       -----------
       Total expenses                                       2,718,899         5,335,126
                                                          -----------       -----------

Loss from operations                                       (1,229,062)       (1,456,745)

Other income - Gain on sale of assets                       1,286,197                --
                                                          -----------       -----------

Income (loss) before extraordinary item                        57,135        (1,456,745)
Extraordinary item - forgiveness of debt                      162,729            80,088
                                                          -----------       -----------

Net income (loss)                                         $   219,864       $(1,376,657)
                                                          ===========       ===========

Basic and diluted income (loss) per common share:
    Income (loss) before extraordinary item               $       .02       $      (.48)
    Extraordinary item                                            .06               .03
                                                          -----------       -----------

    Net income (loss) per common share                    $       .08       $      (.45)
                                                          ===========       ===========

Weighted average number of common shares outstanding        2,926,417         3,069,775
</TABLE>

                 See notes to consolidated financial statements.
                                       F-4

<PAGE>
                           PARAMARK ENTERPRISES, INC.
                 (formerly T. J. Cinnamons, Inc.) and SUBSIDIARY
                 Consolidated Statement of Stockholders' Equity
                        For the Years Ended December 31,


<TABLE>
<CAPTION>
                                                                       Additional                            Total
                                              Common Stock               Paid-In         Accumulated     Stockholders'
                                         Shares          Amount          Capital           Deficit          Equity

<S>                                   <C>            <C>              <C>              <C>               <C>
Balance at December 31, 1995            2,910,833      $    29,109      $ 6,704,421      $(5,451,936)      $ 1,281,594

    Issuance of common stock for
     services                             158,000            1,580           53,070               --            54,650

    Net income                                 --               --               --          219,864           219,864
                                      -----------      -----------      -----------      -----------       -----------

Balance at December 31, 1996            3,068,833           30,689        6,757,491       (5,232,072)        1,556,108

    Issuance of common stock for
     services                               1,250               13            1,861               --             1,874

    Net loss                                   --               --               --       (1,376,657)       (1,376,657)
                                      -----------      -----------      -----------      -----------       -----------

Balance at December 31, 1997            3,070,083      $    30,702      $ 6,759,352      $(6,608,729)      $   181,325
                                      ===========      ===========      ===========      ===========       ===========
</TABLE>

                 See notes to consolidated financial statements.
                                       F-5

<PAGE>
                           PARAMARK ENTERPRISES, INC.
                 (formerly T. J. Cinnamons, Inc.) and SUBSIDIARY
                      Consolidated Statements of Cash Flows
                        For the Years Ended December 31,

<TABLE>
<CAPTION>
                                                              1996              1997
<S>                                                        <C>               <C>

Cash flows from operating activities
    Net income (loss)                                      $   219,864       $(1,376,657)
                                                           -----------       -----------
    Adjustments to reconcile net income (loss) to net
     cash from operating activities
      Depreciation and amortization                            151,471           114,273
      Licensing revenue                                        (12,500)               --
      Provision for doubtful accounts                          138,139             1,760
      Noncash interest expense                                  70,822                --
      (Gain) loss on sale of assets                         (1,286,197)               --
      Gain from forgiveness of debt                           (162,729)          (80,088)
      Noncash consulting fees                                   28,250             1,875
    (Increase) decrease in
      Accounts receivable                                     (378,841)           74,291
      Inventories                                              (82,201)         (152,621)
      Prepaid expenses and other current assets                (12,316)            5,089
      Other assets                                               1,155                --
    Increase (decrease) in
      Accounts payable and accrued expenses                    312,135           389,184
      Other current liabilities                                (14,116)          (53,383)
                                                           -----------       -----------
        Total adjustments                                   (1,246,928)          300,380
                                                           -----------       -----------
                                                            (1,027,064)       (1,076,277)
                                                           -----------       -----------

Cash flows from investing activities
    Purchases of property and equipment                       (154,893)         (240,518)
    Proceeds from sale of assets                             1,424,043                --
    Principal payments received on notes receivable            326,489         1,353,674
                                                           -----------       -----------
                                                             1,595,639         1,113,156
                                                           -----------       -----------

Cash flows from financing activities
    Principal payments on long-term debt                      (748,237)         (830,215)
    Proceeds from long-term debt                               201,500           866,230
    Principal payments on notes payable                        (23,848)               --
                                                           -----------       -----------
                                                              (570,585)           36,015
                                                           -----------       -----------

Net change in cash                                              (2,010)           72,894

Cash - beginning                                                51,677            49,667
                                                           -----------       -----------

Cash - ending                                              $    49,667       $   122,561
                                                           ===========       ===========
</TABLE>

                 See notes to consolidated financial statements.
                                       F-6

<PAGE>
                           PARAMARK ENTERPRISES, INC.
                 (formerly T. J. Cinnamons, Inc.) and SUBSIDIARY
                   Notes to Consolidated Financial Statements


Note  1 - Principal Business Activity and Sale of Assets
          Operations
          Paramark  Enterprises,   Inc.  (formerly  T.J.  Cinnamons,  Inc.)  and
          Subsidiary (the "Company"),  a Delaware corporation,  was incorporated
          on  August  23,  1993  as  a  wholly  owned  subsidiary  of  Signature
          Acquisition Corp.  ("SAC").  In October 1993, SAC and its wholly owned
          subsidiary, Signature Foods, Inc. ("Signature"),  were merged with and
          into the  Company.  In October  1996,  the  Company  formed  Interbake
          Brands, Inc., a Delaware corporation,  as a wholly owned subsidiary to
          conduct all wholesale bakery operations.

          Sale of Assets
          In  August  1996,  the  Company  closed  a  purchase  agreement  ("the
          Transaction")   with  Triarc  Restaurant  Group  d/b/a  Arby's,   Inc.
          ("Triarc") through which (a) Triarc purchased the trademarks,  service
          marks, recipes and secret formulas of the Company, (b) Triarc licensed
          back to the Company the rights to operate existing  franchised  bakery
          locations and to distribute  T.J.  Cinnamons  products  through retail
          grocery  outlets,  and  (c)  the  Company  entered  into a  management
          agreement with Triarc to manage the franchise system.

          The Company has received  payments of $3,470,000  through December 31,
          1997 from the Transaction.  In addition,  the Transaction provides the
          potential for contingent payments to the Company of up to a maximum of
          an additional  $5,500,000  over time dependent upon the amount of T.J.
          Cinnamons product sales by Triarc exceeding a minimum base system wide
          sales  of  $26.3  million.  Pursuant  to the  terms  of  the  purchase
          agreement,   T.J.  Cinnamons,   Inc.  changed  its  name  to  Paramark
          Enterprises, Inc.

          Additionally, major stockholders of the Company, related to an officer
          of the Company,  with  holdings of 1,013,390  shares of the  Company's
          common stock as of December 31, 1997,  signed a stock sale restriction
          agreement.  Under the terms of this agreement,  these stockholders are
          prohibited,  through  August 1998,  without prior  written  consent of
          Triarc,  to sell more than 2.5% of the total  issued  and  outstanding
          shares of the  Company.  Subsequent  to August  1998,  and  during the
          existence of the license agreement with Triarc,  the threshold will be
          increased from 2.5% to 10%.

          Simultaneous with the closing of the Transaction,  the Company entered
          into an  agreement  with Heinz  Bakery  Products  to  terminate a 1992
          manufacturing  and  license   agreement.   Under  the  terms  of  this
          agreement, the Company paid Heinz Bakery Products $600,000 at closing.

          Following the closing of the  Transaction,  the  Company's  operations
          have  been  concentrated  exclusively  on  its  wholesale  development
          activities.

                                       F-7
<PAGE>
                           PARAMARK ENTERPRISES, INC.
                 (formerly T. J. Cinnamons, Inc.) and SUBSIDIARY
                   Notes to Consolidated Financial Statements


Note  2 - Operating Plans
          The Company has incurred  significant  operating  losses  resulting in
          working  capital and  accumulated  deficits as of December  31,  1997,
          which  raise  substantial  doubts  about its  ability to continue as a
          going concern. The financial statements do not include any adjustments
          that may result from the outcome of this uncertainty.

          The Company is currently negotiating with a third party to sell, among
          other things, the Company's rights under the Transaction.  The closing
          of  this  transaction  is  subject  to  completion  of due  diligence,
          negotiation of final terms,  execution of a definitive agreement,  and
          the receipt of  shareholder  approval.  Management  believes  that the
          consummation  of this  transaction  will  provide  sufficient  working
          capital to finance its  activities  through at least June 30, 1999, as
          well as recover the remaining cost of intangible assets.

          The  failure  to  consummate  this  transaction  could have a material
          adverse  effect  on the  Company's  ability  to  continue  as a  going
          concern.

Note  3 - Summary of Significant Accounting Policies

          Principles of Consolidation
          The consolidated financial statements include the accounts of Paramark
          Enterprises, Inc. (formerly T.J. Cinnamons, Inc.) and its wholly owned
          subsidiary   Interbake   Brands,   Inc.,  after   elimination  of  all
          significant intercompany balances and transactions.

          Revenue Recognition
          Royalty  revenue is based upon a percentage  of sales of the Company's
          franchisees.  Royalty  revenue is recognized by the Company when sales
          are made by the  franchisee.  Licensing fees are based on a percentage
          of sales using the Company's trademark and/or trade name. License fees
          are recognized when the sale is made by the licensor.

          In  conjunction  with the  Transaction,  the  Company  entered  into a
          management  agreement  with Triarc for the management of the franchise
          system.  Under this agreement,  royalty fees collected are recorded as
          revenue, and paid to Triarc via a management fee.

          Inventory
          Inventory is stated at the lower of cost (first-in,  first-out  basis)
          or market, and consists principally of raw materials.

          Property and Equipment
          Depreciation  of furniture and equipment is being  provided for by the
          straight-line  method over the  estimated  useful lives of the related
          assets.  Leasehold  improvements  are  amortized  over the term of the
          lease.

                                       F-8

<PAGE>
                           PARAMARK ENTERPRISES, INC.
                 (formerly T. J. Cinnamons, Inc.) and SUBSIDIARY
                   Notes to Consolidated Financial Statements

Note  3 - Summary of Significant Accounting Policies - (continued)
          Income Taxes
          The Company recognizes  deferred income tax liabilities and assets for
          the expected future tax consequences of temporary  differences between
          the carrying amounts and the tax basis of assets and liabilities.

          Intangibles
          The excess of cost over fair value of net assets acquired ("goodwill")
          is being  amortized  using  the  straight-line  method  through  2006.
          Accumulated amortization was $73,333 on December 31, 1997.

          At  each  balance  sheet  date  the  Company   determines  whether  an
          impairment  exists  with  respect  to  the  Company's   goodwill.   In
          determining  whether an impairment  exists,  the Company  compares the
          projected  future cash flows  attributable  to the  goodwill  with its
          carrying value (see Note 2).

          Stock-Based Compensation
          Statement of Financial  Accounting  Standards No. 123, "Accounting for
          Stock-Based  Compensation," encourages, but does not require companies
          to record  compensation  costs for stock-based  employee  compensation
          plans at fair value. The Company has chosen to continue to account for
          stock-based  compensation  using the intrinsic value method prescribed
          in Accounting  Principles Board Opinion No. 25,  "Accounting for Stock
          Issued  to  Employees,"  and  related  Interpretations.   Accordingly,
          compensation cost for stock options is measured as the excess, if any,
          of the quoted market price of the  Company's  stock at the date of the
          grant over the amount an employee must pay to acquire the stock.

          Use of Estimates
          The  preparation of financial  statements in conformity with generally
          accepted  accounting  principles 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.

          Earnings Per Share
          The Company has adopted  Statement of Financial  Accounting  Standards
          No. 128 ("SFAS 128"),  "Earnings Per Share".  In accordance  with SFAS
          128, primary earnings per share have been replaced with basic earnings
          per share,  and fully  diluted  earnings per share have been  replaced
          with diluted  earnings per share which includes  potentially  dilutive
          securities  such as outstanding  options and  convertible  securities.
          Prior periods have been presented to conform with SFAS 128.

          Net income  (loss) per common  share is  calculated  by  dividing  net
          income (loss) by the weighted average number of shares of common stock
          outstanding for each period presented. Stock options and warrants have
          been  excluded  from  the  computation  of  weighted   average  shares
          outstanding since their effect is antidilutive.

                                       F-9
<PAGE>
                           PARAMARK ENTERPRISES, INC.
                 (formerly T. J. Cinnamons, Inc.) and SUBSIDIARY
                   Notes to Consolidated Financial Statements


Note  4 - Notes Receivable
          Note receivable  from a corporation is due in monthly  installments of
          $2,289, including interest at 9.25%, maturing in September 1998 with a
          final  payment of  $50,000.  Payments  on the note are  restricted  to
          satisfy the note payable to a former licensee (Note 7).

Note  5 - Property and Equipment
          At December 31, 1997, property and equipment, at cost, consists of the
          following:
<TABLE>
<CAPTION>
                                                                                         Depreciation and
                                                                                        Amortization Period
<S>                                                             <C>                                <C>
              Furniture and fixtures                            $        24,149                    5 years
              Equipment                                                 454,624               5 - 10 years
              Leasehold improvements                                     61,068                    5 years
                                                                ---------------
                                                                        539,841
              Less accumulated depreciation and
               amortization                                              86,545
                                                                ---------------
                                                                $       453,296
                                                                ===============
</TABLE>

          Depreciation and  amortization  expense for property and equipment was
          $15,989 and $59,274 for 1996 and 1997, respectively.

Note  6 - Accounts Payable and Accrued Expenses

          Trade accounts payable and other                     $       791,732
          Accrued professional fees                                     67,950
          Accrued payroll                                              244,242
          Accrued other                                                 38,491
                                                               ---------------
                                                               $     1,142,415
                                                               ===============

Note  7 - Long-term Debt

          Note payable to former licensee, monthly payments
          of $4,580, including interest at 9.25%, due
          September 1998. The note is being satisfied
          directly from payment on a note receivable (Note 4).         $ 69,837

          Note payable to a financing institution, monthly
          payments of $2,184, including interest at 19.4%,
          due September 2002, collateralized by production
          equipment.                                                     80,960

          Note payable to a shareholder with no specified
          repayment terms, quarterly interest payments at 10%.          112,000

                            F-10

<PAGE>
                 PARAMARK ENTERPRISES, INC.
       (formerly T. J. Cinnamons, Inc.) and SUBSIDIARY
         Notes to Consolidated Financial Statements

Note  7 - Long-term Debt - (continued)

          Loan payable to a financing institution, interest
          at prime plus 6.75%, due on demand. Maximum
          borrowings up to $300,000, collateralized by
          accounts receivable of a major customer.                       65,208
                                                                    -----------
                                                                        328,005
          Less current maturities                                       258,545
                                                                    -----------
          Long-term debt, net of current maturities                 $    69,460
                                                                   ============

          The prime rate at December 31, 1997 was 8.5%.

Note  8 - Related Party Transactions

          Included  in  prepaid  expenses  and  other  current  assets is a loan
          receivable from an officer, in the amount of $6,365, which consists of
          advances  made,  prior to the IPO,  to an officer of the Company and a
          partnership affiliated with officers of the Company.

          Included in accounts payable and accrued expenses,  are amounts due to
          officers  aggregating  $188,000,  to be paid in the ordinary course of
          business.

          Interest expense and fees,  related to loans from affiliates,  charged
          to  operations  for the year  ended  December  31,  1996  amounted  to
          $53,900.

          In November  1996,  the Company  granted 5,000 shares of the Company's
          common stock to Philip  Friedman,  a member of the Company's  Board of
          Directors.  These shares were issued in  consideration  for consulting
          services  rendered in the amount of $7,500,  the fair market  value of
          the shares on the date of issuance.

          In November 1996, the Company  granted 125,000 shares of the Company's
          common  stock  to the  Loccisano  Irrevocable  Trusts,  affiliates  of
          Charles  Loccisano,  the Company's Chairman and CEO. These shares were
          issued in consideration for shares  previously  conveyed by the Trusts
          on behalf of the  Company to Dan  Feldman,  a member of the  Company's
          Board  of  Directors,  in  exchange  for an  agreement  to  serve as a
          Director.

          The Company paid  consulting  fees in the amount of $6,000 during 1996
          and 1997 to a  Company  owned by a member  of the  Company's  Board of
          Directors.

          In January  1998,  officers  of the  Company  loaned an  aggregate  of
          $500,000 to the Company.  This amount is required to be repaid  within
          one year,  with  interest  payable  quarterly  at 5.39% per annum.  In
          consideration  for the loan, the officers were granted  300,000 shares
          of the Company's common stock.

Note  9 - Forgiveness of Debt
          Forgiveness  of debt of  $162,729  and  $80,088  for the  years  ended
          December 31, 1996 and 1997,  respectively,  resulted from negotiations
          with vendors. There is no income tax effect.

                                      F-11

<PAGE>
                           PARAMARK ENTERPRISES, INC.
                 (formerly T. J. Cinnamons, Inc.) and SUBSIDIARY
                   Notes to Consolidated Financial Statements


Note 10 - Income Taxes
          Deferred tax assets at December 31, 1997 consist of the following:

              Loss carryforwards                                 $    1,100,000
              Installment gain on sale of assets                        675,000
                                                                 --------------
              Gross deferred tax asset                                1,775,000
              Valuation allowance                                    (1,775,000)
                                                                 --------------

              Net deferred tax asset                             $           --
                                                                 ==============

          The  provision  for income taxes for the year ended  December 31, 1996
          was   reduced   $90,000  by  the   benefit  of  net   operating   loss
          carryforwards.

          At December 31, 1997, the Company has net operating loss carryforwards
          for financial reporting purposes of approximately $2,700,000 available
          to offset future taxable  income.  These  carryforwards  expire in the
          years 2009  through  2012 for federal  income tax  purposes,  and 2001
          through 2004 for state  income tax  purposes.  Utilization  of the net
          operating loss  carryforwards  may be  significantly  limited based on
          changes in the Company's ownership.

Note 11 - Stock Option Plan
          The Company's  1993  Incentive  Stock Option Plan has  authorized  the
          grant of options to management  personnel for up to 450,000  shares of
          the Company's  common stock.  All options granted have ten year terms,
          other than 10%  shareholders  that have five year terms,  and vest and
          become fully exercisable upon grant.

          The  Company's  1996 Stock  Option  Plan has  authorized  the grant of
          options to directors,  management  and  consultants  for up to 500,000
          shares of the  Company's  common stock.  All options  granted have ten
          year terms, other than 10% shareholders that have five year terms, and
          vest and become fully exercisable upon grant.

          Pro forma  information  regarding net income and earnings per share is
          required by  Statement  of  Financial  Accounting  Standards  No. 123,
          "Accounting for Stock-Based  Compensation," and has been determined as
          if the Company had accounted for its employee  stock options under the
          fair value method of that Statement.  The fair value for these options
          was  estimated  at the  date of  grant  using a  Black-Scholes  option
          pricing  model  with  the  following   weighted-average   assumptions:
          risk-free  interest rates of 6.0%,  dividend yields of 0%;  volatility
          factors of the expected market price of the Company's  common stock of
          .7%; and a weighted-average  expected life of the option of five years
          for 1996 and three years for 1997.

                                      F-12

<PAGE>
                           PARAMARK ENTERPRISES, INC.
                 (formerly T. J. Cinnamons, Inc.) and SUBSIDIARY
                   Notes to Consolidated Financial Statements


Note 11 - Stock Option Plan - (continued)
          The  Black-Scholes  option  valuation  model was  developed for use in
          estimating  the fair  value of traded  options  which  have no vesting
          restrictions and are fully transferable. In addition, option valuation
          models require the input of highly  subjective  assumptions  including
          the expected stock price  volatility.  Because the Company's  employee
          stock options have characteristics  significantly different from those
          of  traded  options,  and  because  changes  in the  subjective  input
          assumptions  can  materially  affect  the  fair  value  estimate,   in
          management's opinion, the existing models do not necessarily provide a
          reliable  single  measure  of the  fair  value of its  employee  stock
          options.

          For purposes of pro forma disclosures, the estimated fair value of the
          options is amortized to expense over the options' vesting period.  The
          Company's pro forma information follows:
<TABLE>
<CAPTION>
                                                                 1996          1997

<S>                                                          <C>          <C>
          Pro forma net income (loss)                        $  151,864   $ (1,566,657)

          Pro forma basic and diluted income (loss)
            per common share                                 $      .05   $       (.51)
</TABLE>

          There was no  compensation  expense arising from stock options for the
          years ended December 31, 1996 and 1997.

          A  summary  of  the  Company's  stock  option  activity,  and  related
          information for the years ended December 31, follows:

<TABLE>
<CAPTION>
                                            1996                      1997
                                            Weighted-Average           Weighted-Average
                                   Options   Exercise Price   Options   Exercise Price
<S>                                 <C>          <C>          <C>          <C>
          Outstanding -
           beginning of year        457,812      $   2.38     405,312      $   1.68

          Granted                    55,000          1.94     752,500          1.59
          Exercised                      --            --          --            --
          Forfeited                (107,500)         4.77     (10,000)         1.94
                                 ----------                ----------

          Outstanding -
           end of year              405,312      $   1.68   1,147,812      $   1.62
                                 ==========                ==========
</TABLE>

                                      F-13
<PAGE>
                           PARAMARK ENTERPRISES, INC.
                 (formerly T. J. Cinnamons, Inc.) and SUBSIDIARY
                   Notes to Consolidated Financial Statements


Note 11 - Stock Option Plan - (continued)


                                  1997
        Options
      Outstanding      Exercise          Expiration           Exercisable at
      End of Year       Price               Date             December 31, 1997

          17,812       $ 2.81         December 1998               17,812
         192,500         1.58         June 2000                  192,500
         140,000         1.58         June 2005                  140,000
          45,000         1.94         November 2006               45,000
          27,500         1.94         July 2007                   27,500
          45,000         1.75         March 2002                  15,000
         230,000         1.75         March 2007                  60,000
         180,000         1.50         July 2002                  145,000
         270,000         1.50         July 2007                  130,000
      ----------                                               ---------
       1,147,812                                                 772,812
      ==========                                               =========

          The  weighted  average fair value of options  granted  during 1996 and
          1997 was $1.24 and $.38, respectively.

          In  connection  with the IPO, the Company has  outstanding,  1,453,000
          redeemable  Class A  warrants,  each to  purchase  one share of common
          stock and one Class B warrant for $4; and 557,750  redeemable  Class B
          warrants,  each to  purchase  one  share of  common  stock  for $5. No
          warrants have been  redeemed  through  December 31, 1997.  The Class A
          warrants expire May 1999, and the Class B warrants expire May 2001.

Note 12 - Supplemental Cash Flow Information
          During the year ended  December 31, 1996,  the Company  issued  33,000
          shares of its common stock as payment for consulting services rendered
          and  interest  expense on certain  debt  obligations  in the amount of
          $28,250 and $26,400, respectively, the fair market value of the shares
          on the date(s) of issuance.

          During  the year  ended  December  31,  1997,  the  Company  purchased
          equipment for $84,000 by assuming long-term debt.

          During the years ended  December  31, 1996 and 1997,  the Company paid
          interest of $110,345 and $84,114, respectively.

Note 13-  Major Customers
          The Company had two major  customers that accounted for  substantially
          all of the  Company's  wholesale  sales for 1996 and 77% of  wholesale
          sales for 1997. These same customers  accounted for  substantially all
          of the Company's accounts receivable as of December 31, 1996 and 1997.

                                      F-14
<PAGE>
                           PARAMARK ENTERPRISES, INC.
                 (formerly T. J. Cinnamons, Inc.) and SUBSIDIARY
                   Notes to Consolidated Financial Statements

Note 14 - Commitments and Contingencies
          Rent
          The Company  leases space for its main  offices,  retail  bakery,  and
          wholesale bakery operation under  noncancelable  operating leases. The
          lease retail  bakery  provides for  additional  rents based upon sales
          volume, and the Company is required to pay all real estate taxes.

          Aggregate minimum annual payments due under this lease are as follows:

                  Year Ending
                  December 31,
                      1998                                    $     45,000
                      1999                                          38,000
                      2000                                          20,000
                                                              ------------
                                                              $    103,000
                                                              ============

          Rent expense  charged to operations  for the years ended  December 31,
          1996 and 1997 amounted to $115,000 and $168,000, respectively.

          Litigation
          The  Company is  presently  and from time to time  involved in routine
          litigation,   including   litigation   with  vendors,   suppliers  and
          franchisees.  In management's opinion, none of the litigation in which
          the  Company  is  currently  involved  is  material  to its  financial
          condition or results of operations.

                                      F-15