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

                                   FORM 10-KSB

(Mark One)
[x]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934
         For the fiscal year ended December 31, 2001

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

Commission File Number: 000-31317

                          RACHEL'S GOURMET SNACKS, INC.
                 (Name of small business issuer in its Charter)

           Minnesota                                      41-1766701
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

            8120 Penn Avenue South, Suite 140, Bloomington, MN 55431
               (Address of principal executive offices, Zip Code)

                                 (952) 884-2305
                (Issuer's telephone number, including area code)

Securities registered pursuant to section 12(b) of the Act:

            Title of each class             Name of exchange on which registered
                   None                                    None

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

                          Common Stock, $.01 par value
                                (Title of class)

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

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B not contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]

The issuer's revenues for its most recent fiscal year were $17,282,995

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The aggregate market value of the voting stock held by non-affiliates of the
Company at March 23, 2002 was $3,317,296, assuming that all directors are
affiliates, and the following officers are affiliates: Leo Short, Pablo Malacara
and Kent Hammond.

The Registrant had 10,254,289 shares of Common Stock, $.01 par value outstanding
as of March 22, 2002.

Transitional Small Business Disclosure Format (Check one) [ ] Yes [X] No


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                                     Page 2


                          RACHEL'S GOURMET SNACKS, INC.

                                   FORM 10-KSB

                                Table of Contents

PART I.
                                                                        Page No.
                                                                        --------

Item 1.   Description of Business.                                          3

Item 2.   Description of Property.                                         10

Item 3.   Legal Proceedings.                                               10

Item 4.   Submission of Matters to a Vote of Security Holders.             11

PART II.

Item 5.   Market for Common Equity and Related Stockholder Matters.        11

Item 6.   Management's Discussion and Analysis or Plan of Operation.       13

Item 7.   Financial Statements.                                            17
          (see Table of Contents, page 24)

Item 8.   Changes In and Disagreements With Accountants on Accounting
            and Financial Disclosure.                                      17

PART III.

Item 9.   Directors, Executive Officers, Promoters and Control Persons;
            Compliance With Section 16(a) of the Exchange Act.             17

Item 10.  Executive Compensation.                                          19

Item 11.  Security Ownership of Certain Beneficial Owners and Management.  21

Item 12.  Certain Relationships and Related Transactions.                  22

Item 13.  Exhibits and Reports on Form 8-K.                                22

SIGNATURES                                                                 23

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                                     Page 3


                             Introductory Statement

This Annual Report on Form 10-KSB contains forward-looking statements, which
reflect the Company's views with respect to future events and financial
performance. These forward-looking statements are subject to certain risks and
uncertainties, including those identified below, which could cause actual
results to differ materially from historical results or those anticipated. The
words "aim," "believe," "intend," "estimate," and other expressions which
indicate future events and trends identify forward-looking statements. Actual
future results and trends may differ materially from historical results or those
anticipated depending upon a variety of factors, including, but not limited to:
competition in the snack food product business and the Company's ability to
obtain additional equity or debt financing on acceptable terms in order to
continue operations and to retire debt incurred by the Company.


                                     PART I

Item 1.  Description of Business

Substantial Doubt About Our Viability as a Going Concern

The viability of Rachel's Gourmet Snacks, Inc. (the "Company") as a going
concern is uncertain. The Company incurred net losses of $1,732,884 and
$1,939,225 in 2001 and 2000, respectively, and as of December 31, 2001, has an
accumulated deficit of $14,954,147, and a stockholders' deficiency of
$1,472,860.

The Company also has a material uncertainty regarding a stockholder dispute (see
"Legal Proceedings").

These conditions, among others, raise substantial doubt about the Company's
ability to continue as a going concern.

The Company's continuation as a going concern is dependent upon its ability to
generate sufficient operating cash flows and obtain additional financing or
refinancing to meet its obligations (see "Management's Discussion and Analysis
or Plan of Operation").

General Business Development

RLD Enterprises, Inc. was incorporated under the laws of the State of Minnesota
on April 11, 1991. In 1995, RLD Enterprises, Inc. acquired Rolar, Incorporated,
a potato chip manufacturing company in Menomonie, Wisconsin, as a wholly owned
subsidiary and launched the "Rachel's" line of gourmet potato chips. On October
31, 1997, Rolar, Incorporated changed its name to Rachel's Gourmet Snacks, Inc.
On November 6, 2001, Rachel's Gourmet Snacks, Inc. (formerly Rolar,
Incorporated) changed its name to Rachel's Manufacturing, Inc.

On June 30, 1997, RLD Enterprises, Inc. acquired Triple-C-Inc., a Canadian
corporation, as a wholly owned subsidiary. Triple-C-Inc. is a 40 year old
company based in Hamilton, Ontario that distributes name brand confectionery
products throughout Canada. The acquisition price totaled $3,508,774 and
consisted of 640,000 shares of the Company's common stock valued at $1,811,200,
cash of $1,360,755 (including $177,705 in acquisition costs), and 12% notes
payable totaling $274,356. In connection with the transaction, the Company
issued to Don Siemens as a "finder's fee" a warrant to

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                                     Page 4


purchase 100,000 shares of common stock of the Company at $3.00 per share (which
was included in the total acquisition price at a value of $62,463). The warrant
issued to Mr. Siemens expires on June 30, 2002. The holders of the shares of the
common stock issued in connection with the acquisition had the right to require
the Company to purchase all or any part of 608,000 of those shares held by the
holders on any of the following dates at the share price stated:

                  Exercise Date                      Price
                  -------------                      -----
                  April 1, 1999                      $3.174
                  July 1, 1999                       $3.127
                  October 1, 1999                    $3.221

On October 1, 1999, the option of these holders to require the Company to
purchase their shares expired without the delivery of the prescribed notice of
exercise by the holders. Notwithstanding the expiration of this option, the
holders have asserted a claim that the Company must purchase their stock in the
Company, which assertion the Company disputes (see "Legal Proceedings").

Square-Knot, Inc. was incorporated under the laws of the State of Minnesota on
June 11, 1996, and on October 31, 1997 acquired, as a wholly owned subsidiary,
RLD Enterprises, Inc. Square-Knot, Inc. changed its name on October 31, 1997 to
RLD Enterprises, Inc., and RLD Enterprises, Inc. changed its name effective
October 31, 1997 to Rachel's Gourmet Snacks, Inc. The Amended Articles of
Incorporation and Bylaws of Rachel's Gourmet Snacks, Inc. were approved as the
Amended Articles of Incorporation and Bylaws of RLD Enterprises, Inc. On January
29, 1999, RLD Enterprises, Inc. changed its name to GO-RACHELS.COM CORP. On
September 17, 2001, GO-RACHELS.COM CORP. changed its name to Rachel's Gourmet
Snacks, Inc.

The "Company" means Rachel's Gourmet Snacks, Inc. and its subsidiaries, Rachel's
Manufacturing, Inc. and Triple-C-Inc. The Company's shares of common stock are
quoted on the North American Securities Dealers Automated Quotation (NASDAQ)
Over-The-Counter Bulletin Board (OTC:BB) under the symbol "RCHS," (see "Market
for Common Equity and Related Shareholder Matters").

The Company has not been the subject of any bankruptcy, receivership, or similar
proceedings.

Products and Services

The Company, through its subsidiary Rachel's Manufacturing, Inc. manufactures,
markets, and distributes great tasting, healthier "Home Style" gourmet potato
chips which are cholesterol free, and are relatively low in sodium and fat,
under the "Rachel's Made From the Heart" label. Rachel's Made From the Heart
"Home Style" gourmet potato chips are made with care and high-quality
ingredients. Cooked one batch at a time, Rachel's uses mid and/or high oleic
sunflower oil to achieve a healthy, satisfying crunch that is 100% natural, low
in polyunsaturates and high in vitamin C. Rachel's potato chip products come in
five flavors: Traditional, Mesquite Barbeque, Parmesan & Garlic, Salt & Vinegar,
and Jalapeno. Each of these flavors is packaged in the following sizes: 1.5 oz.;
5 oz.; 5 lb. Bulk; 10 lb. Bulk; and a Variety Pak consisting of six 1.5 oz.
bags. Certain flavors are also packaged in 1 oz. and 16 oz. packages. Rachel's
potato chip products are packaged in high-quality colorful packaging to position
the products in the gourmet potato chip market.

The Company, through its subsidiary, Triple-C-Inc., a Canadian corporation,
distributes confectionery and specialty snacks. Triple-C-Inc. is an importer and
distributor of sour candy and "Gummy" candy in Canada. Approximately 50% of
Triple-C-Inc.'s confectionery sales are private brand sales, whereby other
manufacturers sell products with the Triple-C-Inc. name and/or various other

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                                     Page 5


proprietary trademarks. The remainder of Triple-C-Inc.'s confectionery sales
consist of products manufactured by other companies. The Company has begun
introducing a line of confectionery products into the United States. There can
be no assurance, however, that the Company will be able to continue the
expansion or introduction of new product.

The Company intends to expand its current line of products to include bagel
chips, rye chips, snack mixes, and other confectionery and specialty snacks in
2002, a goal the Company was unable to attain in 2001. This expansion has and
will continue to be achieved through private label arrangements (where the
Company sells products manufactured by others under the "Rachel's" name or other
proprietary mark of the Company), but future expansion may also be achieved
through internal development or through acquisitions. All of the Company's
current private label arrangements are conducted via oral agreement. The costs
for expansion through private label arrangements in 2001 were approximately
$60,000, which the Company financed from cashflow of existing operations. The
costs for expansion through private label arrangements in 2002 are estimated to
total $120,000, which the Company intends to continue to finance from cashflow
of existing operations. There can be no assurance, however, that cashflow of
existing operations will be sufficient for this purpose, and the Company's
recent financial history indicates that it may be impossible to finance future
private label arrangements through cashflow of existing operations. The
possibility exists that the Company will be required to raise additional capital
to finance these private label arrangements, the prospects of which are
uncertain. In addition, costs for additional expansion of private label
arrangements through other means are currently unknown, but could be
substantially greater than $120,000. If the Company is required to expand the
Company's current product line by means other than private label arrangements,
the Company will probably be required to raise additional capital in excess of
$120,000, the prospects of which are uncertain (see "Management's Discussion and
Analysis or Plan of Operation").

Using Triple-C-Inc.'s marketing and branding capabilities, the Company has
developed a line of Rachel's Gourmet Candy, including Rachel's Gourmet
Chocolates. These products were introduced into the U.S. and Canada in the
second half of the year 2000.

In January 2000, Triple-C-Inc. was appointed the Canadian distributor for
Pokemon and WWF licensed candy, and in April 2000, Triple-C-Inc. was named by
PEZ Candy, Inc. as its exclusive distributor for "Pez" candy in Canada.

In October 2000, the Company entered into a license agreement with Gardner
Resources, a New Jersey Company ("Gardner"), whereby the Company obtained
the exclusive potato chip marketing and manufacturing rights to the "Death Rain"
brand of potato chips for North America. The "Death Rain" brand of potato chips
does not compete directly with the "Rachels" brand of potato chips. In exchange
for the license granted to the Company, the Company issued 100,000 shares of
common stock in the Company and a warrant to purchase 100,000 shares of common
stock of the Company to Gardner. The license agreement with Gardner has an
initial term of five years but may be renewed by the Company for an additional
five-year term in exchange for a warrant to purchase 50,000 shares of common
stock of the Company. In addition, the Company has entered into a private label
agreement with Gardner, whereby the Company has agreed to manufacture, for
export, potato chip products on a fee basis under the "Blair's Death Rain Chips"
label.

In December 2000, Nestle USA ("Nestle") announced to its customers that
Triple-C-Inc. had been named the exclusive representative for the sale and
distribution of Nestle's "Willy Wonka" brand of confectionery products in
Canada. Gross sales for the "Willy Wonka" brand of confectionery products in
Canada in calendar year 2000 were in excess of $8 million. "Willy Wonka" sales


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                                     Page 6


in calendar year 2001 were substantially below this level due to the inability
of Nestle to deliver product because of problems related to the shifting of
Nestle's production from Canada to the U. S.

In 2001, the Company was selected as the sole provider of premium private label
potato chips under the "Archer Farms" brand, for Target Corporation's
SuperTarget stores ("SuperTarget"). Target Corporation currently has sixty-three
(63) SuperTarget units, and the number of such units is growing. The "Archer
Farms" brand of potato chips was also tested in approximately eighty (80) Target
stores. In December 2001, the Company was notified that sales of the product
will be expanded to an additional four hundred thirty-four (434) Target stores
in April 2002. The Company has also received approval from SuperTarget to
provide eleven (11) additional line items which will be marketed in 2002 under
the Archer Farms brand.

Status of Any Publicly Announced New Products or Services

Except for the "Archer Farms" brand products provided for Target Corporation,
and the "Death Rain" brand of potato chips, the Company has not publicly
announced any new products or services in the past three years.

Marketing

The success of the Company's marketing efforts will depend largely on five basic
and related focuses. These focuses form the foundation of the Company's
marketing strategies and will allow the Company to penetrate all trade segments.
The focuses are: packaging, pricing, sampling, distribution, and
promotion/marketing.

Persuading consumers to try new products is always important. The Company
recognizes this and plans to devote an undetermined amount of marketing dollars
annually to ongoing sampling events. The Company estimates that it has spent
approximately $15,000 in each of the calendar years 2001 and 2000 for sampling
events.

While the biggest purchases of snacks may be during the key holidays or events,
it is the Company's experience that most purchases of salty snacks and
confectionery products are made on impulse (about 70%). The Company's packaging,
color, and name are designed to capitalize on the impulse buyer, to enhance
consumer loyalty, and create a unique brand image/position for the Company's
products in the marketplace.

The Company has positioned itself to offer high quality gourmet-style products
and has chosen not to discount its retail pricing as is widely prevalent in
today's snack business. Rather, the Company is positioning itself as a gourmet
snack company offering high quality products at a fair everyday price. The
Company, through its distribution network, will manage and execute premium
market everyday pricing.

The Company actively participates with several non-profit organizations such as
The MS Society and Children's Heart Fund. In addition to the goodwill such
events generate for the Company, participation in such fundraisers provides the
opportunity to present sample products to event participants. Because the
"Archer Farms" brand products are provided exclusively for Target Corporation,
the Company does not actively promote or market the "Archer Farms" brand line of
products.


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                                     Page 7


Distribution Methods of Products or Service

Other than the "Archer Farms" brand line of products, which are distributed
exclusively through Target Corporation, the Company distributes its products
through wholesale distributors in Minnesota and Wisconsin. Since September 1996,
the Company has also distributed its products to food service customers through
Sysco Food Service in Minnesota, Wisconsin, Colorado and Florida and also
distributes its products through Alliant Food Service in Minnesota. All of the
Company's distributor relationships with third parties are conducted via oral
agreement. The Company also sells its products directly to customers via its
internet web site. In addition, Triple-C-Inc. currently distributes its products
throughout Canada through a network of small distributors and sells its products
directly to retailers in Canada.

The Company intends to expand its distribution network throughout North America
with food brokers and distributors. Also, the Company has a distribution
relationship with Sysco Food of Minnesota, Inc., Sysco Food of Colorado, Inc.,
and Sysco Food of Florida, Inc. These relationships may lead to further
distribution opportunities with Sysco Corp. (the parent of Sysco Food of
Minnesota, Inc., Sysco Food of Colorado, Inc., and Sysco Food of Florida, Inc.),
although the Company has not yet ascertained or realized the benefit of this
relationship, nor does it have reason to believe that its products will be
distributed nationwide by Sysco Corp. in the foreseeable future. The Company
intends to distribute Triple-C-Inc.'s product line in the United States to
current distributors and retailers of the Company's products in the United
States.

Need for any Government Approval of Principal Products or Services

The Company is not currently subject to any preconditioned government approval
for the sale of any of its products or services.

Effect of Existing or Probable Governmental Regulations on the Business

The Company, as a manufacturer and marketer of food items, is subject to
regulation by various government agencies, including the United States Food and
Drug Administration, the Canadian Department of Agriculture and Agri-Food, and
the Canadian Food Inspection Agency. Under various U.S. and Canadian statutes
and regulations, such agencies prescribe requirements and establish standards
for quality, purity, and labeling. The finding of a failure to comply with one
or more regulatory requirements can result in a variety of sanctions, including
monetary fines and/or a compulsory withdrawal of product from store shelves. The
Company may also be required to comply from time to time with international,
state, and local laws regulating food handling and storage.

Under the U.S. Nutritional Labeling and Education Act of 1990, as amended
("NLEA"), the Canadian Food and Drugs Act, and the Canadian Consumer Packaging
and Labelling Act, food manufacturers are required to disclose nutritional
information on their labels in a uniform manner. The Company does not believe
that compliance with these regulations has materially increased its
manufacturing costs or had a material effect on operations to date, but is
unable to predict effect of regulations promulgated under authority granted by
such acts on future products or the costs of compliance in the event such
regulations are amended in the future.

In addition to laws relating to food products, the Company is subject to various
international, federal, state, and local environmental laws and regulations,
including Canadian laws and regulations, that limit the discharge, storage,
handling, and disposal of a variety of substances. The Company does not believe
that compliance with these other environmental laws and regulations has
materially increased its manufacturing costs or had a material effect on
operations to date, but is unable to predict these


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                                     Page 8


other environmental laws and regulations' effect on future products or the costs
of compliance in the event these other environmental laws and regulations are
amended or supplemented in the future.

Competitive Business Conditions and The Company's Competitive Position in the
Industry and Methods of Competition

Competition with all of the Company's products occurs primarily on the basis of
price, quality and variety. There are numerous competitors providing the same or
similar products as the Company. The Company does not consider that any one
producer dominates the sugar confectionery market. Frito-Lay is the dominant
producer in the salted snacks market with more than 50% market share (as
reported in the Snack Food Association's "State of the Industry Report" of June
2000). Many of these competitors have significantly greater sales and capital
resources than those of the Company. Management believes that its technical
competence, pricing structure, packaging and niche market approach allows the
Company to compete effectively in the market.

Sources and Availability of Raw Materials and Names of Principal Suppliers

Raw materials are purchased and available from numerous sources. Approximately
47% of the Company's merchandise in 2001 was purchased in the aggregate from
Nestle USA, Astra Sweets nv, a Belgium Company and Red Band Venco, a division of
CSM nv, a Netherlands Company.

The dispute between the Company and Trolli, a division of Nabisco, Inc.,
referred to in the Company's Annual Report on Form 10-KSB for the calendar year
ended December 31, 2000, was resolved in 2001 to the satisfaction of both the
Company and Trolli. The financial effect of the resolution, which was not
material, was accounted for in the consolidated financial statements for the
year ended December 31, 2001.

Dependence on One or Few Major Customers

The Company receives an overwhelming majority of its sales from a large variety
of retail customers. Approximately 20% of the Company's sales in 2001 were from
two customers.

Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements, or
Labor Contracts

The Company has registered the following trademarks with the United States
Patent and Trademark Office: "Rachel's Made From the Heart," and "Gourmet
America's Finest."

The Company has applied for registration of the following trademarks with the
United States Patent and Trademark Office: "Rachel's Made From the Heart,"
"Squaw Buck," "Golden Revelations," "Rachel's Revelations" and "Rachel's
Batonnets."

In addition, the Company uses the following unregistered trademark: "Rachel's."

Triple-C-Inc. has applied for registration of the following trademarks with the
United States Patent and Trademark Office: "Goldie Dollar," "Casino Chips,"
"Rachel's Coffee Revelations," "Gummy Guy," "Kidz Korner," "Millennium Coins,"
and "Windsor".

Triple-C-Inc. has registered the following trademarks with the Canadian
Intellectual Property Office: "Rachel's," "Rachel's Crunchy Goodness & Design,"
"Sour Simon," "Sour Simon and Head Design,"


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                                     Page 9


"Child-Boy's Face Fanciful Design," "Cola Bottles," "Sour Face Pullers," "Sour
Soothers," "Sour Tongues," "Summer Berries," "Belly Buttons," "TC and Design,"
"Screaming Sirens," "Tiger Tails," "Surfin Snakes," "Sour Subs," "The Original
Sour Face Puller," "Flossed Teeth," "Fins And Scales," "Dog Bones," "Sour
Straws," "Gummy Guy and Head Design," "Rachel's Crunchy Goodness & Design,"
"Simon Sur," "Gummy Guy," "Child Boy's Head Design," "Sour Puss," "Yukkies,"
"Pucker Power," "Loonies," "Initial," "Peanut Smaks," "Beer Bottles," "Santa's
Own," "Quenchers," "Kool Kiss," "Blockheads," "Candy On The Move & Design,"
"Santa's Own & Design," "Wow That's Sour," "Super Frogs," "Frogs," "World Class
Candy," "It's A Boy," "Windsor," "It's A Girl," "Les Grimaciers Sur Originaux,"
"Le Grimacier Sur Original," "Sujets Surs," "Tetines Surs," "Grenouilles,"
"Bouteilles Cola," "Grimace Assuree," "Toonies," "Twonies," "Barclay,"
"Millennium Coins," "Chocolate on the Move & Design," "Fizzy Rolls," "Fun
Hearts," "Fruits De Mer," "Talking Hearts," "Toopops," "Watches," and "Sea
Fruit."

Triple-C-Inc. has applied for registration of the following trademarks with the
Canadian Intellectual Property Office: "Affections," "Droppies," "Golden
Revelations," "Kidz Korner and Design," "Mad Money," "Rachel's Batonnets," "Sour
Bolts Design," "Kidstuff," "Rachel's Revelations," "Choco-Beans," "Rachel's
Coffee Revelations," and various design marks.

Triple-C-Inc. currently uses, but has not registered, the following trademarks:
"Sour Simon," "Sour Soother," "Gummy Frogs," "Belly," and "Loonies Chocolate
Coins."

The Company has pursued and will continue to selectively pursue registration of
its trademarks with relevant state and national registration authorities as
appropriate.

The Company has entered into a license agreement to manufacture the "Death Rain"
brand of potato chips (See "Products and Services," above). The Company does not
hold any patents. The Company is not a party to any other material franchise,
license, concession, royalty, or labor contract.

Research and Development

In the past two fiscal years, the Company has spent only nominal amounts on
internal and external costs relating to research and development on new and
existing product lines. All costs relating to research and development were
expensed as they were incurred. The Company does not anticipate spending more
than nominal amounts on internal and external costs relating to research and
development on new and existing product lines in the foreseeable future. This
may have some material adverse effect on the Company's ability to successfully
expand or introduce new product lines (see "Products and Services" above).

Environmental Compliance

There have been no significant costs borne by the Company in an effort to comply
with environmental laws, and none are anticipated in the foreseeable future (see
"Effect of Existing or Probable Governmental Regulations on the Business"
above).

Employees

The Company employs 84 full-time and 30 part-time employees, including
management. The number of employees engaged in particular operations of the
Company is as follows: Executive - 8, Administrative - 25, Manufacturing - 23,
Warehouse/Distribution - 23, Sales - 15, and Merchandisers - 20.


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                                    Page 10


Reports to Security Holders.

Prior to the filing of the Registration Statement on Form 10-SB, filed with the
United States Securities and Exchange Commission on October 20, 2000 and amended
on January 16, 2001 and February 22, 2001, the Company had not filed any other
reports with the Securities and Exchange Commission. As a reporting company
under the Securities Exchange Act of 1934, the Company has timely filed all
required reports and information with the Securities and Exchange Commission.
Likewise, to the extent that the Company has been required to deliver annual and
quarterly reports to security holders due to its status as a reporting Company,
or as may have been or may be required by the rules or regulations of any
exchange upon which the shares of the Company are traded or quoted, the Company
has delivered annual and quarterly reports to all stockholders. If the Company
issues additional shares, the Company may file additional registration
statements for those shares.

This report and any other information that the Company has filed with the United
States Securities and Exchange Commission may be read or copied at the SEC's
Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. The public
may obtain information on the operation of the Public Reference Room by calling
1-800-SEC-0330. The Commission maintains an Internet site that contains reports,
proxy and information statements, and other information regarding issuers that
file electronically with the Commission. The Internet address of the
Commission's site is http://www.sec.gov.

The Company also maintains an Internet web site at http://www.go-rachels.com/.

Item 2. Description of Property

The Company leases Corporate office space in Bloomington, Minnesota. The
Company's confectionery snack segment leases office and warehouse space in the
following Canadian locations: Hamilton, Calgary, and Montreal. The snack foods
segment leases a manufacturing plant in Menomonie, Wisconsin. All properties
leased by the Company are adequate for the Company's operations.

Item 3. Legal Proceedings

In conjunction with the acquisition of the stock of Triple-C-Inc., the Company
issued 608,000 shares of its common stock to former stockholders of
Triple-C-Inc. stock, one of whom, Mr. Harm Scholtens, is currently employed by
Triple-C-Inc., a wholly-owned subsidiary of the Company (see "General Business
Development" above). According to the acquisition agreement between the Company
and the stockholders, these stockholders retained the right to require the
Company to purchase all or part of 608,000 of their shares at predetermined
prices on stipulated dates. The terms of this repurchase obligation of the
Company included the delivery of promissory notes bearing interest at 6% with a
five-year term. Prior to October 1, 1999, these stockholders indicated their
general intent to exercise their right to require the Company to purchase their
shares, and the Company and these stockholders conducted negotiations regarding
method of payment and extension of the date of exercise of the stockholders'
right to require the Company to purchase their shares. During these discussions,
counsel for the stockholders delivered a draft promissory note to be used by the
parties to evidence the payment obligation from the Company to the stockholders.
On October 1, 1999, the option of these stockholders to require the Company to
purchase their shares at $3.221 per share expired without the delivery of the
prescribed notice of exercise by the stockholders. Nevertheless, the
stockholders (including Mr. Scholtens, an employee of Triple-C-Inc.) have
asserted and continue to assert that the Company is obligated to purchase these
shares, arguing that the delivery of the draft promissory note from
stockholders' counsel to the Company constituted "constructive" notice of
exercise of the stockholders' option. It is the Company's position that the
delivery of the draft promissory note from stockholders' counsel to the Company
did not constitute notice of exercise of the stockholders right to require the
Company to purchase their shares, as the


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                                    Page 11


form and means of exercise were specifically described in the acquisition
agreement, and the Company never received definitive notice of exercise. The
Company has continued to communicate with these stockholders in an attempt to
resolve this matter, but negotiations have been unsuccessful to date. It is
possible that either party may resort to judicial resolution of this matter.
While the Company is confident in its position that it did not receive actual or
constructive notice of exercise of the stockholders' right to require the
Company to purchase all or part of its shares, it is a possibility that
litigation with the former Triple-C-Inc. stockholders will result in an adverse
judgment against the Company, which adverse judgment may have a material adverse
effect on the Company and its operations, and any adverse judgment may
jeopardize the Company's ability to continue its operations. There was no
significant resolution of any aspect of this dispute in 2001.

The dispute between the Company and Trolli, a division of Nabisco, Inc.,
referred to in the Company's Annual Report on Form 10-KSB for the calendar year
ended December 31, 2000, was resolved in 2001 to the satisfaction of both the
Company and Trolli. The financial effect of the resolution, which was not
material, was accounted for in the consolidated financial statements for the
year ended December 31, 2001.

The Company was a defendant to various claims of litigation as detailed in the
Annual Report on Form 10-KSB for the year ended December 31, 2000. All of these
claims were resolved in 2001, with no material significant impact on the
consolidated financial statements.

Except as disclosed above, the Company is not a party to any material existing
or pending legal proceedings nor has its property been the subject of any such
proceeding.

Item 4. Submission of Matters to a Vote of Security Holders

None.


                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters

Dividends

The Company has never paid cash dividends on its common stock and does not
intend to do so in the foreseeable future. The Company currently intends to
retain its earnings for the operation and expansion of its business. The
Company's continued need to retain earnings for operations and expansion are
likely to limit the Company's ability to pay future cash dividends.

Market Information

The Company's Common Stock is currently quoted on the NASDAQ OTC:BB, under the
trading symbol "RCHS.OB". On March 22, 2000, the stock became ineligible for
trading on the NASDAQ OTC:BB and the stock was quoted in the "pink sheets" until
March 11, 2001. On March 12, 2001, the Securities and Exchange Commission
declared the Company's Form 10SB filing "free of comments," allowing the
Company's Common Stock to resume trading on the NASDAQ OTC:BB.

The following table sets forth, for the period from January 1, 2000 through
December 31, 2001, the range of high and low bid information for the Company's
common stock on the OTC:BB and in the "pink sheets." The prices represent
quotations between dealers without adjustment for retail markups, markdowns, or
commissions and may not represent actual transactions.


<PAGE>

                                    Page 12


                                  2001                       2000
                                  ----                       ----
                            High         Low          High          Low
                            ----         ---          ----          ---
    First Quarter           .65          .15          .375          .05
    Second Quarter          .60          .30          .18           .02
    Third Quarter           .30          .21          .15           .10
    Fourth Quarter          .35          .21          .51           .08

The shares of common stock are subject to various governmental or regulatory
body rules, including the Securities Act of 1933 and regulations thereto, the
Securities Exchange Act of 1934 and regulations thereto, and rules promulgated
by NASDAQ, which may affect the liquidity of the shares.

Holders

There were approximately 400 holders of record of the Company's common stock as
of December 31, 2001.

Issuance of Common Stock

During the period from October 1, 2001 through December 31, 2001, the Company
issued common stock to certain persons known to the Company as follows: (i)
40,000 shares on October 1, 2001 in satisfaction of amounts owed a vendor and
(ii) 361,122 shares on December 31, 2001 in exchange for services provided to
the Company.

The recipients of this common stock agreed to accept common stock of the Company
in lieu of cash compensation. All issuances of common stock were unregistered in
reliance upon Section 4(2) of the Securities Act of 1933. There were no offering
expenses incurred by the Company in conjunction with these issuances.

Convertible Debenture Offerings

During the period from October 1, 2001 through December 31, 2001, the Company
sold or reissued convertible debentures to five individual purchasers in the
following amounts on the dates indicated: $588,505 on October 20; $80,000 on
November 30; $84,092 on December 3; $589,497 on December 8; $367,938 on December
11; and $56,000 on December 14. All are short term (six months to one year), are
convertible into common stock of the Company at weighted-average conversion rate
of $2.21 per share, and were issued to certain parties known to the Company. All
of the purchasers of convertible debentures had previously purchased convertible
debentures from the Company, and upon the maturity of such convertible
debentures, all principal plus accrued interest was used to purchase new
convertible debentures. The issuance of the convertible debentures was exempt
from registration under Section 4(2) of the Securities Act of 1933. As of the
date of this report none of the convertible debentures have been converted into
common stock of the Company. The Company incurred offering expenses of $77,842
in conjunction with these issuances.

Warrant Issuances

During the period from October 1, 2001 through December 31, 2001, the Company
issued, to certain parties known to the Company, 41,666 warrants convertible
into common stock of the Company. The warrants were issued on October 1, 2001,
with a per-share exercise price of $1.00 in connection with


<PAGE>

                                    Page 13


debt financing. The warrants issued carried an immaterial fair value as
calculated by the Black-Scholes option-pricing model. The issuance of the
warrants was exempt from registration under Section 4(2) of the Securities Act
of 1933. None of the warrants issued have been converted into common stock.
There were no offering expenses incurred by the Company in conjunction with
these issuances.

Stock Option Issuances

No stock options were issued during the period from October 1, 2001 through
December 31, 2001.

Item 6. Management's Discussion and Analysis or Plan of Operation

General

The Company remains optimistic about the future, but its prospects must be
considered and evaluated in light of the risks, operating and capital
expenditures required, and uncertainty of economic conditions that may impact
its operations. To achieve and sustain profitability and to remain viable, the
Company must successfully introduce and market additional new products, meet the
demands of its customers, respond quickly to changes in its market, and control
expenses and cash usage, as well as attract additional capital investments.

The Company incurred net losses of $1,732,884 and $1,939,225 in 2001 and 2000,
respectively, and as of December 31, 2001 has an accumulated deficit of
$14,954,147 and a stockholders' deficiency of $1,472,860. The Company will need
to obtain additional financing in 2002. The Company is pursuing plans to
increase sales, reduce operating expenses, and obtain capital financing through
debt and equity placements; however, there is no assurance the Company can raise
the additional financing. The Company also has a material uncertainty regarding
a stockholder dispute.

These conditions, among others, raise substantial doubt about the Company's
ability to continue as a going concern.

The Company's continuation as a going concern is dependent upon it ability to
generate sufficient operating cash flows and obtain additional financing or
refinancing to meet it obligations.

Liquidity and Capital Resources

Triple-C-Inc. has a $4,715,000 revolving line of credit facility expiring in
2002, subject to a four year extension. Borrowings are due on demand, bear
interest at the prime rate plus 1.5% to 2% (as defined), and are collateralized
by substantially all Triple-C-Inc. assets. Advances are subject to defined
limitations on the collateralized assets. Triple-C-Inc.'s use of the line of
credit facility is subject to operating covenants relating to tangible net
worth, additional debt, and dividends, among others. The Triple-C-Inc. line of
credit may not be utilized by the Company for its U.S. operations, and may be
cancelled at any time by the lender. At December 31, 2001, the loan balance on
the line of credit facility was $2,521,708.

The Company is currently in dispute with former stockholders of Triple-C-Inc.,
one of whom, Mr. Harm Scholtens, is currently employed by Triple-C-Inc. The
dispute relates to the obligation of the Company to repurchase shares of common
stock issued to the former stockholders of Triple-C-Inc. for a total of
$1,958,368 by delivery of a five-year 6% promissory note. Although neither party
has resorted to litigation at this point, it is a possibility that either party
may resort to judicial resolution of


<PAGE>

                                    Page 14


this matter, and it is a possibility that any litigation with former
Triple-C-Inc. stockholders will result in an adverse judgment against the
Company, which adverse judgment may have a material adverse effect on the
Company and its operations, its future liquidity, and any adverse judgment may
jeopardize the Company's ability as a going concern.

The Company does not currently have any material credit facilities in place to
finance its U.S. operations, and is currently financing its U.S. operations out
of current cashflow. The Company is actively exploring alternatives to provide
operating capital for its U.S. operations. The Company estimates that it will
need at least $400,000 in operating capital over the next twelve months, of
which there can be no assurance of availability. The Company was unable to meet
its goal of obtaining capital investments of $400,000 in 2001, and in fact,
obtained no material capital financing in 2001.

The Company's obligations and commitments to make future payments under debt and
lease agreements is as follows:

<TABLE>
<CAPTION>
                                                   Payments Due by Period
                   ----------------------------------------------------------------------------------------
                      2002         2003         2004         2005         2006      Thereafter     Total
                   ----------   ----------   ----------   ----------   ----------   ----------   ----------
<S>                <C>          <C>          <C>          <C>          <C>          <C>          <C>
Line of credit     $2,521,708                                                                    $2,521,708
Convertible debt    3,325,490                                                                     3,325,490
Notes payable         287,050                                                                       287,050
Long-term debt         27,969       36,971       19,809       23,122       12,094                   119,965
Operating leases      462,100      457,800      425,200      402,500      386,400      236,600    2,370,600
                   ----------   ----------   ----------   ----------   ----------   ----------   ----------
Total              $6,624,317   $  494,771   $  445,009   $  425,622   $  398,494   $  236,600   $8,624,813
                   ==========   ==========   ==========   ==========   ==========   ==========   ==========
</TABLE>

The inability of the Company to obtain additional capital financing will have a
material adverse effect on the Company's ability to continue operations. In the
event that the Company has insufficient cashflow to provide operating capital to
the Company over the next 12 months, and is unable to obtain additional capital
financing, the Company may consider pursuing additional debt or equity
financing, and may be forced to explore alternatives, including reorganization
under the U.S. Bankruptcy Code, although no such reorganization is currently
under consideration by the Company.

Net cash used by operating activities totaled $1,670,824 and $540,837 in 2001
and 2000, respectively. Negative operating cashflows resulted primarily from net
operating losses.

Net cash provided by investing activities totaled $115,117 and $68,730 in 2001
and 2000, respectively. Investing cash flows resulted from proceeds on the sales
of marketable securities and property and equipment. Outflows related to the
purchase of property and equipment.

Net cash provided by financing activities totaled $1,610,899 and $439,714 in
2001 and 2000, respectively. Financing cash flows resulted primarily from
fluctuations in proceeds and payments on Company debt.

The Company issued $4,386,757 and $2,779,181 of short term, six months to one
year, convertible subordinated debentures in 2001 and 2000, respectively. The
average interest rate on the debentures was 10.04% and 12% and the average
conversion price was $.62 and $2.50 in 2001 and 2000, respectively. Debentures
for $3,122,359, including $1,530,589 of the debentures issued in 2001, were
refinanced in 2001. Debentures for $2,281,728, including $1,187,411 of the
debentures issued in 2000, were refinanced in 2000.

Triple-C-Inc. issued $900,281 and $443,915 of six months convertible
subordinated unsecured debentures in 2001 and 2000, respectively. The average
interest rate on the debentures was 10.25%


<PAGE>

                                    Page 15


and 12% in 2001 and 2000, respectively. The debentures are subordinated to
borrowings under the bank line of credit and are convertible into common stock
of Triple-C-Inc. at 80% of the initial public offering (IPO) price only upon
completion of a Triple-C-Inc. IPO. No IPO is planned or expected at this time.
Debentures for $874,874, including $430,959 of the debentures issued in 2001,
were refinanced in 2001. Debentures for $419,429 were refinanced in 2000.

The Company issued $20,000 of long-term, secured and unsecured promissory notes
at a 13% interest rate in 2001.

The Company issued $210,988 and $399,985 of short-term, secured and unsecured
promissory notes at interest rates ranging from 6% to 17.75% in 2001 and 2000,
respectively. Notes in the amount of $569,651 and $523,244 were retired or
refinanced in 2001 and 2000, respectively.

Results of Operations

Financial results of Triple-C-Inc. are included in the consolidated financial
statements results of the Company, but certain information is presented in
addition to consolidated financial information where relevant.

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

Sales of $17,282,995 for 2001 were approximately the same as those for 2000. Net
loss for 2001 was $1,732,884, or $.18 per share, compared to a net loss of
$1,939,225 or $.22 per share in 2000. The decrease in net loss was the result of
an increase in gross margin of $1,279,213, offset by an increase in operating
expenses, primarily marketing and distribution expenses, of $509,045, an
increase in non-operating expenses of $470,227, and increased income tax expense
of $93,600.

Sales of Triple-C-Inc. for 2001 were $15,702,369, compared to $16,158,114 for
2000. The decrease was partially caused by the weaker Canadian dollar as
compared to the U.S. dollar. Triple-C-Inc.'s sales in Canadian dollars increased
by $289,940 in 2001 compared to 2000. Sales of new products introduced in 2001
were essentially offset by the elimination of a low margin seasonal candy
program and a reduction in the sale of Y2K chocolate coins. Sales of snack foods
were $1,580,626 for 2001, compared to $1,092,318 for 2000. The increase was
primarily due to the addition of three "private label" customers.

Cost of goods sold decreased by $1,246,650 to $12,269,170 in 2001 from
$13,515,820 in 2000. Cost of goods sold as a percentage of sales decreased by
7.4% to 71.0% in 2001, as compared to 78.4% in 2000. The margin improvement was
primarily due to a change in the sales mix at Triple-C-Inc. to higher margin
products.

Operating expenses were $5,922,673 for 2001 compared to $5,413,628 in 2000, an
increase of 9.4%. The increase was primarily attributable to increased sales,
marketing, and general and administrative expenses in the Triple-C-Inc.
operations. Operating expenses increased by $109,274, an increase of 30.4%, in
the snack foods operations in 2001, compared to expenses in 2000. The increase
was primarily due to the increase in sales.

Net non-operating expense for 2001 was $821,636, compared to $351,409 for 2000.
Interest expense increased by $249,398 to $899,421 in 2001, compared to $650,023
in 2000, because of a significant increase in the amount of debt outstanding.
Foreign currency exchange losses were $33,132 in 2001 compared to a gain of
$201,056 in 2000. The fluctuations in foreign exchange were primarily at
Triple-C-Inc. and were caused by fluctuations of the Canadian dollar in relation
to other foreign


<PAGE>

                                    Page 16


currencies (including the U.S. Dollar, the Belgian Franc, and the Dutch
Guilder). The Company realized a gain of $110,917 in 2001 from the sales of
marketable securities it held for investment, compared to a gain of $97,558 in
2000.

Income taxes increased $93,600 to a $2,400 expense in 2001 from a $91,200
benefit in 2000. The tax benefit in 2000 resulted from partial utilization of
the operating loss of Triple-C-Inc. Triple-C-Inc. had operating loss
carryforwards for Canadian federal income tax purposes, therefore no tax benefit
was utilized in 2001.

Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

Sales of $17,250,432 for 2000 compared to $20,282,793 for 1999. Net loss for
2000 was $1,939,225, or $.22 per share, compared to a net loss of $1,893,215 or
$.23 per share in 1999. The increase in net loss was the result of a gross
margin decline of $1,407,455, reduced operating expenses of $1,209,061, a
decline in foreign currency gains of $140,336, a decrease in interest and other
nonoperating expenses of $182,720 and net decreased income taxes of $110,000.

Sales of Triple-C-Inc. for 2000 were $16,158,114, compared to $18,748,885 for
1999. The sales decline was the result of reduced sales of chocolate coins,
primarily Y2K coins, in 2000. Net sales of the Y2K chocolate coins were
approximately $600,000 in 2000 compared to approximately $3,200,000 in 1999. The
remaining sales increase, after taking into consideration the effect of the Y2K
chocolate coin sales, was due primarily due to sales of new product lines. The
sales of Rachel's potato chips declined by $441,590 in 2000 compared to 1999,
primarily due to a decision by a major distributor of the Company's potato chip
products, to increase production of its own line of potato chip products and to
stop distribution of the Company's potato chip products.

Cost of goods sold decreased by $1,624,906 to $13,515,820 in 2000 from
$15,140,726 in 1999. The decline was primarily the result of the decline in
sales. Cost of goods sold as a percentage of sales increased by 3.8% to 78.4% as
compared to 74.6% in 1999. The percentage decrease was primarily due to a margin
decrease of 4.6% at Triple-C-Inc., primarily due to reduced higher margin Y2K
chocolate coin sales and lack of sufficient supply of proprietary products.

Operating expenses were $5,413,628 for 2000 compared to $6,622,689 in 1999, a
decrease of 18.3%. Expenses in 1999 were impacted by a North American marketing
program which included the sponsorship of Team Cheever, a member of the Pep Boys
Indy Racing League. The sponsorship of Team Cheever was terminated in May 1999,
as the Company was unable to take advantage of the sales opportunities provided
by the relationship. Costs associated with the Team Cheever program were
approximately $500,000 in 1999. Operating expenses were also reduced because of
cost controls implemented at Triple-C-Inc. and the Corporate office.

Net non-operating expenses for 2000 were $351,409 compared to $393,793 for 1999.
In 2000, there was a $201,056 gain on foreign exchange compared to a gain of
$341,392 in 1999. The fluctuations in foreign exchange were primarily at
Triple-C-Inc. and caused by fluctuations of the Canadian dollar in relation to
other foreign currencies (including the U.S. Dollar, the Belgian Franc, and the
Dutch Guilder). Interest expense decreased by $148,499 to $650,023 in 2000 from
$798,522 in 1999 because of lower effective interest rates on the outstanding
debt and refinancing costs related to the line of credit included in expense in
1999.

Income taxes decreased $110,000 to a $91,200 benefit in 2000 from an $18,800
expense in 1999. The benefit in 2000 results from partial utilization of the
operating loss of Triple-C-Inc. for the year.


<PAGE>

                                    Page 17


Income taxes in 1999 were primarily affected by utilization of the 1998 Canadian
operating losses of Triple-C-Inc.

Item 7. Financial Statements

The Company's Financial Statements, and the report of Lurie Besikof Lapidus &
Company, LLP, independent auditors, referred to in the Index to Financial
Statements, appear elsewhere in this Form 10-KSB.

Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure

The Company has not changed nor has it had any disagreements with its
accountants.


                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
With Section 16(a) of the Exchange Act.

Lawrence Castriotta

Lawrence Castriotta joined the Company and was named President, CEO and elected
a Member of the Board of Directors of the Company in August 1999. Mr. Castriotta
has assumed the title of Chairman of the Board of Directors upon the resignation
of Mr. James Garlie as Chairman of the Board of Directors on November 2, 1999.
Mr. Castriotta has more than 30 years in consumer marketing and retailing
experience. From 1997 until he joined the Company, Mr. Castriotta was
semi-retired and lived in Europe. From 1990 to 1997, he served as Chairman and
CEO of Spectrum Services, Inc. a Minneapolis manufacturer of custom designed
horse trailers. He co-founded (in 1985) and served as President and Board Member
of Image Retailing, Inc., a publicly traded retailer of consumer electronics
located in Edina, Minnesota, from 1985 to 1989. He was also Executive Vice
President and Board Member of Schaak Electronics, Inc., a St. Paul electronics
retailer, from 1980 to 1984 and Vice President of Merchandising for Target
Corp.'s Team Electronics division from 1977 to 1980. Mr. Castriotta received his
B.S. from Boston University and his MBA from Harvard University.

Leo Short III

Leo Short III joined the Company as Executive Vice President in February 1996.
Mr. Short has significant experience in the snack food industry. After starting
his career at Campbell Soup Company where he was employed from 1974 to 1978, he
worked for Frito-Lay (the largest US manufacturer of potato chips) from 1978 to
1992, and was a self-employed consultant from 1993 to 1996. In addition to
working his way up from District Sales Manager to Regional Sales Manager to
Division Sales Manager to one of twenty-two Area Vice Presidents, building and
managing hundreds of routes along the way, Leo received several awards including
"Division Manager of the Year" and runner-up to Frito-Lay's highest honor, the
"Herman Lay Award". He was also responsible for launching Sunchips, which became
a $200,000,000 line for Frito-Lay.

Harm Scholtens

Harm Scholtens is Vice President of Sales and Marketing of Triple-C-Inc. He has
35 years of service with Triple-C-Inc. as a salesperson, Sales Manager, Vice
President of Sales, and past President, and is responsible for the development
of the successful proprietary brands that the Company markets throughout Canada
and the development of the extensive distribution network of the Company.


<PAGE>

                                    Page 18


Kent W. Hammond

Kent W. Hammond joined the Company on November 1, 1999, as Vice President for
Specialty Marketing. Mr. Hammond has in excess of 25 years of consumer marketing
and retailing experience. He has worked as a buyer at Target Corp.'s Team
Electronics in Minneapolis, where he was employed from 1975 to 1978, was
employed with SER, Inc., a consumer electronics manufacturer's representative
firm in Chicago, from 1978 to 1981, and was the National Merchandise Manager for
Sanyo America in Los Angeles from 1981 to 1988. He was the Vice-President of
Marketing for Solar Reflective Fabric, Inc., a Minnesota fabric company, from
1991 to 1997, and was also employed with Klein Volvo, a large Minneapolis
automobile dealer, from 1997 to 1999. Mr. Hammond is also responsible for the
e-commerce web sites operated by the Company.

Pablo Malacara

Pablo Malacara joined the Company as Chief Financial Officer of Triple-C-Inc. on
September 5, 2000. He was named to the additional position of Chief Financial
Officer of the Company in January 2001. Mr. Malacara has over 17 years of
experience in executive management positions in the food processing, plastics,
and hospitality industries. This includes three years as manager of finance and
strategic planning at a confectionary subsidiary of The Wrigley Company. Mr.
Malacara received his B.A. degree from Stanford and his MBA from UCLA.

Danny Bob Berenberg

Danny Bob Berenberg is the President and CEO of Lincoln Dels, Inc., and
President of Lincoln Baking, of which he has been the owner since his purchase
of the companies in 1993, and Chief Manager of Crystals International, LLC, of
which he has been the owner since his purchase of the company in 1996. Each of
Lincoln Dels, Inc., Lincoln Baking, and Crystals International, LLC are food
service companies located in the Minneapolis area. He is Chairman of the Board
of the Bloomington Minnesota Convention and Visitors Bureau, Member of the Board
of the Bloomington Hospitality Association, Vice Chair of the Bloomington
Community Foundation, and a Member of the Board of Directors of The Thunderbird
Hotel and Convention Center Corporation, both Bloomington, Minnesota hospitality
companies. He received his Bachelors and JD degrees from the University of
Minnesota.

The names, ages, and respective positions of the officers and directors of the
Company are set forth below.

Name                        Age       Position
----                        ---       --------

Lawrence J. Castriotta      56        Chairman of the Board, President and CEO,
                                      Rachel's Gourmet Snacks, Inc.

Leo Short III               47        Exec. V.P. of Sales & Marketing, Rachel's
                                      Gourmet Snacks, Inc.

Pablo Malacara              39        Chief Financial Officer, Rachel's Gourmet
                                      Snacks, Inc.

Harm Scholtens              56        V.P. Sales and Marketing, Triple-C-Inc.,
                                      Director, Rachel's Gourmet Snacks, Inc.

Kent W. Hammond             48        V.P. Specialty Marketing, Rachel's Gourmet
                                      Snacks, Inc.

Danny Bob Berenberg         55        Director, Rachel's Gourmet Snacks, Inc.

<PAGE>

                                    Page 19


The Company's directors are elected at the annual meeting of stockholders and
hold office for a three-year term or until their successors are elected and
qualified. The Company's officers are appointed by the Board of Directors and
serve at the pleasure of the Board and subject to employment agreements, if any,
approved and ratified by the Board. The current directors of the Company intend
to nominate for election two additional outside persons and one additional
insider to the Board of Directors at the next annual meeting of the
stockholders.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Officers, directors and
greater than 10% percent shareholders are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file. The Company's
officers, directors, or greater than 10% percent shareholders were required to
file Form 3s on or before December 20, 2000. No person required to make filings
under Section 16(a) did so in a timely manner. Form 3s for all persons required
to make filings under Section 16(a) (other than Pablo Malacara) were filed on
July 20, 2001. A Form 3 was filed by Pablo Malacara on August 10, 2001. To the
best of the Company's knowledge, all other Form 3s, Form 4s, or Form 5s required
to be filed under Section 16(a) of the Securities Exchange Act of 1934 were
filed by all of the officers, directors, and greater than 10% percent
shareholders of the Company.

Item 10. Executive Compensation

The Company has entered into an employment agreement with Lawrence J.
Castriotta, the Chairman of the Board, President and Chief Executive Officer of
the Company. Mr. Castriotta's employment agreement commenced on August 1, 1999
and had an initial two-year term ending July 31, 2001. The contract has been
extended to July 31, 2003. As per the terms of his contract, Mr. Castriotta's
annual salary was increased to $125,000 on August 1, 2000 and to $150,000 on
August 1, 2001. In addition to the annual salary, in 1999 Mr. Castriotta was
issued 100,000 shares of common stock of the Company, and was granted an option
to purchase 200,000 shares of common stock of the Company at an exercise price
of $1.00 per share, all of which were exercisable immediately, with an
expiration date of September 10, 2009. In 2001, Mr. Castriotta was issued
200,000 shares of common stock of the Company, and was granted an option to
purchase 200,000 shares of common stock of the Company at an exercise price of
$.30 per share, all of which were exercisable immediately, with an expiration
date of January 8, 2006. Under the agreement, Mr. Castriotta is entitled to an
automobile expense allowance of $525 per month and reimbursement for all other
expenses related to said automobile. In the event that the agreement is
terminated by either party prior to July 31, 2003, the Company will be obligated
to pay Mr. Castriotta the greater of (i) all salary amounts which would
otherwise be due Mr. Castriotta through July 31, 2003 if the agreement were not
terminated, or (ii) one year's salary. Mr. Castriotta's employment agreement
also provides for other customary fringe benefits. The agreement does not
contain any payment of any amounts that would be considered "parachute payments"
under Section 280G(b)(2) of the Internal Revenue Code. The agreement does
contain certain protections for Mr. Castriotta, including indemnification for
any individual liability relating to Mr. Castriotta's employment for liabilities
of the Company existing or arising out of occurrences prior to August 1, 1999.
The contract provides for disability payments under certain circumstances.

<PAGE>

                                    Page 20


Triple-C-Inc. has entered into an employment agreement with Harm Scholtens, the
V. P. Sales & Marketing, Triple-C-Inc. Mr. Scholtens' employment agreement
commenced on June 1, 2000 and had an one-year term. The agreement is
automatically renewed and subject to one year terms, unless notice of
termination is given by either party six months prior to the end of any
termination date. Mr. Scholtens will receive a salary of not less than $100,000
annually. In addition to the annual salary, Mr. Scholtens is entitled to receive
an earnings bonus based upon the revenues of Triple-C-Inc. In the event that Mr.
Scholtens' employment with Triple-C-Inc. is terminated, Mr. Scholtens is
entitled to receive severance pay of at least six months' salary and all bonuses
earned to the date of termination. Under the agreement, Mr. Scholtens is
entitled to an automobile expense allowance and reimbursement for all other
expenses related to said automobile. Mr. Scholtens' employment agreement
provides for other customary fringe benefits. The agreement does not contain any
payment of any amounts that would be considered "parachute payments" under
Section 280G(b)(2) of the Internal Revenue Code. The agreement contains certain
protections for Triple-C-Inc., including covenants against: (i) disclosure of
proprietary information; and (ii) competition; and (iii) post-employment
solicitation of employees. Triple-C-Inc. may terminate the agreement for "cause"
(as defined in the agreement) or upon Mr. Scholtens' death or disability, and
Mr. Scholtens' may terminate the agreement upon the occurrence of certain other
events. The contract provides for disability payments under certain
circumstances.

Compensation Table

The following Summary Compensation Table sets forth the cash compensation paid
or accrued for services performed during the year ended December 31, 2001, for
the executive officers of the Company:

<TABLE>
<CAPTION>
                                                Annual Compensation
                                      ----------------------------------------       All Other
Name and Principal Position           Year      Salary       Bonus       Other      Compensation
---------------------------           ----     --------      -----       -----      ------------
<S>                                   <C>      <C>           <C>       <C>          <C>
Lawrence J. Castriotta, Chairman
  of the Board, President, CEO        2001     $127,917      $ 0       $60,900(1)

Harm Scholtens, VP Sales and
  Marketing, Triple-C-Inc.            2001      116,622        0           0           1,245(2)
</TABLE>

(1)  Mr. Castriotta was awarded 200,000 shares of the Company's common stock,
     which was valued at $60,000. Mr. Castriotta is entitled to an automobile
     expense allowance of $525 per month and reimbursement for all other
     expenses related to said automobile.

(2)  The Company maintains and pays the premiums for a $314,350 term life
     insurance policy for the benefit of Harm Scholtens.

In 2001, Mr. Castriotta was granted options to purchase 200,000 shares of the
Company's common stock at a price of $.30 per share. No other long term
compensation was awarded to the above individuals. No other executive officers
of the Company received compensation that exceeded $100,000.

<PAGE>

                                    Page 21


Item 11. Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information regarding the ownership of
the Company's common stock as of December 31, 2001 by each of the Company's
directors and executive officers.

<TABLE>
<CAPTION>
Name & Address                                           Shares Owned
                                                         Beneficially &    Percentage of Total
                                                         Of Record         Stock Outstanding
----------------------------------------------------------------------------------------------
<S>                                                        <C>                    <C>
Lawrence J. Castriotta                                     701,800(1)             6.8%
President, CEO & Chairman of the Board,
Rachel's Gourmet Snacks, Inc.

Leo Short                                                  210,000(2)             2.0%
Executive VP Sales & Marketing,
Rachel's Gourmet Snacks, Inc.

Kent W. Hammond                                            100,000(3)               *
VP Specialty Marketing,
Rachel's Gourmet Snacks, Inc.

Harm Scholtens                                             277,536(4)             2.7%
Director, Rachel's Gourmet Snacks, Inc.
VP Sales & Marketing, Triple-C-Inc.

Pablo Malacara                                             100,000(5)               *
CFO, Rachel's Gourmet Snacks, Inc., Triple-C-Inc.

Danny Bob Berenberg                                         60,000(6)               *
Director, Rachel's Gourmet Snacks, Inc.


ALL OFFICERS AND DIRECTORS                               1,449,336               14.1%
</TABLE>

* Less than 1%

(1) Includes Mr. Castriotta's option to purchase 200,000 shares of common stock
at $1.00 per share and 200,000 shares of common stock at $.30 per share within
the next 60 days.
(2) Includes Mr. Short's option to purchase 200,000 shares of common stock
within the next 60 days at $1.00 per share.
(3) Includes Mr. Hammond's option to purchase 100,000 shares of common stock
within the next 60 days at $.36 per share.
(4) Includes Mr. Scholtens' option to purchase 100,000 shares of common stock
within the next 60 days at $5.50 per share.
(5) Includes Mr. Malacara's option to purchase 100,000 shares of common stock
within the next 60 days at $.30 per share.
(6) Includes Mr. Berenberg's option to purchase 50,000 shares of common stock
within the next 60 days at $.15 per share.

No person, group or entity, other than Mr. Castriotta, has beneficial ownership
of 5% or more of the outstanding equity in the Company.


<PAGE>

                                    Page 22


Item 12. Certain Relationships and Related Transactions

None.

Item 13. Exhibits and Reports on Form 8-K

Exhibit No.   Description
-----------   -----------

3.1.1         Restated Articles of Incorporation*

3.1.2         Amendment to Articles of Incorporation*

3.1.3         Notice of Change of Registered Office/Registered Agent*

3.1.4         Bylaws*

3.1.5         Amendment to Articles of Incorporation****
10.1          Employment Agreement - Lawrence Castriotta*
10.2(1)       Employment Agreement - Harm Scholtens*
10.3(1)       Real Property Lease - Menomonie, Wisconsin*
10.4(1)       Real Property Lease - Hamilton, Ontario*
10.5(1)       Real Property Lease - Calgary, Alberta*
10.6(1)       Specimen of Convertible Debentures*
10.7          Gardner Resources License Agreement**
10.8          Gardner Resources Private Label Agreement**
10.9          Amendment of Employment Agreement - Lawrence Castriotta***
11            Statement re: Computation of Per Share Earnings
21            Subsidiaries of Registrant*

*    Previously filed with Company's Form 10-SB dated November 30, 2000.
**   Previously filed with Company's Amendment Number One to Form 10-SB dated
January 16, 2001.
***  Previously filed with the Company's Form 10-QSB dated May 15, 2001.
**** Previously filed with Company's Form 10-QSB dated November 14, 2001.

On October 24, 2001, the Company filed a report on Form 8-K, reporting the
change of the Company's corporate name from GO-RACHELS.COM CORP. to
Rachel's Gourmet Snacks, Inc. The action was previously approved by the
shareholders of the Company at its Annual Meeting held on September 17,
2001.


<PAGE>

                                    Page 23


                                   SIGNATURES

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


                                     Rachel's Gourmet Snacks, Inc.

    DATE: April 1, 2002                 By: /s/ Lawrence Castriotta
                                            -----------------------
                                            Lawrence Castriotta
                                            Chief Executive Officer

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


    DATE: April 1, 2002                 By: /s/ Lawrence Castriotta
                                            -----------------------
                                            Lawrence Castriotta
                                            Chief Executive Officer


    DATE: April 1, 2002                 By: /s/ Pablo Malacara
                                            ------------------
                                            Pablo Malacara
                                            Chief Financial Officer


    DATE: April 1, 2002                 By: /s/ Danny Berenberg
                                            -------------------
                                            Danny Berenberg
                                            Director


    DATE: April 1, 2002                 By: /s/ Harm Scholtens
                                            ------------------
                                            Harm Scholtens
                                            Director


<PAGE>


                          RACHEL'S GOURMET SNACKS, INC.
                        CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


                                 C O N T E N T S


                                                                        Page
                                                                        ----

INDEPENDENT AUDITOR'S REPORT                                             F-1

CONSOLIDATED FINANCIAL STATEMENTS

    Consolidated balance sheets                                          F-2

    Consolidated statements of operations                                F-3

    Consolidated statements of stockholders' equity (deficiency)         F-4

    Consolidated statements of cash flows                                F-5

    Notes to consolidated financial statements                        F-6 - F-18


<PAGE>


                          INDEPENDENT AUDITOR'S REPORT



Board of Directors and Stockholders
Rachel's Gourmet Snacks, Inc.
Bloomington, Minnesota

We have audited the accompanying consolidated balance sheets of Rachel's Gourmet
Snacks, Inc. (formerly GO-RACHELS.COM CORP.) and Subsidiaries as of December 31,
2001 and 2000, and the related consolidated statements of operations,
stockholders' equity (deficiency) and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated 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 Rachel's Gourmet
Snacks, Inc. and Subsidiaries as of December 31, 2001 and 2000, and the results
of their operations and their cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that Rachel's Gourmet Snacks, Inc. and Subsidiaries will continue as a going
concern. As discussed in Note 2 to the consolidated financial statements, the
Company incurred losses of $1,732,884 and $1,939,225 for 2001 and 2000,
respectively, and as of December 31, 2001, had an accumulated deficit of
$14,954,147 and a stockholders' deficiency of $1,472,860. As discussed in Note
16 to the consolidated financial statements, the Company also has a material
uncertainty regarding a shareholder dispute. These conditions, among others,
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans regarding these matters are also discussed in Note
2. The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.


                                        /s/ Lurie Besikof Lapidus & Company, LLP

                                        Lurie Besikof Lapidus & Company, LLP
Minneapolis, Minnesota
February 23, 2002


<PAGE>


                                     - F-2 -

                 RACHEL'S GOURMET SNACKS, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                December 31,
                                                                       -----------------------------
                                        ASSETS                              2001             2000
                                                                       ------------     ------------
<S>                                                                    <C>              <C>
CURRENT ASSETS
    Cash                                                               $     55,192     $         --
    Marketable securities                                                        --          133,950
    Accounts receivable, less allowance of $77,000 and $75,000            2,416,218        1,808,240
    Inventories, less allowance of $40,000 and $85,000                    4,005,877        3,482,195
    Prepaid expenses and other                                              147,559           35,766
    Restricted securities                                                        --          515,700
                                                                       ------------     ------------
       TOTAL CURRENT ASSETS                                               6,624,846        5,975,851

PROPERTY AND EQUIPMENT                                                      444,844          520,900

GOODWILL                                                                  2,660,760        2,840,194

OTHER ASSETS                                                                122,909          181,013
                                                                       ------------     ------------

                                                                       $  9,853,359     $  9,517,958
                                                                       ============     ============

                  LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

CURRENT LIABILITIES
    Checks issued in excess of deposits                                $         --     $    104,580
    Line of credit borrowings                                             2,521,708        1,439,405
    Convertible subordinated debt                                         3,325,490        2,035,685
    Notes payable                                                           287,050          645,713
    Current maturities of long-term debt                                     27,969           42,117
    Obligation payable to stockholder                                            --          515,700
    Accounts payable                                                      4,334,794        4,000,570
    Accrued expenses                                                        737,212          696,158
                                                                       ------------     ------------
       TOTAL CURRENT LIABILITIES                                         11,234,223        9,479,928
                                                                       ------------     ------------

LONG-TERM DEBT, less current maturities                                      91,996           13,508
                                                                       ------------     ------------

COMMITMENTS AND CONTINGENCIES                                                    --               --
                                                                       ------------     ------------

STOCKHOLDERS' EQUITY (DEFICIENCY)
    Preferred stock, $.01 par value; 20,000,000 shares authorized;
       no shares issued and outstanding                                          --               --
    Common stock, $.01 par value; 50,000,000 shares authorized;
       10,172,959 and 9,041,563 shares issued and outstanding               101,730           90,416
    Additional paid-in capital                                           13,443,370       13,128,676
    Accumulated other comprehensive income (loss)                           (63,813)          26,693
    Accumulated deficit                                                 (14,954,147)     (13,221,263)
                                                                       ------------     ------------
                                                                         (1,472,860)          24,522
                                                                       ------------     ------------

                                                                       $  9,853,359     $  9,517,958
                                                                       ============     ============
</TABLE>

<PAGE>


                                     - F-3 -

                 RACHEL'S GOURMET SNACKS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                            Year Ended December 31,
                                                         -----------------------------
                                                             2001             2000
                                                         ------------     ------------
<S>                                                      <C>              <C>
SALES                                                    $ 17,282,995     $ 17,250,432

COST OF GOODS SOLD                                         12,269,170       13,515,820
                                                         ------------     ------------

GROSS MARGIN                                                5,013,825        3,734,612

OPERATING EXPENSES                                          5,922,673        5,413,628
                                                         ------------     ------------

OPERATING LOSS                                               (908,848)      (1,679,016)
                                                         ------------     ------------

NONOPERATING INCOME (EXPENSES)
    Interest                                                 (899,421)        (650,023)
    Gain (loss) on foreign exchange                           (33,132)         201,056
    Other                                                     110,917           97,558
                                                         ------------     ------------
                                                             (821,636)        (351,409)
                                                         ------------     ------------

LOSS BEFORE INCOME TAXES                                   (1,730,484)      (2,030,425)

INCOME TAX PROVISION (BENEFIT)                                  2,400          (91,200)
                                                         ------------     ------------

NET LOSS                                                 $ (1,732,884)    $ (1,939,225)
                                                         ============     ============

NET LOSS PER SHARE - BASIC AND DILUTED                   $       (.18)    $       (.22)
                                                         ============     ============

WEIGHTED - AVERAGE SHARES OUTSTANDING -
    BASIC AND DILUTED                                       9,668,523        8,661,938
</TABLE>

<PAGE>


                                     - F-4 -

                 RACHEL'S GOURMET SNACKS, INC. AND SUBSIDIARIES

          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)

<TABLE>
<CAPTION>
                                                                                        Accumulated
                                                    Common Stock            Additional      Other
                                            ---------------------------      Paid-In    Comprehensive   Accumulated
                                               Shares         Amount         Capital    Income (Loss)     Deficit          Total
                                            ------------   ------------   ------------   ------------   ------------   ------------
<S>                                         <C>            <C>            <C>            <C>            <C>            <C>
BALANCE AT DECEMBER 31, 1999                   8,622,824   $     86,228   $ 13,002,078   $     99,982   $(11,282,038)  $  1,906,250
                                                                                                                       ------------
   Comprehensive loss:
      Net loss                                        --             --             --             --     (1,939,225)    (1,939,225)
      Unrealized loss on securities,
         net of reclassification adjustment           --             --             --        (62,474)            --        (62,474)
      Foreign currency translation loss               --             --             --        (10,815)            --        (10,815)
                                                                                                                       ------------
         Total comprehensive loss                     --             --             --             --             --     (2,012,514)
                                                                                                                       ------------
   Common stock issued for:
      Services                                   110,000          1,100         18,400             --             --         19,500
      Financing                                  308,739          3,088         96,912             --             --        100,000
   Warrants issued for services                       --             --         11,286             --             --         11,286
                                            ------------   ------------   ------------   ------------   ------------   ------------
BALANCE AT DECEMBER 31, 2000                   9,041,563         90,416     13,128,676         26,693    (13,221,263)        24,522
                                                                                                                       ------------
   Comprehensive loss:
      Net loss                                        --             --             --             --     (1,732,884)    (1,732,884)
      Unrealized loss on securities,
         net of reclassification adjustment           --             --             --       (107,157)            --       (107,157)
      Foreign currency translation gain               --             --             --         16,651             --         16,651
                                                                                                                       ------------
         Total comprehensive loss                     --             --             --             --             --     (1,823,390
                                                                                                                       ------------
Common stock issued for:
      Cash                                       150,000          1,500         21,000             --             --         22,500
      Services                                   200,000          2,000         58,000             --             --         60,000
      Financing                                  843,144          8,431        255,077             --             --        263,508
   Repurchase of common stock                    (61,748)          (617)       (19,383)            --             --        (20,000)
                                            ------------   ------------   ------------   ------------   ------------   ------------
BALANCE AT DECEMBER 31, 2001                  10,172,959   $    101,730   $ 13,443,370   $    (63,813)  $(14,954,147)  $ (1,472,860)
                                            ============   ============   ============   ============   ============   ============
</TABLE>

<PAGE>


                                     - F-5 -

                 RACHEL'S GOURMET SNACKS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                     Year Ended December 31,
                                                                  -----------------------------
                                                                      2001             2000
                                                                  ------------     ------------
<S>                                                               <C>              <C>
OPERATING ACTIVITIES
    Net loss                                                      $ (1,732,884)    $ (1,939,225)
    Adjustments to reconcile net loss to net cash used
      by operating activities:
       Depreciation                                                    186,674          189,712
       Amortization of goodwill                                        179,434          179,433
       Deferred taxes                                                    2,400           20,000
       Interest expense added to debt principal                        266,781          219,967
       Gain on sales of marketable securities                         (110,917)         (97,558)
       Common stock issued for services                                 60,000           19,500
       Warrants issued for services                                         --           11,286
       Changes in operating assets and liabilities:
          Accounts receivable                                         (607,978)          47,414
          Inventories                                                 (523,682)         303,793
          Prepaid expenses and other                                   224,070          212,655
          Accounts payable                                             344,224          662,458
          Accrued expenses                                              41,054         (370,272)
                                                                  ------------     ------------
             Net cash used by operating activities                  (1,670,824)        (540,837)
                                                                  ------------     ------------

INVESTING ACTIVITIES
    Proceeds from sales of marketable securities                       137,710          107,534
    Purchases of property and equipment                                (22,593)         (54,804)
    Proceeds from sales of property and equipment                           --           16,000
                                                                  ------------     ------------
             Net cash provided by investing activities                 115,117           68,730
                                                                  ------------     ------------

FINANCING ACTIVITIES
    Increase (decrease) in checks issued in excess of deposits        (104,580)         104,580
    Net proceeds (payments) on line of credit borrowings             1,082,303           (3,107)
    Proceeds from debt                                               1,082,967          701,957
    Payments on debt                                                  (452,291)        (363,716)
    Proceeds from sale of common stock                                  22,500               --
    Repurchase of common stock                                         (20,000)              --
                                                                  ------------     ------------
             Net cash provided by financing activities               1,610,899          439,714
                                                                  ------------     ------------

NET INCREASE (DECREASE) IN CASH                                         55,192          (32,393)

CASH
    Beginning of year                                                       --           32,393
                                                                  ------------     ------------
    End of year                                                   $     55,192     $         --
                                                                  ============     ============
</TABLE>


<PAGE>


                                     - F-6 -

                 RACHEL'S GOURMET SNACKS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.     Nature of Business and Significant Accounting Policies -

       Nature of Business

       The Company manufactures, markets and distributes "Rachel's Made From the
       Heart" gourmet potato chips. The potato chips are sold by independent
       distributors and Company sales personnel to grocery and convenience
       stores, restaurants, and other retail and institutional accounts. The
       Company also manufactures potato chips for others under private labels.
       In addition, the Company distributes confectionery and specialty snacks
       primarily in Canada.

       On September 17, 2001, the Company changed its name to Rachel's Gourmet
       Snacks, Inc. from GO-RACHELS.COM CORP.

       Principles of Consolidation

       The consolidated financial statements include the accounts of Rachel's
       Gourmet Snacks, Inc., its U.S. subsidiary, Rachel's Manufacturing, Inc.
       (formerly known as Rachel's Gourmet Snacks, Inc.), and its Canadian
       subsidiary, Triple-C-Inc. (collectively "the Company"). All significant
       intercompany balances and transactions are eliminated.

       Management Estimates

       The preparation of these financial statements in conformity with
       accounting principles generally accepted in the United States of America
       requires management to make estimates and assumptions that may affect the
       reported amounts and disclosures in the financial statements and
       accompanying notes. Actual results could differ from these estimates.
       Significant management estimates relate to amortization periods for
       goodwill and the valuation allowance on deferred tax assets.

       Revenue Recognition

       The Company recognizes revenue at the time product is shipped to a
       customer. Estimated allowances for bad debts, discounts and returns are
       recorded at the time of sale as a reduction against accounts receivable
       with a charge to operations.

       Foreign Currency Translation and Transactions

       Assets and liabilities of Triple-C-Inc. are translated at the exchange
       rate in effect at the balance sheet date. Revenue and expenses are
       translated at the average yearly exchange rate. Translation adjustments
       arising from the use of differing exchange rates are reported as
       accumulated other comprehensive income (loss) in stockholders' equity
       (deficiency).

       Triple-C-Inc. had foreign currency exchange gains (losses) of
       approximately $(33,100) and $201,100 in the years ended December 31, 2001
       and 2000, respectively. The gains (losses) are reported as nonoperating
       income (expense) in the statements of operations.

       Fair Value of Financial Instruments

       The carrying amounts of financial instruments consisting of cash,
       marketable securities, receivables, line of credit borrowings,
       convertible subordinated debt, notes payable, long-term debt, accounts
       payable, accrued expenses and off balance sheet foreign exchange
       contracts approximate their fair values.

       (continued)


<PAGE>


                                     - F-7 -

                 RACHEL'S GOURMET SNACKS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.     Nature of Business and Significant Accounting Policies - (continued)

       Marketable Securities

       Marketable securities are classified as available-for-sale securities and
       are recorded at fair value.

       Inventories

       Inventories, consisting primarily of food products available for resale,
       are valued at the lower of cost or market, with cost determined on a
       moving average basis and market determined at net realizable value.

       Property and Equipment

       Property and equipment are stated at cost less accumulated depreciation.
       Depreciation is provided using both the straight-line and declining
       balance methods over the estimated useful lives of the assets. Leasehold
       improvements are amortized over the lease term.

       Goodwill

       Goodwill represents the excess of the purchase price and related costs
       over the fair value of the identifiable net assets of businesses acquired
       and is amortized on a straight-line basis over 20 years. The Company
       evaluates goodwill for impairment by comparing the net carrying values to
       the undiscounted future cash flows of the assets acquired. This
       evaluation is done whenever events or changes in circumstances indicate
       that the carrying amount of goodwill may not be recoverable, but in no
       event less than annually. Accumulated amortization was $927,912 and
       $748,478 at December 31, 2001 and 2000, respectively.

       Common Stock Issued

       The Company issued common stock for certain services and financing. The
       value of these services and financing was based on the fair value of the
       common stock as determined by public trades of the Company's common stock
       during the same time periods. The costs of the services were charged to
       operations and stockholders' deficiency was decreased. Stock issued for
       financing was to settle liabilities and to obtain additional debt
       financing.

       Stock Based Compensation

       The Company accounts for employee stock options under Accounting
       Principles Board No. 25, Accounting for Stock Issued to Employees, and
       provides the disclosures required by Statement of Financial Accounting
       Standards (SFAS) No. 123, Accounting for Stock-Based Compensation.
       Options and warrants to nonemployees are accounted as required by SFAS
       No. 123.

       Advertising Costs

       Advertising costs are expensed as incurred and totaled approximately
       $400,000 and $280,000 in 2001 and 2000, respectively.

       (continued)

<PAGE>


                                     - F-8 -

                 RACHEL'S GOURMET SNACKS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.     Nature of Business and Significant Accounting Policies - (continued)

       Credit Risk

       Significant concentrations of credit risk exist in accounts receivable,
       which are due from customers dispersed across different geographic and
       economic regions in the Upper Midwest and Canada.

       Net Loss Per Share

       Net loss per share - basic is determined by dividing the net loss by the
       weighted-average common shares outstanding. Net loss per share - diluted
       normally includes common stock equivalents (options, warrants and
       convertible debentures), but were excluded since their effect was
       antidilutive.

       Reclassifications

       Certain reclassifications were made to the 2000 financial statements to
       make them comparable with 2001. The reclassifications did not affect
       previously reported stockholders' equity (deficiency), net loss, or net
       cash flows.

       Recent Accounting Pronouncements

       In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS
       No. 142, Goodwill and Other Intangible Assets, which is effective for
       fiscal years beginning after December 15, 2001. This statement addresses
       accounting for acquired goodwill and other intangible assets,
       discontinues the amortization of acquired goodwill, and makes goodwill
       subject to periodic impairment testing.

       In August 2001, the FASB issued SFAS No. 144, Accounting for Impairment
       or Disposal of Long-Lived Assets, which is effective for fiscal years
       beginning after December 15, 2001. This statement superceded various
       conflicting earlier pronouncements and addresses financial accounting and
       reporting for the impairment of long-lived assets. It also amends
       Accounting Research Bulletin No. 51, Consolidated Financial Statements,
       to eliminate the exception for consolidation of a subsidiary for which
       control is likely to be temporary.

       The Company does not anticipate adoption of these standards will
       materially impact its consolidated financial statements.

2.     Going Concern -

       The consolidated financial statements were prepared assuming the Company
       will continue as a going concern. The Company incurred net losses of
       $1,732,884 and $1,939,225 in 2001 and 2000, respectively, and as of
       December 31, 2001, has an accumulated deficit of $14,954,147 and a
       stockholders' deficiency of $1,472,860. The Company also has a material
       uncertainty regarding a shareholder dispute (Note 16). These conditions,
       among others, raise substantial doubt about the Company's ability to
       continue as a going concern.

       (continued)

<PAGE>


                                     - F-9 -

                 RACHEL'S GOURMET SNACKS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


2.     Going Concern - (continued)

       The Company's continuation as a going concern is dependent upon its
       ability to generate sufficient operating cash flows and obtain additional
       financing or refinancing to meet its obligations. The Company is pursuing
       plans to increase sales and profits and decrease operating expenses. In
       addition, the Company is attempting to raise additional debt and equity
       financing. The consolidated financial statements do not include any
       adjustments relating to the recoverability and classification of recorded
       assets and liabilities should the Company be unable to continue as a
       going concern.

3.     Marketable Securities -

       Net unrealized gain and loss on marketable securities, which are
       classified as available-for-sale securities, are included in accumulated
       other comprehensive income (loss) in stockholders' equity (deficiency).
       The Company had no marketable securities at December 31, 2001. The cost
       of available-for-securities at December 31, 2000, was $26,793. The
       Company had gross realized gains of $110,917 and $97,558 on these
       securities, based on cost determined on an average basis, in 2001 and
       2000, respectively.

       For purposes of other comprehensive loss, net unrealized gain (loss) on
       securities, net of reclassification adjustment, is as follows:

                                                         Year Ended December 31,
                                                         ----------------------
                                                            2001         2000
                                                         ---------    ---------

       Unrealized holding gain                           $   3,760    $  35,084
       Less reclassification adjustment for realized
         gains included in net loss                       (110,917)     (97,558)
                                                         ---------    ---------

                                                         $(107,157)   $ (62,474)
                                                         =========    =========

4.     Restricted Securities and Obligation Payable to Stockholder -

       Restricted securities, at December 31, 2000, consisted of common stock of
       a publicly traded company held specifically for the retirement of the
       obligation payable to stockholder. The securities were carried at cost
       which represented their fair value at the time they were transferred to
       the Company in return for the obligation payable. The securities' fair
       value at December 31, 2000 was $544,350. The obligation payable was due
       on demand with interest at 4.75% and was retired by the return of the
       restricted securities in July 2001.

<PAGE>


                                    - F-10 -

                 RACHEL'S GOURMET SNACKS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


5.     Property and Equipment -

       Property and equipment consist of the following:

                                               December 31,         Estimated
                                        ------------------------     Useful
                                           2001          2000      Lives-Years
                                        ----------   -----------   -----------

       Machinery and equipment          $  738,747   $  619,487      3 to 10
       Furniture and fixtures              350,048      407,985      3 to 11
       Vehicles                             56,598       56,792         3
       Leasehold improvements              144,677      158,545        15
                                        ----------   ----------
                                         1,290,070    1,242,809
       Less accumulated depreciation       845,226      721,909
                                        ----------   ----------
                                        $  444,844   $  520,900
                                        ==========   ==========

6.     Line of Credit -

       At December 31, 2001, Triple-C-Inc. has a $4,715,000 ($7,500,000 CAN)
       revolving line of credit facility, expiring October 2003, subject to a
       four year extension. Borrowings are due on demand, bear interest at the
       prime rate (6.0% and 9.0% at December 31, 2001 and 2000, respectively)
       plus 1.5% to 2.0% (as defined), and are collateralized by substantially
       all Triple-C-Inc. assets. Advances are subject to defined limitations on
       the collateralized assets. The line has requirements relating to tangible
       net worth, additional debt, and dividends, among others.

7.     Convertible Subordinated Debt -

       Rachel's Gourmet Snacks, Inc. had $2,856,168 and $1,591,770 of
       short-term, six months to one year, convertible subordinated unsecured
       debentures outstanding at December 31, 2001 and 2000, respectively. The
       weighted-average interest rate on the debentures was 9.83% and 12.00% and
       the average conversion rate was $.74 and $2.50 at December 31, 2001 and
       2000, respectively.

       Triple-C-Inc. had $469,322 and $443,915 of six month convertible
       subordinated unsecured debentures outstanding at December 31, 2001 and
       2000, respectively. The average interest rate on the debentures was
       10.25% and 12.00% at December 31, 2001 and 2000, respectively. The
       debentures are subordinated to borrowings under the line of credit and
       are convertible into common stock of Triple-C-Inc. at 80% of the initial
       public offering (IPO) price upon completion of any Triple-C-Inc. IPO.
       Since the convertible subordinated debentures have a beneficial
       conversion feature only if a Triple-C-Inc. IPO is completed, no
       beneficial conversion interest has been recorded.

       At December 31, 2001, $1,395,617 of convertible subordinated debentures
       were held by two individuals also owning 799,466 (7.9%) of outstanding
       common shares.

<PAGE>


                                    - F-11 -

                 RACHEL'S GOURMET SNACKS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


8.     Notes Payable -

       Notes payable consist of the following:

<TABLE>
<CAPTION>
                                                                                   December 31,
                                                                             ------------------------
                                                                                2001          2000
                                                                             ----------    ----------
<S>                                                                          <C>           <C>
       Stockholders:
          15.00%, collateralized by all Company assets                       $  132,625    $  283,256

          6.00% to 17.75%, unsecured                                            154,425       193,058

       Others, retired in 2001                                                       --       169,399
                                                                             ----------    ----------
                                                                             $  287,050    $  645,713
                                                                             ==========    ==========
</TABLE>

       Interest on all stockholder debt, including convertible subordinated debt
       and long-term debt, was approximately $623,000 and $360,000 for 2001 and
       2000, respectively.

9.     Long-Term Debt -

       Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                                    December 31,
                                                                              ------------------------
                                                                                 2001          2000
                                                                              ----------    ----------
<S>                                                                           <C>           <C>
       Stockholders:
          Capital lease obligation, imputed interest at 15.6%, payable in
          monthly installments of $2,250, including interest, through 2006    $   86,535    $       --

          Note payable, 13.0%, unsecured, due 2003                                20,000            --

       Others, 5.90% to 13.0%, due 2002                                           13,430        55,625
                                                                              ----------    ----------
                                                                                 119,965        55,625
       Less current maturities                                                    27,969        42,117
                                                                              ----------    ----------
                                                                              $   91,996    $   13,508
                                                                              ==========    ==========
</TABLE>

       Future maturities of long-term debt are as follows:

<TABLE>
<CAPTION>
                          Year            Amount
                        --------        ----------
<S>                                     <C>
                          2002          $   27,969
                          2003              36,971
                          2004              19,809
                          2005              23,122
                          2006              12,094
                                        ----------
                                        $  119,965
                                        ==========
</TABLE>

<PAGE>


                                    - F-12 -

                 RACHEL'S GOURMET SNACKS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


10.    Stock Options and Warrants -

       Stock Options

       The Company has a nonqualified stock option plan, which authorizes the
       granting of stock options to employees, directors, and others to purchase
       up to 2,500,000 shares of common stock. Vesting and award terms are at
       the discretion of the Board of Directors, but cannot exceed ten years.

       Stock option activity was as follows:

<TABLE>
<CAPTION>
                                                            Year Ended December 31,
                                              ----------------------------------------------------
                                                        2001                       2000
                                              ------------------------   -------------------------
                                                             Weighted-                   Weighted-
                                                              Average                     Average
                                                             Exercise                    Exercise
                                              Options          Price      Options          Price
                                             ---------       ---------   ---------       ---------
<S>                                          <C>             <C>         <C>             <C>
        Outstanding, beginning of year       2,302,498       $   1.84    2,297,498       $   1.84
           Granted                             325,000            .30       10,000            .15
           Expired/cancelled                  (294,998)          1.03       (5,000)          1.00
                                             ---------                   ---------
        Outstanding, end of year             2,332,500           1.72    2,302,498           1.84
                                             =========                   =========
</TABLE>


       The option price equaled the stock price for all options granted in 2001
       and 2000. The weighted-average grant-date fair value of options granted
       in 2001 and 2000 is $.07 and $.04, respectively.

       Stock options outstanding and exercisable at December 31, 2001, are as
       follows:

<TABLE>
<CAPTION>
                                                Weighted-
                                                 Average
                                                Remaining
            Exercise          Options          Contractual         Exercisable
              Price         Outstanding         Life-Years           Options
          ------------     -------------      --------------      -------------
<S>                        <C>                <C>                 <C>
             $   .15              10,000           3.5                   10,000
                 .30             325,000           4.0                  200,000
                 .36             100,000           7.8                   40,000
                1.00           1,270,000           4.5                1,078,000
                1.75              80,000           6.9                   80,000
                2.83             150,000           5.7                  120,000
                3.00              55,000           5.2                   44,000
                5.50             342,500           1.1                  332,000
                           -------------                          -------------
                               2,332,500           4.3                1,904,000
                           =============                          =============
</TABLE>

       The weighted-average exercise price for the exercisable options at
       December 31, 2001, was $1.89.

       (continued)

<PAGE>


                                    - F-13 -

                 RACHEL'S GOURMET SNACKS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


10.    Stock Options and Warrants - (continued)

       Stock Options (continued)

       If the Company recognized compensation expense for options based on the
       fair value at the grant-dates consistent with the method prescribed by
       SFAS No. 123, net loss and per share disclosures would change to the pro
       forma amounts below:

<TABLE>
<CAPTION>
                                                        Year Ended December 31,
                                                   --------------------------------
                                                        2001              2000
                                                   --------------    --------------
<S>                                                <C>               <C>
        Net loss:
           As reported                             $   (1,732,884)   $   (1,939,225)
           Pro forma                                   (1,786,694)       (2,039,132)

        Net loss per share - basic and diluted:
           As reported                                       (.18)             (.22)
           Pro forma                                         (.18)             (.24)
</TABLE>


       Stock Warrants

       The Company issued various compensatory warrants for short-term debt
       financing, services, and issuance of common stock.

       Stock warrant activity was as follows:

<TABLE>
<CAPTION>
                                                            Year Ended December 31,
                                              ----------------------------------------------------
                                                        2001                        2000
                                              ------------------------   -------------------------
                                              Weighted-                   Weighted-
                                               Average                     Average
                                              Exercise                    Exercise
                                              Warrants        Price       Warrants        Price
                                             ---------       --------    ---------       --------
<S>                                          <C>             <C>         <C>             <C>
        Outstanding, beginning of year       2,863,775       $   1.46    2,726,527       $   1.62
           Issued                              282,499            .90      342,185            .39
           Expired/cancelled                  (244,190)          1.41     (204,937)          1.84
                                             ---------                   ---------
        Outstanding, end of year             2,902,084           1.41    2,863,775           1.46
                                             =========                   =========
</TABLE>

       The weighted-average grant-date fair value for warrants issued was as
       follows:

<TABLE>
<CAPTION>
                                                             Year Ended December 31,
                                                ------------------------------------------------
                                                         2001                      2000
                                                ----------------------    ----------------------
                                                                 Fair                      Fair
                                                 Warrants       Value      Warrants       Value
                                                ----------     -------    ----------     -------
<S>                                             <C>            <C>        <C>            <C>
       Warrant price greater than stock price     282,499      $   .00      142,185      $   .00
       Warrant price equals stock price                --           --      200,000          .06
                                                ---------                 ---------
                                                  282,499          .00      342,185          .03
                                                =========                 =========
</TABLE>

       All warrants outstanding at December 31, 2001, were exercisable.

       (continued)

<PAGE>


                                    - F-14 -

                 RACHEL'S GOURMET SNACKS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


10.    Stock Options and Warrants - (continued)

       Assumptions

       The fair value of options and warrants is estimated at grant-date using
       the Black-Scholes option-pricing model with the following
       weighted-average assumptions:

<TABLE>
<CAPTION>
                                                    Year Ended December 31,
                                       -----------------------------------------------
                                             Options                    Warrants
                                       --------------------       --------------------
                                         2001        2000           2001        2000
                                       --------    --------       --------    --------
<S>                                      <C>         <C>            <C>         <C>
        Risk-free interest rate          5.13%       6.63%          4.98%       5.92%
        Expected life - years               5           5              5           5
        Expected volatility*                0%          0%             0%          0%
        Expected dividend rate              0%          0%             0%          0%
</TABLE>

       * Since less than 5% of the Company's stock was traded throughout most of
         2001 and 2000, the Company is essentially a nonpublic entity.
         Therefore, volatility was set at 0% as permitted by SFAS 123.

11.    Income Taxes -

       Income tax expense (benefit) consists of the following:

<TABLE>
<CAPTION>
                                                              Year Ended December 31,
                                                             -------------------------
                                                                2001           2000
                                                             ----------     ----------
<S>                                                          <C>            <C>
        Foreign:
           Current                                           $       --     $ (111,200)
           Deferred                                          $    2,400         20,000
                                                             ----------     ----------
                                                             $    2,400     $  (91,200)
                                                             ==========     ==========
</TABLE>

       Income tax computed at the U.S. federal statutory rate reconciled to the
       effective tax rate is as follows:

<TABLE>
<CAPTION>
                                                             Year Ended December 31,
                                                           ---------------------------
                                                             2001              2000
                                                           --------          --------
<S>                                                           <C>               <C>
          Benefit at statutory tax rate                       (34.0)%           (34.0)%
          Net operating loss not recognized                    33.1              37.0
          Change in valuation allowance                         4.7                .1
          Foreign taxes                                          .1              (4.5)
          Other                                                (3.8)             (3.1)
                                                           --------          --------
          Effective tax rate                                     .1%             (4.5)%
                                                           ========          ========
</TABLE>

       (continued)

<PAGE>


                                    - F-15 -

                 RACHEL'S GOURMET SNACKS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


11.    Income Taxes - (continued)

       Significant components of net deferred tax assets are as follows:

<TABLE>
<CAPTION>
                                                               December 31
                                     ----------------------------------------------------------------
                                                 2001                               2000
                                     -----------------------------      -----------------------------
                                       Current          Long-Term         Current          Long-Term
                                     -----------       -----------      -----------       -----------
<S>                                  <C>               <C>              <C>               <C>
        Deferred tax assets:
           Loss carryforwards        $ 5,650,000       $        --      $ 4,995,000       $        --
           Other                              --            47,600               --            50,000
                                     -----------       -----------      -----------       -----------
                                       5,650,000            47,600        4,995,000            50,000
        Valuation allowance           (5,650,000)               --       (4,995,000)               --
                                     -----------       -----------      -----------       -----------
        Net deferred tax assets      $        --       $    47,600      $        --       $    50,000
                                     ===========       ===========      ===========       ===========
</TABLE>

       The valuation allowance was provided as it is probable the deferred tax
       asset will not be realized. The valuation allowance increased by
       approximately $655,000 and $755,000 for 2001 and 2000, respectively,
       primarily because of the Company's inability to utilize net operating
       losses.

       Long-term deferred tax assets are included with other noncurrent assets
       on the balance sheets. State and provincial tax effects are insignificant
       and not separately disclosed.

       The Company had the following approximate net operating loss
       carryforwards for U. S. federal income tax purposes:

<TABLE>
<CAPTION>
                       Year of
                      Expiration                 Amount
                      ----------              ------------
<S>                                           <C>
                         2008                 $     23,000
                         2009                      118,000
                         2010                    1,234,000
                         2011                    1,396,000
                         2012                    2,791,000
                         2018                    2,869,000
                         2019                    2,177,000
                         2020                    1,257,000
                         2021                    1,658,000
                                              ------------
                                              $ 13,523,000
                                              ============
</TABLE>

       In addition, the Company had approximately $600,000 of net operating loss
       carryforwards available for Canadian federal income tax purposes, which
       generally expire in 2008.

<PAGE>


                                    - F-16 -

                 RACHEL'S GOURMET SNACKS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


12.    Operating Leases -

       Facilities and equipment are utilized under operating leases expiring
       through 2009. The facilities leases require monthly base rents plus
       increases for operating expenses and/or property taxes as defined in the
       leases. Some leases contain renewal options. Total rent expense was
       $462,000 and $419,000 for 2001 and 2000, respectively.

       Approximate future minimum lease payments are as follows:

<TABLE>
<CAPTION>
                           Year                 Amount
                       ------------         ------------
<S>                                         <C>
                           2002             $    462,100
                           2003                  457,800
                           2004                  425,200
                           2005                  402,500
                           2006                  386,400
                        Thereafter               236,600
                                            ------------
                                            $  2,370,600
                                            ============
</TABLE>

13.    Supplemental Disclosures of Cash Flow Information -

<TABLE>
<CAPTION>
                                                                             Year Ended December 31,
                                                                           ---------------------------
                                                                               2001            2000
                                                                           -----------     -----------
<S>                                                                        <C>             <C>
        Interest paid                                                      $   361,749     $   381,643

        Noncash operating, investing, and financing activities:
           Convertible subordinated debt and notes payable refinanced        4,168,278       2,701,157
           Unrealized losses on securities                                    (107,157)        (62,474)
           Foreign currency translation gain (loss)                             16,651         (10,815)
           Receipt of restricted securities for obligations payable            332,000         515,700
           Retirement of obligations payable with restricted securities        847,700              --
           Equipment acquired under capital leases                              88,025              --
           Common stock issued for financing costs                             263,508         100,000
</TABLE>

<PAGE>


                                    - F-17 -

                 RACHEL'S GOURMET SNACKS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


14.    Segment Information and Foreign Operations -

       The Company has two reportable segments: confectionery snacks and snack
       foods. The two reportable segments are strategic business units that
       offer different products. The confectionery snacks segment distributes
       confectionery products. The snack foods segment manufactures and
       distributes potato chips. The accounting policies for the segments are
       the same as those described in Note 1. The Company evaluates performance
       based on profit or loss from operations after income taxes. The
       operations of the confectionery snack segment are in Canada and the
       remainder of the operations are in the United States. The Company
       protects itself from adverse changes in foreign currencies by, at times,
       hedging with foreign exchange contracts. Such items are translated at the
       foreign exchange contract rate. The terms of the contracts are generally
       less than one year. Gains and losses on the contracts are recorded when
       the related transaction occurs. At December 31, 2001, the Company had no
       foreign exchange contracts outstanding.

<TABLE>
<CAPTION>
                                                         Year Ended December 31, 2001
                           ----------------------------------------------------------------------------------------
                           Confectionery          Snack            Segment           Corporate
                              Snacks              Foods             Totals          Headquarters       As Reported
                           -------------      ------------       ------------       ------------       ------------
<S>                        <C>                <C>                <C>                <C>                <C>
Sales to
  external customers       $ 15,702,369       $  1,580,626       $ 17,282,995       $         --       $ 17,282,995
Interest expense                327,891             22,108            349,999            549,422            899,421
Depreciation                     89,630             61,812            151,442             35,232            186,674
Goodwill amortization           131,250             48,184            179,434                 --            179,434
Income taxes                      2,400                 --                 --                 --              2,400
Net loss                       (206,233)          (313,840)          (520,073)        (1,212,811)        (1,732,884)
Expenditures for
  segment assets                (12,286)           119,266            106,980              3,638            110,618
Year end segment
  assets:
   Tangible                   6,542,869            465,823          7,008,692            183,907          7,192,599
   Goodwill                   2,034,362            626,398          2,660,760                 --          2,660,760

<CAPTION>
                                                         Year Ended December 31, 2000
                           ----------------------------------------------------------------------------------------
                           Confectionery          Snack            Segment           Corporate
                              Snacks              Foods             Totals          Headquarters       As Reported
                           -------------      ------------       ------------       ------------       ------------
<S>                        <C>                <C>                <C>                <C>                <C>
Sales to
  external customers       $ 16,158,114       $  1,092,318       $ 17,250,432       $         --       $ 17,250,432
Interest expense                327,038             (6,069)           320,969            329,054            650,023
Depreciation                     93,460             49,586            143,046             46,666            189,712
Goodwill amortization           131,249             48,184            179,433                 --            179,433
Income tax benefit              (91,200)                --            (91,200)                --            (91,200)
Net loss                       (857,021)          (201,132)        (1,058,153)          (881,072)         1,939,225
Expenditures for
  segment assets                 36,742             18,062             54,804                 --             54,804
Year end segment
  assets:
   Tangible                   5,577,236            356,479          5,933,715            744,049          6,677,764
   Goodwill                   2,165,612            674,582          2,840,194                 --          2,840,194
</TABLE>

<PAGE>


                                    - F-18 -

                 RACHEL'S GOURMET SNACKS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


15.    Major Customers and Vendors -

       Approximately 20% of the Company's sales in 2001 were to two customers.

       Approximately 47% of the Company's merchandise in 2001 was purchased from
       three suppliers in the United States, Belgium and the Netherlands.
       Approximately 29% of the Company's merchandise in 2000 was purchased from
       two suppliers in the United States and Belgium.

16.    Contingency and Uncertainty -

       The Company has a dispute relating to options held by certain
       stockholders. The stockholders believe the Company is required to
       repurchase their 608,000 shares for $3.221 per share ($1,958,368) with
       five year 6% promissory notes. The Company believes the stockholders did
       not exercise their options by the October 1, 1999, specified date in the
       manner required. The stockholders assert that they did properly exercise
       their options and the Company's dispute is without merit. It is possible
       that either party may resort to judicial resolution of this matter. While
       the Company is confident that it did not receive actual or constructive
       notice of exercise of the stockholders' right to require the Company to
       purchase all or part of its shares, it is a possibility that litigation
       with the stockholders will result in an adverse judgment against the
       Company, which may have a material adverse effect on the Company and its
       operations, and may jeopardize the Company's ability to continue as a
       going concern (Note 2). The terms of the notes require the principal to
       be paid in full five years after the exercise of the options with
       semi-annual interest payments. The outcome at this time cannot be
       determined.