SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

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


(Mark One)
[X]  Annual report  pursuant to Section 13 or 15(d) of the  Securities  Exchange
     Act of 1934 [No Fee Required]

     For the fiscal year ended September  30,  2000

[ ]  Transition  report  pursuant  to Section  13 or 15(d) of the  Securities
     Exchange Act of 1934 [No Fee Required]

     For the  transition  period from  __________  to  __________

     Commission File No. 0-4289
                        -------

                               TONE PRODUCTS, INC.
                  --------------------------------------------
                 (Name of small business issuer in its charter)


           Arkansas                                          71-0390957
--------------------------------                       ---------------------
(State or other jurisdiction                           (I.R.S. Employer
of incorporation or organization)                      Identification Number)


        2129 North 15th Street
        Melrose Park, Illinois                                  60160
 --------------------------------------                        --------
(Address of principal executive offices)                      (Zip Code)

Issuer's telephone number:  (708) 681-3660
                          ----------------

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

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

                           $.10 Par Value Common Stock
                           ---------------------------
                                (Title of Class)


Check whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
                                    Yes  X  No
                                       -----  -----

     As of November 30, 2000, 2,219,260 shares of the Registrant's $.10 par
value Common Stock were outstanding. As of November 30, 2000, the market value
of the Registrant's $.10 par value Common Stock, excluding shares held by
affiliates, was $585,717 based upon a closing bid price of $0.750 per share of
Common Stock on the Electronic Bulletin Board.

     Check if there is no disclosure contained herein of delinquent filers in
response to Item 405 of Regulation S-B, and will not 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 amendment to
this Form 10-KSB.[ X ]

     The registrant's revenues for its most recent fiscal year were $12,264,085.

     The following documents are incorporated by reference into Part III, Items
9 through 12 hereof: None.

<PAGE>



                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS
--------------------------------

     Except for the historical information contained herein, the matters set
forth in this Report include forward-looking statements within the meaning of
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. These forward-looking statements are subject to risks and uncertainties
that may cause actual results to differ materially. These risks and
uncertainties are detailed throughout this Report and will be further discussed
from time to time in the Company's periodic reports filed with the Commission.
The forward-looking statements included in this Report speak only as of the date
hereof.

Business

     The Company manufactures, distributes and markets under its own proprietary
brand names, as well as under private labels developed for others, a line of
specialty beverages, snack foods and condiments. The Company's product lines
include fruit and other drink concentrates; juices and juice blends; bar mixes
and cocktail bases; snow cone syrups; pancake, waffle, corn and molasses syrups;
barbecue and steak sauces, marinades and dressings; popcorn, cookies, nuts and
other snack foods.

     The Company's proprietary products are marketed under a number of its own
brand names including "Bonnie", "Hi-Tone", "Evons", "Rainbo-Rich" and "Players'
Choice." As indicated, the Company also manufactures products for its customers
under private label brand names designated by the customers, and also enters
into copacking arrangements with other manufacturers for some of its products
and acts solely as a distributor for other products.

     The Company's customers include large domestic grocery store chains (such
as Aldi's, and Von's), domestic mass merchandisers (such as Sams Club, and
Market Day), large retail food service distributors (such as Marriott, Sysco,
and Alliant), brand name soft drink bottling companies and federal, state and
local government agencies including school districts, colleges and prisons.

     The Company manufactures its own products and its private label products in
a 72,000 square foot manufacturing and distribution facility in Melrose Park,
Illinois, and a 17,000 square foot manufacturing and distribution facility in
Las Vegas, Nevada. See "Item 2". These products are marketed through the
Company's own marketing staff consisting of six individuals. Marketing efforts
include direct sales calls, attendance at trade shows, advertisements in trade
journals, and the use of food brokers and sales representatives.

     The Company's business strategy is to increase revenues by focusing on
sales of it's steak and barbeque sauce manufacturing capabilities, expanding its
private label and contract packing operations, increasing its production of
certain food specialty products including barbecue sauces and marinades and
expanding it's direct store delivery system ("DSD") at the Company's Fun City
Popcorn unit in Las Vegas, Nevada. The Company believes that existing revenues
may be increased without a pro rata increase in fixed expenses, thereby
generating economies of scale (primarily in manufacturing operations) which will
create higher levels of earnings as a percentage of total revenues.

<PAGE>


History

     Tone Products, Inc., an Illinois corporation ("TPI") was organized in
March, 1947 to manufacture and market concentrated beverage syrups. In May 1996
TPI was acquired by Minute Man of America, Inc., an Arkansas corporation ("MMA")
in a reverse merger transaction. Under the terms of the reverse merger
transaction, MMA reverse split its stock on the basis of one share for each four
shares outstanding (resulting in 773,752 shares outstanding) and initially
issued an additional 2,275,000 shares to acquire all of the outstanding shares
of TPI. As a result, the management and principal stockholders of TPI became the
management and principal stockholders of the Company. In connection with the
reverse merger transaction, MMA also sold 478,850 shares of its Common Stock at
$2.00 per share in a private placement of its securities ("Private Placement").

     In May, 1996, the Company acquired Fun City Popcorn, Inc. ("FCP") for
$875,000 in cash generated from the sale of securities under the Private
Placement and the issuance of 100,000 shares of the Company's Common Stock.

Competition

     The specialty beverage, snack food and condiments industries are highly
competitive, and there are numerous multinational, regional and local firms that
currently compete, or are capable of competing, with the Company. Specialty
beverage competitors include Nedlog, Damon and Pride Beverages; snack food
competitors include Frito-Lay, Snak-King and Granny Goose; and condiment
competitors include Redwing and Brooks. Most of the Company's competitors are
larger than the Company and have superior financial, marketing and management
resources, and brand name recognition, than the Company. Competitive factors in
these specialty foods industries include price, product quality and product
flavor. The Company believes its products compete favorably against similar
specialty food products.

Government Regulation

     The Company is subject to various federal, state and local regulations
relating to cleanliness, maintenance of food production equipment, food storage
and food handling, and the Company is subject to unannounced on-site inspections
of its food production facilities. As a manufacturer and distributor of foods,
the Company is subject to regulation by the U.S. Food and Drug Administration
("FDA"), state food and health boards, and local health boards in connection
with the manufacturing, handling, storage, transportation, labeling and
processing of food products. Future changes in the regulations may adversely
impact the Company by raising the cost to manufacture and deliver the Company's
products and/or by affecting the perceived healthfulness of the Company's
products. A failure to comply with one or more regulatory requirements could
interrupt the Company's operations and result in a variety of sanctions,
including fines and the withdrawal of the Company's products from store shelves.
The Company holds all material licenses and permits required to conduct its
operations.

     The Company is also subject to federal and state laws establishing minimum
wages and regulating overtime and working conditions. Since some of the
Company's personnel are paid at rates not far above federal or state minimum
wage levels, future increases in federal or state minimum wage levels may result
in increases in the Company's labor costs.

<PAGE>


Trade Names and Trademarks

     The Company has registered a number of its proprietary brand names as
trademarks or trade names in Illinois or with the United States Patent office,
including "Bonnie", "Rainbo-Rich", and "Players' Choice". There can be no
assurance that the Company's trademarks or trade names will not be copied or
challenged by others.

Employees

     At November 30, 2000, the Company employed 45 individuals including its
three executive officers, 11 administrative and clerical employees and 30
factory and warehouse employees. The Company believes that its relations with
its employees are satisfactory.

ITEM 2.  DESCRIPTION OF PROPERTY
--------------------------------

     The Company leases 72,000 square feet of office, warehouse and
manufacturing space in Melrose Park, Illinois on a one year lease expiring
September 30, 2001 at a monthly rental of $33,235 or $5.54 per square foot. The
Company also leases 16,802 square feet of office and warehouse space in Las
Vegas, Nevada on a one year lease expiring May 31, 2001 at a monthly rental of
$8,544 or $6.10 per square foot. The Company leases its Melrose Park, Illinois
facility from three of its executive officers and directors and its Las Vegas,
Nevada facility from one of the directors. The Company believes that the terms
of both such facilities leases are fair, reasonable, and consistent with the
terms of leases which could be obtained from unaffiliated parties. The Company
believes its facilities are adequate for its needs in the foreseeable future and
that additional space is available at reasonable rates.

ITEM 3.  LEGAL PROCEEDINGS
--------------------------

     Not applicable.

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

     Not applicable.

<PAGE>


                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
-----------------------------------------------------------------

     The Company's Common Stock is traded over-the-counter on the Electronic
Bulletin Board ("EBB") under the symbol "TNPD".

     The following table sets forth for the quarters indicated the range of high
and low bid prices of the Company's Common Stock on the EBB.

                                                         Bid Price
                                                -------------------------
By Quarter Ended:                                High                Low
-----------------                                ----                ---

September 30, 2000..........................    $1.00               $0.62
June 30, 2000...............................    $1.12               $0.81
March 31, 2000..............................    $1.25               $0.87
December 31, 1999 ..........................    $1.25               $0.93

September 30, 1999 .........................    $1.00               $0.62
June 30, 1999...............................    $1.25               $1.00
March 31, 1999 .............................    $1.00               $0.87
December 1998 ..............................    $1.25               $0.75

     As of November 30, 2000, the Company had approximately 500 beneficial
holders of its Common Stock.

Dividend Policy

     The Company has never paid cash dividends on its Common Stock and intends
to retain earnings, if any, for use in the operation and expansion of its
business. The amount of future dividends, if any, will be determined by the
Board of Directors based upon the Company's earnings, financial condition,
capital requirements and other conditions.

Description of Securities

Common Stock

     The Company is authorized to issue 50,000,000 shares of $.10 par value
Common Stock. At November 30, 2000, there were 2,219,260 shares of Common Stock
outstanding. The holders of Common Stock are entitled to one vote for each share
held of record on all matters submitted to a vote of stockholders, including the
election of directors. There is no right to cumulate votes in the election of
directors. The holders of Common Stock are entitled to any dividends that may be
declared by the Board of Directors out of funds legally available therefor
subject to any prior rights of holders of Preferred Stock. In the event of
liquidation or dissolution of the Company, holders of Common Stock are entitled
to share ratably in all assets remaining after payment of liabilities and the
liquidation preferences of any outstanding shares of Preferred Stock. Holders of
Common Stock have no preemptive rights and have no right to convert their Common
Stock into any other securities. All of the outstanding shares of Common Stock
are fully paid and non-assessable.

Preferred Stock

     The Company is authorized to issue 500,000 shares of Preferred Stock,
$10.00 par value, none of which are outstanding. The Preferred Stock may,
without action by the stockholders of the Company, be issued by the Board of

<PAGE>


Directors from time to time in one or more series for such consideration and
with such relative rights, privileges and preferences as the Board may
determine. Accordingly, the Board has the power to fix the dividend rate and to
establish the provisions, if any, relating to voting rights, redemption rate,
sinking fund, liquidation preferences and conversion rights for any series of
preferred stock issued in the future.

     It is not possible at this time to state the actual effect of any
authorization of Preferred Stock upon the rights of holders of Common Stock
until the Board determines the specific rights of the holders of any series of
preferred stock. The Board's authority to issue Preferred Stock also provides a
convenient vehicle in connection with possible acquisitions and other corporate
purposes, but could have the effect of making it more difficult for a third
party to acquire a majority of the outstanding voting stock. Accordingly, the
issuance of Preferred Stock may be used as an "anti-takeover" device without
further action on the part of the stockholders of the Company, and may adversely
affect the holders of the Common Stock.

Stock Transfer and Warrant Agent

     Security Transfer Corporation is the stock transfer agent for the Company's
Common Stock.

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

General

Results of Operations-September 30, 2000 Compared to September 30, 1997

     Net Sales for the 12 month period ended September 30, 2000 increased to
$12,264,085 from $11,675,668 in 1999, which represents an increase of 5%. Sales
increases were a result of overall growth in private label packaging.

     Cost of goods sold increase to 75.5% of sales or $9,268,374 from 73.2% or
$8,552,954 a year ago. A one time charge for obsolete inventory and higher
inbound shipping costs were the two largest factors in this increase. The
obsolete inventory charge was a one time charge of $236,439 related to
dispensing equipment for a special cappuccino product that did not create enough
sales to warrant the continued expense of placing and servicing the equipment.
No further expenses related to that failed project are expected.

     Operating expenses rose 4.4% to $2,396,520 from $2,293,989 for the previous
year. Increased expenses related to outbound shipping and repair of dispensing
equipment were the main factors in that increase.

     Net Income after tax was $283,141 or 2.3% of sales, down from $415,971 or
3.5% of sales in 1999. The decrease resulted from the one time inventory related
charge discussed above.

<PAGE>


Liquidity and Capital Resources

     The Company has access to traditional lines of credit and term financing
and has in each of the past three years increased its lines of credit in order
to keep pace with growth. The Company had not made any material commitments for
capital expenditures as of September 30, 2000 and believes it has sufficient
cash resources to meet its needs in calendar 2000.

Seasonality

     A significant percentage of the Company's business is seasonal. The sale of
beverage syrups, fruit juice concentrates and barbecue sauces are greater during
warm weather. The holiday season, Thanksgiving through the New Year, helps to
offset this seasonality to some degree. Management has established lines of
credit to offset cash shortages during slow periods and has also instituted
policies and practices to manage cash flow.

Trends

     This year we expect to lose some revenue in the private label packaging
sector. We have lost two significant customers and a third has lost sales volume
that will effect the Company's sales. The total revenue decrease resulting from
the loss of these customers is expected to be approximately $1,000,000. The
Company's sales department is working to offset these losses with new business,
however the Company does expect to feel some significant effects of this
decrease in this fiscal year, and intends to watch expenses closely.

     The Company expects the supply of raw materials in the three largest
purchase categories to remain stable, if not increase. Liquid sweeteners, juice
concentrates and packaging materials are expected to remain in adequate supply
through fiscal 2001. The Company's purchasing power with suppliers continues to
grow, and cost of sales should not be adversely effected by raw material
purchasing calendar 2001.

     This Form 10-KSB specifies the forward looking statements of management.
Forward looking statements are statements that estimate or anticipate the
happening of future events. The forward looking statement of management
specified in this Form 10-KSB have been compiled on the basis of assumptions
made by management and considered to be reasonable. Future operating results of
the Company, however, are impossible to predict and not representation regarding
future operating results of the Company is to be inferred from those forward
looking statements. The assumptions used for purposes of the forward looking
statements specified in this Form 10-KSB represent estimates of future events
and are subject to uncertainty as to possible changes in economic, legislature,
industry, and other circumstances. As a result, the developing and selecting
assumptions from and among reasonable alternatives require the exercise of
judgement to the extent that the assumed events do not occur. The outcome may
vary substantially from that projected, and accordingly, no opinion is expressed
regarding the achievability of particular forward looking results. In addition,
those forward looking statements have been compiled as of the date of this Form
10-KSB and should be evaluated with consideration of any changes occurring after
the date of this Form 10- KSB.


<PAGE>


ITEM 7.  FINANCIAL STATEMENTS
-----------------------------




                               Tone Products, Inc.


                        Consolidated Financial Statements

                      As of September 30, 2000 and 1999 and
                  For Each of the Two Years in the Period Ended
                               September 30, 2000

<PAGE>


                               Tone Products, Inc.
                 Index to the Consolidated Financial Statements

                    As of September 30, 2000 and 1999 and For
          Each of the Two Years in the Period Ended September 30, 2000
--------------------------------------------------------------------------------



         Report of Independent Auditors ....................................1

         Consolidated Financial Statements of Tone Products, Inc.:

            Consolidated Balance Sheets, September 30,
              2000 and 1999.................................................2

            Consolidated Statements of Operations for
              Each of the Two Years in the Period
              Ended September 30, 2000......................................4

            Consolidated Statements of Shareholders'
              Equity for Each of the Two Years in the
              Period Ended September 30, 2000...............................5

            Consolidated Statements of Cash Flows for
              Each of the Two Years in the Period
              Ended September 30, 2000......................................6

         Notes to the Consolidated Financial Statements.....................8

<PAGE>


                         REPORT OF INDEPENDENT AUDITORS




To the Board of Directors
Tone Products, Inc.

We have audited the accompanying consolidated balance sheets of Tone Products,
Inc. and its subsidiaries as of September 30, 2000 and 1999, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the two years in the period ended September 30, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

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

By:  /s/  KELLY & COMPANY
   ----------------------
          Kelly & Compamy

Kelly & Company
Newport Beach, California
December 19, 2000

<PAGE>
                              Tone Products, Inc.
                         Consolidated Balance Sheets
                      As of September 30, 2000 and 1999

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


                                     ASSETS

                                                         2000            1999
                                                      ----------      ----------

Current assets:
       Cash and equivalents                           $  163,942      $  173,248
       Accounts receivable trade, net                  1,042,512         987,259
       Inventories                                     1,174,754       1,725,472
       Deferred tax asset                                    927             927
       Prepaid income taxes                              117,947            --
       Other current assets                               54,119          44,504
                                                      ----------      ----------
Total current assets                                   2,554,201       2,931,410

Property and equipment, net                            1,477,414       1,722,261
Intangible assets, net                                   638,722         702,163
Other assets                                              34,741          59,798
                                                      ----------      ----------
Total assets                                          $4,705,078      $5,415,632
                                                      ==========      ==========


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

                                        2

<PAGE>
<TABLE>
<CAPTION>



                                       Tone Products, Inc.
                                  Consolidated Balance Sheets
                               As of September 30, 2000 and 1999

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

                     LIABILITIES AND SHAREHOLDERS' EQUITY

                                                                            2000           1999

                                                                        -----------    -----------
Current liabilities:
       <S>                                                              <C>            <C>
       Lines of credit                                                  $   214,954    $   835,954
       Accounts payable trade                                               374,867        402,746
       Accrued expenses                                                     273,004        299,699
       Notes payable, current maturities                                    157,235        104,010
       Income taxes payable                                                    --            6,404

                                                                        -----------    -----------
Total current liabilities                                                 1,020,060      1,648,813

Notes payable, net of current maturities                                    547,436        139,505
Deferred tax liability                                                       64,432         66,584
                                                                        -----------    -----------

Total liabilities                                                         1,631,928      1,854,902
                                                                        -----------    -----------

Commitments and contingencies
Shareholders' equity:
       Convertible Series A preferred stock; $10 par value;
            500,000 shares authorized; none issued and outstanding at
            September 30, 2000-and 1999                                        --             --
       Common stock; $0.10 par value; 50,000,000 shares
            authorized; 2,722,910 and 3,235,200 shares issued and
            2,395,260 and 3,2272,291 shares outstanding at September
            30, 2000 and 1999, respectively                                 272,291        323,520
       Common stock held in treasury, 327,650  and 0 shares at
           September 30, 2000 and 1999, respectively                        (32,765)          --
                                                                        -----------    -----------
                                                                            239,526        323,520
       Common stock committed to be issued                                     --           15,364
       Additional paid in capital                                           529,222        804,746
Retained earnings                                                         2,304,402      2,417,100
                                                                        -----------    -----------
Total shareholders' equity                                                3,073,150      3,560,730
                                                                        -----------    -----------
Total liabilities and shareholders' equity                              $ 4,705,078    $ 5,415,632
                                                                        ===========    ===========


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

                                                 3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>



                                Tone Products, Inc.
                       Consolidated Statements of Operations
         For Each of the Two Years in the Period Ended September 30, 2000

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


                                                         2000            1999
                                                     ------------    ------------
<S>                                                  <C>             <C>
Net sales                                            $ 12,264,085    $ 11,675,668
Cost of sales                                           9,268,374       8,552,954
                                                     ------------    ------------
        Gross profit                                    2,995,711       3,122,714
Operating costs and expenses                            2,396,520       2,293,989
                                                     ------------    ------------
        Income from operations                            599,191         828,725
                                                     ------------    ------------
Other income (expense):
        Interest expense                                  (90,644)        (62,698)
        Interest income                                     4,612           3,106
        Other income, net                                   3,746          19,809
                                                     ------------    ------------
                                                          (82,286)        (39,783)
                                                     ------------    ------------
Income before provision for income taxes                  516,905         788,942
        Provision for income taxes                        233,764         372,971
                                                     ------------    ------------
Net income                                           $    283,141    $    415,971
                                                     ============    ============
Net income per share, basic and diluted              $       0.09    $       0.12
                                                     ============    ============
Basic weighted average common shares outstanding        3,115,860       3,417,841
                                                     ============    ============
Diluted weighted average common shares outstanding      3,115,860       3,428,146
                                                     ============    ============


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

                                         4
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<PAGE>
<TABLE>
<CAPTION>


                                         Tone Products, Inc.
                           Consolidated Statements of Shareholders' Equity
                  For Each of the Two Years in the Period Ended September 30, 2000

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

                                                                        Common Stock   Common Stock
                                            Common          Common        Held in       Committed
                                            Shares          Stock         Treasury     To Be Issued
                                          -----------    -----------    -----------     -----------
<S>                                         <C>          <C>            <C>            <C>
Balance, September 30, 1998                 3,579,612    $   357,961           --      $    21,136
       Treasury stock:
          Shares repurchased                 (347,900)          --      $   (34,790)          --
          Shares retired                         --          (34,790)        34,790           --
       Issuance of committed shares             3,488            349           --           (5,772)
       Net income                                --             --             --             --
                                          -----------    -----------    -----------    -----------
Balance, September 30, 1999                 3,235,200        323,520           --           15,364
       Treasury stock:
          Shares repurchased                 (839,940)          --          (83,994)          --
          Shares retired                         --          (51,229)        51,229           --
       Cash paid in lieu of issuance of
          committed shares                       --             --             --          (15,364)
       Net income                                --             --             --             --
                                          -----------    -----------    -----------    -----------
Balance, September 30, 2000                 2,395,260    $   272,291    $   (32,765)          --
                                          ===========    ===========    ===========    ===========


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

                                                 5
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                 Tone Products, Inc.
                   Consolidated Statements of Shareholders' Equity
          For Each of the Two Years in the Period Ended September 30, 2000
                                  (Continuned)
------------------------------------------------------------------------------------


                                           Additional
                                            Paid-in        Retained
                                            Capital        Earnings        Total
                                          -----------    -----------    -----------
<S>                                       <C>            <C>            <C>
Balance, September 30, 1998               $ 1,023,307    $ 2,095,629    $ 3,498,033

       Treasury stock:
          Shares repurchased                 (223,984)       (94,500)      (353,274)
          Shares retired                         --             --             --
       Issuance of committed shares             5,423           --             --
       Net income                                            415,971        415,971
                                          -----------    -----------    -----------
Balance, September 30, 1999                   804,746      2,417,100      3,560,730
       Treasury stock:
          Shares repurchased                 (280,583)      (395,839)      (760,416)
          Shares retired                         --             --             --
       Cash paid in lieu of issuance of
          committed shares                      5,059           --          (10,305)
       Net income                                --          283,141        283,141
                                          -----------    -----------    -----------
Balance, September 30, 2000               $   529,222    $ 2,304,402    $ 3,073,150
                                          ===========    ===========    ===========


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

                                        5(Con't)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>



                                       Tone Products, Inc.
                               Consolidated Statements of Cash Flows
                 For Each of the Two Years in the Period Ended September 30, 2000

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

                                                                         2000           1999
                                                                      -----------    -----------

Cash flows provided by (used in) operating activities:
                  <S>                                                 <C>            <C>
                  Net income                                          $   283,141    $   415,971
        Adjustments to reconcile net income to net cash provided by
             operating activities:
                  Depreciation and amortization                           416,380        397,719
                  Allowance for uncollectable accounts receivable          15,058          6,105
                  Loss (gain) on sale of assets                             4,005        (11,526)
        Decrease (increase) in assets:
                  Accounts receivable - trade, net                        (46,695)       (73,058)
                  Due from a related party                                   --           10,760
                  Inventories                                             550,718       (645,106)
                  Other current assets                                     (9,613)       (24,080)
                  Prepaid income taxes                                   (117,947)          --
                  Deferred tax asset                                         --           17,776
                  Other assets                                              1,441           --
        Increase (decrease) in liabilities:
                  Accounts payable trade                                  (27,879)        (3,307)
                  Accrued expenses                                        (26,694)        91,056
                  Income taxes payable                                     (6,404)      (150,132)
                  Deferred tax liability                                   (2,152)         4,434
                                                                      -----------    -----------
Cash provided by operating activities                                   1,033,359         36,612
                                                                      -----------    -----------
Cash flows provided by (used in) investing activities
        Purchase of property and equipment                               (116,558)      (589,546)
        Sale of property and equipment                                      4,461         29,965
                                                                      -----------    -----------
Cash used in investing activities                                        (112,097)      (559,581)
                                                                      -----------    -----------


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

                                            6

</TABLE>
<TABLE>
<CAPTION>
<PAGE>

                                            Tone Products, Inc.
                                   Consolidated Statements of Cash Flows
                     For Each of the Two Years in the Period Ended September 30, 2000

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



                                                                                     2000         1999
                                                                                   ---------    ---------
Cash flows provided by (used in) financing activities:
        <S>                                                                        <C>          <C>
        Net proceeds (payments) from the line of credit                            $(453,195)   $ 595,954
        Payment on notes payable                                                    (128,256)     (92,217)
        Proceeds from the issuance of notes payable                                     --         87,411
        Satisfaction of committed stock                                              (10,305)        --
        Repurchase of Company common stock                                          (338,812)    (353,274)
                                                                                   ---------    ---------
Cash provided by (used in) financing activities                                     (930,568)     237,874
                                                                                   ---------    ---------
Net increase (decrease) in cash                                                       (9,306)    (285,095)
Cash at beginning of period                                                          173,248      458,343
                                                                                   ---------    ---------
Cash at end of period                                                              $ 163,942    $ 173,248
                                                                                   ========     =========

                             Supplemental Disclosure of Cash Flow Information

        Interest paid                                                              $  90,644    $  62,698
        Income taxes paid                                                          $ 352,800    $ 527,537


                    Supplemental  Schedule of Non-Cash Investing and Financing Activities

        Issuance of committed stock:
                  Common stock committed to be issued                                   --      $   5,772
                  Common stock                                                          --      $    (349)
                  Additional paid-in capital                                            --      $  (5,423)
        Repurchase and retirement of common shares:
                  Retained earnings                                                $ 395,839         --
                  Common stock                                                     $  46,845         --
                  Additional paid-in capital                                       $ (21,080)        --
                  Line of credit                                                   $(421,604)        --
        Debt refinancing:
                  Line of credit                                                   $ 589,412         --
                  Note payable                                                     $(589,412)        --


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

                                                     7
</TABLE>
<PAGE>


                               Tone Products, Inc.

                 Notes to the Consolidated Financial Statements

                      As of September 30, 2000 and 1999 and
        For Each of the Two Years in the Period Ended September 30, 2000
--------------------------------------------------------------------------------

1.   Description of Business
     -----------------------------

     Operations

     Tone Products, Inc. (an Arkansas corporation)(the "Company") and its
     subsidiaries, Fun City Popcorn, Inc. (a Nevada Corporation)("Fun City") and
     Tone Products, Inc. (an Illinois corporation)("Tone Products") are engaged
     in the purchase, manufacture, and wholesale distribution of food products
     in the beverage, dry mix beverage, snack, syrup, condiments, and sauce
     categories.

2.   Summary of Significant Accounting Policies
     ------------------------------------------

     Principles of Consolidation

     The accompanying consolidated financial statements include the accounts of
     the Company and its subsidiaries, Fun City and Tone Products. All
     significant intercompany transactions have been eliminated.

     Recognition of Revenue

     Revenues are recognized when the Company's products are shipped. Provisions
     for discounts and rebates to customers, estimated returns and allowances,
     and other adjustments are provided for in the same period the related
     revenues are recorded.

     Cash and Equivalents

     The Company invests portions of its excess cash in highly liquid
     investments. Cash and equivalents include time deposits and commercial
     paper with original maturities of three months or less. The Company has no
     requirements for compensating balances. The Company maintains cash balances
     in accounts, which exceeded the federally insured limits by $32,804 and
     $14,126 at September 30, 2000 and 1999, respectively; however, the Company
     has not experienced any losses in such accounts.

     Concentration of Credit Risk

     Financial instruments, which potentially subject the Company to
     concentrations of credit risk, consist primarily of trade accounts
     receivable. The Company sells products to private and public companies
     supplying the food services industry, certain governmental entities, and
     public institutions primarily within a 300-mile radius of each of its two
     facility locations. Exposure to losses on accounts receivable is
     principally dependent on the individual customer's financial condition, as

                                        8

<PAGE>


                               Tone Products, Inc.

                 Notes to the Consolidated Financial Statements

                      As of September 30, 2000 and 1999 and
        For Each of the Two Years in the Period Ended September 30, 2000
--------------------------------------------------------------------------------

2.   Summary of Significant Accounting Policies, Continued
     -----------------------------------------------------

     Concentration of Credit Risk, Continued

     credit sales are not collateralized. The Company monitors its exposure to
     credit losses and reserves for those accounts receivable that it deems to
     be not collectible. No single customer accounted for more than 10% of the
     accounts receivable at September 30, 2000 and 1999 or of the revenues for
     the years then ended.

     Inventories

     Inventories are stated at the lower of cost or market. Cost is determined
     on a standard cost basis, which approximates the first in - first out
     method of valuation. The Company's management monitors inventories for
     excess, obsolete, and calendar date sensitive items and makes necessary
     valuation corrections when such adjustments are required.

     Property and Equipment

     Property and equipment are recorded at cost and are depreciated using the
     straight-line method over the expected useful lives noted below.
     Expenditures for normal maintenance and repairs are charged to operations.
     The cost and related accumulated depreciation of assets are removed from
     the accounts upon retirement or other disposition, and the resulting profit
     or loss is reflected in the statement of operations. Renewals and
     betterments that materially extend the life of the assets are capitalized.

                                                     Estimated
                                                    Useful Lives
                                                    ------------

         Property and equipment                          7 years
         Furniture and fixtures                      5 - 7 years
         Vehicles                                    5 - 7 years
         Leasehold improvements                     5 - 39 years

     Intangible Assets

     Intangible assets is comprised of goodwill resulting from business
     acquisitions and purchased intangible assets, which represents the excess
     of the acquisition cost over the value assigned to the net tangible assets
     at the date a business or asset is acquired. Intangible assets are
     amortized over their estimated useful lives, which is fifteen years
     utilizing the straight-line method.

                                        9

<PAGE>


                               Tone Products, Inc.

                 Notes to the Consolidated Financial Statements

                      As of September 30, 2000 and 1999 and
        For Each of the Two Years in the Period Ended September 30, 2000
--------------------------------------------------------------------------------

2.   Summary of Significant Accounting Policies, Continued
     -----------------------------------------------------

     Treasury Stock

     In the year ended September 30, 1999, the Company's board of directors
     authorized the repurchase, at management's discretion, of shares of the
     Company's common stock. Shares repurchased under the board of directors'
     authorization may be retired or held for later reissuance. The Company
     accounts for its treasury share transactions utilizing the par value
     method.

     Impairment of Long-Lived Assets

     The Company periodically evaluates its long-lived assets, including
     intangible assets for potential impairment. When circumstances indicate
     that the carrying amount of an asset is not recoverable, as demonstrated by
     the projected undiscounted cash flows, an impairment loss is recognized.
     The Company's management has determined that there was no such impairment
     present at September 30, 2000 and 1999.

     Income Taxes

     The Company accounts for income taxes under the liability method. Under the
     liability method, deferred tax assets and liabilities are determined based
     on differences between financial reporting and tax bases of assets and
     liabilities. They are measured using the enacted tax rates and laws that
     will be in effect when the differences are expected to reverse. The Company
     is required to adjust its deferred tax liabilities in the period when tax
     rates or the provisions of the income tax laws change. Valuation allowances
     are established when necessary to reduce deferred tax assets to the amounts
     expected to be realized.

     Stock-Based Compensation

     Statement of Financial Accounting Standards ("SFAS") No. 123, Accounting
     for Stock-Based Compensation, established accounting and disclosure
     requirements using a fair value based method of accounting for stock-based
     employee compensation plans. As permitted by SFAS No. 123, the Company
     continues to account for stock-based employee compensation using the
     intrinsic value method prescribed in Accounting Principles Board Opinion
     No. 25, Accounting for Stock Issued to Employees. Compensation cost of
     stock options granted to employees, if any, is measured as the excess of
     the quoted market price of the Company's stock at the date of grant over
     the amount an employee must pay to acquire the stock. Compensation cost is
     recognized over the requisite vesting periods.

                                       10

<PAGE>


                               Tone Products, Inc.

                 Notes to the Consolidated Financial Statements

                      As of September 30, 2000 and 1999 and
        For Each of the Two Years in the Period Ended September 30, 2000
--------------------------------------------------------------------------------

2.   Summary of Significant Accounting Policies, Continued
     -----------------------------------------------------

     Advertising Costs

     Advertising costs are expensed as they are incurred. Advertising expense
     was $4,396 and $75,905 for the years ended September 30, 2000 and 1999,
     respectively.

     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
     consolidated financial statements and the reported amounts of revenues and
     expenses during the reporting period. Actual results could differ from
     those estimates.

     Financial Statement Classification

     Certain amounts within the 1999 financial statements have been reclassified
     in order to conform to the 2000 financial statement presentation.

     New Accounting Pronouncement

     In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
     No. 133, Accounting for Derivative Instruments and Hedging Activities,
     which established accounting and reporting standards for derivative
     instruments. This statement requires that an entity recognize all
     derivatives as either assets or liabilities in the statement of financial
     position and measure those instruments at fair value. In June 1999, the
     FASB issued SFAS No.137, Accounting for Derivative Instruments and Hedging
     Activities - Deferral of the Effective Date of FASB Statement No. 133,
     which postponed the adoption date of SFAS No. 133. The statement is
     effective for all fiscal years beginning after June 15, 2000. As such, the
     Company is not required to adopt the new statement until the year ending
     September 30, 2001. The Company is currently evaluating the effect that
     implementation of the new standard will have on its results of operations
     and financial position. However, due to the Company's limited use of
     derivative instruments, adoption of SFAS No. 133 is not expected to have a
     significant effect on the Company's consolidated balance sheets, statements
     of operations, or statements of cash flows.

                                       11

<PAGE>


                               Tone Products, Inc.

                 Notes to the Consolidated Financial Statements

                      As of September 30, 2000 and 1999 and
        For Each of the Two Years in the Period Ended September 30, 2000
--------------------------------------------------------------------------------

3.    Accounts Receivable - Trade, Net
      --------------------------------

     During the years ended September 30, 2000 and 1999, the recognized bad debt
     expense of $1,558 and $6,104, respectively. As of September 30, 2000 and
     1999, the provision for uncollectable accounts receivable was $0.

4.    Inventories
      -----------

      At September 30, 2000 and 1999 inventories consisted of the following:

                                                  2000            1999
                                                  ----            ----
           Raw materials                      $    604,562    $    918,061
           Work-in-process                            --           215,640
           Finished goods                          570,192         591,771
                                              ------------    ------------
           Total inventories                  $  1,174,754    $  1,725,472
                                              ============    ============


     During the year ended September 30, 1999, the Company purchased fabricated
     parts to manufacture new Company developed drink dispensing machine. The
     costs of these parts, including purchases made during the year ended
     September 30, 2000 amounted to $236,439 and were included in work in
     process inventory. The Company issued the drink dispensing machines at no
     cost to the customers as part of a new drink product sales program during
     the year ended September 30, 2000. This new product sales program was
     eventually cancelled due to lack of customer interest. The still remaining
     fabricated parts were sold at scrap value and the loss resulting from their
     sale was reported in the cost of sales portion of the statement of
     operations for the year ended September 30, 2000.

5.   Property and Equipment
     ----------------------

     At September 30, 2000 and 1999,  property and  equipment  consisted of the
     following:

                                                  2000            1999
                                                  ----            ----
           Property and equipment             $  3,119,812    $  3,004,079
           Furniture and fixtures                  111,766         111,766
           Vehicles                                321,164         338,679
           Leasehold improvements                  582,476         581,651
                                              ------------    ------------
                                                 4,135,218       4,036,175
              Less: accumulated depreciation     2,657,804)     (2,313,914)
                                              ------------    ------------
           Total property and equipment, net  $  1,477,414    $  1,722,261
                                              ============    ============


                                       12

<PAGE>


                               Tone Products, Inc.

                 Notes to the Consolidated Financial Statements

                      As of September 30, 2000 and 1999 and
        For Each of the Two Years in the Period Ended September 30, 2000
--------------------------------------------------------------------------------

5.   Property and Equipment, Continued
     ---------------------------------

     Depreciation expense for the years ended September 30, 2000 and 1999 was
     $352,939 and $334,277, respectively.

6.   Intangible Assets
     -----------------

     At September 30, 2000 and 1999, intangible assets was comprised of the
     following:

                                                            2000        1999
                                                            ----        ----
        Goodwill resulting from the acquisition of Fun
          City Popcorn, Inc.                            $  442,076  $  442,076
        Goodwill resulting from the acquisition of
          T.J. Distributing                                121,136     121,136
        Acquisition cost of the Balboa Bay trademark       300,000     300,000
                                                        ----------  ----------
                                                           863,212     863,212
          Less: accumulated amortization                  (224,490)   (161,049)
                                                        ----------  ----------
        Intangible assets, net                          $  638,722  $  702,163
                                                        ==========  ==========



     Amortization expense for the years ended September 30, 2000 and 1999 was
     $63,441 and $63,442, respectively.

7.   Lines of Credit
     ---------------

     At September 30, 2000 and 1999, the Company had operating lines of credit
     with a bank as follows:

     Collateralized

                                                            2000       1999
                                                            ----       ----

     Line of credit with a maximum amount of
     $1,300,000 available, collateralized by
     certain Tone Products assets (with a net
     carrying amount of approximately $3,300,000
     at September 30, 2000) and guaranteed by its
     two largest shareholders, who are also
     corporate officers and members of the board
     of directors of the Company (the "largest
     shareholders"). The bank line of credit had a
     weighted average interest rate of 8.70% and
     7.64% for the years ended September 30, 2000
     and 1999, respectively. The bank line of
     credit expires in February 2001 and is
     eligible for a one-year extension.

                                       13

<PAGE>


                               Tone Products, Inc.

                 Notes to the Consolidated Financial Statements

                      As of September 30, 2000 and 1999 and
        For Each of the Two Years in the Period Ended September 30, 2000
--------------------------------------------------------------------------------

7.   Lines of Credit, Continued
     --------------------------

     Collateralized, Continued
                                                            2000       1999
                                                            ----       ----

     It is the Company's intention at this time to
     extend any unpaid balance at the due date.         $ 125,000   $ 580,772


     Line of credit with a maximum amount of
     $650,000 available, collateralized by certain
     Tone Products assets (with a net carrying
     amount of approximately $3,300,000 at
     September 30, 2000) and guaranteed by the
     largest shareholders. The bank line of credit
     had a weighted average interest rate of 8.14%
     for the year ended September 30, 1999. In
     March 2000 the Company converted the line of
     credit to a term credit agreement, which is
     due June 2003.                                          --       165,228

     Line of credit with a maximum amount of
     $300,000 available, collateralized by certain
     Fun City assets (with a net carrying amount
     of approximately $1,000,000 at September 30,
     2000) and guaranteed by the largest
     shareholders. The bank line of credit had a
     weighted average interest rate of 8.70% and
     7.89% for the years ended September 30, 2000
     and 1999, respectively. The bank line of
     credit expires in February 2001 and is
     eligible for a one-year extension. It is the
     Company's intention at this time to extend
     any unpaid balance at the due date.                   89,954      89,954
                                                        ---------   ---------
     Total lines of credit                              $ 214,954   $ 835,954
                                                        =========   =========


                                       14

<PAGE>


                               Tone Products, Inc.

                 Notes to the Consolidated Financial Statements

                      As of September 30, 2000 and 1999 and
        For Each of the Two Years in the Period Ended September 30, 2000
--------------------------------------------------------------------------------

8.   Accrued Expenses
     ----------------

     At September 30, 2000 and 1999, accrued expenses consist of the following:

           Accrued co-operative promotional expenses  $  74,804   $ 119,625
           Accrued real estate taxes                     56,847      94,997
           Accrued payroll and payroll taxes             51,750      54,253
           Due to shareholder                            39,908        --
           Other accrued expenses                        49,695      30,824
                                                      ---------   ---------
           Total accrued expenses                     $ 273,004   $ 299,699
                                                      =========   =========


9.   Notes Payable
     -------------

     At September 30, 2000 and 1999, notes payable consist of the following:

     Collateralized

     Note payable to a bank, collateralized by
     certain Tone Products assets (with a net
     carrying amount of approximately $3,300,000
     at September 30, 2000), payable in monthly
     principal installments of $3,690 plus accrued
     interest, due in April 2001. Interest is
     calculated at the bank's prime rate plus
     three-quarters of a point (10.25% and 9.00%
     per annum at September 30, 2000 and 1999,
     respectively).                                   $  25,857   $  70,137

     Note payable to a bank, collateralized by
     certain Tone Products assets (with a net
     carrying amount of approximately $3,300,000
     at September 30, 2000), payable in monthly
     principal and interest installments of $813,
     with any unpaid principal and interest due in
     January 2003. Interest is calculated at a
     fixed rate of 8.00% per annum.                      20,748      29,067

     Term credit agreement with a bank, which is a
     long term line of credit, with a maximum
     amount of $422,000 available, collateralized
     by all Tone Products assets (with a net
     carrying amount of approximately $3,600,000
     at September 30, 2000), requiring minimum
     monthly payments of $6,791 with any


                                       15

<PAGE>



                               Tone Products, Inc.

                 Notes to the Consolidated Financial Statements

                      As of September 30, 2000 and 1999 and
        For Each of the Two Years in the Period Ended September 30, 2000
--------------------------------------------------------------------------------

9.   Notes Payable, Continued
     ------------------------

     Collateralized, Continued
                                                        2000        1999
                                                        ----        ----

     remaining unpaid balance due July 2005.
     Interest is calculated at a fixed rate of
     9.00% per annum.                                 $ 414,619        --

     Term credit agreement with a bank, with a
     maximum amount of $300,000 available,
     collateralized by all Tone Products assets
     (with a net carrying amount of approximately
     $3,600,000 at September 30, 2000), requiring
     minimum monthly payments of $3,571 with any
     remaining unpaid balance due June 2003.
     Interest is calculated at the bank's prime
     rate less one-quarter of a point (9.25% per
     annum at September 30, 2000). In March 2000,
     this term credit agreement was converted from
     a line of credit.                                  154,928        --

     Notes payable, collateralized by certain of
     the Company's vehicles (with a net carrying
     amount of approximately $100,000 at September
     30, 2000). The notes provide for monthly
     installments of principal and interest of
     $3,411, maturing through September 2002. At
     September 30, 2000, the interest is
     calculated at rates varying between .90% and
     7.50% per annum.                                    47,473   $  87,460

     Uncollateralized

     Note payable to an individual as part of the
     purchase price of a business acquisition;
     payable in monthly principal and interest
     installments of $1,600, with any unpaid
     principal and interest due in January 2003.
     Interest is calculated at a fixed rate of
     7.00% per annum.                                    41,046      56,851
     ------------------- ---------------
     Total notes payable                                704,671     243,515
         Less: current maturities                      (157,235)   (104,010)
                                                      ---------   ---------
     Long term portion of notes payable               $ 547,436   $ 139,505
                                                      =========   =========


                                       16

<PAGE>


                               Tone Products, Inc.

                 Notes to the Consolidated Financial Statements

                      As of September 30, 2000 and 1999 and
        For Each of the Two Years in the Period Ended September 30, 2000
--------------------------------------------------------------------------------

9.   Notes Payable, Continued
     ------------------------

     Maturities of notes payable for the years ending September 30:
           2001                                             $157,235
           2002                                              127,788
           2003                                              156,492
           2004                                               60,244
           2005                                              202,912

     Interest expense during the years ended September 30, 2000 and 1999 was
     $90,644 and $62,698, respectively.

10.  Other Income
     ------------
     For each of the two years in the period ended September 30, 2000, the
     components of other income are:

                                                        2000          1999
                                                        ----          ----
           Gain (loss) on the sale of assets, net   $  (4,005)    $   11,526
           Miscellaneous other income                   7,751          8,283
                                                    ---------     ----------
           Total other income, net                  $   3,746     $   19,809
                                                    =========     ==========



11.  Income Taxes
     ------------

     At September 30, 2000 and 1999, the components of the provision for income
     taxes are:

                                                        2000          1999
                                                        ----          ----
           Current tax expense:
                Federal                             $ 200,062     $  307,142
                State                                  35,854         43,619
                                                    ---------     ----------
                                                      235,916        350,761
                                                    ---------     ----------

           Deferred tax expense (benefit):
                Federal                                (1,748)        21,375
                State                                    (404)           835
                                                    ---------     ----------
                                                       (2,152)        22,210
                                                    ---------     ----------
           Total provision                          $ 233,764     $  372,971
                                                    =========     ==========


                                       17

<PAGE>


                               Tone Products, Inc.

                 Notes to the Consolidated Financial Statements

                      As of September 30, 2000 and 1999 and
        For Each of the Two Years in the Period Ended September 30, 2000
--------------------------------------------------------------------------------

     Significant components of the Company's deferred income tax assets and
     liabilities at September 30, 2000 and 1999 are:

11.  Income Taxes, Continued
     -----------------------
                                                            2000           1999
                                                          -------        -------
         Deferred income tax asset:
              State taxes                                 $ 4,060        $ 4,198
              Other                                           987            987
                                                          -------        -------
         Total deferred income tax asset                    5,047          5,185
              Valuation allowance                            --             --
                                                          -------        -------
         Net deferred income tax asset                      5,047          5,185
                                                          -------        -------
         Deferred income tax liability:
         Depreciation                                     $68,552        $70,842
                                                          -------        -------
         Total deferred income tax liability               68,552         70,842
                                                          -------        -------
         Net deferred income tax liability                $63,505        $65,657
                                                          =======        =======


     Reconciliation of the effective tax rate to the U.S. statutory rate is as
     follows:

                                                            2000           1999
                                                            ----           ----
         Tax expense at U.S. statutory rate                 34.0%         34.0%
         State tax provision                                 4.5           3.7
         Non-deductible expenses                             6.9           4.6
         Assessment of additional taxes related to a prior
           period                                             --           2.8
         Other                                              (0.2)          2.2
                                                            -----         -----
         Effective income tax rate                          45.2%         47.3%
                                                            =====         =====


12.  Stock-Based Compensation
     ------------------------

     The Company's 1997 Stock Option Plan (the "plan") adopted in November 1997
     provides for the issuance of up to 500,000 options to purchase shares of
     its common stock to selected officers, outside directors, employees, and
     consultants. The plan's options vest pro rata over a five-year period and
     expire ten years from the date of grant. Under the term of the plan,
     options granted may be either non-qualified options or incentive stock
     options ("ISOs"). The exercise price for non-qualified options or ISOs may
     not be less than the quoted market price of the stock on date the option is
     granted. As of September 30, 2000, no options have ever been granted.

                                       18


<PAGE>


                               Tone Products, Inc.

                 Notes to the Consolidated Financial Statements

                      As of September 30, 2000 and 1999 and
        For Each of the Two Years in the Period Ended September 30, 2000
--------------------------------------------------------------------------------

13.  Disclosures about Fair Values of Financial Instruments
     ------------------------------------------------------

     The estimated fair value amounts of all financial instruments on the
     Company's September 30, 2000 and 1999 balance sheets, which are held for
     nontrading purposes, have been determined by using available market
     information and appropriate valuation methodologies.

     Fair value is described as the amount at which the instrument could be
     exchanged in a current transaction between informed willing parties, other
     than in a forced liquidation. However, considerable judgment is necessarily
     required in interpreting market data to develop the estimates of fair
     value. Accordingly, the estimates presented herein are not necessarily
     indicative of the amounts that the Company could realize in a current
     market exchange. The use of different market assumptions and/or estimation
     methodologies may have a material effect on the estimated fair value
     amounts. The Company does not have any off balance sheet financial
     instruments.

     The following methods and assumptions were used by the Company in
     estimating fair value disclosures for financial statements:

          Cash and equivalents, accounts receivable, inventory, prepaids,
          accounts payable, lines of credit payable, and certain other current
          liability amounts, as reported in the balance sheet, approximate fair
          value due to the short term maturities of these instruments.

          The fair value of non-current notes payable is estimated by
          determining the net present value of future payments. The carrying
          amounts on the balance sheet approximate fair value.


14.  Employee Benefit Plans
     ----------------------

     Profit-Sharing Plan

     In November 1998, the Company terminated its non-contributory profit
     sharing plan (the "plan") that covered substantially all employees. No
     employer contribution was ever made.

     Employee Retirement Plan

     In November 1998, the Company adopted an employee benefit plan, whereby
     eligible employees may elect to defer a portion of their annual
     compensation, up to a maximum of 15%, pursuant to Section 401(k) of the
     Internal Revenue Code. Substantially all employees are eligible to
     participate. The Company matches contributions on a discretionary basis as
     determined by the board of directors, not to exceed 50% of the first 5% of
     the employees elected deferral. The Company recognized $32,819 and $0 of
     expense relating to the employee retirement plan for the years ended
     September 30, 2000 and 1999, respectively.

                                       19

<PAGE>


                               Tone Products, Inc.

                 Notes to the Consolidated Financial Statements

                      As of September 30, 2000 and 1999 and
        For Each of the Two Years in the Period Ended September 30, 2000
--------------------------------------------------------------------------------

15.  Related Party Transactions
     --------------------------

     Facilities Operating Leases

     The Company leases its Chicago area facility from an entity owned by the
     largest shareholders. For the years ended September 30, 2000 and 1999, the
     Company paid facility rent of $390,042 and $333,060 respectively.

     The Company leases its Las Vegas area facility from a former major Company
     shareholder and the former owner of Fun City prior to its acquisition and
     who is currently still a member of the Company's board of directors. For
     the years ended September 30, 2000 and 1999, the Company paid the former
     major shareholder facility rent of $82,008 for each year.

     Due from Related

     Party In years prior to the year ended September 30, 1999, the Company
     conducted business with an entity owned by the largest shareholders. The
     amount due from the entity to the Company was paid in full during the year
     ended September 30, 1999.

16.  Commitments
     -----------

     The Company leases its facilities from related parties (Note 14) on
     operating leases with future minimum lease payments at September 30, 2000,
     as follows:

                2001                                             $  450,702
                2002                                                 82,008
                2003                                                 54,672
                                                                 ----------
                Total future minimum lease payments              $  587,382
                                                                 ==========



     Rental expense was $472,050 and $415,068 during the years ended September
     30, 2000 and 1999, respectively.

17.  Earnings Per Share
     ------------------

     Basic earnings per share ("EPS") is computed by dividing income available
     to common shareholders by the weighted average number of common shares
     outstanding for the year. Diluted EPS is similar to basic EPS except that
     the weighted average of common shares outstanding is increased to include
     the number of additional common shares that would have been outstanding if
     potentially dilutive common shares had been issued.

                                       20

<PAGE>


                               Tone Products, Inc.

                 Notes to the Consolidated Financial Statements

                      As of September 30, 2000 and 1999 and
        For Each of the Two Years in the Period Ended September 30, 2000
--------------------------------------------------------------------------------

17.  Earnings Per Share, Continued
     -----------------------------

     The computation of basic and diluted earnings per common share at September
     30, 2000 and 1999 are as follows:


                                                          2000          1999
                                                          ----          ----
           Basic earnings per common share:
                Net income (numerator)                $   283,141   $   415,971
           Weighted-average shares outstanding
                (denominator)                           3,115,860     3,417,841
                                                      -----------   -----------
           Basic earnings per common share            $      0.09   $      0.12
                                                      ===========   ===========
           Diluted earnings per common share:
                Net income (numerator)                $   283,141   $   415,971
                                                      -----------   -----------
                Weighted-average shares outstanding     3,115,860     3,417,841

                Shares committed to be issued                --          10,305
                                                      -----------   -----------
                Shares outstanding for the diluted
                earnings per common share calculation
                after assumed issuance (denominator)    3,155,860     3,428,146
                                                      -----------   -----------
           Diluted earnings per common share          $      0.09   $      0.12
                                                      ===========   ===========


18.  Common Stock
     ------------

     Shares Committed

     During the year ended September 30, 1998, the Company committed to issue
     13,793 shares of its common stock over a four-year period as part of the
     acquisition cost of a business. The fair value of the commitment to issue
     the common shares over four years was $21,136. In the year ended September
     30, 1999, the Company issued 3,488 of the committed shares. In the year
     ended September 30, 2000, the Company paid $10,305 in full satisfaction of
     the obligation in lieu of issuing the remaining 10,305 committed shares of
     common stock.

     Shares Retired

     During the years ended September 30, 2000 and 1999, the Company repurchased
     and retired 512,290 and 347,900 shares of its common stock for $464,584 and
     $353,274, respectively. Of these repurchased shares, 468,452 and 100,000
     for the years ended September 30, 2000 and 1999, respectively, were
     repurchased from one of the largest shareholders who formerly was a
     corporate officer and a member of the board of directors at prices greater
     than the original issuance value resulting in decreases to retained
     earnings of $395,842 and $94,500 for the years ended September 30, 2000 and
     1999, respectively.

                                       21

<PAGE>


                              Tone Products, Inc.

                 Notes to the Consolidated Financial Statements

                      As of September 30, 2000 and 1999 and
        For Each of the Two Years in the Period Ended September 30, 2000
--------------------------------------------------------------------------------

18.  Common Stock, Continued
     -----------------------

     Treasury Shares

     The Company accounts for treasury stock under the Par Value Method whereby
     the treasury stock account is recorded at the aggregate par value of the
     shares reacquired and the excess of the purchase price over the par value
     is recorded to the additional paid in capital account.

     During 2000, the Company repurchased 327,650 shares of common stock for an
     aggregate cost of $295,832. Of those shares, 231,250 were purchased for
     $208,125 from a former major Company shareholder and the former owner of
     Fun City prior to its acquisition who currently is a member of the
     Company's board of directors.

19.  Geographical Business Segments
     ------------------------------

     For the years ended September 30, 2000 and 1999, the Company operated in
     two geographical business segments. Each of the business segments is a
     separate legal entity; each operates in a distinct geographical area with
     unique product lines.

     Tone Products operates from facilities in Chicago, Illinois that
     manufacture and distribute food products in the beverage, dry mix beverage,
     syrup, condiment and sauce categories that are sold to wholesale customers.

     Fun City operates from facilities in Las Vegas, Nevada that manufacture and
     purchases snack food products that are sold to wholesale and retail
     customers.

     Both entities focus their marketing efforts for their products on the
     client base within a 300-mile radius of the facilities.

                                       22

<PAGE>



                               Tone Products, Inc.

                 Notes to the Consolidated Financial Statements

                      As of September 30, 2000 and 1999 and
        For Each of the Two Years in the Period Ended September 30, 2000
--------------------------------------------------------------------------------

19.  Geographical Business Segments, Continued

                                                         2000           1999
                                                         ----           ----
            Revenue
            Tone Products, Inc.                     $ 10,102,409   $  9,295,681
            Fun City Popcorn, Inc.                     2,161,676      2,379,987
                                                    ------------   ------------
            Total revenue                           $ 12,264,085   $ 11,675,668
                                                    ============   ============
            Operating income (loss)
            Tone Products, Inc.                     $    653,655   $    882,765
            Fun City Popcorn, Inc.                       (54,464)       (54,040)
                                                    ------------   ------------
            Total operating income (loss)           $    599,191   $    828,725
                                                    ============   ============
            Depreciation and amortization
            Tone Products, Inc.                     $    283,701   $    263,027
            Fun City Popcorn, Inc.                       132,680        134,692
                                                    ------------   ------------
            Total depreciation and amortization     $    416,380   $    397,719
                                                    ============   ============
            Interest expense
            Tone Products, Inc.                     $     76,517   $     46,350
            Fun City Popcorn, Inc.                        14,127         16,348
                                                    ------------   ------------
            Total interest expense                  $     90,644   $     62,698
                                                    ============   ============
            Identifiable assets
            Tone Products, Inc.                     $  3,582,386   $  4,141,812
            Fun City Popcorn, Inc.                     1,122,692      1,273,820
                                                    ------------   ------------
            Total identifiable assets               $  4,705,078   $  5,415,632
                                                    ============   ============
            Expenditures for long-lived assets
            Tone Products, Inc.                     $    114,368   $    547,883
            Fun City Popcorn, Inc.                         2,190         41,663
                                                    ------------   ------------
            Total expenditures for long-lived
            assets                                  $    116,558   $    589,546
                                                    ============   ============


                                       23

<PAGE>


ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
--------------------------------------------------------------------------------
NONE


                                    PART III

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

Directors and Executive Officers

     The following table sets forth certain information  regarding the Company's
executive officers and directors:


                                                              Officer or
    Name                Age            Office                 Director Since(1)
    ----                ---            ------                -----------------
Timothy E. Evon         47      President, Chairman of the     October, 1996
                                Board, Chief Executive
                                Officer, and Director

Thomas J. Evon          45      Vice-President - Special       November, 1996
                                Accounts, and Director

William H. Hamen        40      Secretary, Treasurer,          November, 1996
                                Chief Financial Officer
                                and Director

Jack T. Cory            59      Director                       October, 1996

Charles A. Ehemann      48      Director                       October, 1996

Martin J. Finan         39      Director                       March, 1999

(1)  Reflects the date TPI was acquired by the Company. Messrs. Evon and Evon
     had been directors of TPI, the Company's predecessor, from September 1978.

     Directors hold office for a period of one year from their election at the
annual meeting of stockholders and until their successors are duly elected and
qualified. Officers of the Company are elected by, and serve at the discretion
of, the Board of Directors. Directors not employed by the Company do not receive
fees for attending Board of Directors' meetings but are reimbursed for
out-of-pocket expenses, and each is granted stock options to purchase 25,000
shares of the Company's Common Stock after one year of service and an additional
10,000 share option after their second year of service. Timothy E. Evon and
Thomas J. Evon are brothers.

<PAGE>


Background

     The following is a summary of the business experience of each executive
officer and director of the Company for at least the last five years:

     Timothy E. Evon has been President of TPI, and subsequently the Company,
since 1989 and is responsible for the Company's overall operations, with
emphasis upon management of production facilities and sauce operations.

     Thomas J. Evon has been an executive officer of TPI, and subsequently the
Company, since 1989 with principal responsibility for marketing the Company's
products primarily to government agencies, including school districts, colleges
and prisons.

     William H. Hamen has been the Company's controller since 1996 and was named
its Secretary, Treasurer and Chief Financial Officer in November 1998 with
principal responsibility for accounting and related functions. Previously, Mr.
Hamen was an independent systems consultant and a computer network engineer
since 1992.

     Jack T. Cory founded Fun Foods, a California based popcorn and snack foods
manufacturer in 1967 and sold the company in 1982. In 1985 he founded and
subsequently managed Fun City Popcorn, Inc. ("FCP") until he sold FCP to the
Company in May 1996.

     Charles A. Ehemann has been employed by Wixon/Fontarome, a spice,
seasoning, flavors, and food chemicals manufacturer since 1974 and has acted as
its Executive Vice President since 1991.

     Martin J. Finan has been employed by S.G. Cowen Corp. since 1993 and
currently is the Director of the Structured Finance Group. Previously he was the
Vice President of Corporate Finance at Westpac Corp. Mr. Finan is a C.P.A. and
has a M.B.A. from the University of Chicago

<PAGE>


ITEM 10.  EXECUTIVE COMPENSATION
--------------------------------

     The following table sets forth certain information concerning compensation
paid to the Company's Chief Executive Officer for the years ended September 30,
1999 and 2000. Timothy E. Evon currently receives an annual salary of $132,600.

<TABLE>
<CAPTION>
                                   Summary Compensation Table

                                              Annual                               Long Term
                                           Compensation                          Compensation
                                           ------------                          ------------
     Name and                                  Other Annual     Awards                    All Other
Principal Position          Year     Salary       Bonus      Compensation     Options     Compensation
-------------------                 --------   ----------    ------------     -------     -------------
<S>                         <C>     <C>         <C>              <C>            <C>           <C>
Timothy E. Evon,            2000    $115,215    $23,000          $0             $0            $0
Chief Executive Officer     1999    $104,300     $3,450          $0             $0            $0

Thomas J. Evon,              2000   $101,380    $20,000          $0             $0            $0
Vice President

</TABLE>

Stock Option Plan

     In November 1997, the Company adopted its 1997 Stock Option Plan (the
"Plan"), which provides for the grant to employees, officers, directors and
consultants of options to purchase up to 500,000 shares of Common stock,
consisting of both "incentive stock options" within the meaning of Section 422A
of the United States Internal Revenue Code of 1986 (the "Code") and
"non-qualified" options. Incentive stock options are issuable only to employees
of the Company, while non-qualified options may be issued to non-employee
directors, consultants and others, as well as to employees of the Company.

     The Plan is administered by the Board of Directors, which determines those
individuals who shall receive options, the time period during which the options
may be partially or fully exercised, vesting periods required for issuance of
options, the number of shares of Common Stock that may be purchased under each
option and the option price.

     The per share exercise price of the Common Stock subject to an incentive
stock option may not be less than the fair market value of the Common Stock on
the date the option is granted. The per share exercise price of the Common Stock
subject to a non-qualified option is established by the Board of Directors. The
aggregate fair market value (determined as of the date the option is granted) of
the Common Stock that any employee may purchase in any calendar year pursuant to
the exercise of incentive stock options may not exceed $100,000. No person who
owns, directly or indirectly, at the time of the granting of an incentive stock
option to him, more than 10% of the total combined voting power of all classes
of stock of the Company is eligible to receive any incentive stock options under
the Plan unless the option price is at least 110% of the fair market value of
the Common Stock subject to the option, determined on the date of grant.

<PAGE>


Non-qualified options are not subject to these limitations.

     No incentive stock option may be transferred by an optionee other than by
will or the laws of descent and distribution, and during the lifetime of an
optionee, the option will be exercisable only by him or her. In the event of
termination of employment other than by death or disability, the optionee will
have three months after such termination during which he or she can exercise the
option. Upon termination of employment of an optionee by reason of death or
permanent total disability, his or her option remains exercisable for 12 months
thereafter to the extent it was exercisable on the date of such termination. No
similar limitation applies to non-qualified options.

     Options under the Plan must be granted within ten years from the effective
date of the Plan. The incentive stock options granted under the Plan cannot be
exercised more than ten years from the date of grant except that incentive stock
options issued to 10% or greater stockholders are limited to five year terms.
All options granted under the Plan provide for the payment of the exercise price
in cash or by delivery to the Company of shares of Common Stock already owned by
the optionee having a fair market value equal to the exercise price of the
options being exercised, or by a combination of such methods of payment.
Therefore, an optionee may be able to tender shares of Common Stock to purchase
additional shares of Common Stock and may theoretically exercise all of his
stock options with no additional investment other than his original shares. Any
unexercised options that expire or that terminate upon an optionee ceasing to be
an officer, director or an employee of the Company become available once again
for issuance.

     As of the date of this Report, options to purchase 400,000 shares have been
granted under the Plan, of which 170,000 options have been issued to the
Company's executive officers and directors. Options are exercisable at $1.00 to
$1.75 per share until November 2007, and none of such options have been
exercised.

<PAGE>


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------------

     The following table sets forth certain information as of November 30, 2000
concerning stock ownership of the Company's Common Stock by all persons known to
the Company to own beneficially 5% or more of the outstanding shares of Common
Stock, by each director and by all directors and officers as a group.

     Except as otherwise noted, the persons named in the table own the shares
beneficially and of record and have sole voting and investment power with
respect to all shares of Common Stock shown as owned by them, subject to
community property laws, where applicable. Each stockholder's address is in care
of the Company at 2129 North 15th Street, Melrose Park, Illinois 60160. The
table also reflects all shares of Common Stock which may be acquired within 60
days from the date hereof upon exercise of stock options or common stock
purchase warrants.

                                        Number of
                                        Shares of
                                         Common
                                       Stock Owned                   Percent of
                                        of Record                   Common Stock
       Name                        and Beneficially(1)                 Owned
       ----                        -------------------                 -----

Timothy E. Evon                          748,166                       28.5%
Thomas J. Evon                           748,166                       28.5%
William H. Hamen                         108,500                        4.1%
Charles A. Ehemann                        12,500                        0.4%
Cede & Co.                               590,787                       22.5%
All officers and directors             1,617,332                       61.7%
as a group (6 persons)
------------

(1) Includes Stock Options exercisable within 60 days from the date hereof.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------

     The Company believes that the transactions described below were fair,
reasonable and consistent with the terms of transactions which the Company could
have entered into with nonaffiliated third parties. All future transactions with
affiliates will be approved by a majority of the Company's disinterested
directors.

     The Company leases office, warehouse and factory space in Melrose Park,
Illinois and Las Vegas, Nevada from certain of its executive officers and
directors. See "Item 2 - Description of Property."

 ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K
-------------------------------------------

     a. Exhibits: None
     b. Reports on Exhibit 8K: None

<PAGE>



                                   SIGNATURES

     In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
has duly caused this Report to be signed on its behalf by the undersigned,
hereunto duly authorized, in Melrose Park, Illinois, on December 24, 2000.


                                                TONE PRODUCTS, INC.



                                                By  /s/  Timothy E. Evon
                                                  ------------------------------
                                                         Timothy E. Evon
                                                         President

     Pursuant to the requirements of the Securities Act of 1933, as amended,
this Report has been signed below by the following persons on the dates
indicated.

       Signature                        Title                        Date
       ---------                        -----                        ----

By:  /s/  Timothy E. Evon       President Chief Executive      December 24, 2000
---------------------------     Officer, and Director
          Timothy E. Evon


By:  /s/  Thomas J. Evon        Vice-President - Special       December 24, 2000
---------------------------     Accounts and Director
          Thomas J. Evon


By:  /s/  William H. Hamen      Secretary, Treasurer,          December 24, 2000
---------------------------     Chief Financial Officer
          William H. Hamen      (Principal Accounting Officer)
                                and Director


By:  /s/  Jack T. Cory          Director                       December 24, 2000
---------------------------
          Jack T. Cory


By:  /s/  Charles A. Ehemann    Director                       December 24, 2000
---------------------------
          Charles A. Ehemann


By:  /s/  Martin J. Finan       Director                       December 24, 2000
---------------------------
          Martin J. Finan